Supply and demand

This year in the UK, at least politically, much has been made of changing relationships. Any economic downturn is a guaranteed call for a change at the top but the result of a coalition government was, in itself, surprising. However, new faces and new partnerships in government is perhaps a good indicator of what needs to happen in the larger commercial and industrial world.

After all, it’s not just in the public sector that the rhetoric, ‘more for less,’ is required right now. The retail and commercial sectors are feeling the pain of the recession to varying degrees and everyone is looking for ways to reduce spend and generate more income. The time is ripe for shake-ups and for the forging of new relationships. Trying to do things differently.

As the recession continues to run its course, big businesses will be forced to react in some way, no matter how resilient they have proved themselves to be so far. A typical company will cut back on hiring new employees, stop buying new equipment, curtail internal projects and staff training, while reducing its advertising and marketing expenditure. Many others companies with far less in the bank to cushion themselves, will have to face the prospect of making staff redundant and closing down specific sections to reallocate funds and expenditure.

Such activity, or, rather, lack of it, will naturally impact on other businesses, both large and small, that count the first company as a customer and provide it with goods and services. The supply chain will always be effected by what happens at the top and no company in that chain can claim to be absolutely fire-proof.

How we choose to respond to a change in the market should give us food for thought. Although it can be difficult to root around and find the positive in strained financial times, a recession does give us the chance to review how we spend our budgets and to take a calculated look at the relationships we have built to-date. Can we make them more cost-effective? How can we save ourselves money and, potentially, do things better?

A recession presents businesses with a prime opportunity to drive a fresh approach. We all face a far more competitive market than we have been used to, but where there are challenges; there are also new prospects to strive towards.

The service providers who come out on top in trying times are those who relish a challenge and who are willing to reassess and extend what they initially offer. If the water runs dry in one pool and there is nothing more to fish for, it makes sense to cast your net in new waters.

Similarly, the efficient decision maker doesn’t hang on to incumbent suppliers out of loyalty or generosity of spirit. He or she renegotiates or looks to other parties who can provide a similar service for a better price.

Businesses are operating with far more limited budgets and are continually having to make cuts across the board. The door is now wide open for new suppliers to make an approach and make their move in regards to their more costly and limited forbearers – even if that ground isn’t vacated yet. This is a time for new agreements and a new way of working.

The changes that are afoot as a result of the coalition government’s response to the deficit are giving businesses a reason to scale back, cut the excess, reassess the budget and use suppliers who can offer a more unified and cost-effective service option. This works as a positive for the initial company, as well as the new suppliers or those who haven’t had such a firm footing in the established chain. It’s a chance for the former to save money and for the latter to shine.

External facilities management companies are in a particularly vulnerable position on the property supply chain as there are numerous experts in the field, snapping at their heels, keen to extend their service remit and include facilities management in the mix.

If facilities management is considered as a part of the overall property provision and estates services, then there is room for a more unified, and potentially cost-effective approach. After all, surely it is better in the long run to have all your property needs met by a one-stop shop?

The forward-thinking company is looking for opportunities to build on its relationships with its clients in a hardened market. To provide continued maintenance and facilities management makes the most sense if the fit out company has built and fitted the facilities in question. That fit-out company knows the facilities better than anyone else, particularly if it has played a part in the design as well as the fit out project. It works well for both parties.

If facilities management and maintenance services can be accommodated in the original fit-out contract, at a reduced cost or as part of the refurbishment package, then why would the client company continue to bear the uneeded costs of a specialist facilities management company?

For the fit out company, providing facilities management and ongoing maintenance is an easy win, well within the comfort zone of what their team already delivers. The company has the credentials of knowing both the property and the facilities and it knows how the business operates and functions – a necessity in order to create a functional, well-oiled working environment.

As facilities management can be a bit of a difficult area to define, it is down to each contractor to agree, in the first instance, what they are taking on board. Furthermore, companies need to know what will fall into their remit so they are adding real value for money and an extra service without running the risk of damaging the relations they are hoping to build and capitalise on. If a fit-out provider can successfully build this service into a contract at a low enough cost then the independent facilities management company has much to be fearful of in the current market.

Any spend that is reviewed and deemed unnecessary has to be cut and it will be the yearly budget that casts the deciding vote for most companies going forward. If it is found that certain facilities management services required can be incorporated elsewhere and the costs absorbed, then it makes good business sense to pass that business across to the most accommodating source.

It’s not what you make in a business but what you spend that ultimately counts when times are tough. Hopefully, we will see some growth in the latter stages of 2011 – those who have adapted to the hard times and reviewed their operations wisely will be well-placed when this happens.