Working capital II: Effectively managing inventories
2006
After years of consolidation and cost cutting, companies are switching back to growth strategies that require additional capital. Often it is not necessary to obtain such funds from capital markets as resources can likely be found tied up in the company's balance sheet as working capital.
Roland Berger Strategy Consultants' study shows where potential cash can be found by effectively managing inventories. What's more, we highlight how companies can significantly reduce their risks and lower costs. In the first part of the global study we asked 500 large and medium-sized businesses how they manage their inventories and what trends they expect in the future.
We found that through proper management, companies can improve inventory performance by more than 30% over 5 years. Especially companies in the electronics, machinery/system engineering, consumer goods, steel and chemical industries showed potential for improvement. The study participants evaluated optimization levers which include current and future success factors. The study provides comprehensive inventory benchmarks by industry.
About 15% of the study participants have reached best-practice levels by properly managing their inventories. These companies use successful levers on a regular basis by
- Optimizing their warehouse network
- Integrating customer forecasts into company planning
- Streamlining the product portfolio
- Using vendor-managed inventory
- Integrating suppliers by EDI
- Recalculating safety and buffer stocks in the warehouses
Improving the inventory management offers huge potential for almost any company. Such potential can often be quickly realized. Use our expertise to tap hidden cash resources trapped in your balance sheet.
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