Risk Management For Manufacturing
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Risk Management For Manufacturing

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more focus on qualitative management factors and construction of social capital within organization

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Risk Management For Manufacturing Risk Management For Manufacturing Presentation Transcript

  • Risk Management for Manufacturing By Dick Lam May 9, 2009 Hong Kong
  • Financial Crisis
  • Gordon Brown, 23 November 2008 CUT VAT by 2.5 per cent to encourage consumer spending. I'll give help when INCREASE the state pension by between £4 and £5 a you need it 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 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. View slide
  • 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 and other technologies designed to pay for themselves in the long run quot;will be about $500 billionquot; View slide
  • George Bush, 25 November 2008 • US$800 billion to be spent • unfreeze credit on student loans, credit cards and car loans be returned to normal levels • stabilize the system and support the lending that is vital to our economy
  • 金融海嘯下的日子…… 美國人賣血賣精子過活 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 )。 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. • 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 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 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 risks
  • Agenda 1. Financial body check-up 2. Re-identification of core competence 3. Risk management: A/R 4. 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 • dicklam128@hotmail.com
  • Agenda 1. Financial body check-up 2. Re-identification of core competence 3. Risk management: A/R 4. Risk management: Production & Inventory 5. Risk management: Cash 6. Risk management: People 7. In-depth meaning on Risk Management
  • What “finance 財務” means? 管理會計 Management Accounting 財務會計 財務學 Financial Corporate Accounting Finance
  • Relationship between Financial System and Financial Reports 會計系統 accounting system 管理會計 Management Accounting 財務會計 Financial Accounting
  • NOW Know the Present, Know what you “really” have
  • Balance Sheet 營業額 銷售成本 流動 毛利 銷售費用 管理費用 營業利潤 流動 財務費用 稅前利潤 所得稅 長期 資產 負債 稅後利潤 股息 資本 本年保留利潤 固定 盈餘 股本 At a particular time
  • Balance Sheet 流動 流動 長期 資產 負債 資本 固定 盈餘 平衡點 股本
  • Balance Sheet Assets 銀行結餘 應收帳款 存貨 流動 投資 設備 固定 廠房 商譽
  • Balance Sheet Assets 自我控制 銀行結餘 應收帳款 存貨 流動 資產隨時可以 投資 增值或縮水 設備 固定 廠房 商譽
  • Value of Assets 遊戲規則 Rules of Game? 市場價格 market price 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 自我控制 銀行結餘 應收帳款 存貨 流動 投資 設備 固定 廠房 商譽
  • Operation, Investment & Arbitration 營運,投資與投機 我的控制能力有多少? 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 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 歷史價值 historical value 變現價值 net realizable value 半成品 WIP 使用價值 usable value 原材料 R/M 投資物 Investment
  • PAST
  • Profit & Loss A/C 營業額 銷售成本 毛利 銷售費用 管理費用 營業利潤 財務費用 For a period of times 稅前利潤 所得稅 稅後利潤 股息 本年保留利潤
  • Profit & Loss A/C 營業額 銷售成本 公司整體表現 毛利 Overall company performance 銷售費用
  • A Paradox of Pricing Formula • Price = Unit Cost + Mark-up % • Cost: Variable Cost, Fixed cost • Variable Cost: more output, fixed unit cost • 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 審核核心競爭力 – Quantity core competence – unit price 發現浪費 wastage – cost elements
  • 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 利润 现金 ===== PROFIT CASH
  • The Future Forecast Cash Flow Statement 現金流量表 賒銷 估算 信貸 credit 晚點再討論
  • People we face 供應商 supplier 員工 staff 客戶 Customer
  • Decision & Behavior Model 預估結果 他人經歷 Expected result Others experience 自身體驗 行為 實際結果 Self feeling behavior Actual result 本身經歷 Self experience 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 Discussion
  • Agenda 1. Financial body check-up 2. Re-identification of core competence 3. Risk management: A/R 4. Risk management: Production & Inventory 5. Risk management: Cash 6. Risk management: People 7. In-depth meaning on Risk Management
  • What is your core competence? • Product vs. Service • Product Design? • Quality? • 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 2009 Customers Forecast Rebate Forecast Contract Price Program Program Reason Reason Reason Change Budget A B C D E F G H Total: Critical Elements: Surprise and Fulfillment
  • Projection > Prediction 2008 Gross 2008 2008 net Inc/(Dec) in New (Lost) X Y Z Net 2009 Products Forecast Rebate Forecast Contract Price Program Program Reason Reason Reason Change Budget A B C D E F G H Total: 只要信, 不要問; 我办事, 你放心!? 只要信 不要問 你放心!?
  • 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? • 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 Who is going to answer the above question?
  • 3 Stories to share
  • Derail because of windfall profit • Building copper products • Profit from Hedging of copper commodity • Over-trading
  • Business Longevity • Manufacturing to Assembly • Injection, Stamping, Weaving, 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 1. Financial body check-up 2. Re-identification of core competence 3. Risk management: A/R 4. Risk management: Production & Inventory 5. Risk management: Cash 6. Risk management: People 7. In-depth meaning on Risk Management
  • Accounts Receivable • Examine the current situation • Spot out the customers • Review the collection strategy and credit 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 Gross A/R Customer Credit Terms Current Over 1 Over 7 Over 30 Over 60 Over 90 Over 120 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? • 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 Collection according to credit term D+1wk D+2wk D+3wk D+4wk D+2mth D+3mth Customer Credit Terms Current OverDue Total 0 0 0 0 0 0 0 0
  • • Performance review of Collection • Any follow-up actions? Planned Actual Customer 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, 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 1. Financial body check-up 2. Re-identification of core competence 3. Risk management: A/R 4. Risk management: Production & Inventory 5. Risk management: Cash 6. Risk management: People 7. In-depth meaning on Risk Management
  • Inventory Holding • Inventory Aging Report HKPC Stock Aging Report As at Jan 31, 2006 Cur: USD Items Ttl Amt 0-30 31-60 61-90 91-120 121-150 151-180 181-360 >360 FG 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 =================== ========== ========= ========== ======== ========= ========== ========== ========== ============
  • ACC Stock Aging Report As 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 >360 Ttl Qty Ucost Ttl Amt Terminals 1,889,028 0.01 23,046 - - - - 29,028 - 840,000 1,020,000 8911415P01 TERMINAL HEYCO 5703 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 - - - - - - 938,003 0.02 16,321 - - - - 26,003 - 408,000 504,000 8911415P07 TERMINAL HEYCO5880 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 - - - - - - 1,118,340 0.01 10,624 - - - - - - 152,340 966,000 TERM403-G81 TERMINAL AMP-JAPAN 170328-1 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 0.04 8,903 - - - - - - - 246,612 TERM404-K89 TERMINAL TYCO 521282-1 8,903 - - - - - - - 227,878 0.04 8,887 - - - - - - 17,878 210,000 TERM404-6Z TERMINAL ETCO#PDF225FRTHB 8,190 697 - - - - - - 215,500 0.04 8,405 - - - - - - 5,500 210,000 TERM404-LP Terminal ETCO PDF224NFRTHB 8,190 215 - - - - - - 649,215 0.01 8,310 - - - - - - 511,215 138,000 TERM405-80 TERM,MOLEX,43178-1001 1,766 6,544 - - - - - - - - - - - - - 235,317 235,317 TERM403-5A TERMINAL ETCO#PD260NFRTHB 0.03 7,530 7,530 - - - - - - - 730,481 0.01 7,261 - - - - - - 78,481 652,000 TERM409-P10 TERMIANL JST# SLM-41T-P1.3E 6,481 780 - - - - - - - - - - - - - 1,203,768 1,203,768 8911409-TZ TERMINAL AMP 350416-1 0.01 6,380 6,380 - - - - - - - 1,906,875 0.00 6,293 - - - - - 592,875 1,314,000 - TERM409-DJ MOLEX SOCKET 39-00-0038 - 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 - - - - - - 680,520 0.01 5,989 - - - 32,520 - - 216,000 432,000 TERM408-OW TERMINAL MOLEX 43375-1001 3,802 1,901 - - 286 - - - - - - - - - - 296,292 296,292 8911403-I5 TERMINAL AMP 2-520183-2 0.02 5,955 5,955 - - - - - - - 1,141,662 0.01 5,937 - - - - - - 406,662 735,000 TERM406-M63 TERMINAL GEM 99470BS-2 3,822 2,115 - - - - - - 1,000,000 0.01 5,360 - - - - - 1,000,000 - - A-8911409-L2 TERMINAL AMP 350700-1 - - 5,360 - - - - - 792,048 0.01 4,831 - - - - - - - 792,048 8911409-K8 TERMINAL AMP 350687-1 4,831 - - - - - - - 761,228 0.01 4,720 - - - - - - 169,228 592,000 TERM406-M64 TERMINAL GEM 99475BS-2 3,670 1,049 - - - - - - - - - - - 752,000 - - 752,000 A-8911408-A7 TERMINAL AMP 770642-1 0.01 4,437 - - 4,437 - - - - - 138,260 0.03 4,010 - - - - - - - 138,260 TERM403-4D TERMINAL ETCO#PD163NFRTHB 4,010 - - - - - - - - - - - - - 57,090 75,000 132,090 TERM408-WF connector plug molex 40-06-20 0.03 3,963 2,250 1,713 - - - - - - 680,177 0.01 3,673 - - - - - - 80,177 600,000 8911409-L2 TERMINAL AMP 350700-1 3,240 433 - - - - - - - - - - - - - 124,581 124,581 TERM403-5B TERMINAL ETCO#PD165NFRTHB 0.03 3,613 3,613 - - - - - - - 102,622 0.04 3,612 - - - - - - 9,122 93,500 TERM404-ZK TERMINAL AMP 3-520997-2 3,291 321 - - - - - - - - - - - - - 545,335 545,335 8911409-TB TERMINAL AMP 350218-1 0.01 3,545 3,545 - - - - - - - 426,754 0.01 3,474 - - - - - 26,754 320,000 80,000 TERM408-R37 TERM,UTILUX,RE4820501-40 651 2,605 218 - - - - - - - - - - - 251 598,500 598,751 8911407-CS TERMINAL AMP 63625-1 0.01 3,353 3,352 1 - - - - - - 245,290 0.01 3,238 - - - - - - 185,290 60,000 TERM405-81 TERM,MOLEX,43178-3001 792 2,446 - - - - - - 307,302 0.01 2,612 - - - - - - 155,302 152,000 TERM408-OM TERMINAL MOLEX 43375-0001 1,292 1,320 - - - - - - - - - - - 550,000 - - 550,000 A-8911409-F8 TERMINAL AMP 350537-1 0.00 2,591 - - 2,591 - - - - - 88,973 0.03 2,367 - - - - - - 88,973 - 8911404-F9 TERMINAL AMP 2-520128-2 - 2,367 - - - - - -
  • • Clearly identify what inventory can and cannot be used • Why are there so many unusable 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-04 Cost of Goods Sold 3,253 1,540 3,548 4,500 Stock Value 8,500 Cost of Goods Sold Days Jan-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 Target I-Week: 2 Item A 27-Feb 6-Mar 13-Mar 20-Mar 27-Mar 3-Apr Opening 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 - D Day - O Day - D e d Tim Time me r Lea ad Ti Lead Orde ry Le ction rial e Produ Deliv Mate
  • • 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 2010 3,930,777 3,930,777 3,930,777 Total Gross Sales 0.0% - - - Payment Discount 0.0% - - - Rebate 3,930,777 3,930,777 3,930,777 Total Net Sales % Tot Cost % Sales 89.0% 2,797,206 2,797,206 2,797,206 71.2% Direct Materials 1.4% 44,755 44,755 44,755 1.1% Material Adders 7.1% 224,044 224,044 224,044 5.7% Labor/Overhead 0.0% - - - 0.0% Logistics/Whse 2.5% 78,616 78,616 78,616 2.0% Import Duties 100.0% 80.0% Total Incremental Cost 3,144,621 3,144,621 3,144,621 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 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 502,781 502,781 502,781 Tax Rate 0.00% 12.50% 12.50% Tax Payments 0 62,848 62,848 Working Capital Items: DSO (Enter DSO) -----> (327,565) (327,565) (327,565) 30 Inv Turns-Normal (Enter Inv Turns) -----> (279,721) (279,721) (279,721) 10 Freight (Enter Days in Transit) -----> (61,145) (61,145) (61,145) 7 AP Days (Enter AP Days) -----> 582,751 582,751 582,751 75 Total Working Capital (85,680.0) (85,680.0) (85,680.0) EBITDA 723,869.0 723,869.0 723,869.0 Tax Payments 0.0 (62,848.0) (62,848.0) Working Capital Change (85,680.0) 0.0 0.0 NET 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? – 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 • Order Lead Time • …..
  • When to produce for customers? • Raw Material is converted to Finished Goods • Conversion cost is labor plus production capacity Buying capacity reserve (预订供应商 的生产能力)
  • Working with Customers The competition Better design Higher quality Faster to market Value engineering in the supply chain • Share the supplier expertise and obtain long-term relationship
  • Pause for Discussion
  • Agenda 1. Financial body check-up 2. Re-identification of core competence 3. Risk management: A/R 4. Risk management: Production & Inventory 5. Risk management: Cash 6. Risk management: People 7. In-depth meaning on Risk Management
  • Cash Cycle Stock Days Debtors Days Cash Cycle Cash Creditors Days Days Actual Trends Inventory DSO 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 template Cashflow 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-08 Net 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 WC A/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 forecast Asia 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 Forecast 10/26/08 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 items VAT Payments Tax Payments Other 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 • 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
  • Pause for Discussion
  • Agenda 1. Financial body check-up 2. Re-identification of core competence 3. Risk management: A/R 4. Risk management: Production & Inventory 5. Risk management: Cash 6. Risk management: People 7. In-depth meaning on Risk Management
  • People • This is you and me that usually expose the company to risky situation • 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 The environment Make your people happy so that they can make your customer happier
  • • Am I the only one that knows the company and its business? • Do I welcome opposite comment? • 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 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,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 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 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 bankers • Your competitors • But not your investment consultants 上下同欲者勝
  • It is all a matter of TRUST! Trust You & Your Business Trust But, why should I believe you?
  • Trust • Is myself trustworthy? – To the bank and to the employees? • Is my business 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 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 & 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 – 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 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 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 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? – 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 – 修身編 • 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 • 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 • 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
  • Pause for Discussion
  • Agenda 1. Financial body check-up 2. Re-identification of core competence 3. Risk management: A/R 4. Risk management: Production & Inventory 5. Risk management: People 6. Risk management: cash 7. In-depth meaning on Risk Management
  • No wastage Utilize resources especially those unrecorded 人力資源 人事 人力資本 human personnel human capital resources
  • Devil Advocate • Who are they? • Where are they? • When do we need them? • 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 • 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 little • Legal entity concept
  • Avoid Over-Trade • Wear the right hat • Continuous checking the size of your head 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 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 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 ≠ 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 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 knowledge • Extend the base of knowledge providers • Empathy • No rush for perfect answer Management By Question
  • Business takes risks, But measurement risks