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Working Capital Management

NEEDS-BASED RESULTS

 

Working Capital Management

SITUATION

Industrial minerals cash conversion cycle had deteriorated from a target of 134 days to 172 days resulting in excess stock, delayed shipments and late collections.

DRIVER GOAL

  • Improve working capital performance and release $60 million in cash from two operations.

RESULT

  • Increased DPO from an average of 56 to 68 days within 18 weeks.
  • Reduced working capital by $67 million with a P&L impact of $7.5 million
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Case Study

Improve Working Capital Management

Issue

This industrial minerals giant began to focus on working capital management in order to release cash, lower interest costs and improve earnings. Their method of gaging working capital efficiency was to measure the cash conversion cycle—or CCC days—and seek to influence this metric by establishing targets. By year end, the measure deteriorated from a target of 134 days to 172 days due to a combination of excess stock, delayed shipments and late collections. This prompted the acceleration of a formal project to improve efficiency and focus on the underlying drivers behind the measure. The Highland Group was engaged to conduct an analysis of the working capital position for this $950 million revenue mining company with $360 million in net working capital with mine and smelter operations in Canada.

Highland Approach

The Highland Group conducted a four-week desktop analysis and identified a working capital reduction opportunity of $45 million with additional cost reductions for a total P&L impact of $3 million from Accounts Payable, Accounts Receivable, Finished Goods Inventory and M&S.

Actions Taken

The Highland Group partnered with client teams to realign business processes, including:

  • Streamlined AP invoicing and payables processes.
  • Realized $24 million in one time AP benefit on $700 million of total annual spend.
  • Reduced DSO by 12 days and attained a $34 million reduction in Accounts Receivable.
  • Reduced DIO by 20 days and Total Inventory (Raw, WIP, F/G & MRO) by $38 million.
  • Identified a $10.5 million working capital benefit in M&S including $4.4 million agreed reductions across sites.
  • Realized a $6 million cost reduction from Procurement within 26 weeks from the end of the engagement.
  • Developed clear indicators and targets to monitor the health of each process.

Reduced working capital by

$67m

resulting in a P&L improvement of $7.5 million

The Highland Group not only opened our eyes to the impact of reduced working capital but also assisted us in achieving a substantial reduction. The Highland Group provided knowledge, leadership and coaching for our people.

President, Mining Company

Related Information

subject matter-based

Head of Organizational Development

Don is an internationally recognized organizational change and development expert with 33 years of global experience in partnering with results-oriented clients to achieve sustainable behavioral change and targeted bottom-line results in productivity, quality and profitability. He is recognized for fostering high levels of enterprise-wide sustainable performance improvement ownership. Don’s key strengths include his ability to engage stakeholders at all levels, create collaborative environments and work within the culture to achieve leadership, management and employee breakthrough results.

Project Director

Working Capital

Hamid has over 20 years of experience as a management consultant. He has a wealth of experience in process and operational improvements, corporate strategic planning, development and deployment, global sourcing, supply chain management as well as working capital improvement experience (A/R, A/P, Contract & Vendor Management, Inventory, MRO/Materials & Supplies).

Senior Consultant

Working Capital

North America

Joe is an innovative and versatile professional with over 25 years of solid experience building, growing and operating diverse, multi-faceted and geographically dispersed global high-growth organizations. He has an exceptional track record of managing projects that deliver credible and sustainable improvements in cash management, operations, service quality and cost.

Senior Consultant

Supply Chain

Laurence has more than twenty years of industry and consulting experience in all areas of supply chain management – including inventory management and procurement – and in Total Working Capital management.

Project Leader

Financial Services

North America

Brandon is a senior project leader and consultant with more than 12 years of experience in helping financial services firms maximize revenue and control costs through continuous improvement. He specializes in implementing efficiency, service and quality process enhancements in Fortune 500 companies by utilizing Lean and Six Sigma principles.