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ToolsGroup has launched Rapid Inventory Rightsizing, a program that it says will help companies rapidly rightsize their inventories, free up millions of dollars of cash, and improve free cash flow.
ToolsGroup says that the RIR Program is ideally suited for companies with large inventories not being put to optimal use. By improving inventory targets, companies reduce global inventory levels while still maintaining excellent customer-service levels (i.e., fill rates). For example, one Fortune 1000 consumer packaged goods company supply chain director commented, "We achieved a 25 percent reduction in inventory and 99 percent service levels... ToolsGroup let us re-mix the stock in two months... Needless to say, our finance people were ecstatic..."
The program is targeted at CEOs and CFOs looking for increased liquidity or free cash flow, private equity funds wishing to improve ROIC, and supply chain executives addressing corporate mandates to reduce inventory cost while maintaining customer service metrics.
Individual companies will find different results from this process, but can typically xpect to generate cash of between 10 and 30 percent of their inventory value, while maintaining the same or improving customer service, according to ToolsGroup. The program costs a small fraction of the inventory saved and cash generated. RIR consists of three steps:
1. An immediate rightsizing of the inventory to eliminate the least effective inventory and insure profit-generating and strategic products are properly served. Capital is rapidly reallocated to the most financially productive areas. Inventories that are not aligned with profits and customer service are drawn down. Because this first step can be implemented in a few weeks, it can rapidly begin generating free cash flow, often within the same quarter.
2. All inventories are adjusted to avoid excess inventory experienced in a slow down, while maintaining customer service levels. As revenues slow in certain product streams, most companies neglect to adjust their inventory targets to changing circumstances. While individual items will vary, overall inventory requirements are reduced, freeing up additional cash flow.
3. An ongoing review process, managed either inside or outside the company, to keep inventory targets aligned with changing conditions and insure a sustainable results over time.
"Using the experience we've gained at more than 150 corporate clients in a variety of industries, we can run an instant snapshot of a company's inventory and immediately identify the potential savings and time-to-benefit," says Joseph Shamir, CEO of ToolsGroup. "In today's tightening credit environment, this ability to move quickly is critically important to our clients."
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