Last week, I had the opportunity to tour a new client’s production facility. I always enjoy these days. It’s a great way to learn about what goes into making a product. While I won’t develop the expertise and understanding of the company leaders, it’s necessary to have a base level of understanding to bring meaning to the financial results, to ask intelligent questions during management discussions and to aid in developing forecasts.
There is something noteworthy that happens every time I tour a production facility and last week was no exception. There is always a conversation with one of the workers tending a machine. And during that conversation you can hear the pride in their voice as they explain something about their role and that of the machine in the manufacturing process. Last week, it was about the speed that the machine was running. Other times I have heard about temperature settings, the precision needed in set up, the sound the machine makes when it is running “just right” or the sound they are listening for when something is starting to go wrong.
I’m always impressed by these conversations. The typical production job requires a good deal of in-depth knowledge, skill, experience, and attention to detail in order to produce thousands of items in rapid succession meeting strict quality standards. The people doing this work take pride in what they produce. They work together to solve problems because they know if something isn’t right early in the process, it will impact each and every stage that follows with the end result being needless waste or poor quality which adversely impacts sales.
For a production operation to run smoothly, everyone needs to show up on time and ready to do their part in the overall process. Rarely are these minimum wage jobs. Good production workers command higher wages because they bring value to the table.
After each of these visits, I have never looked at the product the same way again. Last week, it was food packaging. But over the years it has been metal stamping, automotive assembly, a steel foundry, railcar parts, eyewear, bricks and plating to name just a few.
When things are running smoothly, I can see it in the financial results. Gross margins are at or above standard. Customer returns and rework are low. Profits are on target. When the facility is not running smoothly, it’s common to see lower gross profit margins, excessive overtime, quality costs, and lower than planned profits.
If your business involves the production process, you probably have a unique appreciation of how the goods we all purchase are made just as those in other fields understand and appreciate their specific craft.
If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to [email protected]
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