Most businesses understand the need to maximise the return on their investments and by investments that means inventory. Cash is significant to every business, beyond funding growth and reducing reliance on debt or other forms of external financing, increasing cash availability can help you both strengthen your balance sheet and enhance operational performance.
While this might seems simple and straightforward yet, a gap still exists for many businesses between recognising the imperative for working capital optimisation and understanding what steps to take to improve their liquidity.
The key to optimising your working capital and cash can start and end with your inventory management processes and inventory optimisation. Yes, it is true, inventory optimisation will lead to better working capital management. So inventory optimisation will actually pay you!
Given the cash outlay required to acquire it, inventory often constitutes one of a company’s most significant balance sheet items and most significant expenditure. As a result, inventory has a considerable influence on your working capital. Determining how to carry sufficient inventory to meet demand, but not so much that it affects cash flow, requires a delicate balancing act and inventory optimisation.
The goal of any company is to balance the needs of the customer with the goals of the company in an integrated inventory management and inventory optimisation model where the right inventories are in the right place, at the right time. What is needed is a disciplined process whereby the level of investment in inventory is in line with the expected level of customer service to be provided through your target fill rates.
To maintain optimal inventory levels and to strive for inventory optimisation you need robust systems like Intuendi to track and maintain control of your inventory levels. Then this along with internal processes are required to manage your vendors and customers, your supply chain, and to maintain control of your inventory while starting on the path to inventory optimisation.
Such processes and technology like that from Intuendi will enable you to track inventory performance, monitor demand patterns and ensure you are ordering correcting to maximise your working capital while optimising your inventory.