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Working capital optimisation

Tata Steel

Assessment of working capital and determination of target inventory levels

Assessment of working capital and determination of target inventory levels

What they asked

Our client is a European steel manufacturer. A subsidiary company recently restructured its product portfolio and asset configuration. Inventory levels were not yet in line with the new situation and deemed too high. The subsidiary was in the process of being sold. The parent company wants to reduce the working capital captured by the subsidiary to facilitate the sales process.

What we did

We modelled their reconfigured supply chain by analysing lead times, manufacturing campaigns and technical capabilities. Next, we created a demand profile for each point in their supply chain by translating end product demand to each intermediate product. This allowed us to form a solid opinion on existing inventory levels and its age profile. In addition, it enabled us to identify measures to lower inventories.

What we accomplished

We established a new target inventory level in line with the new asset configuration and product portfolio. We identified and sized five short-term policies to structurally reduce inventory significantly within one month. The financial impact of each measure was determined, taking into account existing provisions and write-downs. Furthermore, we identified and sized four mid-term measures that further reduce inventory; to be implemented once inventory levels have stabilised.

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