Category Archives: Best Practices

The British Chambers of Commerce Top Ten Export Tips

The BCC, which recently urged small business to take a measured approach to export opportunities (created as a result of the weakening pound), also provided exporters with a handy dandy notebook filled with its top ten exporting tips that covered some basics that even old pros need to be reminded of every now and again. So, without further ado, here are the BCC’s top ten export tips:

  1. Do Your Homework
    There are export rules for your home country and import rules for the country you plan to import into that cover reporting requirements, safety requirements, and duties and tariffs, among other things. Learn these facts up front, or risk massive fines and seizures later that could, insted of growing your business, kill it.
  2. Understand the Market
    Is your product and service appropriate for the market you want to export into? Will people buy it at a profitable price point? Are you trying to sell a Nova in Mexico?
  3. Research Costs
    In addition to the duties and tariffs, you’ll also incur shipping costs and loading, unloading, and storage costs at the docks, at a minimum. And these costs can increase substantially in good economic times.
  4. Understand Exchange Rates
    A small fluctuation in the exchange rate can lead to a large fluctuation in your profit margin, possibly wiping it out completely.
  5. Look to the Future
    Is there long-term potential in the new market? Or is it a short-live opportunity that will disappear when the economic situation improves at home or abroad?
  6. Assess the Competition
    Who are you competing against? Could they wipe you out with a simple change in their marketing strategy?
  7. Communicate Effectively
    You need to be sensitive to language and cultural differences in your target market. The last thing you want to do is imitate the AT&T Commercial and call your potential buyer Mr. Stinky Fish Face.
  8. Streamline Paperwork
    Not only should you secure export certification and documentation online to save time and money, but you should use leading SaaS trade management systems to manage the process as this will allow you to track your shipments and create any additional documents or reports you might need on-demand. Remember, you need trade visibility.
  9. Don’t Over-Commit
    Take new markets one by one and make sure you’re solid in one before embarking on a second. If you over-commit, not only could you risk them all, but you could lose key customers at home.
  10. GET HELP
    Expert support and advice through every stage of the process the first few times you go through it is invaluable. It is often the difference between success and failure.

Downturn Survival Strategies from PWC

The Global Supply Chain Council recently published a piece by Robert Barrett, a Director in PricewaterhouseCoopers that, for the most part, had some great “strategies to survive in a downturn”. Considering that it will likely be at least six months, if not eighteen, before we start to claw ourselves out of this recession (longer if companies decide to stay dumb and wait until natural selection gives us yet another dead company), they’re definitely worth yet another review.

It’s important to remember that recessions create winners as well as losers AND companies that effectively manage the downturn have a higher likelihood to emerge more quickly during the upturn (and win big).

  1. Focus the Business
    During a downturn a clear focus on the key business drivers is essential to ensure resources are allocated to those areas that deliver most value to the business. Three tactics you can use include:

    1. Product and Item Rationalization
      Simply put – Go Lean! Considering that, in an average organization, up to 30% of products are actually loss-generators when you correctly allocate direct and indirect costs, focusing on core, revenue generating products can quickly turn a balance sheet from one that’s in the red to one that’s in the black.
    2. Scrap Special Trade Relations and Promotions
      Up to 75% of promotions lose money and fail to generate long-term sales and only lead to reduced forecast accuracy, complexity, and management cost.
    3. Customer Profitability
      Focus on the customers that you can impact significantly while making a reasonable rate of return. In some companies, up to 25% of customers are actually loss-generators. They should be weeded out and the resources re-allocated to your most profitable customers.
  2. Generate Cash
    1. Optimize the Order-to-Cash Cycle
      Inefficiencies leave cash on the table and sub-optimal credit decisions cost you and your customers.
    2. Optimize the Procure-to-Pay Cycle
      Inefficiencies increase processing costs and result in the loss of rebates and early payment discounts. Inefficiencies also result in delayed payments to suppliers, forcing them to borrow at unfavorable terms, which increases their overhead and ultimately increases your costs.
    3. Tie Forecasts to Demand Drivers
      Excessive Inventory is a big drain on cash, and lost sales are a big drain on revenue. Fix them.
    4. Implement all identified 3X+ savings opportunities that can be realized in the next 12 months.
      Everyday I hear of yet another company hemhorraging cash who has decided to delay yet another opportunity to generate a 3X, 5X, 7X, or 10X return because it will require a small investment of cash up-front or prevent them from reducing head-count, which is NOT a sustainable method of cost reduction. Considering that many service providers are now offering pay-per-performance models, where you don’t pay until the contract is signed or the new process is implemented, this is ludicrous! (And any company that doesn’t latch on to a guaranteed savings opportunity in this market deserves to fail.)
  3. Review Trading Partnerships
    Companies commonly lack alignment between sales teams and their finance departments, leading to ineffective development and execution of commercial terms. The elimination of non-standard terms can often lead to quick bottom line savings.
  4. Improve Buying
    Considering that a 5% reduction in costs can result in a 50% profit improvement, this should be top of every agenda. And there are dozens of service and SaaS solution providers who can help you do this with little, or no, money down. You have nothing to lose and everything to gain.
  5. Implement a “Lean Office”
    Eliminating low-value activities and reducing bureaucracy at the office is a quick and effective way to reduce costs and to improve responsiveness to the market. When you consider that during previous downturns, companies have reduced the size of their head offices by 15 percent to 25 percent without a noticeable loss of performance, there are probably numerous savings opportunities that can be realized by better processes and technology.
  6. Improve Productivity
    Not only will this improve cost efficiency, but it will increase customer satisfaction, which is critical to retaining profitable customers in the current economy.

Do More With Less in Procurement

“Do More With Less” is the new mantra of businesses who are slashing budgets and, unwisely, slashing head counts. It’s a darned good thing it’s not a new mantra for procurement who has always been trying to “Get More From Less”, and do so with too few resources. That’s why I enjoyed a recent article in the Spring Edition of the CPO Agenda by Nick Martindale who outlined eight strategies being used by companies that really are “doing more with less”. These strategies, and others like them, will not only help you survive the downturn, but position your procurement department to be the organizational leader of tomorrow.

  1. Prioritize Workloads
    Understand where your finite resources will deliver the most bang for the buck and focus on those endeavors. Don’t oil the squeaky wheel … if it gets too loud, simply replace it. Focus on strategic sourcing projects and lean supply chain transformations that will reduce cost, improve efficiency, and take the waste out of your processes. That’s where the savings lie.
  2. Increase Productivity
    Eliminate redundant activities. Streamline sign-offs and processes. And, most importantly, don’t put off the acquisition of new systems. With pay-as-you go SaaS systems, you’ll save more than the small monthly fee you have to spend on them. Stop thinking about it. It’s a no-brainer decision.
  3. Refocus Strategic Initiatives
    Strategic initiatives are more important than ever, but the reality is that you can’t wait five years for payback, especially when there are strategic activities you can take now that start realizing payback next quarter. Start with those, and work your way up.
  4. Use Technology to its Fullest
    A real spend analysis system will allow you to slice and dice the data anyway you want, exposing opportunities you wouldn’t find otherwise. If you need to bring in an expert to do this, do so. Most consultants, who will work on a results-basis, can save you millions with these kinds of tools. Use them!
  5. Shoot the Mavericks
    Or at least prevent them from buying off of contract. Force all buys to go through an e-Procurement system that only allows orders against the contract without approval from a senior manager (for exceptional circumstances only).
  6. Reassess Spend Priorities
    Your best sourcing opportunities six months ago are not necessarily your best sourcing opportunities today. Every time you finish a project, reassess the next set of projects in the queue before you begin. There might be a new opportunity in the marketplace worth re-prioritizing your queue for.
  7. Use External Expertise
    You don’t know everything, and with a staff who can barely keep up with their increased workloads thanks to hiring freezes, you don’t have time to figure it out. Bringing in an expert will help you identify numerous opportunities that you’d otherwise miss.
  8. Outsource Non-Critical Activities
    Sometimes a third party really can do it better. And sometimes the quick-hit savings you’ll get from a GPO, while not necessarily the best possible, will be very significant to you, especially since you’ll get savings AND free up your staff to focus on core categories where they expertise will allow you to identify even more savings.

Supplier Relationship Management Best Practices

An article in the spring edition of the CPO Agenda addressed the issue of “SRM in turbulent times”. Noting that now is not the time to put efforts to develop stronger supplier relationships on the back burner, in addition to addressing the important issues of trust and being a good customer, it outlined some specific measures that you can take to improve your relationship.

As these measures were some of the best recommendations I’ve ever read in a traditional publication, I’m going to address them, and dive into the best ones.

  1. Accurate, Timely, Information (Exchange)
    There’s a reason they kept telling The Prisoner “We Need Information“. Simply put, you can’t effectively operate without it. And if you can’t effectively operate without it, how can you expect your suppliers to? Implement a web-based system that allows them to access what they need, when they need it. Insure that they get accurate, adequate performance metrics frequently, that design specifications for new products are complete and unambiguous, and that you provide them with realistic volume estimates for pricing new business.
  2. Realistic Cost Reduction Targets
    It’s okay to have stretch goals, but 20% cost reduction when commodities, energy costs, and labor costs are rising across the board may not be realistic. Work with the supplier to understand the process, the savings opportunities, and then set realistic targets. Also implement a program that shares the savings between you and your supplier in an equitable manner.
  3. Cost Avoidance Proposals Are Just As Good As Cost Reduction
    If your supplier comes up with a new process to produce the product that takes out certain production costs, or a new design that allows for cheaper materials to be used (without affecting performance or quality), that qualifies as a cost reduction.
  4. Provide Them With Lean Experts
    This will help both of you find ways to take waste, and cost, out of the system and demonstrate that you are committed to their success as well as yours.
  5. Provide The Supplier with Free Training
    Once you identify where they need improvement, give them the training they need to improve.
  6. Make It Clear That The Best Suppliers Get the Business
    This will reinforce the message that improvement will result in more business, and more profit.
  7. Align Purchasing And Engineering Expectations
    Nothing risks a good relationship more than forcing a supplier to be a referee when there are internal conflicts in your company when it comes to requirements.
  8. Fairly Compensate Suppliers When You Don’t Meet Your End of the Agreement
    If you cancel a program, fail to meet expectations, or change the requirements, don’t try to weasel out of your end of the agreement and force the supplier to bear the brunt of sunk costs. Pay for your mistake, or award them the new contract with an increased profit margin to allow them to make up their losses.

A Handy Guide to the Eight Biggest Mistakes in (Procurement) Outsourcing

Global Services recently published a great piece on the “eight worst mistakes in outsourcing and how to avoid them” that should not be overlooked if you are outsourcing or considering outsourcing one or more business functions (in your supply chain). These mistakes are all too common — and they don’t need to be, especially since they can be prevented up front.

  1. Poor Governance
    A formal governance model, backed by executive sponsorship, is absolutely critical to success. Without a model, which must clearly define the objectives, a collaborative working model, SLAs, and a dispute resolution process, there’s nothing to stop the outsourcer from doing whatever they want, which includes doing nothing at all!
  2. Shortsighted Focus on Cost Savings
    This leads to unrealistic expectations for year over year savings. Done right, outsourcing will save you money, but the savings will not increase continually. If you’re 80% efficient, then you’ll get 20% savings … and that’s it. But that’s still better than what the function is costing you now. The real benefits come in the form of process efficiency, improved planning ability, higher levels of operational reliability, and the ability to divert focus to core business areas where strategic improvements can lead to significant savings.
  3. Lack of Preparation
    Starting the RFP and contract negotiation process before an outsourcing decision has been thoroughly evaluated internally is the wrong way to go about it. First you analyze the cost / benefits thoroughly, then you outline the governance and model, then you evaluate the vendors, then you start negotiations with the preferred vendors.
  4. Outsourcing High-Touch Activities
    Not all processes are ideal for outsourcing. Processes with high business value that you are effective at should be kept in house. Processes that require continual contact with stakeholders are also not good candidates for outsourcing.
  5. Failure to develop an Effective Communication Program
    Poor communication is often the top reason cited for failure of an outsourcing project. Regular information sharing is essential and needs to be addressed up front.
  6. Improper Evaluation of Outsourcing Providers
    Outsourcing is not an instant solution and proper evaluation of providers is crucial. Choosing the wrong solution provider will give you sub-optimal returns at best, and can lead to the outsourcer abandoning the engagement, leaving you high and dry.
  7. Poor Cultural Fit
    At the end of the day, an outsourcing relationship works best when the chemistry between outsourcer and service provider is right. If the evaluation and negotiation process leads you to believe that the working relationship will not be a comfortable one for your people, immediately call off negotiations and move on to the next provider.
  8. Inappropriate Metrics and SLAs
    For example, call throughput is a bad metric. It’s not how many calls a rep takes in a day, but how many issues get resolved in a day.