Although behavior modification is an important and viable business cost reduction strategy, it is often overlooked, just as a hidden gem might be. By mining through data to find how goods and services are used, a knowledgeable expense reduction analyst can identify significant cost savings without requiring a change in provider.
Challenging yet Rewarding
Unfortunately, many cost reduction consultants do not use behavior modification as an expense reduction strategy because it requires thorough use case analysis (very time consuming), meticulous review of several invoices to establish usage patterns (often tedious) and an intimate understanding of how individual cost components relate to use cases and usage patterns (sometimes befuddling).
Cost reduction analysis through competitive bidding, reverse auctions and the like can certainly put money back in your bank account, but without utilizing behavior modification, a business is likely to miss out on substantial savings.
Behavior Modification in Action
Simple Business Solutions conducted a telecommunications cost reduction analysis on behalf of a distribution company with operations in multiple states. As we studied the client’s telephone bills we noticed that the client was paying far too much for toll free telephone usage. By meticulously scrutinizing invoices, we identified something unexpected: only a handful of telephone numbers were calling the client’s toll free number and these numbers were calling several times per day.
We asked the client whether she recognized the numbers originating all these calls and learned that the numbers belonged to employee mobile phones. These individuals were calling in to speak with the main office staff. This discovery is meaningful because the client was essentially paying twice for each of these minutes; once for each minute consumed on the employee’s mobile phone plan and twice for each minute of toll free usage.
We immediately recommended that the client send out a company-wide voicemail broadcast directing employees to dial only the local telephone number of the main office, and not the toll free number. Through this simple behavior modification, we helped the client eliminate 43.5% of the usage on the toll free number. Then, by engaging an alternative service provider of toll free services, Simple helped the client reduce the rate by more than 50%. The total savings equaled 72.5%.
If only the supplier renegotiation/supplier change cost reduction strategy were used, the client would have missed out on an additional 20%+ recurring cost savings. That’s an awful lot of money to leave on the table.
Just as carbon does not become a precious diamond without the application of significant time, heat and pressure, maximum cost savings are not achieved without the application of time, specialized knowledge and good ol’ fashioned hard work.