Need help managing costs? Distributors can lend a hand
Staff -- Purchasing, 5/15/2003 2:00:00 AM
One way office supplies distributor Staples is helping customers cut costs is by eliminating returns. Returns are viewed as an annoyance by customers and can be costly for distributors to process. Beginning this spring, the company is testing a new 'no returns' program with five customers. Under the program, if a customer is not satisfied with an item he or she simply informs Staples of this and they will be issued a credit. Then, the customer may donate the item to charity.
Jay Baitler, senior vice president, contracts, Staples Inc., Framingham, Mass., views this experimental program as a potential 'shared value opportunity'. The term is used by Staples to describe savings it shares with customers which result from process improvements. Reducing returns streamlines internal processes, helping lower costs. Other shared value opportunities include offering customers incentives for raising average order size and shifting order placement to the Internet.
Staples is not the only big office supplies distributor keenly aware of customer efforts to keep a tight rein on rising costs, especially in this sluggish economy. In response to demand, office supplies distributors are introducing many new and innovative programs developed to help corporate buying operations keep costs in check. Distributors have fine-tuned usage reporting activities, expanded product lines, beefed up efforts to help with challenges of implementing national and global agreements and launched new versions of e-commerce systems. Here's a look at some specifics:
Understanding costs
Customer Insight Reports (CIR) from Boise Office Solutions provide its customers with detailed information on end user purchasing activity. Through the reports by which Boise perhaps knows more about the buying habits of a customer's end users than the customer, the office supplies distributor can relay such information as frequency of order placement, items ordered, and ordering tool (phone, fax, or Internet). The distributor has capability to gather this information on a multitude of end users working at multiple locations. This helps corporate purchasing monitor user compliance to national agreements. Boise provides about 1,000 of the reports regularly to its customers.
'The CIR gives our customers a better understanding of control, compliance and cost drivers,' says Dave Goudge, division senior vice president of marketing, Boise Office Solutions, Itasca, Ill. 'If a customer doesn't want end users to purchase furniture from us or if they want them to buy a certain kind of toner (one for which they negotiated a discounted price), we also can communicate this message to the end user at the time he or she is placing an order.' Messages can be customized, for instance, to direct end users to place orders for office supplies through diversity suppliers or to buy environmentally friendly items such as recycled paper.
Boise now is working to gather this information and present it electronically to customers via a 'dashboard' on their computer screens each morning. These dashboards would list such potential cost savings indicators as contract compliance, ordering method, etc. and alert end users when these thresholds are violated. This information can be relayed by individual or by location (i.e., a site is complying to contract 42% of the time.) Similar information can be communicated to the customer's Boise account manager. The company expects to have this technology available to customers later this year.
Another way Boise helps customers reduce costs is by offering a formal paper audit. Leveraging resources of its parent company, the supplies distributor assigns a team of paper experts to spend 2-3 days analyzing a location's paper usage habits. 'Through the audit we may learn that a customer may be using very expensive paper for internal use,' says Goudge. 'Suggesting a less expensive paper will reduce costs without sacrificing functionality.'
Boise also offers a POWER series of motivational and job-training seminars. 'The current economic environment is really tough on large business to business customers,' says Goudge. 'They've cut back on everything, not just office supplies purchasing.' Through the series, employees of customers have an opportunity to learn more about manufacturers products (Boise does not use the sessions for a sales pitch) and hear such motivational speakers as Barbara Bush and Christopher Reeve.
Value-added services
Customers want their spending data sliced and diced,' says Mark Hoffman, president & CEO, Corporate Express, Broomfield, Colo. A wholly owned subsidiary of Buhrmann, Corporate Express has operations in more than 20 countries. 'Customers want to monitor contract versus off-contract purchasing, branded label versus private label buying. They like to see cost savings available to them through various analyses.'
As a value-added service, Corporate Express offers customers a product substitution program through which it determines usage and product mix. Under the program, the office supplies distributor will substitute private label alternatives where appropriate. Through its global network it has capability to do this for customers with locations in Europe, where such programs are more popular than in the U.S. Use of private label products makes up about 40% of a company's office supplies purchases in Europe; in the U.S. the figure is closer to 10%, excluding paper.
Executives at Corporate Express are working closely with their counterparts in Europe and Asia to coordinate global purchasing for the company's private label, to help further reduce costs for customers. 'We will probably use one common brand name across the globe,' says Hoffman.
With $200 million in new global agreements in 2002, Corporate Express has a dedicated international sales organization through which it rolls out implementation of its agreements with global customers country by country. It provides customers with usage information to help manage and compare a company's spend across countries. In response to customer demand (more than 30 companies) for a presence in Mexico, Corporate Express recently entered into a partnership with Papeleria El Guerrero, an office supplies distributor, located there.
For its customers looking to expand the geographic scope of their relationship with their office supplies distributor, Staples has an alliance with Lyreco, a large contract player in Europe and the Far East. Both companies sport similar operations and core product offerings; each takes part in management meetings of the other. Lyreco also recently started a Customer Advisory Board like Staples. (At the Customer Advisory Board meetings, Staples customers gather to share best practices in office products purchasing.) Used to be, companies in the U.S. were looking to expand agreements to sites located in Europe and the Far East. 'In the past nine months, however, companies located in Europe have become interested in expanding their agreements with Lyreco to the U.S.,' says Baitler. 'For the first time we are seeing a two-way flow.'
E-commerce
More than half of all office supplies distribution business is now being conducted electronically. Big players Staples, Boise and Corporate Express all report that at least 50% of orders are placed via the Internet and this figure continues to grow.
In February, Staples launched a new version of StaplesLink.com, its business-to-business procurement Web site. All orders-whether placed via phone, fax or online-can be tracked by purchasing managers in one location.
In August, Corporate Express introduced the latest version of its e-commerce site, E-Way. Functionality includes ability to track order status and an enhanced product catalog.
Office supplies distributors concur: Now that end users are comfortable placing orders online, corporate purchasing managers are looking to suppliers to expand their product lines.
'A significant majority of customers are clamoring for capability to order additional products lines through E-Way,' says Hoffman. Beginning this past fall, they got the opportunity; now customers can place one order for a multitude of related products: office supplies, imaging and computer graphics supplies, software and business forms and printing services.
At the same time, Staples contract customers can purchase copy and printing services available through the company's retail stores nationwide, using their Staples convenience card or procurement card. With the card, customers receive the lower of the retail or contract price.
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