Profitability analysis based on production improvements in the electronics manufacturing industry

Paper in proceeding, 2011

A method for analysing a factory’s profitability was developed to gain an understanding of how to improve the competitiveness of the Swedish electronics manufacturing industry. Profitability is chosen as it is one of the most important factors for success and survival in a single factory perspective. Profitability can be improved through increased profit margin (sales in relation to costs) combined with increased capital turnover rate. This can be analysed using the Du Pont method. The novelty of this research project is the combination of Du Pont and factory floor production engineering improvements. The relation between production improvements and financial effects is complex, and the method used to attack the problem is to analyse the productivity potential and how it relates to costs and tied up capital. The analysis builds upon the Productivity Potential Assessment (PPA) method and the focus is on making a relatively fast and cost effective analysis of the factory.