Bringing Strategic Sourcing Into the Home

Those who know my wife and I know that we are two of the cheapest people in the world. After all, if you truly live the Spend Management lifestyle, then you need to bring your dog food home from work with you, and not just snack on it in the office. But that's not to say we're "cheap" in the sense of not procuring the finer things in life. For example, I have no problem paying a thousand bucks a case for a unique Pinot and letting it sit in my cellar for a few years. And my wife's shoe and handbag collection could prop up the GDP of most developing nation. Trust me, if there's even been a better reason to call your broker to by LVMH stock, she's it.

But when it comes to buying the more mundane items for the home -- and gifts for the holidays -- we are always searching for the best value. Over years, I've jotted down a few pieces of advice that I think are worth sharing here. Below are the five easiest ones to implement.

First of all, if you can buy in bulk, do so. I have no doubt Costco saves us -- and our businesses -- thousands of dollars a year. Other warehouse retail / wholesale formats can be equally as good depending on what's in your area. But by all means, if you want to be miserly, start by buying in the warehouse format. Viva la Costco!

Second, unless you're writing off part or all of a car purchase or lease on a business, always buy a vehicle that's at least a few months old (demos or executive cars can be great, especially for Bimmers and Benzes, where they'll certify them and bump up the warranty if you ask, actually giving you longer coverage than had you purchased the car new). I've saved an average of $10-$15K per vehicle over the years by letting someone else take the initial depreciation hit by doing this.

Third, make strategic use of multi-round negotiations for contractors (even for large projects, reverse auctions can be challenging to pull off). By pursuing the multi-round sealed bid approach and making contractors bid apples to apples, you can save thousands in such areas as bathroom and kitchen renovation. Moreover, you can plough part of the savings into performance-based bonuses to contractors for coming in on or ahead of schedule (from a total cost perspective, factoring in the utility of finished space, you always come out ahead if you can provide incentives for contractors to finish early).

Fourth, audit your own telecom bills and create logical bundle and lot structures to re-source. Between regular lines, home office lines, wireless subscriptions, cable, DSL, and the like, I reckon we used to spend well into the thousands per month. To save money, we switched almost all of our lines over to one VOIP provider and consolidated and negotiated heavily with a single wireless provider. Our total savings is probably $500 per month.

Fifth, make judicious use of eBay for purchasing high-end esoteric items, rather than branded merchandise. By this I mean to avoid using eBay for things such as designer handbags or Hermes ties (which have an established "market" value very close to retail on the site. But such items as antique Bennington door-knobs (which can go for $100+ a pair in an antique store) routinely sell for $10-15 on eBay or new Oxxford suits / sport-coats (which retail in the thousands) but are not a branded item per say can be had for 15-25 cents on the dollar. I reckon on just a dozen or so purchases a year like this per year, we've saved at least a few grand on eBay by avoiding the "brand" trap by seeking out esoteric high-end items.

So what's your secret for bringing strategic sourcing home? Rumor has it the Spend Fool bought a tricked out version of a regular mid-size car, and uses it to leave Porsches in the dust on his communte into the office. And there's nothing foolish 'bout that!

Jason Busch

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