Cost Management: Thoughts from Titan

1. The emphasis of cost management should be on rationalizing costs, not on cutting them indiscriminately. We need to question each major outflow and ask, “What returns will I get from this expenditure/ investment? Can the money be used more productively? Can the desired results be obtained at a lower cost?”

2. A greater focus on costs can be achieved by cross-functional teams (CFTs) – consisting of enthusiastic influencers. Such teams work best when the members are empowered and motivated. One way of accomplishing this is by factoring the results of cost management into participants’ Key Result Areas.

3. Demonstrate organisational commitment to cost management. For example, Titan’s Managing Director recently launched “WOW” (War on Waste) and conducts monthly progress reviews with CFTs. During the initial meetings, participants brainstormed and generated initiatives with potential to save costs. These are then discussed and the initiatives with maximum saving potential are selected. Later, responsibilities and timelines are assigned, and results are reviewed on a periodic basis.

4. Cost reduction is not ‘Finance’s baby’; it is an organisational priority. Nevertheless, Finance professionals must be involved in operations to be able to enhance cost consciousness. This can be achieved by focusing attention on costs, analyzing cost data and sharing relevant information with CFTs.

5. Accountants can also help focus attention on costs by interpreting them intelligently. Examples from Titan’s watch manufacturing plant in Hosur:
(a) The Machine Hour Rate of Precitramme equipment was high because it was not fully utilized. The fixed costs were spread over a lower number of hours. This pushed up the cost and retail price of Titan Edge (“the slimmest watch in the universe”), thus suppressing demand for the watch. After we adopted a ‘variable cost MHR’ for costing and pricing decisions, the watch became an overnight success.
(b) In-house vs outsourced decisions: Similarly, the Manufacturing team used to outsource certain watch components because the in-house manufacturing cost appeared higher. However, when one looked only at relevant costs, it made sense to utilize existing machinery to manufacture those components in-house. Our cash outflow was thus reduced.

6. Even ‘Overheads’ need to yield some benefit: Before Tanishq’s business picked up, diamond-setting capacity (a labour-intensive process) was surplus, classified as ‘employee cost’ or overheads. Hence, the cost of stone-setting was not factored into the price of jewellery. We were losing a big opportunity. Later, realizing our lapse, we rectified prices and also looked at cheaper mechanized processes. This improved our gross margins on studded jewellery significantly.

7. Constantly review your assets and, when times are good, clean up your Balance Sheet… Release cash by liquidating non-moving/ slow-moving items. Tanishq’s retail businesses achieved this by constantly reviewing its current assets. Slow-moving jewellery designs were redeployed to other Tanishq showrooms. We also had road shows, exhibitions and ‘Best Deals’ counters - wherein jewellery was sold at attractive discounts. Many of Tanishq’s promotions were a resounding success. When all else failed, we even melted jewellery!

8. Identify the core problem and explore every opportunity to solve it: Initially, Tanishq used to buy gold bullion - 80% of our material cost - on spot basis, resulting in outflow of scarce funds and exposure to price risk... In the early 2000s, Titan was a cash-strapped company. We gradually started buying gold on credit from foreign banks (lower interest, open price) and operating on the forward market. These mechanisms reduced the company’s net capital employed and interest cost, boosted Return on Capital Employed, and helped hedge the gold price risk.

9. Contrary to popular logic, paying creditors late is not good business: When Tanishq approached diamond merchants to negotiate prices, we realised that we had been short-sighted by delaying their payments. The suppliers’ interest cost (higher than ours) had been loaded onto their normal prices, based on our longest-delayed payment… By agreeing to pay suppliers in time, we got significantly lower purchase prices, which helped us to further improve our margins.

10. When Excise Duty was introduced on branded jewellery, it came as a big burden in a low-margin business. We were already at a disadvantage vis-à-vis the local jewelers. To mitigate this risk, Tanishq established a manufacturing unit in an excise free area (Uttaranchal).

11. Advertising: Some Marketing people lack business acumen but they do have an important role to perform. Tanishq faced a three-fold problem:
(a) The proportion of money spent on producing advertising was excessive, relative to mass media spends
(b) Product ranges were launched without proper cost benefit analyses and
(c) Service providers’ rates had not been adequately negotiated down.
We needed to encourage the Marketing department to spend on advertising that reaches the customer rather than on production costs.
We also used Public Relations and press releases judiciously; these are a lower-cost and more credible medium than advertising.

12. People drive businesses... But when salaries are undifferentiated, good performers have no motivation to give off their best and they will seek more remunerative opportunities. Titan faced such a situation that also resulted in a costly attrition problem. So, the company revamped salaries, paid rates closer to best-in-market and demanded superior performance. Titan also introduced a package wherein 30% of earnings (even higher for retail staff) was linked to performance. This improved morale, efficiency and output.

13. This was preceded by an attractive VRS package that eliminated ‘deadwood’/ redundant employees, who had been a drag on the organisation.

14. Challenge employees to justify their existence, to measure cost savings relative to their salaries. For instance, I once negotiated with a credit card ‘acquirer’ (who placed electronic data capturing machines at our stores) for a reduction of 0.10% (10 percentage points) in their commissions. This resulted in savings for Tanishq that were more than my annual earnings.

15. One radical rule introduced in Tanishq was that domestic air travel could only be on discounted tickets, which were available for nearly 50% less than normal prices. This is a small item, but it resulted in lowering costs and better planning of activities. The most significant benefit was that people became aware that such cost-saving opportunities exist.

16. For greater involvement across the organisation, invite ideas from employees and announce rewards for suggestions that are successfully implemented. When ideas and winners are recognized (intranet, public felicitation), it could motivate others to come forward.

Learn To Love by Ralph Marston

Learn to love challenge, and you'll fill your life with accomplishment.

Learn to love effort, and your skills will grow more valuable with each passing day.

Learn to love making a difference, and doors will quickly open for you wherever you go.

Learn to love giving freely of yourself, and you'll receive more fulfillment than you ever could imagine.

Learn to love being the authentic person you are, and everything you do will be infused with integrity.

Learn to love whatever work you're doing, and that work will bring abundant rewards.

Learn to love beauty for beauty's sake, and you'll discover a wealth of it in places no one else would even think to look.

Learn to love unconditionally, and there will be no limit to what your love can accomplish.

Learn to love life just because it is, and each day will be a grand new adventure.

Learn to love the moment you're in, and you'll find richness in every direction.

Learn to love the possibilities, and you'll make your way to whatever you seek.

Learn to love no matter what, and you'll discover what a miracle you truly are.

Courtesy: Mario Motha

When You Gotta Go, You Gotta Go

Obtaining an Employment visa to the UAE, which ought to have taken ‘three or four days’ (according to my sources in Dubai) ended up taking all of eight weeks… If that sounds like I’m grumbling - No, I’m not … I have found a new kind of peace that is helping me to ride out this situation.

The High Commission of India has taken twenty months now – and there is no end in sight. It’s amazing how much lack of responsibility and empathy exists in the corridors of bureaucracy there! As was frequently mentioned when the Indian Government refused to condemn the Myanmar junta: “India does not necessarily do what is morally right, but what is politically expedient.”

Back to my scene… Until Wednesday, I was twiddling my thumbs and waiting for the UAE visa, which – as I mentioned - took a long time coming. I used the opportunity to wrap up matters with the bloke I am writing about… He has checked all the facts and spellings and given me a carte blanche on creative work.

I have asked to be booked on the December 21st flight to Dubai – to rejoin the country’s community of migrant workers before Christmas.

Fed Up of Procedures? Go, DIE!

The process of renewing a Sri Lankan passport is simple and fast. This morning, we discovered exactly how fast - when Uncle and I decided to get the validity of his passport extended by five years. We visited the Department of Immigration and Emigration (DIE) in Punchi Borella.

The approach to the offices was like a bazaar, with colourful shops and restaurants in which to while away the waiting hours. We entered the building at 11 o’clock sharp.

Having obtained a form from Jetwing Travels and filled it up at home, there was no time lost. It was a simple matter of getting a signature, paying the appropriate fees (LKR 500 for a five-year extension) and waiting for the renewed travel document.

Signboards posted all over suggested that the passport would be ready “within two hours”. The dynamic gentleman behind the counter provided us with entertainment and kept us posted on the status.

Exactly an hour after we had entered the office, we were out – with Uncle’s passport having been renewed till April 2013! Considering that this office frequently handles more than 1,000 renewal requests on a single day, the experience was like a breath of fresh air.

Go, DIE!

...Madison County, Anybody...?

When I was younger, I used to get my literary kicks reading books by Alistair MacLean. His descriptions blended fact with fiction and captured my imagination. I still recall how, in Fear Is the Key, I think, he describes how a fugitive evades arrest by climbing a tree... He then explains the role of the protuberance above the eye and how it prevented the pursuers from seeing the fugitive.

…I lost my reading habit when I started working. I preferred spending my non-working hours with some interesting friends, I guess.

However, in 2000, I met with a car crash in which I almost lost my left arm. While recuperating in hospital, I started catching up with reading. I started with John Grisham and got hooked on his story-telling style. I was a die-hard Grisham fan, still am. The Firm was my first book followed in quick succession by A Time to Kill and Runaway Jury.

I prefer the Grisham books to the movies that they have been made into. Give me a good book any day… Books spur the imagination, while movies generally tend to be damp squibs, especially after you have read the book.

I generally like the books that have been recommended to me. One memorable book was Ladies Coupe by Anita Nair – for the insights the book gave me into the feminine psyche. One exception was Lolita, which bordered on soft pornography at times but made for heavy reading.

The Bridges of Madison County must qualify as one of the best books that I’ve ever read. The treatment of the theme is sensitive; it touched a chord somewhere deep down inside me. ‘…Madison County’ takes story telling to another level, drawing on the finest human emotions. Few authors can draw pictures with their words and portray characters as realistically as Robert James Waller does.

So, what’s the book about? I’m not telling, but I am willing to lend the book to anybody who appreciates a heart-warming love story. The only condition is that you lend it forward…

Just Motherhood, No Apple Pie

The young mother set foot on the path of life. “Is this the long way?” she asked.

And her guide said: “Yes, and the way is hard. And you will be old before you reach the end of it… But the end will be better than the beginning.”

But the young mother was happy and she would not believe that anything could be better than these years. So she played with her children, and gathered flowers for them along the way, and bathed them in the clear streams; and the sun shone on them, and the young mother cried, "Nothing will ever be lovelier than this."

Then the night came, and the storm, and the path was dark, and the children shook with fear and cold, and the mother drew them close and covered them with her mantle, and the children said, “Mother, we are not afraid, for you are near, and no harm can come.”

And the morning came, and there was a hill ahead, and the children climbed and grew weary, and the mother was weary. But at all times she said to the children, “A little patience and we are there.” So the children climbed, and when they reached the top they said, “Mother, we would not have done it without you.”

And the mother, when she lay down at night looked up at the stars and said, "This is a better day than the last, for my children have learned fortitude in the face of hardness. Yesterday I gave them courage. Today, I've given them strength."

And the next day came strange clouds which darkened the earth, clouds of war and hate and evil, and the children groped and stumbled, and the mother said: “Look up. Lift your eyes to the light. And the children looked and saw above the clouds an everlasting glory, and it guided them beyond the darkness. And that night the Mother said, "This is the best day of all, for I have shown my children God.”

And the days went on, and the weeks and the months and the years, and the mother grew old and she was little and bent. But her children were tall and strong, and walked with courage. And when the way was rough, they lifted her, for she was as light as a feather.

And at last they came to a hill, and beyond they could see a shining road and golden gates flung wide. And mother said, “I have reached the end of my journey. And now I know the end is better than the beginning, for my children can walk alone, and their children after them.”

And the children said, "You will always walk with us, Mother, even when you have gone through the gates.” And they stood and watched her as she went on alone, and the gates closed after her. And they said: "We cannot see her but she is with us still. A mother like ours is more than a memory. She is a living presence..."

Your mother is always with you… She's the whisper of the leaves as you walk down the street; she's the smell of bleach in your freshly laundered socks; she's the cool hand on your brow when you're not well.

Your mother lives inside your laughter. And she's crystallized in every teardrop. She's the place you came from, your first home; and she's the map you follow with every step you take. She's your first love and your first heartbreak, and nothing on earth can separate you. Not time, not space... not even death!

Courtesy: Charmaine Webster

"This Too Shall Pass"

When I first met Uncle at Veeranna Gardens more than twenty years ago, I spent a lot of time with him. I needed to… because I was courting one of his daughters and I had to impress him before I could even begin to impress her.

He told me how mischievous his daughter had been when she was younger – but that did not dissuade me.

Uncle and I spent a lot of time together, drinking endless cups of tea together as he regaled me with stories of British Army life. We discussed everything under the sun: politics, sport, religion and life in general. I recall with fondness his sense of humour and his happiness despite the adverse circumstances during those days.

What impressed me most about him was his sense of history. He seemed to know everything that had happened in the past. By all accounts, he had already lived a life that was full.

In his later years, after the stroke that he suffered, I remember Uncle for his resilience. Against all odds, he soldiered on and was there with a welcoming smile whenever we visited him.

We still have vivid memories of my sister’s wedding reception, at which Uncle and Aunty surprised us all by doing an impromptu dance. That picture will be embedded in our minds for a long time.

My father-in-law was a good man who did his best for his family. He is in a better place now and life goes on for the rest of us. Looking down at his wife and children - his pride and joy, he would want them to be strong. I think he would want them to be comforted by the words of this song:

“The Father knows the tears you cry before they fall
He feels your pain, His heart and yours are one
The Father knows that sorrow's heavy chains are strong
But with His strength, you'll overcome.

“This too shall pass
Like every night that's come before it
He'll never give you more than you can bear
This too shall pass
So in this thought be comforted
It's in His Hands
This too shall pass.”