Uniform Rental Programs: What You Don’t Know Could be Costing You
Uniform rental — like waste disposal, pest control and a handful of other complex indirect services — is an exceedingly challenging and complex expense for procurement generalists to wrap their heads around.
There are so many moving pieces that make it hard for anybody who’s new in procurement, wearing many hats, to understand.
To make matters worse, increasingly lean procurement departments have left buyers with more demands and less time on their hands, rendering effective management of this highly complex expense nearly impossible.
All categories are not equal
Even for businesses with highly skilled procurement professionals working in departments with strong processes and checks-and-balances, these strengths tend not to translate well to the uniform rental category.
The problem is, the expense isn’t a “3-card monte,” it’s a “3,000-card monte.” There’s just so much to know—and as a result, even for the sharpest buyers, there tend to be a good many “unknown unknowns.” And unfortunately, the vendors are masters of these areas.
Your well-trained buyers dive into this expense in earnest every three to five years and try to learn the lay of the land…and they’re competing against supplier contacts who live in this complicated expense every day. Simply put, your buyers are at a huge disadvantage.
What happens after the contract negotiation?
Even if competitive unit rates are negotiated, procurement departments tend not to have mechanisms to make sure that what they signed up for is what they get. And they don’t have a way to prevent their field personnel from undermining the work they’ve done at a corporate level.
It’s not enough to just be good at negotiating the contract, you need some mechanism to manage the expense moving forward. The ongoing auditing and management are just as important, if not more important, than the up-front contract work.
Otherwise, contract compliance (of both black-and-white and “gray area” varieties), new product additions, price increases, increased discretionary charges, and all the other random things that happen after the deal is signed tend to erode any savings you thought you were getting.
As a result, the long-term arc of this category tends to look like a roller coaster, only one that’s steadily climbing as it cycles through the peaks and valleys. With a starting point of $1,000,000, a buyer thinks he’s negotiated the category down to $800,000, but the new deal never implements quite the way he though it would, and the year-1 spend is $900,000. Then, the deal erodes due to all the challenges we’ve discussed, and the spend increases from there; when the buyer revisits the category towards the back end of the deal, his starting point is $1,200,000. Modest savings gets implemented again, and the “roller coaster ride” continues.
The value of a trusted advisor
Best-in-class procurement departments are finding alternative strategies to solve their most persistently challenging categories—especially “nuisance” categories that take more time than they’re worth. At Fine Tune, we’ve seen a growing number of Fortune 1000 businesses entrust us with their uniform programs because they want to put an actual solution in place, rather than continuing to ride the roller coaster.
With our experts on their side, they know they’ll be getting an optimal contract in place up front, making sure the contract is implemented properly, securing credits when they’re overcharged, and fending off all the forces that try to drive their spend upwards over time. They know they don’t have the resources to really engage in the joust with this expense on an ongoing basis, so they’ve implemented a smart strategy to make sure they’re not losing in this area.
Having minimal resources in procurement doesn’t mean you can’t deliver smart, dedicated and vigilant management of “nuisance expenses,” it just means you have to find the right strategies to make that happen.