REACH Consulting Group evaluated Confidential Client’s procurement profile using trend, horizontal, and vertical analyses as well as ratios such as past spend, Current and Quick ratios. Other calculations included rates of return, represented through percent savings. Further, when reviewing the savings program for Business Products, a scheduled Core list was detailed from top cost and top volume data to deliver an accurate Core representation.

All calculations can be found in the appendices.

Analysis Methodology

REACH Consulting Group reviewed the current spending patterns of both product sectors, as well as the pricing measures and performance details of current vendors. Through this process, we outlined by rank the benefits/challenges of current and potential vendors.

Our review determined that Confidential Client incurred the following expenditures between July 1, 2007 through July 1, 2008:

Medical - $135,325.23

Business Products - $97,697.52

Medical Supply Expenditure Analysis:

Current Vendor: McKesson

Representative: Account Representative, Blake Hall

FY08 Costs: $135,325.23

Projected FY09 Costs: Not Provided

REACH Consulting Group found McKesson Medical supply to be resistant and non-responsive to our cost-reduction inquiries. Their efforts to make changes to the pricing and service practices of Confidential Client were minimal at best.

Potential Vendor: Physician Sales & Service, Inc.

Representative: Account Representative, Jason Schultz

Projected FY09 Costs: $105,291.16

Projected Savings: (22.2%)

REACH Consulting Group found Physician Sales & Service, Inc. to be very accommodating in determining new pricing and service guidelines for Confidential Client. This new pricing represents a projected 22.2% savings compared to McKesson Corporation’s 2008 costs.

Business Products Expenditure Analysis:

Current Vendor: Corporate Express / Staples Inc.

Representative: Account Executive, Monica Hart

FY08 Costs: $97,697.52

Core List Analyzed Cost: $89,881.12

Projected FY09 Costs: $71,645.50

Projected Savings (over Core List Analyzed Cost): (20.3%)

Potential Vendor: Office Depot, Inc.

Representative: Account Representative, James Williams

Projected FY09 Costs: $74,825.35

Projected Savings (over Core List Analyzed Cost): (16.8%)

REACH Consulting Group found both Corporate Express and Office Depot to be responsive to making the necessary changes to reduce Confidential Client’s business products expenditures.  However Corporate Express / Staples Inc.’s cost reduction measures reflect a projected 20.3% savings.

Findings

REACH Consulting Group finds Confidential Client’s current purchasing position does not serve its best interests. Current vendor profit margins are well beyond accepted profitability standards. Implementing the recommendations below, should allow Confidential Client to reap the aforementioned projected savings.

Conclusions

REACH Consulting Group makes the following recommendations:

1. Adopt Physician Sales & Service, Inc. as Confidential Client’s new Medical Supply vendor.  Under our proposed negotiated cost structure, this election will save over 22.2%.

1. Retain Corporate Express / Staples Inc. as Confidential Client’s Business Products vendor.  Under our proposed negotiated cost structure, this election will save over 20.3%.

1. Retain REACH Consulting Group to examine other areas for potential cost savings to include: Telecommunications, IT Solutions, and Document Management.

1. Allow REACH Consulting Group to negotiate the elimination of non-vendor item restocking fees. 

1. Allow REACH Consulting Group to negotiate to end the delivery of products nearing their expiration date.

Recommendations