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Understanding the Basics of the Business of Manufacturing

Learning how money flows through an organization is important to a successful career in the industry.

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Modern manufacturing is a knowledge business. It is not the dark, dirty, and dangerous environment of yesteryear that many still perceive it to be. Today’s factory floors are shiny, sanitary, and safe. And in this knowledge-based environment, manufacturers are looking for people who use creativity and insight to improve processes. But that kind of business acumen only comes with understanding the bottom line.

Recognizing how money flows through a manufacturing company is important to a successful career in the industry—regardless of position or title.  “From getting an order to designing a product to getting it through the process of planning, production, packaging, distribution, and delivering it to the customer, it’s important to understand the fundamentals of how product flows through the supply chain,” said Robert Hersh, a partner in Grant Thornton’s east region business advisory services, who is also the national managing principal of the manufacturing industry practice.

Grant Thornton is an audit, tax, and advisory professional service for a wide variety of industries which includes manufacturing. Even with in-depth knowledge of manufacturing, Hersh has established an internal program for all of the company’s own professionals in the manufacturing practice to go through 17 to 20 hours of fundamental manufacturing training, outlining how money flows through the entire process from the supply chain to the factory.Robert Hersh is a partner in Grant Thornton's east region Business Advisory Service practice and the national managing principal of the manufacturing industry.Robert Hersh is a partner in Grant Thornton's east region Business Advisory Service practice and the national managing principal of the manufacturing industry.

According to Hersh, it’s a good exercise for any manufacturing organization, because even high-level executives who have been in the industry for a long time can learn something. Whether you’re a machine operator or a CEO, the most important quality a person can have in manufacturing today is intellectual curiosity.

“That inquisitiveness and understanding that you never know everything is important,” Hersh said. “And intellectual curiosity goes beyond the basic skills, especially in manufacturing, because things are changing so fast.”

Hersh’s advice for a young professional coming in to the industry is to understand the basics. You have to understand that you source parts, you get them into a warehouse, you issue the parts to a work order, that work order goes to finished goods, which is then sold or distributed. “Understanding that transaction flow is really important. I run into a lot of young professionals that think making something is easy, but there is a disciplined process that you have to go through.”

The ABCs of EBITDA – Do Your Homework

Unless you’re working in the finance department, you don’t need to understand all the implications of earnings before interest, taxes, depreciation, and amortization (EBITDA), but you do need to comprehend the basics of a balance sheet, including cash flow and profit and loss, which overtime will lead to the nuances of manufacturing. A product designer, for example, shouldn’t over-engineer a product, which can create waste in the process.

Individuals also need to reach out internally to create trusted relationships with different departments. “You don’t learn this stuff by reading it in a book, you learn it be practicing and creating relationships with professionals in the organization,” Hersh explained.Getty Images EbitdaGetty Images

Build trust with others and don’t be afraid to ask questions. “That personal interaction is really important. Don’t be afraid to ask questions to people outside of your silo. People appreciate when you are intellectually curious.”

You don’t have to be an EBITDA expert, but you can do your own research. LinkedIn groups, podcasts, whitepapers, and asking the questions to the right person, are all important avenues leading to the baseline business acumen that will help anyone starting a career in manufacturing.

And remember, it’s about continuously educating yourself.  “Keep your fingers on the pulse of what is going on in the industry and how it is changing,” Hersh advised. “Understand what’s coming down the road in terms of the new disruptions that manufacturers will have to deal with.  Do your homework and have a point of view on those things.”

 

This article is part of the digital resource, Voices of Women in Packaging and Processing, provided by PMMI’s Packaging & Processing Women’s Leadership Network (PPWLN) and the OPX Leadership Network. Click here to download the full document.

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