Manufacturing is in recession and the economy has seen better days. Is there anything distributors can do besides cry, "Woe is me!"?

As business growth slows, effectively building your bottom line with financial and operational improvements becomes more and more important. Here are some ways to grow your business while floating in the doldrums of a soft economy.

By now, many businesses have become aware that the economy has slowed dramatically, whether based on reduced exports due to the strong dollar or increasing accounts receivables because customers are facing slower cycles. But, with every challenge comes opportunity. For those businesses that have benefited from substantial growth in the last several years, the slowdown means taking a step back to re-align priorities and evaluate ways to improve performance.

Decrease inventory and related expenses
Ensure sales and procurement processes (actual sales and ordering) are in alignment with forecasts.

• Evaluate processes to determine opportunities for savings. These actions can be as simple as increasing focus on quality inspections of incoming raw materials to revising purchase order procedures to minimize costs.

• Create supplier relationships that are of true value to your companys goals. In a tightening market, it is critical to understand who your critical suppliers are and how you can work together to increase inventory turns and minimize expenses. This may mean sharing data and integrating information flow to allow for reduced order delivery times while maintaining or improving quality.

Increase operating efficiencies
Emphasize meeting key customer needs. Those customers responsible for 80 percent of your profits are most important to your company. Make sure you understand and are responding to the critical needs of these clients, including expanding your business relationship with them.

• Review the activities along your supply chain. For instance, many companies are reducing costs by outsourcing non-core activities such as freight management or logistics. Others are implementing vendor-managed inventory to reduce order management costs and increase efficiency.

• Evaluate equipment in terms of your current processes to determine if current assets best meet current needs. For instance, upgrading equipment may allow for increased efficiency and flexibility, as well as decreased energy or waste costs.

Positively impact your bottom line
Become aggressive in managing accounts receivable. This can mean working with key clients to ensure that payment terms are acceptable to both parties, as well as increasing vigilance and follow-up across the board to speed payments. Ensure bills are accurate. While aggressive management is important, bill payment is often extended because of incorrect or unclear initial bills.

• Perform a redundancy review to uncover processes or activities that can be done more efficiently. Any process still done manually that could be done by a computer wastes valuable human capital. Any time freed from paper processing can be redeployed to improve performance through activities such as increased customer service, focused collections or personnel development.

• Get creative!  Whether management identifies opportunities or you hold an employee contest, all organizations have hidden opportunities for cost savings large and small. Ideas from management and staff can range from saving substantially on energy costs by moving production to off-peak times to eliminating unnecessary supplies to selling under-utilized or excess equipment.

This article provided by Grant Thornton LLP, an accounting, tax and management consulting firm based in Chicago. Contact www.grantthornton.com for more information.

back to top                                          back to online exclusives