Business Case: Manufacturing

Manufacturing

Result: Released $420K to $1M in trapped cash by improving unit economics and inventory discipline

The situation
The manufacturer was profitable on paper but constantly tight on cash. Inventory levels were high, production schedules were misaligned with demand, and margins varied widely by product line. Industry data shows that many discrete manufacturers carry 80 to 110 days in their cash conversion cycle, while better run operators compress this into the 40 to 60 day range by managing inventory and unit level profitability more tightly.

What we did
We applied the CFO Practice unit economics method at the product level, tied directly to inventory behavior.

How it worked step by step

1. Calculated true unit cost by product including materials, labor, machine time, and scrap

2. Measured contribution margin per product instead of blended gross margin

3. Identified low margin products consuming disproportionate production capacity

4. Linked production scheduling to unit level profitability, not just backlog

5. Reduced build quantities on slow moving and low margin SKUs