Efficiencies in delivery

Efficiencies in delivery are key for any business. Have you ever thought about your processes in this regard? Find following 10 tips for small businesses wanting to start out in online e-commerce, from a factory, distribution and automation perspective:

1. Turnaround time is very important. Focus on the products that differentiate the business, and make sure they can be dispatched quickly. If this means holding stock, make sure to plan the stockholding carefully and negotiate quick turnaround times from key suppliers.

2. A committed relationship with a primary courier is vital. Efficiencies only come with volume, so rather than distributing deliveries across multiple couriers, negotiate decreasing rates with as few couriers as possible.

3. Don’t be afraid of tackling process challenges with your own intuition. It’s likely that you understand the subtleties better than others would.

4. Implement a system which is flexible on physical layout. Avoid storing items by brand/type, rather relying on maintaining some sort of coded location lookup. This allows easy expansion/contraction when product ranges change.

Delivery a key feature of e-commerce. (Photo source: Wikipedia)

5. Be aware that any technical solution to a physical problem must be kept synchronised or it will lead to pain and gnashing of teeth. This can only be achieved by rigorous discipline on the part of all people using it.

6. Aim to have processes in place which can scale in parallel. This implies formalising and documenting key procedures like picking, packing and restocking so that processes can quickly be adapted by extra people to handle peak volumes.

7. As staffing increases, make sure to have double-check mechanisms in place. For example, orders need to be cross-checked before dispatching to avoid short-shipping items in an order and incurring costs to make it right.

8. Institute fulfillment disciplines and stick to them rigidly. For example, aim to dispatch all fulfillable orders by a cut-off-time each day to avoid dangerous backlogs developing.

9. Automating processes obviously leads to efficiencies, but there needs to be readily available skills to solve technical problems as they arise. Make sure to have skilled help in-house or nearby.

10. Above all else, hire very carefully. Processes and systems will live beautifully or die painfully on the quality of the people operating and maintaining them.

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High failure rate of new SMMEs

New SMMEs have a high failure rate and the Department of Small Business Development claims it is working towards reversing this rate. According to research the failure rate for new businesses is almost 80 percent in the first year, and only about half of those who survive remain in business for the next five years.

The department wants to create a conducive environment for the development and growth of small businesses and cooperatives through the provision of enhanced financial and non-financial support services, competitiveness, market access, promotion of entrepreneurship, advancing localisation and leveraging on public and private procurement.

Lindiwe Zulu, minister of small business development (Photo: Citypress)

Minister Zulu said that the department would lead an integrated approach on the promotion and development of small businesses and cooperatives through a focus on the economic and legislative drivers that would stimulate entrepreneurship to contribute to radical economic transformation.

MTBPS: higher taxes from 2015

The MTBPS (Medium Term Budget Policy Statement) stresses fiscal consolidation is necessary to put public finances on a sustainable footing. There will be a greater focus on long-term expenditure planning and alignment with government’s policy objectives. Expenditure growth will, according to Minister Nene, not compromise frontline services and social spending.

The end of stimulating and expanding SA’s budget cycle may have short-term consequences for the economy, but it is realistic and can build a platform for investment-led growth in the future.

Finance Minister Nhlanhla Nene (source: fin24)

The highlights are:

• Tax: South Africans will pay more taxes from next year. The detailed proposals will be outlined in next February’s budget, but the mini budget mentions that policy and administrative reforms will raise at least R12bn in 2015/16, R15bn in 2016/17 and R17bn in 2017/18.

• Reduced spending: Government will lower its 2014 budget expenditure ceiling by R25bn over the next two years. Reductions will focus on non-essential goods and services – for example, planned expenditure on travel and subsistence across national departments has been cut by R555m and on consultants R370m. Together with tax measures, it will improve the fiscal position by R22bn in 2015/16 and R30bn in 2016/17.

• National government’s personnel budgets will be frozen, and funding for vacancies will be reviewed.

• The largest spending allocations over the three-year spending period ahead will be on basic education and skills development (15%; R833bn), health (11%; R500bn) and social protection (11%; just under R500bn).

• The budget deficit will be reduced in line with targets in the 2014 Budget (3.6% in 2015/16, 2.6% in 2016/17 and 2.5% in 2017/18).

• Eskom will receive a direct allocation of R25bn from the sale of non-strategic state assets. This will not carry any direct costs to taxpayers, and any help to state-owned companies will be budget-deficit neutral. Any capitalisation will not widen the budget deficit.

• National government’s net debt will stabilise at 45.9% of GDP in 2017/18 (R2.4trn), declining thereafter. Debt service costs will grow at 9.3% per year – faster than the budget as a whole – reaching about R150bn in 2017/18.

• Economic growth is projected at 1.4% this year (in line with other forecasts), 2.5% next year and 2.8% in 2016, and inflation at around 6%. Food inflation is expected to recede from current levels thanks to buoyant global and domestic production. SA’s growth figures are lower than both those forecast by the International Monetary Fund for Africa (between 5% and 6%) and emerging markets in general (between 4.4% and 5.2%).

• Over the medium term there will be increased exploration for on- and offshore oil and gas, by developing an exploratory drilling plan and legislation.

• The focus on development of cities will be through a new approach to local government infrastructure financing.

• African Bank: Government has provided a R7bn backstop to the SA Reserve Bank (Sarb) in line with international practice, but it is unlikely that Sarb will draw on this facility.

• The government’s total wage bill will be R440bn this year, expected to rise to R470bn next year.

•  About R500bn of social protection (pensions and social grants) will be paid out over the three-year period of the MTBPS

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No debt – no credit?

One of the difficulties with credit is that it’s hard to get it until you’ve had it. For any bank to lend you large sums of money, it needs to see that you’ve been responsible with credit before. This does sound a bit impossible, but usually what it means is that in order to qualify for a big loan such as car or home finance, you’ll need to have shown that you can handle smaller sums. This could be in the form of store credit, credit cards or personal loans.

But what if you’ve been highly responsible and never gotten yourself into any sort of debt at all? Will banks still be able to judge your credit-worthiness?

A credit rating is a rating or a score reflecting how you as an individual are handling the responsibility of credit. Credit ratings are reflective of past payment behaviour. If you have not taken up any credit in the past, there will not be any information available to allow companies to determine a credit score for you. So banks won’t be able to rate you if they have nothing to go on.

In such an instance the bank would have to approach the granting of the loan on a fairly conservative basis and may require the customer to put down a deposit and the bank may also not be prepared to grant a home loan unless the customer has an account with that bank into which their salary is being deposited so that the bank has full visibility of transactional behaviour.

Your primary bank is normally in the privileged situation where they have behavioural information on your cheque and savings accounts which can tell them a lot on how you are handling some of your financial responsibilities. In the case where you do not have a relationship with the bank there would be an individual assessment on a case by case basis as to whether or not the bank is prepared to enter into a credit relationship with you.

Credit cards for scoring (Photo credit: Wikipedia)

Nevertheless, having a credit rating will certainly make it more likely that you will have an application for a home loan approved. It will also allow you to apply to banks other than your own. So it may be a good idea to build up some sort of track record, even if only with very small credit limits. These could be on a credit card, an overdraft or preferably both. Credit cards are actually the best way of earning a score, because just having one means that you will have a credit rating on the bureaux, even if you never use it. You will however earn a better score if you do make purchases on it and pay off the balance every month.

The longer the period is that the client has demonstrated that they can responsibly use credit the better their credit score will be. Having a credit card for example and not using the limit demonstrates to some extent to the bank that the client can manage their affairs prudently.

Importantly, though, there are other ways to build up a credit score. Cell phone contracts and paying rent, for instance, are reported to credit bureaux, so if you have a contract that you pay every month that will reflect as a positive on your score.

But what you certainly shouldn’t do if you’re thinking of applying for a home loan is to rush out and take all sorts of new credit in an attempt to get a score. Keep in mind that it does not look good if you have opened up a lot of credit facilities within a short period of time. This might indicate that you are experiencing some form of distress and may also negatively impact your credit rating.

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