This is a column written by our representative, Kazuaki Sawada, detailing the insights he has accumulated in the field of business revitalization, management improvement, and bank negotiations.
We provide information that serves as decision-making material for managers, ranging from reading monthly trial balances, dialogue with banks, organizational restructuring, to business succession.
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basic information
Please use this as hints for management decisions, such as building a management foundation, improving management quality, cash flow management, bank relations, business succession, and restructuring after the appointment of the second or third generation. Also, feel free to contact us with any questions or inquiries when putting this into practice.
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Applications/Examples of results
The analysis of product contribution and cost reduction will proceed as follows: - Determining key products 1. Product turnover rate = Sales ÷ Average inventory (1) High gross profit margin & high product turnover rate (2) Low gross profit margin & high product turnover rate (3) High gross profit margin & low product turnover rate (4) Low gross profit margin & low product turnover rate The priority of key products is in the order of (1), (2), (3), with (4) being discontinued. 2. Cross ratio & contribution ratio The method for evaluating key products numerically is through the cross ratio (gross profit margin × product turnover rate) and contribution ratio (cross ratio × sales composition ratio). Products with high cross ratios and contribution ratios are considered key products. - Cost reduction through inventory compression 1. Setting inventory compression targets and reductions based on contribution standards (1) Setting compression targets: Inventory trends over the past three years → Setting monthly and product-specific inventory targets (2) Product contribution ABC analysis: Product contribution analysis → Establishing management policies for products by rank 2. Effects of inventory compression (1) Reduction of storage fees, insurance fees, warehouse fees, and transportation costs (2) Reduction of inventory interest (3) Reduction of disposal costs for long-term and obsolete inventory (4) Reduction of management labor costs I hope you will refer to these methods for cost reduction with a focus on product contribution analysis. Next time, I will convey "Clarifying the gap between the ideal state and the current situation to accurately generate performance."
Company information
Our company is a group of professional consultants who value practical insights born from responding to corporate needs. With practical management know-how and a strong belief, we solve management challenges and achieve everything from startup support, reconstruction and revitalization support, growth expansion support, and business continuity support to building a solid management foundation.
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