It was all hands to the pump to reduce working capital at Europe’s leading manufacturer of rigid plastic packaging products, which supplies many of the world’s largest multinational consumer products companies.
With cash flow under pressure, the company turned to one of Novo Altum’s consultants for expert advice on turning the situation around.
Change was swift and significant – within just a few months his programme halved work in progress inventories, and brought about a 25% reduction in working capital tied up in receivables and payables.
Facing a massive sales slump as the recession hit the consumer products market particularly hard, cash flow at the company was severely squeezed.
Novo Altum’s consultant could see that reducing working capital was vital to help the company negotiate this difficult period, but also that time was of the essence. A strategy would have to be developed which would rapidly decrease cash flow out of the business and speed up payments into it, as well as minimising working capital held in inventories.
To achieve this in a short space of time was no easy task. An in-depth analysis of the client’s operations was required to determine where the costs actually were in the business. Only then could the consultant put the necessary processes in place to reduce the working capital tied up in inventories, receivables and payables.
Freeing up capital held in inventories was a major undertaking, requiring the streamlining of production schedules, conducting materials analyses and creating leaner manufacturing processes to move inventories through faster.
Keeping receivables and payables on a tighter rein also demanded an extremely detailed level of insight and analysis of the company’s payment history – both as a customer and a supplier.
By conducting a detailed business cost analysis, from which he was able to identify and formulate what process and controls changes would be necessary to improve cash flow, Novo Altum’s consultant was able to effect rapid, yet sustainable, change.
The processes he devised led to work in progress inventories being reduced by half, as well as a 25% reduction in working capital tied up in receivables and payables.