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Managing Perceived Over Valued Products

By Neil Grime

Occasionally an organisation will have a specific product or service that will have a perceived higher degree of importance. It will actually be or be seen as fundamental to the success of the business and any disruption could cause irrevocable damage to its standing with its customers and repeat business.

However, with the best of intentions to protect the business this can result in being closed to alternative solutions, which with the right and thorough approach can deliver significant cost reduction.

This reads like a case study and the points will need to be adapted depending on the product or service under review.

However, this should provide insight into all the points that need to be considered when reviewing more sensitive or critical products. 

A manufacturer of high-end material handling equipment had for a long period of time using a well-known brand of lubricants when servicing the equipment at the client’s premises.

These were all the points that were covered to deliver not only a significant cost reduction but a superior service level and a range of products that maintained the same servicing schedule and performance of equipment.

  • Obtained details of all current products, including product codes, full description, pack size or unit of supply, annual quantities and current costs.
  • Understood any minimum order values, delivery charges and delivery lead times
  • Highlighted all add on services such as a collection of waste after servicing
  • Obtained copies of product specifications and COSSH classifications
  • Confirmed current servicing frequency for all equipment with the client
  • Obtained details of customer OEM (Original Equipment Manufacturer) approvals for each lubricant and its application.
  • Carried out detailed review ensuring all product, service and approval requirements were understood and matched.
  • Ensured proposal mirrored the OEM approvals for each equivalent lubricant
  • Obtained written assurance that the service frequency of the equipment would not increase. This also included a guarantee to cover all costs to revert to the original lubricant should this prove not to be the case in practice.
  • Confirmed service level and lead times for delivery to locations across the UK. This was also critical, as the products needed to arrive at the same time as the service engineer.
  • Ensured suppliers were using the client’s correct product codes and able to allocate each order to the correct cost centre.
  • Agreed with the supplier and client an initial price guarantee together with a procedure and a minimum notice period for any price changes that were due to global oil costs.
  • Arranged initial and successful trial of a few locations. Implementation across the UK was then introduced on a next service basis.
  • Held regular performance reviews with the supplier and client to catch any issues early and resolve them.

Neil Grime | UK Business Advisors (ukba.co.uk)

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