Blog

From insights come answers.

A series of articles from the Insider Pro team, in which we examine relevant topics and examples of current challenges that we see in our work with a huge range of organisations, across many sectors.

The productivity puzzle - can you solve it in 2024?

Posted by Jeremy Bowley
 
The productivity puzzle in the UK is a longstanding challenge, one that seems resistant to both quick fixes and seismic shifts in economic policy. While technological advancements, government interventions, and investment strategies are often heralded as silver bullets, the real solution lies deeper within the fabric of how businesses operate and strategize.  We need productivity growth to make sure that we can grow as a nation and deal with the global inflation we have experienced in the last year.
 
 
The Current Productivity Landscape
Recent statistics paint a grim picture of UK productivity, lagging significantly behind other G7 nations. This is not a new problem, but it has been exacerbated by a confluence of recent geopolitical and economic upheavals—from Brexit and the COVID-19 pandemic to the ongoing effects of the War in Ukraine and the Middle East, and fluctuating interest rates. The broader economic and political climates have undeniably influenced the UK's productivity, creating an environment of uncertainty and reactive policymaking. For instance, Brexit alone has reshaped trade, labour markets, and regulatory frameworks, disrupting established business operations and supply chains.

Source: House of Commons Library. Productivity: Key Economic Indicators

Historical Context
However, the UK has faced and surmounted significant challenges before. The post-war rebuilding efforts, the Cold War, and the economic crises of the 1970s, including the Winter of Discontent, all presented substantial hurdles. This historical resilience suggests that while external factors do impact productivity, they are not insurmountable barriers.  There has however been a decline in productivity growth over the past 50 years, from an average 2.1% per annum between the years 1975 - 2006, to 0.2% between 2007 - 2019.  The pandemic years of course led to a further decline and we are struggling to turn this around even now in 2024.
 
The Limits of Conventional Solutions
In the face of these challenges, there is a rush to look to technology, increased investment, or changes in tax policy as panaceas. Indeed, technological innovation has the power to transform industries, making processes faster and more efficient. However, as seen in various sectors, technology alone cannot spur productivity if the workforce is not skilled enough to leverage these new tools effectively, or if organisational structures do not adapt to new operational paradigms.  The recent collapse in the e-passport system at our borders, led to a very unproductive few hours whilst border forces appeared powerless to manage efficiently without the technology.

Similarly, while government policies on investment incentives or tax relief can provide temporary boosts, they often fail to address underlying systemic issues. For example, significant investment has flowed into digital infrastructure and startup ecosystems, yet productivity growth remains tepid. The reason? These investments are not always aligned with a coherent strategy that addresses the specific needs of businesses or the economy at large.  The Government funded UK Productivity Commission set up by the National Institute for Economic and Social research has noted a North/South divide with London performing well but cities in the Midlands and North of England, suffering from poor communications and investment in skills.  Lagging sectors include manufacturing, Finance, Insurance and Communications technology.

What else could be drivers?  Ross Clark, writing in the Spectator last September had some good ideas.  Did the plentiful availability of Eastern European labour replace any incentive for investment in automation? Did the Equality Act of 2010 make it harder to recruit and manage the productivity performance of the workforce? Is the post-pandemic pattern of increased working from home, focus on work-life balance and mental health awareness, also contributing to our challenges in increasing productivity?

Rethinking Productivity Growth
This brings us to a crucial realization: the challenge of productivity is fundamentally a thinking issue. It's about how we design our business propositions and our work processes. Productivity growth is less about what tools we have and more about how we use them. It is about leadership vision, management practices, and organizational culture—factors that determine how effectively resources are utilized and how well employees are engaged.

True productivity enhancement comes from within the organization. It involves rethinking how tasks are allocated, how teams are structured, and how outcomes are measured. It requires a shift from traditional hierarchies towards more agile, collaborative work environments that empower employees and foster a culture of continuous improvement.

Conclusion
In conclusion, while external factors like economic policies, global crises, and technological changes influence productivity, the core of the issue lies in how businesses strategize and operate. The UK's productivity challenge is not just an economic puzzle to be solved by policymakers but a call to action for business leaders across the nation. The path to higher productivity is paved with smarter work designs and more innovative business models.
 
Some practical, fairly easy things you can do, right now:
  1. Reduce the number of meetings your team is involved in - evaluate the necessity of every meeting.
  2. Invest time in making sure everyone, at all levels, understands the 3 most important things the team will deliver, each quarter.
  3. Focus half a day a week on getting your team together in one room, to agree who is doing what and what they are not doing. Follow up each week to review activity.
  4. Use Whatsapp within small groups to communicate quickly - include urgent information, and lots of good news to help motivation and a sense of healthy competition.  
  5. Meanwhile, encourage people to speak to each other 1-2-1, to iron out issues and clarify who is doing what.

In this era of unprecedented change, the UK has the opportunity to redefine its productivity narrative, building on its historical resilience and forward-thinking leadership. The solution lies not in the hands of government alone but within the corridors of businesses across the country.

It is time for a strategic re-think of how we work and grow.

#productivity #efficiency #supplychainmanagement

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Topics: Disruptive Procurement, Procurement People, Best Practice, Supply Chain Management

Are you tracking the right commodities?

Posted by Ollie Hucks

In an ever-changing world that is shaped by global political, environmental, social and technological changes, being aware of how these changes affect your business can feel extremely daunting. Keeping on top of your day-to-day role and responsibilities at work may seem a never-ending task, and then, on top of this, ensuring your business is getting optimal value for money through the products and services that it procures, may not be at the top of your “to do” list.

The world today is exposed to major shifts, be that through environmental degradation fuelled by climate change, or by geopolitical conflicts sending shock waves throughout the world. These events often feel distant to your organisation, especially since the majority of the audience that this article will reach is living in a relatively sheltered and stable society. However, these events can have a significant impact on our society at a scale far beyond just localised impact.

At Insider Pro we are constantly exposed to examples where global dynamics are having an impact on specific sectors. To demonstrate this, we will examine the paper commodity prices and the implications that this has had on the paper packaging sector. To set the scene, this article is being written in early 2024, amidst a war between Russia and Ukraine and a few years after the Coronavirus pandemic. Paper is a commodity, trees have to be cut down, or items have to be recycled to produce the end product.

The very nature of this commodity means that it is exposed to impacts from the following:

Whilst not exhaustive, the aspects highlighted above give a flavour of just how many key elements drive a final commodity price, so understanding how each of these aspects impacts on a commodity price is something that we empower our clients to understand. Continuing with the example of paper pricing, we believe that a holistic understanding of the market and subsequent commodity prices is something that should be a common area of discussion between a packaging supplier and their customers. This could be through a contract term that tracks commodity prices, or just through general discussions aimed at understanding the likely direction of travel in any upcoming price reviews.

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Topics: Disruptive Procurement, Best Practice, Procurement Consultancy, Supply Chain Management

The importance of relationship building

Posted by Ollie Hucks

It’s no secret that speed is a fundamental characteristic of many successful businesses, be that fast food chains delivering food, or a service-based company delivering value and quick results through efficiencies or cost savings.  Speed is ultimately a result of delivering a product or service in an efficient and timely manner. 

Whilst there are almost endless things that can increase the speed of a business, this blog focuses on one of the key aspects that our team at Insider Pro takes time to commit to all of our customers, relationship building. By building strong relationships, we ultimately gain the trust of those individuals and this enables a far more successful and faster-paced working relationship.

A relationship is not formed with a company, but with those individuals who work for that company. All of these individuals have different personalities and ways of going about their work. Taking the time to understand how every individual operates is key to the success of a project. This could be as simple as understanding how best to communicate with an individual. Are they someone who prefers written communication to enable more time to digest the information? Or do they prefer a simple phone call or video call as a means to relay information? Tailoring your ways of working to deliver an optimal strategy for a customer, offers benefits to both parties.

Strong relationships with customers can be developed through the following key themes:

  • Clear Communication - Clear communication is vital for trust because it ensures customers understand what to expect, what our ways of working are, and any potential issues. When expectations are clear and met, trust naturally grows.

  • Shared Values - Having shared values creates a sense of alignment between us and our customers. This creates a foundation of mutual understanding and respect, which enables increased confidence in our decision-making and actions taken on our customers' behalf.

  • Shared Goals and Objectives - Mutual success is a common characteristic that enhances the relationship between Insider Pro and our customers. When both parties are working towards common goals, such as hitting specific milestones, this fosters collaboration and transparency.

  • Confidence to challenge each other constructively - The ability to challenge each other within a customer relationship is something that requires much consideration. Ensuring that the challenge is made in a way that is constructive and makes the customer feel empowered, is critical. Challenging a customer with accompanying data to support your challenge can prove particularly impactful. At Insider Pro we are sometimes met with an initial reluctance to change, but if challenged with data or evidence that clearly supports a change, this helps to empower our customers to act upon our proposals. This is always a two-way relationship, and having a customer that challenges our ways of thinking too, can enable a deeper dive into a specific area.

When the four themes discussed above are implemented within a structured framework, the results will speak for themselves. Great results are a product of great relationships, and our team at Insider Pro has experienced this first-hand!

Download 11 ways to reduce profit by 20%

 

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Topics: Disruptive Procurement, Procurement People, Procurement Consultancy, Our Team

Create a killer supply chain strategy to ensure resilience in 2024

Posted by Jeremy Bowley

Almost every route to higher revenues depends on a reliable and predictable supply chain. Whether you are the CEO, CFO or the Supply Chain Director, knowing that your supply chain weaknesses could suddenly derail this quarter’s numbers, is probably keeping you awake at night! Managing long-term risk, sustainability considerations and the financial impact of an inefficient supply chain can make the difference between business success or failure.  Conversely, there are plenty of revenue growth opportunities lurking in your supply chain or operations, hidden by poor data or a resistance to change.  Now is the time to expose them and reveal how to scale operations, improve deals with suppliers, leverage overhead and drive out inefficiencies.

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Topics: Disruptive Procurement, Supply Chain Management

Disinflation: Are we being duped? (And how to push back)

Posted by Jeremy Bowley


A salesperson using the term 'disinflation' should immediately put your bullshit filters on high.

This rather old-fashioned term dating from 1840 simply means "a reduction in the rate of inflation". For example; Inflation was 8% and now its 4% = disinflation.

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Topics: Disruptive Procurement

The UK Manufacturing Barometer - 6 top recommendations to action now

Posted by Jeremy Bowley

Insider Pro recently conducted some original research into the pre-pandemic manufacturing sector. We accessed Companies House data for the last 5 years pre-pandemic, for 1500 small and medium sized manufacturing businesses in the UK. The findings show the stark reality about cash and working capital trends, relevant to almost all sectors and organisations, small and large. The insight and learnings can be applied to any business and demonstrate the importance of mapping your supply chain and understanding your key dependencies. Aligning the team around key financial objectives, and making sure they understand how critical it is to manage cash and working capital well will help to build the enterprise value of a healthy, successful business.

Remember, almost every route to higher revenues depends on a reliable and predictable supply chain.

Plan! When forecasting sales, be sure your supply chain can deliver. Big companies have sales and operations planning functions. Smaller ones should bring in some outside help to make sure they are not underestimating the value they can generate from their supply chain.

Source as close to home as you can. Sourcing from low-cost countries may be cheaper but it is often not enough to overcome supply-chain disadvantages, Cost is important but it is not everything.

Make versus Buy – don’t make a component you can source cheaply and reliably. Focus on where you can add value and review service contracts regularly so you are sure you are getting the best price.

Balance where the cash is in the supply chain – don’t pay for goods you’ve not yet received and understand whether your supplier can easily afford to extend credit or not. If a supplier’s cost of capital is higher than yours, you will pay an unnecessary premium for additional credit terms.

Understand your customer. If the cost of capital is very high, the customer will be more motivated to attempt to delay payment.

In conclusion, make sure you pay attention to all these metrics and dials on your metaphorical dashboard. If everything is balanced, revenues will grow but so will profits and cash flow.

Read more about how we came to these conclusions in the UK Manufacturing Barometer – download now at www.insiderpro.co.uk

 

Insider Pro Manufacturing Barometer 2021

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Topics: Disruptive Procurement, Supply Chain Management, Enterprise Value, Working capital improvement, Cash Flow

The Enterprise Value equation – driving value through the supply chain

Posted by Jeremy Bowley

Companies aspire to grow for many reasons. To survive, for their employees, for future sale valuation, for an IPO, the incentives are many and varied.

Definitions also vary but at Insider Pro we define Enterprise Value as EBITDA x the MULTIPLE applied.

There are 3 main levers to focus attention on; 

  • increase revenues,
  • reduce costs, and
  • improve the multiple to be applied.

Most importantly, you need clarity around how your supply chain and operations will impact these metrics and ultimately your enterprise value.

Revenues – can you set higher prices, increase volumes, improve throughput optimisation and availability, alter your product mix to impact sales?

Costs – through disruptive procurement and working with strategic suppliers, can you reduce cost per X, lower volumes, how can you do things differently and re-engineer the supply chain to reduce the cost of goods and costs of running the business?

Multiple – can you demonstrate consistent execution and stability, and show clear risk management activity? Can you overcome barriers to entry and predict how your competitors will behave? All these will push up the multiple investors are willing to pay.

Why does all this matter? Because if your supply chain and operations teams do not understand the impact of their decisions and actions, they can seriously affect your overall enterprise value. Managing the supply chain is hard and it is critical that all teams, whether Sales, Operations or Procurement are aligned in their understanding and around the company objectives for short, medium and long-term success.

For more real examples of how to impact your supply chain and your enterprise value, download the UK Manufacturing Barometer from www.insiderpro.co.uk now and help to improve understanding of these key metrics.

 

Insider Pro Manufacturing Barometer 2021

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Topics: Disruptive Procurement, Supply Chain Management, Enterprise Value, Working capital improvement, Cash Flow

Timely & relevant article from Manufacturing and Engineering Magazine

Posted by Jeremy Bowley

There are two routes to growing the value of your business. You can use brute force – just keep cranking up production, run your sales force hot and hope the rest follows, or you can take steps to increase the multiple of profits the business will attract when you come to sell. It’s pretty hard to rely on growth alone. Insider Pro’s Manufacturing Barometer shows that UK manufacturers managed to increase sales by a fifth between 2015 and 2020 before the pandemic – that’s great. But unfortunately, profits haven’t budged. An extra £38bn on the top line hasn’t delivered any additional operating profit. Companies, especially smaller manufacturers, endured a steady margin squeeze that left them less resilient when Covid-19 struck. Higher revenues alone are not enough to build enterprise value.

Of course, the last twelve months have caused a painful hit to industry. Manufacturing has certainly fared better than some parts of the economy like high street retail and hospitality, but even so sales are down around 10% across a broad spread of manufacturing sectors, while profits have approximately halved. Manufacturers are also having to face the messy complications caused by Brexit.

Huge upheaval like this feels awful but it also provides a golden opportunity for a rethink. If you can work both routes at the same time – growing the business and expanding the multiple – then you can really transform the value of your company. There are lots of dials on your metaphorical dashboard that can help you drive higher sales and do so profitably by controlling your costs. If you can grow your profitability 10% but you don’t increase your multiple, then your business is worth 10% more. Not bad. But if you can also get the multiple of profits a buyer would be prepared to pay from 5x EBITDA (operating profit with depreciation added back) to 6x, you’ve just added another 20% right there. Suddenly your business is worth a third more!

Getting your supply chain right goes to the very heart of the issue. These months of crisis have exposed some structural weaknesses in how manufacturers manage their supply chains. A moment of such dislocation makes it easier to reform long-established practices that no longer serve the business well. In any recovery, manufacturers all need to start thinking like growth companies as they come off the back off a ‘low volumes’ year. Scaling up always means stress-testing your supply chain, rather than simply expecting it to grow with you. If your suppliers don’t have capacity, don’t blame them if they can’t keep up, so keep them close and keep an eye on them. Minor problems can quickly balloon as you get bigger.

For example, through the pandemic we have seen how shipping costs can spiral unexpectedly and the availability of product can disappear altogether – supply chains can simply break. Accidents happen too. Indeed, the hullabaloo in the Suez Canal completely severed Asian supply routes in March this year creating all sorts of ripples that took weeks to smooth out. Put simply, a cheap listing price for a component or raw material is irrelevant if getting it to your factory gets pricier, or if you simply can’t get it there at all.

Cash is one of the biggest obstacles for growth, so companies must prioritise cash generation over profit. At Insider Pro we help businesses embed a cash-first culture from boardroom to shop floor. Just adding cash monitoring to weekly reporting can make a surprising difference. Don’t just buffer your business with loads of inventory if you are anxious about disruption to supplies or fulfilment, or because you lack visibility about demand for your products. That’s a cash black hole, right there.

Better forecasting certainly helps, but crucially sourcing supplies closer to home makes a huge difference. For example, China’s low prices are tempting but if you are growing your sales rapidly, such a long supply chain makes the business less resilient and will tie up mountains of working capital. So rather than only aiming for the lowest unit price for a component, the real win may come from sourcing products closer to home and the payoff is more rapid sales growth with less environmental impact and a lower cash-funding requirement.

It might cost a little bit more, but a simpler, shorter supply chain will help you maximise product availability and that means you can take market share from less agile competitors. Show the value of being close to your customer if your competitors are on the other side of the world. That’s a valuable barrier to entry against newcomers.

Similarly, when you innovate you are thinking about adding to the growth side of the enterprise value equation. That’s great. But make sure your engineers have thought about where they will source components. If there is only one supplier and that supplier is far away, you’ve just introduced a major vulnerability into your business and that knocks a chunk off the multiple side of the equation.

Supply chains have consistently dominated the headlines during the last few months. Post-Brexit food shortages in Northern Ireland, pandemic panic-buying, vaccine programmes, disruption of global shipping – the list goes on. Weak supply chains mean risk.

Potential investors pay less for vulnerable businesses. They pay more for those that can execute consistently, are more resilient than their competitors and generate lots of cash in the process. In our experience finance directors underestimate by half the efficiencies they can extract. That’s a big lever to pull in terms of increasing your enterprise value and is especially important in limiting the amount of cash burnt each month.

Over the next couple of years, we are going to see a dramatic rebound in manufacturing that will push sales and profits higher. If companies reengineer their supply chains and source closer to home as part of the recovery then positive multiplier effects can reverberate around the British economy too. Growing sales, expanding margins, building resilience, and doing all this with the most efficient use of scarce capital possible, are the perennial objectives of businesses everywhere that wish to grow their enterprise value. You don’t have to choose route A or route B. You can travel both roads to a higher valuation for your business.

Download the UK Manufacturing Barometer for more insight, using the link below.

 

Insider Pro Manufacturing Barometer 2021

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Topics: Disruptive Procurement, Supply Chain Management, Enterprise Value, Working capital improvement, Cash Flow

Transform your supply chain to grow enterprise value

Posted by Jeremy Bowley

Almost every route to higher revenues depends on a reliable and predictable supply chain. Whether you are the CEO, CFO or the Supply Chain Director, knowing that your supply chain weaknesses could suddenly derail this quarter’s numbers, is probably keeping you awake at night! If 2020/21 has taught us anything it is that managing long term risk, sustainability considerations and the financial impact of an inefficient supply chain, can make the difference between enterprise success and failure.

Many businesses spend up to 70% of the value of their revenue with external third-party suppliers.   We see many companies that have overlooked the huge benefits they could achieve by re-assessing and re-mapping their supply chain. Most CFOs underestimate the value by up to 50%.

Although lower pricing from China is attractive, if you are growing your sales rapidly, such a long supply chain makes the business less resilient and ties up mountains of working capital which would be better invested in acquiring new customers. If your business model relies on debt funding, then reducing the environmental impact of inbound deliveries by repatriating supply closer to home will help you attract the growing legion of ESG-focused investors. Your supply chain needs a strategic approach; balancing cash, investability and opportunity cost. All of which grow the enterprise value of your business.

Run your supply chain ahead of where you want to be rather than where you are now. Can your suppliers support your production or sales forecasts? Call your key suppliers and ask them what business they expect to do with you over the next month/quarter/year. You might be running your own inventory effectively or managing payment terms superbly, but strains elsewhere in the supply chain will usually end up costing you one way or another. Not solving these problems is like driving a car with the handbrake on and too much luggage in the boot.

Have clarity about what can be done to improve the business. Set clear objectives and organise the supply chain around them. Be able to predict what your competitors or suppliers will do if you take a certain decision. Build barriers to entry wherever possible.

Building enterprise value depends on fine-tuning all the dials on your metaphorical dashboard. Doing this right doesn’t just add incremental value but is truly transformative.

 For some good examples download the UK Manufacturing Barometer now from www.insiderpro.co.uk

 

Insider Pro Manufacturing Barometer 2021

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Topics: Disruptive Procurement, Supply Chain Management, Enterprise Value, Working capital improvement, Cash Flow

Are you on top of your data? Insight, intelligence and visibility

Posted by Jeremy Bowley

Most companies I meet have problems with data. Why? There is often no one person sponsoring the need to get on top of the issue, no one making it a central focus area and helping the business to believe it can be sorted. Culturally, it’s about ownership and accountability but someone needs to lead the revolution. The problems are rooted in:

  • legacy ERP systems that do not talk to each other
  • poor processes meaning that the most relevant data is not captured accurately, leading to quality issues
  • outdated technology meaning they do not have access to latest automation or visualisation tools

Why does it matter? Poor data management often results in poor alignment across teams, different understandings, opinions not based on facts, no single version of the truth, no evidence-based decision making. Companies underestimate the cost of poor data management in terms of lost opportunities, re-work, brand and regulatory damage. And moreover, forecasting and predicting future requirements become very difficult without a strong, reliable, source of data.

What can you do about it?

  • Most importantly, decide what insights you need to run the business and to meet your strategic and day-to-day decisions.
  • Improve Financial literacy of your S & OP teams – help them to see the impact that their activities on the overall company performance. Make sure that everything they do is linked to the overall Company financial objectives and that they have the data to see the effect of their activities.
  • Support investment in new, accessible analytical tools as well as training and development which will help to “democratize” data for all. Simplify self-serve analytics.

Insider Pro’s recent research in the UK Manufacturing Barometer revealed interesting trends by gathering data on 1500 companies over the past 5 years from Companies House. Simple visualisation tools enabled us to see the wood from the trees and understand the trends and patterns that had been affecting the sector. Managing working capital is at the heart of business success and you can only succeed if you have the data to see what is happening.

For some good examples of supply chain data revealed the challenges, download the UK Manufacturing Barometer from www.insiderpro.co.uk by using the link below.

 

Insider Pro Manufacturing Barometer 2021

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Topics: Disruptive Procurement, Enterprise Value, Working capital improvement, Cash Flow