Saturday, 5 March 2011

Let's get down to business

This is the start of my attacks on modern business practices which I believe add no value to the customer. It is my opinion that if a task or process adds no value for the customer then DON'T DO IT!!!
These days business has been complicated by people who do not have experience or confidence enough to operate successfully or efficiently.
I want to take a brief look at one modern idea as an example of the stupidities we have to endure and that is the idea of CONSIGNMENT STOCKS.
This concept originated in the Automotive Industry and was designed to reduce the stock holding of the manufacturer and increase his inventory turns. No doubt Inventory turns was a key performance indicator that some managers were judged by, but that is beside the point.
The use of Consignment stocks is a great idea if you "do it to them before they do it to you". However, if we look at the total business process from raw materials to the retail market then it would appear that if every organisation in the supply chain adopted this process then the goods that each member of that chain stocked would ultimately be at the material value plus all the added value he had added to it, as he would be holding "Finished Goods" instead of "Raw Materials". (Except the retailer !!!)
There will undoubtedly be  some pundits who will come up with a justification for this but in reality there is no benefit to the ordinary man in the street who buys the final product as he will go to the store, select his goods and pay his money EXACTLY AS HE DID BEFORE.
Trying to manage consignment stock is a more difficult process than managing without it as it involves additional steps in paperwork.
I work for a company that is now being managed primarily by Americans who unfortunately do not always have a grasp of reality because in Europe particularly and also South America, laws relating to the ownership of goods and the use of "Self Billing Invoicing" varies.
Also the common practice in each country differs. For example in America the majority of manufacturers have contracts with their suppliers that allow the practice of self billing, whereas, culturally, in Central Europe for example this is not normal practice.
I have written this to try to persuade managers not necessarily to change, but to ponder why they use this process. Is it because it is a sensible business practice ( for a one-off gain in cashflow ) or is because it is the latest trend in business and all their friends and peers are doing it)
I believe this practice, as well as others I will discuss in later articles, is not the  product of some well thought out strategy but more than likely an ill considered directive from above, about which most managers and employees feel unable to comment.

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