Free up your working capital by increasing global inventory visibility

I do not have to sell the idea of reducting your working capital as there is not even a single organization that does not want to freeup its working capital so that it can be invested in expanding, modernizing or improving its operations in many ways. I want to share one of the effective ways of not only reducing the working capital but also to improve some other critical business metrics. 

In case, an organization has multiple warehouses (and in multiple continents) due to reasons like faster delivery to customer, savings in shipping costs or low cost local sourcing of components/products then it makes good sense to improve on its capabilities in having visibility of inventory while booking a sales order from a customer. It means, that if an organization has the ability to see in real time, which all of its warehouses has the item available required by the customer then it makes easier to make decision on which warehouse should be used to ship the material so that following metrics can be improved:
  • Reduction in  slow moving inventory - If a warehouse holds large stock of slow moving items and a "closer to customer" warehouse also have that item but in bare minimum quanttities, even then, one might want to select the warehouse which is far but provides the opportunity to reduce that slow moving item in bigger numbers
  • Reduction in item obsolescence - Some items have shelf life and having visibility on their stock in different warehouses provides us the opportunity to ship the soon expiring items first
  • Higher ontime delivery - Again, if a nearer (and default) warehouse for a customer, does not have the item and will have to procure it to ship to the customer, then visibility of stock in other warehouses provides the opportunity to check out if the item is available elsewhere and can be shipped to the customer cost effectively without compromising on on time delivery
  • Higher Customer Satisfaction - This business metric will get a boost from the above metric (high ontime delivery) and we are sure to see much improved confidence in our organization when their orders are reaching on time more frequently
  • Higher Inventory Turns - The most obvious and effective benefit of global inventory visibility is its capability to improve the overall inventory turns by provding us the opportunity to optimize stock at all warehouses and hence improving annual inventory turns which results in freeing up of working capital
So, keep an eye on a solution in your Supply Chain that provides you the capability to improve your real time visibility to global warehouses so that you can reap the benefits that it brings.

1 comment:

  1. Increasing the inventory visibility is the first step of a successful program I worked on. Some of the next step we implemented were:

    - As you mentioned, you need to set GLOBAL inventory turns and customer satisfaction goals
    - Get Global commitment and measurement to the goals
    - Reduce transportation cycle times of international and local deliveries


Your thoughts are welcome