We discussed this this morning in order to expand our understanding of business and why there is outsourcing or bpo.
Objectives:
1. To increase our knowledge
2. To understand why it is better to outsource - to focus on our key competencies, lessen headaches and over head
3. To help us appreciate why there is a prevalence of bpos and outsourcing
4. To understand how various business processes and strategies contribute to higher ROI and to better managers Principle No. 1
Background:
1. We suggested that MM and other parties can outsource our interment at following rates:
MM - excavation and ISG work at 3,600.
We suggest: whole interment work P10,000 included ang vault
5,000 with backhoe but to be amortized
Computation: Revenues: P10,000.00
Expenses: Vault P5,300
Excavation (with backhoe
labor P500.00
diesel 100.00
amort 1,000.00 1,600
Budget for repair 500 500
Total 7,400
GP 2,600 x 40 interments = 91,000 x 12 = 1,092,000 THIS IS A BIG BUSINESS FOR HER
(It should be 12,000 because the labor of other personnel of interment has not been covered)
(This is in fulfillment of our mission - giving jobs and employment)
Kanya ang backhoe at the end of 2 years, we lessen our head ache
What:
1. This is taught at MBA, and SEC in the annual report does computation of du Pont
2. It is an ROI formula: Net income / Stockholders equity
3. It is however a long formula that covers the entire spectrum of business operations:
Margin Turn over Leverage
(Patong) (Paikot) (Laway)
Net Income/ Sales/ Total Assets/
Sales Total Asset Stockholders equity
When we cancel numerator and denominator, we are left with Net Income/Stockholders equity
Net Income/ Sales/ Total Assets/
Sales Total Asset Stockholders equity
4. The various items can be improved/increased
Margin Net Income/sales
Net income can be increased by 1. Advertising
2. Having more sales personnel
3. Being in more geographical areas
4. More product offerings
5. Value adding to the product - more uses, more value for money -----> price increase
6. Reducing operational expenses: utilities, rent, repairs OH, GA
7. Reducing COGS Direct Labor and Materials
Turn over 1. Increasing cash sales - offering discount for cash sales
2. Collecting AR promptly
3. Having a third party finance the purchase/discounting of receivables
4. Reducing asset size ie by outsourcing
5. Reducing inventory by just in time, and/or pass through strategy (pasa buy)
6. Focusing on trending and fast selling products; dispose by sales those that are not
Leverage - this is to be practiced only in low interest environment;
focus on service or those that rely more on intellectual capital
Outsourcing, by reducing the total assets increase the asset velocity by reducing the Total Assets. The wasteful use of asset that can be dissipated by interest income can thus be reduced.
Thus if there is an investment of $100 million and this is leased back to the computer supplier, the asset is reduced and instantly the turn over is increased.
Say Sales P200M/Total asset = P100 million
When the denominator P100 million is removed the turn over becomes infinity. What to do with the cash? Return to stockholders in stock buy back or invest in other products and revenue generating project
In the Philippines, BPO is equally made tantalizing by various EPZA zones and current business support:
1. EPZA offers 5 years RPT free operation
2. Gross taxation of say 5%
3, Cheap A -1 fiber optic lines to handle thousands of telephone voice calls
4. No need to put up your own building:
1. Available cyber offices for lease (built by business men
2. FFE for lease: office tables partitions and computers
5, Huge savings for labor and wages $400 - $500 /month (P21,600 to P27,000) tax free (and attractive to our P14,000 a month wage earners) vs $20.00 per hour x 8 hours x 20 days = $3,200 (or a savings of $2,700 per month) x 12 = $32,400 /year /emp
ITS A WIN WIN SITUATION FOR EVERY ONE. THAT IS WHY BPO FLOURISHES.
