I have recently seen an interesting article in a manufacturing magazine by Lloyds Bank recognising the need for companies to improve their working capital and 3 strategies that can be deployed to achieve this;
Improve receipts from customers
Manage supplier payments
The interesting part of this is that 2 of the 3 strategies involve engagement with suppliers. Traditionally companies will focus their efforts on the big ticket items of spend, and predominantly the direct spend purchases too. However, in my experience the pennies are often overlooked, and as the old saying goes, "look after the pennies and the pounds will look after themselves".
Manufacturing consumables and maintenance stock are often viewed as low spend items, and as such do not get the focus that is required when looking at ways to improve working capital or indeed cost savings potential as a whole. In fact, in a lot of instances the supply chain can be fragmented and in some cases no contracts exist at all.
Therefore please ask yourself the following questions when considering consumables and maintenance stock:-
1) Do you know what your payment terms are with your suppliers?
2) Are they contractually bound?
3) How often do you pay your suppliers?
4) Is consignment stocking utilised?
5) When did you last review your stock and usage levels and matched this against forecast?
If you struggle to answer any of these questions then you are probably missing out on an opportunity to improve your working capital position.
Alliance Procurement Solutions has recently started working with a client and upon a review of their spend data it has been immediately identified that the supply chain is fragmented, no contracts are in place & payment terms are inconsistent.
There is certainly room to improve and work continues to analyse this further but clearly we will be able to improve working capital and plans are being drawn up to implement this..
See my blog from May, (https://www.allianceprocurementsolutions.co.uk/single-post/2017/07/24/Alliance-Procurement-Solutions-Adding-Value-and-Delivering-Huge-Working-Capital-Savings), on how I achieved significant working capital improvements for a major globally recognised brand.
If you feel that you need some additional hands and eyes, need an independent strategic review of your current status on working capital and implement an improvement plan for your manufacturing consumables and maintenance stock, then Alliance Procurement Solutions can apply its knowledge and expertise in these areas to help your business.
Please get in touch for a free no obligation initial discussion so that we can understand your business requirements further and for you to understand further how Alliance Procurement Solutions can help you.
Tel: 07515 003472