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Friday, December 30, 2016

Cost Reduction - The Cost of Doing nothing

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
December 30, 2016

Image result for container ships

Today marks the death of national hero.  What could mean the death of companies?   High costs and expenses.  Remember that the basic formula for business is

          = Gross Profit

Thus you try your best to pour resources and key activities into sales while at the same time
 Reducing your op ex, cap ex and other expenditures.

And yet none could be worse than expenses for doing nothing.

1.  In lean system, in the acronym for waste (MUDA) TIMWOOD, several of these refer to not doing anything:

        I -  nventories -  machinery raw mat, finished goods that are lying idle in the warehouse consume a lot of space and cost of money

        W aiting  for someone to finish the job, for someone to sign check payments, sign PO

        D elay  like waiting can consume a lot of time (which is an expensive resource.  In US you pay this by the hour.  That is why in Japan, they have JIT (Kanban system) of material usage and the rapid change over of tools in production.  They reduced this from weeks to single digit number of minutes. Delay in the production line costs money

 2. Shipping companies are aware of this   That is why ships: especially the large ones:

   1. Use container to speed up loading and unloading.  They have loading and unloading plan to speed up operations, thus, last in first out in loading containers for containers to be offloaded in the next port of calls. Thus a large PANAMAX container ship must load unload in major ports like HK or Singapore in 24 hours or less.  The cost of doing nothing involve the huge depreciation of the ship (plus the interest expense on its financing), the huge labor costs of the crew, fees from the cost of port call excluding demurrage, berthing fees which accumulate on a daily basis;

  2. Thus for the next port of call, its pays that custom duties are processed before the ship actual docking at the port.  Many customs provide this advanced payment system

Thus we have to improve our own operations to counter the cost of doing nothing:

1.  POs that are left unsigned for the past six months.  The POs concern:

     repairs of equipment
     materials needed for a new business

2.  Projects like road development being unattended to by Engineers.  Some crucial steps are not being attended to.  In the meantime, although we have funds for the project, for which we pay P300,000 a quarter (P1,200,000 a year) our Engineer does not care and must be spanked or banged in the head.  Equally responsible are accounting staff and other members of general management

3.  Accomplishments of people who went on overtime must be scrutinized. Currently they are not.

Accomplishments of every one must be demanded.  Work plan and work achievements are needed. What with very expensive starting salary.  Otherwise, what we taunt as our people are our assets, means that if they are dead weight, they bring down the company with their high cost of doing

A lot of education is needed at this area of financial management operations (lean system)

Image result for idle time

Adversities in the Life of an Entrepreneur - Power and Credit Grab

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
December 30, 2016

Image result for family feud

Today we commemorate the nth death anniversary of who is considered the national hero - Dr. Jose Rizal. His death by firing squad is the greatest adversity a person can meet in his life.

This makes me recall the adversities in the life of a business leader/entrepreneur.  They are the major ones but there are more.

1.  A business partner tells of the sons and daughter of his siblings (whose parents his brods and sis have died) Since they are taking over the shares of his siblings, the different breed have tried to oust him out of the picture.  As of now he represents the corporation in the joint project agreement.   I said that is most unwelcome, since we formed this joint project;  the children had nothing to do with the project.  All they have now are rights of the heirs and their actions are destructive to the unity of their group.

2.  A friend who has a successful party needs business (he has a venue, chairs and tables rental, party packages) put up  burger business. He gave this to his children.   He is making suggestions on how to improve the business.  And he being senior is being set aside.

3. In the companies which I set up so that my brods and sis will not be poor just like the rest of our clan, I was ousted under  Sec. 28 of the CC,  after implementing a bequeath of the estate (equal sharing) the younger ones voted together to remove me from the company which I established. I have not gotten a single cent yet from those companies including a crematorium where I invested wholly my savings.

Thus the seminars and courses of this school on managing conflicts and family business are flourishing.   In a major food company which sells billions, the family feud is intense as I facilitated the presentations of departmental strategies.

There is a group that facilitates formation of family council at a fantastic rate of only $2,000 per day.  That is a great rate if we consider the problem and the friction that it tries to remove from the operations of the family business

The Family feud, Dallas, Falcon Crest are all about this intrigues, power grabs, conflicts in family business

Wednesday, December 28, 2016

Who decides the fate of your company - you the entrepreneur or the lawyer

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
December 28, 2016

My father is a lawyer, a notary public but was a government employee;  was an admin man and his knowledge of civil code, obligation and contracts, the admin code of the Philippines helped him a great deal in his job.

One time, there was a need for a document and I requested him as a lawyer to make one for us/the company to which he declined.

He said, decide on what you want to agree or do, write it and then, I will correct this if the agreement is in clear legalese.   If you do it the other way around, then the lawyer has decided for you what you will do in the business.

And so I thought, and then later on I read a book on entrepreneurship that you need some 10 or 11 transactions a year that you need the lawyers comment or nod on for you to be prospectively avoiding the problems.  So you need lawyers

And so I tried very hard to stick to this dictum of my late father.  He is right.  The agenda of the lawyer and the entrepreneur are very different.  His goal is to get his fees;  the entrepreneur want to succeed and not to pay the fees. or be engaged in legal battles.

Every time, the lawyer will say that your position is so weak the the worse that could happen is...

I never heard any one say that on a brighter note.... Or strength...

I do not like to hear that when there is a problem, run to the lawyer.... not a good idea.