The new normal is cost savings as companies in all industries today are learning to do more with less; less money and less people. With over 40 years of experience in transportation, logistics and supply chain management, LGE Execs Partner Walt Atkinson explains that cost savings goes all the way from HR and Finance to Operations and Supply Chain. By Jason Myers

When Walt Atkinson engages with a client whose primary objective is to cut costs, he starts looking in one of two places: their current capital expenditures and the supply chain.

“It’s a different environment out there today,” he says. “The money is just not there, and so many executives are more than a little upset that they can’t get the headcount they want or the money they want–but they’re finding ways to get things done, even if they have to stretch their brains a little bit.”

“The excuse is always ‘we need more software’ or ‘we need better equipment’. “But if you really look at how their using the software they already have, most companies on average were only using 15-20 percent of it’s capabilities. So if we can increase the effectiveness of the software or equipment that they already have (say up to 75-80 percent) then you can really examine whether or not more software or capital equipment is needed,” says Walt.

As a general rule, Atkinson explains that for every dollar that is under management control, companies could generally expect upwards of 20 percent cost savings on an annual basis. “At my last engagement, the company had a spend visibility at 32 percent on $4 Billion. So the cost savings were there, all we had to do  was get their spending under tighter management control.”

Easier said than done, however. Many large companies have over 15,000 suppliers. “It can be a painful process, but that’s where sit down with those that are responsible for procurement examine every supplier. In one company, I had to go through 2600 suppliers–but we discovered that they only needed 400.”

When asked about what they look for when vetting suppliers, Atkinson used the example of a Hotel that uses a lot of heating and air conditioning. “The company had 59 suppliers for items such as filters, thermostats, switches, pumps, and so on. When we added all this up, they were spending $1M per year. But because they were able to consolidate these products with 4 or 5 suppliers, they were able to save 10 percent–that’s $100K that goes directly to the bottom line.”

“Senior management knows how important cost savings is to the company’s bottom line, but that has to get communicated all the way down in the company to the front line, because those are the people that are spending the money,” he says.

And the reason that these cost savings have been overlooked in the past? “It was because it was never that important,” he says. “When we’ve asked individuals who were buying this stuff, they would say things like, ‘well, we’ve bought from this person for a long time.’ Yesterday’s companies spent money–they had purchasing departments that payed invoices. Now it’s called procurement, and that’s where spend visibility comes into play because it’s all about doing more with less.”