Effective management of working capital is critical for a business, not only to ensure it has the necessary cash flow to meet its short-term operating costs and obligations but also to achieve the right balance of liquidity so that optimum profitability is maintained. With our extensive consulting expertise and digital capability, we support our clients in evaluating their working capital across every department to improve cash flow, business resilience and profitability.
At Vendigital, we cover three core workstreams of working capital: Stock, Cash Management and Material Requirement Planning (MRP) / Demand Signal. We follow the steps below in order to embed long-term benefits for clients:
We approach working capital by undertaking tried and tested processes, combining our consulting expertise and digital platform regardless of which workstreams we explore. Firstly, we identify, consolidate and cleanse key sources of data to provide a strong base. We engage key stakeholders across the business including procurement, supply chain, operations, warehouse and finance to ensure a high level of buy in. We then analyse the data and identify opportunities, prioritising key cost drivers and value before validating these opportunities and building a pipeline with agreed targets and timelines.
Stock analysis identifies opportunities for stock improvements, exploring how stock can best support the requirements of the businesses. We review factors such as slow-moving materials, scrappage, future stock profiling, supplier challenges and material control to understand the full range of business-unique working capital opportunities available.
By assessing current stock and taking advantage of write-off opportunities we are able to deliver quick wins, while reviewing safety stock calculations, identifying opportunities with materials, examining bill of materials structure and conducting ABC SKU analysis to provide longer term ways to increase revenue and enhance operational efficiencies.
Cash management workstream
This workstream identifies ways of retaining cash for longer or accessing cash sooner from suppliers and customers. We analyse the cash conversion cycle, understanding the difference between current performance and the agreed standards on payment terms. We also explore supplier spending and related payment terms, site differences and identify variables and opportunities for better alignment.
By identifying opportunities to improve cash holding and overall processes we support clients to improve process/PT adherence, payment performance and invoicing accuracy while helping to increase their cash holdings and overall liquidity.
MRP / demand signal workstream
The MRP parameters workstream identifies gaps between various scenarios, enabling targeted challenges of MRP set-up or purchasing decisions. It also seeks to pinpoint where there is more entitlement in the business than is currently being utilised, for example, better leveraging of order coverage.
By combining our digital platform and consulting expertise we help our clients explore of a number of factors in which MRP parameters impact stock holding. Short-term opportunities may include SKU batching and examining Minimum Order Quantity (MOQ) / Economic Order Quantity (EOQ). Meanwhile, long-term prospects may be found in consignment stock, master data management and reverse MRP.
By undertaking activities such as exploring existing MRP parameters, identifying forecasting issues, reviewing coverage groups and master data optimisation we can help reduce inventory, identify stock write off opportunities and increase revenue.
Embedding results long term
Our working capital consultants work with our clients to embed solutions into their business to achieve on-going cost saving opportunities. Though our digital platform we create bespoke dashboards to explore data related to stock, cash and MRP in real-time. This includes inventory actuals vs. forecasting, stock types by supplier, supplier performance and opportunities over a period. In addition, our consultants work to upskill client teams, embedding knowledge and expertise for the long-term.
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The benefits of best practice
The benefits of improved working capital management can be significant for our clients. By partnering with them and implementing strategic action plans, Vendigital can bring benefits in the following areas:
Improvements in stock
In reviewing safety stock calculations, identifying opportunities with materials and creating stocking strategies, we help to reduce inventory, enhance stock write-off opportunities, and increase revenue and operational efficiencies.
Better cash management
With more effective cash management, we support our clients in increasing cash reserves and improving payment terms, adherence and process.
Optimised MRP parameters
By reviewing existing MRP parameters, demand signals and master data management, we enable businesses to reduce inventory, create stock write-off opportunities and increase revenue.
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