Staying Profitable in Challenging Times

1. Optimise Supply Chain Management

Supply chain management involves streamlining processes, reducing waste, and improving sourcing, production, and distribution efficiency.

There’s no time like the present to look at ways to negotiate better prices and payment terms with your suppliers. You’d be surprised how understanding they can be. If high costs are negatively impacting your operations, meet with your suppliers to explore ways those costs can be brought down. Don’t be afraid to diversify that supplier base, either, to help with exploring your options.

Additionally, reducing lead times and improving inventory management can lower costs and improve your bottom line. If you manufacture a product, how long does it take your business to fulfil an order, from the start of production to the time it gets to your customers? How do you manage stock replenishment and just-in-time (JIT) strategies to boost your productivity and reduce the likelihood of tying up cash?

Take, for instance, a restaurant business. It can reduce costs by sourcing ingredients locally and in bulk from farmers and wholesalers, which in turn reduces its dependence on imported produce. By establishing long-term partnerships with suppliers and monitoring market prices, the restaurant can secure better deals and reduce the impact of inflation on their costs. Carefully monitoring stock replenishment to avoid sitting on too much inventory (which ties up cash and can lead to losses through spoilage or discount sales) or too little stock (which leads to loss in sales due to a lack of product availability), will help to keep costs low.

2. Reduce Energy Consumption

Energy costs can make up a significant portion of a business’s overhead expenses, so finding ways to conserve energy can lead to substantial cost savings. With the cost of diesel, petrol, and gas reaching new heights recently, it is essential for businesses to review and adjust their consumption patterns.

From converting to energy-efficient equipment, such as air conditioners, refrigerators, ovens, and

Dear readers,

It’s no secret that we are living in challenging times. According to the National Bureau of Statistics (NBS), Nigeria’s inflation rate rose to 29.9% in January 2024, with food inflation hitting 35.41%—up 11.1% since January 2023.

In the face of macroeconomic inflation, food businesses in Nigeria are facing significant challenges in managing their costs. Rising prices of raw materials, transportation, and energy have put a strain on profit margins, making it essential for businesses to find ways to lower costs without compromising on quality – although many have found this challenging.

As a business owner in the food space, I have had to review prices more frequently during this period than at any other point over the last eight years. Our most consistent long-time suppliers now review prices weekly or at the time of each supply.

How does one stay alive during times of inflation? What strategies can food businesses implement to survive these challenging times? Let’s explore three strategies you can implement to maintain profitability in a challenging economic environment, particularly in the small and medium enterprise (SME) space. lighting, to implementing practices such as turning off equipment when not in use and optimising heating and cooling systems, your business will be well on its way to cost savings.

Take for instance a catering business that is located in an area that receives more consistent power from the grid than another. If the rate of its electrical consumption is lower than the rate for gas, it might make more sense to invest in electronically powered equipment as opposed to gas-powered equipment. Similarly, if the power usage of your equipment is high but your store is typically not busy, it may make sense to trade said piece of equipment for one with a lower rate of power usage.

Training staff on energy-saving practices can also be a valuable practice for reducing energy consumption to lower operating costs.

3. Leverage Technology

Many SMEs still rely on manual processes to manage their operations. There’s this notion that automated processes and productivity software are only reserved for large corporations with extensive budgets. However, this shouldn’t be the case. Software exists for many different stages of a business’s lifecycle.

Technology can be a powerful tool for businesses looking to lower costs and improve efficiency. By investing in digital solutions such as inventory management systems, online ordering platforms, payroll processing, and automation tools, businesses can streamline operations, reduce human error, and cut labour costs. Technology can also help businesses analyse data, track performance, and make informed decisions to optimise their processes and reduce waste.

For example, a food delivery service can lower costs by implementing a mobile app or website for online orders, route optimisation software for delivery drivers, and a customer relationship management system for targeted marketing campaigns. By leveraging Technology, the delivery service can improve its operational efficiency, reduce costs, and enhance the customer experience, ultimately boosting sales.

Conclusion

There are many more ways to lower costs in a challenging macroeconomic environment, including using targeted cost-effective marketing strategies, portion control tactics and extensive staff training. It’s important to do your research and learn which strategies will work best for your type of food business. If you run a food business, let me know how you are navigating the present economic times. I’d love to hear from you!

If you have any food-related questions you would like me to answer or stories you would like shared in this column, please send them to food.column@biscuitboneblog.com.