Saturday, November 24, 2018

Beach Metrics

Just like beach muscles, which look good but don't do much to make a person stronger or healthier, there are lots of beach metrics in running a factory. Here are a few:

1. Number of employees
2. Square footage of a factory
3. Top Line revenues
4. Amount of product made
5. Number of customers
6. Amount of inventory on hand

It’s easy to see some of these business metrics and assume someone else's business is going well. But increasing these metrics can be either wonderful or a disaster for a factory, depending on the circumstances. Increasing the number of employees without increasing sales or revenue simply adds cost to the business. Moving to a larger factory space could be as much due to mismanagement of inventory and space as an actual increase in sales and throughput. These kinds of metrics are easy to quote to others, easier than sharing net margins, throughput per employee, total profits, or whether the owner is drawing a reasonable salary from the business.

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