The management of cash and stock investments is the bedrock of solvency at any time, and has become a key CEO-level concern during the current crisis. Well-managed order-to-cash, procure-to-pay and inventory processes can help companies protect themselves against uncertain credit markets, bad debts, demand shifts, competitor plays and many other issues. A.T. Kearney has proven expertise across the working capital spectrum, which has seen renewed demand in recent months.
Managing receivables and payables often means streamlining account management processes to support an agreed company policy. But the current economic crisis has introduced a stronger sense of urgency. A typical A.T. Kearney review may involve a detailed process design analysis to ensure efficient invoice handling, together with a review of policies and the variability of terms and associated justifications. Simple improvements can often come from stricter compliance enforcement and financial discipline, and from addressing value leakage such as inappropriate discounts and term incentives.
Inventory management is also key, and strong policies and practices must be in place, supported by advanced systems. A weak link in any part of the chain will result in excess stock or damaging stockouts. A typical A.T. Kearney inventory optimisation project starts with a good understanding of all aspects of stock control systems, and continues with an evaluation of historical stock levels relative to the actual and forecasted customer demand. An inventory modelling exercise then assesses the demand and stock replenishment flows through the network, taking into acccount the sensitivities to various supply parameters. By addressing the root causes of stock management inefficiencies, we would typically expect a 20-30% reduction in inventory levels, with comparable or even improved service levels.
Frequently our working capital projects go beyond the existing physical network and account base, addressing more strategic questions. What is the correct service level for a product group or customer segment? If forecasting is difficult, can the supply chain be adapted to overcome this? Are there 'bad' customer segments for which I should adapt my terms accordingly? Can I use postponement strategies? Can I serve (and bill) the customer differently? Although the current pressure is to address working capital aggressively across the board, the situation presents an opportunity to step back and assess the best way to balance performance and return.
For more information on how we can help you in this area, please contact us at
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