The Inventory Mentor

Apr 14, 2020


Is there time to save your business?

Is there time to save your business?

Country lockdowns, as a result of COVID-19, have affected a third of the global population, and governments from around the world are doing what they can to assist small companies during this time. Airlines have been the hardest hit, and it's estimated that most of the airlines will be bankrupt by the end of May. Think about how many people will lose their jobs over the next couple of months.

In some countries, governments can pay employees on behalf of companies of up to 80% of their income, but for many other countries, this financial assistance is not available. 

It's not clear when businesses will be open again, and when they do - it's unlikely to be "business as usual." There is no denying that we will see a surge of bankruptcies, especially amongst the retail and hospitality industries and smaller sized companies as they simply don't have the cash flow to see them through. 

Before you start laying off staff, there are a few things that you can investigate and adapt in your business that may prevent sending people into unemployment.

Where is your cash?

For many companies, cash is tied up in excess stock. Given the decline in sales since you haven't been trading, you could well find yourself with a lot more cash in stock than you need right now. It's also unlikely that people are going to go on a shopping spree when businesses reopen and will want to hang on to their cash while they wait to see if the dust settles. You could find ways to free up that cash tied in excess stock by running promotions or bundling that item with one of our money spinners. One of our customers was able to dramatically reduce their inventory value by merely improving their inventory planning and trusting the system recommendations. You'll need to get creative to reduce excess inventory, but enhancing your processes now could help prevent additional excess being tied up. This is an immediate cash flow benefit for your business and something that is needed right now. Think about how many people you can keep on board if you reduce your excess inventory AND reduce your procurement spend.

Streamline your operations

Focus on the other aspects of your inventory. 

  • You may have obsolete or slow-moving items that are taking up expensive real estate that you can get rid of. Now is the time to centralize those bigger, expensive, and slow-moving items.
  • Look at your insurance - if you reduce your inventory value, make sure you aren't over-insured and paying too much on your premium. 
  • Look at your stock out history and identify what put you in a stock out situation. Aside from pandemic related shortages, were there any other factors such as poor supplier performance?
  • Now more than ever, you need Sales and Operations teams to collaborate. Hold a monthly (or even weekly) forecasting meeting (or Zoom call) and talk about what you are seeing and hearing about demand. Amend your forecasts based on that input in real-time.
  • Discuss the top 5 excess items and get creative as a team to sell those off at discounted rates.
  • Look for items where demand spikes and dips are most significant and talk about this as a team - what do you expect? Give your planning team the absolute best input you can.
  • Look at production (if you are still running a production line) and find ways to reduce the new bottlenecks being created due to changed demand plans. Remember, when you laid out the production line and planned this, there was probably a completely different ideal demand plan/requirement on the team.
  • You may have implemented a lot of controls and checks to ensure the best decisions are made on planning and procurement for normal operations. But we are not facing normal conditions, so look at your authorizations and controls and lighten that up. Let your team be a little more creative on decision making so you can be leaner and faster than your competitors. Take care not to throw all control out the window though.

Reassess your systems

What are you paying for your business solutions? Are there more efficient and cost-effective ones that you could be using? There are loads of excellent SaaS tools out there that are a fraction of the cost from monthly fees to support and maintenance, AND they are rich in features and functionality. Since your company information is hosted in the cloud, there is no need for your business to purchase and maintain expensive, power-hungry servers. Additionally, employees can share and access information from anywhere, anytime. If you switch to a percentage of your business being a remote-first operation, this will also reduce travel costs, carbon emissions, and printing costs of your business, nevermind the flexibility it provides for times like this. You may be thinking that this is the worst time to look at systems, and for bigger projects, that is probably true. Look at smaller systems and tools that won't have an enormous impact on your teams and your finances. Any tool that helps a core department do their job better and can be implemented quickly is well worth looking at. Maybe your staff has more capacity to learn and improve their skills while they are at home? Why waste that time?

Restructure your operations

Over the lockdown period, you may have discovered that your brick and mortar premises are larger than what you need to run your business. Think about those employees that have been able to work from home - why can't they continue to do that? This could mean downscaling and saving massive amounts on rent, utilities, etc.  

If this is not a possibility, talk to your landlord and negotiate a new deal. The landlord will be in a similar situation as many lessors may have already closed down, so they may be open to giving you a reduced rate.

Reduce your utility costs

Companies that keep their lights and air conditioners running 24/7 - 365 will save enormous amounts if they change this behavior. Additionally, turn down the heat and water heaters in your building if nobody is in the office.

Look at ways to reduce your water costs - fix any taps that are dripping, check for leaks, and install low-flow toilets and use a high-efficiency pressure washer for cleaning jobs. Reducing utilities not only saves you money and prevents job loss, but you are also reducing your carbon footprint and making the world a better place.

Restructure employee packages 

Talk to your employees about taking a small cut in pay. Employees would most likely be happier to look at this option than to lose their jobs outright, especially now, as the likelihood of finding other employment is not great. The pay cut per person will most likely not need to be that much to affect individuals but collectively could make a significant impact on the companies payroll.

After that, look at the 'cherry on the top income,' i.e., Bonuses. Employees should not be relying on these, and perhaps if you reduced or even eliminated bonuses, it could save a few jobs.

Another option is to talk to employees about job sharing or reducing hours to part-time. There may be some employees that would welcome this idea. Consider a compensation model for some of your employees, e.g., Sales - that is tied to results and not to time worked. 

Besides the surge in business bankruptcies, we will also see a significant surge in personal liquidations as a result of unemployment. Try and do what you can to avoid adding to the queues of the unemployed by being more conscientious and less wasteful. It's better to run a super tight ship than no ship at all.  

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Written by Craig de Kock

Craig comes from an engineering background, receiving his degree from the University of Pretoria in the early ’90s. His experience in supply chain started in 1992, where he joined a team developing ERP and logistics solutions for local organizations in South Africa. Focusing in supply chain, Craig moved to a specialist supply chain business in the early 90's and moved through the ranks to eventually end up managing a team of consultants on various supply chain projects in SA. Craig joined Barloworld logistics as General Manager of product development and was responsible for the development, testing, and international rollout of their inventory optimization product. Craig later expanded his talents and joined a team to manage IT infrastructure, IT Projects, Warehousing, Operations and Supply chain in a cellular business as the COO and later CIO. In 2011 Craig went back to his supply chain roots and joined cloud-based Inventory Management company NETSTOCK. He began his journey at NETSTOCK, building the business from the ground up. Today Craig is President for NETSTOCK in the USA and CIO for the group. Craig focuses on NETSTOCK customers, empowering his team to make sure they have the right systems and processes in place to deliver a superior customer experience.

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