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reduce and/or eliminate hidden and wasteful costs.
What It Means to the Bottom Line Properly executed, the TCO approach can result in significant mobility cost savings for employers. On average, employers can save an estimated 10 to 15 percent on their total mobility costs. In other words, by looking at the “big picture,” this cost inefficiency and “waste” can be eliminated with no reduction or even an increase in service levels to the transferees. The financial advantages of the TCO methodology easily can be seen when applied to the homesale process. Accounting for an estimated 40 percent of an employer’s total mobility costs, homesales typically exemplify the practice of looking at this one cost event; but doing so based solely on the expenditure of fees charged (directly or indirectly) by the mobility service providers is not the whole story. For example, the costs incurred from homesales often continue to accrue long after the transferee has physically moved. This situation occurs in one of two ways: when there is a “fall through”—in a buyer value option-type (BVO) program; or a home does not sell to an outside buyer and the guaranteed offer is taken by the transferee, which results in the home going into an employer’s inventory. In today’s poor real estate market, an estimated one in two homes ends up in inventory, where both direct and indirect costs increase rapidly. Homesale costs are just one piece of the total mobility cost spend that often are not properly evaluated or measured. Homesale costs, especially the cost of the homes that go into
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inventory, are not just affected by the real estate market but also by the systems and solutions an employer’s mobility service supplier may or may not have in place to proactively increase amended homesale rates while also lowering loss on sale and reducing the home inventory risk to the employer.
Implementation of a TCO Process First, the strategic procurement of mobility services both domestically and globally should begin with identifying a qualified supplier that can help an employer understand where inefficiency and waste exist in the total mobility spend. Most mobility programs have significant cost-saving opportunities. This is the result of programs that have evolved over time with too many people responsible for too many costs and not enough single-point accountability throughout the process. Accordingly, it is important to identify and assemble all the cost elements that comprise a mobility program, which can include homesale, expense/tax management, temporary living, destination services, and similar areas. A supplier can help manage the evaluation process by auditing and estimating these cost drivers by conducting a thorough analysis across company divisions, geographic regions, and mobility suppliers at all levels. The supplier can take a thirdparty objective view of a company’s supply chain and establish expectations and accountability for driving efficiency and cost-effectiveness through process improvements and cost reductions. Once the individual elements are identified, a standard set of metrics must be defined so that costs can be evaluated. In establishing these met-
...information and applications are NOW available!
Worldwide ERC®’s 2010 Certified Relocation Professional (CRP®) exam will be held on
MAY 19 in the following locations:
Orlando, FL (just prior to the Worldwide ERC® National Relocation Conference)
Chicago, IL Dallas, TX Phoenix, AZ Stamford, CT Find eligibility requirements, program information and an exam application at www.WorldwideERC.org.
Additional Questions? Contact the Professional Development Department at crp@WorldwideERC.org, or call us at +1 703 842 3430.
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