Working Capital Management in Manufacturing

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 manufacturing we can share involved a Receivables Improvement Project for a Leading Global Ceramic Manufacturer.

Order to Cash

Company – Leading Global Ceramic Manufacturer

Project Description – Receivables Improvement – Italy

Location – Italy plus European countries supplied from Italy

Working Capital Issues

    • The Sales Organisation were convinced that a high DSO was inevitable. They believed that if they tried to get their customers to pay earlier it would result in customers moving to the competition. (mental model*)
    • High and rising DSO with overdues at 68 days and weighted average terms at 130 days.

(* Mental models are deeply held internal images of how the world works. – Peter Senge)

JustOne Actions Undertaken

  • Short Discovery Assignment identified opportunities relating to payment terms, billing. delays and overdues with a target AR reduction of 33%.
  • Two staff members were selected to act as Internal Consultants to be involved with. the ongoing project and to undertake sustainability measures.
  • JustOne’s practice manual, processes, tools and KPIs were adopted by the company.
  • Collection, credit management and customer services were trained and coached.
  • A workshop was held with the 11 Area Sales Managers to train them to be able to. work with their sales teams to reduce terms. The workshop achieved a change in the prevalent mental models and also improved negotiation skills.
  • JustOne supported the rollout sales workshops in four of the key Areas.

Benefits

  • Leading practice collection processes in place
  • Leading practice methodologies and procedures in place
  • Mental models regarding terms reduction changed
  • Sales staff enthused to go out an negotiate shorter terms with their customers
  • DSO reduced from 202 days to 130 days

Comment

  • The mental models observed with the sales people in this company are common. In every country we hear sales people say “What you are recommending will not work in our country; or in our sector; or with our customers”.
  • We are convinced that these mental models need to be changed before progress can be made with the new ways of working.

We need to change what people think before we change what they do.

Testimonial

“JustOne used techniques to change the negative mental models of the sales teams and improved their negotiation skills resulting in much lower terms. What we achieved with their help was nothing short of amazing. I wish I had known about JustOne before.” – Portfolio Company Manager