Tag: logistics

Part 3: Why Businesses Fail

The business section of the newspaper seems to carry daily notices of failing businesses. Despite tighter requirements, bankruptcies are up. Businesses are succumbing to a combination of the economic slowdown, tighter credit and high fuel costs. Today we continue our series on why businesses fail (see our July 14 and 16 posts).

Most business fail for a combination of reasons, including:

  • Poor collection practices. It’s not enough to make the sale; you have to collect the money. While this should be obvious, many businesses fail to initiate or maintain good collection practices. Just like sales, collections should be a daily task. The biggest mistake many businessmen make is to allow late accounts to go too long before starting the collection process. Many customers will take advantage of the traditional 30-, 60-,  90-day payment schedule. Try aging your accounts receivable by the 15th and month end or even weekly. The sooner you start collections, the better the chance of collecting and the faster your money turns over.
  • Lack of experience in basic business know-how. On-the-job experience is an effective teacher, but the lessons can be costly. Develop an ability to learn from the experiences of others. Education, keeping up with industry journals and publications and attending professional conferences and seminars can offset a lack of personal experience. Meeting with other businessmen through professional organizations or social/community service groups provides a valuable opportunity to discuss common business problems and issues.
  • Poor location. For retail businesses that depend upon walk-in or drive-by trade, poor location can be disastrous. Manufacturing and industrial concerns require easy access to freeways and other transportation routes for both delivery of raw materials and shipment of finished product. Convenience and visibility are key. 

    To be continued

Part 5: Why Businesses Fail

At DJ Products we believe in the value of learning from experience — ours, our customers and the business community at large. It’s not necessary to reinvent the wheel. The savvy businessman will learn from the experiences of others and turn that knowledge to his advantage.

With that in mind, we’ve been talking about why businesses fail (see our posts starting July 14). The economy is down, credit is tight and fuel is up. Times are tough and many businesses are struggling to survive. Taking a look at the most common reasons businesses fail may help us all to avoid the same pitfalls.

Continuing our list of why businesses fail:

  • Unwarranted personal expenses. The news is fully of greedy or sloppy businessmen (and politicians) who now find themselves fired or even jailed for using their business as a personal expense account. Hard-working businessmen deserve to profit from their labors, but they also have a responsibility to set an example of fiscal responsibility for their employees and create a profit for their shareholders. You need to be profitable to earn the perks. Set clear policies for charging expenses to the company that follow IRS guidelines and regulations. Set an example for employees and monitor expenses regularly to curb abuse.
  • Unplanned expansion. Entrepreneurs eager to capitalize on every opportunity may be tempted to expand quickly. However, unplanned expansion is the quickest way to run out of cash fast. Expanding a business should involve careful, long-term planning. Take sufficient time for market analysis to ensure that expansion is warranted and can continue to be supported by future sales. Develop an implementation schedule and don’t cut corners on the implementation process. Proper implementation is pivotal to the success of an expansion plan. A good plan, poorly implemented, will turn out to be a poor plan.

 To be continued

Logistics Industry Down But Not Out

Considering the state of the economy, it’s not unexpected that the logistics industry is suffering along with everyone else. According to the recently released Global Contract Logistics 2009 report published by Transport Intelligence, the global contract logistics market grew at a rate of 5% in 2008, half the 10% growth experienced in each of the past few years. Of greatest concern was the noticeable drop in volume during the fourth quarter, generally considered the industry’s peak season.

“This downturn has been felt well into 2009, although there are signs that the fall in volumes may well have bottomed out by the end of the first quarter, the report suggests,” logistics industry analyst Ken Hurst noted in today’s posting on Works Management online.

Increasing, global reach provides the greatest opportunity for future success in the logistics industry, particularly when U.S. markets go stale. Developing markets in Latin America, Central and Eastern Europe and the Asian Pacific region offer the most opportunity for future growth, according to the Ti report. While the China market has cooled recently, Hurst expects it to rebound, saying, “… with GDP growth still in the high single digits, and a $585 billion stimulus package taking effect, underlying economic activity will continue to drive its [China’s] logistics sector.”

The report predicts five more years of volatile swings in the logistics industry worldwide with significant recovery not predicted until 2011. Rebuilding is expected to be agonizingly slow. According to Hurst’s post, “Ti believes that the market will grow at a compound annual rate of 2.4% between 2009 and 2012.” Stabilization of the industry will depend on the speed with which global sales increase. Until consumer confidence returns and drives up demand for goods, manufacturers and retailers will continue to keep supply costs lean. Because of its position at the tail end of the supply chain, the logistics industry may be one of the final economic sectors to achieve recovery. While contractual relationships will protect some logistics companies from the worst market volatility, “logistics providers will have to work hard at increasing their value proposition to clients if they are to avoid the worst excesses of the recession,” John Manners-Bell, Ti CEO told Hurst.