Being a numbers-driven manufacturing CFO is a good thing—in fact, it’s essential. But as a CFO, you probably know finance and operations more than you know the ins and outs of manufacturing, which can lead you to measuring the wrong key performance metrics.

Here are five costly manufacturing mistakes to avoid.

Mistake No. 1: Using inventory costs as primary driver for manufacturing performance

CFOs often want to drive down inventory costs to free up cash flow. On the surface, that strategy makes sense. However, what happens in the real world is that employees meet the mandate, but miss getting the inventory mix right. Employees may not be aware of all the bill-of-material needs and supplier lead times. Your company risks losing more money than you save when you can’t meet the production schedule because you don’t have the right parts in stock. High expediting costs for parts delivery and then customer shipments are symptoms of having inventory not right-sized to your actual use. Instead of measuring on inventory cost, use tools to forecast the right inventory mix and safety stock you need to keep your plant running smoothly.

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