Frank Collier Business Systems

Assuming that your company needs to improve its Broad-Based Black Economic Empowerment score, and that your supply chain includes one or more small manufacturing outfits that qualify as beneficiaries under Code 600, here is a practical idea that might also improve your supply-chain efficiency.

Firstly, select those suppliers that qualify. They must satisfy the following criteria:

They must be at least 50% Black owned

Or

They must be at least 25% Black owned with a B-BBEE status of between level 1 and level 6

There is no point in making the investment unless you can see some form of return. Would there be a benefit to you if these suppliers became more efficient? Would the level of quality improve? Would it help your production planning if they delivered on time? If the answer is yes to any of the above, read on:

You decide to assist a selected group of suppliers by providing them with a business management system and the training that goes with it. You would expect the following return on investment:

• The suppliers become more efficient and make more profit (they may even avoid going out of business because of your help), and become loyal suppliers willing to give you the best service they can;

• the quality of their products improves, so you have less rejects to handle, and less chance of one of your products being rejected because of sub-standard components;

• their deliveries become more reliable and predictable, thus reducing the chance of line stoppages in your plant;

• you score some useful points for your B-BBEE rating.

The money you spend can be treated as a normal company expense from a tax point of view.

Let’s assume that your company does a turnover of R 100 million per annum with a net profit of 5% after tax.

We use the Generic Scorecard which allocates a maximum of 15 Weighting Points for Enterprise Development. These points are achieved if you spend 3% of your net profit after tax (R 150,000). This is known as the Compliance Target.

You elect to spend R25,000 each on six suppliers (R 150,000 in total), all of whom have a turnover of less than R 35 million and qualify in terms of the criteria stated above (technically, they are known as Qualifying Small Enterprises or Exempted Micro-Enterprises).

The calculation follows: Spend: R150,000 / Compliance Target: R150,000 X Weighting Points: 15 ; Score = 15 (the maximum you can obtain for Code 600). Obviously, if you spend less than R150,000, your score will drop proportionately.

In addition, you score additional points in terms of Code 500 (Preferential Procurement) because you can multiply your spend with these suppliers by a factor of 1.2, because you have assisted them in terms of Enterprise Development.

You need to ensure that the grant you make to these suppliers actually achieves the returns mentioned above, as well as the B-BBEE points. For more on the business management system see Orwin Lite or call us on 082 653 9279.

Please note that we are in the process of changing telephone numbers at present. The preferred number to call is:

27 82 653 9279. That way you get faster action!

Most small manufacturing businesses go out of business within the first three years of their existence. There are a number of reasons why this happens, and one of the most common paths to liquidation involves supplying your customer with high-quality products on which you make a loss!

The idea is to give you a customer what he wants, when he wants it. But you have to make a decent profit! If you don’t have a system to control your manufacturing orders so that you know what your profit is, then you may be interested in a really cool product for the SMME market…Take a look at Orwin Lite

Recession marches steadily towards us, through the mists of economic uncertainty – its time to face the enemy!

For the last few years George has been running his small manufacturing business at a fairly hectic pace. The emphasis has been on getting the orders out of production and to the customer.

Any spare time has been used to ensure that customers remain satisfied with the service, after all, the sheer volume of business has attracted new competitors and loyalty to suppliers isn’t a major feature of modern business policy.

Meanwhile, behind George’s back, the global economy rolls over into a sudden tailspin, the precise reasons for which are understood by very few people, and even then they don’t always agree.

The price of fuel, food and steel starts climbing like a Saturn V rocket, followed closely by interest rates, bank repossessions and the incidence of stress-related illnesses.

Business confidence, consumer spending and public happiness rapidly head south.

And suddenly George realises that the factory is no longer working a full shift, demand is dropping dramatically, rising input costs have to be absorbed as customers won’t accept price increases, the people want more money because they cannot feed their families, and all his reserves are tied up in assets such as stock and machinery now standing idle.

What is George to do?

Firstly, understand that recession is a normal part of the economic cycle – deal with it!

Secondly, you are not alone – except for the minority with substantial cash reserves, the rest of the country faces similar problems.

Finally, the one priceless asset you probably have more of right now is time – use it effectively!

The recession will march into economic history, leaving numerous casualties in its wake. Now is the time to take the steps that will not only ensure your survival but will enable you to scale up to take advantage of the uplift in the economy when it inevitably occurs.

The key to survival at this time can be summed up in one phrase – “systemic discipline”.

Businesses run on systems, no matter whether they are corner cafes or giant international corporations. As long as the systems work, more or less, when business is good and cash flow is positive nobody has the time or inclination to examine levels of efficiency.

But now you have time on your hands, use it to ensure that your systems are effective, that the business intelligence available to you is accurate, and that you have strategies in place to survive the recession and to be ready to take advantage of the upturn when it comes.

Here is one, simple example:

• Do you have a computerised stock control system? If not, get one!
• Does the system record stock movement history? If not, make certain that it does in future!
• Compare your average monthly usage with current stock levels, calculate what you need to keep in terms of supplier lead times, and evaluate how much excess stock you are carrying – you might be very surprised!
• Get rid of the excess, turn it into cash and stick it into your reserves.

There are plenty of other areas of your business that probably need critical examination. If you really don’t have the time or the skill-set to investigate your systems, call for help. Spending a buck to score ten makes sense!

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Many companies are fast approaching their financial year-ends – always a good time to review your business management systems. If you think you need to step up to a more effective IT solution, have a look at SYSPRO