Problem Definition :
A leading Jeweller based in India, was facing severe cash flow issues with outstanding payables, intense pressure from suppliers, excess overdraft drawn beyond limits, financial crunch and strained cash flows. Though the business was performing satisfactorily with highly satisfied clientele, premium customer base, best in class locality, quality products / designs, still there was something left incomplete in the process of their operation. The client approached Align Associate to provide a solution to their problem.
Align Associate’s experience of 14 years across industries, knowledge of business standards, best practices, key performance metrics were used to assess the problem. A team of experts drawn from finance, operations with sector specific knowledge and expertise were drawn to research & identify the root cause of the problem on the following parameters:
• Balance Sheet Analysis
• Financial Ratio Analysis
• Working Capital Analysis
• Cash Flow Analysis
• Industry Benchmarking Analysis
On research of their business model, it was found out that the root cause of cash flow issue was due to overstocking of inventory than what was required to meet the Sales throughput. The company was performing at half the level of stock rotation in comparison to industry best players. Once identified, Align Associate worked towards putting in a comprehensive solution.
To address this issue, the last 4 years Historical Sales Data was analyzed in detail to understand sales patterns in various categories & sub-categories across price & design ranges. Pattern based, algorithmic analytics were designed using advance data crunching tools and user friendly Dashboards were developed and deployed to provide decision support with respect to Inventory Management.
Advanced Analytics Dashboards were able to provide a comprehensive direction through:
• Optimum stocks to be maintained and Industry Standards for every Jewellery category
• Optimum Stocks split across various weight and price ranges, including designs
• Right suppliers for jewellery categories that customers bought to help plan sourcing
Adoption of the Advanced Analytics Dashboard by the Client took approximately 6 to 9 months and with its user friendly design and intuitive view, the client was able to closely monitor and take action. Align Associate experts were continuously supporting and handholding the initiative through external watch & monitoring process.
Challenges Faced :
In the initial stages of the project, the Sales force had to be convinced that the myth of “more stocks leads to more sales” does not hold good. Once the root cause of the problem was identified, there was deep effort to educate the client on maintaining optimum stock levels. Right sizing of inventory was necessary to optimize working capital apart from increasing sales.
Further, getting the right data was also a critical challenge amd Align Associate had to cleanse data which was provided in complex formats. Team members at Align Associate had to use their extensive knowledge of Oracle, SQL to convert data into the relevant formats.
The client, after initial hesitation and resistance, realized the importance of optimization and positive changes achieved through inventory correction. Business derived significant benefits with the help of Advanced Analytics Dashboards:
• Reduction of inventory by 40%
• Sales increased by 20%
• Usage of excess Cash flows generated to buy other valuable capital assets
• Payment of Overdraft
Please contact Align Associate for exploring possibilities of providing your organization similar support.
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