How To Maximise Your Buyer Power

The larger your business, the more leverage you have with suppliers. Instead of suppliers manipulating their pricing for maximum profits, you’re able to use your spend knowledge to leverage buyer power, bringing cost savings to your business, while still making it a valuable proposition for suppliers to favour working with you.

It all starts with categorisation.

Using categorisation of sales to leverage bulk price discounts

1) Item categorisation

It’s one thing to list an item but it’s quite the other to tag it to the right category. One way to categorise items being purchased is to use a hierarchy.

1.      Chief category

2.      Category

3.      Subcategory

Take for example replacement keyboards for computers. You could categorise that as office supplies. Using the hierarchy above though, that could be computing as the chief category, the main category, electronics, and the subcategory, replacement parts.

Costs could be cheaper by buying in from an electronics supplier offering bulk price discounts that aren’t on offer from a general supplier of office equipment.

The choice of categories gives your business more choice over suppliers rather than sticking to one general area. The reason being, suppliers in a specialised category will have a higher price per unit and therefore charge more for their expertise. It’s not to say you couldn’t get a better deal elsewhere on the same equipment.

Categorise what you buy so that you can accumulate the most units per supplier based on your category hierarchy to take advantage of bulk unit pricing.

2) Supplier categorisation

As the first step is about maximising the units you buy in at one single time to take advantage of bulk pricing, this part strengthens that to ensure that whatever you are buying, you’re only dealing with the minimum number of suppliers. That’s advantageous in itself, however what it’s also doing is putting buyer power in your favour because the more you order with one supplier, the better leverage you have to negotiate better pricing per unit.

3) Maximise category budgets

Whatever category’s your business spends on; you need to know them in order to maximise them. Ideally, what you want to do is lower the number of suppliers which reduces your administration costs, but more importantly it increases your spend per supplier. That again, puts buying power in your favour. The best scenario would be to find one supplier who can deal with your chief category, main category and sub-categories.

4) Leverage your buying power

The categorisation of items you buy will let you narrow your choice of suppliers but that’s useless if you don’t play it up. When you request a proposal for anything, stress that you’ve categorised expenditure and let suppliers know your overall budget at an organisational level and that you expect favourable pricing based on the volumes of transactions. This will also help you take out any supplier that isn’t large enough to cater to your needs.

5) Review and negotiate if you need to

When you categorise your expenditure and assign budgets to categories and then further add to that multiple sites, there’s often times extremely large volume. Sufficient enough to leverage discounts provided you work with a supplier who can meet your demands.

Some will be too small to manage your demand. Larger suppliers are often more expensive until bulk price discounts are applied because that’s the business contracts they are focused on attracting. When you match your contract requirements to the specialities of suppliers who target your type of business with volume discounts, there’s huge cost savings to be had.

The fastest way to access the savings is by categorising what you buy, lowering the number of suppliers you have and increasing your spend budget per supplier in order to make it attractive for suppliers to propose discount pricing. 

Is Your Business Ready For The Retail Water Market?

Businesses across England are set to benefit in reduced water savings, and enhanced services when the new retail water market emerges.

There’s no fixed date as of yet for when England introduces the retail sector for water. It’s expected to be sometime around April of 2017. When that happens, you could see your bill drop and quite possibly by a considerable amount.

There may be some business owners dreading the change though, thinking that it’s going to be just another utility, invoice and more suppliers, adding up to increased administration costs.

When there are admin costs, there’s savings to be had.

What’s more is that commercial water and sewerage can be combined into the one supplier. Given that business customers will be dealing with retailers, along with the new supplier comes customer service.

As things stand just now, you can’t exactly call up the water board and have an advisor come to your site to provide you with a water efficiency report. You need to bring aboard a consultant for that service. Given it’s a new market opening, new retail water suppliers will be competing for your custom so there’s no telling what’s going to be on offer.

In addition to the water services, it’s expected that other utilities such as telecoms, gas and electricity may be offered under the one contract. That will be of benefit to multi-site operations, as it will drastically reduce the administration involved. On that note, so too will be how you manage your utilities.

With other utilities, such as gas, electricity and telecoms, you can manage your bills online, including settling invoices. That doesn’t currently exist in the water market. The current water market has been described as an “analogue service in a digital age” something that will be changing when the retail water market emerges. The entire industry will change for the better, making it easier for commercial contracts to be managed, and savings made by choosing your supplier carefully and managing the contracts efficiently.

The most savings will be made (and fastest) by larger firms with multiple sites. The reason being, those are the companies water retailers will be targeting in early 2017 in a bid to win competitive contracts. Right at the time when the majority of business owners who haven’t researched prior to the water retail sector emerging won’t know much about the changes therefore, won’t know of the true potential savings.

For efficiency, it’d be wise to keep an eye on the Ofwat regulated companies so you know the companies that can supply you with the water services you need.

Companies will be required to obtain a licence from Ofwat. Those who do meet the licencing criteria will be listed on the website here.

There are two licences:

1.      Water supply and/or sewerage licences (WSSL)

2.      Water supply licences (WSL)

Some water retailers will only be licenced to sell you a water delivery service, with others being licenced for both service delivery and managing the sewerage.

What to expect when the water market opens

When the market opens (expected April 2017) retailers won’t only be providing water. There will be smart meters and advisors. Real people to help you with monitoring your water usage, increasing water efficiency, thus reducing your wastage and the subsequent charges wastewater incurs. In other words, they’ll be able to help your business become greener and operate smarter.

While it is a new market for England, it’s not unique to the UK.

Scotland opened the water market in 2008. One supplier in Scotland was able to assist a caravan park to reduce the water consumption by 20% by harvesting rainwater. With water retailers acting as advisory services, partnering with the right supplier could become a pivotal part of your environmental or sustainability policy.

Another example to come from Scotland is in the public sector where bundled deals were tailored to five schools, reducing the cost of wastewater by £56,000 per annum. That was done by increasing efficiency by 44%.

Of course, in order for suppliers to measure the results, smart meters will need used and the retailers providing the service will need to include benchmarking as part of their service provision to guarantee you that they are actually offering you a service and not just selling you water.

As with everything that involves commercial purchasing and contracting issues - research the market before committing.

For multiple sites, there will be cost-savings to be had, and those smaller sized firms who don’t expect to save much, it’s likely to be another service that will benefit from collective purchasing so every size of business throughout England will be able to benefit from the open water market when it emerges. In particular, those who bundle together water, energy and telecoms as part of an energy management strategy. With that in mind, if your energy contracts are due to renew, it may be worth holding out for a few months before committing to a long term fixed rate, which will affect the amount you can save.

Be ready to save.