Ver 1.0 (Apr 23)

Savings are often linked to a Client contract and this must form an integral part of the Contract negotiations with any Supplier partner.

Maintenance cost and regular inspection are the prime challenges in the elevator market globally. Regular preventative maintenance keeps the machinery in efficient condition, preventing malfunctions, extending the lifespan, safety, and dependability of the lift or escalator, and decreasing long term operating expenses.

1. Savings and Efficiency in Operations

2. Savings Drivers / Triggers

• Existing Supplier partner contract sunsets within six months
• Cost-plus supplier over-spending
• Renewed savings strategy
• Program optimizaton that redefines client objectives, SOW and levels of transparency
• Transitioning a Supplier partner
• Early stages of transformation planning

3. Key Points

1. Be clear on desired outcomes
2. Identify deal breakers early in the contract planning phase
3. Identify and engage all the necessary stakeholders to ensure clear communications and agreement

Confidential & Proprietary | 2023 CBRE Inc.

The following pages provide for a guideline to enable savings to be negotiated, implemented and monitored with a Supplier partner.  When in doubt on potential savings consult your Global Solutions Lead to assist you on your requirements, especially where Global partners are involved.

4. XXXX Cost Structure Analysis

Cost Component

Insights

Impact on Price

Equipment and Replacements

Operating and Service Costs

Labour, Licenses & Overheads

• Import and export costs affect the cost of the equipment and replacements
• Physical capital for security systems and replacements, contributes more

• Manpower productivity and the level of automation adopted are the key factors contributing to the cost of security monitoring systems
• Annual maintenance contracts cost more and depends on the reliability and longevity of the equipment
  
• Wages in countries, such as US, Germany, Japan, are relatively higher as compared to China, India, and ASEAN countries. Relatively lower labor cost is expected to play a key role in sourcing prospects from emerging economies, such as Mexico, Brazil, South Korea, etc,

• Overheads typically include licenses, safety regulation adherence, administrative cost,
  machine depreciation, insurance etc,
  
• Port congestions have increased, leading to delayed shipments. European logistics
  companies are facing shortage of Ukrainian lorry drivers, who are well represented in
  driving profession across Central Europe

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Ver 1.0 (Apr 23)

Strategy

Services

Equipment

MRO

Description

Direct Negotiation with Supplier partner

Yes

Yes

Yes

Direct negotiate with incumbent Supplier partner to determine best options to offset increase (ie., - SOW optimisation, frequency, specification modifications, fixed prices) etc,

Manage RFP initiative to test market and ID all qualified Supplier partner options

Yes

Competitive Sourcing Event

Yes

Yes

Explore alternative brands, service approaches, materials, specifications, etc,

Yes

Alternative Products / Services

Yes

Yes

Seek improvements in how maintenance and / or equipment can be delivered to and maintained on site (ie- automated parts monitoring)

Yes

Demand Innovation improvements

Yes

Yes

Re-engineer the SOW to fit Client specific requirements

Yes

Reengineer SOW

Yes

Consolidate work with other projects to increase potential spend discounts

Yes

Consolidation / Bundling

Yes

Yes

Ensure that Should Cost models are applied to maintain accurate costs and cost modelling

Yes

Should Cost Modelling

Yes

Yes

Pass through inflation cost increases to customers (where applicable)

Yes

Pass-Through

Yes

Yes

Confidential & Proprietary | 2023 CBRE Inc.

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Ver 1.0 (Apr 23)

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1. Where can Addressable savings be found in XXXXXXX?

 XXXXXXXXX

This section looks at some possible options to consider first as they are usually easy to implement: 

Possible Actions

Possible areas of Savings

Scope. Are we delivering to the right scope? Are we over-delivering – have we accepted a legacy scope that is above the MSA service level without challenging it?

Has a Scope Gap Analysis been conducted? If not – carry out a scope Analysis – check that the scope being delivered is what is required. Look for out of scope services.

Check for:

• Check client’s specified Service Levels - Is the client’s specified service level what is being delivered or is there a legacy SL that is too high?
• Look at frequencies, volumes and response times – high volumes, greater frequencies and faster response times have a cost. Check that these are to the correct SL specified by the client – if nothing is specified – check and adjust SLs based upon a risk and service evaluation to make sure they are appropriate for the site, service and risks etc
• Is the service level right for the site? Particularly for security systems maintenance – more frequent service visits, faster response times and comprehensive maintenance add significantly to the cost. But is these are too high for the site type and risk, then they can legitimately be reduced.
• E.g. a Four hour response time for a low risk site or low priority system can be reduced to next day. Four annual maintenance visits can be reduced to two – or one if one of these could be done virtually by an on-line check

Service Level. Are we delivering to the right service level? Are we over-delivering the service?

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Roadmap for Procurement wins

Ver 1.0 (Apr 23)

Enable Immediate Action

Create Transparency and the right set up

to implement immediate actions

Take Action to secure supply and mitigate

Price increases now and in the next months

Deploy advance solutions to manage costs and

set targets to enable resiliency

Institutionalize to prepare for the new normal

Build capabilities, tools and processes to

manage future uncertainty

1. Have you prioritized categories based on exposure?
2. Is a cross-functional inflation nerve center in action to quickly capture value?
3. Are you deploying a full set of levers to mitigate short-term challenges (eg, supply, demand, inventory)?

1. Have you identified a full suite of levers that mitigate risk via technical, demand, process, financial, and commercial levers?
2. How will you define longer-term value creation in the face of continued uncertainty?
3. Do you have effective cross-functional partnerships in place to execute all levers?
4. Do you have effective strategic partnerships in place to assure supply and to stay relevant?
5. Do you have a way to accelerate alternatives (eg, new Supplier partners, new locations, new designs, new materials)?

1. How will you improve the procurement operating model with the learnings from mitigating current challenges?
2. Which new systems and tools will you put in place to assure future resilience?
3. Do you have the right talent and capabilities in your team?
4. How will you redefine procurement governance and cross-functional collaboration to enable both agility and resiliency?

Link to CBRE

Market Indices and Inflation data

Link to CBRE

Inflation Commercial Guidance

Confidential & Proprietary | 2023 CBRE Inc.

Useful Links

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