A recent benchmark between 9 large organisations from various industries indicate that up to 49% more might be available on local car travel deals. “One would expect that buyers with a larger procurement spend in this area will be the more cost competitive, but it turns out that quite the opposite is true,” Alan Low, MD of Purchasing Index told Smart Procurement this week.
“The organisations benchmarked were from various sectors including Educational, Mining, Manufacturing and Financial Services. All travel expediture analysed was on contract albeit with various service providers. The average annual expenditure in this area ranged between R1m to R4m per annum.”
Low told Smart Procurememt that: “In July 2006 some organisations paid up to 49% more for the same item, from the same or a different supplier. With such a large difference prices, we would have thought that the companies with the higher spend in this area had negotiated a better deal than those with only R1million per annum. It is truly surprising to note that it was in fact the organisations with the smaller expediture who achieved the higher savings.”
“We think the reason for this discrepancy lies in the fact that large buyers do not pay as much attention to these items as they have much larger commodities to focus on,” he says.
“Considering though that a 49% reduction in price on an expenditur of R4m would result in a R2m saving, the bottom line effect is equal to a 5% saving on a R40m commodity.” “So perhaps there is more scope for cost reduction in car travel than meets the eye,” says Low.
If you would like to compare the rates paid by your organization and understand how car hire companies increase their profits through such practices as bracket creep, contact Alan Low on 084-890-0005 or email him at alan@pricetrak.co.za.
Update on the impact of the exchange rate on PC Prices vs
PC laptop and desktop prices in South Africa have shown remarkable resilience over the last three years as the Rand has strengthened and weakened against the Euro and US Dollar. With what seems to be a structural correction to the Rand’s value in July 2006, the Rand Euro exchange rate now sits at the same level as it did in January 2003.
How will this effect Dell’s local PC prices (Dell supplies local PCs from its factory in Eire)? If nothing else it will put extreme pressure on margins of PCs sourced from Euro countries. Does this give Lenovo (IBM) an opportunity to exploit the market and win back market share through under-cutting its competitors?
If you are buying PCs and want to know how prices will be affected over the ensuing months, contact Alan Low at Purchasing Index (alan@pricetrak.co.za).
