5 Feb 2016
Management Consultants Help Reduce Operating Costs
Publicity, marketing and public relations are essential components of a successful product launch in a new market. The hiring of management consultants can help increase the chance of success by leveraging their professional knowledge and business network.
- Definition of “management consultancy”: According to the Management Consultancies Association (MCA) of the UK, a management consultancy provides independent advice and assistance on management issues, including identifying and investigating problems or opportunities, recommending appropriate action and helping to implement those recommendations.
- Scope of services provided by management consultancies:
- Roles and responsibilities of management consultants
Role Responsibilities 1 Diagnosis of enterprise problems As an independent third party, a consultant can provide objective and independent advice to the enterprise, investigate the causes of problems, recommend effective and appropriate solutions, and even assist in the implementation of the recommendations. A consultant can help maximise the overall operational efficiency of an enterprise. 2 Guidance to overseas markets Overseas markets have different trade and market regulations and practices. A consultant can provide information and advice to the enterprise according to its needs and characteristics. Such information and advice may cover market research, identification of target customers and development of marketing strategy. This helps reduce investment risks. 3 Training and development A consultant can help an enterprise rationalise its business processes to enhance profitability and competitiveness, and change the mindset of all staff from management through to the operational level to align with the new processes and appraisal standards.
HKTDC Tips (on management consultancy)
- Small and medium-sized enterprises have greater need for management consultants: Successful reform can help small and medium-sized enterprises grow in a sustainable manner. Below is an overview of the fees for reference.
Overview of management consultancy fees
|Type of service||Fees|
|Whole projects||Fees are basically charged on an hourly basis depending on scope of services, complexity of job and volume of work.|
|Individual projects||Fees are charged on an hourly basis depending on the scale of the project and the qualifications of the consultant required. Large consultancies and experienced consultants may charge hourly rates in the range of HK$1,000 to HK$3,000 and above.|
Note: Some consultants may charge 10% of the monetary amount when a quantitative target is reached.
|Day-to-day consultation||Fees may take the form of a fixed monthly fee. The charging basis will depend on the hourly fee and the volume of work.|
It is important to note that the above information is for reference only. The fees charged may vary depending on the nature of the project, the type of service and the consultancy providing the service.
Freeing up HK$50 million in working capital a month by lowering inventory levels
Business nature: US-invested razor blade factory
Company size: about 500 staff
Human resources: 40% of management staff are university-educated
Problem: Reading the financial reports, the factory management was puzzled as to why growth in profits was unsatisfactory even though there was no lack of orders. They decided to engage the services of management consultants to look into the problem.
Diagnosis and action taken:
- Long production time: Production time was 50 days from order confirmation to delivery. This was unacceptably long in today’s competitive environment.
- High inventory levels: As the production lead time was long, the factory had to keep on producing in order to satisfy any unexpected upsurge in demand, resulting in high inventory levels.
- Solution: The management consultant recommended a solution within 1.5 months and assisted the company to implement it within six months. In the process, the consultant:
- consulted with the clients and the staff of the company, evaluated the current mode of operation, made market forecasts, and rationalised work processes;
- established internal standards, enhanced supply chain management, and reduced production lead time;
- reviewed the accounting information to ensure accuracy; and
- established a system of key performance indicators (KPIs) for the company.
- Production lead time was shortened from 50 days to 16 days.
- By reducing the inventory level by HK$50 million, the company freed up HK$50 million as working capital. This was beneficial to cash flow and indirectly achieved savings in interest expenses.