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Lean Manufacturing: Productivity

 

PART IV. 

 

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.

To be Continued


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