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Spend Management

3 Ways to Drive Savings with eProcurement

Improve Spend Management

First of all, let’s be clear, all vendors operate differently. Some honestly keep your best interests in mind when buying their products or services, while others play games with your account to optimize their revenue. That said, there is one underlying theme with almost all of them; the more you spend, the more you can (theoretically) save. This can be frustrating for a property manager…we want great prices but we don’t really want to buy 1,000 rolls of toilet paper to save $40. This is where Spend Management comes into the picture.

The fact is many vendor contracts encourage us to buy more in order to save more. Most vendors have spend thresholds in their contracts. Some contracts contain spend minimums that secure certain pricing. (e.g. you only get a 10% discount if you spend more than $100k). Other contracts have pricing bands. For example, if you spend above $100k/year, you get 10% savings on all products and if you spend $250k/year, you will save 15%. It can become a real battle of the bands.

That leaves us with the question, “How can we save more without increasing spending?”

Let’s take a look at 3 ways to keep spend management in check:

  1. Core List – a “Core List” is a basket of frequently purchased goods with exceptional pricing. Items that should be on a core list are things like copy paper, pens, trash bags, toilet bowl cleaner, paper towels, bath tissue, envelopes, light bulbs, batteries, smoke detectors, oven cleaner and so on. You get the idea. You buy these items regularly to keep a property running smoothly and with a Core List’s outstanding pricing, your portfolio will save big. eProcurement is a quick way for your entire portfolio to see the Core List, ensuring all property managers and maintenance staff are buying the right products at the right prices.
  2. Corporate Catalog – Product Standardization is a growing trend in property management. The logic goes something like this: If a group of apartments has the same appliances, the same kitchen faucets, the same carbon monoxide detectors, the same furnace, the same bath faucets, and the same ceiling fans, maintenance staff will be repairing the same equipment on a regular basis. The benefit here is two fold: one is on the maintenance team side, the second is at the corporate office. The maintenance team will be more knowledgeable about the products and will be able to fix them faster, reducing the man hours for repairs. This saves tons of time because the maintenance team will know exactly which smoke detector to install, which piece is needed to fix the range in the kitchen, and the go-to light fixture for the bathroom. Plus they won’t be driving to 3 different stores to find a $2 part. They can quickly find it in the corporate catalog and reorder for delivery. On the dollar side, the corporate office benefits from product standardization because the item cost is known ahead of time both for replacement and repairs. They can set the product list based on their budget ahead of time, and training maintenance staff on what to buy and where will prevent errant spending. Technology is simplifying the process of building and maintaining a corporate catalog. Learn more here.
  3. Order Approval – A ‘workflow’ or order approval routing is a method to keep spending in check before it happens. This component of eProcurement is disrupting the way invoices have been processed in the past. Previously, a manager was approving an Invoice. Think about it…they are approving something that has already been purchased. What can the manager do? Direct the buyer to return it? Or try to negotiate with the vendor after the fact? This wastes a lot of time and resources. Order approval means that a supervisor or asset manager can see what items a property or maintenance manager intends to buy, before the purchase actually takes place. This means the person in charge has the power to control spend management by seeing orders as they are placed, before the supplier receives the order. As soon as a team member places an order, the supervisor or asset manager receives an email notification with the details of the order. They can then approve, deny or edit the order, which then goes back to order placer. Not only does it regulate spending in the portfolio, it trains the team members to purchase according to the portfolio’s catalog and budget.

Spend Management across a portfolio can be difficult to keep tabs on. Adding eprocurement (a.k.a. esupply) will simplify the buying process and save time and money.

 

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