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The inventory advisor

Apr 16, 2020

Streamline your business processes and avoid employee retrenchments

With a third of the global population in lockdown as a result of the COVID-19 pandemic, the impact on business is colossal.  There is no doubt that we will see many companies close down over the next couple of months, especially in the retail and hospitality industries. It is estimated that most of the airlines will be bankrupt by the end of May. Think about how many people will lose their jobs.  

Some countries’ governments have been able to assist businesses by paying up to 80% of employees’ salaries; however, there are many countries where this financial assistance is unavailable. 

We can’t be sure when companies will start trading again, and when they do, it’s unlikely to be “business as usual.” We will see a surge of bankruptcies as companies simply don’t have the cash flow to see them through. However, 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?

A lot of companies in the supply chain have large amounts of cash tied up in excess stock. Since there has been little to no trading and a noticeable decline in sales, you will most likely find yourself with a lot more cash in stock than you need right now. When businesses resume, it’s most unlikely that people will rush out on shopping sprees. They will be more inclined to hang on to their cash and wait for the situation to settle. With this in mind, you could look for ways to free up some of that cash by running promotions or bundling an excess stock item with one of your money spinners. 

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

Spend some time and focus on the other aspects of your inventory, such as:

  • Do you have any obsolete or slow-moving items that are taking up expensive floor space?
  • If you reduce your inventory value, make sure you aren’t over-insured and paying too much on your insurance premium. 
  • Stock-out history – identify what put you in a stock out situation. Aside from pandemic related shortages, were there any other factors such as poor supplier performance?
  • Get your Sales and Operations teams to collaborate. Hold monthly (or even weekly) forecasting meetings (or Zoom calls). Discuss what you are seeing and hearing about demand and 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.
  • If you are still running a production line, find ways to reduce the new bottlenecks being created due to changed demand plans. When you initially laid out the production line, 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 controls out the window.

Reassess your systems

What are you paying for your business solution, and are there more efficient and cost-effective ones that you could be using? You may be thinking that it’s not the right time to look at implementing completely new systems, and that’s probably true. Rather look at smaller systems or tools that won’t have an enormous impact on your teams or your finances but will bring improved efficiency to your existing system. Any tool that helps a core department do their job better and can be implemented quickly is well worth looking at. 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 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. 

Restructure your operations

You may have learned over the lockdown period that your office premises are a lot larger than what you need to run your business. Perhaps some employees could continue to work from home. This could mean downscaling your offices to something smaller and saving massive amounts on rent, utilities, insurance, etc. If this is not in your realm of possibilities, then perhaps chat with 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 adjust their behavior. 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 reducing your carbon footprint at the same time.

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.