At EHS, we approach the area of procured goods and services with an attitude of reducing total costs. That means working on not just the purchase price but also how much is bought, what is being bought, and who is doing the buying. We define success as lowering total overall costs. For example, one client decided to increase the cost of its packaging by using more and better packaging material to eliminate damaged goods at delivery. The company found that the value of the reduction in damaged goods far outweighed the extra cost of packaging. Another example was a bank that was ordering five credit reports for every loan application because each part of the organization reviewing the loan ordered its own report. By redesigning the process, the bank eliminated the need for tens of thousands of credit reports every year before it ever started thinking about the price it paid for each report. Procured goods and services are often the single biggest element of cost in a company, yet the total costs associated with purchased goods and services is often not nearly as completely managed as companies believe.

Reducing the unit price of purchased goods and services is important—very important—but we have found that this element, even if well managed, can go only so far in reducing total costs. Often times, the true driver of purchased goods and services lies outside the control of procurement professionals. It is kind of like an iceberg.

The purchase price or unit price is the most visible part of "procurement" just as the tip of the iceberg is the most visible part of the iceberg. The real danger however may lurk below the waterline. Maverick spending, specifications that are more rigid than necessary, lack of buying leverage across divisions, or just plain using too much are typical of the kind of things that drive up total costs and don't get addressed.

The EHS approach gets at all elements of the total cost equation. Using our approach and working with our team, your procurement department will use the best techniques to get the lowest price and best quality. Additionally, the process ensures that line managers get the right goods and services to do their jobs while eliminating wasted consumption and underleveraged spending power.