Reducing Costs With Efficient Operations

7/27/2019 Reducing Costs With Efficient Operations

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SAP Solutions for Small Businesses and Midsize Companies

REDUCING COSTS WITH EFFICIENTOPERATIONS

A FAST TRACK TO MORE WORKINGCAPITAL


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But theres a bright side: you can get ahandle on costs by taking systematicsteps to improve operational efficiency.

By instituting efficient automatedprocesses throughout your organiza-tion, you can reduce waste, unneces-sary overtime, and a host of other costfactors. Integrated business softwaresystems put this efficiency overhaul

within reach, quickly and affordably.

As you gain more control of the debitledger, both sides of the balance sheetimprove: cutting costs gives you higher gross margins and enables you to boostrevenues by offering your customersmore competitive pricing and terms.Saving money helps you make moremoney. Plus, changing red ink toblack helps you, your employees,shareholders, and investors sleepeasier.

TAKING CONTROL OF YOUR COST STRUCTURE

If only it didnt cost so much money to make money. Thatsthe predicament of many small businesses and midsizecompanies. Customers keep demanding more for less andthose product and service enhancements cost you moreto provide even though you get paid less for them. Larger competitors often have deeper pockets plus, they enjoy economies of scale that you cant match. Untamed costscan deplete the precious working capital thats critical to

your ongoing operations and new expansions.

Among the 698 of firms thatwe studied over the past seven

years, firms that implement ERPsystems experience 10% greaterlabor productivity, 13% higherinventory efficiency, 15% higherasset utilization, and 9% greaterpayment collection efficiencyon average than firms that donot.

Sinan Aral, Research Affiliate,MIT Sloan School of Management,

Assistant Professor,NYU Leonard N. Stern School of Business


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Some cost drivers (like energy andcommodity prices, interest rates, andhealthcare) are largely beyond your ability to control. Others, such as labor and materials, can be effectively man-aged and reduced if you know how to

identify and control them. Generally speaking, rising controllable costssignal inefficient use, even waste, ofresources, including people, capital,and assets. Controllable cost driversinclude:

Customer squeezing Why shoulda customer pay for custom delivery,drop shipping, promotions, merchan-dizing, and warehousing when your business can be coerced to pay in-

stead? Customers are pushing many costs upstream to producers anddistributors, relying on competitivepressure to strengthen their demands.

And when customers insist on fixed-bid pricing, the temptation to bid lowin order to win a contract may lead tofrustration as costs outstrip fees. Toidentify the true cost of goods andservices sold, you must take all theseconcessions into account. Then, youcan analyze whether what youredoing to win customer satisfactionis really paying off.

Unproductive labor and staff People are your most valuable andcostly resource. Youre constantly trying to improve productivity, reduceredundancy, and eliminate unneces-sary shifts, positions, and overtime.But you dont want to jeopardize astable, experienced, and loyal

workforce with across-the-board

measures. You need a method toanalyze and manage how you use your resources and take into account thereal costs and value of your staff andpositions. You also need efficient,automated processes that reducemanual tasks, optimize schedulingand assignments, and enable your talent to work at a higher level ofproductivity.

Low-yield working capital Customersdont want to tie up their cash flow by buying and holding your products inadvance, so you need to carry enough safety stock to meet surgesin demand. That leaves you carryingthe costs of inventory and compro-mising your own cash flow. You need

to focus your inventory on key prod-ucts and narrow safety stock levels,still ensuring you can meet demand.

Inefficient use of assets andmaterials How much can you skimpon materials before you underminethe quality of your product? Better toapply efficiencies in materials man-agement and procurement to managecosts. With a haphazard materialsmanagement system, youre scram-bling just to locate needed materialsrather than negotiating the best pric-es from reliable suppliers. You needa way to consolidate your buyingpower and establish a stable networkof suppliers.

WHAT DRIVES UP COSTS?

SAP Busin e i r j st ost ver its an sol t s e bu i ss.

Lou Giovannone, Group Controller, Fagerdala USA Inc.


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By helping you to control costs ofproduction, maintenance, administration,and asset utilization efficient opera-tions improve the cash position andfinancial stability of your company.

The common thread is the need for aclear understanding of how you canimprove your cost structure, and a planto execute that improvement. Onceinefficiencies are identified, you cantarget improvements, such as: Automating processes Compressing cycle times Eliminating errors in order fulfillment Streamlining inventory Procuring materials at better prices Optimizing staffing and resources

Controlling credit and debt Automate Processes, ReduceLabor Costs

People can only be as productive as their working environment allows. An auto-mated system can relieve your staff ofroutine, error-prone tasks and direct

workflow toward greater productivity and higher-value activities. For instance,in a service environment, your resourcesshould be doing just that providingbetter client service, not spending timeon nonbillable administrative tasks.

In addition, consider using a good sys-tem to track employee skills and train-ing levels, so the right talent is available

when opportunities arise. You can alsolimit overtime by scheduling employeesmore efficiently. Embedded controlscan alert management to overtime issuesthat might indicate scheduling problems,so you can correct the problem before

the next production or work cycle.

When you have a unified, integratedbusiness system in place, you can pro-mote process excellence, automateroutine and administrative tasks, andenable your people to be more efficientand productive.

Streamline Operations, CompressCycle Time

Time is money. If it takes you a week tofulfill an order when it should take aday, your faster competitors will seizethe advantage. Order fulfillment is anexample of a key cycle that can becompromised by inefficiencies frommany sides such as order entry, pick-ing and packing, delivery service, and

staff training and scheduling. Rather than trying to evaluate and overhauleach step separately, you can quickly achieve superior processes by using aunified business system. Youll bringbest practices, speed, accuracy, andefficiency to your core cycles fromsales through product or service delivery to invoicing and cash receipt in timely fashion.

Eliminate Redundancies andWaste

Waste can mean everything fromredundant manual processes tomanufacturing defects, reworks, andexcessive SKUs. Waste can be foundnot only on the shop floor and in the

warehouse and loading dock, butalso in administrative, purchasing,and other business activities how much added revenue did thatpromotional campaign really generate? Bad debt is a corrosive

form of waste.

MAXIMIZE EFFICIENCY TO DRIVE DOWN COSTS

With a unified view across operations,sales, customers, and financials, youcan assess business processescompany-wide and identify and priori-tize opportunities to reduce waste,redundancies, and costs.

Built-in controls and alerts keep your operations focused on efficiencies.

Automated alerts can notify decisionmakers when costs in a particular areamay be trending higher, in time toevaluate options and identify ways tokeep costs in line.

Put Cash to Work in High-ValueInitiatives

You have limited resources, so you want them earning maximum returns.With the clear information you gainfrom a comprehensive, integrated busi-ness system, you can analyze invest-ment strategies and select the rightcombination of initiatives that will maxi-mize profitability. Whether you use your cash to expand into new markets, movemanufacturing to lower-cost areas,develop new services, or increaseproduct marketing and promotion, youcan do so with confidence that you willbe applying your resources to yieldmaximum return.

The results on your bottom line will winthe confidence of your shareholders,investors, and board members.


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SUMMARY: INVEST IN COST MANAGEMENT

When it comes to the widely vary-ing needs of small and midsizebusinesses, one solution doesnt fitall. SAP offers a portfolio of flexibleand affordable business manage-ment solutions designed specifically for the fast-changing needs of

small businesses and midsizecompanies.

With SAP software, you gain astandardized, proven solution plat-form enabling you not only to run

your entire business efficiently butalso to predict the costs and out-come of your IT investment. SAPsolutions can be deployed readily and affordably, so businessesfocusing on cost containment canquickly improve and realize measur-able returns. By integrating andstreamlining the entire businessoperation across sales, customers,financials, and operations, SAP

It seems like a paradox: spend to save.But by investing in a unified, integratedbusiness management system, you caninstitute operational efficiencies that willidentify the cash sieves in your organi-zation and help you stop the drain. When

you gain control of costs, you raise your gross profit margins and strengthen your competitive position. You boost reve-nues by offering better prices and termsto your customers. You increase your cash reserves and free up resources toinvest in strategic initiatives. You enable

your employees and assets to workmore productively. As you gain a clearer understanding of all the ways you canimprove your cost position and developa plan to execute those improvements,

you build an efficient operation and

your bottom line grows.

solutions help drive operationalefficiency, enabling you to better control costs.

Cost control is critical to being ableto offer competitively priced goodsand services. SAP can help you better

control both fixed and variable costsby unifying systems, providing built-incontrols and alerts, and producingup-to-the-minute, accurate reportingfor all parts of your business.

Trusted by more than 25,000 smalland midsize customers around the

world, SAP brings the industry expe-rience and range of solutions it takesto help companies control costs,increase profits, stay ahead of thecompetition, and succeed.

For more information, please visit www.sap.com/solutions/sme/index.epx .

SAP Can Help You Cut Costs Affordably and Easily

SAP Solutions for Small Businesses and Midsize Companies

The SAP portfolio of comprehensive,integrated business solutions, designedspecifically for small businesses andmidsize companies, helps you takecontrol of your cost structure. With

these solutions, you can cut costs toachieve higher gross margins even as

you increase revenue by offering your customers more attractive pricing andterms.

With SAP Business One, weve realized a 30% reduction inoperating costs, in the area of about a 12% increase in revenues,and our margins are getting better.

Kellen Watkins, President and CEO, Materials Handling Equipment Corporation
http://www.sap.com/solutions/sme/index.epxhttp://www.sap.com/solutions/sme/index.epxhttp://www.sap.com/solutions/sme/index.epxhttp://www.sap.com/solutions/sme/index.epx


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Reducing Costs With Efficient Operations