2016 has seen many new developments: an uncertain global economy, the shock of the American presidential election and disruptive technological innovations. These solutions will optimise your supply chain in 2017.
Get closer to the authorities and governments
While most of the world's resources are in the hands of the private sector, the concentration of industries makes managing a large number of factors, such as the environment, performance, ethics or even society's expectations more complex. Throughout the world, governments provide platforms for coordinating and facilitating supply chain operations (customs agencies, domestic security, food security, ethical resources). Nowadays, a wise supply chain manager understands the benefits of keeping close to the authorities: local economic development, transport, workforce, culture and salaries.
Go through your contracts with a fine-tooth comb
Follow the example on contract theory developed by Oliver Hart and Bengt Holmström, awarded the Nobel Memorial Prize in Economic Sciences in 2016. Their work sets out a framework for analysing all aspects of a contract: managers' remuneration based on their performance, deductibles, co-payers in insurance and even the privatisation of (some) public sector concerns. Guides are available for drafting more pertinent contracts for managing the supply chain.
Even less income, even more experiences
This trend is no newcomer, but is a growing one: when making a purchase customers are no longer satisfied with a deal in which they take all the risks. They hold the seller responsible for the promised quality of the purchased product or service (for example, a diesel car promising 62 miles to the gallon). The way ahead is the following: establish a long-term relationship with the customer based on trust and made indispensable by the growth in social networks. Managing reputation and the customer relationship become crucial factors given that consumer demands have never been so strong and/or supply chains have never been so interdependent.
Assess the value of every employee against automation
Automation affects all economic sectors. McDonald's has launched self-service order kiosks in markets where the cost of labour is significant, particularly in Europe and the United States (against the mass movement for an hourly rate of $15). If this decision involves some controversy, it begs the question: what is the impact on the supply chain managers? Labour has always been the biggest item of expenditure in the chain. For certain positions, automation enables fixed capital investment costs and fewer variable costs. The new rule is that in order to know when and where to implement automation, you need to know the value of each worker.
Make a friend of technology
Making technology work for you enables the supply chain to be successfully digitised. To this end, a combination is vital: automation and adoption of the industrial Internet of Things, along with best security practices against threats (ransomware, hacking). Intelligent initiatives will enable you to optimise the 'leagility' (a combination of the words lean and agile) of the supply chain.
Export plans? Make sure you talk to our experts first
To prepare your international adventure properly, ask yourself the right questions and talk to people who have done it all before: partners, customers, fellow exporters and experts.
BNP Paribas Fortis listens to the questions asked by international entrepreneurs and offers reliable advice. "A lot of exporting companies ask for our help when it's too late", Frank Haak, Head of Sales Global Trade Solutions, says.
Entrepreneurs with little export experience are often unaware of the bigger financial picture. So what do they need to take into account when they set up a budget for their export plans?
Frank Haak: "Budgeting and pricing are affected by a lot of crucial factors: working capital, currency exchange risks and currency interest, prefinancing, profit margins, insurance, import duties and other local taxes, competitor pricing and so on. We always advise customers or prospects to start from a worst-case scenario. Quite a few companies are insufficiently prepared for their first international adventure: they see an opportunity and they grab it, but quite often disappointment and a financial hangover are not far away.
Our experts have years of export experience and the BNP Paribas Group has teams around the world. This means that we can give both general and country-specific tips. Let's say a machine builder wants to design and manufacture a custom-made machine. We recommend including the machine's reuse value in the budget: can this machine still be sold if the foreign customer suddenly no longer wishes to purchase it or if export to that country becomes impossible due to a trade embargo or emergency situation?"
What type of companies can contact BNP Paribas Fortis for advice?
Frank Haak: "All types! Entrepreneurs are often hesitant to ask for advice. Sometimes they are afraid that it will cost them money. However, the right advice can save them a lot of money in the long run. For example, we recommend a letter of credit or documentary credit to anyone exporting goods to a foreign buyer for the first time. This product is combined with a confirmation by BNP Paribas Fortis to offer the exporter the certainty that it will receive payment when it presents the right documents and to assure the buyer that its goods or services will be delivered correctly."
The consequences of not seeking advice: what can an exporter do in case of non-payment without documentary credit?
Frank Haak: "If you are not receiving payment for your invoices, the counterparty's bank can be contacted in the hope that it advances the payment on the customer's behalf. However, we shouldn't be too optimistic in that respect: the chances of resolving the issue without financial losses are very slim. Once you have left your goods with customs, you usually lose all control over them. Hence the importance of good preparation: listen to and follow the advice of your bank and organisations such as Flanders Investment and Trade (FIT). It will protect you against a whole host of export risks."
BNP Paribas Fortis
- is the number one bank for imports (approx. 40% market share) and exports (approx. 25% market share) in Belgium (according to the statistics of the National Bank of Belgium): it offers advice/financing and can help you to discover new export markets through trade development;
- is proud that Belgium is one of the world's 15 largest export regions and is pleased to give exporters a leg up, for example by sponsoring the Flemish initiative ‘Leeuw van de Export’.
Source: Wereldwijs Magazine
The art of negotiating payment terms with suppliers
Cash management is an SME's frontline weapon, and payment terms are a key means of keeping it under control – providing companies proactively open negotiations with their suppliers. But this solution remains underutilised by entrepreneurs
Cash flow difficulties are the number one cause of company bankruptcy in Belgium. Business owners face a constant battle to stay in control and maintain the balance of their inflows and outflows. Negotiating payment terms is one of the levers that can be employed: shortening them for customers while extending them for suppliers. In Belgium, the statutory deadline between companies is 30 days. Yet the reality can be different, since either trading partner may deviate from the rule. Where one of the parties is in a dominant position, the other is often obliged to accept the conditions it imposes... meaning its payment term becomes longer. Everything is negotiable, however, even with "big" suppliers, as long as you formalise the situation and ensure you protect your business relationship.
Who is your supplier?
They say information is power, and there is some truth in this. Indeed, the more you know about your "opponent", the more you will be able to turn the tables. How are the company's finances, and what is its cash position? Is it experiencing difficulties? Where is it placed on the market, particularly in relation to its competitors? What is your dependency ratio in relation to this partner? How does it make payments, and what is its purchase history? The answers to these questions will allow you to take up better positions in the negotiations, and find the best angle to launch an attack that catches the other side by surprise. Specialised websites, data banks, word of mouth (the competition): all means are justified in order to find out more!
What do you want to gain?
And a resulting question: what are you willing to put on the table to achieve your objective? In other words, you need to be properly prepared and establish a strategy regarding what you are willing to concede (and how much this will cost you) and what you absolutely want to gain in return. Remember that the other party has presumably not requested anything, and potentially has little to gain. Therefore, you cannot arrive empty-handed. Are you willing to order larger volumes in order to extend your payment terms? Can you envisage a long-term contractual commitment? Could you contemplate paying more in return for spreading your debits further? Imagine you are playing poker: clearly, you should keep your cards close to your chest. Wait for the right time to show your negotiating partner that you are prepared to make concessions.
How can you negotiate successfully?
The art of negotiating is a difficult skill. However well prepared you are, keep the following principles in mind:
- Even if you have brought a proposal to the table, listen to the other side and pay attention to detail so that you can react quickly.
- Do not be frightened of bearing your teeth a little, even if you are concerned about spoiling the business relationship with your supplier. Stand your ground and mention what the competition can offer you, for example.
- You must control how you communicate, so that you avoid giving the impression that you have cash management problems. Emphasise that payment delays do not help anyone, and that it would be better to agree on a reasonable and sustainable schedule.
- If your business relationship is established, mention your positive partnership and your desire to see this continue.
- During discussions, regularly refer to how far you have come and your shared progress to date. This positive tone will be well received.
- If the negotiations stall, try to resolve the difficulty by pulling out a trump card, for example (i.e. a concession).
- Remember: a good agreement is balanced, and leaves neither party feeling wronged. So do not be too greedy: the outcome must be worthwhile.
- Are you happy with the situation? Move to finalise the deal, either by accepting what is on offer or by finally opting for a fair compromise.
The conversation manager: essential and permanently online
Coordinating a company's social media strategy is a task in itself. Who will you use to handle this? And what about involved customers who suddenly get too involved?
Because of social media, the role of a traditional marketing manager is evolving more and more towards being a conversation manager: someone who facilitates consumer communication. This includes communication between customers themselves and communication between the customers and the company.
Some key tasks in the conversation manager's job description are:
- Uniting and activating ‘branded fans’, as they will recommend the brand to friends and family.
- Listening to what people are saying about your company and seeking their active contribution to your products and strategy.
- Creating content worth distributing in order to encourage discussions.
- Managing these discussions.
- Ensuring your work is very customer-oriented and customer-friendly through customer care, i.e.by responding faster and providing more than what the customer is expecting.
Some companies are big enough to hire a full-time conversation manager. In other cases another employee will take on this role part-time. A third possibility is using a specialised company.
Caroline Hombroukx, conversation manager at content marketing company Head Office:
“No matter which option you go for, communication in social media must come across as personal. There is definitely a reason why large companies such as Telenet and Belgacom have created a fictitious person to deal with their customers; Charlotte and Eva respectively. The conversation manager also has to know the company and its social media strategy very well. It may therefore be an advantage if someone in the company itself takes on that role. That person is right at the source and so can distribute information, take a quick picture and post it online, etc.
This task is not for everyone. A conversation manager must have experience with social media, have fluent communication and writing style and must be empathetic, positive and solution-oriented in his or her dealings with customers. Prior training is not a luxury, because the employee must be very aware of the company's content strategy. The audience is varied and unpredictable. You have to decide time and time again whether certain content is or is not suitable for your target group. It is also not a nine-to-five job: the online world keeps on turning even at night or at the weekend."
The advantage of hiring a conversation manager from an external company is that in principle the expertise is present. In that case the challenge is to know the company to such an extent that the customer has the impression that he or she is talking to a real employee.
Getting angry is out of the question
Traditional marketing and advertising are a one-way street. If they do not work, they are a waste of money. However, they are not likely to result in angry comments. A company venturing out on Facebook, Twitter or other social media, can be sure to receive comments and reactions. Including negative ones. Caroline Hombroukx:
“On social media the consumer is suddenly right next to you banging the table. It is important to respond well to that. Getting angry yourself is out of the question. You need to respond by showing that you understand and you are taking the question or complaint seriously. Everyone following the discussion must see that the company is providing a quick answer and is trying to find a solution. If a mistake has been made, you can acknowledge this openly and honestly. You can also show the problem as something positive: as an opportunity to improve your brand, product or service. Of course you must find a suitable solution in the end. If the person sharing the complaint becomes too negative, you have to try and divert him or her to a private channel: a private message on Facebook, a direct message on Twitter, an e-mail or a phone call."
An enthusiastic, understanding response also works well if the consumer is sharing something positive about your brand, company or service. Thanking the consumer strengthens the bond between the company and the customer. Caroline Hombroukx:
"The dialogue with the target group is an opportunity to improve your product or operations through constructive criticism. Make customers feel involved. It creates a strong relationship. If you are publishing a magazine or starting a poster campaign for instance, you can let customers choose the best layout or title from three options posted on Facebook, for example. Everything that engages customers can only strengthen their commitment."
Social media dos and don'ts
- The consumer is always right (even when this isn't the case).
- Be open, honest and friendly.
- Use a personal style.
- Respond quickly to any questions or reactions.
- Stay positive and be understanding.
- Do all you can to engage your customers.
- Come up with a free gift every now and then.
- As a brand, try to avoid political topics.
Social media and e-commerce: opportunities and risks
The huge popularity of social media brings new opportunities, but has resulted in some new stumbling blocks as well. What are the most recent trends? And how should you respond to them?
Social media such as Facebook, YouTube, Twitter, Instagram, etc. seem cutting edge, but the principle is as old as the hills: word of mouth, sometimes abbreviated as WOM in marketing. Even in the heyday of the mass media, positive recommendations from neighbours, family and friends remained important to a company's success. Newspapers, magazines and television advertising were the first channel introducing a new product to consumers, but word-of-mouth turned out to play a decisive role in what matters most: consumer behaviour. Consumers shared experiences and thereby affected the behaviour of their fellow consumers. Today, more than ever, they do so through social media.
Consumers persuading consumers
Social media are the contemporary, more sophisticated and super-fast successor of old-fashioned word-of-mouth advertising. They are a catalyst. Social networks allow people to exchange views, share experiences, express their dissatisfaction, etc. more quickly than ever.
In addition, more and more consumers are opting for a "social search" over search engines such as Google to find information. They consciously do not search the entire internet, but approach their friends on Facebook or contacts on LinkedIn or Twitter. It speeds up the search and makes the result more reliable. The idea is that if X thinks it is good/nice/beautiful, we will probably think it is good/nice/beautiful too. There is also the option to ask questions and really discuss the product or service you need information about.
Consumers talk about all sorts of products (offline and online), from new detergents to new car models. And it is not just young people who are sharing their experiences about products and brands. Young and old, male or female: everyone does it. All these recommendations between consumers are worth gold.
We can illustrate this with an example: computer manufacturer Dell assumes that 25% of its customers choose their brand after it has been recommended by another user. The average purchase value per customer is about 210 dollars. Based on this amount, the value of every recommendation is estimated at 42 dollars. The more consumers Dell can convince to buy its products, the more money it makes.
However, the reverse is equally true: bad word-of-mouth advertising can have devastating effects. Particularly in this age of social media, a bad reputation does not take long to spread.
Social media in 2014
Perhaps Facebook will no longer exist in ten years' time, but it will most certainly have been replaced by something else. Social media are here to stay. It is therefore important for companies to build a good social media strategy. They can start by thinking about which channel they want to use for which content and objective. What do you need to take into account?
- Content (the message to the consumer) is still the key part, but the importance of segmentation is increasing. The audience is varied, so not all content and every channel is suitable for everyone. As a company, it is best to divide your target audience into sub-target groups. You can then choose specific content and a channel per sub-target group.
- Create real-time content: define a number of key moments in the year in advance and use these wisely. The World Cup, back to school, the summer holidays, etc. are all events that happen regularly and companies can respond to in a clever way. The trick is to find a good link between the key moment and your product. Be creative in this respect. If a school bag brand presents its content at the end of August, it will have to use an original approach to avoid coming across as predictable.
- Social media are predominantly a mobile story: most consumers are switching to smartphones and tablets. It is no coincidence that the four best-known social networks are also in the list of most popular mobile apps: Facebook, YouTube, Instagram and Twitter. In any case, your content (both on the website and on social media) will have to be mobile-friendly.
- The importance of customer care is only increasing. Consumers will now use social media more than ever to find information, ask questions and make comments.