Working Capital Stock Reduction

Pauline works with the company to streamline and modernise their operations to improve working capital.

This manufacturer and distributor of school electronic equipment has its Head Office in the UK and has worldwide sales offices and hubs in the US and China. Their warehouse was in Blackburn.

Working with the operations management we looked into the company’s stock planning requirements and brought planning together by using a single source of data. We developed a fortnightly planning cycle and implemented real-time three dimensional reporting of stock, supplier orders and the sales pipeline so that the company had a far clearer idea of what was happening throughout every area of its business.

The cash cycle also needed investigation because a lot of capital was tied up in stock that was either making its way around the world in inefficient and costly ways or was slow moving or obsolescent. Together we ran a project overview of slow moving and obsolescent stock and had a ‘fire sale’ of older products to free storage.

These measures together reduced the amount of stock that the company had to hold globally from $20 million to $10 million within twelve months. This is a huge improvement on the amount of working capital available to the company and enabled it to look to the future with big ambitions.

Together we next looked into changing the location of their distribution hubs and their transportation routes.

I undertook a review of their global logistics planning, starting with the European hub in the UK.  90% of their customers resided in Europe. Importing products to the UK warehouse only for European customers to collect then ship back to the continent did not make logistical or financial sense.

I led a feasibility study and implementation of a new, outsourced, 3PL warehouse in the Netherlands for the business to serve its European customers. This reduced in-house fixed costs and simplified transportation issues around the continent.  The customers benefited from reduced transportation costs and improved time on collecting the goods whilst the business benefited from reduced sailing times from China to the new hub so there was less time for working capital to be tied up.

In the US we moved to transporting products from their China factory and supplier base through the Panama to Florida rather than crossing the Pacific to California and then transporting across the US.  Although this increased shipment time by approximately five days it reduced transportation costs by 35%.