KIE Factory Stories: Why Did the Customer Pay for a Product That the Factory Never Made?

The Finance Manager was reviewing the monthly production report when he noticed something unusual.

The factory had purchased enough raw material for 10,000 units.

But only 9,200 units had been shipped.

“Where are the remaining 800 units?” he asked.

The Production Manager checked the records.

There were no major quality issues.

No unusual machine breakdowns.

No shortage of manpower.

So where had the material gone?

The team started tracing it.

They found that some material had been cut incorrectly.

Some was damaged during handling.

Some was left over from production batches and could not be used for the next order.

And some had been issued to production without proper recording.

Individually, these losses looked small.

Together, they represented a significant amount of money.

The factory introduced better material tracking, improved cutting plans and stricter control over material movement.

The next month, material consumption dropped without reducing production output.

This is the importance of Material Yield and Material Utilization.

Buying material is only the beginning. A factory must also understand how much purchased material actually becomes saleable product.

Profit can disappear long before a product reaches the customer.

Don’t just measure what you buy. Measure what you actually get from it.