February Members Speak: Tackling the white elephant in the room

Monday, 26 February 2018 00:00 - - {{hitsCtrl.values.hits}}

The Management Club Board of Management Immediate Past President Nasser Majeed was the speaker at the Members Speak Program, which was held on 22 February at Hotel Galadari.

How stringent is your focus on maintaining the right size of inventory? In sharing his experience, Nasser was of the view that unless it was driven through transformational leadership, winning over all of the stakeholders like sales, marketing, logistics, commercial and finance, these vital aspects of asset management simply merge into the wallpaper of routine tasks.

Maximum focus on the fast movers or the cash cows and stars was the takeout. The need to keep the stockholding period at a minimum and improve the frequency of purchase; the other benefits of carrying the optimum inventory like less shrinkage, early detection of pilferage, product damages and lesser final impact at the time of obsolescence were also discussed.

In citing an example of a retailer, it was explained that a half-turn improvement in Inventory Turnover Ratio (ITO) would result in Rs. 120 million in interest costs arising of a lesser stockholding.

Coupled with the other savings mentioned above this can easily add over Rs. 200 million to the bottom line.

Nasser also spoke on the benefits of pricing for value rather than margin or market share. Case studies were shared demonstrating that more volume and margin were achieved through innovative pricing as opposed to discounting. The customer retailer interface should be changed to one based on differentiated values rather than price competition. Relationships based on the value proposition of an organisation are more than likely to survive ups and downs rather than low-priced ‘Me Too’ options.