Page 4 - Getting a Handle on Unmanaged Spend - SIB Whitepaper

ineffective Negotiations
Contract and price negotiations are one of the more common methods of cost control. This approach can make you feel like you have a lot of
control, but the problem with negotiating on your own is that you only really know what you used to pay. This amount becomes a false benchmark for all future decisions.
This can make a 15% reduction look like a great deal even if you’re still being charged too much.
For example, services like off-site document storage are the same whether you’re a hospital, law firm, or a bank branch. Vendors, however, will arbitrarily scale prices based on the type of customer. In other words, the hospital may be using the same landscaping company as the restaurant down the street, but could be paying twice as much for the same level of service.
You may also be unknowingly paying excess for “fluff” fees like environmental, fuel, and administrative costs. This can conceal true pricing as the base rate may be low, but these hidden costs are where the vendor really makes their margin. Combined with annual price increases, these hidden costs can easily undo any savings you’ve won through negotiations.
Without data on real costs and expected margin from your vendors, your negotiations will never be as effective as they could be.
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Getting a Handle on Unmanaged Spend | © 2016 SIB Fixed Cost Reduction