The fifth resource to consider is money.
Everyone knows that a business must have money to operate, but we
can improve the issue by focusing on cash flow. Cash flow is the
net rate at which you take in money and it is not dependant on
operating profitably. Many unsuccessful businesses have operated
for a long time because they have been able to manage and control
their cash flow, while other more profitable businesses have
failed because they ran out of cash. Each of you in your
respective businesses can contribute to a positive cash flow by
balancing expenditures against planned collections. The other
function that you can help support is the collection effort. Most
often, disputed invoices and the un-willingness of a customer to
pay focuses on information issues as opposed to product issues.
You can significantly support the finance people by quickly
supplying all information requested to support the collection
efforts. It is not an unusual request to supply duplicate bills of
lading, duplicate shippers, or even proof of delivery. If you are
involved in these efforts, do them as quickly as possible.
I mentioned earlier about the profitability of
business is a second requirement. Once you have cash flow, then
you most focus on operating profitably. We are led to believe that
some products, if we produce them, will instantly be profitable.
We have heard the arguments from marketing of the better mouse
trap and how the world will beat a path to our door. All too
often, this will go up in smoke and we are left with high
overheads to support low production rates. The major issue to
operating profitably is to put together a good forecast and master
production plan and then utilize strategic planning through the
year to operate so that the cost structures of the business are
consistent with the levels of production.
The other issue that affects money is when
manufacturing people begin to get the parts and the dollars
confused. It is a very common occurance when we get close to month
end. More focus is placed on the dollar value of the parts still
in process, as opposed to the shipping schedule. This focus causes
us to begin emphasizing only the parts with high values, even
though they may be ahead of schedule, and sacrificing the parts
with low dollar values, even though they are due. The message here
is that if we support our master schedule and shipping schedule,
the dollars will take care of themselves. We must trust the master
schedule and those who are guiding the business to make sure that
the dollar value will be there to support the budget. Doing
otherwise usually drives up cost through expediting,
missed-schedules, and having to ship late goods to customers at
premium freight rates.
The final issue concerning money is what we miss when we do not
have adequate financial resources. Continually we are evaluating
opportunities that could positively affect our business. If we do
not have the financial resources to seize those opportunities, we
will be unable to increase our productivity. Many times machines,
new types of products or processes are offered to us, and without
funds we cannot have a chance of acquiring those issues. Lack of
money also prevents adequate training that will also affect our
productivity. But the real bottom line is that when we have a lack
of funds, all our energy and focus tends to be on how to get
sufficient funds together that will allow us to make ends meet—a
very inefficient and unproductive effort.