A food processor frees cash tied up in stock
Seasonal buying, slow-moving packaging and safety stock set by habit had locked cash into the warehouse. Setting stock levels from data released cash without risking supply.
An illustrative scenario. The company is fictional and the figures show how the method works; they are not a client result.
The situation
A food processor buys crops at harvest and sells finished products all year. That makes some inventory unavoidable. Over time, though, stock had grown faster than sales: packaging bought in bulk for discounts, spare parts kept "just in case" and safety stock levels nobody had revisited for years.
The CFO wanted to release cash without risking supply to customers.
What we looked at
- Three years of stock movements by item and warehouse
- Purchase orders, supplier lead times and minimum order quantities
- Sales history and forecasts by product
- Customer and supplier payment terms
What we found
| Area | Finding |
|---|---|
| Packaging and labels | Items with more than a year of cover, some for discontinued products |
| Spare parts | Many items with no movement in years |
| Safety stock | Levels set by habit, far above what demand variability required |
| Supplier terms | Payment earlier than the agreed terms for many suppliers |
| Customer terms | Some customers paying well beyond their agreed terms |
What changed
- Safety stock from data. Levels are now set from demand variability and lead times, item by item, and reviewed each quarter.
- Slow stock cleared. Obsolete packaging and parts were sold, returned or written off, with a decision recorded for each.
- Terms enforced. Payments go out on the agreed date, not earlier, and overdue customers are chased by value.
- Seasonal buying planned. Harvest purchases are sized against the sales forecast, not last year’s volume.
Products and services
Our working capital and inventory team ran the analysis and set up the monthly review. For the treasury side, read Idle cash is a cost: a treasurer’s checklist.