At the height of the crisis; companies had to activate emergency mode and fight to maintain their supply chains due to the heavy losses generated by lockdown closures. Now; with the first vaccines available and normality returning; companies must take advantage of the opportunities available to draw up their recovery plans. It is precisely in this process of recovery and planning for the immediate future that cost reduction and optimisation can help companies face this new stage with more tools at their disposal; as reducing or optimising costs is what will give them the greatest benefit.
At ERA Group; we would like to share five steps to help organizations in their recovery:
- Boost the potential of the supply chain
A supply chain is the entire process that a product goes through 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 improvements; such as purchasing; logistics; inventory management; etc. Changing suppliers or finding a more efficient way to sell our product are some of the small things that can change the dynamics of many companies' accounts.
Controlling these costs will allow us to get more out of our entire chain. This can be achieved by following six steps: cost transparency and supply chain analysis; assessment of the most important processes in the supply chain; identification of profitable investment opportunities; preparation of an opportunity assessment report; creation of a roadmap; and execution.
- Ensure production
Losing parts of production is one of the main causes of declining sales; and it is something that could lead to a delay in recovery. For example; supply chain failures in strategic items; which have high annual expenditure and risk; could result in significant losses; whereas in the case of a standard item; the losses would be less severe due to low annual cost and low risk. Monitoring the supply chains of different products and their costs will help companies to better adjust their budgets.
To avoid these problems; it is important to take the following steps: identify the most important products; compare the supply portfolio and implement new complementary actions to minimise supply risks.
- Rethink 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; analyze 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 quickly and safely; companies can take several actions: review stock for liquidation and loans; analyze and eliminate cash-binding processes; and update the liquidity plan.
- Manage human resources for reconstruction
Apart from the negative economic effects of the pandemic; companies face the challenge of hiring the people they need for their business. Re-evaluating areas within Human Resources will help companies achieve this goal and accelerate recovery.
The high level of expertise required to maintain control of regular business costs and monitor them continuously is prohibitive for many; which is why working with ERA gives companies the space they need to focus on what is really important to them: growing their business.
"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 line;" says 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."
