| Keywords: | As One Technolgies, go green, total cost of quality, short-term ROI, operating challenges, operational strategies, Supply chain, cost reductions, total cost of ownership, TCO, strategically reposition, Raise fixed asset turnover rates, |
 This paper was written for business leaders now faced with the extremely difficult operating challenges thrust at them by today's economy. The bombardment of economic news we receive each day requires little more to be said about the severity of the 2009 economic "Tsunami." This global economic downturn has senior managers re-evaluating operational strategies from "A" to "Z." So, the intended audience for this paper is those executives and managers in manufacturing businesses that are looking for additional preemptive moves in the face of this storm. We hope our “Capital Ideas” are of solid assistance.
Manufacturers have seen total order volumes drop, accompanied by variability in demand and smaller lots. Supply chain disruptions, plus energy and raw material cost increases have served to exacerbate the situation. With lower order volumes, there are diminishing returns in focusing predominately on unit cost reductions. In any economy, we know that generating cash is the life blood of the business, but today, it's far tougher to generate cash through profit leverage. So, on the subject of cash, we submit that now is a perfect time to look at the capital side of the balance sheet. Keeping outside investors in mind, this is an outstanding time to be positioned with more cash.
Our premise is that if capital is not being leveraged from sales margins, then it alternatively should be generated through working capital reductions. Moving to also cover fixed assets on the capital side, another area of opportunity is associated with the total cost of ownership (TCO) of machinery and equipment. In past boom times, companies invested heavily in new machinery and equipment and made acquisitions that led to added capacity. As we move through this recession it is advisable to reassess current operations and cull assets that are "over the line" in terms of TCO. After making this cut, even "keeper" assets may need a re-commissioning tune-up to insure that they are as productive and efficient as possible.
So, the current environment provides an opportunity for manufacturers to strategically reposition their respective businesses - with a more distinct emphasis on the utilization of assets and the agility it takes to manage them.
AVS has intended this document as a roadmap. Rather than a general whitepaper on theoretical approaches to lean transformations or software strategies, we chose to utilize our industry knowledge to provide specific ideas on how leaders can better position their operations in this economy. Thus we named this paper, "Capital Ideas for the Times." Our five capital ideas for optimizing manufacturing performance focus on these outcomes:
- Pull working capital out of your operations
- Raise fixed asset turnover rates
- Go green
- Optimize your total cost of quality
- Fully utilize your human capital
Each of these five is presented with a solid focus on driving short-term ROI with sustained long-term operational improvements. Integrated with each, are specific examples of how information technology can be used to first leverage and then sustain improved operational results. Through this paper, the reader has access to best practices from a variety of industry verticals and manufacturing styles. Best of breed software solutions are presented, as well. We hope our readers will find this material valuable. Our contact information is included on page 14 and we hope our readers will contact us with any questions or comments they may want to share.
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