Working Capital
SITUATION
Working capital had not been a focus for the leadership of a major mining company. Significant financial and operational opportunities were available with immediate effect.
DRIVER GOAL
- Reduce working capital by 15% - 20% by year end.
- Generate $65 million of working capital benefits that are rapid, visible and sustainable.
RESULT
Identified cash releases in the following areas:
- AP & AR - $48.6 million
- Inventory - $1.8 million
- MRO - $4.1 million
Issue
Working capital had not been a focus for the leadership and management of this major mining company. Consequently, significant financial and operational opportunities were available with immediate effect. The company lacked basic process, discipline and management practices typical of Accounts Payable, Accounts Receivable and Materials & Supplies. Additionally, the lack of readily available and accurate data and information was significant.
Highland Approach
Detailed analysis determined that the goal was attainable within a 30-week timeframe, although there were significant barriers to achieving success. The Highland Group concluded that key drivers for each function (Accounts Payable, Accounts Receivable and Materials & Supplies) required process modifications in order to maximize cash flow for the company.
Actions Taken
The Highland Group identified, developed and implemented processes, disciplines and management practices delivering the following results:
- Reduced DSO by 7 days in Accounts Receivable.
- Introduced methodology and metrics for tracking and measuring operational performance that supports corporate strategy.
- Improved DPO from 24 to 32 in Accounts Payable.
- Reduced inventory, contributing $10.8 million to cash conversion cycle.
- Developed systems to manage MRO stock at major sites for the future.
Rapid and measurable financial results were realized through the implementation of process improvements across operations in the U.S. and Europe, achieving a combined working capital savings of $57 million (plus $5.2 million in interest and cash savings) in the midst of a major collapse in commodity prices.
