Buying Power Potential

FM must be sure to align with the business’ wider goals.
 

Increasingly, facilities managers are being asked to  extend their purchasing responsibilities, either working in partnership with or assuming the role of procurement managers. With organisations under pressure to reduce their property footprint as a result of the global recession, the challenge facing such managers in this shifting landscape is to ensure that the facilities function continues to support the business’s strategic goals.
 

THE SOLUTION
Portfolio consolidation programmes offer an opportunity to  review and streamline service delivery. The current economic environment provides and impetus for facilities managers and procurement professionals to review the services received at each site across the portfolio and identify opportunities to drive better efficiencies. This could be achieved by reducing overheads, consolidating the supplier base, changing the service scope or realigning service-level consistency, as appropriate.

The key steps in a facilities-based procurement programme are considered below.
 

SERVICE REVIEW
Levels of service can differ great across geographically diverse estate, either as a reflection of different building uses, or accidentally as a result of historic arrangements. A comprehensive review of all sites is the starting point  for facilities mangers to determine core requirements and measure the standards currently being achieved.
 

Depending on the property estate, facilities managers can incorporate as many as 20 different service lines. With such as diverse remit it is important to identify the delivery models in use.  Services can be in-sourced, outsourced, manage by an agent, bundled or single service. Each model has its own merit and mangers should gain an understanding of which best suits the needs of their organisation.
 

COST MANAGEMENT
Increasingly, facilities managers have responsibility over the sourcing strategies and procurement processes for the services they control. They may be individually responsible or have a procurement manager.
 

A clear view across the supply chain for each service is key to improving financial performance. An organisation may have a relationship with a managing agent, who has contract with another service provider, who in turn might outsource specialist elements of the service.  Clear visibility is necessary because each additional link in the chain adds a layer of complexity and increases the total margin paid by the end user.
 

Facilities managers should also insist on having an “open-book account” with their suppliers.  This requires the supplier to be transparent about where its revenue streams are generated. A supplier may seem attractive because of low management fee, but an open book account may demonstrate other hidden  areas where costs are recouped, adding to the overall price.
 

Likewise, prices should be benchmarked against industry averages. However, it is easy to become preoccupied with unit prices for goods and services. While it is important to ensure good value for money, focusing solely on the cost of a pen or light bulb will not result in a major  improvement in terms of service delivery.
 

RISK MANAGEMENT
Current market conditions offer an opportunity to shift as much financial risk as possible to a supplier. Ideally, suppliers, rather than clients, will bear the costs of any overspend.  This decreases the risk for the client and helps achieve results with a predetermined budget.
 

It is important to scrutinise the financial strength of any potential supplier to ensure security of supply. The stability of a medium-term supplier relationship versus a short-term one, enables greater knowledge transfer and opportunities for value-added services. The financial security that the supplier derives from a medium-term account will in turn ensure that the clients account receives high priority, resulting in better service and terms.
 

COMMUNICATION
Clear communication is vital to the success of facilities and procurement change programmes, particularly where there is a visible impact on end users. It is vital to engage with key stakeholders as soon as possible, to tailor this communication to suit the audience and articulate the value of the proposition clearly to the business. The benefits must be emphasised, whether they are financial savings, service delivery enhancement, increased flexibility, following best practice, risk mitigation or generating a new revenue stream.
 

ALIGNING WITH BUSINESS GOALS
Managers should be careful to take a wider view of the facilities delivery model, contract models and service levels to ensure they align with the organisations own strategic drivers. Despite current challenges, the economic environment provides the opportunity to elevate property and facilities management on the corporate agenda as businesses look to rein in their costs and increase their ability to  respond to the vagaries of the marketplace. 


*Originally published in Facilities Management Magazine