Are you using your economy of scale to reduce your spend on coffee?

Written by Peter Doonan

In a report from Industry Canada in 2012, there are over 1,500 companies across the nation with 500 or more employees.  Companies like Bell Canada have over 50,000 employees working for them.  Yet most of these companies (including Bell) have local agreements in place for coffee services. 

When it comes to Canada's largest companies, these local agreements have an effect on the companies bottom lines.  Most noticeably, local agreements pay no attention to the companies real economy of scale.  If unit pricing is based on consumption, would it not make more sense to look at the companies national footprint as opposed to office by office?

There are other hidden costs to these local agreements.  If you look at the agreements in place, many companies are managing hundreds of separate agreements, each of which have had to be negotiated separately which can be a substantial drain of procurement productivity.  They will all have different price points and products (no service standards), and invoices have to be managed separately (drain on accounts payable).

In point form, here are some the advantages to larger corporations:

1. National pricing (one price) based on your national consumption

2. One agreement to negotiate, not hundreds.

3. Central billing (huge benefits to AP)

4. Standardizing services across the country.

5. More control over spend.

Although there are other benefits aside from these, there are more than enough reasons for large corporations to rethink their spend on coffee services.  Food for thought? (or in this case coffee).