FREE Business e-tips issue#1 (re-posted) Suggested Solutions per Scenario 1: Getting lower than 20% profit from gross sales? Suggested Solution 1 – (a) Make sure that all costs are accounted for and categorized in Net of Sales, Cost of Goods Sold or CGS (should separate foods from beverages as sub-categories) and Administrative or operating costs. Your products mix CGS should not be more than 33% of gross sales. Foods not more than 38% (this is high already) while Beverages not over 20%. Should it be, evaluate and make necessary solution. Reasons for this, maybe has to do with over produce than safe calculated buffer which is an unnecessary cost of money, spoilage due to over stocking and or did not implement FIFO rotation and replenishment process flow, more wastage, rejects and or lose due to production. As to Operations Expenses, all related costs to be sub-categorized in a very clear Account Titles such as compensation package cost proportion to gross sales which should not go over 17%, rental not over 7 to 8%, electricity consumption, water, shellane, depreciation and others related cost? (b) Based on Gross Sales, how much or what is your Net of Sales? Evaluate and study to make necessary policy to increase your Net of Sales. (c) Based on Actual Costing against your Actual gross sales, evaluate and study carefully all the details to establish your Budget (for each category over Gross Sales as referred above in letter a. And the bottom-line budget for your gross profit after tax allocation) and set a policy for Budget Control Management). If still actual cost is higher than the budget allocated in a week average or a month, review and evaluate the methods and procedures and correct the guidelines. Then issue a written policy to be signed by the concerned employees for strict compliance. Post in Bulletin. (d) How accurate and real time (daily cut-off time) is your CGS? When you have these, this mean that your Inventory operation and management systems are great. People are organized / systematized. Each SKUs are properly piled and tagged (format to follow). Its pile placement / shelf position or racking is according to set FIFO rotation and replenishment flow policy (e-tips to follow soon). Note that piling per row has its standard to easily detect if properly piled. This is so, that Each actual row quantity is according to the set policy quantity for that particular SKU. If no Shelf or pallet piling in a rack, may have stock card system. As to shelf / pallet positioning in a rack standard, Bin Card is recommended. Either cards should have the IN (receive) and OUT (issuance) flow signature per transaction with check & balance by the OIC or head (format to follow soon). Inventory Related Control System to follow. (e) Are all purchases (PO & Purchase Requests) passed the checked and verified by the General Manager before the Purchasing Manager acts on it? Actually, Purchasing Manager should and must initiate the checking and balancing / verifying with the requester or Department / Division Head its request against actual physical inventory counts, and (2) two weeks quantity average supply (audited monthly quantity issued or sold over # of working days = daily working average quantity required) of local material requirements for this example. Quantity based on Lead time computation = Processing time (from purchase request to Purchaser’s checking and balancing based on # of days supply, its canvassed approval to PO approval, then issuance to Suppliers and up to receiving from the supplier) except for emergency (lack of supplies at suppliers end and other causes) where need to allot a day or two days more stocking quantity (e-tips on SOPs to follow such as forms, tools, reports, attachments, methods and procedures). May allot 2 to 3 working days as buffer (in cases when supplier cannot deliver as required). A daily Inventory Flow Report with cut-off time should be attached to the Purchase Request. (f) Production and Product Costing to evaluate how you can get good yield mileage over usage. Establish the Controlled set of parameters for preps, stabilization stage, stabilized production and post production to meet the desired quantity of quality produce, limited wastage, rejects and lose per assembly. (g) Do you experience overdue collections often or bad debts? If yes, evaluate and study what should be your A/R Operating and Managing METHODS & PROCEDURES Systems to avoid these (will share system soon). (h) Evaluate and study your hourly sales, costing and profit for your stores operating hours. Others implement broken time to save their Stores man power & electricity cost. (i) Evaluate and study your man power intensive operations cost such as mass production, handling and others related. You may establish piece rate or daily wage rate systems. Converting your fix cost to variable. Before implementation, check with your Lawyer (or get guidelines from DOLE) for legal procedures. (j) Evaluate and study your other fix cost (post dated billings). You may convert some to prepaid to control your cash flow and profitability. Suggested Solution 2 - It is good to have Specific Account Titles and clear to those processing your book keeping so that he / she or they will not be confused or make wrong entries. Evaluate the Turn-Overs Check and Balance Operating System if implemented at all times to avoid double or multiple transaction handling cost (will give e-suggestion soon). Also, your cost - budget proportion or allocation Management to gross sales will be accurate and timely. Remember, Profit margin should be part of your budget allocation. Suggested Solution 3 - Should have timely cut-off per day reporting (will address this soon) with supporting documents. Suggested Solution 4 - Evaluate and study Liquidation (on disbursement, & other turn-over) System and Compliance Policy particularly on cut-off time (will give suggestion soon). Suggested Solution 5 - Evaluate and study handling cost per batch (will address this soon) or per transaction Suggested Solution 6 – Spare a time to evaluate a batch assembly operator’s usage of materials. Check its equipment / machine setting details in preps, stabilization (wastage, rejects, lose), stabilized stage (yields, wastage, rejects. Lose) and post production. Physical lay-outs for the Time & Motion per transaction. Analyze with your key assembly Head and or maybe with your Supervisor as to what parameter settings and dry run in your presence. Once the result meets your desired performance indicator, set a policy and have the concerned sign with date and time. Very important to include the operator’s document. Does it have a Check and Balance by (Section Head) and Auditor. Suggested Solution 7 – Your Net of Sales and Cost of Goods Sold (CGS) seem already meeting your desired scores, although your Administrative / Operating Expenses is more than 37% (this maybe high). In this case, is your rental cost at 7% and compensation at 17%, if so, how come? (SS7a) Study carefully your cost budget account titles under this Category. You might have allocated so much in the following account titles such as Representation, Miscellaneous and others related. Some critical adjustments in these account titles should be made to increase the profit margin. FOR MORE SCENARIOS, opsmgt.weebly/scenario-e-tips.html __________ Critical Success Factors opsmgt.weebly/clients-beneifts.html PREVENTIVE MANAGEMENT (somehow) INTERNAL CONTROL EFFICIENCY EFFECTIVE DELIVERABLE MANAGEMENT __________ For helpful ideas, Comprehensive Pre-Requisite Syllabus opsmgt.weebly/ops--mgt-hands-on-workshop-syllabus.html __________ Sample of Works opsmgt.weebly/opsmgt-sample-of-works.html __________ Testimonies opsmgt.weebly/testimonies.html __________ FREE OFFERS FREE Hands-On Spot Evaluation Analysis at Client Site within GMA during the first appointment meeting by the said client. FREE consultation via phone call every Wednesdays from 1:30pm to 4pm. Note: subject to availability. FREE e-consultation via FB at https://facebook/opsmgt.sys.7 (inbox message) and well e-reply (subject to availability)
Posted on: Thu, 30 Jan 2014 04:53:34 +0000
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