Ten key functional areas
Most of the opportunities we have examined in this series have dealt with financial line items or at least fairly specific concepts. In the next 10 segments we will look a little
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It doesn’t grow on trees
The tenth and final profit driver we will examine is cash. Cash is of course the lifeblood of any organization and its importance becomes all the more pronounced when you don’t have
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The conflicting objectives of inventory management
The ninth profit driver we look at for opportunities is inventory. Inventory reduction tends to go straight to the top of every production executive’s priority list when interest rates are high. Even
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Better, cheaper, maybe not faster
The eighth profit driver is Accounts Payable (AP). The AP function plays an important role in managing the cash flow cycles of the organization. The objective of most performance improvement projects is
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Where is the money?
The seventh profit driver, accounts receivable (AR), sounds a little dull but is actually one of the more important barometers of the general health of the organization. AR can be a very
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The by-product savings in variable overhead costs
Finding the opportunity with variable overhead costs requires trying to understand how these costs are allocated in the financial statements and then analytically drawing some correlations between those costs and the process hours.
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The variable nature of fixed overhead costs
When companies volumes decline they are often stuck with more fixed costs than they need. Fixed costs are often much more difficult to reduce than variable costs because they represent a longer term commitment in many cases.
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How much indirect labor do you really need?
Indirect labor includes supervisors, material handlers, quality technicians, mechanics, and IT support, all functions which are required to support the production of goods or services. While the functions are important to keep organizations working, its not always easy to determine how many people you actually need.
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The two components of direct labor costs
Hours worked are driven by how many people you need to run a process to achieve some volume output. So there are two distinct analytical questions; how do you staff the process, and how well does the process run?
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The conflicting objectives of materials management
Material costs can make up a significant part of a product’s cost structure, often many times more than labor costs, so it’s a good profit driver to focus on to find opportunities.
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