Industry Week recently an article on “how to optimize your supply chain to improve cash flow” that was pretty much a 21-point mega cash-flow optimization checklist for manufacturers that need to improve their cash-flow, which starts with EBITDA (earnings before interest, taxes, depreciation, and amortization) optimization. The suggestions offered were:
- Business Process OptimizationReduce direct variable process costs with better information flows that are designed to decrease order management costs.
- Direct Effort OptimizationDecrease direct variable costs by increasing the value-added-to-nonvalue-added ratio through network and production optimization.
- Efficient Utilization of ToolsLessen direct variable costs by ensuring the right number of tools are available, adequately utilized, cared for, and properly stored.
- ERP & PLMDiminish divisional ERP/PDM/PLM software fixed costs by rationalized all of the various ERP, PDM, and PLM instances in use.
- Indirect SG&A Optimization Constrict variable headcount costs through processes and procedures as well as organizational and software solutions.
- Logistics OptimizationShrink direct variable costs with better packing and storing that reduces waste and overhead.
- Machine OptimizationCompress direct and indirect variable costs by optimizing machine utilization and maintenance schedules.
- Network OptimizationEbb fixed costs by reducing the number of redundant facilities.
- Obsolescence Cost MitigationWane direct variable costs through better forecasts and inventory management.
- Lean your Plant LayoutSubside fixed costs by reducing the space needed for the same output.
- Product Management OptimizationAbate indirect variable costs by improving product-use instructions.
- Production OptimizationContract direct variable costs through cycle time reduction.
- Quality Control Assessment of ProductionCurb indirect variable costs by minimizing failure rates.
- Research and Development OptimizationCurtail indirect variable costs by reducing the need for engineering support staff.
- Risk ManagementLighten indirect variable legal costs by assessing potential business risks.
- Safety Audits, Training, & Insurance Spend Management Lower indirect variable costs by auditing the production area and minimizing safety issues.
- Spend ManagementRestrain direct variable costs by evaluating existing assets to realize consumption cost savings.
- Supplier AuditCheck indirect variable costs by ensuring material and information flows with the supplier are optimized to minimize failure and rejection rates.
- Supply Chain ManagementSlash direct variable costs by developing optimal just in time structures with demand planning.
- Supply Chain Management OptimizationMinimize direct and indirect variable costs by focussing on financial, material, and information flows in planning/scheduling, logistics, and procurement.
- Transportation ManagementNarrow direct variable costs by optimizing shipment lot sizes, consolidating shipments, and improving freight terms.