from the Lionesses of Africa Operations Dept
So last week we looked at easy wins on the Sales side to reduce your Days Sales Outstanding (DSO) and who would have thought that one of the easy wins, in automating the process of sending out invoices, would have such a huge impact!
But, as always, Technology is at the core of any business transformation. Sadly the technology we already have - the Quickbooks or other such accounting packages in which we have invested so much money and so little time - have such powerful tools within them waiting for you to just take a moment to investigate, appreciate and then use, yet are left idle and under-utilized. What a waste!
Much like indicator lights in a car, they’re paid for, they were not an optional extra, so why is it that some on the roads refuse to use them!
“Would Madam like indicator lights or the ‘Go Faster Stripes’ and ‘Furry Dice’ that your husband is looking so lovingly at?”
It just doesn’t work like that. This is not a question asked at the dealership (although to be fair, we all know how dangerous it is to allow men into a car dealership on their own…!).
The technology is there, please take an afternoon to investigate it, then use it. It has found its way onto the Quickbooks of this world, there must have been a reason why someone sat down and decided that Indicators or even Window Wipers would be a good addition….
The extra benefit of fully utilizing the available technology is that when terrible things happen, much like the semi-conductor plant in Wuhan that continued to pump out chips, technology just continues to chug away, doing what it was designed for and sometimes even controlled by an app on your phone many miles away.
However, this week we move deeper into the Cash to Cash Cycle (CCC) and look at Days Payable Outstanding (DPO) and wonder how we can extend these without breaking our supply chain, and then look at what is lurking deep within our warehouse with Days Inventory Outstanding (DIO).
On our previous look at DPO we stated that we should be very careful when we extend our DPO or to put it another way, our Credit from our suppliers. You are feeling pain, your suppliers will also be feeling pain, and if you have a number of SMEs within your supply chain, now really is not the time to turn the screw. We at LoA are very aware that SMEs are the lifeblood to this beautiful continent of Africa and indeed the globe, yet are extremely fragile.
Look first to your large suppliers and indeed your large customers, sit with them and discuss the best way forward to extend your credit and payment terms. For those of you who have been turned down by banks, please note that supplier led credit is the fastest growing ‘informal’ lending program in the world. Indeed some huge global names are working within their entire supply chain to both speed up their payments and also technical and physical support to their SME suppliers AND their SME customers. This has become central to their drive to strengthen their complete supply chains from Farm to Table. If you supply to or supply from a large international name, such as Unilever then check out their programs (as Unilever write in this article: “Empowering and including women throughout our value chain is a vital part of this ambition.”) and arrange a meeting. What’s the worst that could happen? It is in all suppliers’ interests to have strong and loyal customers AND a strong and loyal supply chain, and where a company has recognised it’s social responsibility, we should celebrate that.
Our eagle-eyed Head of Finance (HoF) found this some months ago in his daily reading of the industry centric ‘Just Food’ magazine (please don’t ask - it only encourages!):
The full article can be found here.
So allow your relationships to work for and with you. That is Evolution, this is not slamming the phone down and grumpily demanding new suppliers or customers (which is more akin to Revolution!). Work together, but just like Unilever, please don’t forget your SMEs.
So now arm yourself with your Inventory and DIO list and we shall take a walk into your Warehouse. Please leave your emotions and love for your products at the door, we have to be tough and totally focused.
If your Head of Warehouse looks surprised as you walk in and starts to follow you around nervously, then you are getting warmer. Just like the children's’ game ‘Hot or Cold’ you know you are getting closer to his pile of hard to shift but ‘absolutely essential items’ (as Sales call them once every six months when they come looking…), the more nervous he gets. Usually placed in hard to find and dark areas, these items will have been gathering dust for a few years. This is cash wasting away. There will be a market for them.
Either 1) put the new intern onto this and give them a project to sell them. If nothing else this will be a great learning curve for them and you know how we feel about Interns - Train them and use them well, as they will repay the trust you give them 10-fold, if nothing else in great PR when they return to University, but they might also bring you the latest University thinking in their specialized field, be it Marketing, MBA, Finance or Technology. Get them to fire up those ‘Grey Cells’ and allow them to be adventurous.
or 2) contact a bulk buyer who will remove all of these items hidden in dark places’ instantly releasing cash. Granted they may pay by the kilo if this is clothing and the amount they pay will be a mere fraction of your original purchase price, but this is cash. If you have an overdraft, then even a small clearing of this makes a huge difference and starts to put you back into the Bank’s good books.
Next look at your recently produced chart of the CIO vs Profit and CIO vs Cost.
Anything in the ‘Long Days’ and ‘High Cost’, ‘Low Profit’ area must be brought out from its dark place and moved to somewhere open, obvious and in plain sight. Bring your Sales Team out into the Warehouse and show them this large area, they must be made aware of how dangerous this is. This is not only Cash, but is a grungy, fat-clot in your company’s arteries. Speed of cash flowing around your system is absolutely central to your survival, but also in good times is essential for the efficient running of your company. This is not just CV19 stuff!
Far too often (because it is not shifting) the Warehouse Manager pushes these items deeper and deeper into the warehouse until eventually they start to become forgotten. This is not through malice, for the Warehouse Manager they want the ‘easy to shift’ items near to the door so that their team do not have to travel far when collecting the day’s orders, thereby increasing speed and allowing for more orders to make their way out. Amazon designs its warehouses scientifically in much the same way for speed and efficiency, your Warehouse Manager is thinking along the same lines, but times are different now and you are not Amazon…
It is important that you are armed with the correct information because there will be some items that are essential that must be in stock, for example during March, April and May PPE was being sucked out of all corners of the globe to feed the USA and other large and rich nations. We know of one company in Europe that although was on 3M’s favoured customer list, they could not get any 3M PPE during this time (obviously not that favoured then!). Once the initial spike of demand had dropped 3M reopened supply to the rest of the world and so this company stocked up hard. This is an Executive Decision, certainly not a Sales decision. That is different.
So having dealt with ‘Evolution’ (make better what you have - again, apologies to Darwin!) where does ‘Revolution’ come in?
There are enough consultancy firms who are very willing to come into your business and design the latest automatic, Ai driven, Blockchain linked, ‘smart-contract’ controlled, ergonomically designed warehouse and supply chain for you. Our only suggestion if that is the way you want to go, would be to reach out to the Lionesses who have been through that kind of transformation and ask them for advice and information on how it went and who to approach. Because one thing we do know, for such a type of ‘Revolution’ you will need deep pockets, cool head and a strong constitution, but the results can be spectacular.
However, there are a few simple (some say) revolutionary steps you can make prior to that big spend and here we shall look at The ‘Lean’ Organisation, but the reality is, once again this is more evolutionary than revolutionary.
‘Lean’ means creating more value for customers with fewer resources. What you are aiming for is to provide perfect value to the customer through perfect value creation with zero waste. Sounds simple doesn’t it! But by chasing perfection (which is impossible to catch) we get exceptional, and exceptional value for your customers is certainly something worth fighting for.
This we shall cover in the next Weekender!
Stay safe.