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A series of articles on the world of procurement from the Insider Procurement consultancy team.

Property directors: How to cut TCO by 20% per annum AND improve service levels

Posted by Phil Denson
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Property directors and facilities management companies are always under pressure to reduce costs in everything that they do, but there often comes a point when a cheaper alternative fails to deliver the service that is required.

Getting the absolute cheapest plumbing service in the area might force the supplier to cut corners in order to deliver at that rate. They may prioritise higher paying customers and be slow to respond. They could add unexpected charges to the bill or simply not turn up, leaving the facilities manager with a disgruntled customer at best, or water damage and more.

So what do you do?

  • Pay a bit more for a (hopefully) better service?
  • Put suppliers through a trial before awarding a contract?
  • Or think a little differently?

Disruptive procurement is about the latter option - thinking about the issue differently.

In most commercial organisations it is the TIME it takes to effect a repair that leads to:

  • customer dissatisfaction, and
  • losses whilst the building is not functioning

In some cases the cost of the repair is insignificant when compared with operational losses.  One solution that works well in multi-site businesses is to invest in a third party “triage” service to manage requests and schedule service providers accordingly.

This can mean increasing the overall cost of the maintenance services, but we know that with careful setup and monitoring, services like this can result in an overall reduction in costs and increased customer satisfaction.

In one case, we convinced a property manager that they needed a facilities management company to try to resolve issues over the phone before calling on any service engineers, and then manage the whole process to a conclusion.

But then we went a step further.....

...we constructed a deal that resulted in instant payback.

On average, they had been spending £5 million per year on maintenance. It was variable, of course, depending on the amount of requests in any given year.

The facilities management company that we selected were so confident about the results that they agreed to manage everything for a capped annual fee of £4 million.

As a result, they immediately saved £1m in the first year.

The business has continued to enjoy those savings each year, provided a superior service AND achieved high satisfaction ratings from their tenants.

This example is a great illustration of how old fashioned procurement methods need to change. Dealing with the problem (how to reduce costs) is not simply a matter of tendering and pushing costs down further. Disrupting the process, challenging assumptions and creating a new solution to an old problem often gives the business additional important benefits way beyond simple cost reduction.

Old fashioned procurement methods need to change: disruptive procurement drives benefits beyond simple cost reduction.

To read more about this and other examples of disruptive procurement in action, download our eBook "11 thought-provoking examples of disruptive procurement in action".

Disruptive Procurement eBook Cover

Topics: Case Studies, Property Management, Disruptive Procurement, Facilities Management