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

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The COO of pharmacy distributor PBA Healtjh got a call from a fellow churcn member who did consultinh asking whether PBA could reducseits spending. Balcom was somewhat hesitant. “There’z always a reluctance on those who oversee thesee kinds of areas of the company to lift the hood and see howwell we’rr doing,” Balcom said. Nevertheless, the companyg hired to see whether it could cut somenoncoree spending. In packaging and freight alone, the companuy was spending $650,000 annually between and On the advice of the PBA recast its request for proposals to carriers on its Inthe end, the process spared PBA Healtyh $80,000 to $90,000 annually.
Balcom said those savings translate into twoto 2.5 full-timd equivalents in the office and four in the With companies quick to shed employeesx to save costs, noncore expense reduction has emerged as an alternatives to job cuts and compromising production and “When you save on you save on telecommunications that’s all savings that drops on your bottojm line and that does not adverseluy affect service,” Balcom At its simplest, noncore spendingg amounts to costs associated with runninyg a business that don’t involve direct personnel expenses or raw materials.
“Overhead” and “indirect are interchangeable terms commonly associatedr withnoncore expenses. On these costs can represent 15 percent ofa company’s expenditures, said Kris director of Expense Reduction Analysts in Leawood. “Here’sz the way I typically frame it: It is prettyu much anything that is important but supportivd ofthe business,” he said. “Fotr most of our clients, telecommunications do not definwa business, but they are important.” Information supplies, phones, computers, equipment maintenance and equipment such as copiers typicallh encompass noncore expenses.
Steve Cattron, managinb director of Expense Reduction Analysts, said CFOs and COOs ofte don’t know how many minute noncores expensesthey incur. “At the it’s surprising the lack of detailedr knowledge that exists about spending incertain categories,” he said. “Thegy don’t know how much they’re spending on small-packagd freight.” Kauss said that finding noncore expenses starts with identifying areas that supporta business’s outpurt but do not tie in directlyh with its product or A law firm, for would not find noncore expenses in its asseta — the lawyers — but perhaps in paper, copy equipment and insurance.
According to Expense Reductionm Analysts, payroll processing, janitorial supplies, office productsz and merchant card fees are among the categories that typicallgy can reveal the largest cost savingsby percentage, with each drawing average savings of more than 30 Many noncore expenses are tied up in contracts or lease with vendors and suppliers. Slicingy many noncore expenditures lies in renegotiatin those contracts beforethey elapse. Kauss and Cattron said significangt savings can be foundd in reworkinga contract. Furthermore, many vendor have grown amenable to requests to change the terms of theirf arrangementswith customers, fearful of losing business.
“Today’s suppliera don’t want to experience any more attritionn than theyalready have,” said Brian managing partner of spend management advisor y solutions for ’s Kansas City “Something is better than nothing, so even if suppliers have to get a 5 percentr reduction in unit costss across the board, that’s something they will give up to keep from losingh that business.
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