company-operating-system

05 · Resource Foundation: People, Finance, Materials, Data

The foundation answers: what sustains the business? People come first, then the work; data comes first, then decisions. ⚠️ “Data” is the fourth resource of the modern enterprise — many companies miss it.

1. People (human resources)

1.1 Select, develop, deploy, retain

Stage	Core actions	Key point
Select	Hiring / screening	Above the iceberg: capability; below the iceberg: values (see Chapter 10)
Develop	Training / mentoring	Capability can be trained; values almost never change
Deploy	Role matching	Play to people’s strengths, tolerate their weaknesses
Retain	Pay + growth + meaning	All three layers — money / promotion / mission — are indispensable

1.2 ⚠️ Leak plugging

Talent pipeline / succession planning: no critical role should depend on a single person (A/B roles)
Incentives: a dual track of bonus / promotion + equity (to bind core talent)
Performance management: goals → review → feedback → improvement (closed loop)

2. Finance (accounting / tax)

2.1 The three financial statements

Statement	Answers	Key point
Income statement	Are we making money?	Revenue − cost = profit
Balance sheet	How much do we own?	Assets − liabilities = net assets
Cash flow statement	Are we alive?	Cash is the line between life and death

2.2 ⚠️ Cash flow is the lifeline of manufacturing

Profit is an opinion; cash is a fact.

Three payment-term cycles decide life or death:

AR payment terms (how long customers owe you)   → shorter is better
Inventory days (how long goods sit)             → faster is better
AP payment terms (how long you owe suppliers)   → longer is better (interest-free financing)

Case: many companies die with “a good-looking income statement but a broken cash flow”
Management actions: aging schedules, collection procedures, inventory red lines, cash flow forecasting (next 3-6 months)

2.3 Tax planning (especially cross-border)

Export tax rebates (manufacturing)
Transfer pricing (related-party transactions at market rates)
Hong Kong/Singapore structures (keeping profit in low-tax jurisdictions)
⚠️ This is not tax evasion — it is compliant optimization

3. Materials (procurement / supply chain)

3.1 The full supplier lifecycle

Sourcing → Qualification → Quoting & negotiation → Ordering → Performance review → Phase-out

Stage	Key point
Sourcing	At least 2-3 candidates
Qualification	Samples + audit + small-batch trial
Negotiation	Annual price-downs, payment terms, volume discounts
Performance	Score on quality / delivery / price / cooperativeness
Phase-out	Swap out after repeated misses

3.2 ⚠️ Supply chain resilience

Dual-source critical materials (never bet on a single supplier)
Lock in long-lead-time materials early
Supply-interruption plan (alternate materials / alternate suppliers / safety stock)
Monitor geopolitical / price-increase / logistics risks

4. Data (IT systems / data foundation) ⚠️ essential for modern enterprises

4.1 The system stack

System	Solves	Manufacturing example
ERP	Integrated business-finance (orders-procurement-production-inventory-finance)	Kingdee / Yonyou / Odoo / ERPNext
MES	Manufacturing execution (work orders-operations-yield)	Shop floor
CRM	Customer management	Sales
WMS	Warehouse management	Inventory
BI	Data analytics / dashboard	Decisions

4.2 The business dashboard (management accounting)

True profit by product / customer / project — the basis for pricing and for cutting orders.

Check daily / weekly:
├─ Revenue (by product / customer)
├─ Gross profit (by product / customer)
├─ Cash flow
├─ Inventory (value + turnover)
└─ Open orders (delivery risk)

Case: many companies “feel profitable” but don’t know which product makes money — management accounting on ERP data makes it instantly clear
⚠️ More data is not better — build what decisions actually need to see

5. Cost structure (people / finance / materials mix)

Industry	Typical cost structure
Manufacturing	Materials 50-70% + labor 10-20% + overhead 20-30%
Services	Labor 60%+
Trading	Goods + freight + cost of capital
Software	Labor 60-80% + cloud

Management action: activity-based costing to get true costs → pricing / order-cutting backed by data

📌 One-line summary: Four foundation resources — people (select/develop/deploy/retain), finance (three statements + cash flow), materials (supply chain), and data (systems + dashboard). Cash flow and true gross margin are the two lifelines of a manufacturing company.

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