Risk Management For Manufacturing

Risk Management for Manufacturing

By

Dick Lam

May 9, 2009

Hong Kong

Financial Crisis

I'll give help when you need it

Gordon Brown, 23 November 2008

CUT VAT by 2.5 per cent to encourage consumer spending.

INCREASE the state pension by between £4 and £5 a week.

INTRODUCE temporary tax cuts for low-income families, who are more likely to spend and give the economy a boost.

CANCEL planned tax rises on cars and small businesses CANCEL planned tax rises on cars and small businesses and cuts in tax allowances.

INCREASE spending on schools, hospitals and transport projects.

The rescue will increase national debt to record levels, with Britain set to borrow up to £120 billion a year by 2011. Taxpayers already spend over £300 a year EACH just on the interest on national debt.

Barack Obama, 25 November 2008

• pump money into the battered economy

• create 2.5 million new jobs• a tax cut to the poor and

middle class• make massive government

investments in energy-saving

"will be about $500 billion"

investments in energy-saving and other technologies designed to pay for themselves in the long run

• US$800 billion to be spent

• unfreeze credit on student loans, credit cards and car loans be returned to normal levels

George Bush, 25 November 2008

• stabilize the system and support the lending that is vital to our economy

金金金金融融融融海海海海嘯嘯嘯嘯下下下下的的的的日日日日子子子子… … 美美美美國國國國人人人人賣賣賣賣血血血血賣賣賣賣精精精精子子子子過過過過活活活活

經濟不景，失業人數飆升，越來越多美國人被迫出賣身體求活，包括賣血（每包 390 港元）、賣精子（每次 780 港元）、賣卵子（每個54,600 港元）和頭髮（一條馬尾值 1,560 港元）。54,600 港元）和頭髮（一條馬尾值 1,560 港元）。以賣卵子為例，申請賣卵者由每天兩人增至20 人。

美國 Msnbc 網站

蘋果日報2008-12-07

Cash is King

In retrospect,

• Was there a day in the past that I did not have any cash issue?– Yes. – Yes.

• Why? When you have sufficient or more than enough cash, what did you actually do?– ………..

Where to get money?

• Stockholders

• Bank

• Business– Profit

– Customers

– Suppliers

– Assets

– Employees??

Stockholders, do you have money?

• Yes– But, why don’t you invest?

– No problem. Can I get back the money? And when?

• No– Then, what should we do?

– Fight or Flight?

BANK

A bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain.

Robert Frost (1874 -1963), US poetRobert Frost (1874 -1963), US poet

4C principles

• Capacity - the ability of the owner/manager/business, as lending to a project=lending to the person

• Capability - the feasibility for the project to make profit and cash flow to pay for the interest and repayment of principlerepayment of principle

• Collateral - guarantee for the loan

• Condition - the market atmosphere on the business sector

It is all a matter of TRUST!

Trust

You & Your Business

But, why should I believe you?

Business

• Profit = Sales – Cost – Expenses

• Customers: A/R

• Suppliers: A/P

• Asset: True Value

Where to burn money?

• Operating Expenses

• Capital Expenditure

• Raw Material

Business takes risks,

Need to master the risksNeed to master the risks

Agenda

1. Financial body check-up

2. Re-identification of core competence

3. Risk management: A/R

4. Risk management: Production & Inventory4. Risk management: Production & Inventory

5. Risk management: Cash

6. Risk management: People

7. In-depth meaning on Risk Management

林楚祺 Dick Lam

• 香港浸會大學工商管理學士

• 香港城市大學電子商貿碩士

• 在讀香港工商管理博士(DBA)學位

• 香港會計師公會(HKICPA)會員

• 英國特許會計師公會(ACCA)資深會員

• 曾任職不同類型企業，包括港資、中資及美資公司，長期於國內工作，善於管理會計、供應鏈、財務策略、國內稅務計劃，有超過18年實戰經驗

• http://360.yahoo.com/lamchorki128

• [email protected]

Agenda




4. Risk management: Production & Inventory




What “finance 財務” means？

管理會計

Management Accounting

財務學

Corporate Finance

財務會計

Financial Accounting

Relationship between Financial System and Financial Reports

會計系統

accountingsystem

管理會計

Management AccountingAccounting

財務會計

Financial Accounting

NOW

Know the Present,Know what you “really” have

Balance Sheet

流動流動流動流動


營業額營業額營業額營業額銷售成本銷售成本銷售成本銷售成本毛利毛利毛利毛利銷售費用銷售費用銷售費用銷售費用管理費用管理費用管理費用管理費用營業利潤營業利潤營業利潤營業利潤財務費用財務費用財務費用財務費用稅前利潤稅前利潤稅前利潤稅前利潤

負債負債負債負債資產資產資產資產

固定固定固定固定

長期長期長期長期

資本資本資本資本

股本股本股本股本

At a particular time

盈餘盈餘盈餘盈餘

稅前利潤稅前利潤稅前利潤稅前利潤所得稅所得稅所得稅所得稅稅後利潤稅後利潤稅後利潤稅後利潤股息股息股息股息本年保留利潤本年保留利潤本年保留利潤本年保留利潤

Balance Sheet



負債負債負債負債資產資產資產資產

固定固定固定固定

長期長期長期長期

資本資本資本資本

股本股本股本股本

盈餘盈餘盈餘盈餘平衡點

Balance Sheet


銀行結餘應收帳款存貨

AssetsAssetsAssetsAssets

固定固定固定固定設備廠房商譽

投資

Balance Sheet



AssetsAssetsAssetsAssets 自我控制自我控制自我控制自我控制

資產隨時可以


投資資產隨時可以增值或縮水

Value of Assets

遊戲規則 Rules of Game？

市場價格market price

公允價值 fair value公允價值 fair value

How to report Asset Value?– If long term, at cost

– If short term, at market value

– Who knows your intention?

Balance Sheet



資產資產資產資產自我控制自我控制自我控制自我控制


投資

Operation, Investment & Arbitration

營運，投資與投機

� 我的控制能力有多少？� How much do I control?� How much do I control?

� 佔我的資金比例有多少？� What portion of my funding has been put in?

Controllable Cash Value

� 應收賬款 A/R

可操控的現金值可操控的現金值可操控的現金值可操控的現金值以審慎﹝悲觀﹞prudence的態度去衡量現有的資產值

� 應收賬款 A/R

� 庫存 Inventory� 成品 F/G

� 半成品WIP

� 原材料 R/M

� 投資物 Investment

歷史價值 historical value變現價值 net realizable value使用價值 usable value

PAST

Profit & Loss A/C

營業額營業額營業額營業額銷售成本銷售成本銷售成本銷售成本

毛利毛利毛利毛利銷售費用銷售費用銷售費用銷售費用管理費用管理費用管理費用管理費用管理費用管理費用管理費用管理費用營業利潤營業利潤營業利潤營業利潤財務費用財務費用財務費用財務費用稅前利潤稅前利潤稅前利潤稅前利潤

所得稅所得稅所得稅所得稅稅後利潤稅後利潤稅後利潤稅後利潤

股息股息股息股息本年保留利潤本年保留利潤本年保留利潤本年保留利潤

For a period of times

Profit & Loss A/C

營業額銷售成本

毛利銷售費用

公司整體表現Overall company performance

A Paradox of Pricing Formula

• Price = Unit Cost + Mark-up %

• Cost: Variable Cost, Fixed cost

• Variable Cost: more output, fixed unit costcost

• Fixed Cost: Lump Sum / Output– more output, less unit cost

– less output, more unit cost

Solution: Convert fixed cost to variable cost as far as possible

產品分析 Product analysis

By each product type, changes in

– Quantity

– unit price

– cost elements

審核核心競爭力審核核心競爭力審核核心競爭力審核核心競爭力core competence

發現浪費發現浪費發現浪費發現浪費 wastage– cost elements 發現浪費發現浪費發現浪費發現浪費 wastage

What big enterprises do

• 控制非增值性的費用﹝差旅費﹞cut expenses

• 凍薪 freeze salary

• 裁員 redundancy

• 拆賣 disposal

Understand costing structure

• 生產成本 vs. 費用

• Production cost vs. expenses

• 變動成本 vs. 固定成本

• Variable cost vs. fixed costs

• 產品盈虧平衡點

• Break-even point

The third report

現金流量表Cash Flow Statement

现金CASH

利润PROFIT

=====

The Future

Cash Flow StatementForecast

現金流量表

估算估算估算估算

晚點再討論

賒銷信貸credit

People we face

供應商supplier

員工staff

客戶Customer

Decision & Behavior Model

他人經歷Others experience

預估結果Expected result

本身經歷Self experience

自身體驗Self feeling

實際結果Actual result

行為behavior

What made me earn money in the past?

Risk Nature

Financial Risk

Operation Risk

How much risk are you willing to take?

Alert!!

• Key Performance Indicators– The higher the index, the better the

performance

• Key Risk Indicators– The lower the index, the more secured the

business

Pause for DiscussionPause for Discussion

Agenda








What is your core competence?

• Product vs. Service

• Product Design?

• Quality?

• Cost?• Cost?

• Assembly?

• Manufacturing?

• Supply Chain?

What is your sales strategy in 2009?

• Selling product or services (what services?)

• Segmentation / Classification Market/Product

• Existing Business vs. New Business– Level of confidence

• Do you have the right people in place?– If no, then…..

• What is your sales expense budget?

Finish your job; people in China is hungry for yours

Projection > Prediction

2008 Gross 2008 2008 net Inc/(Dec) in New (Lost) X Y Z Net 2009Customers Forecast Rebate Forecast Contract Price Program Program Reason Reason Reason Change Budget

ABCDEF

Critical Elements: Surprise and Fulfillment

FGH

Total:

Projection > Prediction

2008 Gross 2008 2008 net Inc/(Dec) in New (Lost) X Y Z Net 2009Products Forecast Rebate Forecast Contract Price ProgramProgram Reason Reason Reason Change Budget

ABCDEF

只要信只要信只要信只要信, 不要問不要問不要問不要問; 我我我我办办办办事事事事,,,, 你放心你放心你放心你放心!?!?!?!?

FGH

Total:

Keep the sales

• Why customers loyal to your company?

• Have you ever got the satisfaction score from your customers?

• How do your customers look at you?• How do your customers look at you?

• Exploration vs. Exploitation– Sales & Marketing / Customer Service

– Product Engineering (PE)

Make your people happy so that they can make your customer happier

Any Derail?

In terms of:

• Products

• Services

• Functions• Functions

Who is going to answer the above question?

3 Stories to share3 Stories to share

Derail because of windfall profit

• Building copper products

• Profit from Hedging of copper commoditycommodity

• Over-trading

Business Longevity

• Manufacturing to Assembly

• Injection, Stamping, Weaving, Electroplating, Processing & final Electroplating, Processing & final Assembly

• Where is the focus?

Trust & Trustworthiness

• What is the basis for trust?

• Check & Balance

• What is the underpinnings of the business?

Agenda








Accounts Receivable

• Examine the current situation

• Spot out the customers

• Review the collection strategy and credit hold policycredit hold policy

• Re-connect with your customers (how much you know them?)

• Create forward-looking credit control policy

• Any way to generate more cash from A/R?

Examine the health of A/R

• A/R Aging Report and its history

Customer Credit Terms Current Over 1 Over 7 Over 30 Over 60 Over 90 Over 120Gross

A/R

Total 0 0 0 0 0 0 0 0

• What is the total overdue debt?

• What is the longest credit terms accepted by the company?

• Any credit terms > the standard term?• Any credit terms > the standard term?

• For customers with overdue debts, do we still release delivery? If yes, why?

• How frequent do you read the aging report?– Monthly? Weekly? Daily? Or Never?

• Cash Projection

Customer Credit Terms Current OverDue D+1wk D+2wk D+3wk D+4wk D+2mth D+3mthCollection according to credit term

Total 0 0 0 0 0 0 0 0

• Performance review of Collection

• Any follow-up actions?

Planned ActualCustomer Credit Terms Current OverDue Collection Collection Difference RemarksCustomer Credit Terms Current OverDue Collection Collection Difference Remarks

Total 0 0 0 0 0

• Forward-looking– Credit Limit Alert Report (Weekly)

• Current Balance + Average Invoice Amount vs. Credit Limit

• Report generated if it exceeds the credit limit, • Report generated if it exceeds the credit limit, alert the customer & salesmen of this would-be credit hold situation

– Know more about your customers• From your salesman & staff

• From your suppliers

• From your competitors

• From your environment

• Local purchased materials for local sales

• Imported materials for export sales

• Consignment– Title of ownership

• Bank Draft

• Fixed cost vs. variable cost with spare capacity

Key Risk Indicators (KRI)

• % of overdue debt / Total A/R

• Top 10 delinquent A/R and amount

• Late Payment customers and amount

• ….• ….

When is AR created?

• Sales on credit– Pass on ownership (擁有權) of the

products

– Pass the ownership risk

• Consignment goods– Pass on custody (保管權) of the products

– Do not pass the ownership risk

Agenda








Inventory Holding

• Inventory Aging Report

HKPCStock Aging ReportAs at Jan 31, 2006

Cur: USD

Items Ttl Amt 0-30 31-60 61-90 91-120 121-150 151-180 181-360 >360Items Ttl Amt 0-30 31-60 61-90 91-120 121-150 151-180 181-360 >360FG 85,546 133,435 (142,168) - - - - - 94,278 Wire 225,292 210,939 2,405 618 129 492 6 150 10,553 Terminal 310,827 195,365 67,066 30,556 2,534 3,611 100 3,169 8,426 Housing 221,425 132,676 49,172 7,675 6,185 9,207 970 5,737 9,803 Electrical parts 103,836 17,170 18,155 3,331 - 41,730 23,431 20 - PVC (Moulding) 45,036 27,769 1,307 227 6,720 - - 8,494 519 Heat shrinkable tubings 38,073 27,844 4,075 - - - 1,395 3,097 1,663 Other 64,652 40,215 14,824 799 2,040 863 363 569 4,979 ---------------------------------- ------------------ ----------------- ------------------ --------------- --------------- ----------------- ----------------- ----------------- ----------------------

Total 1,094,687 785,412 14,836 43,207 17,608 55,903 26,264 21,236 130,221

=================== ========== ========= ========== ======== ========= ========== ========== ========== ============

ACCStock Aging ReportAs at Jan 31, 2006

>360 181-360 151-180 121-150 91-120 61-90 31-60 0-30 0-30 31-60 61-90 91-120 121-150 151-180 181-360 >360Ttl Qty Ucost Ttl Amt

Terminals- - - - 29,028 - 840,000 1,020,000 1,889,028 8911415P01 TERMINAL HEYCO 5703 0.01 23,046 12,444 10,248 - 354 - - - - - - - - - - 676,238 3,020,000 3,696,238 8911409-2C TERMINAL AMP 350536-1 0.00 17,003 13,892 3,111 - - - - - - - - - - 26,003 - 408,000 504,000 938,003 8911415P07 TERMINAL HEYCO5880 0.02 16,321 8,770 7,099 - 452 - - - - - - - - - - 33,242 418,000 451,242 8911404-F1 TERMINAL AMP 2-520334-2 0.03 12,003 11,119 884 - - - - - - - - - - - - 152,340 966,000 1,118,340 TERM403-G81 TERMINAL AMP-JAPAN 170328-1 0.01 10,624 9,177 1,447 - - - - - - - - - - - 2,000,000 - - 2,000,000 A-8911409-2C TERMINAL AMP 350536-1 0.00 9,200 - - 9,200 - - - - - - - - - - - - 246,612 246,612 TERM404-K89 TERMINAL TYCO 521282-1 0.04 8,903 8,903 - - - - - - - - - - - - - 17,878 210,000 227,878 TERM404-6Z TERMINAL ETCO#PDF225FRTHB 0.04 8,887 8,190 697 - - - - - - - - - - - - 5,500 210,000 215,500 TERM404-LP Terminal ETCO PDF224NFRTHB 0.04 8,405 8,190 215 - - - - - - - - - - - - 511,215 138,000 649,215 TERM405-80 TERM,MOLEX,43178-1001 0.01 8,310 1,766 6,544 - - - - - - - - - - - - 511,215 138,000 649,215 TERM405-80 TERM,MOLEX,43178-1001 0.01 8,310 1,766 6,544 - - - - - - - - - - - - - 235,317 235,317 TERM403-5A TERMINAL ETCO#PD260NFRTHB 0.03 7,530 7,530 - - - - - - - - - - - - - 78,481 652,000 730,481 TERM409-P10 TERMIANL JST# SLM-41T-P1.3E 0.01 7,261 6,481 780 - - - - - - - - - - - - - 1,203,768 1,203,768 8911409-TZ TERMINAL AMP 350416-1 0.01 6,380 6,380 - - - - - - - - - - - - 592,875 1,314,000 - 1,906,875 TERM409-DJ MOLEX SOCKET 39-00-0038 0.00 6,293 - 4,336 1,956 - - - - - - - - - - - 389,336 867,500 1,256,836 8911409-F8 TERMINAL AMP 350537-1 0.00 6,033 4,164 1,869 - - - - - - - - - 32,520 - - 216,000 432,000 680,520 TERM408-OW TERMINAL MOLEX 43375-1001 0.01 5,989 3,802 1,901 - - 286 - - - - - - - - - - 296,292 296,292 8911403-I5 TERMINAL AMP 2-520183-2 0.02 5,955 5,955 - - - - - - - - - - - - - 406,662 735,000 1,141,662 TERM406-M63 TERMINAL GEM 99470BS-2 0.01 5,937 3,822 2,115 - - - - - - - - - - - 1,000,000 - - 1,000,000 A-8911409-L2 TERMINAL AMP 350700-1 0.01 5,360 - - 5,360 - - - - - - - - - - - - 792,048 792,048 8911409-K8 TERMINAL AMP 350687-1 0.01 4,831 4,831 - - - - - - - - - - - - - 169,228 592,000 761,228 TERM406-M64 TERMINAL GEM 99475BS-2 0.01 4,720 3,670 1,049 - - - - - - - - - - - 752,000 - - 752,000 A-8911408-A7 TERMINAL AMP 770642-1 0.01 4,437 - - 4,437 - - - - - - - - - - - - 138,260 138,260 TERM403-4D TERMINAL ETCO#PD163NFRTHB 0.03 4,010 4,010 - - - - - - - - - - - - - 57,090 75,000 132,090 TERM408-WF connector plug molex 40-06-20 0.03 3,963 2,250 1,713 - - - - - - - - - - - - 80,177 600,000 680,177 8911409-L2 TERMINAL AMP 350700-1 0.01 3,673 3,240 433 - - - - - - - - - - - - - 124,581 124,581 TERM403-5B TERMINAL ETCO#PD165NFRTHB 0.03 3,613 3,613 - - - - - - - - - - - - - 9,122 93,500 102,622 TERM404-ZK TERMINAL AMP 3-520997-2 0.04 3,612 3,291 321 - - - - - - - - - - - - - 545,335 545,335 8911409-TB TERMINAL AMP 350218-1 0.01 3,545 3,545 - - - - - - - - - - - - 26,754 320,000 80,000 426,754 TERM408-R37 TERM,UTILUX,RE4820501-40 0.01 3,474 651 2,605 218 - - - - - - - - - - - 251 598,500 598,751 8911407-CS TERMINAL AMP 63625-1 0.01 3,353 3,352 1 - - - - - - - - - - - - 185,290 60,000 245,290 TERM405-81 TERM,MOLEX,43178-3001 0.01 3,238 792 2,446 - - - - - - - - - - - - 155,302 152,000 307,302 TERM408-OM TERMINAL MOLEX 43375-0001 0.01 2,612 1,292 1,320 - - - - - - - - - - - 550,000 - - 550,000 A-8911409-F8 TERMINAL AMP 350537-1 0.00 2,591 - - 2,591 - - - - - - - - - - - 88,973 - 88,973 8911404-F9 TERMINAL AMP 2-520128-2 0.03 2,367 - 2,367 - - - - - -

• Clearly identify what inventory can and cannot be used

• Why are there so many unusable inventory?inventory?– Re-visit the planning process…

– Any reward for minimize inventory level without affecting order fulfillment

• Keep it or dispose it? Or sell back to the suppliers

• Deferred customization

Target Inventory

• What is your target inventory level?

• How do you measure it?Dec-03

Stock Value 8,500 Stock Days 91 days

Jan-04 Feb-04 Mar-04 Apr-04Jan-04 Feb-04 Mar-04 Apr-04Cost of Goods Sold 3,253 1,540 3,548 4,500

Stock Value 8,500

Cost of Goods Sold DaysJan-04 3,253 30

------------5,247

Feb-04 1,540 30 ------------

3,707 Mar-04 3,548 30

------------159

Apr-04 4,500 1 ------------ ------------

- 91

Inventory Control

Item A Target I-Week: 2

27-Feb 6-Mar 13-Mar 20-Mar 27-Mar 3-Apr27-Feb 6-Mar 13-Mar 20-Mar 27-Mar 3-AprOpening 300 400 200 580 1,230 1,048 Incoming 600 250 700 1,000 160 480 Requirement 500 450 320 350 342 480 Closing 400 200 580 1,230 1,048 1,048

Inventory Weeks 0.89 0.63 1.67 2.78 2.08 1.88

Tools for reduction

• 7 Waste– Rework

– Excessive Production

– Conveyance

– Excessive Motion

– Waiting

– Inventory in production area (pull system)

– Inappropriate processing

• Reward people for cost saving idea & action

Order Lead Time

• Time from the order placed by your customers to the time you deliver to them

Day - O Day - DDay - O Day - D

Day - O Day - D

Mat

eria

l Ord

er L

ead

Tim

e

Prod

uctio

n L

ead

Tim

e

Del

iver

y L

ead

Tim

e

• Unquestionably, customers prefer short lead time to long

• What is the element in lead time?

• What is the bottleneck?

• How to shorten it?

Inventory

Lead time

• Suppliers– VMI

– Consignment Inventory

– Equalize MOQ to SPQ

– Order cancellation agreement

– Design-in to exploit opportunities

– Be transparent to the suppliers• Come to visit my factories

– Go to visit your suppliers

– Exploit new suppliers

New Project Evaluation …..REQUESTED CAPITAL: 1,547,151 REQUESTED EXPENSE: 62,286

Capacity Expansion: 2008 2009 2010Total Gross Sales 3,930,777 3,930,777 3,930,777 Payment Discount 0.0% - - - Rebate 0.0% - - - Total Net Sales 3,930,777 3,930,777 3,930,777

% Tot Cost % SalesDirect Materials 89.0% 2,797,206 2,797,206 2,797,206 71.2%Material Adders 1.4% 44,755 44,755 44,755 1.1%Labor/Overhead 7.1% 224,044 224,044 224,044 5.7%Logistics/Whse 0.0% - - - 0.0%Import Duties 2.5% 78,616 78,616 78,616 2.0%Total Incremental Cost 100.0% 3,144,621 3,144,621 3,144,621 80.0%

MARGIN on Incremental Sales 786,155 786,155 786,155 786,155 MARGIN % Sales 20.0% 20.0% 20.0% 20.0%

Cost Reduction:Total Cost Reduction - - - Requested Expense 62,286 62,286 62,286 Requested Expense 62,286 62,286 62,286 COMBINED MARGIN 723,869 723,869 723,869

Ul/CSA Expense - SG&A % Sales N/A N/A N/A

EBITDA 723,869 723,869 723,869

Depreciation: (Enter Depreciable Life) -----> 7 221,088 221,088 221,088 Taxable Income 502,781 502,781 502,781Tax Rate 0.00% 12.50% 12.50%Tax Payments 0 62,848 62,848

Working Capital Items: DSO (Enter DSO) -----> 30 (327,565) (327,565) (327,565) Inv Turns-Normal (Enter Inv Turns) -----> 10 (279,721) (279,721) (279,721) Freight (Enter Days in Transit) -----> 7 (61,145) (61,145) (61,145) AP Days (Enter AP Days) -----> 75 582,751 582,751 582,751

Total Working Capital (85,680.0) (85,680.0) (85,680.0)

EBITDA 723,869.0 723,869.0 723,869.0Tax Payments 0.0 (62,848.0) (62,848.0)Working Capital Change (85,680.0) 0.0 0.0NET CASH FLOW (1,547,151) 638,189 661,021 661,021

CASH FLOW ECONOMICS:RRR 13%NPV $ (6,585)IRR 12.8%PAYBACK (Years) 2.4

• Capacity– Indirect labor vs. Direct labor

– Salaried labor vs. Direct & Indirect Labor

• What to save?• What to save?– Let the employees to tell you

– But don’t forget to motivate them

KRI

• Inventory Days

• Obsolete Inventory vs. Inventory Values

• Inventory with days > target• Inventory with days > target

• Order Lead Time

• …..

When to produce for customers?

• Raw Material is converted to Finished Goods

• Conversion cost is labor plus production capacityproduction capacity

�Buying capacity reserve (预订供应商的生产能力)

Working with Customers

The competition

�Better design

�Higher quality�Higher quality

�Faster to market

Value engineering in the supply chain• Share the supplier expertise and obtain long-term relationship


Agenda








Cash CycleCash Cycle

CashDaysCreditors Days

Stock Days Debtors Days

Actual Trends Inventory

DSO

Inventory

Days DPO Cash Cycle

Dec 2007 160 32 85 107

Jan 2008 161 32 75 118

Feb 2008 84 37 88 33

Mar 2008 102 39 88 53

Apr 2008 127 36 93 70

May 2008 85 24 73 37

Jun 2008 83 21 77 27

Jul 2008 82 22 83 20

Aug 2008 80 22 95 7

Sep 2008 104 26 107 22

Cashflow templateCashflow Cur: HKD'000

Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08Net Income 157 (258) 45 22 166 72 57 454 618 489 338 223 Add:

Depreciation 117 117 117 117 117 125 125 125 125 125 125 125

Change of WCA/R (545) 2,172 (1,816) (249) 694 (374) (890) (1,246) (854) 338 890 374 Inventory 1,274 (632) 10 474 (605) (1,160) (1,339) (622) 574 880 453 1,156 A/P (803) (1,233) 784 (702) 380 1,323 1,412 706 (580) (1,063) (579) (1,062) Others

--------- ---------- ---------- --------- ---------- ---------- ---------- ---------- --------- ---------- ---------- ------------------- ---------- ---------- --------- ---------- ---------- ---------- ---------- --------- ---------- ---------- ----------(73) 307 (1,022) (478) 469 (211) (817) (1,162) (860) 155 764 468

Capex - - - - (200) - (1,200) - - - - -

Cash (Surplus)/Loan Required(50) (165) 861 339 (552) 15 1,836 583 118 (769) (1,227) (815)

--------- ---------- ---------- --------- ---------- ---------- ---------- ---------- --------- ---------- ---------- ----------150 - - - - - - - - - - -

Bginning Cash Balance 150 300 300 300 300 300 300 300 300 300 300 300 Net Cashflow 150 - - - - - - - - - - -

Ending Cash Balance 300 300 300 300 300 300 300 300 300 300 300 300 ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====

Sweet lemon; Sour grape!?

Weekly cashflow forecastAsia Harness Week Week 45 Week 46 Week 47 Week 48 Week 49 Week 50 Week 51 Week 52 Week 53 Week 54 Week 55

Actual Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast10/26/08 11/2/08 11/9/08 11/16/08 11/23/08 11/30/08 12/7/08 12/14/08 12/21/08 12/28/08 1/4/09 1/11/09

Beginning Cash 226 226 441 122 422 292 292 58 258 105 146 476

VAT Receipts - - - - - - - - - - - - Other Receipts - Cash Receipts (A/R collections) 100 100 100 10 100 100 100 41 100 138

Total Cash Inflows - 100 100 100 10 - 100 100 100 41 100 138

Cash Payments (A/P Checks and wire transfers) (1,197) (1,919) (1,100) (1,100) (1,277) (1,200) (1,713) (1,000) (1,270) (1,100) Payroll (200) (40) (200) (40) Capital expenditures (188) (57) Other nonworking capital itemsVAT PaymentsTax PaymentsOther PaymentsOther Payments

Total Cash Outflows - (1,385) (1,919) (1,300) (1,140) - (1,334) (1,400) (1,753) (1,000) (1,270) (1,100)

Loan / (Excessive cash) 1,500 1,500 1,500 1,000 1,000 1,500 1,500 1,000 1,500 1,000

Total Intercompany - 1,500 1,500 1,500 1,000 - 1,000 1,500 1,500 1,000 1,500 1,000

Interest - - - - - - - - - - - - Principal - - - - - - - - - - - -

Total Financing - - - - - - - - - - - -

Other - - - - - - - - - - - -

Ending Cash 226 441 122 422 292 292 58 258 105 146 476 514

Weekly Projection

• Cash collection projection

• Cash payment projection– A/P– A/P

• How much to pay and how much be delayed?

• Not a good strategy of always paying your supplier late

– Expenses• On time payroll release is a must!!

– Capex


Agenda








People

• This is you and me that usually expose the company to risky situation

• Why & How?• Why & How?

• Are you using the following assumption:– Manager’s job is to protect the company

from the abuses of the workers?!

Control

The Self

The Employee

Make your people happy so that they can make your customer happier

The environment

• Am I the only one that knows the company and its business?

• Do I welcome opposite comment?

• Do I continuously ask for negative • Do I continuously ask for negative opinion?

• Do I reward people for preventing me from doing bad deal which I originally thought it was good?

• How do I describe “Luck”?

• There is no repeated fluke

• Goodness & badness co-exist (yin & yang)

• The value of devil advocate (loyal • The value of devil advocate (loyal opposition)

• The underlying principles of running the existing business

• The line between acceptable & unacceptable behavior

曲突徙薪亡恩澤曲突徙薪亡恩澤曲突徙薪亡恩澤曲突徙薪亡恩澤，，，，燋頭爛額為上客燋頭爛額為上客燋頭爛額為上客燋頭爛額為上客

• Belief Systems– Systems to articulate the values and

direction that senior managers want their employees to embrace

– Draw employees’ attention to key tenets of – Draw employees’ attention to key tenets of to business:

• how the organization creates value

• The level of performance the organization strives for

• And how individuals are expected to manage both internal & external relationships

What is your organization risk appetite?

• Boundary Systems– Management principle: power of negative

thinking, minimum standards

– Tell people what not to do only and let them figure out what to dothem figure out what to do

– Of particular value when employees under pressures to achieve superior results being collided with stricter codes of behavior

Profit prioritize or Growth prioritize?

Who knows your business?

• Yourself

• Your employees

• Your suppliers

• Your customers• Your customers

• Your bankers

• Your competitors

• But not your investment consultants

上下同欲者勝上下同欲者勝上下同欲者勝上下同欲者勝

It is all a matter of TRUST!

Trust

You & Your Business

But, why should I believe you?

Trust

Trust

• Is myself trustworthy?– To the bank and to the employees?

• Is my business trustworthy?

• Is my business philosophy trustworthy?• Is my business philosophy trustworthy?

• Do I trust my employees?

• Do my employees trust me?

• How do I earn the trust?

• ………….

Some sidetrack

Trust:

• I cannot ask for it

• I can accept being trusted or give trust

• When I trust, I expect something • When I trust, I expect something happen

• When I trust, I take the risk

• It liberates and mobilizes human agency, release creative, uninhibited, innovative, entrepreneurial activism toward other people

To be trustworthy

• I need to be financially healthy– proved by the Balance Sheet & PNL

• I need to meet the expectation of the creditors, suppliers, customers & creditors, suppliers, customers & employees

• I need to be consistent with what I said and intended to do

Risk vs. Uncertainty

• Risk: I do not know the future

• Do I create uncertainty?

• Why?

Transparency - GIVE

• Goals

• Identity

• Values

• Emotion

5 R – Cost saving strategy

• Remove– Why does a particular expense need to

incur? Is there a way to totally remove this expense?

• Replace• Replace– If not possible to remove this expense, can

we replace the function with a cheaper one?

One to say Yes, Two to say No.

• Reduce– If not possible to remove it, is there a way

to reduce the spending?

– We should think about request for price reduction from supplier or source reduction from supplier or source alternative supplier.

There is no repeated fluke!

• Redesign– If not possible to reduce, can we re-design the

process to utilize the scarce resources?

– Kaizen should be a continuous process.

– There should be a regular review of existing – There should be a regular review of existing process by freshman.

– The old process creator should only act as a information provider but not member of new Kaizen group.

沒有最好沒有最好沒有最好沒有最好只有更好只有更好只有更好只有更好

• Redistribute– If not possible to redesign the process, can

we have the function to share its value to different functional area as well as the cost?cost?

– Maximization subject to constraint is maxim not only in economics but also in cost saving perspective.

Great intelligence comes from heart, not mind

How to pay your staff

• Buy their time or their talent

• Treat them as staff or “working partner”

• Pay by fixed or portion in variable

YOUR STAFF ARE THE ONES DOING THE BUSINESS & GENERATING THE INCOMES

墨子墨子墨子墨子 –修身編修身編修身編修身編

• 志不强者智不达；言不信者行不果志不强者智不达；言不信者行不果志不强者智不达；言不信者行不果志不强者智不达；言不信者行不果

• 行不信者，名必耗。名不徒生，而誉不自长行不信者，名必耗。名不徒生，而誉不自长行不信者，名必耗。名不徒生，而誉不自长行不信者，名必耗。名不徒生，而誉不自长

• 务言而缓行，虽辩必不听务言而缓行，虽辩必不听务言而缓行，虽辩必不听务言而缓行，虽辩必不听• 务言而缓行，虽辩必不听务言而缓行，虽辩必不听务言而缓行，虽辩必不听务言而缓行，虽辩必不听

• 言无务多而务为智，无务为文而务为察言无务多而务为智，无务为文而务为察言无务多而务为智，无务为文而务为察言无务多而务为智，无务为文而务为察

• 善无主于心者不留，行莫辩于身者不立善无主于心者不留，行莫辩于身者不立善无主于心者不留，行莫辩于身者不立善无主于心者不留，行莫辩于身者不立

• 名不可简而成也，誉不可巧而立也名不可简而成也，誉不可巧而立也名不可简而成也，誉不可巧而立也名不可简而成也，誉不可巧而立也


Agenda






6. Risk management: cash


No wastage

Utilize resources

especially those unrecorded

人事personnel

人力資源human

resources

人力資本human capital

Devil Advocate

• Who are they?

• Where are they?

• When do we need them?

• Financial risk management is not the • Financial risk management is not the sole responsibility of Finance Department, rather, every operation departments

Maxim

• I only earn money by manufacturing– Better quality

– Lower price

– Higher productivity

– Higher return on lower equity capital

– And nothing more….

Do not only use memory

• The financial accounts remind you and give you an objective view

• Ask your Finance staff to explain• Ask your Finance staff to explain

• Demand your Finance team to provide management accounting information

Be focus

• Core competence

• What is your strength?– You can think more but you can only do – You can think more but you can only do

little

• Legal entity concept

Avoid Over-Trade

• Wear the right hat

• Continuous checking the size of your head and the size of your hathead and the size of your hat

• the measuring tools are – management accounting reports

– numeric analysis from your finance staff

– Regular meetings with management team

• Trust– Build the atmosphere of entrust

• Transparency– Everyone knows the norm, the way and its – Everyone knows the norm, the way and its

rationale within the organization explicitly

• Social Capital– Well-connected within the organization

Power

• How to demonstrate power?

• People who have it deny it

• People who want it try not to appear to be seeking itbe seeking it

• People who are good at getting it are secretive about how they got it

• People who have it may not know how they got it, and they do not know when they will lose it

The critical is• Why don’t you define power explicitly?

– Knowledge and application is power

– Execution is power

– Power ≠ Complacency

– Power ≠ One voice– Power ≠ One voice

– Power ≠ Unidirectional communication

– Power ≠ Blind compliance

– Power ≈ Influence

– Power ≈ Humility

– Power ≈ Collaboration

– Power ≈ ……..

To be an authentic leader

• Be bold to face our fears

• Ready to challenge our assumptions

• Be able to change our self-perception

• Empowered to get the intelligence of • Empowered to get the intelligence of everybody, not from thyself

Managing others by defining Yourself

The intelligence to raise Question

Techniques

• 5-Why

• Not a shame if not knowing the answer, what critical is no pretense of what critical is no pretense of knowledge

• Extend the base of knowledge providers

• Empathy

• No rush for perfect answer

Management By Question

Business takes risks,

But measurement risksBut measurement risks

Date post:	24-Dec-2014
Category:	Business
Upload:	dick-lam
View:	1,117 times
Download:	1 times