Huge Cost Savings upon Financial System in Manufacturing Michael Li (Yong-Ming) +86-13862621022, mliym@163.com There are many methodologies aiming at how to make huge cost savings, in the world. However, since these methodologies are not upon the financial system in manufacturing, the huge costs saved are not payable by banks. A new methodology is proposed herewith, which is strictly upon financial system in manufacturing, and therefore, the huge costs saved are payable by banks anytime, anywhere. Also, some critical disadvantages, risky mistakes, and negative effects, of some typical cost saving methodologies (like: 6 Sigma and Lean Manufacturing) are exposed. So, here is an alert to all manufacturers. Innovation The present situations: A percentage of capitals (say: millions of US$) disappears during manufacturing unconsciously, if the material scrap rate is higher than 1% in a middle manufacturer . The 2 systems (the finance system and the quality system) cannot cover with each other (for controls or improvements). And, other methodologies (including: 6-Sigma and Lean Manufacturing) cannot, neither. Some of the critical disadvantages, risky mistakes, and negative effects of some cost saving methodologies (like: 6 Sigma and Lean Manufacturing), are exposed with an alert to all manufacturers ___ deep details are elaborated in the research paper. Make a program, with below 8 steps: Classify all the different scrap reasons in daily practices. Breakdown the responsibility among all different department heads, as the action owners to control and to improve. Separate the material scrap approvals (by managers) from the material scrap dispositions (by MRB members). Adjust, modify, the operations (or even re-design the software) of the existing (original) ERP system or MRP system. Organize different technical FA (failure analysis) forces to perform different FA activities on different levels. Make action plans by all the responsible departments, with all actions in details. Write new quality control procedures (or revise existing ones with the similar functions), to establish new rules for the new operations upon the adjusted (or modified) ERP system or MRP system (i.e., the finance system). Audit all “nettable” and “non-nettable” stores in ERP system or MRP system frequently by financial auditors (or by other audit teams), against “aging days” to trigger actions, timely. Resolution Summary Conclusion Background Criteria The 3 key points are as below: Financial Supports. Technical Supports. Quality Supports. The 3 criteria to judge if a methodology is a good (practical and realistic) one to make huge cost savings: Payable by banks anytime? Any negative effects? Any critical disadvantages? Millions of US$ (payable by bank) were saved in the 1st year to start implementing this new methodology in a manufacturer (a previous company the author worked for). And also, the overall scrap rate dropped down sharply from higher than 1.0% to less than 0.1% later after the 1st year. Since there are always heavy cost losses nearly in all manufacturers, it is always possible to make huge cost savings in any manufacturers (payable by bank anytime), as long as this new methodology (or some others with a similar principle) can be used correctly, systematically, and financially. Results