Five ways to cut costs, control cash

Along with other SMEs, Indian printing businesses are encountering a number of ongoing struggles with marketing, growth and cash-flow. Cash-flow is the lifeblood of any business, and managing it well will ensure that the company’s vital signs are stable. Outlined are some ways that one can pump life back into it’s business – and thrive in the worst economic conditions.

1. Using Just-in-time (JIT) strategy for inventory: 

JIT is an inventory management strategy, which companies employ to increase efficiency and decrease waste by receiving materials only as and when they are needed during the production process. JIT brings a whole range of benefits to manufacturing businesses of any size, as well as retailers with complex supply chains.

The traditional notion is to consider raw material or inventory of finished goods as an asset. The JIT method turns this concept upside down and considers stock as waste or dead investment which in turn incurs opportunity costs.

JIT can be used by the organisation for procurement of all its raw materials. Let us consider paper, which constitutes a major cost in the printing process. Paper can be purchased according to the requirement of each job, as and when jobs are received. By following this method of paper procurement, one can efficiently cut costs and reduce investment in inventory.

This method also minimises storage costs. Many businesses find that purchasing only the raw materials or the components they need for their current jobs, improves cashflow and minimises the amount of money tied up in stock. Likewise, storing less work-in-progress and fewer finished goods reduces space requirements.

However, efficient use of this method requires a printer to be able to accurately forecast demand. For the success of it, it is critical to maintain strong relationships with suppliers. Its success depends on the ability of the supplier to produce raw materials on demand. It requires reliable suppliers, who ensure the supply of compatible and standardised products in the shortest possible time. But, once achieved, this can greatly help in reducing inventory costs and carrying costs.

2. Using technology to cut costs:

(a) Before starting each job, careful planning in terms of the technological requirement of the job must be done. This can be achieved by having a complete understanding of the machine and knowing what it can do for you. A printer must be able to utilise the full potential of a machine so as to maximise its output and use of manual labour. Human tendency is to throw the job into production as soon as it is received. However, spending some time in the planning stage will ensure that there is zero wastage, greater efficiency and hence cost control.

(b) Another area where costs can be controlled to a great extent is maintenance. The cost of maintaining machines can be much higher than we realise. Reducing equipment downtime and related cost is the greatest argument for planned maintenance versus unplanned maintenance. The habit of regularly servicing machinery at a pre-determined time, helps prevent the machine from developing catastrophic failures. Also at the same time, making it perform better over its useful lifecycle is important.

Preventive maintenance not only enhances the lifespan of regularly used machines, but also enables higher performance by increasing uptime. Although it is well known that machines routinely serviced on a pre-determined schedule outlasts those that are not, many companies still indulge in the practice of neglecting machinery or only responding reactively to equipment failures, ie, curative maintenance. Preventive maintenance can go a long way in helping companies save costs. For starters, machines that are poorly maintained typically require more electricity or fuel to run.  This increase in electricity or fuel use may seem trivial at first, but it ends up costing companies a great deal. Further, preventive maintenance reduces overtime costs, considered a major expenditure in the industry. It also entails judicious use of maintenance staff due to working on a scheduled basis instead of a crash basis to service breakdowns.

In a nutshell, you tend to pay penalties when you respond to problems rather than preventing those problems.

(c) Investing in purposeful software can help cut costs and control cashflow to a great extent. Having a robust Management Information System (MIS) in place ensures availability of timely and accurate information, thus opening up newer avenues to control expenses. In addition to this, a reliable estimation software ensures accurate forecasting of the requirements of a job. This helps in accurately predicting raw materials required, thus reducing errors and wastage. It also ensures accounting for all probable expenses that maybe associated with a job and controlling them wherever possible.

3. Minimising rejections: 

Rejections are a direct and irreversible cost to a printer. Most printers have to bear these costs and many find this unavoidable. Rejections in the lot may occur due to issues in colour reproduction, transparency, font, issues in making the file print ready, etc. If not completely done away with, a printer can minimise his costs on account of rejections in a number of ways.

A few of which are as follows:

(a) Investing in high-end digital presses and monitors; and regularly colour calibrating them with the printing press to achieve actual colour reproduction will help reduce errors in printing on account of colour reproduction, transparency etc.

(b) Prepare a full-size digital dummy using actual paper and colours close to 90% of the actual colours, before the execution of the job. Printers must get into the habit of preparing a dummy and getting it approved by the client. Once a go-ahead is received from the client, only then should the job be taken into production. This is the most sure-shot and effective way of minimising, and in due course, getting rid of rejections.

4. Supplier rebates: 

Suppliers’ disounts can be availed in case of volume purchases and on-time/before time payments. These discounts can go upto 2-2.5% in case of early settlement or on-time payments. And this, when multiplied across the main suppliers, quickly adds up to a lumpsum. One can also use volume as a means to accrue discounts. If the order is not sufficient enough to bargain with, one can try finding like-minded SMEs in the industry and establish a mini buying group. Or better still, join an established buying group that will do the legwork and negotiating for the purchase.

5. Smart marketing:

Indulging in smart marketing can lead to a huge increase in profits for the  business and at the same time cut costs as it’s a tad different from traditional marketing. Smart marketing can include:

•       Ensuring that clients receive constant communication and helpful advice so that you are top-of-the-mind

•       Scheduling follow-up calls and reminders when it is time for new printing work

•       Utilising vouchers and referral incentives.

•       Draw up a list of businesses that comple-ment your printing business, for example graphic designers, and seeing if there’s a way you could help each other out. For example, offering discounts to customers when they use each other’s services or including vouchers for each other’s businesses in gift and information packs.

•       Using low cost and free marketing tactics such as PR, networking and speaking opportunities.

•       Another area where most can be made is social media. Social media represents a new way for companies to communicate internally and externally. Social media can help organisations build terrific client relations, due to its very nature of encouraging two-way communication. Some of the ways in which this can be done is by creating a forum wherein you can interact with your customers and prospects by fielding frequently asked questions about your products and services; advising prospects and customers about the best ways that clients use your services; celebrating business milestones and keeping your customers updated about your latest developments and investments and how it may benefit them; elebrating the completion of interesting and different projects and inviting comments thereon; communicating regarding business conditions in emergency situations; writing about any new or interesting technologies; introducing and welcoming new employees.