How Company Finances Inform Manufacturing Operations

You may not initially see a strong connection between a manufacturing plant’s operations and its financial executives. However, there’s a more prominent link between those things than many people realize. 

Financial Decision-Makers Want Appropriate Inventory Levels

Inventory levels heavily influence what happens on a factory floor. For example, when certain items are in high demand and it’s difficult to keep them in stock for clients, manufacturers may focus on sourcing those as quickly as possible. 

Conversely, issues exist if you have too much slow-moving or stagnant inventory. It takes up space and doesn’t contribute enough to the bottom line. Thus, a manufacturer’s financial team becomes concerned with having just the right amount of inventory available or at least getting as close as possible to that goal. 

Long Cycle Times Become Unsustainable 

Even if a company’s financial team spends very little time observing an assembly line, they care about a plant’s cycle times. If equipment remains idle for too long, the factory falls too short of its full potential. 

Similarly, if a manufacturing leader cannot set appropriate expectations for customers, those clients will eventually look elsewhere to have their needs met. Consider a scenario where a facility manager tells a client they can fulfill an order in three weeks, but it actually takes twice that long.

Long cycle times are probably not fully to blame for such an issue, but any delays help give the impression that a factory is not sufficiently reliable. If that happens, a company could experience financial struggles in a continually competitive marketplace. 

Financial Experts Can Steer a Company’s Growth

Manufacturers often reach a point where it becomes feasible to expand operations into other countries. Sometimes, it’s most cost-effective to outsource to providers in distant nations, which can help with a manufacturer’s budgeting needs.  However, it’s often more difficult to oversee quality control as production expands like that. 

Financial professionals can give useful guidance about whether a company should rely on foreign supply chain support or build its own factories in other countries. They can give input on the overall cost-benefit ratio, increasing the chances that business leaders facilitating an organization’s growth make the most appropriate decisions. 

These are some of the main ways that financial experts influence what happens at a manufacturing plant. However, you’ll almost certainly encounter additional instances. For example, people who monitor a company’s finances can give advice about whether a plant manager should lease equipment or buy it new. In any case, financial professionals help the world’s factories remain profitable.