Working Capital Management in the Chemical Industry

Working capital management in the chemical industry

We’ve worked on a number of Working Capital Improvement and Management Projects over the last 15 years – one example of working capital management in the chemical industry we can share involved a Single entity reduction of Overall Working Capital Project for the business unit of a global chemical company.

Negotiation Support

Company – Business unit of a global chemical company

Project Description – Single entity reduction of Overall Working Capital OWC

Location – Business unit based in Sweden and their customer in Italy

Working Capital Issues 

  • During segmentation exercise identified one customer who accounted for 50% of the total European over dues.
  • This customer has been the distributor for Italy since the company began and is the third biggest customer in Europe.
  • Despite repeated previous attempts to reduce over dues they still averaged 62 over due days for the 12 months up to the start of the project.

JustOne Actions Undertaken

  • Because of the critical and sensitive relationship with this customer JustOne were asked to coach the sales team through the delicate negotiation to get the over dues down.
  • Key information including the contract, historical payment details, customer service and previous meeting notes were gathered and reviewed.
  • A negotiation preparation workshop was held to review good negotiation practices with the account manager and European sales director, agree goals, agenda for negotiation meeting and their respective roles within the negotiation plan.
  • During the workshop the potential reasons and motivation for over dues, the likely style and objections to change that the customer would adopt, the balance of power in the relationship and possible sanctions that could be applied discussed and agreed.
  • A compelling reason for change was developed.
  • Once the negotiation plan was agreed it was role played with the JustOne consultant to test and refine approach and style.
  • The negotiation meeting was held with the customer and the JustOne consultant was introduced as a working capital expert but acted as coach and observer supporting the account manager and sales director with their negotiation.

Benefits

  • The negotiation team was successful in getting the customer to admit that his payment performance was unacceptable.
  • Immediate agreement to reduce overdue days by 32 days.
  • Agreement to reduce the final 30 days within 4 months.
  • Provided demonstration to the Sales Director and her team that a properly planned negotiation can deliver significant results even with challenging customers based in Southern Europe where late payment and long terms are the norm.
  • Improved and clearer relationship with customer.