Apart from its obligations to lenders, the company’s management strives to maximise the return on equity. For this purpose, the components profitability, operational efficiency and financial leverage must be maximised. Profitability can be maximised by increasing sales and reducing costs. Operational efficiency is maximised by reducing the assets used and ultimately every company should keep the share of equity as low as necessary.
Figure 1: Increasing the return on equity
In order to adjust these parameters in a targeted manner, in addition to the classic performance improvement parameters such as cost reduction, for example through operational restructuring, the expansion of sales markets and product portfolio optimisation, the digitalisation and E-Commerce levers are particularly important. Through digitalisation, manual processes are consistently simplified, standardised and automated and thus resources are freed up. These can then be used to expand the E-Commerce offering and the associated infrastructure as well as the corresponding processes ( Fig. 2). In addition to an increase in profit, this can bring employees closer to the customer, which, for example, results in stronger identification with the product and better utilisation of the employees’ innovative power.
Figure 2: Increasing profit through digitalisation
Digitalisation to reduce costs and increase efficiency
Digitalisation is about adapting or implementing an efficient infrastructure and the corresponding systems. The most important systems are ERP, SCM, HCM and WMS. On the other hand, in addition to the IT systems, it is important to systematically optimise all adjacent processes that cannot be mapped by software. This is possible through the consistent application of lean and agile methods.
In addition to an experienced team with strong implementation skills, the following success factors are particularly critical for digitalisation initiatives:
- Engage all stakeholders: First, it is critical to involve all stakeholders at all hierarchical levels in the process and build on their experience. Managers must be consistently involved and the background to the transformation must be clearly communicated to the workforce and other stakeholders in order to avoid and address resistance.
- Align organisational design consistently with strategy: Core capabilities are derived from a strategy. These are then translated first into processes and then into a target organisation. Then the corresponding incentive systems are developed and finally personnel issues are clarified.
- Consistent planning of data migration: The cleansing, allocation, categorisation and classification of data is the focus here. This is one of the decisive criteria for success and the resources required for this are significantly underestimated.
- Clear coordination with system integrator: The necessary expertise for integrating systems, such as an ERP system, is often outsourced. Responsibilities must be clarified and common goals clearly defined.
E-Commerce expansion to increase turnover
In line with this channel shift from offline to online on the sales side, which is becoming apparent in all markets worldwide, companies should prepare their online activities for the future challenges. Above all, because this “BIG SHIFT” has another aspect besides the shift from offline to online channels: Namely, the shift of market shares that goes hand in hand with the channel shift. Not only are market shares changing from competitor A to competitor B, but above all market shares are changing from “brick and mortar top dogs” to “new, agile online players”.
In order to face this market development and to profit from it as much as possible, it is advisable to develop a systematic E-Commerce distribution strategy that includes all relevant E-Commerce channels.
Figure 3: Classification of existing sales channels influencing e-commerce
As shown in Figure 2, e-commerce channels form a new link between manufacturers/suppliers and end customers in B2B and B2C alongside the classic sales channels. As far as the connection to the manufacturer/supplier is concerned, e-commerce channels, like classic channels, can be connected both via non-automated order processing (NAOP) and via automated order processing (AOP). The main difference is the interface to the end customer, which in the case of e-commerce channels – logically – exists exclusively online. Basically, all three pillars are relevant for a comprehensive e-commerce distribution strategy. Since, as described, each pillar has different challenges and potentials, a dedicated strategy is needed for each pillar within the framework of a holistic e-commerce distribution strategy.
Deployment of an efficient performance improvement team
Typically, so-called Performance Improvement Teams (PIT) are deployed in the context of turnaround projects, for example, in which substantial cost savings are realised within a short period of time in order to stabilise the financial result. Against this background, our Performance Improvement Teams are made up of individual experts with many years of operational experience and comprehensive restructuring know-how. In doing so, we draw on a core of in-house specialists from consulting and work closely with a large network of external experts. Such a team ensures the consistent improvement of performance and at the same time serves as a model for a goal-oriented and efficient way of working within the company.
Based on a large number of projects carried out in a wide range of industries, five key success factors have emerged.
- Experienced project team: FOSTEC & Company has specialist teams with extensive experience in the areas of cost reduction programmes and e-commerce, as this is the only way to realise the necessary savings effects in what is typically a very short period of time.
- Immediate implementation: Short but systematic analysis phase with focus on formulating ready-to-implement, target-oriented measures.
- Intensive project controlling: Constant monitoring of project progress and results against the business case from planned cost saving potentials.
- Holistic concept: Strategic superstructure ensures consistency of all operational and short-term levers with long-term goals.
- Cooperation between clients & consultants: Constant, constructive and good cooperation between internal and external teams, i.e. involvement of the organisation and joint development of solutions
In summary, it can be stated that in addition to the classic restructuring measures to reduce costs and increase efficiency, the digitalisation of processes must be the main focus. This frees up the necessary resources to tap further market potential, especially in the online sector – a prerequisite for this is a highly efficient team that can ultimately ensure this adaptation.