A business friend gave me a book “The 80:20 Manager“, I didn’t read it for 6 months thinking it is just another self-help book that is good to read but tends to be forgotten after a week. But this was something that was inline with my established beliefs and it was not hard to follow. It rather, gave me confidence to implement what I believed.

In essence, book is about Pareto Principle applied to management. 20% of selected inputs leads to 80% of outputs. For business, 20% of customers can give 80% business and profits.

Since starting 3 years back, business has been journeying in various ways. Here are a few ways in which we got back our focus in the last 3 months.

Other edible oils trading
With coconut oil getting dearer, consumers were shifting from coconut oil to other edible oils. So, our business within the existing market was getting reduced. Demand was shifting from bigger SKUs like 1-litre pouches to, say, 500, 500-ml pouches. So, we started trading in other edible oils like Refined Palmolein Oil, Refined Sunflower Oil and Lamp Oil. With this, we could

• Provide our existing Coconut Oil customers, i.e. Retailers, with a full range of edible oils so that they can source more from a reliable vendor
• Get more income from the same customer at the same distribution expense and more sales turnover
• Use vehicle load fully, keep a better tab of fluctuations in other edible oils

But with it,

1.The focus started shifting away from our core business of manufacturing and marketing coconut oil.
2.Adequate service could not be given to our customers because of supply disruptions from our vendors.
3.Lot of works were to be done in transportation, unloading, loading, accounting, leakage processing, payment, selling in credit, managing working capital etc.

What seems like busy work and turnover was actually not contributing towards building Cocoguru brand or increasing bottom-line. So, we just stopped them altogether. That provided a lot of relief and we closed Sullia godown, released a rented vehicle and saved on a few resources.

Distribution
Wholesalers/Retailers were given a supply of coconut oil through our Sales Van. For this, we had to arm the vehicle with a driver and salesman. To account for those transactions, an accountant was required, and an officer was required to manage the delivery team. These are unrewarding work for a manufacturer but had to be done initially to sell our products. The cost was very high, 40% of our company expenditure was going towards sales and distribution. We had five delivery vans to supply all over Dakshina Kannada district.

I always had a dream to stop doing line-sales ourselves and get distributors to do it for us. However, distributors will take it up only when the brand is popular, and they are confident about selling it. The margins should also be sufficient to sustain their business by only selling coconut oil.

The tough decision of increasing our selling price has made it possible and very soon. We left out less productive salespeople, made enthusiastic salespeople as distributors, and gave away our existing vehicles to them at a reasonable price. With this, we could leave out about 12 people from our payroll, stop renting two vehicles, sell 2 of our own vehicles, and save the work of 2 accountants, a Logistics officer and Top Management. Expenses are very low and under control, and the selling price is predictable. When the distributors have to sell to earn their living, their performance is even better, and sales improve.

Leave Customers
With the eagerness to sell more and acquire as many customers as possible, we tend to serve any customer at any cost. But some customers are not worth our attention. Some need discounts, credit, or pampering, are difficult to supply, need a different quality, put restrictions on us, and still never get satisfied. Bolding and leaving them out is a win-win situation for both the customer and us. We can cater to profitable customers better; others can get their desired service from a competitor. For every customer lost, there are a couple of them to be gained.

Piece Work/Contract Labour
If we believe in Theory X, labourers are lazy, they tend to take away maximum wages for minimum work. While employers looks to get maximum work for minimum wages. Mostly the labourers have their say. It is cumbersome for supervisors to get maximum work with quality from them always.
So, to align their work output with their income, we have made a piece work system, where they get paid only for the units of work done and not on attendance. This is system is fair for all workers, they are not paid on seniority, experience or any prejudice, only on output they produce.
In any annual appraisal discussion their only focus is on the revised salary, without any regard to their past performance or skills to be developed, responsibility to be assumed in future. For such people giving instant reward is the way to go.

After doing this their performance have increased multiple folds. Example, for a 5 member team segregating 6 tons of copra a day was very difficult, now 3 members are doing it very comfortably and with better quality.
For bulk quantity loading and unloading, in house labourers weren’t willing to do, so external labours had to be called. Now for 10 paise per kg, they are willing to do.
In packing section, where 9 people couldn’t finish all packing jobs, now after leaving 3 people, the 6 people are having enough time to go for other jobs.

Overall, we could leave about eight fewer performing people, and better-performing people are getting handsomely paid. Form 30 labourers, we have brought down the count to about 20; work is getting done faster and better, and existing labourers are fully engaged and satisfied.

With all these steps, the amount of administration work has come down drastically. Again, a couple of people who have become redundant were left out. With this lean an organization, it is possible to even double the business without having to add any headcount. Any decline in business can also be managed with minimum overheads. With operations focused and streamlined, the way forward is to grow sales through advertising and appointing distributors to cover more areas. From accumulating losses for 2 years and not knowing the way forward, this is a very pleasant situation to be in.