Working Capital Management: Inventory Management Solutions

Improve cash flow management

In a volatile era, there is no substitute for cash. No matter how much revenue you recognize or how many assets you have on your books, the simple and enduring truth is this: The enterprises that survive are those that generate enough cash to keep their operations running.

Improving cash flow management starts with understanding gaps in each component of the cash conversion cycle. This includes inventory management, or forecast-to-fulfill (F2F) processes.

A holistic view of inventory management is critical to F2F process transformation

To produce working capital improvements from inventory management, world-class companies look at the F2F process across multiple functions, including sourcing and procurement, finance and operations. This is particularly important given the potential for conflicting priorities – for example, operations may want to minimize risks of running out of stock while finance wants to reduce amounts tied up in inventory. This requires carefully developed approaches for balancing the trade-offs associated with each decision made across the F2F process.

The global leader in improving working capital management

The Hackett Group Inc. has helped many of the world’s leading businesses release billions through sustainable working capital improvements. We focus on three critical end-to-end processes – inventory management, accounts receivable and accounts payable – to improve cash flow management and service performance while enabling cost optimization and risk management.

Through more than 30 years working with Global 1000 enterprises, we understand inventory management best practices that can drive effective working capital management. We examine your supply chain processes from beginning to end, covering all activities that impact inventory levels – from determining your product range, to forecasting and demand planning, to purchasing, to scheduling manufacturing, to storing and distributing finished goods.

Our systematic approach helps you determine optimal inventory levels with a high degree of precision. We use proven models that reflect the relationships among relevant variables to identify inefficiencies and determine the potential for inventory reduction with great accuracy. These models also are useful for simulating the impact of changing the variables and constraints to further reduce inventory levels.

We blend experience, tools and understanding of business best practices with your team’s operational experience and local knowledge to create a holistic working capital management solution that can improve cash, cost and service levels – and equip your organization to realize and sustain better working capital management and performance.

We have used this approach to deliver successful working capital initiatives in more than 60 countries. These projects not only deliver tangible working capital and cash flow improvements; they also produce exceptional return on investment in a short time frame.

Target and improve key inventory management process metrics

We use indicators and process metrics such as these to assess the health of your working capital management practices, help you understand how your performance compares with peers and world-class organizations and facilitate continuous process improvement.

Headline indicators:

  • Inventory value
  • On-time in-full (OTIF)
  • Forecast accuracy
  • Product availability

Operational metrics:

  • Supplier variability
  • Aging inventory
  • SLOBS (slow moving or obsolete)
  • Forecast bias
  • Capacity utilization
  • Life cycle management
  • Inventory integrity
  • Lead times
  • Adherence to plan
  • Back orders


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