Monitor Your Raw Material, Inventory & Receivables

At one of our customers place, a board is seen 'Raw Material is also bought by giving money! Don't waste it'. At one of the companies where I worked, it's Chairman said in a meeting, 'If you see iron ore particles or coke particles going up in air, you should see money going up in air'. It is not normal to associate your raw material with money, but think about it. You pay your raw material supplier. Agreed that it is quite low in value with respect to the goods that you prepare out of it. But still you can see a lot of money is wasted in the raw material. Then there is other thing called inventory. Normally, we associate this word inventory with the material 'Ready For Dispatch'.

We do planning for our inventory. But many a times, there are products which need to be made as per customer request. But the quantity is not enough. At times it happens, that the schedule is less, but still production is taken as there are no more products lined up for production. And then comes the time, that there are no takers for the inventory. This inventory gets stuck up. You do not see any movement in this inventory. Regular cleaning of your factory place will give you many such products which have been lying idle. Don't see the parts, products there. See money. See that your money is blocked in that product. If your view to look at your product changes, your life will change. Instead of looking at the physical size & shape of the product, you should look the equivalent of money. You will get a solution in some time for that.

Monitoring of the Receivables is similar to monitoring of physical money. You need to monitor receivables, simply to see who has been using your money. There are times when you have low businesses and at such times it is better to concentrate on business. But you need to look for people who are using your money and paying up late. With some customers, they have their own accounting practice. Their accounts will release money when it is due. For some customers, they are more owner oriented. They will normally give only when you ask. For others, situation is worst. They will not give money even after asking many times. And when you see the money coming, it is ultimately their immediate requirement of parts which brought the money in. You need to recognize the customer type and ask money accordingly.