Are You Ready For Explosive Growth?
You will have seen in the financial press articles on the newest sharemarket darling – Bubs Australia. Recently their share price jumped 50% with the news they had secured a new contract in the US to help them fill the void after Abbott Laboratories closed its Michigan plant. Four babies fell ill and two died after consuming their product.
Bubs are now operating at full capacity and operating 24/7 to produce the product required to service both the current Australian market share they have and this additional demand. This type of growth places significant strain on:
- Production capacity – both from a piece of machinery and experienced human resource perspective. You will be working your machinery harder. You will have to man the additional operational hours with suitably qualified and experienced people. These people do not magically appear when you need them. You have to take the time to train and test their capability to ensure you have the right people making the right decisions in order to ensure the quality of your product being produced is meeting the right standards. Many companies struggle with this type of expansion as they do not have the supporting policies, procedures or technology in place to ensure this happens without too much disruption.
- Cash Flow – As production has to increase so too does the demand for your raw materials. This puts significant strain on your sales forecasting ability, your procurement people, your supply chain more generally, your warehouse people and the space they have to work within. All areas of operations and supply chain are placed under significantly increased pressure. Often your ERP system is woefully inadequate to handle the change in pace and demands for information. There are many, many times when existing business systems place significant constraints on a business and in some cases completely prevent the business from taking advantage of the opportunities placed before them. Many businesses run out of cash as their raw material inventory and WIP (work in progress) skyrockets.
- Data analytics – as I mentioned earlier, ERP and business intelligence systems are often woefully inadequate and cannot provide the data or information executives need.
- Executive’s time – So many more topics appear in an executive’s meeting schedule and daily task list. Topics over and above the daily operational decisions and matters that have to be dealt with. New decisions have to be made – decisions like: where do we get the additional raw material from; can our existing supplier supply what we need; will we buy from this new untested supplier and if so how much; how should we incorporate a new supplier into our current mix? Should we buy new plant, buy or lease new premises?
All sorts of new discussions and decisions come on an executive’s horizon due to this additional growth. Many businesses are not ready for this change. And because ERP and supply chain are connected at the hip, should any element of the solution map in either field not be adequate, then you have a risk for a catastrophic outcome as you “step on the gas” to embrace this new growth. I have witnessed many a business find themselves potentially trading insolvent due to growth. They essentially grow themselves into bankruptcy.
I was speaking with a client on this topic only the other day. He said, “I wish we had started this ERP replacement project much earlier”. They are experiencing tremendous growth and their people are under pressure to operate the business on a day-to-day basis. Now because we are implementing a new ERP system, the time and effort demand on their people is significantly increased. Remember the quickest and cheapest way to implement a new ERP is to have the very best people you have fully committed full-time to the ERP project.
He is currently experiencing what I try and advise prospects to avoid. But unfortunately, when I speak about commencing these ERP replacement projects earlier before the pain gets too bad, SOME prospects I speak with think it’s me just trying to get a sale.
The reality is if you are showing any signs of growth you need to start thinking about what your supporting systems need to be at least two years before you will need them. So if this is on your radar you need to be thinking about this NOW.
One client of mine who got the timing right resulted in the business growing by seven times – 700% growth in revenue. While I would love to take all the credit for that growth the reality is that credit goes to their sales and operational teams. They did the work. What I did for them was to provide advice and assistance for them to find and implement a system that allowed the business to fulfil and meet the promises the salespeople were making to customers. They became the most reliable supplier in their industry and the growth followed.
The very best time to have started an ERP replacement project was six months ago. The next best time to start is now. If you are experiencing growth, please reach out to me for a confidential discussion about what is possible for your business.
© David Ogilvie