Optimization of the Working Capital Management (WCM)

Published on 11-Jan-2011

Validated on 11 Jan 2011

"The optimization of the Working Capital Management will improve the competitiveness of BHI significantly. " - Hans-P. van Zon, CFO BHI

Customer:
Brau Holding International GmbH & Co. KGaA

Industry:
Consumer Products

Deployment country:
Germany

Solution:
Business Performance Transformation, Business Process Management (BPM)

Overview

Similar to the tight situations on other markets and industries, the beverages-market is in an ongoing process of consolidation. An increase of total revenue is difficult to realize because of decreasing beer consumption per head – especially in a very price sensitive market.

Business need:
Driven by past growth policies,t investments were purchased but not fully integrated into the group. This diversified and decentralized organizational structure leads to an unhomogenious process landscape. In additiont, the consolidation of the IT systems is pending.

Solution:
The working capital improvements have a direct impact on the balance sheet and enable more flexibility with financing opportunities. During assessments and workshops, the awareness regarding the relevance of working capital management increased on different levels and functions of the organization. The optimization of the working capital performance will free-up important liquidity, and therefore improve the overall competitiveness of the company.

Benefits:
Benefits included direct impact on the balance sheet enabling more flexibility with financing opportunities, improvment of Working Capital Management leading to improved competitiveness, detailled and precise target agreements securing a cross-functional optimization, increased awareness regarding Working Capital within different hierachies and functions of the organization, and defined categories for optimization enabling prioritization of operating figures as well as adjustments of system requirements of upcoming projects.

Case Study

A German/Dutch Brewery-Holding optimizes working capital management regarding the components receivables, payables and inventories. IBM Global Business Services supports with the analysis of the end-to-end-processes, the identification of potentials for improvement as well as definition of the roadmap for realization.

Business challenge
Persistent consolidation of supply and demand markets, securing growth despite decreasing beer-consumption per head, diversified and decentralized organizational structure of BHI Group, disrupted business and sales models, processes, structures and organizational structures within the BHI Group and partially within single breweries.

Solution

After the Analysis of the Working Capital Management Performance from a holding perspective, an investigation using standardized questionnaires was performed for each brewery. The main focus during the analysis was on Order to Cash and Procure to Pay end-to-end-proesses. After the evaluation of all quantitative and qualitative information, the first hypothesis could be drafted, which then needs to be validated through in-depth interviews within the breweries.

The final achievements enable a detailed view on the areas for improvement as well as on the potentials. The developed measures for improvement have been categorized in organization, processes or system related actions. All measures were valued regarding the expected cash impact to the working capital. Beyond that, improvement measures which promise quick-wins were highlighted. To have a common understanding, commitment and solid results, the proposed measures for improvement have been discussed with the stakeholders in the breweries.

The consolidated cash impact resulting from the proposed improvement measures has been calculated per brewery and was used as the basis for the target agreement regarding WCM Optimization.
Benefits
  • Direct impact on the balance sheet enabling more flexibility with financing opportunities
  • Improvement of Working Capital Management leads to improved competitiveness
  • Detailed and precise target agreements securing a cross-functional optimization
  • Increased awareness regarding Working Capital within different hierarchies and functions of the organization
  • Defined categories for optimization enabling prioritization of operating figures as well as adjustments of system requirements of upcoming projects

Products and services used

IBM products and services that were used in this case study.

Service:
GBS Financial Management: Finance Transformation, IBM Global Business Services

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