Working Capital Reduction – Are you doing enough?

Working capital management has emerged as a paramount financial priority for
manufacturing companies in recent years. In the face of today's uncertain economic and
geopolitical landscape, it's evident that turbulent conditions are likely to persist, underscoring
the increasing importance of maintaining low levels of working capital.
Disruptions in supply chains have posed significant challenges in obtaining materials, resulting
in lost sales and the need for supply chain functions to build extra inventory buffers. Moreover,
escalated shipping costs and intensified competition add further pressure on operating
margins.
For most manufacturers, the level of inventory (and total working capital) required to sustain
their business significantly impacts their competitiveness. Consequently, working capital
reduction and supply chain efficiency have become central topics of discussion as
manufacturing companies strive to enhance margin performance.
Key questions for Chief Financial Officers (CFOs) and Chief supply chain officers (CSCOs) to
better manage working capital:

Working Capital Management:

• How much working capital is tied up in inventory, accounts receivable, and accounts
• payable?
• Is our current level of working capital adequate to support our operations efficiently?
• How can we minimize the cash conversion cycle (CCC) to improve cash flows?
• What are the sources of short-term financing available to us, and at what cost?
• Are there opportunities to negotiate better payment terms with suppliers to optimise
  cash flow?
• How can we improve collections on accounts receivable to accelerate cash inflows?
• Are there opportunities to streamline processes to reduce working capital
  requirements?

Inventory Optimization:

• What is the optimal level of inventory that balances the cost of holding inventory with
• the risk of stockouts?
• How can we minimize inventory carrying costs while ensuring sufficient inventory
  levels to meet demand?
• What inventory management techniques can we implement to improve inventory
  turnover and reduce obsolete inventory?
• Are there opportunities to implement Just-In-Time (JIT) inventory systems or vendor-managed inventory (VMI) programs?
• Can we leverage technology such as inventory management analytics software to
  improve inventory visibility and control?
• What are the lead times for replenishing inventory, and how can we reduce these lead
  times to minimize stockouts?
• Are there opportunities to negotiate better pricing or terms with suppliers to reduce
  inventory costs?

Optimized Supply Chain solutions specialize in inventory diagnostics and optimization. Our
mission is to make our clients more profitable by optimizing their working capital investment,
improving product availability, and reducing costs. As well as providing Inventory Analytics
Software, we offer clients a rapid deep dive inventory analysis service to identify inventory
optimization opportunities.
Using our proprietary software, we can turn around a deep dive analysis in less than a week
and summarize our findings in an executive report. We typically identify savings of between
15-20% of total inventory