How To Lose Your Company Billions Before You Knew It

by Benson Agoha | Business

Businesses lose money from time to time, but colossal sums lost through inefficiency. Not exactly. Many `losses' are attributable to good causes - those actions wrapped in a very good intention, without actually realising it.

At least, this was the argument of Andrew R. Thomas in an article for the Industry Week.

The Bestselling business author & associate professor of marketing and international business at the University of Akron, Ohio, United States of America.

"Over recent years, in order to enhance their product’s visibility within a clogged or confused channel and drive sales, many manufacturers have sought to increase the incentives offered “up stream”, he writes, adding "Historically, the belief is that by enticing channel partners with tangible financial rewards, attention by those same partners will be refocused on a specific product or line."

Despite the best intention behind these offers however, organisations find that they end up fretting away huge sums, they would later find could have been better spent on infrastructure or process improvement. Either the sums are wrongly paid out or are held along the chain.

This is called  misallocation of channel incentives and or loss in inventory value and it is not exclusive to the high-tech sector, but are also somewhat applicable to the industrial side.

What then, is the solution to stem the waste? Mr. Thomas admonishes to think before you begin that:

 

* Discount
* Declare anything obsolete, or
* Write it off

Because, despite management's good intentions, inefficiencies, such as those can cost an organisation billions before anyone knew it.

Read the full article [ here ].