Quaestor Equity Partners LLC
The Niche Industry Brief: Highlights for $5 to 50
million makers and marketers of
industrial products.
Third Quarter 2005
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Articles:
Outsourcing Overseas
Credit Risk Management
Systems and Credit Industry Groups
Is
Your CRM Marketing Database Ready For Prime Time?
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Outsourcing Overseas
By Richard Gibb, dick@quaestorequity.com
My friend described the
product costing method for their new plant in
function of material and
overhead elements. We do not consider
labor cost because it is no
larger than a rounding
error in our final calculations.”
No wonder many companies
worldwide source their products in
developed sourcing
relationships, others started joint ventures, and still others set up their
own factories to serve
both local and export markets. Clearly the attraction of very
inexpensive labor is
irresistible.
Businesses have always
sought low cost labor. In the 50’s and
60’s they focused on the
southern part of the
wages. Then, in the 70’s and 80’s they went to the
Mexican border and established
Maquiladoras. Later, they sought out opportunities in the
host of other
countries. When the Iron Curtain fell,
countries like
the rush to the
elsewhere when Chinese
wages rise. But with 1.2 billion people
to employ,
center stage for a long
time.
Many companies have saved
millions of dollars through outsourcing - but there have been
significant failures as
well. Reasons for failure are many,
including inadequate personnel
resources and talent,
limitations of capital, or picking the wrong local partner. But the most
common reason is failure
to develop an outsourcing strategy that is consistent with the
company's overall
strategic plan. It is critical that a
smaller company, for whom failure may
mean bankruptcy, have the
right strategy.
Long term success begins
with making the right decision on what to outsource, which
depends on the company's
strategic product plans and a careful analysis of the relevant
characteristics of the
product, subassembly or part under consideration.
Outsourcing is
potentially most beneficial if the product or has these characteristics:
Make-to-stock
High volume
Few optional features
High labor content
Well documented drawings, BOMs, etc.
Well defined manufacturing process
Infrequent design changes
High value-to-volume ratio
Be cautious when
outsourcing products or subassemblies that lack these characteristics. In
addition, be cautious if
any of the following conditions exist:
The manufacturing processes is a core competency of the
enterprise
The technology or processes are difficult to protect from
illegal copying
Customization is required
Demand is unpredictable, with short lead times and high
inventory value
A subassembly is critical to production in another plant
Some material content is difficult to source
When the above conditions
pertain, often the best solution is not outsourcing but an internal
cost reduction initiative
such as Lean Manufacturing or Value Engineering. Outsourcing
always has a cost, typically
underestimated. If costs can be reduced
internally instead of
outsourcing, this avoids
extending the supply chain and stretching organizational resources.
When outsourcing is the
right decision, there are ample opportunities to find partners
around the world that can
reduce costs. In a subsequent article we
will suggest ways of
approaching that
challenge and pitfalls to avoid.
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Richard Gibb served as
Executive Vice-President of Federal Signal Corporation, a $1.2
billion producer of
products for industry, commerce and government. He had responsibility
for strategic outsourcing
and established relationships with suppliers in
Partner of Quaestor
Equity Partners and engages in Strategic Consulting assignments for the
Outsourcing Network. Reach him at dick@quaestorequity.com.
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Credit Risk Management Systems
and Credit Industry Groups
By Steven Gan, s.gan@icmaj.com
A credit risk management
system helps to minimize the risk of extending credit to customers
who may default on
payment. When a credit risk management
system is properly
constructed, it allows
the company to meet its sales objectives while insuring that its
accounts receivables will
continue to be paid on a timely and cost effective basis.
A credit risk management
system is comprised of many kinds of before- and after-sales
products and services
that a creditor can implement to minimize the risk of doing business
with a customer who may
default. A sampling of these products
and services:
Before-Sales
Credit Insurance
Credit Reports
Accounts Receivable Financing
Credit Industry Groups
Credit Training
After-Sales
Invoicing & Payment Management
Soft Call Collection (Collection performed under the
creditor’s name)
Third Party Debt Collection
Debt Purchasing
Securitization Support
Of these, I would like to
tell you about the value of credit industry groups.
Credit industry groups
bring credit professionals of companies in the same industry together,
in a forum, for a free
and confidential exchange of credit information about their common
customers. Discussion of common accounts not only
provides each company with
invaluable facts for
determining and evaluating credit risks, it also provides the opportunity
to exchange views with
others in the same industry on matters of general business.
Even under strict
Anti-Trust Laws of the
how their customers are
paying their competitors. New company
ownerships, changes in a
company name or location,
closures, returned checks, slow payment trends and conversely,
improvements are included
in these round table discussions. One
piece of critical credit
information can easily
save a member from being saddled with an unpaid accounts
receivable. The purpose of a credit industry group is not
to automatically cut off a present
or future customer. It will however allow the creditors to respond
appropriately and
objectively to the level
of credit worthiness of that customer.
There are more than 1,500
industry credit groups that are sponsored and operated by the
National Association of
Credit Management. Some of the groups may have as few as 10-15
members and others may
contain several dozen. Although most of
these groups are local
or regional in nature,
there are about 112 of them that are national in scope. Some of the
groups have been in
existence for only a few years and other have been working together for
several decades. Not only the NACM, but also organizations and
companies have helped to
establish and operate
credit industry groups throughout the nation.
Some Benefits of Industry
Group Membership:
Up-to-the-minute credit experience
Information on new credit applicants
Updates on established accounts
Recent collection activity
Networking with other credit professionals on job related
issues
Credit industry groups,
as well developed as they have become, are still a fairly unknown
credit tool for many
companies and organizations. If your
company or trade organization is
presently operating
without the benefit of a credit industry group, please contact me without
any obligation or
commitment and I would be pleased to discuss this wonderful credit risk
management tool with you.
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Steven Gan was the
founder and president of Advance & Associates Co., Ltd. in
from 1992-2004 and is the
president of Stellar Risk Management Services, Inc. in
Engineering and graduated
from the
of International
Management. Mr. Gan is also a Certified Public Accountant and a Credit
Risk Management
Specialist. Reach him at s.gan@icmaj.com
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Is
Your CRM Marketing Database Ready For Prime Time?
By Perry Norgarb, perry@agenteers.com
“Right,
people. Let’s blast out that mail campaign we’ve been planning for so
long.” You set
your
Customer Relationship Management software to work searching people and
companies
to
target. You realize something’s wrong.
Your list is far smaller than anticipated. Many
profiles/categories
are not filled in. Numerous records are incorrect or riddled with typos.
You
realize this campaign isn’t going to happen in a hurry.
Time for damage control
Poor
data quality, a common reason for failure of CRM systems, is easily
avoided. Your
CRM
software is only as good as the information it contains. How can you avoid unfit-for
-use
data permeating your CRM software?
Gather your key users and develop a Data
Capture
Procedure, defining rules of use:
Who has what access rights; who can
Create, Insert, Modify or Delete records?
Your
system administrator
should control this.
Check for duplicates before creating
a record. Depending on ‘data scrubbing’
features of your system,
this might require simple searches.
Do you allow abbreviations or
acronyms - IBM or International Business Machines;
Inc. or
Incorporated? Consistency of input
avoids duplication.
Is upper and lower case
acceptable? ALL CAPS?
What's the timing of data
entry? Same day? On return to the office?
Check whether your postal service
has specific requirements.
Will primary customer address be
postal or physical address?
Check spellings! Don't trust spellchecker! Ask the client - they’ll respect that. One
certain way to get your
mail binned is to spell someone’s name incorrectly.
Confirm entity type - LLC, Inc, etc.
Emphasize rules for creating new
User Definable Fields. Approval of new
UDFs
should be required. Otherwise duplicates will permeate your
database, e.g.
Lead Source: Yellow
Pages, YP, yelo pages.
Enter email addresses
correctly. Basic but common mistake!
Set up procedures to create records
from inbound emails.
Will you use Mandatory/Forced
fields?
Address
the issue of backups while you are about it:
Who's responsible for backups? Who
covers when they are absent?
How frequent are backups? Diarise!
What method (e.g. Grandfather,
Father, Son)?
Backup on good quality media. It’s
useless to backup, then find on attempting a
Restore that it fails!
It's good to backup onto multiple data formats.
Where are backups stored?
Are backups secure? It's important for both security and
practicality.
Once
your Data Capture Procedure is finished, everyone should sign off! Distribute it to all
new
employees. Review for possible revision
every three months.
Try
this: put good and bad records on the overhead at meetings. Don’t embarrass anybody,
but
use it as light-relief. People learn
best when having fun!
What
if your database is such a mess it needs a complete overhaul? Turn this challenge into
an
opportunity to re-establish contact with clients. You can put lapses down to data crashes,
but
tell them you've fixed the problem!
Importantly,
help your staff understand what you need from the data to facilitate more
accurate
marketing and reporting and hence the success of your business and their
careers.
By
creating pride and ownership in the database, you create the buy-in necessary
for CRM
success.
Don’t compromise this critical tool by allowing infection by inferior data.
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Perry
Norgarb has specialized in Small Business CRM solutions for the last 15 years.
Contact
him
or find out more about CRM, Contact Management and other Sales Tracking
software
tips
and solutions for small businesses at: www.smallbizcrm.com. You are free to re-publish
this
article as long as this bio box and copyright remain intact. © 28 April, 2005
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Edited by Mark Gibb, Quaestor Equity Partners LLC, mark@quaestorequity.com
Mr. Gibb is a Partner of
Quaestor. Prior to Quaestor, he was President of SINCO, Inc., a
$20 million provider of
safety netting solutions. Before that he was President of Safety
Storage, a $20 million manufacturer
of pre-fabricated HazMat buildings. He has also been a
Strategy Consultant for
Accenture, and held senior sales and operations roles with Stewart
Warner and Federal
Signal. Mr. Gibb has a BA from the
from the
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Copyright 2005 Quaestor
Equity Partners LLC,
The Niche Industry Brief
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