Our own methodology - what we call Lean Working Capital and our Setpoint approach
Lean Working Capital is a holistic end-customer centric approach, helping our clients achieving or improving their company’s Working Capital Setpoint
What is LEAN WORKING CAPITAL and a SETPOINT?
Lean Working Capital is a holistic end-customer centric approach, focused on balancing supply chain risk and right-sizing buffers – while minimizing lead-times and waste
A company’s optimal working capital level – its Setpoint – reflects the amount of working capital required to sustain its current operations. A Setpoint is the steady state in which all processes operate in harmony, providing perfect value for the end-customer
The origin of our approach - 5 common Working Capital misconception
SETPOINT Advisory’s Lean Working Capital concept was developed in response to a set of common Working Capital Management Misconceptions we have encountered over the years
Misconception 1 - YOU MUST CHOOSE BETWEEN WORKING CAPITAL AND PROFITABILITY
Most organizations don’t realize or overlook the substantial impact a sustained improvement in working capital has on both top-line and cost.
The 3 basics of LEAN WORKING CAPITAL
Keep your balance sheet as lean as your P/L – Focus on cash, not instead of sales and profitability, but additionally
Secure a balanced Cash Conversion Cycle – Companies’ ability to convert profit into cash can mean the difference between survival and bankruptcy in times of crisis, and a decisive competitive advantage when times are good
Maintain a holistic view and balance stakeholder perspectives across the organization – a company’s performance is never better than the sum of its functions
The gift that keeps on giving!
LEAN WORKING CAPITAL reduce the cost of GROWTH
It releases CASH to fund innovation & growth, reduce debt or pay dividends
It improves EBITDA through removal of Supply Chain Biases and other inefficiencies
It develops and implements a cash- and continuous improvement culture
It improves end-to-end process transparency, understanding and control
It is a more susceptible approach than pure cost cutting, requiring less energy and resources to implement