3 essential considerations before you implement new margin and cost controls for your client

In a globalised market that is fiercely competitive, businesses need to outperform their competitors wherever and whenever they can.

One huge opportunity for competitive advantage is margin and cost optimisation.

Last month, we established the importance of introducing tighter margin and cost controls. (And the risks of not doing it.)

The next step: how to implement those controls for your clients.

As much as you might want to jump straight into a new margin approach for your clients — knee-jerk, short-lived changes can put their staff off side, and do more harm than good.

How do you ensure their new approach lasts?

Taking an integrated, project-based approach is the best way. But it’s not without its own challenges.

HARMONiQ has helped a wide range of retail, warehousing and distribution businesses put in place the metrics and controls they need to stay more competitive.

We even created a whole eBook about it. Download HARMONiQ’s Controlling Margin and Costs eBook here.

In this month’s blog, I’m discussing what you have to think through before you get down to implementing tighter controls in your clients’ business…

3 essential considerations

1. How effective is your clients’ change management?

“Creating sustainable cost transformation is not a change in process – it is a change in thinking that requires complete organisational commitment and involvement.” – Tania Seary, The Faculty

For change to occur – a complete staff buy-in is needed

Management’s ability to prepare and support their team in making fundamental changes will be a defining factor in their success

Your clients will need to establish a culture of cost and margin optimisation.

This new culture must be embraced by all. It won’t happen if senior management is resistant and staff is not involved.

How do you ensure organisational commitment and involvement?

First, management need to make sure it’s not seen as a cost cutting exercise.

The initiative needs to be embraced as a positive, value-adding endeavour —  to identify and leverage every point where your clients add (or don’t add) value to their customer.

Second, senior management must commit up front to the mission — its importance — and the process to ensure staff buy-in all the way down the line.

2. Are the right metrics and controls being measured?

To make the right decisions you need to be measuring the right metrics

With today’s modern technologies, businesses can measure almost anything — it’s choosing what to filter out that’s the real challenge.

Businesses need to find the true primary and secondary drivers of their value chain. These are the activities that provide significant value to the end-user — and consequently, competitive advantage to their business.

For example: Is their logistical ability to deliver product more quickly than competitors delivering value to their customers? Or is this unimportant to the customer, and a cheaper alternative could win the day?

A deep dive into each of your clients’ organisational activities will highlight the true value drivers. This will ultimately allow your clients to:

  • Reduce the cost of invaluable activities.
  • Spend to add value where it truly matters for their customers.
  • And make their business more competitive as a result.

3. How will you embed the new controls into your clients’ business?

Reporting on the new metrics must become a core part of their organisation

When you’ve decided the right metrics, you’ll need to set up your clients’ business systems to track, measure, and report on them.

But that’s not just a one-time project.

It’s a continuous process that needs to be imbedded into everyday operations — kept top of mind — and used long-term as an ongoing management tool.

It’s imperative that the project isn’t forgotten just because it is a continuous project.

At the same time, the metrics need to remain flexible, adaptable to market changes and open to continuous improvement.

What happens when you get it right

Once you’ve done the initial hard work, your clients’ business will benefit long term from their ability to:

  • Make informed business decisions
  • Cut costs
  • Implement consistent controls, while allowing staff room to negotiate on prices
  • Access one source of truth for all aspects of your business
  • Get accurate real time reporting
  • Encourage team collaboration
  • Get better at purchasing, selling, and negotiating

But most importantly… cost and margin control ultimately means your clients will be more profitable and competitive.

Why not learn more! Download HARMONiQ’s Controlling Margin and Costs e-book.

Next month, I’ll bring you more insights on how to keep up with rapid changes in the retail, warehousing and distribution industries.

And if you’d like to see how our system can help your clients gain control and streamline your processes, click here to request a demo and I’ll be in touch shortly.

Author bio:

Drew Arthur is the Managing Director of Micronet Systems and is focused on helping business leaders overcome inefficient sales, inventory, and customer relationship management practices by leveraging cutting edge technology.