Category: Corporate Trade Industry Report


Risk mitigation has become a common buzz-phrase  thrown around offices; it’s up there with “synergy”, “cross-departmental

Andrew Bulmer, SVP and Managing Director

Andrew Bulmer

problem-solving”, and “paradigm-shifting”. Enterprise risk management: what does it really mean?

Budgeting, forecasting, and company-planning revolve around our ability to accurately predict market reactions. Will our current products continue to do well next year? Can we expect the same kind of success with our new product lines? What about our competitors?

Even the most successful companies can’t predict all market variables and thus enters the need for enterprise risk management strategies, to reduce the negative effects of unforeseen circumstances.

Enterprise risks can come in a number of forms. However let’s focus our attentions on one particular area of risk, inventory management and turnover.

Inventory Management Report Image

The concept of supply and demand is as old as business itself, and although computer simulations, complex algorithms, and the brightest analytical minds on the planet have become incredibly accurate at predicting demand, no method is 100%.

A current example could be the recent NHL lockout. Perhaps there were signs in the summer that there could be a lockout, but none of the hockey merchandise retailers could have predicted that there would be such an extended lockout months ago when they were ordering their inventory for this year. Now those retailers are stuck with storerooms of inventory that is hard to sell.

So what’s a business to do? For manufacturers, having just-in-time (JIT) manufacturing is one way to ensure that only the needed amount of product to meet the current demand is created at any given time. Although this can be a complicated process, those companies that have successfully applied this type of manufacturing avoid unnecessary spoilage and holding costs associated with incorrectly predicting demand.

DellLogoDell is a great example of a company that revolutionized the way tech companies manufacture products. A problem inherent in the technology sector is high inventory turnover rates. Within months of a product hitting the market something newer, faster, or more advanced emerges. Dell had been able avoid its products becoming outdated by only building a computer once it’s been ordered by a consumer.

Perhaps JIT manufacturing isn’t an option for your company or perhaps your main area of enterprise risk management lies more in the uncertainty involved with launching a new product into the market. You’ve done you market research, you’ve tested in consumer groups, and you’ve completed a detailed SWOT analysis. But still, there are risks.

Pepsi-AMDo you remember Pepsi AM? Me neither. Pepsi had wanted to try to enter the morning caffeine market, selling Pepsi AM as a substitute for coffee. Well, needless to say Pepsi AM failed to win over coffee drinkers, thus showing that even one of the most successful companies in the world can misread the market.

So how else can your company plan for inventory risks that you can’t predict? Consider using Corporate Trade (also known as corporate barter) as a contingency plan. Excess inventory sitting in your warehouse incurs carrying costs and can ultimately spoil, causing you to take a loss on the books.  Using Corporate Trade is one way you can avoid incurring a loss.

Corporate barter companies like Active International allow you to realize the full market-value of any excess or unwanted stock. Instead of cash, Active will give you Trade Credits for the inventory. Those Trade Credits are then used to offset the cash expense on things like media, freight and logistics, and retail merchandising. Using Corporate Trade allows you some breathing room when making inventory predictions for the next year knowing that excess inventory won’t become a source of worry. This peace of mind allows more room for product and innovation without failure of total financial loss if the new idea doesn’t take.

So if your company’s new product launch doesn’t quite excite the public as you had predicted it would, consider Corporate Trade as a risk mitigation technique to realize the full economic value of your inventory. Your CFO will thank you.

By Andrew Bulmer

SVP and Managing Director

Active International Canada

By Andrea Allen

The holiday season is a time of giving. We’ll give gifts to our children, our parents, those cousins we see once-a-year, our co-workers, dog walkers, and of course, the odd gift to ourselves (because we deserve it after all). However it’s the season not just of giving gifts to our family and friends, it’s also the time when many of us contribute to our personal charities of choice. The malls just wouldn’t seem the same without a bell-ringer beside a Salvation Army red kettle or giant toy mountains waiting for our additions.  However, charitable donations of all varieties have been in decline over the last couple years due to the economic downtown. Sadly, it’s during these times that donations are most needed by the greatest number of people. In an effort to increase the value of a dollar, one suggestion would be to look for products that are not only great gifts, but also give back to society.

TOMS shoes is a company that will donate a pair of shoes to needy children all over the world for every pair purchased by a customer. You can feel confident that buying your kids a pair of TOMS shoes would put you in the “cool mom or dad” category and you can feel good knowing that your purchase helped someone in need. Similar to TOMS, Warby Parker is a stylish glasses company that for every pair of glasses purchased they will donate a pair to someone in need.

If you’re looking to deck out your special lady in some jewelry this Christmas, why not take a look at a Haitian hand-beaded necklace or a turquoise bracelet from Thailand. Available through World Vision, these and many other gifts can not only put a smile on a loved one’s face this Christmas, but can also contribute to the economic well-being of developing communities. There’s also iSanctuary.org that has a wide variety of beautiful pieces that are sure to impress even those hard-to-shop-for names on your holiday list.

There are even websites that allow consumers to choose the cause they would like to support through their purchase of gift items. Giftsthatgive.com is one such site where $1 for every $5 spent will be donated to the cause of your choice.

But what about the corporate world? Corporate charitable donations can also go the extra mile. As part of the ActiveCares program, Active can contribute funding to an organization’s CSR causes in return for a commitment of a portion of the company’s existing media, freight, or printing spend. Active’s Corporate Trade model allows our clients to leverage our services to benefit a cause without spending incremental dollars. So even if you or your company are strapped for cash and are considering scaling back your charitable contributions this season, consider using more creative ways to stretch those holiday dollars. It will certainly put you on Santa’s “good” list.

By Scott Miles, Client Solutions Manager

Client Solutions AssociateWith Corporate Trade growing in popularity as a strategic business solution, there are a few things every business leader should be aware of when entering into their next Corporate Trade deal.

In a typical trade deal, your company has just exchanged an under-performing asset (such as excess inventory), in return for a bank of Trade Credits that are used with cash to pay for routine budgeted business expenses.  This is clearly a high trust transaction and you must feel confident in your Corporate Trade partner’s ability to deliver on their ability to help you spend your Trade Credits. A legal contract is a must, and for any business engaging in an unfamiliar practice with a lot on the line– this can seem daunting.

Today’s blog focuses on 4 essential elements to your contract. These, at minimum, are “must haves” in order to effectively protect your business in a Trade transaction:

  1. Inventory & Brand Integrity – if there are any restrictions on where your distressed inventory will be remarketed or distributed, make sure you specify as such in your Corporate Trade agreement. It’s important that your brand remains protected, with product being sold only in approved channels and markets. You want to ensure your business is never forced to sacrifice brand integrity.

One of my customer contacts at ConAgra Foods covered this point very well in a recent article discussing the Active/ConAgra relationship in Food in Canada magazine:

“It would normally take me more time to deal with third-party vendors, and I wouldn’t have control of where products end up or know if they’ve been resold or tampered with — but because it has your brand name on it that will hit you two or three years down the road. With Active I’m not going to have that problem.”  

  1. Media Quality – Likely, the majority of your Trade Credits will be used to supplement marketing efforts, and specifically, your paid media budgets. Make sure your Corporate Trade company is applying Trade Credits to your authorized and approved (or your agency’s approved) media plan. By doing so, you’ll ensure your supplemented media plans remain of top-notch quality, thus ensuring the full dollar value of your credits remain intact.
  1. No Media Commissions or Fees – Corporate Trade companies typically do not take media fees as part of their business model. Be sure you aren’t being docked a media commission by your Corporate Barter company each time you use your credits. A central tenet of Corporate Trade is that your credits are used against your existing advertising rates – those that are expertly negotiated by your agency. If you currently employ an Agency of Record, be sure to continue compensating them for their services as you usually would. Their role in the process– defining the media plan, and as a check and balance setting pricing benchmarks and ensuring media quality – is vital to the success of your Corporate Trade deal. Your agency should be compensated with a media commission; your Corporate Trade company should not.
  1. Customer Service – Like any other service-based business transaction, strong customer service is absolutely vital to the success of a handshakeCorporate Trade deal. Before entering into a Corporate Trade deal, you’ll want to ensure up front that you have a dedicated account manager and media team assigned to your business. A strong account manager understands that your business only receives financial gain from the transaction once Trade Credits have been spent (within a reasonable time-frame). Therefore, your account manager should be diligently tracking your Trade Credit usage, routinely presenting opportunities for increased Trade Credit usage through formal business reviews, and attending all relevant media briefing and planning meetings with both your marketing/brand teams and your agency. Further, this account manager should manage the communication/workflow between all parties in a streamlined way that makes the most sense for your business. As a Client Solutions Manager at Active, this is the kind of service I try to deliver on all of the accounts I am responsible for. Your Corporate Trade company should be viewed as a valuable budgetary resource and not an extra step.

 

Your turn – what other elements are essential to your Corporate Trade contracts?

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