7 Tips to Improve Supply Chain Cash Flow

Release date:

2023-04-04

Author:

Jinhua Logistics

Over the past few years, global supply chains have experienced disruptions unprecedented since the start of the 21st century. During the COVID‑19 pandemic, transit times from Asia to the United States surged from two weeks to four to six weeks, and at peak periods, as many as 200 container ships piled up at ports across the country. These disruptions prompted many companies to build up inventory to mitigate delivery‑time risks and guard against shortages during a period of uncertain demand.

Over the past few years, global supply chains have experienced An unprecedented disruption since the beginning of the 21st century. During the global COVID‑19 pandemic, transit times from Asia to the United States surged from two weeks to four to six weeks, and at peak periods, as many as 200 container ships piled up at ports across the country.
These disruptions have prompted many companies to build up inventories to mitigate delivery‑time risks and guard against shortages during a period of uncertain demand.

As a result, many mid-market companies are facing a new challenge: excess inventory. After building up stockpiles to cope with rampant supply-chain disruptions, business leaders are now adapting. “The new normal,” and hopes to reduce inventory.
If your company is experiencing poor on-time delivery, increasing late deliveries, slow or stagnant inventory, or low warehouse efficiency, the first step is to reassess your inventory management and supply chain strategies.
This will enable your business to develop solutions that improve cash flow without compromising profitability or customer satisfaction. The following sections outline the tips and steps you can take to address issues that affect both profitability and customer satisfaction.

1) Leverage proven software solutions
Many mid-market companies use their enterprise resource planning ( ERP systems are used to track sales and inventory. However, the built-in capabilities of ERP for demand and inventory planning may be overly simplistic. By integrating inventory management software as an add-on, ERP data can be paired with more sophisticated algorithms, enabling advanced inventory strategies that provide visualized inventory operations. This approach leverages historical sales data to effectively identify which SKUs should be increased or decreased, thereby optimizing inventory levels, forecasting demand, and helping to reduce costs.
2) Build relationships with suppliers by holding regular meetings.
Business leaders can improve cash flow by engaging in proactive, consistent dialogue with their suppliers. When addressing inventory‑related challenges, a common misconception is that the solution involves issuing tenders to a large number of new suppliers. However, the suppliers with whom you currently collaborate are often those in which your company has invested the most. Therefore, taking the time to build strong relationships with your existing suppliers may be a valuable first step toward resolving cash‑flow issues stemming from inventory.
To build strong relationships with suppliers, schedule monthly or quarterly meetings to ensure that even difficult or routine conversations are not postponed. Additionally, shifting your perspective to view suppliers as business partners fosters open dialogue, allowing you to discuss both your operations and the challenges they face. Many suppliers are actively seeking innovative approaches and eager to understand how they can better serve your business.
3) Implementation indicators serve as tools for facilitating structured communication.
When meeting with suppliers, sharing metrics related to product quality, costs, delivery, and future demand will expedite discussions and demonstrate that you are well-versed in the business trends and plans that matter to both parties. A straightforward way to implement such accountability is to establish a… “Scorecard,” which provides a detailed description of these key agreed-upon indicators.
4) Consider sourcing closer to the customer.
Given the pervasive political and economic uncertainties worldwide, now is not the optimal time to seek suppliers globally whose cost‑performance ratios best align with corporate interests. In fact, the comprehensive cost differentials that once drove companies to offshore are steadily narrowing. Coupled with rising freight rates and longer lead times, the trend is shifting toward securing local supply sources.
If your company is seeking new suppliers, consider those that operate near your customers. Some advantages of choosing local suppliers include the ability to respond quickly to customer needs and to deliver smaller shipments, helping to optimize inventory levels.
5) Consider automation
When considering automation, we often focus on reducing labor costs. While automating repetitive tasks can lower expenses, failing to recognize the opportunities presented by automated information‑exchange processes may result in missed value.
Automation robots are transforming factory floors and logistics. / The layout of the warehouse center. These robots can automatically receive, evaluate, and disseminate information in real time across the entire enterprise, thereby enhancing efficiency and enabling a swift response to evolving customer demands.
6) Know Your Worth
Don’t let your size prevent you from delivering value to your suppliers. Keep in mind that not every aspect of the relationship should be based on projected spending for the current year.
The insights and trends you observe in your business, along with the changes you see in the market, can be invaluable information that suppliers can leverage across all their customers. Suppliers often receive information last in the supply chain. Therefore, if your company can deliver meaningful insights more quickly, suppliers can better align their priorities, thereby enhancing their long-term value as your partner.
In addition, suppliers want to see growth. Present your company’s growth plan to them and, based on realistic projections, explain how procurement volumes will evolve in the future. How to increase within 1–5 years.
7) Focus on your strengths
Finally, focus on your core business and your strengths. In times of economic turmoil and uncertainty, less is more. Given the current economic environment, now may not be the time to experiment… The optimal time to tackle “untested” initiatives. Focus on refining business processes in collaboration with proven vendor partners, reducing complexity, and, where feasible, easing tensions within the supply chain.