3 essential considerations before you implement new margin and cost controls

In a globalised market that is fiercely competitive, your business needs to outperform its competitors wherever and whenever it can.

One huge opportunity for competitive advantage is margin and cost optimisation.

Last month, we established the importance of introducing tighter margin and cost controls. (And the risks of not doing it.)

The next step: how to implement those controls.

As much as you might want to jump straight into a new approach — knee-jerk, short-lived changes can put your staff off side, and do more harm than good.

How do you ensure your new approach lasts?

Taking an integrated, project-based approach is the best way. But it’s not without its own challenges.

HARMONiQ has helped a wide range of retail, warehousing and distribution businesses put in place the metrics and controls they need to stay more competitive.

We even created a whole eBook about it. Download HARMONiQ’s Controlling Margin and Costs eBook here.

In this month’s blog, I’m discussing what you have to think through before you get down to implementing tighter controls…

3 essential considerations

1.How effective is your change management?

“Creating sustainable cost transformation is not a change in process – it is a change in thinking that requires complete organisational commitment and involvement.” – Tania Seary, The Faculty

For change to occur – a complete staff buy-in is needed

Your management’s ability to prepare and support your team in making fundamental changes will be a defining factor in your success

You will need to establish a culture of cost and margin optimisation.

This new culture must be embraced by all. It won’t happen if senior management is resistant and staff is not involved.

How do you ensure organisational commitment and involvement?

First, you need to make sure it’s not seen as a cost cutting exercise.

The initiative needs to be embraced as a positive, value-adding endeavour –  to identify and leverage every point where you add (or don’t add) value for your customer.

Second, senior management must commit up front to the mission – its importance – and the process to ensure staff buy-in all the way down the line.

2. Have you decided on the right metrics and controls?

To make the right decisions you need to be measuring the right metrics

With today’s modern technologies, businesses can measure almost anything — it’s choosing what to filter out that’s the real challenge.

You need to find the true primary and secondary drivers of your business’ value chain. These are the activities that provide significant value to the end-user – and consequently, competitive advantage to the business.

For example: Is your logistical ability to deliver product more quickly than competitors delivering value to your customers? Or is this unimportant to the customer, and a cheaper alternative could win the day?

A deep dive into each of your organisational activities will highlight the true value drivers. This will ultimately allow you to

  • Reduce the cost of invaluable activities
  • Spend to add value where it truly matters for your customers
  • And make your business more competitive as a result.

3. How will you embed the new controls into your business

Reporting on your new metrics must become a core part of your organisation

When you’ve decided your metrics, you’ll need to set up your business systems to track, measure, and report on them.

But that’s not just a one-time project.

It’s a continuous process that needs to be imbedded into everyday operations – kept top of mind – and used long-term as an ongoing management tool.

It’s imperative that you ensure the project isn’t forgotten just because it is a continuous project.

At the same time, your metrics need to remain flexible, adaptable to market changes and open to continuous improvement

What happens when you get it right

Once you’ve done the initial hard work, your business will benefit long term from your ability to:

  • Make informed business decisions
  • Cut costs
  • Implement consistent controls, while allowing staff room to negotiate on prices
  • Access one source of truth for all aspects of your business
  • Get accurate real time reporting
  • Encourage team collaboration
  • Get better at purchasing, selling, and negotiating

But most importantly… cost and margin control ultimately means you’ll be more profitable and competitive.

Why not learn more! Download HARMONiQ’s Controlling Margin and Costs e-book.

Next month, I’ll bring you more insights on how to keep up with rapid changes in the retail, warehousing and distribution industries.

And if you’d like to see how our system can help you gain control and streamline your processes, click here to request a demo and I’ll be in touch shortly.

 

Author bio:

Drew Arthur is the Managing Director of Micronet Systems and is focused on helping business leaders overcome inefficient sales, inventory, and customer relationship management practices by leveraging cutting edge technology.