Surging fuel prices and high inflation rates in recent months have put a damper on the country’s economic activity, making “belt tightening” and “streamlining” the vogue among entrepreneurs hard-hit by them. Which brings us to this question: How does an entrepreneur survive the economic downturn?
According to three small and medium enterprises (SMEs) contacted by Entrepreneur, what’s needed to weather the storm is a mix of creative cost-cutting and a dose of practicality. Here’s what they are doing along those lines:
Vice President for Operations
Topserve Manpower and Logistics Inc.
Topserve is engaged in employee placement services and in cargo logistics and distribution. With more and more companies downsizing their workforces and laying employees off, it is creatively using multitasking to keep itself on top of the situation.
“Multitasking is the name of the game when it comes to manpower services,” says Villacrucis. “Just for an example, if our employees were simply performing janitorial duties before, now we ask them to help out in the loading of the client’s cargo as well. This way, we keep them more productive and at the same time help save the client some money. If we don’t do this, the client might just opt to cut the janitor’s job to save the loader’s job.”
She says that two other multitasking routines—car-pooling for employees and “rationalizing” shipping and delivery schedules—have saved the company at least 5 percent in its fuel bill.
She explains: “We have instituted the rationalization scheme in our delivery routes to minimize the number of vehicles we have out on the road at any one time. Also, as a way of maximizing the use of our assets, we try to squeeze in every trip as many tasks as possible. We are doing this without sacrificing our reliability and the timeliness of our deliveries.”
Villacrusis says that despite the economic downturn, prospects for Topserve remain bright. “Manpower is such a critical factor for companies, especially those in the manufacturing services,” she explains. “That’s why the demand for skilled labor won’t go down even if the economy is not doing well at the moment.”
The Christmas Factory
The Christmas Factory, which exports holiday decorations to Europe, Australia, and the United States, has been hit hard by the continued strengthening of the peso against the US dollar. In fact, the shaving of the profit margins of exporters by as much as 50 percent has already forced a number of them to close shop.
Santos says that what has helped The Christmas Factory stay afloat in these trying times is the seasonal nature of its business. The company does not maintain a regular work force, and manufacturing activity peaks only during the third quarter of the year, thus sparing the company from big overhead costs and heavy payrolls.
He explains that the strong peso has both its disadvantages and advantages: “Although it has shrunk our profit margins—we used to have our products pegged to the exchange rate of P52-P54 to the US dollar—it also drives us to make even better quality products just to remain competitive.”
Santos says his company is banking on the good quality of Philippine-made goods to fend off the growing threat of China’s cheaper products. He explains: “Chinese-made products are indeed cheaper, but their build quality remains suspect. That is why although we are suffering from low margins, we make up for it by the bulk of the orders we ship, which has been growing steadily because of our higher quality.”
As a cost-cutting measure, The Christmas Factory now uses leftover fiberglass from their manufacturing process as “extenders” for other products.
“Before, we just threw them away for scrap,” he says. “Now we gather and reprocess them so we can use them for something else, like building a base for a different product. This has saved us at least 3 percent in fiberglass purchases since last year.”
Director for Operations
While most other companies are getting themselves busy formulating ways to cut down on spending, the local contact center operator Pilipinas Teleserv is going in the opposite direction: it is increasing spending to create a stronger demand for its services.
“We are putting more money into marketing the company and attracting more clients,” says Yupitun. “The way we see it, the better the company performs, the better we will be positioned to augment our employee’s salaries and help them cope with the rising cost of living.”
Pilipinas Teleserv currently has a partnership arrangement with the Philippine government for the
processing and delivery of passports and birth certificates, an undertaking that’s geared for the OFW market. The company also operates contact centers for the fast-food delivery services of some of the biggest chains in the country, such as McDonald’s.
Yupitun says that Pilipinas Teleserv has always been a thrifty company and that this attribute is working to its advantage in the current economic crunch. He explains: “It has become a culture for our employees to be conscious of the cost of everything we do. This is something we have been consistently doing over the years. Because of this, we are not that affected by the rising costs, and we believe that we will weather this current storm with flying colors.”
Indeed, the very location of the company’s offices is strong proof of Pilipinas Teleserv’s long-range cost-cutting vision. While other call centers locate themselves in high-priced business districts, the company had opted to set up shop in the Quiapo area, right in the heart of Manila, where office rentals are much cheaper. This choice of location also has another advantage: it gives Pilipinas Teleserv a steady supply of skilled office and contact center staff from Manila’s University Belt, which covers the area of Recto-Legarda-Morayta all the way to Intramuros.
Yupitun explains this choice of location: “When we put up the company in 2000, we looked for a place that had good telephone lines and affordable lease rates. After a careful search, we chose Quiapo, which is not a place you would normally associate with a contact center. But the lower lease rates are great for us, and the infrastructure costs are cheaper than those of other commercial areas in the city.”