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Inventory by definition refers to the holding of any item or resource used in a business that can be in the following forms:

• Raw materials

• Supplies

• Work-in-process

• Finished goods

• Component parts

Inventory and stock control management is something that many small businesses grapple with due to the fact that upgrading (or creating) a stock control systems and procedure means letting go of old habits. And unfortunately we all know those are die-hard! There are various views on inventory and the control thereof and the one school of thought I personally subscribe to contends that having inventory is an inevitability since the costs and risks of not having inventory when customers want something outweigh the costs and risk of having them.

In essence, if inventories cannot be eliminated and stockless production is an ideal situation, then inventories must at least be managed.

What is stock management?

Holding onto stock occurs to allow businesses to meet customer requirements. It also exists to smoothen the flow of goods through the production and supply process and to protect against uncertainties of suppliers.

What are the costs of holding inventory?

There are two cost categories associated with inventory,

1) The cost to carry inventory

2) The cost of not carrying inventory.

The cost to carry inventory includes the unit materials cost; the cost of ordering them or reordering them; and the carrying or holding costs.

• When businesses produce the materials that they need for production as well, the reorder cost is being substituted by the cost to set up the machine or perform change over activities

• The carrying or holding costs generally include the costs of storage, fire and theft insurance, and warehouse administration.

• The intangible cost related with carrying inventory is the opportunity loss associated with investments in inventories which could otherwise have been spent for more profitable ventures.

The costs of not carrying inventory primarily relate to the loss of customer goodwill and lost revenues when no stock is available, not to mention the probability of such incidents being communicated to other potential customers.

Unfortunately every business has differing factors that will influence the above equation. It is my feeling however that if your business involves any form of tangible good supply an inventory control system is critical in minimizing risk and loss and increasing efficiency.

Business owners often go into their particular business because they are passionate about it and are often very good at doing it. They will know anywhere from ‘a little’ to ‘a lot’ about actually running their business, the particular industry and the roles and responsibilities that will be required to achieve success. Among this group of business owners, governance is not a word used frequently or is a formal governance structure a consideration for these businesses. Generally this is because the term governance is misunderstood or avoided due to the fear of change and unwillingness to complicate life and accept accountability as a critical factor for success.

Having some kind of governance structure in a company is critical to the growth and development of any successful business. And while it can be a scary and frightful thought for some; there is a clear and seemingly rational argument for doing it.

To prove my point start with trying to find a company that has achieved long-term growth, profitability and success that does not have a board of directors. Indeed the companies that we all deem as being successful all have highly effective governance structures. So why is it that you do not provide yourself with the same opportunity if you know it is the formula for success?

Herein lies the problem; governance isn’t simply for multi-national, multi-billion or multi-million dollar companies. It can be a key driver, a key tool and a key component of any business – be it a business with one employee (maybe you) to a company of a reasonable size. The role of the Board is critical in any business that wants to have serious growth and take their business to a whole new level

At Sirdar we believe effective governance is critical to the success of ANY business. Not only does governance ensure compliance and minimise risk, but as Richard Moore from the AICD states “the main difference between SME’s and the larger public companies is the lack of distintion between managers and owners”… Now, you must think to yourself, are multi-million dollar companies successful because these distinctions have been made? Are they prepared upfront for the journey and have all the distinctions of effective governance in place already that they know they will need on the tough road ahead in achieving extreme business success? Where are you with this distinction in your business today?

Your team is what makes your business tick – your people will either make or break your business. This month I have some tips on how to manage your most valuable asset.

• Know what Wealth Dynamics profiles your team are – make it a condition of employment. And make sure you understand what profiles needs to sit and where and with whom in your business. Play to your teams strengths – do not focus on their weaknesses.
• Know your teams Position Descriptions. And make sure your team knows them too! Be very clear and descriptive in what is needed from each of your team and what they are responsible for.
• Money isn’t everything – it ranks only about 5^th in the most important elements of a job. That is not saying financial incentives do not have their place as they will encourage your team members to stay over the short term, over the long term they need opportunities for growth and the sense of belonging.
• Offer a solid foundation for growth and let employees know how they can move up in the ranks and what is needed to do to get there. Offer ‘opportunities and incentives for ownership’ – if all your team feels as though they ‘are a part of ownership’ far less management is needed to motivate and inspire.
• Create a good working relationship with your employees. People are less likely to leave if they feel they are a valued member of a team.
• Praise employees when they’ve done a good job.
• Provide or pay for training. Although workers no longer expect lifetime employment at one company, they do want to be employable throughout their lives, and this means keeping their skills current. This must be motivated and made a company policy by you, or it will just not happen!
• Training a new employee can be much more expensive than paying more to keep an established one.
• Yes, some employees may have you pay for training and then run when the first big offer comes along; nonetheless, over the long run, you will have a better and more loyal team if people feel they’re not losing ground by staying with you.

In business – The Governance of your astute business expedition is paramount if you are looking to achieve extreme business success.

Business owners often go into their particular business because they are passionate about it or are very good at doing it. They will know anywhere from ‘a little’ to ‘a lot’ about actually running their business, the particular industry and the roles and responsibilities that will be required to achieve success. Among this group of business owners, governance is not a word used frequently or is a formal governance structure a consideration for these companies. Generally this is because the term governance is misunderstood or avoided due to the fear of change and unwillingness to complicate life and accept accountability as a critical factor for success.

Having some kind of governance structure in a company is critical to the growth and development of any successful business. And while it can be a scary and frightful thought for some; there is a clear and seemingly rational argument for doing it.

To prove my point start with try to find a company that has achieved long-term growth, profitability and success that does not have a board of directors. Indeed the companies that we all deem as being successful, such as Microsoft, Google, General Electrical and Fletcher Construction, all have highly effective governance structures. So why is it that you do not provide yourself with the same opportunity if you know it is the formula for success?

Herein lies the problem; governance isn’t simply for multi-national, multi-billion or multi-million dollar companies. It can be a key driver, a key tool and a key component of any business – be it a business with one employee (maybe you) to a company of a reasonable size. The role of the Board is critical in any business that wants to have serious growth and take their business to a whole new level

If you would like any help, assistance or advise in this regard, please contact a Sirdar Representative and we will gladly assist.

Economic crisis as an opportunity

We hear about it from almost everywhere. The world is facing probably the most severe economic downturn since the great depression in the 1930s and it is far from being over. Household name companies are struggling – some even face the threat of bankruptcy, investors have lost huge chunks of their asset and property value (according to Reuters UK property prices fell by 17.7% year to year) and individuals find it hard to keep their jobs and keep up with the debt they have accumulated.

Using the analogy of mountain climbing we can say that what we experience are thick mist, strong wind, and heavy snow and we are stuck in high altitude between camps with minimum provisions and a broken headlamp. What makes a difference in a situation where circumstances are severe and life is on the line? What can we take and translate into business?

Despite the severe conditions many entrepreneurs around the world are seeing these turbulent times as a great opportunity. They are keeping their feet on the ground, eyes on the summit and have their teams working together like never before. Jim Collins, author of Good to Great and Build to Last, says “those who panic, die on the mountain.” The same is in business.

Surviving and thriving during these times requires sticking to your values and purpose, reigniting our resourcefulness and the people you trust and work with. So streamline, regroup, innovate and most importantly, measure and manage everything you do. As other entrepreneurs who thrive in the current time, you can too re-discover your ability to use existing resources and provide great value.