Commodity based products like plastics, food and chemicals alongside utilities have seen their pricing increase exponentially this year, and across multiple industries there are supply issues which make obtaining tender pricing a struggle.
The impact of commodity product and utility cost increases is generally having a devasting effect on a company’s financial health, particularly in instances where they are limited in passing these increases onto their customer base. Margins are squeezed and traditionally strong businesses are being forced into loss making.
Cardiff-based consultancy and Chamber member Auditel has released a nine-point plan to help businesses mitigate the impact of rising base costs in their supply chain.
David James, Director at Auditel, said: “In the vast majority of these cases the effect of increases in these cannot be avoided, but there are measures and strategies that can be taken to limit the impact:
- Reducing consumption and frequency, and improving wastage is an obvious first step. This will improve your costs, but also your carbon footprint – something that is becoming so important now, and indeed your carbon neutrality statement will likely form a requirement for all key tenders and opportunities that your business applies for in the future
- Redesign products in instances where the changes will not have a negative effect on customer experience
- Ensure flexibility is built into all key contracts going forward. We saw a lot of wastage during the pandemic, with lease and hire purchase assets sitting dormant in workspaces and factories that were absorbing costs over three-to-five-year contract terms
- Businesses should also improve payment terms to optimise cashflow
- Pass costs to their customer base where they can, e.g., offer free returns for delivery services
- Continue to gain insight from your competitors
- Review your product catalogue. Ask yourself, can you switch from branded to unbranded products for non-customer facing products? Are the products we’re using the most practical? And, if the answer is no, refurbish existing assets instead of replacing them
- Business leaders must look to plug any leaks in the business, by tightening your travel expense policy, reviewing company credit cards or just turning the lights off when everyone leaves the building
- Investing in a procurement review is a great way to ensure you have a commercially minded figure who is knowledgeable of the current situation and can help you see what can be done
“Whilst individually the impact of these steps might be nominal, when combined across a range of improvements the difference can be significant.”
Auditel provides an outsourced cost and carbon reduction offering to its client base, providing full scope procurement services to medium and large sized businesses and most categories of indirect and overhead costs.
Due to recent expansion with the addition of several key clients, Auditel are currently relocating to 3 Cwrt Y Parc, Cardiff Business Park. With the help of Cardiff University and Venture Graduates the new team will be in place in the new premises by mid-October.
David said: “This is an exciting time for our cost and carbon reduction consultancy, with a growing requirement in Wales for our services. Helping companies on their journey to net zero whilst at the same time reducing costs will prove to be invaluable over the coming years”.