Leveraging purchasing-power at the YMCA
Saving 47% costs of trash removal while maintaining the exact same service; clubbing together with other regional non-profits to create purchasing muscle and thereby fix better supplier rates for electricity; and making the most of purchasing power to improve on terms of contract – just some of the things Paul Slovin's team has achieved at the YMCA.
Paul, you are in charge of purchasing for the YMCA in the greater Boston area. What does this involve?
I am the Executive Director and Purchasing Manager for YMCA Shared Services, Inc, an independent corporation that represents 37 YMCAs in the Greater Boston area. We work together to save money on everything from electricity, natural gas, vehicles, janitorial and sanitation supplies, trash removal, maintenance and repair costs, office supplies, staff uniforms, fitness equipment and other items that represent opportunities for savings. YMCA Shared Services was started 15 years ago, and serves the eastern Massachusetts region. The YMCA actually started in Boston in 1851, so as a result there are a lot of smaller associations in this region. In other parts of the country there is a single association that covers the territory, so Boston is a unique area and shared services fills a need.
To what extent did your stakeholders, the different YMCAs you are providing services to, welcome the Shared Services model? Or did they perceive it as encroaching on some of their own purchasing power?
When I first came on board, two years ago, a lot of folks did see Shared Services as encroaching on their territory and felt a loss of independence. It’s still not perfect but we've made huge improvements. What we've done is we set up an operational team where high ranking representatives from the member associations all meet, and where we discuss opportunities to leverage our combined purchasing power and decide which of those opportunities are worth pursuing. We also decide on a direction to move forward. It has given everyone ownership in the process and it has allowed member Ys to recognize the opportunities we present.
It's been a huge help in getting everyone’s buy-in. Also, when you have some victories to show – eg, substantial savings or things that they could not have achieved on their own – it gets easier and easier.
Can you share some examples of how you’ve contributed to cutting costs? What other metrics do you track to demonstrate your success?
Where we’ve really made headway is in combining our purchasing power. Areas such as electricity, natural gas, vehicle leases, trash removal, etc … those are areas that allow us to use our combined purchasing power much better than a single branch could, and we've had some great victories. In trash removal, we've saved up to 47% of costs while providing the exact same service, just by combining our contracts. As far as electricity and natural gas go, we belong to a cooperative of other non-profits called Power Options, where hospitals, colleges, universities, the Y, etc work together to buy electricity and natural gas. It has given us budget certainty and the ability to lock in to fixed rates – we are much more important to a supplier when we collaborate in this manner, and it's allowed us to save about 22% over what rates would otherwise have been. We’ve also been able to get rid of a lot of restrictive clauses in these contracts, thereby achieving better terms. It's something that a single Y wouldn't have the resources to do on their own.
When you make the case for Shared Services, what are your big selling points? How are you communicating with customers so that everyone who has got a stake in your Shared Services is also a supporter of it?
That's a great question. I wasn't here when YMCA Shared Services was created, but we are still growing and talking to new Ys about the benefits of becoming a member, so your question is very current.
There are three main points I stress. The first thing is that a large number of YMCAs working together obviously have much greater purchasing power and will be able to save money, and obtain better service, than a single YMCA negotiating on its own. I also stress that every dollar in savings is really equal to a dollar increase in membership fees, grants, or donations – it affects the bottom line in exactly the same way. And finally, within a Shared Services model, the whole process of buying – whether electricity, vehicles, fitness equipment, IT, or pool supplies – is handled much more efficiently than at the branch level.
How do you communicate with your member Ys?
We do have operational team meetings, but what is really important to me is that staff at all levels of our member Ys understand what I do, and that they buy into it. Whenever there is anything that concerns them – whether on deals that have been negotiated, or changes in service, or products that require attention – I make sure that they are in the loop. This gives them ownership in the process and they understand that we’re saving them time and helping them out.
How does the Shared Services free up resources that can be focused on developing the operation itself?
Staff and budgets are so tight at any non-profit these days, that any burden you take off your employees allows them to free-up time to improve that whole operational side and focus on serving members and people better. It's a burden taken off their shoulders.
Does Shared Services success translate into fewer fulltime employees?
Yes, and it also takes a lot off the plate of employees that would otherwise have had to worry about electricity, about chemicals for the pool, about a snow plow contract, about computers. They are now free to grow the services that they offer, instead.
How can non-profits or public sector organizations collaborate to run Shared Services?
I touched on Power Options earlier, which is a collaboration of non-profits working together for the sole purpose of buying electricity, natural gas and solar energy. Even though everything else about the membership is different, we all have the same goal of saving money and being better at buying electricity and natural gas, so I think that's a perfect example.
At the end of the day, all non-profits have one thing in common: they purchase certain items. So, collaborating is a win-win for purchasing, with no competitive impact.
What’s important as far as leadership skills in the public sector go? Today it’s less about "managing a bureaucracy" than it is about "managing a service delivery model" – which is an incredibly forward-thinking, private sector kind of approach. How is that panning out at the YMCA?
It's a work in progress; we really haven't got there yet. But in the two years I've been here we've made a ton of progress. I come from the "for profit" world, and what I saw at the Y was that we didn't have the business background or experience of the "for profit" sector. So our people were learning on the fly how to deal with contracts, how to read contracts, negotiate with vendors, select vendors, put contracts out for RFP, etc. Depending on that person's experience, the result was either great or it wasn't so great.
What Shared Services has done for member Ys is give us that edge, where we've been able to take people with experience in business and offer their skill as a service to all of our member operations. Again, it frees our member Ys up from having to deal with negotiations and concentrate on branch operations.
How do you determine priorities within the portfolio of services that you offer? What are the drivers that would make you decide in favor of one process or function, or another?
It's real simple. I meet with the operational team and we look at which areas of expenditure offer the most opportunity for savings and, at the same time, help out the majority of our member YMCAs. The budget importance obviously comes into this, but it’s not necessarily low-hanging fruit; it might be a tough area to tackle. Wherever huge amounts of monies are being spent – that is where we’ll take a look. We might not be successful all the time, but most of the time we are.
So you would go in order of magnitude of spending, is that right?
Everything is on the table, but if I saw we were spending 2 million dollars on something and 30,000 dollars on something else, of course I would look at the 2 million dollars first.
When you've identified an area where Shared Services could step in, how do you make a business case and whom do you pitch it to?
Well, numbers don't lie so I've found that the best way is to show, on paper, dollar savings. That speaks for itself. I make the pitch to both my operational team and to my board of directors. Again, we have a great relationship and it's usually a black and white case.
How do you fund your Shared Services? Do you charge members?
We are funded by all the member associations – in other words, the 37 YMCA associations in the greater Boston area. Specifically, we are funded through a monthly membership dues model based on four tiers, ranging from large to small. These dues cover our operating costs.
Do these dues allow for a profit margin that you could reinvest into your operations?
No, being a non-profit we just cover our costs. If there is need for additional funds for one reason or another, we assess the member Ys based on that same tier model.
What will your core message at the Public Sector conference be?
In all honesty, our case is an amazing example of the whole logic behind shared services; how it works. It's really been a great success. Besides saving money, the biggest benefit has come through product selection, as far as fitness equipment, computers, vehicles and copiers are concerned. Again, instead of having 37 Ys with different copiers, Shared Services has allowed us to research what's out there and make the best decision for the group. So now, if an executive at a Y needs some exercise equipment he or she can go to a list that has been vetted by us, offering the best quality for the best value. That's where the main benefit, besides price, has been for us.
Thank you Paul.