Fircroft Proactive Cost Reduction - May 2015
-
Upload
mark-pearce-helping-businesses-drive-efficiency -
Category
Documents
-
view
19 -
download
4
Transcript of Fircroft Proactive Cost Reduction - May 2015
Fircroft Proactive Cost Reduction – May 2015 Enquiries: 08 9262 6212 1
Fircroft Australia
Proactive Cost Reduction - May 2015
Fircroft Proactive Cost Reduction – May 2015 Enquiries: 08 9262 6212 2
Contents
EXECUTIVE SUMMARY 3
DRIVING SUSTAINABLE GROWTH THROUGH COST REDUCTION 4
COST-SAVING OPPORTUNITIES AND OPTIONS 6
FIRCROFT GLOBAL MANAGED SOLUTIONS (FGMS) 11
IN COMMERCIAL CONFIDENCE 12
Fircroft Proactive Cost Reduction – May 2015 Enquiries: 08 9262 6212 3
Executive Summary
The oil and gas and mining industries are experiencing a noticeable market change. The
current climate is challenging companies to lower labour costs as the price of resources
has plummeted, with no foreseeable lift in the near future. The outcome of this market
change is the operating landscape has radically shifted and companies need to respond
by cutting costs whilst maintaining deliverables. Fircroft believes the key to cutting
labour costs is to take a holistic approach, not a knee jerk reaction that can result in a
failure to deliver lasting savings.
The purpose of this white paper is to set out to show how the adoption of managed
labour solutions can result in an 8 to 18% reduction, in direct costs in the first 12
months with further bankable savings in year two, three and four. The white paper has
also been written with time reduction in mind - meaning that Supply Chain, Procurement
and Category Managers are not wasting their time with administration, freeing themselves up to perform more meaningful tasks.
Fircroft has achieved the above outcome with 14 companies across its global customer
network and is managing in excess of $700m AUD of client spend via its Fircroft Global
Management Solutions (FGMS). FGMS services are typically configured to meet specific
client employment program objectives regarding the recruitment of specialist contractors
or permanent employees either managed via Fircroft or independently by a company.
Fircroft is the only dedicated managed service recruitment provider in the oil & gas and
mining sectors for technical, engineering and ancillary professionals across Australia,
Asia, Europe and North America. To assist potential customers with their thinking and
how they might respond to this rapidly changing market, Fircroft has attached a link to a
self assessment tool on page 11, which has been designed to allow you to determine
how much additional time and money you may be able to save your business.
We encourage you to take the time and ‘click-on’ the self-assessment tool and start
saving. Click here to take the self-assessment or turn to page 11 to read further.
Fircroft Proactive Cost Reduction – May 2015 Enquiries: 08 9262 6212 4
Driving sustainable growth through cost reduction
The majority of natural resource companies are currently going through significant
change. The need to maintain a focus on cost reduction to remain competitive is crucial
following the recent and unexpectedly dramatic drop in the prices of oil and iron ore.
This current period of instability and uncertainty has come as a bit of shock to our
industry, with many sector analysts taken by surprise by the speed of the price drops
and the market reactions to it. Supply chain teams are looking to work closer with their
suppliers to gain a fully transparent view of their cost base, to drive new and sustainable
ways to release cash - from within their businesses - to drive both growth and deliver
efficiency.
However, cost reductions should not be viewed in isolation in a single area or element of
the cost of contingent labour. Instead, a review should be taken of the entire cost of
providing, delivering and the utilisation of contractors. When cost reduction programmes
are approached strategically, they can produce rapid and sustainable savings. However,
they are all too often one of the most challenging activities an organisation can carry
out; if they are approached as a one-off activity, they can consistently fail to deliver
lasting savings.
There are a number of areas where supply chains can take action now to drive
immediate cost reductions and efficiency. For example, dealing, engaging with, and
managing multiple suppliers creates inefficiency. This is due to the sheer amount of time
spent on engagement and administration, the variable day-rates and terms of business.
Migrating to a managed solution, for example, providing just one central contact point
through which multiple suppliers can be accessed is ideal. Alternatively, a solution with a
reduced number of core partner suppliers will deliver the significant cost and efficiency
savings currently sought over the short term, but that are equally sustainable over the
medium and long-term.
“Delivery of over $3.5M of savings in the next 12 months on their manpower costs in the
Australia and the UK, additional savings in the pipeline from day-rate savings,
anticipated to be in the region of $5m-$6m.”
It is understandable that companies are looking to uniquely positioned suppliers to be
able to help their supply chain teams meet these market challenges head on. By
proactively working together they can help each other through these challenging times
and become partners of choice.
To ensure alignment with this dynamic marketplace, Fircroft has put together a
cost savings initiative program to support businesses globally.
Fircroft Proactive Cost Reduction – May 2015 Enquiries: 08 9262 6212 5
Some areas of opportunity for cost reduction include:
Cost Saving Area (Opportunity) Impact Timescale
Immediate = 0-3 months
Medium Term = 3-6 months
Long-Term = 6-12 months +
Consolidate manpower supply base and
transition workers
Immediate
Client sourced contractors (nominations) Immediate
Benchmarking exercise to review rate cuts Immediate to Medium Term
Regional contractors v Ex-Pat contractors Immediate to Medium Term
Retention of skills – Flight Risk Model Immediate to Long term
Volume Discounts Medium Term
Workforce planning Medium Term
Process efficiencies Medium to Long Term
Managed Service Solutions Medium to Long Term
Q: In this challenging climate, could your organisation benefit from lower people costs
and enhanced operational contingent workforce outputs?
Continue reading the whitepaper to analyse how you could reduce your costs.
Fircroft Proactive Cost Reduction – May 2015 Enquiries: 08 9262 6212 6
Cost-saving opportunities and options
IMMEDIATE SAVINGS
Consolidation of the manpower supply base and contractor transition
Numerous companies use multiple agencies to supply contract workers, either in
specialist sectors or in geographical locations. This has led to complexity in the supplier
base which can be difficult to manage, especially for central corporate contract holders.
One strategy to consider is consolidating suppliers and appointing just one supplier with
one set of terms through one contract holder, which can deliver exceptional cost and
time savings. This type of strategy can often strip out the complexity of global working
and give one point of contact for the entire supply of contract workers.
“By consolidating the supply base, we reduced non day-rate related costs by over 50%”
Working with one supplier does not mean that service levels are diminished, in fact it is
quite the opposite with one supplier often utilising several secondary or specialist
suppliers. This leads to an increase in the level of service, and an ability to supplement
where different skillsets are required.
By reducing your supply base and transitioning the compulsory contractors
from the de-selected suppliers to a single provider will provide significant
savings. The savings will be in both the agency margin as well as the day-rate
to the contractor (see day-rate benchmarking below).
Example: For one IOC we will be delivering over $3.5M of savings on non day-rate
related costs over the next 12 months under such a model.
Client sourced contractors (nominations)
Where a candidate is clearly “introduced” to Fircroft – i.e. we have not sourced the
candidate via our recruitment teams - represents a saving in our overheads, and can be
reflected in a reduction in our overall charges to you for that individual.
“Fircroft has transitioned across over 900 contractors as part of cost saving initiatives
over the past 12 months.”
Fircroft Proactive Cost Reduction – May 2015 Enquiries: 08 9262 6212 7
IMMEDIATE to MEDIUM TERM SAVINGS
Market Intelligence - Day-rate benchmarking to the current market-rate
Transparency of contractor rates and knowing the exact and correct levels can control
costs through management information of global pay rates, providing transparency
across the business. This type of transparency can be delivered by Fircroft, who has the
knowledge of both the local and global markets, especially in this time of uncertainty.
Regular benchmark rates can be used in this way for hiring managers to have an
understanding of a benchmark rate on the ground in order for them to control costs at
the very start of the recruitment process.
“By using our global market knowledge, we proactively identified a client could safely
implement a 15% contractor day-rate cut.”
Regional v Ex-Pat contractors
Delivered in tandem with the initiative above, by delivering the same technical skills via
a regional contractor compared to an ex-pat can deliver significant savings in the overall
day-rate to a business.
For example: A mechanical engineer who is a regional contractor can be
sourced at up to 50% lower cost than the equivalent ex-pat.
Volume discounts
Concentrating contractor supply through a single or reduced number of preferred
suppliers allows the supplier(s) to make a reduction in overheads and operating costs
and hence offer opportunities for savings. These savings can be passed back to you in
the form of volume discounts.
“Regional contractor (Mechanical Engineer) $900/day, ex-pat equivalent £1,800/day – a
potential 50% saving on the day-rate.”
There are many options for calculating volume discounts based on headcount, sales,
margin etc. There are also variations on how companies may choose to recoup these
savings – corporate, regional, project by project etc.
As volumes and sales increase globally, so do the discounts offered to you.
Fircroft Proactive Cost Reduction – May 2015 Enquiries: 08 9262 6212 8
IMMEDIATE to LONG TERM SAVINGS
Retention of key skills (flight-risk analysis)
The flight risk model has been devised to measure the key parameters that can impact
upon a contract worker’s risk of leaving a contract. It is not a definitive assessment, but
highlights those contract workers we believe to be at
the highest risk.
Knowing the market is a key skill for any business.
Furthermore, utilising a global recruitment supplier
with a global footprint allows companies to access
independent knowledge to who’s doing what and what
projects are ramping up or slowing down. Being aware
of this type of market intelligence informs companies of
the possibilities of skills shortages and/or timings of
increased demand, helping with workforce planning.
Companies should include this type of external knowledge and understanding when
developing initiatives to retain their top talent, which is even more important in today’s
market climate. Independent and outward focused information can supplement the work
being undertaken within organisations and should cover all types of workforce planning
for a project, including staff and contract workers.
MEDIUM to LONG TERM SAVINGS
Process efficiencies
By moving from manual processes for time and expense capture to on-line provision, not
only makes the entire process more efficient, but also saves cost in terms of the
transactional cost as well as in people cost.
Example:
Process Cost to Process Manually Cost to Process On-Line
On-line time and expense
capture
c$30 per timesheet /
expense
$1.50 per timesheet
Please note this is not an exhaustive list – other areas of process can benefit in the
adoption of technology or more efficient ways of working.
Fircroft Proactive Cost Reduction – May 2015 Enquiries: 08 9262 6212 9
Workforce planning
Fircroft works with companies to identify and analyse what the current and future
organisational needs will be in terms of the number, skills, experience, knowledge and
quality of workforce to achieve its objectives. It is a process used to generate business
intelligence to inform the organization of the current, transition and future impact of the
external and internal environment on the organization enabling it to be resilient to
current structural and cultural changes to better position itself for the future. As well as
the traditional workforce planning, one of our key aims is to ensure there is no
duplication of cost.
Other areas for consideration, and which would also generate significant cost savings
include:
Ancillary services
One of the key areas Fircroft could propose to look at on your behalf is the cost of the
ancillary services required to deliver the requisite talent. These services (or requirements
- if pooled and sourced collectively rather than through a number of providers) could
provide significant savings. Areas we would target include:
Cost of visa/work permit provision
Cost of flights in/out of country - Fircroft recently saved a company $3,200 on a
business class fare between Perth and London
Accommodation - Fircroft has saved companies up to 35% on accommodation
rates for city based hotels and even greater savings on rates for rooms located in
a city's immediate surrounds
Transport - with assistance from you, Fircroft would negotiate “preferred” prices
with based on the existing company agreement
Medical cover
Inoculations
Shipping - with assistance from you, Fircroft would negotiate “preferred” prices
with hotel chains based on the existing company agreement
Shorter term assignments
Due to country regulations, expatriate assignments can become very expensive. In order
to minimise this cost, Fircroft could set up an expert team with different disciplines
willing to travel the world on short term assignments. The length of the mission will
depend on each country’s laws.
Compliance is the key for Fircroft; regulations and limits regarding income tax, business
visa duration, employer & employee social burdens etc. will need to be fully respected in
both the home and the assignment location of the individual.
Localisation
We are aware of the dynamics of the recruitment market and the constraints of supply
and demand of qualified technical and management staff across the globe. Fircroft is
committed to local workforce attraction - each of our offices uses a sophisticated process
of local candidate attraction methods to both attract and retain local talent. Companies
are also offered additional internal costs savings by utilising:
Invoicing in-country
Banking in-country
Payment receipt in local currency
Fircroft Proactive Cost Reduction – May 2015 Enquiries: 08 9262 6212 10
Early payment discounts
If you have the facility on Projects to make payments quicker than those currently
agreed, Fircroft may be able to offer invoicing discounts based on faster payment times.
The principal being the earlier the payments are received the greater the discount
available to a business.
Fircroft margin pay back scheme
Fircroft can enter into a formal “back-to-back” contractual arrangement with a
niche/specialist supplier whereby the supplier “lends” Fircroft their candidate for the
duration of the assignment with you. We then place the candidate onto a Fircroft service
contract and then on assignment with you. You are then able to enjoy the protection of
all their contractors being engaged and administered under the same contractual terms.
Fircroft would then transfer to the niche/specialist agency the margin element of the
charge to you on either a weekly or monthly basis, Fircroft would payroll the flexible
employee as normal whilst on the assignment with you.
When the “loaned” contractor’s assignment finishes, the candidate then returns to their
original agency.
As the candidate is engaged under our contractual terms, we will have the responsibility
for their performance and quality whilst on assignment with you.
Our service maximises the value to you by embracing your important suppliers and
which will provide local stakeholders with confidence that they can access all the
required skills to enable them to fulfil their project’s outcomes.
Our recommended solution will also allow us to achieve savings with these
niche/specialist suppliers by a mixture of supplier renegotiation that is based on their not
having to complete some of the more labour and time intensive elements of the
contractor management process. These targeted reductions can be mutually agreed
between a company and Fircroft.
How can Fircroft save you money through this solution?
Savings can be made with these niche/specialist suppliers through margin reductions. By
implementing this supply chain solution, Fircroft remove much of the cost associated
with delivering the service directly to you by the niche/specialist suppliers, namely:
No on-going contractor management
No chasing of timesheets
No credit control required
Cost of payroll – the supplier no longer needs to fund the contractor’s payroll
each month
Simpler administration – Fircroft will automatically provide a payment to each
supplier equivalent to the margin the contractor would have earned the supplier
through our self-bill process
No associated administration – eg visa/work permit application, HSSE support,
on-boarding, travel provision, meet & greet etc.
Therefore, by making these savings, Fircroft is able to work with you to reduce the
margin to the suppliers over the course of the contract to an appropriate level, e.g. a
finder’s fee spread over the lifecycle of the assignment.
Fircroft Proactive Cost Reduction – May 2015 Enquiries: 08 9262 6212 11
Fircroft Global Managed Solutions (FGMS) Fircroft Global Managed Solutions (FGMS) is part of the Fircroft Group and is the only
dedicated managed service provider in the natural resources market sectors for
professional technical/engineering recruitment.
In these overly competitive times, Fircroft has strategically focused its attention on
managed solutions as its clients increasingly looking for greater collaboration and higher
value services from Fircroft as their recruitment partner on a regional and global basis.
Aided by 43 years of knowledge and experience recruiting, Fircroft has both led and
moved with business changes and market dynamics with Fircroft Global Managed
Solutions being specifically embedded within the business to support both regional and
global clients to deliver global solutions, locally.
“Typical savings from the adoption of a Managed Service are between 8%-18% of your
total contingent labour spend.”
FGMS core workforce management solutions include:
Master vendor
Vendor neutral
Blended (or hybrid) model
RPO (Recruitment Process Outsourcing)
All FGMS services are individually configured to meet specific client program objectives
and we are confident our services deliver enhanced operational, tactical and strategic
service outputs for all client stakeholders as well as contractor and recruitment supplier
user groups. Typically these solutions incorporate a bespoke service model that includes
requisition and recruitment of specialist contractors or permanent candidates
(underpinned by market leading technology) either directly via Fircroft or independently
via an approved supply chain of multiple recruitment providers.
Additionally, FGMS delivers services across the full recruitment and talent cycle including
for example; workforce analytics, coordinated and managed provision of contractor
mobility, logistics services (visa/work permit, travel accommodation etc.) and on-
boarding compliance services (e.g. HSSE compliance, company specific policies, right to
work information etc.).
“For one O&G client with a contingent labour spend of $15M we identified over $2.4M of
bankable cash and efficiency savings”
Today Fircroft has 14 managed service clients globally managing in excess of $700m of
client spend. Why not run a self-assessment tool via our partner, Italics to give you an
idea on how much you could save via the models mentioned above. Click here to take
the self-assessment
Cost Savings via a Managed Solution
Our experience shows that a managed service will save our clients anywhere from 8% to
18% of their total contractor expenditure (from the initial baseline cost) within 12-15
months of implementation. The cost savings detailed above are based on the 14
programs we have implemented and currently manage.
Fircroft Proactive Cost Reduction – May 2015 Enquiries: 08 9262 6212 12
In commercial confidence
All information contained herein, including but not limited to information provided in soft
copy format, and any amendments to this proposal howsoever provided, is information
of commercial value and is provided in strict confidence for the sole purpose of
adjudication of this Cost Savings Proposal provided by Fircroft by you the client. This
document shall not be used for any other purpose and shall not be copied or disclosed
wholly or in part to any other party without the prior written approval granted by an
authorised representative of Fircroft Engineering Services Limited, and shall be held in
safe custody. The restriction does not cover information that is published, or known from
sources other than Fircroft Engineering Services Limited, provided that it is not made
known in breach of any obligation of confidence. This is an unpublished work the
copyright in which vests in Fircroft Engineering Services Limited. All rights reserved.
Primary Fircroft contact
Secondary Fircroft contact
Name: Mark Pearce
Position: Client Relationship Manager
Tel No: +618 9262 6212
Mobile: +614 5225 5018
Email: [email protected]
Name: Sharon O’Flaherty
Position: Account Services Manager
Tel No: +618 9262 6246
Email: [email protected]