Académique Documents
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South Asia
Region
Preamble and thanks
• Please note that I am a simple miller, and not a superstar
financier – or I would be sitting with you guys and not up
here!
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The 3 key Profit Indicators
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Other Indicators - Financial Ratios
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Results of milling Total flour sold : 210,233 MT
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There Are Only 2 Strategies To Increase
Profits
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Strategy # 1 – Increasing Sales Revenues
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Difficulties With Sales Growth
VALUE is a function of
Service Quality
Service + Quality +
Price!
Price
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Enhancing Value: Improving Customer Service
• Technical Assistance for the Customer
– Training
– Formula Development
• Back up Inventory
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Strategy # 2 “Reduce the Cost of Sales”
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Reducing Inventory Costs
• Inventory cost is a function of
– Plant capacity
– Grist formulation
– Purchase logistics
– Transportation Logistics
– Minimum and Maximum Inventory
– Inventory turnover period
– Interest Rate
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Some tools used to reduce Inventory Costing
$258
$256
$254
$252
$US/MT
$250
$248
$246
$244
$242
$240
January February March April May June July August September October November December
Average Monthly Price Average Annual Price Poly. (Average Monthly Price)
Simple Tools - Reducing the Cost of Sales
By Increasing Throughput
20 % decrease in
wheat ground
Tons per Day of Wheat
300
290
280
270
260
250
240
25% increase in
manufacturing costs
per ton
A 20% decrease in wheat ground results in a 25%
increase in the cost per ton of flour.
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Courtesy of Kendall McFall - KSU 20
An Expanded View of Throughput
wheat and
manufacturing Cash in
costs. from cash
sales
TIME
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Courtesy of Kendall McFall - KSU
Cash Gap Defined
INVENTORY
Days
PAYABLES RECEIVABLES
CASH GAP
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Managing The Cash Gap
The three ways to reduce the cash gap;
1. Increase the payables period.
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Analysis of a Cash Sale – at best (excluding weekends)
Day Activity
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Learning Points
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Simple Tools - Reducing the Cost of Sales
By Reducing Operational Expense
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Cost of (B1) Extraction
6 % decrease in
extraction
Extraction Percentage
75%
74%
73%
72%
71%
70%
69%
±9 % increase in
cost of product
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Courtesy of Kendall McFall - KSU 33
Effect of extraction on profit in our example mill;
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Revenues
Operating Data
CR DB
total flour 1 $ 91,280,888
Wheat stocks days 60 Days total flour 2 $ 22,820,222
total flour 3 $ 5,310,888
Fixed Costs $29.42 / Ton Flour Net Pretax profit $ 43,208,163 30.85%
Mill Production Costs Total: 15.4% of Average flour costs
Payroll 2.18%
Depreciation 2.51%
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Simple Tools - Reducing the Cost of Sales
By Reducing Operational Expense
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Some final words
• In milling so much of the profitability of the plant is
dependent on your operations staff. Please do not be
tempted to cut costs on your production staff!
5M
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A-Z of Enhanced Profitability – with some license on the English Language
A After-Sales Service
B Better Blending
Control, cut or cancel customer credit.
C Customize
Capacity Utilization
D Diminish Due Days
E Enhance Extraction
F Food Safety and Sanitation
G Gainful Gristing
H Hallmarked operation and products
I Innovation
J Just in time inventory, where possible
K Kilowatt Kontrol
L Lower Inventory wherever possible
M Motivated Millers
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A-Z of Enhanced Profitability - 2
N No corner cutting in new mills
O Optimize your flow for maximum extraction
Partner for profit with your team, suppliers and
P customers
Q Quick Quality Control – Quality Assurance better
R Rapid Response to customers
S Speedy Sales System, SRC, SDS/LA Seds.
TEAMWORK
T
Timely Deliveries to Customers
U US Wheat, of course!
V Variability Voids Value
W Wise wheat buying
X Xtract supplier credits where you can
Y Yakuza - to handle bad payers.
Z Zero Returns
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Thank You for your kind attention.
5/30/2018 42