Scary Supplier Practices
Supplier-driven events that negatively impact your cost-savings efforts in indirect categories—with a spooky twist.
While spooky season is full of haunts and scares, certain supplier practices can send a shiver down your spine at any time of year. This is especially true when it comes to suppliers operating in complex, indirect expense categories.
Join us on the “hauntings of procurement” tour below, throughout which we’ll make “stops” at four particularly burdensome and difficult-to-manage indirect spend categories—uniform rental, waste & recycling, security & guard, and pest control—and “meet” the most common supplier practices within each that are threatening your bottom line.
But tour-goer beware! Scary revelations ahead…
First stop on the “hauntings of procurement” tour: uniform rental.
Haunted Expense Category #1: Uniform Rental
Item adds. Do those two words give you chills? As one of the most pervasive and P&L-damaging (and supplier-enriching) practices within the uniform rental category, they should.
Consider these examples which—as ghost stories often claim—are based on true (and prevalent) product-add events:
- New product suggestions made to and “accepted” by field-level employees. Uniform route people regularly encounter customer field-level personnel. This presents several opportunities for the route person to offer new products to, or act on one-off complaints (via injection of new product) from those personnel.
- Only name-brand, off-contract options presented. Sometimes a change in business or a special project may require employees to switch to more specialized uniforms such as flame-resistant (FR). Often, uniform suppliers will take this opportunity to only present higher-margin and/or off-contract options, such as name brand.
- Withheld information on new product-driven variable charges. When a uniform switch is contemplated, uniform route people will often neglect to disclose the variable charges that will result from the transition: new emblem & makeup fees, full buyback of old uniforms, and substantially higher loss/ruin charges.
- New product “trials” end up on invoices. Oftentimes, uniform route person will present their local customer contact with the “latest and greatest” item, offering a free trial for a couple weeks. However, that trial is never canceled, and no one notices when the new item ends up on the weekly invoices three weeks later.
Scared yet? Let’s see if stop number two on the “hauntings of procurement” tour will frighten you further…
Haunted Expense Category #2: Waste & Recycling
Step up to the second procurement haunt, waste & recycling. That is—if you dare.
These supplier practices within the waste & recycling category are sure to give you and your organization’s P&L real-life nightmares:
- Container overfill left to the waste driver’s discretion. Most waste driver’s trucks are equipped with a camera so that if there is waste material protruding out of the open container, causing the lid to remain even slightly ajar—even with significant empty space remaining within—they can take a photo and impose a penalty charge.
- Unwarranted service increases. Often, a waste driver will notify customers of pending overfill charges in advance of an upcoming bill, offering the opportunity to avoid the charges if service levels are increased. Frequently, customers agree without realizing that—in many cases—the overfill charges were avoidable or rare. The result? Much greater spend (via a higher weekly rate) than if the few overcharges had been paid and, if necessary, actions taken to avoid further overfills.
- Warranted service changes with unpermitted price increases. Any time service changes are made, waste haulers will attempt to increase margins, hoping the customer won’t catch or have the resources to argue it. For example, a customer facility halves their $100 service and now pays $65 instead of the $50 substantiated by the agreement.
- Recycling contamination billed vs. addressed. If there is the slightest contamination in a recycling container (i.e., a McDonald’s bag), the recycling driver can—and often will—categorize the load as contaminated and charge the customer a corresponding charge.
Hop back in and let’s head to stop number three on the “hauntings of procurement” tour—you’ll want to make sure you’re armed with your spook-repellant for this one.
Haunted Expense Category #3: Security & Guard
Welcome to the third procurement haunt: security & guard services. Cue: *thunderclaps*.
Within security & guard services, the most common savings-eroding supplier practices can be broadly categorized as “billing beyond the contract.”
And like the shapeshifting creatures of spooky lore, this supplier practice can take several forms, including:
- Billing at a higher officer level than is contractually stipulated. For example, a contract calls for 168 hours per week of service at an “entry-level Security Officer 1” rate. But when billed, 80 of those 168 hours are charged at a higher “Security Officer 2” rate.
- Billing supervisor rates when a supervisor fills in for an absent line officer. Oftentimes, when a junior officer is late or absent, a security supervisor will temporarily fill in. Instead of correctly billing the client at the junior officer’s rate, the post is frequently billed at the higher supervisor rate.
- Billing overtime rates for straight-time hours. Generally, overtime rates should be billed only if a client explicitly requests extra services that directly cause security vendor personnel to work additional hours. Commonly, though, security vendors bill overtime when their own staffing and scheduling challenges are the cause of officer overtime.
- Adding positions or services beyond the original scope of work. Security vendors will occasionally bill for services or extra hours not defined in the contract—even without written approval from an authorized client representative.
- Non-labor costs. Charges or markups on items such as: vehicles, mileage, travel, guard tour systems, software portals, and even officer vacations and health insurance.
Feeling spooked? We’re not letting you off just yet—one more stop on the “hauntings of procurement” tour…
Haunted Expense Category #4: Pest Control
We’ve reached the fourth procurement haunt—and creepy crawlies are the least of your worries here; in the pest control category, you’ll face much bigger frights in the form of what can be generally summarized as unnecessary services.
Often lurking in the shadows, you’ll find these supplier practices feeding on—and eroding—the savings you originally set out to capture:
- Frequency of service. Pest control providers will often use the lone fact that a site is in a particular geographic region (i.e., the Southern US) to justify more frequent service. Adjustments should be based on actual data and structural reviews to determine if permanent solutions are available—not simply increasing service frequency.
- Out-of-scope treatments. Often, out-of-scope applications are baked into pest control programs because of a single incident that occurred years ago. This is frequently the case for foggings & fumigations; just because a fumigation or fogging was needed years ago does not mean it’s automatically needed every year. Providers truly practicing integrated pest management should be finding ways to prevent foggings & fumigations.
- Reactive vs. proactive pest control management. Is your pest control provider simply “checking boxes” and reacting to problems as they arise? If so, your pest control provider is likely providing reactive vs. proactive pest control management, leading to unnecessary services and costs—and possibly threatening safety audits.
Quick! Breathe a sigh of relief—you’ve made it through the “haunts of procurement” tour.
Unfortunately, though, the terror is not over—until you address it head-on.
Who ya gonna call? (Not) Ghostbusters.
Supplier-instigated efforts that erode your savings and negatively impact your organization’s P&L—like those examined throughout the “hauntings of procurement” tour—bleed into accounts and slowly but surely, early efforts put into their contracts are rendered less and less impactful.
And what’s scarier? The examples of supplier-instigated efforts provided throughout the “tour” are nowhere near exhaustive.
To protect your complex indirect categories from the ghosts & ghouls—i.e., savings-eroding supplier practices—threatening your efforts to positively impact the P&L, you’ll need to find a way to “ward off” their efforts. Or else!