Working Capital in Lean Manufacturing
By: Dominic Doruem Nwagbaraocha
I was discussing this with a business owner in the manufacturing sector and his challenge was keeping operations running (working capital challenges), and I simply asked him to go lean.
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Working capital represents short-term assets available to a business for meeting financial obligations such as payroll, creditors and suppliers. One accounting description is when net working capital equals current assets minus current liabilities. When this is a negative number, the business should be alert for near-term cash flow problems.
In a country like Nigeria, working capital one big challenge looking at our economy, at times like this you will see the benefits of lean management for improving liquidity and cash flow.
A lean manufacturer has a goal of reducing waste and unnecessary costs throughout the manufacturing process.
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Reducing costs might not be enough to maintain positive cash flow for a manufacturer.
So, start by;
- Institute a project team to identify and eliminate wastes identified.
- Waste in the process could be any of these; Transportation, Inventory, Motion, Waiting, Overproduction, Over processing, Defects and unutilized man power.
Looking at the picture below, opportunities for waste reduction would be in inventory and utilities, this will in turn increase working capital.
Take a finance course no matter your function it helps you in conversations on that table, you would make the right contributions and be looked at differently.
Click Here to Download Readymade Editable Toolkits & Templates on Quality Assurance/Quality Control, Lean Six Sigma, Lean Manufacturing, Six Sigma, ISO 9001, ISO 14001, ISO 22000, ISO 45001, FSSC 22000, HSSE, Project Management etc.
Dominic is a process & quality consultant with over 10 years’ experience leading various continuous improvement in world-class organizations. founder of Doruem Process Services and Co-Founder to Nodal Point Engineering, with core competence in manufacturing excellence and digital manufacturing.
You can reach him on LinkedIn here.
