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Client Case Studies |
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Freight & Supply Chain - Retail Clothing
Manufacturer |
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SCENARIO:
With negotiated rates more than 3 years old, this CRS client was in the process of renegotiating their carrier contracts. Shipping volumes were divided between 3 major parcel carriers based primarily on service requirements. As all carriers offered minimal rate improvements in spite of the increase in business, CRS was engaged to alleviate the client's lack of carrier expertise, industry benchmarking information, and corporate resources by researching, evaluating, and negotiating the new carrier proposals. |
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ACTION:
Gathering specific freight data, CRS examined the company's freight requirements and characteristics, and outlined a strategy to improve the client's carrier contracts. CRS developed and issued an RFP to carriers with instructions to provide proposals for retaining the existing business with a single-source solution. Detailed analysis of the client's characteristics and guidelines for structuring pricing contracts were delivered to all carriers. CRS then analyzed the final proposals for adherence to stated guidelines and evaluated projected performance based on cost and service. Final cost comparisons were provided to the client with CRS' recommendations for action. |
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RESULTS:
The client awarded the contract to the incumbent carrier providing a single-source solution. On $4.9 million, the new proposal generated a 34% reduction in freight costs totaling $1.7 million in cost savings annually.
CRS continues the process of evaluating and establishing guidelines to help the client manage and monitor their freight program effectively.
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Accounts Payable Audit - An Entertainment Company |
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SCENARIO:
An entertainment company engaged CRS to provide a comprehensive recovery audit of its accounts payable (A/P) and sales/use tax departments. The company had grown through more than 60 mergers and acquisitions of smaller companies located in multiple states. The company was also under audit by the state of California for sales and use tax. |
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ACTION:
CRS' staff and the client's key personnel met to discuss the client's expectations for the audit. CRS analyzed the client's A/P processes and procedures by obtaining hard copy purchase documentation, an electronic download of its A/P history, and purchase order information. CRS compared the electronic data against the hard copy information to identify the client's feeding process so that custom queries could be created to identify more than 25 different types of payment irregularities. CRS exported, extracted, and filtered the data to generate reports that were used to identify overpayments in the data.
CRS then conducted a comprehensive manual audit wherein all underlying A/P documents were reviewed independent of the data. Our manual review resulted in the identification and recovery of overpayments not found within the data, including taxes overpaid to multiple states.
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RESULTS:
CRS' recovery audit reduced the client's state tax assessment by over $600,000 and yielded an additional $2.5 million in recovered monies. Additionally, CRS delivered recommendations designed to minimize future A/P overpayments and assisted the client with completion and delivery of exemption and resale certificates to reduce the overpayment of erroneous taxes.
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Cost Segregation Study - Office Building Owner |
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SCENARIO:
A taxpayer owned an office building with a value of $5.5 million and placed it into service in 1999. Initially, $500,000 was identified as furniture and equipment, such as cubicles, phone system, security cameras, etc. The remaining $5 million in project costs was treated as 39-year property. A 41% federal and state tax rate and an 8% expected rate of return were assumed. |
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ACTION:
A Cost Segregation Study was completed, and the specialist found that 8% of the construction-related costs should have been classified to a 5-year depreciable life, 7% should have been classified to a 7-year depreciable life, and 12% should have been classified to a 15-year depreciable life. |
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RESULTS:
The Cost Segregation Study resulted in an increase of $808,250 in depreciation deductions for Year 1, translating to $331,382 in increased cash flow after tax. The net present value of these savings after tax was $261,574, and the benefit-to-cost ratio was 35 to 1.
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IT Cost Control - Midsized Insurance Company |
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SCENARIO:
A growth- and acquisition-minded automotive insurance provider was investing in a major upgrade of its systems and processes to allow for improved efficiencies and growth. Due to the company's strategy of growth through acquisition, the company had a variety of unconnected and inefficient systems to manage its business processes. A major component of this technology upgrade was the purchase of large-scale software to replace its aging and inefficient system. The cost of these new multi-million dollar systems was almost prohibitively expensive, so the cost was seen as a major roadblock in this mission-critical upgrade. |
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ACTION:
As in most companies, major technology purchases such as this are not common occurrences, so the price and terms negotiated by the client were still seen as prohibitively high. CRS was retained to negotiate the purchase of the software at an improved cost and to ensure that the complex terms and conditions related to large-scale software purchases were the most favorable to the client. After reviewing the current and future needs of the client and determining the optimum negotiation strategy, CRS moved forward with the software vendors on the client's behalf. |
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RESULTS:
The purchase price of the software was reduced by approximately 40% from the previously negotiated price. This represented approximately $2.4 million in savings. In addition to the one-time savings, the first year's maintenance cost was waived and the ongoing maintenance cost was reduced by an additional 20% over and above the maintenance savings realized by the lower purchase cost. Working in partnership with the client's in-house counsel (who had no experience in software contracts), a contract was negotiated that provided optimum advantage and protection to the client.
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Utility Cost Management - National Envelope Manufacturer |
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SCENARIO:
A large paper manufacturer was in the process of expanding their operations and decided that this provided a good opportunity to review their power costs. They felt they had done everything they could operationally to reduce costs: they had implemented state-of-the-art technological process improvements, upgraded motors, upgraded heating, ventilation, and air conditioning (HVAC), and hedged natural gas purchases by buying futures. |
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ACTION:
Billing histories and customer service records were gathered, and a detailed audit was completed. Several key areas of interest were identified, including the evaluation of their utility service contracts. A detailed analysis determined that the tariffs for this client's rate structures had provisions for certain discounts and savings based on their utility consumption and energy trends.
CRS was able to shift their balance of purchased on-peak and off-peak power to a ratio that was more favorable to the client without their incurring any additional risk. In addition, CRS was able to take advantage of an enhanced version of the rate they were currently paying to increase savings by an additional 10%. Finally, since the company had backup generation, non-firm delivery was added without creating additional risk.
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RESULTS:
In addition to the implementation of new rate structures and other billing adjustments, annual cost reductions for the client resulted in a total savings of over $680,000-with none of the changes resulting in any additional risk to the client. The client will continue benefiting from the cost savings in the future.
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Waste Management & Recycling - Automotive Parts Manufacturer |
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SCENARIO:
This regional manufacturer of automotive interior trim parts was awarded a large contract to make acoustic parts from a new raw material. The remnant material was causing excessive trips to the landfill, and the client's waste-disposal budget skyrocketed. CRS was contracted to perform a comprehensive waste and recycling audit to determine areas for improvement. The client's project profitability was being eroded due to the unforeseen waste-disposal costs. |
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ACTION:
CRS was provided with waste-hauling invoices from the past several months, as well as contracts and receipts
from existing hauling and recycling vendors. A detailed analysis of the paperwork revealed several things: (1) the
client was being oversold by their hauling company, (2) recycling rebates were not accurate, and
(3) the municipally run landfill was improperly assessing a "density tariff." CRS negotiated a new
hauling service agreement to its specifications, located a new recycling vendor, and was able to
adjust the density tariff to accurately reflect the client's situation.
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RESULTS:
The client has effectively cut their solid waste-hauling and disposal costs by over $300,000. This
represents a 62% cost reduction across the board from their previous spend. Recycling rebates
are at a historical high, with the client receiving an increase in revenue of $24,000 per year—an
increase of 700% from the previous years of activity. The client is looking to expand their engagement
with CRS to include freight management and utility cost-reduction opportunities.
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Document Fleet - Building Products Retailer |
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SCENARIO:
For years, this $1.6 billion building products retailer had allowed their 150 branch locations to negotiate and manage their copier agreements. Senior management wanted to obtain an accurate inventory of assets and related lease and service agreements to determine the company's total spend for this expense category. An internal team of 5 employees was assigned to the task, but after investing a year's effort, they arrived at an inconclusive outcome. After considering various outsourcing resources to tackle this problem, the company awarded the project to CRS to provide a solution. |
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ACTION:
The client wanted to specifically address the following 6 key areas:
- Create a full inventory of devices.
- Provide a comprehensive Total Cost of Ownership analysis.
- Implement a fleet management program to track and reduce spend.
- Inventory and manage supplier contracts.
- Increase overall fleet performance.
- Address and resolve performance disputes.
CRS conducted a complete analysis and defined all cost and performance metrics.
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RESULTS:
This client has documented a 46% reduction in related copier contract costs and a 23% increase in equipment productivity. The savings is estimated to be $2.3 million over a 5-year contract period. Additionally, the company now has an updated and accurate inventory of all of their device and supplier agreements, as well as a clear understanding of the output needs of their branch operations. They are extremely pleased with the overall performance of their copier fleets.
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Healthcare Cost Control - Recreational
Vehicle Manufacturer
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SCENARIO:
Employing over 300,000 people worldwide and earning $32 billion in revenues, this company's domestic medical expenses exceeded $2,500 per employee. Although operations are located throughout the U.S., their Southwest location was hit with a "rent-a-patient" fraud scheme. During the audit, a series of contractual issues were noted and it was determined that out-of-network claims were funding a fraud scheme commonly targeted at employer benefit plans. The company utilized a third-party administrator (TPA) to process their claims. The TPA was not only unable to accurately connect members to the contracts associated with their specific network, but they also generated significant problems in payment accuracy in the area of contract compliance because their internal controls did not catch these fraudulent claims. |
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ACTION:
A comprehensive healthcare audit identified problems with duplicate payments, eligibility, and out-of-network benefits, with contract compliance isolated as the largest single area of inaccuracy. A focused audit isolated the claims associated with the rent-a-patient fraud scheme totaling $3.5 million during a 1-year time period. The rent-a-patient fraud scheme was submitted to the employer's fidelity crime policy. |
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RESULTS:
Roughly $1 million, or 5%, of total medical expenses were identified as overpaid during the comprehensive audit. Contractual changes were made to avoid these losses in the future. After a successful investigation and proper crime policy submission, the employer recovered the losses associated with the rent-a-patient scheme. |
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Travel Management - Pharmaceutical Manufacturer
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SCENARIO:
A midsized pharmaceutical manufacturer had an onsite travel agent who had been contracted through a major travel agency. The client's CFO asked CRS whether the transaction fees paid to the agency were competitive. He also asked whether they should require a business they had recently acquired to book their travel with the same agent. |
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ACTION:
CRS reviewed the contracts, policies, and management reports from the travel agencies serving both HQ and the new acquisition. It was determined that due to non-consolidated reporting, total payments to both agencies were far higher than market rates. Also, since each business negotiated its own airline, hotel, and car rental rates, they lost a lot of leverage and could not use each other's rates. Without good reporting, managers could not stop excessive spending by travelers until long after the fact.
CRS helped the client select and instate a single agency in a more cost-effective service configuration. All travelers automatically accessed discounts negotiated by either business or by their travel agency. Designated agents were available to support their travelers and travel policies, and the agency implemented an optional 24/7 corporate self-booking tool with even lower transaction costs. The CFO began receiving management reports on travel spending and policy violations by cost center, as well as other spending drivers.
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RESULTS:
CRS identified multiple drivers of excessive travel spending. We quickly helped the client implement a world-class travel management program that reduced the travel agency fees and costs while providing management with improved reporting on travel spending. |
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