Category Archives: General Business

Supply Chain and Concentration Risks

Concentration risks can hurt your supply chain

Broken chain link held together by paper clipIf a company relies on a customer or supplier for 10 percent or more of its revenue or materials, or if several customers or suppliers are located in the same geographic region, it creates a concentration risk for your business. Because if or when a key customer or supplier experiences turmoil, the repercussions travel up or down the supply chain and can quickly and negatively impact your business.

To protect yourself, it’s important to look for concentration risks as you monitor your financials and engage in strategic planning. Remember to evaluate not only your own success and stability, but also concentration risks that are a threat to your customers and suppliers.

Two types of concentration risks
Businesses tend to experience two main types of concentration risks:

  1. Product-related. If your company’s most profitable product line depends on a few key customers, you’re essentially at their mercy. Key customers that unexpectedly cut budgets or switch to a competitor could significantly lower revenues.Similarly, if a major supplier suddenly increases prices or becomes lax in quality control, it could cause your profits to plummet. This is especially problematic if your number of alternative suppliers is limited.
  2. Geographic. When gauging geographic risks, assess whether a large number of your customers or suppliers are located in one geographic region. Operating near supply chain partners offers advantages such as lower transportation costs and faster delivery. Conversely, overseas locales may enable you to cut labor and raw materials expenses.

But there are also potential risks associated with close geographic proximity of customers or suppliers. Local weather conditions, tax rate hikes and regulatory changes can have a significant impact. And these threats increase substantially when dealing with global partners, which may also present risks in the form of geopolitical uncertainty and exchange rate volatility.

Financially feasible
Your supply chain is much like your cash flow: When it’s strong, stable and uninterrupted, you’re probably in pretty good shape. We can help you assess your concentration risks and find financially feasible solutions to minimize them. We work with businesses of all sizes and in a wide range of industries. Contact Ciuni & Panichi, Inc. and Dan Hout-Reilly, CPA, CVA, at dhout-reilly@cp-advisors.com or 216-831-7171.

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It may be time for your company to create a strategic IT plan

Portrait of three technicians standing in a server roomIt is understandable why many companies have taken an ad hoc approach to technology. A usual scenario is that as business needs developed and technology provided the best solutions, automation was implemented without creating an overall, company-wide plan.

As a result, many companies find all their different hardware and software may not communicate together. What’s worse, lack of integration can leave you more vulnerable to security risks. For these reasons, some businesses reach a point where they decide to implement a strategic IT plan.

Setting objectives
The objective of a strategic IT plan is to — over a stated period — roll out consistent, integrated, and secure hardware and software. In doing so, you’ll likely eliminate many of the security dangers wrought by lack of integration, while streamlining data-processing efficiency.

To get started, define your IT objectives. Identify not only the weaknesses of your current infrastructure, but also opportunities to improve it. Employee feedback is key: Find out who’s using what and why it works for them.  Also, figure out what isn’t working and why it isn’t working.

From a financial perspective, estimate a reasonable return on investment that includes a payback timetable for technology expenditures. Be sure your projections factor in both:

  • Hard savings, such as eliminating redundant software or outdated processes, and
  • Soft benefits, such as being able to more quickly and accurately share data within the  office as well as externally (for example, from sales calls).

Also calculate the price of doing nothing. Describe the risks and potential costs of falling behind or failing to get ahead of competitors technologically.

Working in phases
When you’re ready to implement your strategic IT plan, devise a reasonable and patient time line. Ideally, there should be no need to rush. You can take a phased approach, perhaps laying the foundation with a new server and then installing consistent, integrated applications on top of it.

A phased implementation can also help you stay within budget. You’ll need to have a good idea of how much the total project will cost. But you can still allow flexibility for making measured progress without putting your cash flow at risk.

Bringing it all together
There’s nothing wrong or unusual about wandering the vast landscape of today’s business technology. But, at some point, every company should at least consider bringing all their bits and bytes under one roof.

Need help. Please contact Reggie Novak, CPA, CFE, Ciuni & Panichi, Inc. senior manager, at rnovak@cp-advisors.com or 216-831-7171 for help managing your IT spending in a measured, strategic way.

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