Top Business Issues, plus their Effects on Profit

I’d like to thank everyone who took the time to complete this survey from a previous communication! Let’s discuss the results and connect the issues to expenses, income, and profitability.

 

To stay in business, all businesses need to be profitable over time. Investopedia is a financial education resource and states: “In April 2018, the average profit margin for companies in the electronics sector was approximately 6.7%.” That means that every dollar saved in expenses affects profit the same as an extra $15 of income. Here is information about the average effect of ISO 9001 on profit margins.

Cash Flow can be measured on the Income and Expense Statement, which covers a period of time, often a month. Cash flow is a result of all planning and business processes.
And it’s important to understand fixed expenses (or operating expenses) like rent, electricity, or on-going services vs. variable expenses like material costs, energy or labor costs associated with a production run.

Each manufacturing issue affects or is affected by other issues on the survey list, just as business processes are inter-connected. Outputs from one process become inputs of another.

Supplier delay and rework/defects are the top recurring issues for manufacturers who completed this survey. Questions to ask include:
Is the supplier delay avoidable?
Is it due to material shortages or defects?
With the right planning, communication, and risk management, could some of the delays been avoided?
Supplier delays and defects will affect operational processes and the expense side of the P&L- but may also affect the income side of the P&L.
How can small business apply supplier performance management like the big corporations?

The cause of rework and defects can be human, machine, material, process, or environment. Understanding why, then addressing each will lead to different corrections. Questions to ask include:
Is the staff adequately trained?
Is equipment adequate to handle customer specs and throughput demands?
Any unplanned equipment downtime?
Are material issues from inventory or operations handling, or are they caused by the supplier- again, could this have been avoided with better risk-based planning, and communications.

Throughput and production flow are results of operational processes, equipment downtime or efficiency, employee competence and training, rework, and supplier delays. And it will have an effect on-time delivery and expedited delivery costs.

Operational processes are key to maintaining a well running business. Are people and departments communicating effectively, are process hand-offs smooth are do mistakes occur? Learn the 9 steps to establish world-class business processes, or use it as a checklist to improve your existing processes.

Does your facility layout and workflow work as well for todays business as it did when it was originally setup?
How about your electrical and hvac, pneumatic, and other systems?

Overtime and expedited delivery costs can greatly affect profitability.
Satisfying the customer at all costs may sound noble until you understand that much of those costs are avoidable by understanding and planning for risks and “critical-pathing” a project to avoid delays.
FMEA, PERT, SWOT, and Porters Five Forces are straightforward methods to mitigating risk and avoiding unplanned costs, along with many others on this list. Learn more about FMEA and how it can help you with risk planning and mitigation.

Low margin customers may be an outcome of market conditions which is tough to remedy. However, planning and leadership can drive changes to prepare for the better contracts. Questions to consider:
If it takes several months to earn ISO certification would that affect which projects, customers, and markets you would pursue? And would it help you weather a downturn in the consumer electronics or other markets you serve?
Wouldn’t those months pass either way? Learn more about the affordable option for small business to earn ISO certification.

Or ask about our “most affordable path to ISO 9001 certification guarantee“, contact us at info@cpisys.com or 864-256-1056. If you already have an ISO certification, and are paying more than $1,000 annually, contact us to see how much you can save.

Book a Free Consultation to do a deeper dive on your key business issues with Vicki Delaney and Jim.

For best pricing with used/refurbed SMT production equipment contact Jim at 423-930-6644, or jimatchoice@gmail.com
– or talk to our SMT Equipment partner Jill Kelley directly through Choice Equipment Inc, and tell her CPI Systems sent you!
Jill is the owner at Choice Equipment and has the best reputation in the business for service after the sale.

Many profitable improvements,
Jim Goodrich and Vicki Delaney
Continuous Process Improvement Systems – Choice Equipment
864-256-1056 (CPI Systems) or 423-930-6644 (Choice)
www.linkedin.com/in/jimgoodrich-cpisys-choiceequipment