Snapshot: Cost Management in a Slowing Economy

This large multinational oil and gas company first engaged SIRVA’s services more than a decade ago as a moving supplier in Malaysia, and we now provide them a full suite of relocation services across the APAC region.

Industry:                 Oil & Gas
Project Scope:       Cost reduction amidst industry decline
Annual Volume:     16,000 service initiations in Malaysia annually
Locations:              APAC
Service Team:        Dedicated on-site and off-site team

We’re proud to provide this major oilfield services company with our full suite of relocation and moving services for more than eight years now, with our dedicated team of on-site and off-site employees working closely with the client. What started as a standalone partnership it Malaysia, with our dedicated and demonstrated success, this has grown into a full-fledged regional account.

Due to the fall in oil prices over the past couple of years, there has been a shift towards shorter term deployments, repatriations and a closer scrutiny on relocation cost management.

Collaborating closely with the client to analyze the cost components, we identified that rental cost amounted to 60% of the annual spend. Together, we identified and executed the following initiatives to manage costs better: rental rate reductions, early termination of leases without penalties and separation of rent and non-core expenses.

Rental Rate Reductions

In 2015, we saved approximately USD 160,000 when our destination services consultants leveraged on the soft economic climate and successfully executed rental rate reductions. This was achievable by reviewing a few hundred contracts after a series of back-and-forth negotiations with the landlord. About 50% of the contracts were successfully negotiated and more importantly, the assignees did not have to compromise on housing quality.

Early Termination of Leases without Penalties

Our team of realtors also took the initiative to negotiate the reduction or elimination of early termination penalties for vacated homes due to repatriation, saving over USD 50,000. These negotiations were extremely difficult to execute as the ‘diplomatic clause’ (termination without penalty) was not built into some of the contracts. The assignees also risked forfeiting their security deposits. However, through tough negotiations, we managed to achieve our goal in terminating leases without penalty for more than a quarter of these contracts.

Separation of Rent and Non-core Expenses

Following an audit on the rental cost with the intention of absolute transparency in all components of the cost, we identified and removed non-core components (eg wifi, cable TV and clubhouse charges) that was previously built into rental agreements resulting in further savings.

This cost savings exercise would not have been possible if not for:

• A long standing partnership with the client so as to understand their challenges clearly and to bring about the most effective recommendation to address their pain point.
• Having in-depth country knowledge and best practices so as to identify areas of
  improvements.
• Trust and support from the client in the form of strict administration of policies and
  clear internal communications so that SIRVA can successfully implement the agreed
  changes.

These factors which helped us foster a strong partnership with this client for the long run.

Note: To protect the privacy of our client, the organization mentioned in this document shall remain anonymous.