Client Situation
A mid-sized manufacturing company was experiencing increasing pressure on cash flows due to significant funds being tied up in working capital. A detailed review revealed that excessive inventory levels, delayed customer collections, and suboptimal supplier payment practices were the primary drivers.
In manufacturing, the working capital cycle is largely influenced by three key levers—inventory days, receivable days, and payable days. Improving these areas presents the fastest and most effective opportunity to unlock cash and strengthen liquidity.
The Problem
- Excess Inventory: High levels due to forecast-driven planning
- Delayed Collections: Weak follow-ups and relaxed credit control
- Inefficient Payables: Underutilized supplier credit terms
- Lack of Visibility: Poor tracking of aging and receivables
- Siloed Operations: Poor coordination across teams
- Resistance to Change: Legacy processes and complexity
Our Approach
1. Inventory Optimization
Production planning relied heavily on large batches and excess safety stock, locking capital unnecessarily.
2. Receivables Management
Billing delays and reactive collections led to prolonged receivable cycles.
3. Governance and Visibility
Lack of ownership and KPI tracking delayed corrective actions.
Inventory Improvements (15-Day Reduction)
- Reduced raw material coverage by 5 days
- Cut WIP by 3 days
- Reduced finished goods by 5 days
- Eliminated slow-moving stock
Receivables Improvements (10-Day Reduction)
- Invoices within 24 hours
- Customer segmentation
- Structured collection follow-ups
- Dispute resolution tracking
Payables Optimization
- Standardized payment cycles
- Optimized credit utilization
- Selective renegotiation
Results
The company reduced its working capital cycle from 100 days to 75 days.
- Faster cash conversion
- Lower borrowing dependency
- Improved liquidity
- Better operational efficiency
Key Takeaway
Working capital optimization requires coordinated improvements across inventory, receivables, and payables.
- Shift to demand-driven operations
- Enforce billing discipline
- Create ownership across teams
- Use data for decisions
Looking to Improve Your Working Capital?
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