Reducing Working Capital Is A Key Priority In 2021
After a “lost” year, we may look forward to a renewed economical perspective in 2021. There is no certainty at all, but there is reason to have a certain entrepreneurial optimism. Another reality is the alarming reduction of financial reserves due to the pandemic. So how will companies finance their entrepreneurial plans?
Ways to creating financial means
There are various routes to creating financial means. A promising one is unleashing working capital in the supply chain. Especially in spare parts supply chains, where a significant part of the working capital is tied up in inventories. Unlocking that capital is possible, but certainly not easy. One of the root causes is the in the service supply chain. Maybe the pandemic can open up the eyes and tear down the walls between the various disciplines.
One silo is the maintenance function. Maintainers often have a “better safe than sorry” mentality. Asset availability prevails above all other metrics. According to them “everything is critical”. Or: “one hour of plant down time due to a lack of spares, legitimates 3 stadiums full of spares”. If you look the maintenance people deep in the eyes, they know there is massive overinvestment.
Another silo is procurement. Often there is a neglected relationship with suppliers, representing itself in absence of proper framework agreements, and long and unreliable lead times. Setting up a collaborative supply chain using forecasting data from maintenance plans, for now, is still a dream.
The last silo mentioned here is IT. “The ERP system shall capture all required functionality”. Some basic recognition of the fact that ERP systems are predominantly transactional systems, in no way able to support spares related decisions, is absent.
Making the right decisions
Wouldn’t it be great if these functions connect and have open and receptive discussions? Then maintenance and procurement will see they can help each other, the service supply chain, and thus the company. Also, IT will notice the ERP system is respected as backbone, but specific enrichment will help the business tremendously.
Breaking down walls is good, but unfortunately not good enough. Ultimately, the best possible supply decisions should be made. This requires good information, good people, and good decision support systems. COVID made these requirements extra apparent. For instance, the pandemic led to disruptions in demand and supply, causing history-based decision making to be pretty useless. Only in a culture of collaboration and with the practice of professional supply chain management, the right decisions are made. We are proud to be part of such vibrant ecosystems at many of our clients.
*1 <a href=’https://www.freepik.com/photos/business’>Business photo created by pch.vector – www.freepik.com</a>
*2 Mohamed Hassan via Pixabay