Page 3 - Getting a Handle on Unmanaged Spend - SIB Whitepaper

Band-aid
solutions
There are a handful of ways companies have attempted to get on top of costs like these, but they’re often too cumbersome to implement, don’t actually maximize your savings, or just flat don’t work.
"ONE SIZE FITS ALL" Contract Consolidation
In theory, consolidating contracts makes sense. Combine all similar services under one master contract and use your new purchasing power to
negotiate for lower rates across all locations. In practice, this is not only difficult to implement but can actually be more expensive as well.
The problem arises when companies try to shoehorn different branches with multiple service levels into the same contract with a single national vendor, regardless of whether it makes sense operationally or financially.
It is extremely rare for contracts scattered across an organization to end at the same time. A company therefore has to choose to wait until the contracts lapse (paying a higher rate the whole time), or back out of the contracts early (often resulting in high cancellation fees).
This method of cost control almost always has a negative effect on operations. Local divisions who are happy with their current vendors tend to resist and resent change. Often a new vendor just means a new set of problems to cope with. The honeymoon period of a new relationship fades quickly, and before you know it, you’re right back to where you were before.
PAGE 3 Getting a Handle on Unmanaged Spend | © 2016 SIB Fixed Cost Reduction