Achieving better value from suppliers through market intelligence

Issue No. 16.4Insight and market analysis to achieve better value from suppliers
MARKET
INTELLIGENCE
Sue Ryder provides incredible hospice
and neurological care for people facing a
frightening, life-changing diagnosis.
As with any charity, keeping costs down and
securing the most competitive rates from
suppliers is a high priority. However, for David
White, Head of Procurement at Sue Ryder, a
top-class procurement consultancy needed to
offer much more than great savings.
After a benchmarking exercise against another
procurement consultancy, ERA’s fully engaged
and highly personalised service completely
overshadowed their competitors and the
contract was awarded to ERA, led by St
John Rowntree.
Two years on and the relationship between Sue
Ryder and ERA has become one cemented in
trust. ERA’s team, now led by Client Manager
Simon Dodson is currently tracking over £2
million of spend and delivering 23% savings
across the board, with more on the horizon.
Demonstrating best practice with a bespoke,
personal touch
David’s experience ensured he understood
the value that a third-party procurement
consultancy could bring to the charity. His
approach was to invite a shortlist of two
(ERA and A.N. Other) to perform a process
demonstration on an existing cost centre in
order to decide on an appointment.
A multi-million contract built on trust
and collaboration with Sue Ryder
CONTINUED ON BACK PAGE >>>
Savings per annum
Business & General Print 35%
Clinical Waste 31%
Desktop Printers 38%
Fuel Cards 10%
General Waste 24%
Medical & Cleaning Supplies 15%
Medical Gases (+ VAT Rebate) 21%
Ocean Freight 23%
Photocopiers 20%
Stationery 25%
Telecoms (Conference Services) 76%
Telecoms (Fixed Line) 34%
Telecoms (Mobile) 48%
Water Rates 7%
Added value
• Streamline and strengthen supply chains
• Identify potential future savings
• Improved level of service and support
• Access to specialist category experts
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The Document Exchange (DX) system is a UK
courier service established during the postal
strikes of the 1970s and very quickly became
the only alternative next-day delivery service.
Its origins lie mainly within the legal sector, with
its users’ network supplying a majority of legal
firms within the UK. However, its tariff structure
and the procedure behind DX’s calculation of
the cost of the service to users are fraught with
issues and sometimes not understood.
The annual cost of the service is based on
an estimate made by DX of the amount of
mail anticipated to be dispatched during the
forthcoming year to other DX users only.
The user processes their DX mail by way of
manually adding their unique number to each
item dispatched and then delivering them to
a nearby collection point, which is normally
hosted by another DX user. The Member can
become a host point by meeting certain criteria
set by DX.
The user is advised to monitor and manually
record all of their outgoing mail over a two-
week period each year. This annual monitoring
should be completed over two weeks that
typically reflect total annual usage, generally
not in August or December.
DX calculates the user’s next year’s subscription
based on their own internal figures and the
two-week monitoring period, which can only be
viewed as accurate if completed properly by
both parties.
Therefore, the biggest problem with DX is that
the fees are based on estimate, paid annually in
advance, and generally unquantifiable, leaving
the user with no knowledge as to whether they
are getting value for money.
There are very few options that enable DX
users to accurately calculate the level of
their subscription fee - apart from accurately
recording manually every item sent whilst taking
into consideration the varying weight, size and
thickness of non-standard items.
Rather than simply accepting the estimated
annual DX invoice, it makes more financial sense
to consider changes in procedure or methods of
monitoring in order to confirm the actual cost of
using the service instead of relying on the very
limited information generally provided by DX.
Do you really know whether you are getting the best value for
money when using DX?
Distribution by Zoe Willis
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Market Intelligence Issue No. 16.4

To hedge or not to hedge? That is the question!
Fuel by Duncan Rogers
We are often asked by clients whether it is a
“good idea” to hedge fuel purchases, and can
one reduce costs as a result? Unfortunately,
the simple answer is “it depends”, and the
more complex answer is “it depends on luck”.
Traditionally, transport operators, particularly
big road fleets, airlines, and large shipping
fleets have hedged their fuel purchasing in order
to safeguard against unexpected sudden rises
in fuel prices. However, we increasingly find
that users of industrial fuel-oils such as Gasoil
or Kerosene are considering whether a hedging
strategy would be beneficial, particularly as
volumes increase in the autumn/winter period.
If a client is looking for absolute certainty in
fuel costs for budgeting purposes for instance,
a hedge can provide a very effective way to do
this. It is likely to be marginally more cost-
effective versus a fixed price offer for fuels, and
normally does not require a commitment to buy
minimum quantities of fuel - whereas fixed price
deals normally do (adding a cost risk factor if
volumes fall short of forecasts).
The big cost risk
However, in addition to the direct cost of the
hedge, some hedging agreements require the
client to pay the difference between the hedged
price and actual price to the hedge provider, if
the price of fuel falls below that price. There
have recently been some quite spectacular
cost penalties incurred by airlines in particular
as kerosene prices tumbled. Hedges with less
onerous conditions are available, but the
premium payment for the hedge will be higher.
Is hedging complicated?
For most companies, a hedge is a very
simple financial instrument available from
not only specialist providers, but also banks
and insurance companies. The key thing to
remember about most of these hedge plans is
that the price the client actually pays for their
fuel is irrelevant. Because client-specific hedges
would generally be prohibitively expensive to
write and administer, most plans are based on
fuel costs at wholesale markets (e.g. Rotterdam
or Marseille). These markets price fuel in dollars
per tonne, so it is important to realise that
most hedges are against that measure and can
exclude currency movements in sterling versus
the dollar, and any increase in duty.
Hedging plans generally therefore do not relieve
users of following good procurement practice in
buying their fuel. Fuel suppliers are constantly
seeking opportunities to increase margin,
whether at the pumps or in bulk deliveries.

What does your Modern Day Slavery Act Statement say?
by Simon Dodson
The UK Modern Slavery Act 2015 has left
many organisations in the UK wondering how
best to tackle their anti-slavery supply chain
statement.
Since October 2015, under Section 54,
commercial organisations with a turnover of
more than £36m must produce a ‘slavery and
human trafficking’ statement for each financial
year, setting out what they have done to ensure
there is no modern slavery in their business
or supply chains. The Government has issued
guidance but little in the way of a template to
follow. Though the legislation does set out
the following:
A slavery and human trafficking statement for
a financial year is:
a. a statement of the steps the organisation has
taken during the financial year to ensure that
slavery and human trafficking is not taking
place:
i. in any of its supply chains, and
ii. in any part of its own business, or
c. a statement that the organisation has taken
no such steps.
An organisation’s slavery and human
trafficking statement may include
information about:
a. the organisation’s structure, its business and
its supply chains;
b. its policies in relation to slavery and human
trafficking;
c. its due diligence processes in relation to
slavery and human trafficking in its business
and supply chains;
d. the parts of its business and supply chains
where there is a risk of slavery and human
trafficking taking place, and the steps it has
taken to assess and manage that risk;
e. its effectiveness in ensuring that slavery and
human trafficking is not taking place in its
business or supply chains, measured against
such performance indicators as it considers
appropriate;
f. the training about slavery and human
trafficking available to its staff.
It is notable that organisations can say no steps
have yet been taken, but this is unlikely to show
the organisation in a good light, and should not
be considered beyond the first year, where some
leniency may apply.
It’s also worth remembering that organisations
have to give the statement a prominent
position on their homepage, as customers and
competitors will be looking out for it.
Some organisations below the £36m t/o
threshold have elected to publish a statement
anyway, in order to emphasise their efforts
in this area. Of course many of them will be
suppliers to those larger organisations, so they
are likely to come under scrutiny from their
customers anyway, as they attempt to prove
their own case.
What have organisations done about the Act
and what they have said?
Vinci Construction UK is a construction and
facilities company and part of a group with £2bn
turnover a year, employing around 9,000 people.
It says, where appropriate, its supply chain
should be registered with Constructionline, or
have completed the company’s pre-qualification
process.
Its statement adds that the company will:
“carry out audits on supply-chain partners that
incorporate physical audits of suppliers’ records
pertaining to workers on our projects, to ensure
that they are compliant with our requirements
and expectations. Suppliers employing or
providing non-UK nationals undergo appropriate
investigation to understand their recruitment
methods and their management of permits and
working visas”.
If you google ‘Vinci Modern Day Slavery’ you can
see a pdf of the full statement, signed by the
Chief Executive.
Millennium & Copthorne Hotels is a leading
global hospitality management and real estate
group, with 120 hotels in 79 businesses around
the world.
It has several business models – for example, it
owns hotels operated by third parties, such as
Hilton and AccorHotels, while also franchising
its brands for use by third-party hotel owners
who, in turn, operate their hotels. So, as its
statement notes, it has “varying degrees of
control over operational policies and procedures
and the review and selection of suppliers”.
While the hotel group has many safeguards
in place, it says: “We do not believe an
organisation can ‘achieve compliance’ in this
important area and will continue to look for
ways to improve upon our existing policies and
procedures.” Unusually, it also invites comment
from employees and other stakeholders.
The full statement can be found by googling
‘Millennium Hotels Modern Day Slavery’.
London Universities Purchasing Consortium
(LUPC) was the first UK public sector consortium
to publish a slavery and human trafficking
statement.
A non-profit professional buying organisation
owned by its members, LUPC made the move
despite its annual turnover being below
the legal £36m threshold. As its members
spend around £200m annually through supply
agreements, it was felt it warranted
a statement.
In it, LUPC identified the principal risk
categories as office supplies, laboratory
consumables, ICT equipment and some estates
services, such as cleaning and security services.
LUPC said many suppliers in higher risk
categories have committed to the Base Code of
the Ethical Trading Initiative, and it was trying
to persuade its remaining suppliers in these
categories to join them.
It’s quite a read and can be found by googling ‘London
Universities Purchasing Consortium Slavery and Human
Trafficking Statement’.
There are plenty more examples including
Reynolds Catering Supplies, John Lewis
Partnership, Haymarket Media Group,
Pendragon, AB InBev and Gleadell Agriculture.
Simply googling the organisation’s name and
‘Modern Day Slavery’ on any of these will show
that there is a variety of different approaches.
If you need further help, a register has been set
up by CIPS and anti-trafficking charity Unseen
to host a searchable database whereby you can
find details of what companies are doing to
combat slavery in their supply chains.
This site can be found at tiscreport.org.
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Market Intelligence Market IntelligenceIssue No. 16.4 Issue No. 16.4

Communications Industry news
Communications by the Communications Team
Apple has announced the iPhone 7 which is
very similar to the iPhone 6S, but it has a
much improved camera with dual lens,
a new jet black glossy finish and a new
‘home’ button.
The headphone jack has also disappeared, so
wireless headphone sales are no doubt going
to shoot up as well as adding a cost for users
- although we understand Apple will supply
a converter with the phone. How much are
wireless headphones needed for business use?
Is an improved camera needed for business use?
Also announced were changes to iPads, a new
Apple Watch 2 which is “swimproof” complete
with a built-in GPS in case you get lost at sea.
IOS10 was also announced. Depending on your
phone renewal cycle, you might like to consider
the rumour that Apple will have a major 10-year
anniversary iPhone update in 2017.
Samsung, presumably in an effort to beat Apple
to market with its new Samsung 7, has hit the
buffers with a recall due to exploding batteries.
US Civil Aviation has advised passengers not to
turn on these devices during flight.
Mobile networks continue to evolve the charging
structures for data and roaming which seem to
be more and more complicated with each new
announcement. Presumably revenue lost from
the regulated cost reductions over the last few
years, the latest in July 2016, mean the revenue
bubble has to pop up elsewhere. How Brexit will
affect roaming costs in Europe no-one knows.
Apple’s new operating system IOS10 may also
change the landscape and encourage more
tariff changes, as it now allows you to call your
contacts (seamlessly using the green button),
via WhatsApp, Facetime and other apps which
use your data allowance. So you should watch
out for a switch from voice minutes to data if
you have no control over how your users use
their company phones.
All companies really need a mobile phone policy
these days which is written to take account of
their mobile contract. Without giving employees
any advice/instructions on how to use their
phones, you may end up with extra costs.
Do you plan for staff to use free hotel wifi
whilst travelling to save costs? Many hoteliers
are struggling with the increasing demands
of guests who wish to consume more and
more data. Cheap hotels are unlikely to have
invested in a big data pipe to keep all guests
happy. Download the app ‘Hotel wifi Test’ and
contribute to crowd knowledge of how good
hotel wifi is.
Just got used to 4G? Vodafone is already
conducting trials of 4.5G to significantly
increase the capacity and efficiency of its 4G
network in urban areas, as well as laying the
foundations for the introduction of 5G by 2020.
EU regulations have been reducing roaming
charges over the last few years, and earlier this
year announcements were made that roaming
charges would be scrapped in 2017 and all
charges incurred would be the same as your
home country. Critics of the ban suggest the loss
of revenue for mobile phone companies could
push up prices in general, including prices for
non-travellers. When the draft proposals were
announced, consumer groups were outraged
that only 90 days of ‘free’ roaming
per year would be allowed.
In September 2016, the draft proposals were
scrapped on the instruction of Commission
President Jean-Claude Juncker and a new
version was to be produced. The EU Commission
said that they had been listening and now were
going back to the drawing board, but roaming
charges would still disappear by June 2017.
BT has increased some call prices from 1st
September 2016, and will be increasing network
feature prices from 1st October 2016. For
example, BT Business Plan increases local and
mobile inland calls by 1p/min and international
calls go up too and on the BT Business One Plan,
local and mobile are increasing. As always,
keeping up with BT plans and prices is both
an art and a science. If you don’t know what
your current communications contracts pricing
is or what commitments you have you should
carry out a contracts review. This is often only
done when a reason for change arises through
another project or initiative and often there are
surprises. With BT these can be caused because
termination charges have been increasing over
the last few years.
Phone book entries – when was the last time
you looked in a phone book? One standard
entry comes free with your line rental but many
businesses historically have paid for additional
entries in non-local directories, or to bold their
entries. BT last increased these prices on 1st
January 2016. These costs are usually small
in relation to the overall bill and go unnoticed
until perhaps the line associated with the
number is cancelled. Often unknown though
is that you are committed to pay for your
entry until the next print run of the relevant
directory. BT says: “If the customer cancels the
entry or ceases the exchange line to which the
special entry applies, he/she may be liable for
charges until this time, up to a maximum of six
quarterly rental payments”.

Are you getting value from your exhibition budget?
Events by Alastair Baker
When exhibitions don’t deliver on commercial
expectations, it’s common practice to blame
the exhibition organiser for not delivering
the right people to your door. But it’s
worth considering whether you have done
everything possible to get value from
your investment.
Spending time, money and effort on an
impressive bespoke stand will only be
profitable if it is reinforced with strong
promotional materials. It’s a common mistake
for companies to fail to provide consistent
marketing materials within their exhibition
design. Even worse, some companies fail to use
them at all! From brochures, to displays, to
hand-outs, this is your opportunity to reinforce
your brand’s messaging and promote your
company through marketing they can take
home. Ignore the use of promotional material
and your customers will have nothing to
remember you by.
If you haven’t bagged the most prominent
plot in the hall, you’ll need to work a little
harder to stand out. A poorly lit, disengaging,
unexceptional stand in a prime position will still
fail to attract visitors.
Produce an eye-catching stand with high-
level branding, designed for optimum visibility
at every angle of the hall, and you’ll entice
visitors wherever in the exhibition they may
be. Appealing to different senses with a variety
of textures, lighting and sounds can help to
immerse your customers in your stand and
capture their imagination.
Attracting your customers to your stand is just
one part of the sales process. You then need
to concentrate on giving them a superb visitor
experience, whether that’s through engaging
interactive displays, memorable large-scale
demonstrations or, critically, well prepared and
enthusiastic staff.
Your team should look the part and behave
professionally throughout; it’s unlikely they
will do so if they have been on their feet for 24
hours over the past 2 days! Equally staff should
only be seated when talking ‘one to one’ to
visitors. So make sure your team has time off,
and introduce fresh blood every day if possible.
Make sure your available budget is being
fully utilised. When did you last change your
supplier? How much of the spend does your
audience really see? Would the purchase of
a modular display system reduce labour and
transport costs, and enable you to attend
more exhibitions?
Keep your target market in mind at all stages
of the concept, design and exhibition process.
Are you looking to sell to a broad audience, or is
your market a very specific, lucrative group?
Combine this with committed follow-ups
to leads, and you’ll ensure your exhibition
experience isn’t a wasted one.

Business Rates appeal window looming
Property by Paul Giness
After a two year delay, the Government is
finally due to publish its Draft Rating List
in October. The rating list, which applies a
rateable value – which in turn determines
the property rates payable – had been due
in 2015, but was delayed for two years
following the financial crash, by the Coalition
Government.
This opens the window for its new ‘Check,
Challenge, Appeal’ process, which allows
organisations to challenge the rateable value
applied to their properties, ahead of the
publication of the final Rating List in April of
next year.
The Valuation Office is currently collecting
rental info and preparing draft valuations, and
we have created a timeline depicting the key
events from now until the start of the new
Rating List in April 2017.
Business Rates – what are they?
This is the commercial version of Council Tax
and applies to all non-domestic occupiers and
landlords (if the property is vacant), including
businesses and educational establishments.
The new rateable values that will be published
in October, are in preparation for the April
Revaluation, which will be based on the
hypothetical rent of a property at a fixed
valuation date. The existing valuations are
based on pre-credit crunch rents from April
2008, whilst the new List is based on rents in
2015. So, with minimal overall growth since the
economy collapsed, it will be interesting to see
what is calculated.
Within the current Revaluation period, savings
can still be obtained for payments already made
between 2015 and 2017 and, where appropriate,
our team can review scope for these additional
savings.
Check, Challenge, Appeal
The Government is concerned there are too
many appeals in the rating system, causing
unnecessary delays. Therefore in an attempt to
improve the review process, it is introducing a
new ‘Check, Challenge, Appeal’ (CCA) system.
The Enterprise Act provides the framework
for this to take place. The aims are to provide
a more streamlined and efficient system in
which the key issues are identified early by the
ratepayer/agent and are resolved as quickly as
possible.
Be warned though! The new landscape is
littered with risk. Opponents of the system say
there is a lack of transparency from government
on how rates are calculated and that the
appeals process is lengthy and cumbersome.
Since the latest revaluation of business rates
was enforced in 2010, there have been appeals
on 590,850 of the 1.8m commercial properties
in the UK eligible to pay business rates.
That means around 1/3 of the invoices are
challenged, and our experience tells us that
you are more likely to be successful if you use
a dedicated specialist who knows the process
inside-out.
How can ERA Property help?
Both clients and prospects will likely receive
a plethora of information from the authorities
leading up to the Revaluation. As well as Forms
of Return from the Valuation Office, we can help
clients make sense of the draft Rating List and
predict the impact on their future budgets. In
fact, if you send us a list of your UK properties,
we can produce a five year forecast for you, as
well as assess the scope for a successful appeal.
We will ensure that cases are sufficiently
supported in order to achieve the result wanted
by both parties, i.e. a reduction in rateable
value, savings and where possible a refund!

Does Brexit bring any changes to card payments?
Banking & Payments by Stephen Whitlam, Paul Davidson and Paul Lucraft
Since the Brexit decision was taken, most
business leaders simply want clarity so key
decisions are not delayed due purely to
uncertainty. Because the dramatic change in
card interchange costs in 2015 was an EU-led
initiative and impacts directly on margins,
clients have been asking us if we see the
benefits being unwound in the UK – and if so,
on what timescale?
The simple answer is “no!” – we do not see any
meaningful changes leading up to actual Brexit,
nor for the medium-term of, say, five years after
that - related to the UK leaving the EU.
But there are already such enormous changes
taking place, and inevitably that means the
cost of taking card payments should be actively
considered by all organisations.
So, why do we think that Brexit will bring no
change in the foreseeable future?
Primarily because the UK Government was not
only an active supporter of all aspects of the
changes, but also because the spin they put
on it was one of maximising the reduction in
retailers’ costs. It is difficult to see them back-
tracking on that as, crudely, the beneficiaries
would be seen as the politically unpopular
banks, and the cost would potentially fall onto
consumers through the risk of increased
retail prices.
Secondly – whatever one’s politics – it is unlikely
an alternative government would favour banks
over consumers in the post-Brexit five-year
horizon that we are considering.
So, we are drawn to the conclusion that the
primary aim of the interchange changes – that
of potentially driving £750m of costs per annum
out of retail prices – is going to remain.
What does ERA’s Payments Team think needs
to be looked out for?
Credit Card costs should fall from levels seen
prior to December 2015. The clearest impact
of the changes has been a fall in interchange
from the widely-accepted average of 0.85% of
transaction size to 0.3%. Of course the acquirers
have other costs to consider, but any business
that has not seen the relevant tariffs fall by
at least 0.5% of transaction values, needs to
consider why that is the case.
Debit cards are a little trickier than credit
cards. Here interchange costs averaged around
8.5p per transaction for Visa Debit cards, which
account for about 80% of such transactions in
the UK. The changes led to a cost of 0.2% of
value plus 1p, with an overall cap of 50p for
secure transactions effective March 2015. That
means that any business where transactions are
less than £35 on average should have seen the
cost of such activity fall.
Debit cards have been complicated further
as – effective 1st September this year – the
cap is being removed. This implies that high-
ticket retailers need to be really sure of their
ground before proactively challenging tariffs.
Equally, thought needs to go into accepting or
challenging any proposed changes notified
by acquirers.
ERA expects the card schemes to develop and
introduce other charges to replace the income
lost through the interchange regime changes.
Or existing “other” charges to be increased or
more widely applied.
The interchange environment is in a state of
considerable flux just now, and the situation is
not helped by the fact that not only was (is?)
the IT of many of the acquirers not fully up to
the task now needed, but in some instances a
strategic way forward is not clear.
Whilst maintaining a constant awareness of both
the market and the costs faced by that market,
our actions are solely with our clients’ interests
in mind. We believe that any work starts with
gaining a full understanding of current and
planned activity, and only then seeking to
negotiate changes.

Temporary Labour – asset or overhead?
by Steve Stiles
According to the most recent CIPD UK Labour
Market report, most employers are projecting
a steady-as-it-goes and ‘business as usual’
approach when it comes to recruitment.
However, the indications are towards a
deterioration in hiring intentions over the next
few months as a result of the Brexit vote.
Significant numbers of employers are also
signalling higher costs, greater recruitment
difficulties and lower investment in the future
as a result of Brexit.
Interestingly, this view is not necessarily
supported by the latest Office for National
Statistics UK Labour Market Report. Between
January and June 2016, the number of people
in work in the UK increased. There were 31.75
million people in work - 172,000 more than for
January to March 2016 and 606,000 more than
for a year earlier.
Furthermore, a recent report by the Association
of Professional Staffing Companies indicated
that this increase in market demand was
fulfilled by both permanent and temporary
placements, with temporary job placements
up 8% and permanent positions up 6% on the
previous year.
With such a backdrop of uncertainty, the labour
market shift towards a more flexible approach
to staffing, including temporary labour, is likely
to continue so that companies can scale their
business performance.
This change is being driven by a number of
factors, and for businesses the benefits are
clear. Labour is one of the biggest costs for
businesses and, in an uncertain economy,
the last thing they want is a high headcount
when orders are falling. A workforce including
temporary staff enables businesses to have
greater flexibility in managing changes in
demand for products or services. It also enables
businesses to quickly inject talent to meet
specific shortfalls or competitive challenges,
without incurring the costs and time delays
of training. This also opens the talent pool -
temporary workers can be drafted in to fill
positions left open by any skills shortage.
Having a more transient workforce can
also keep a business innovative. New and
different injections of ideas bring with them
fresh thinking, new approaches to problem
solving and varied experience. It can also be a
screening device for potential recruits to their
permanent workforce.
Research findings from the UK Commission for
Employment and Skills suggests a projection
of strong growth in construction, information
technology, health & social work and service
sector positions over the next five years. These
sectors are typically considerable areas for
temporary labour usage.
With the recent Brexit vote, the temporary
labour industry is likely to evolve further.
Recent changes to government legislation
around minimum wages and pension
contributions will increase temporary staff rates
and put a further pressure on the bottom line
for businesses. Typically the average cost of
temporary labour to the business is greater than
the equivalent permanent member of staff, so it
does require an element of planning and process
to ensure the contractors arrive when needed
and depart once the requirement has passed.
Streamlining the HR processes supporting
recruitment, succession planning and
internal skills development, in support of the
business strategy, will also help increase staff
engagement. Improving demand and supply
resource forecasting processes will help reduce
the reactive demand for recruitment, including
temporary labour, which can sometimes lead to
uncompetitive commission rates being charged.
In our experience, which includes a wide range
of UK and International workforce planning, ERA
are well placed to provide independent advice
and guidance around all aspects of recruitment
with a focus on improved value for money.

Dealing with post-Brexit IT price rises
Information Technology by Simon Atkinson
There have been many warnings and
predictions about the outcome of the Brexit
vote and its ongoing consequences, both on
a macro-economic level and also in more
specific areas of business in the United
Kingdom.
For consumers of IT, whether personal or
business, there are already consequences. For
example, Dell introduced a double-digit price
rise in the summer, blaming Brexit. HP has
followed suit, paving the way for others. But
why those manufacturers?
The reasons are quite simple. Hardware
manufacturers operate on low margins and
source products form the Far East, in a market
dominated by the US dollar. When the Brexit
vote was confirmed, sterling fell sharply against
the dollar, instantly wiping out a chunk of the
margin from sales in the UK. Further margin
is eroded by discounting and by the indirect
sales channels favoured by many of the low
margin, high volume vendors in the IT hardware
space. Therefore, an adjustment had to be
made to compensate for the abrupt change in
circumstances – which meant raising prices.
It is also worth noting that the same vendors
are struggling to sell equipment more than
ever before, due to the shift towards cloud
adoption. This has reduced the volume of sales
to corporates and even though the pound is now
showing signs of recovery against the dollar, the
general picture for PC manufacturers remains
fairly grim. Because of this, it is unlikely prices
will be reduced, even if sterling recovers
fully. In any case, the mood of uncertainty
surrounding Brexit is likely to continue for some
time, thus discouraging discretionary investment
– a further blow to them. So, it is actually far
more likely we will see further price rises,
rather than falls, over the next two to
three years.
So what can clients do about this?
Well, there are three options:
1. Increase IT budgets by at least 10% to
compensate for the unplanned additional
cost you will have to bear.
2. Reduce expenditure to stay within the
existing budget structure – in other words
reduce the actual number of projects you
were going to undertake.
3. Take steps to find savings in the costs paid,
so that money saved can be reinvested in
planned projects – that means no budget
increase and no reduction in planned
efforts either.
The third option sounds like a utopian view.
However, it is possible in some circumstances.
Expense Reduction Analysts are presently
running a number of IT projects with this goal in
mind – and more importantly we are succeeding.
Savings are being identified and/or retrieved
from vendors, which is having the effect of
nullifying price rises and in some cases going
beyond that to create a significant net gain.
This does not only apply to hardware. Software,
support and services also have a part to play in
optimising spend, without reducing quality, as
do hosting, data centres and communications.
By taking a holistic view of the IT budgetary
requirement, we are able to focus in on the
areas where we can make the greatest impact,
delivering budgeted cash back to clients and
helping them to continue necessary IT provision
and investment in their businesses.

6 Steps to maximise your revenues from scrap metal
Waste by Pete Bramhall
Take control of the relationship
I am often struck by how unbalanced the
relationship can be between companies who
produce scrap metal and the scrap merchants
who buy it from them. For example, it is
common for the scrap merchant to decide
how much they are going to pay (per tonne) at
the end of the month following collection and
inform the supplier how much to invoice them.
No negotiation; no prior notification. Would
manufacturers sell any other product
to customers on these terms?!
Understand the market
Of course, it is hard to negotiate effectively
without knowing the market value of your
scrap. Given that around 60% of UK-produced
scrap is now exported to markets such as Turkey
and India, it is necessary to keep abreast of
both domestic and export market trends.
Non-ferrous metals are traded on the London
Metals Exchange, which can give rise to scrap
price volatility from trading in commodity
investments. Currency fluctuations can also play
a part in export pricing and have clearly done so
since the Brexit vote hit the value of sterling.
Ensure you see the benefits of market
upswings
Scrap metal processors inevitably try to pass
on to suppliers the full amount of each drop in
price and have done so in recent months. When
prices rise again they invariably try to hold on
to a chunk of any increase in order to increase
margins. The vast majority are able to get away
with this, as most contracts are not tied into
market movements.
Check your weight data
Another area of concern is with weight
recording. Rebates are typically paid based on
the weights recorded by the scrap merchant’s
weighbridge and computer systems. It is
important that regular auditing is carried out
to minimise the chance of errors resulting
from missing tickets and under-reporting of
weights either through error or deceit. Whilst
we aren’t suggesting that systematic fraud is
commonplace, it isn’t exactly unheard of either.
Keep it clean
The value paid for scrap metal depends partly
on the ‘grade’ of the material. Higher quality
grades naturally attract higher prices. Often it
is in the scrap merchant’s interests for scrap
to be well segregated and both parties can
benefit from this. However, sometimes they
are happy to let you downgrade your material
by contaminating or mixing grades together,
especially if they can easily process or clean it
and upgrade it themselves before selling it on.
Keep it safe
Theft of scrap metals, especially the more
valuable non-ferrous grades, was enough of an
issue a few years ago to cause the police to set
up a national task force to tackle the crime. The
success of this operation, helped by declining
prices in the interim, means that the situation is
no longer acute and headlines about cancelled
trains due to theft of cables have thankfully
subsided. But nevertheless this remains a
significant issue. High value materials need to
be kept under lock and key.

The cost centre allocated was ‘Waste’, so
Pete Bramhall conducted ERA’s no-nonsense,
fully-engaged process, whilst Simon ensured a
dialogue between the two for maximum clarity
for the charity. And it didn’t go unnoticed.
“The difference in how the two companies
approached the demonstration project was
stark. ERA really stood out not just for the
levels of saving achieved, but the manner in
which they handled the process from start to
finish. That’s what led me to work with them.
They were incredibly thorough, collaborative
and communicative throughout and I could see
they offered a truly managed service, which is
exactly what I was looking for,” explains
David White.
Providing specialist troops on the ground
Following appointment, ERA has now delivered
14 successful projects, with a further three in
the pipeline and more to follow.
For David, a key attribute in this successful
partnership is ERA’s presentation of the very
best, tailored solutions, with absolutely no
pressure to commit: “Despite the fact that they
get more money the more we save, there is
absolutely no pressure at all from ERA – that’s
very special. Not only do we have the final
choice when results of a project are presented
to me, there’s also no pressure to change
suppliers if we don’t want to. Simon and his
team come in as part of the project
and benchmark everything we are buying.
They really get a good grip on how much you
are spending. Then, unlike other companies
who just say, ‘here’s your price and we’ll take a
percentage’ they remain fully engaged with you
for the duration of the process. They assist with
supplier transitions and they do follow-up audits
to ensure you’re getting the saving you were
promised. If there are problems, it’s ERA who
goes back to the supplier. They basically do all
the hard work so that we can get a report to see
the final savings”.
ERA’s client relationships don’t end with
identifying the best supplier and saving
costs. Each specialist manages any changes
to new suppliers or improvements to services
with existing providers to ensure seamless
transitions. Ongoing reviews validate that the
promised service levels are being met, and at
ERA we pride ourselves on an open channel of
communication between all parties.
Trust and collaboration
The level of trust and collaboration that has
been built up within the business has resulted
in an open book policy between ERA and Sue
Ryder. So much so that David regularly provides
Simon with a copy of his purchase ledger for
review to identify new opportunities. Simon
and the team assess the expenditure and
commercial commitments in order to analyse
what that spend is made up of. They identify
potential savings or, where there is no or limited
opportunity for savings or improvements, they
recommend staying with the current suppliers
and arrangements.
CONTINUED FROM FRONT PAGE >>>
To read the case study in full, please visit:
expense-reduction.co.uk/sue-ryder/
WWW.EXPENSE-REDUCTION.CO.UK

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