Controlling Conference: The Vertical Integration Everyone Criticized Saved Our Business!

For the first time in 10 years of holding the controlling conference, a panel was held on the topic of Crisis Management of the New Era, and the main message from the conference participants was a confirmation that it was good that they resisted various advice from business gurus who pushed them towards “just in time” procurement, outsourcing numerous activities, and cheap suppliers from the Far East. Such advice was not heeded by Metal Product, which produces metal products and electrical equipment, nor by the Bosnian-Herzegovinian company Weltplast, specialized in the production of bags and other plastic products, nor by other panel participants, and this bold approach to business proved resilient in the crisis that arose after the pandemic when supply chains were disrupted.

– We at Metal Product have not changed the business strategies designed by my grandfather Stjepan Šafran, the founder of the company, for 50 years. In these 50 years, we have faced wars, shortages, inflation, and supply chain issues that rarely affected us because we developed a resilient business model. We are vertically integrated, we keep all technology under one roof, we have supply chains and regional suppliers who have always delivered raw materials to us on time. Additionally, we have always maintained slightly higher stock levels than necessary, which has proven to be a winning combination that was resilient to the more severe blows of the crisis – emphasized Barbara Vuković, CFO of Metal Product.

Although, for example, Čateks, a textile factory, is listed on the stock exchange and shareholders are seeking results that ensure dividend payments, their vertically integrated business model has shown resilience.

– We had such resilience in the crisis that we began to seriously consider starting cotton production in Croatia. Since that seems impossible, we decided to launch a joint venture company in Egypt or Pakistan to secure sufficient quantities of raw materials – stated Matija Bilandžija, CEO of Čateks, adding that without such raw material stocks, they would not have been able to deliver equipment worldwide during the pandemic.

All panel participants are also certified controllers who have completed the Controlling Academy organized by Kontroling Kognosko, so they have knowledge of how much it has helped them in business.

– We implemented controlling in 2016, and by 2017 we had a 1% decrease in revenue, but a 35% increase in profit – highlighted Marijana Širić Sabljo, CFO of Weltplast, who also added that the company grew particularly due to the fact that they operate on the edge of the European Union. She also mentioned that all her knowledge of the EU was sold off and sent to Asia, and now they are crying in pain, while we have taken full advantage of that fact.

Controlling is also important for Polleo Sport, as noted by Dinko Magazin, co-owner and board member of the company, who feels the crisis but says it is an opportunity. With controlling, they will more easily decipher which of their repetitive processes are unprofitable, and then they will change them.

Ivana Ravlić Devald, CEO of Mesna industrija Ravlić, is in the process of implementing controlling processes, and changes take time.

However, controlling is a process, not a technology that is activated and works tomorrow; it is a process that depends on people, and it is worth investing in human resources, especially since controllers provide special value with their forecasts and analyses, the panel participants agreed.