When times are tough, it is essential to operate as smoothly and efficiently as possible. At at time of high and increasing interest rates, it is important to keep inventory levels as low as they can be, consistent with delivering your desired levels of customer service. When the labour market is tight, organisations need to do what they can to maximise the productivity of their workers. And, in a hyper-competitive marketplace, it is vital to minimise any errors and delays that might harm your reputation. Technology is key to this, and a tool like Compas can help an organisation to operate at maximum efficiency and avoid unforced errors.
In an environment with stable and predictable demand, and reliable supply, it is possible to operate on a Just In Time basis, with stock arriving with just time enough to unload it, package it up and ship it out of the door. Famously, McDonalds is able to operate with negative working capital, as it uses a limited range of ingredients, which have been cooked, garnished and served up many weeks before it pays its suppliers for them.
However, more normal companies need to keep large amounts of capital tied up in inventory that is sitting around doing nothing while it waits to be sold. As interest rates rise, the cost of holding surplus stock rises too, creating a considerable drain on the company’s resources. A number of things contribute to the need for high stock levels, including:
Some of these are just part and parcel of being in business - particularly if sourcing from the Far East. That is what makes it all the more important to bear down as hard as possible in those areas where you can have an impact. Good systems and clean, timely data are absolutely fundamental to this.
For example, it is impossible to predict demand with perfect accuracy in most markets. Even with an accurate forecast of average demand for a product, there is inherent variability, which makes it almost impossible to predict with certainty in a given day or week. However, some variability is systematic - for example, sales may be growing over time (trend), and seasonality means that demand fluctuates over the course of a year, but in a way that is more or less predictable. The right tools can help to calculate trend and seasonality, leaving only the random variation to be supported by buffer stock.
Even at a much more basic level, Compas can help you to build a good forecast of expected supply and demand, and the mismatches between the two, giving you early warning of any upcoming problems. For many businesses, simply having good visibility of future problems is all they need in order to head them off successfully.
A good business system is like a power tool: it enables the operator to do things that they could not otherwise do, or to achieve much more in a given space of time. As with any tool, it is important to choose the right one for the job - although at a pinch, you can often get away with using one that isn’t quite right.
A spreadsheet programme is like that. It is perfect for some jobs, but like a Swiss army knife, it can be used for many other functions too, but is not necessarily the best choice. For example, many small businesses use spreadsheets to manage their accounts, or build their sales forecasts. This works up to a point, but as it is not quite as efficient as using a specialised accounting or forecasting tool.
Compas is a specialist planning and reporting tool. Furthermore, it can be tailored precisely to the needs of each business, so that it operates in precisely the way they require. Data feeds and some analysis can be entirely automated, whilst other tasks can be achieved with a few mouse clicks, leaving staff with more time to think about the business and focus on more productive tasks. This allows companies to achieve much more with the resources they have - vital when staffing levels are stretched.
Humans make mistakes. That is a fact. The more often a number has to be entered into a computer, the more likely it is that it will be entered incorrectly. That is why Compas operates on a single, shared database where every number only has to be entered once, and is then available wherever it is needed. When the Sales department creates a forecast in the system, exactly the same numbers are visible to Finance, Operations, HR etc. so that they are all working to the same target, without the details having to be copied from one spreadsheet to another. Errors will still occur - human nature being what it is - but unnecessary ones resulting from copying the same numbers from system to system (not to mention the wasted time) will be eliminated.
Another common source of error is relying on out-of-date information. Whether that results from data not becoming available for a week, or a lack of communication between departments, it can lead to major dissatisfaction among customers if it manifests itself in poor service. The integrated data feeds and shared database of Compas remove many of the common sources of stale data. Another problem is people using the wrong version of a spreadsheet or document. Because of the file-based nature of that technology, it is all too easy to overwrite a new version of a file with an older one (if they have the same name), or simply to look at the wrong version(if they do not).
Compas supports versioning of plans, allowing you to look back at how things looked a week or a month ago, but it always maintains a current ‘best estimate’ view, combining actuals to date with the most up-to-date version of the plan. This is the view used for all forecasts and projections and ensures that everyone is always working off the same data, whilst still allowing week-on-week and month-on-month comparisons.
Finally, any process that relies on one individual having some specific knowledge about how to operate a spreadsheet, or remembering to use it in a particular way is an invitation for trouble. However, that is in the very nature of a generic tool. A more specialised tool can be tailored to ensure that it is used correctly, helping people to avoid making mistakes along the way.
It is not possible to eliminate errors entirely - we are all human, after all. However, it certainly makes sense to implement systems and approaches that do what they can to minimise them.
Of course, Compas is not just about saving cost - it also helps boost the top line by improving the quality of marketing and other decisions. However, that is for another post.
To understand more about how Compas can help you to operate efficiently, contact us now for a free demonstration.