Manufacturers

The weak pound is biting manufacturers hard – here’s how they can bite back

It was widely reported this week that manufacturers are facing a supply problem, with the falling value of the Pound pushing their raw material costs to record heights.

The rising price of oil has also pushed up the cost of energy and plastic.

With more money being spent at the beginning of the manufacturing process, more money will have to be made at the end, which usually means pushing up the price of goods to customers.  Research experts Markit have proved that this is happening, with its output prices index showing its biggest jump ever.

So how can manufacturers replace the chunk that rising import costs are taking out of their bottom line?

GAS’ answer is twofold:

Efficiency and focusing on the areas they can control.

Defining what manufacturers can control

Manufacturing bosses should look at their outgoing costs as a whole and carry out a procurement audit.  They should build a 360 degree view of what they’re spending money on, then divide that into what feeds their products and what feeds their premises.  At GAS, we’re experts in the ‘running costs’ – what businesses spend to keep the lights on, the machines running and the workplace buzzing.  We know how to manage them, renegotiate them and, ultimately, lower them.

Here are some listed questions as a starter.  Businesses should begin by answering these, then carry on until they’ve covered all of their areas of expenditure in each of the two categories mentioned above:

  1. What are you paying for your waste collection, when is it collected and are the waste containers always completely full?
  2. How is your IT data stored and are the computers you’re using quick and powerful enough?
  3. How much do you pay for your phone lines and internet and how long does your contract last for?  Are there minutes on your mobile deals that are unused every month?
  4. What is your usage and contract length for your energy? What times of the day do you use the most?  Does your machinery work 24 hours a day?
  5. What sort of insurance do you pay? Have you shopped around for the best price?  Are there any unnecessary add-ons, extras, or duplicate cover across your various policies?

Efficiency

What is the only 100 per cent guaranteed way of reducing the amount of money spent on an outgoing?  Using less of it!

Everyone has seen the stickers on the light switches, the locked pen cupboard and the notices on the kettles.  It’s time for businesses to bring their efficiency efforts into 2017.  The world of energy efficiency and behavioural change has come a long way since carbon reduction became front-of-brain for businesses.

Not only can manufacturers draw on a wealth of knowledge and expertise from those who have already achieved impressive carbon and cost reduction figures; there are now smart tools available which can provide sophisticated data and allow managers to make informed decisions about their energy usage.

Manufacturers can reap short and long-term rewards by knowing the detail behind their expenditure and adjusting processes accordingly.

If waste is collected weekly and the bins are only half full, management can adjust the schedule to have them collected fortnightly.

If a printer’s machines run 24 hours a day, they should ensure they aren’t on a pass-through energy contract and accept a higher initial rate for a longer-term saving.

“It is not necessary to change.  Survival is not mandatory.” – W Edwards Deming

The issue many manufacturers will experience at the moment is that the falling value of the pound is actually boosting interest in British products from overseas.  Keeping up with increased exports means management have less time on their hands at the moment and thus the efficiency and strategy work covered above will likely be taking a back seat at the time when it is most important.

Luckily B2B companies exist who can provide an invaluable helping hand (nudge, nudge).

If you are a manufacturer interested in developing a 360 degree view of your running costs to identify areas for improvement, get in touch today for a no-obligation quote!

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Paul JohnsonGroup Financial Director

Paul Johnson is very much a home-grown talent.

He joined Great Annual Savings Group in its infancy, fresh from a youth career as a professional footballer with Hartlepool United.  He quickly established a reputation within the business and aced all required accountancy qualifications in the space of four years to become the Group’s Management Accountant.

Several successful projects later, Paul was promoted to Head of Finance.  When the former FD left GAS, he took on the mantle of the business’ most senior finance professional; boasting a string of incredible achievements all under the age of 30.

Quote:

“I have witnessed phenomenal growth at the Group over the many years I’ve worked here and I’m looking forward to guiding the Group into an exciting new chapter.”

Interesting fact:

Paul made his professional debut for Hartlepool United against Bournemouth in the Football League.  Some say Danny Ings still resides in his pocket to this day.