News & Views

 

The tide of business prosperity is currently ebbing but we know it will eventually come back in. The immediate challenge for businesses is to avoid the rocky reefs while the tide is low. In this paper we explore some practical steps you can take to help your company navigate through the treacherous waters of recession.

 

Over time the balance sheet can hide a multitude of sins. How many assets are sitting around not pulling their weight? Consider aspects such as optimum levels of inventory, timely collection of debtors, maximising payment terms and managing working capital. Also worthy of review are non balance items such as contingent liabilities, valuation of fixed assets and ensuring contracts are up to date.

 

 

Is inventory under control? There is a common tendency to extend range in response to competition and this can result in underperforming SKUs. To get control and release valuable funds, SKU rationalisation exercises that target, define, reduce and remove have become increasingly popular. Selective inventory reduction may mean holding less of the B and C range items. Support this by developing a documented and understood process to ensure it doesn't get unmanageable in the future.

 

 

Clearly it would be unwise to make across the board cuts to marketing activity.  However, a systematic, activity by activity review of the marketing plan (including website) will reveal those activities for which a strong return on investment cannot be demonstrated. Advertising aimed at brand awareness is often one of these.

 

 

There are a variety of relatively low cost tools to improve business efficiency. For example purchasing costs can be significantly reduced by the introduction or optimisation of eProcurement and expense management (PCard) systems. Often processes can be improved by simply removing duplicated or wasted effort. Many organisations have never understood or analysed their core processes. Detailed mapping of the current processes will reveal inefficiencies that then can be remedied.

 

 

In times such as these the whole supply chain is under pressure. One typical response is for both sides of the transaction to clam up - exacerbating the problem.  By seeing this as an opportunity to collaborate, companies can use the pressure they are under as the driver for change. Consider identifying your strategic customers and suppliers and involving them in sessions to agree on ways to reduce the total cost of ownership (for both parties) by taking costs out of the supply chain e.g. price reductions, reducing re-work, wastage or administration.  Even the best of supply relationships need testing from time to time and putting an expenditure category out to the market can deliver unexpected benefits in terms of price, service or value. Leading negotiations, even with tricky relationships made worse by current events, needn't be difficult if approached with the right attitude and methodology, and perhaps facilitated by a neutral party.

 

 

Productivity is a word that has been bandied about much in recent times - usually in negative terms about how NZ's productivity growth is lagging the rest of the world. That wasn't threatening in good times. But now it is. Productivity gains are becoming ever more critical as profit shrinks. Many people have installed systems in recent times or are doing so now. But a much smaller percentage has actually implemented their systems and are achieving the levels of performance their new assets are capable of. If you have a recent or planned IT acquisition think carefully about the people and process elements. Shiny boxes are money down the drain unless the processes are clear and the people know how to use them.

 

 

Speed is of the essence. In the current economic climate, Westpac’s Chief Economist, Brendan O’Donovan, advises organisations to take pre-emptive decisions to address costs early. Of course, this is easier said than done. In busy, resource stretched organisations the availability of appropriately skilled managers and staff is often an inhibitor.

 

 

The Management Toolbox team are experienced business people who work on these issues every day. Since its inception in 1999, Management Toolbox has successfully worked with many leading New Zealand organisations.

 

© Copyright Management Toolbox Limited 2008