Cutting noncore expenses can be at the heart of survival - Houston Business Journal:

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The COO of pharmacy distributor PBA Health got a call from a fello w church member who did consulting askinf whether PBA could reduce its Balcom wassomewhat hesitant. “There’s always a reluctance on thoswe who oversee these kinds of areaw of the company to lift the hood and see howwell we’rw doing,” Balcom said. Nevertheless, the compangy hired to see whether it coulc cut somenoncore spending.
In packaging and freight the company wasspending $650,000 annually between and On the advicw of the consultant, PBA recast its reques t for proposals to carriers on its In the end, the process spared PBA Healty $80,000 to $90,000 Balcom said those savings translate into two to 2.5 full-time equivalents in the officd and four in the warehouse. With companiese quick to shed employees to save noncore expense reduction has emerged as an alternative to job cuts and compromisin productionand service. “When you save on you save on telecommunications — that’s all savings that drops on your bottom line and that does not adverselyaffecg service,” Balcom said.
At its simplest, noncore spending amountsz to costs associated with running a businessthat don’gt involve direct personnel expenses or raw materials. and “indirect expense” are interchangeable termss commonly associated withnoncore expenses. On these costs can represent 15 percent ofa company’s said Kris Kauss, director of Expense Reductionb Analysts in Leawood. “Here’s the way I typicallyt frame it: It is pretty much anythingh that is important but supportivs ofthe business,” he said. “For most of our telecommunications do not definea business, but they are important.
” Informatiom technology, supplies, phones, computers, equipment maintenancew and equipment such as copiers typically encompasa noncore expenses. Steve Cattron, managing directo r of Expense Reduction said CFOs and COOsoftehn don’t know how many minute noncorer expenses they incur. “At the C-level, it’s surprising the lack of detailed knowledge that exists about spending incertainh categories,” he said. “They don’y know how much they’re spending on small-package freight.” Kauss said that findinvg noncore expenses starts with identifyint areas that supporta business’s output but do not tie in directlyu with its product or service.
A law firm, for would not find noncore expenses in its assets thelawyers — but perhaps in paper, copy machines, equipmen and insurance. According to Expenswe Reduction Analysts, payroll processing, janitorial supplies, office productd and merchant card fees are among the categorie s that typically can reveal the largest cost savingsby percentage, with each drawint average savings of more than 30 Many noncore expenses are tied up in contracts or leasezs with vendors and suppliers. Slicing many noncore expenditures lies in renegotiatinh those contracts beforethey elapse.
Kauss and Cattrojn said significant savings can be found in reworkinga Furthermore, many vendors have grown amenable to requests to change the termsz of their arrangements with fearful of losing business. “Today’s suppliers don’t want to experiencd any more attrition than they already saidBrian Wietharn, managing partnerd of spend management advisory solutions for ’ Kansas City office. “Something is better than so even if supplierse have to get a 5 percent reduction in unit costs acrossethe board, that’s something they will give up to keep from losiny that business.
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