How can industrial facilities cope with rising supply chain costs?
Contracted services providers are the backbone of our industry yet it’s nearly impossible for facility managers, maintenance supervisors, planners, and others to clearly understand where their spend is going.
With today’s inflationary pressures, contracted services are the ideal starting point to figure out how facility budgets are being spent to uncover new ways of reducing costs. With 68% percent of manufacturers saying inflation is likely to remain elevated into 2023, laying the foundation for streamlined visibility into spending now will save costs into the future.
Here’s how to do it.
Identify where the facility is losing money
We’re all feeling the pressure of skyrocketing inflation rates while also being stuck between mounds of paperwork and shorter deadlines. Do you have the time to understand every detail of a vendor contract or union agreement? More importantly: Can you validate every invoice line item against gate and contract?
Overbilling and erroneous charges present big opportunities to fight inflation, as it’s money you shouldn’t be spending anyways. Not knowing exactly where facility budgets are being spent leads to:
- Losses at scale - 85% of billing errors fall under the radar as they’re around $200 or less per item that adds up very quickly
- Delayed visibility into spend - with little time and resources, facilities can’t predict overspend and can’t verify every line item on every invoice before payment – so it just goes out without accurate validation
- Ambiguous contract compliance - maybe the worker’s overtime limit was 20 hours. Or was it 15? It’s hard to validate spend when you don’t know what to validate against.
Here are the four ways to do better (don’t worry, we’ll explain the technology below).
1. Find the unknown losses
Beating inflationary pressures is all about overcoming resource and human limitations. Since your planners and engineers can’t compare every line on timesheets or daily force accounts against gate data and contract terms, automating the detection of labor, equipment, materials, and subcontractor (LEMS) leakage and violations of contract compliance is the first step towards reducing spend.
LEMS leakage could be due to a vendor not knowing that night shifts are billed differently than day shifts or someone forgetting to swipe out at the gate. It happens. Contract violations are usually unintentional too, like “I didn’t know our contract said not to include sales taxes on living out allowance (LOA)”.
Uncovering the differences between what the paperwork says and what you’re actually getting helps you plug those cost gaps and provide greater transparency during negotiations.
2. Accelerate invoicing and vendor payments
Knowing when it’s safe to pay out invoices and close out purchase orders is tricky business, especially when it’s hard to remember what happened yesterday, let alone last month.
Shifting towards next-day total cost visibility helps you understand in real-time what’s being spent and when, so you can evaluate and approve services payments faster. This reduces your time spent on invoicing and opens up the possibility for vendor quick-pay discounts, saving you money.
3. Understand contracts and agreements better
Knowing your paperwork inside and out is a cost-saving superpower. Comparing terms and conditions, rates, and LOA conditions against invoices empowers you to go back to the vendor when there’s a discrepancy. Should you be paying for overtime meals or not? If contractors are on site for extra minutes, what threshold should they use to charge for them?
Knowledge is a power that leads to better decisions, negotiations, and savings.
4. Focus your staff on higher-value work
Reliable cost understanding and reduction require time that you probably don’t have right now. To do better, ask yourself this question: Are my people spending time on the right things?
Dealing with paperwork sometimes feels like death by a thousand paper cuts. When your planner or engineer is working through spreadsheets, they’re trying to stare and compare hundreds of line items – conditions ripe for errors. Worse, the most common losses come from low dollar amount items. Think an extra hour here or there and copy-and-paste mistakes leading to duplicate billing in amounts that fall under the radar.
Using technology to shift your team away from manual, time-intensive work not only makes them happy, it increases your chances of finding those small anomalies and gaps that lead to bigger overall losses.
How technology helps facilities manage inflation
Having the time to find, read, and understand every invoice and contract is never going to happen. Data-driven technologies can do this at greater speed and with 100% coverage. They also eliminate human error, identifying billing anomalies and gaps in contract compliance before money is exchanged with vendors, saving time, headaches, and expensive disputes after the fact.
Result: less surprises, reduced costs, and better management of inflationary pressures.
Technology offers a single source of truth for contracted services billing. More powerful than manual processes and less error prone than Excel, purpose-built tools give you:
- Analytics to help you understand where cost leakage is occurring across gate, contracts, union agreements, invoices, and multiple vendors
- Visibility into budget vs. spend anomalies, helping identify problems earlier
- Elimination of human billing errors like typos, copy-and-paste mistakes, and duplicate entries
- Scalable coverage across different sources of data that understands it all and validates every vendor
- Digital intelligence to support better decision making and improve negotiation power when talking with contracted services providers
How PayShepherd helps
The PayShepherd platform simplifies contracted services billing through 100% data coverage and automated validation between all submissions, contracts, gate, and union agreements. Based on our actual customers, PayShepherd can eliminate up to 15% of contracted services spend due to billing errors, invoice discrepancies, and invalid items between invoice and contracts.
This includes the four best practices above: LEMS leakage, process efficiencies, digital intelligence about contracts and agreements, and focusing on higher-value work. PayShepherd’s real-time spend analysis gives you immediate visibility into what’s going on, allowing you to manage contractor time on site more effectively and saving your team countless hours of manual reviews and paperwork.
Fighting inflation isn’t impossible anymore – sign up for a PayShepherd discovery call now to find out how:
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