Are you certain you’re paying the lowest price for the goods and services your company buys?
"Classic" JDHSG Cost Reduction
JDH Solutions Group focuses on helping clients execute strategies to pay less for the goods and services that they buy. Our collective experience has provided us with a unique perspective to know how to affect behavior and to motivate vendors to offer non-standard pricing and terms, allowing our clients to meet or exceed their economic expectations. Substantial, measureable savings are achieved by applying our proven process to virtually all major overhead and direct material sourcing categories.
How We Do It
During the initial phase of engagement with a client, JDHSG expects to identify 25% of a company’s annual sourcing costs, which will allow us to achieve unit price reductions of 15% to 20%. The goal is to complete the work within four to six months.
To monetize this value proposition, for each $100 million in sourcing cost, JDHSG will identify and aggregate several cost categories totaling $25 million, with the expectation of saving the client about $5 million. Individual categories typically range from $1 million to $25 million in annual cost.
Once the cost categories are identified and have been deemed “attackable” by the client, JDHSG prepares a project strategy detailing how we recommend applying our proven unit cost reduction process.
Again, with the client’s approval of each project strategy, JDHSG then guides a client-appointed contract team through the tactical implementation of the project.
A unique feature of the JDHSG process is that we do not have direct contact with our client’s vendors. We do this for two primary reasons: (1) vendors will not reveal non-standard pricing and terms to a consultant that could use that knowledge at another customer site and (2) the business relationship is between our client and their vendor (a consultant should not get in the middle of that relationship). This differentiates us from most of the larger national and international consulting firms (our competitors) who reveal themselves to the vendors and will use a generalized, transparent negotiating approach, which ultimately stifles their results.
As a part of our process, JDHSG will prepare a detailed financial baseline model that captures trailing twelve-month usage, on a line-by-line basis, the quantity and unit price for each purchased item (along with any other necessary supporting data – e.g. vendor, description, etc). Meticulous attention to the data collection of past purchases provides the basis for new vendor pricing and the ability to easily compare the old cost against the new cost. It is not possible to accurately measure savings unless comprehensive data collection has been done.
JDHSG manages each project until our client awards an agreement to the vendor(s) of their choice.
An ancillary benefit of the JDHSG process is that the project teams are left with the skills necessary to apply the process on their own, in other areas.
Client Resources – The Client Appointed Contract Team
Contract negotiation can be a big time strain within a company, often times in multiple divisions. Our process relieves the contract teams of the most time consuming duties, while still allowing the client to maintain the direct communication with the vendors. JDHSG does the evaluation of the cost categories, prepares the baseline financial model, drafts the project strategy document, writes each message to be communicated to the vendors, evaluates all vendor proposals, reviews vendor agreements and guides the client team throughout the entire process.
Since 1990, the cumulative hard dollar savings for the entire JDHSG-managed portfolio of clients has exceeded $2 billion.
JDHSG Provides Certainty
At the conclusion of each project, our clients know:
1. They are paying the lowest unit prices for the goods and services that they buy.
2. All competing vendors were treated fairly throughout the process.
3. The contract terms are favorable.
4. The contract structure properly fits the business purpose.
5. The winning vendors were selected because they best fit the project requirements, and not necessarily because they offered the lowest price.