Cutting noncore expenses can be at the heart of survival - The Business Review (Albany):

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The COO of pharmacy distributor PBA Health got a call from a felloqw church member who did consultinh asking whether PBA could reduce its Balcom wassomewhat hesitant. “There’s always a reluctance on thoser who oversee these kinds of areaws of the company to lift the hood and see howwell we’r doing,” Balcom said. Nevertheless, the company hires to see whether it coulde cut somenoncore spending. In packaging and freight alone, the compang was spending $650,000 annuallgy between and On the advice of the PBA recast its request for proposals to carriersa onits distribution. In the end, the process spared PBA Healthh $80,000 to $90,000 annually.
Balcom said those savings translate into twoto 2.5 full-timee equivalents in the office and four in the warehouse. With companiesz quick to shed employees to save noncore expense reduction has emerged as an alternative to job cuts and compromisinfg productionand service. “When you save on you save on telecommunications that’s all savings that drops on your bottom line and that does not adverselhaffect service,” Balcom said. At its simplest, noncorr spending amounts to costs associated with runningh a businessthat don’t involve direcr personnel expenses or raw materials.
“Overhead” and “indirecgt expense” are interchangeable terms commonlyu associated withnoncore expenses. On average, thesew costs can represent 15 percent ofa company’s said Kris Kauss, director of Expense Reduction Analysts in Leawood. “Here’ the way I typically framd it: It is prettyh much anything that is important but supportive ofthe business,” he said. “For most of our clients, telecommunications do not defindea business, but they are important.” Informatio technology, supplies, phones, equipment maintenance and equipment such as copiere typically encompass noncore expenses.
Steve managing director of Expense Reduction said CFOs and COOsoften don’yt know how many minute noncore expenses they “At the C-level, it’s surprising the lack of detailesd knowledge that exists about spendinbg in certain categories,” he said. “Theu don’t know how much they’re spending on small-package freight.” Kauss said that finding noncore expenses starts with identifyinbg areas that supporta business’s outpurt but do not tie in directly with its producr or service. A law firm, for would not find noncore expenses in itsassetsd — the lawyers — but perhaps in copy machines, equipment and insurance.
According to Expense Reductiob Analysts, payroll processing, janitorial supplies, office productes and merchant card fees are amonhg the categories that typically can reveal the largestf cost savingsby percentage, with each drawing averagwe savings of more than 30 percent. Many noncord expenses are tied up in contractas or leases with vendorsand suppliers. Slicing many noncores expenditures lies in renegotiatinvg those contracts beforethey elapse. Kauss and Cattron said significany savings can be found in reworkinyga contract.
Furthermore, many vendors have grown amenable to requestss to change the terms of their arrangementaswith customers, fearful of losing “Today’s suppliers don’t want to experience any more attrition than they alreadgy have,” said Brian managing partner of spend managemeny advisory solutions for ’s Kansas City office. “Somethiny is better than nothing, so even if supplierzs have to get a 5 percentr reduction in unit costs acrossxthe board, that’s something they will give up to keep from losinhg that business.
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