At the height of the crisis, companies had to activate emergency mode and strive to maintain their supply chains due to the significant losses generated by lockdown closures. Now, with the first vaccines available and normality returning, companies must capitalise on the available opportunities to formulate their recovery plans. It is precisely in this process of recovery and planning for the immediate future that cost reduction and optimisation can equip companies to navigate this new phase with enhanced resources, as reducing or optimising costs will yield the most substantial benefits.
At ERA Group; we would like to share five steps to help organizations in their recovery:
Maximise the potential of the supply chain
A supply chain is the entire process that a product undergoes until it is sold to the end consumer. Within the supply chain, there are costs other than direct material costs that offer significant potential savings and process enhancements, such as purchasing, logistics, inventory management, etc. Changing suppliers or identifying a more efficient method to sell our product are some of the minor adjustments that can significantly alter the dynamics of many companies' financial performance.
Controlling these costs will allow us to maximise the value from our entire chain. This can be achieved by following six steps: cost transparency and supply chain analysis; assessment of the critical processes in the supply chain; identification of lucrative investment opportunities; preparation of an opportunity assessment report; development of a roadmap; and execution.
Ensure Production Continuity
Disruptions to production are one of the primary causes of diminishing sales, and a factor that could impede recovery. For example, supply chain failures in strategic items, which have high annual expenditure and associated risk, could result in substantial losses; whereas in the case of a standard item, the losses would be less severe given their low annual cost and minimal risk. Monitoring the supply chains of different products and their costs will help companies to optimise their budgetary allocations.
To avoid these problems, it is important to take the following steps: identify the critical products; evaluate the supply portfolio and implement supplementary measures to mitigate supply chain risks.
Re-evaluate Operational Processes
To accelerate recovery; companies need to consolidate and professionalise these new processes; modernise their IT structures and train their employees in them to optimise processes. Companies; especially medium-sized ones; must streamline these procedures if they do not want the technology gap to widen; audit processes; analyse areas for improvement and prioritise areas for action.
The 20% drop in sales for many companies due to the pandemic has made cash a very powerful weapon. Therefore; selling stock; renegotiating bank loans or suspending early payment can significantly increase cash flow.
To recover liquidity rapidly and securely, companies can take several actions: review inventory for liquidation and reassess loan agreements; analyse and eliminate cash-binding processes; and update the liquidity management plan.
Optimise Human Resources Management for Recovery
Beyond the negative economic effects of the pandemic, companies face the challenge of securing the requisite personnel for their operations. Re-evaluating areas within Human Resources will help companies achieve this objective and accelerate recovery.
The high level of expertise required to maintain control of routine operational expenditures and monitor them continuously is prohibitive for many organisations, which is why working with ERA provides companies with the necessary latitude to focus on their core strategic imperatives: fostering business growth.
"To overcome this situation; companies need to be bold and decisive in their decisions. They must study their entire structure to get the most out of their supply chain; commit to retaining their most important asset (their people); increase the company's liquidity and recover their bottom queue;" [Fernando Vázquez; Consulting Partner and Co-Area Developer for the North; Central and South regions of Spain at ERA Group.]
With ERA Group; companies can focus on their business plan and profitability.
