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Could Quest for Working Capital Cripple Your Supply Chain?
Boston, MA – May 18, 2009 – In the face of today’s unprecedented credit crunch and volatile economic environment, companies must do everything they can to free up working capital. Optiant, the premier provider of inventory optimization solutions, finds that many leading-edge organizations can look within their supply chain operations to find working capital, even if lean initiatives have been put in place. “If management mandates lowering operating costs, running leaner, streamlining operations, reducing workforces, and canceling projects, companies can still find cash within their supply chain operations,” says Fred Lizza, CEO of Optiant, Inc. According to a report by Deloitte Consulting, companies can squeeze working capital from their supply chain. Their recommendations include focusing on inventory reduction, cash-to-cash conversion cycles, and supply chain risk.
- Focus on the cash-to-cash conversion cycle
- Consider alternate supply chain financing options
- Ensure you have a robust framework for managing supply chain risk
- Focus on inventory reduction
- Extend payables, intelligently
- Manage and expedite receivables
- Audit payables and receivables transactions
- Eliminate fixed costs
- Think beyond your four walls
- Think like a CFO
For many companies, inventory levels are driven more by customer service requirements and operational capabilities than by financial constraints. However, in today’s credit crunch, supply chain managers may be faced with the reverse scenario, where working capital is the primary constraint on inventory. Management’s answer may be to reduce inventory for finished goods and raw materials, but these cuts may have an adverse effect on customer service. “The best solution is to take a holistic approach rather than brute-force inventory reduction,” said Lizza. “Strategically adjust safety stock policies, rationalize SKUs, revisit your sourcing plan, quantify your supply and demand uncertainty, and consider postponement strategies. All of these moves can reduce lead times, lower costs, and improve your competitiveness in the long term. This positions your company for growth as the economic climate improves.” Optiant’s PowerChain® allows companies to find more working capital within their supply chains by:
- Thinking globally across the enterprise to reduce inventory while improving service level performance.
- Using optimization technology to model and “dollarize” the entire, multi-echelon supply chain, rather than focusing on each stage of the supply chain in isolation.
- Making informed strategy and policy decisions that:
- Minimize ripple effects, inventory holding costs, and lead times
- Mitigate supply and demand uncertainty
- Optimize inventory throughout product cycles, from launch to end-of-life
- Anticipate seasonality and one-off demand fluctuations
- Achieve any desired customer service level
- Reduce time-to-market to meet business goals
Using PowerChain technology, companies can avoid “silo decisions” by simultaneously evaluating initiatives across the entire supply chain (everything from sourcing parts from a shorter-lead-time supplier to improving the forecast accuracy of demand in a particular region). They can evaluate multiple alternatives using “what if” sensitivity analysis to find the solution that best achieves key business goals. In addition to identifying sources of inventory and gaining immediate savings through strategic inventory placement, PowerChain helps:
- Streamline the product planning process, eliminating constant fire drills and expediting costs.
- Automate demand profiling by calculating the demand parameters, at the correct level of granularity, to use for inventory target optimization.
- Mitigate the bullwhip effect with precise inventory targets by SKU by location by period.
- Provide powerful decision-support metrics and reports that deliver critical metrics to S&OP teams.
- Create efficient flexibility to handle seasonality, new product introductions, end-of-life transitions, and more.
- Prioritize strategic initiatives relative to corporate goals for profitability.
Optiant, a premier provider of supply chain network design, inventory optimization, and supply chain business intelligence solutions, helps Global 2000 companies optimize bottom-line performance by reducing inventories, freeing up working capital, optimizing supply chain asset utilization and delivering lowest total supply chain costs. Optiant’s solutions optimally balance resources, total costs, and customer service across the entire, extended supply chain to deliver greater profitability, increased customer satisfaction, more efficient use of capital, and a resilient supply chain that fully handles uncertainty in supply and demand. Optiant has transformed supply chains for the world’s leading manufacturers including Procter & Gamble, Kraft, HP, IKEA, Intel, Microsoft and Boston Scientific.
Delivering millions of dollars in returns, Optiant’s solutions for consumer product, high tech manufacturing and industrial organizations generate quantifiable savings within 90 days of implementation. Optiant’s solutions, certified for integration by SAP, are based on award-winning research from MIT and decades of experience dedicated to the identification and realization of supply chain efficiencies. For more information, please visit optiant.com. Optiant, the Optiant logo, and PowerChain are registered trademarks of Optiant, Inc. All other product and service names mentioned are the trademarks of their respective companies.