Liquidity Management for Management Consultants & Managers

In the second section I will show how to the general framework for liquidity improvement and liquidity management. We will use it throughout the whole course.

Inventory in most business is a must if you want to sell your products and scale the business. That is why it so vital to reduce the inventory if you want more cash

In this section I will discuss different ways in which you can reduce inventory

• Components of Inventory

• General framework for Inventory Reduction

• Cases Studies & Analysis

There are 4 main components that create Inventory

• Raw Materials

• Work in Progress (WIP)

• Finished Products

• Goods

We will have a look what do they depend on

Let’s have a look at the general framework for inventory reduction. You can lower the inventory by following actions:

• Order Less

• Reduce Product Range

• Shorten production cycle

• Unify packaging & materials

• Get rid off the middleman

• Sell more directly

• Consolidate the # of warehouses

• Decrease waste

• Reuse slow moving inventory

• Sell dead wood stock

• Consignment Stock

Let’s have a look at some standard ways to shorten production cycle that will help you reduce inventory

• Reduce processing time

• Implement Kanban

• Implement Continuous Flow

• Change Factory Layout

• Make sure you have the required materials

• Make sure you have the required resources

• Do only things that are required

• Remove bottlenecks

To measure the impact of shortening production time we should measure WIP in days of production. I will show you how to do that in this lecture.

Kanban is a way in which you can drastically limit work in progress. I will show you in this lecture what it is and how it looks like in practice 

I will show you how to calculate the impact of Kanban in Excel 

In this lecture I will show you how to take advantage of periods of lower activities using the so called Kanban 

The ideal in production is the so called      continuous flow -every go smoothly and fast. Products are being produced      fast and cheap. In this section I will tell you how to achieve it.

Using a sandwich factory I will show you the mistakes people do when they try to create a continuous flow

I will continue our example of sandwich factory. We add the Kanban to the continuous flow

I will continue our example of sandwich factory. We add the Kanban to the continuous flow

There are 3 ways to unify packaging and materials

• Implement modularity of finished products

• Standardize similar things and limit number of materials used

• Unified version for a big number of use cases

In the next lectures we will go through a case study of a cosmetics producer. One of the things we will do there is to estimate the impact of unifying bottles

Now we will have a look at a cosmetics producer and we will try to measure how much they can save by using less. We will look at 3 areas of their activities. Below some information about the firm we will be analyzing

• They want to minimize number of bottles they use

• The are considering visiting less frequently customers

• They want to move 2 offices into 1 bigger office

• Check how much they can save

In this lecture we will be solving the previously introduced case study

In this lecture we will be solving the previously introduced case study

In this lecture we will be solving the previously introduced case study

Decreasing waste is one of the ways to reduce inventory

If you manage to decrease waste, there are 3 potential beneficial impacts:

• You waste less material

• You can produce more or order less materials

• You can earn more (higher production or lower costs)

Before you start analyzing the waste you have to somehow group it by stages of occurrence and type of waste

For finding the potential improvements in waste I propose the following approach:

• Measure and allocate waste by stages and type of waste

• Pick specific type of waste and the stage you want to tackle

• Find the root cause

• Find the improvement

• Calculate whether it makes economic sense or not

Imagine that you work for a plywood firm with 3 factories and you have to decrease waste. A few information about he firm:

They have 3 plants

• They have different waste level

• You can find waste: in too big level of wood usage or plywood quality

• Estimate the potential impact on profit and cash

  
  

In this lecture we will be solving the previously introduced case study

In this lecture we will be solving the previously introduced case study

In the 4th section, I discuss methods that you can use to reduce receivables. Most firms don’t sell directly, so a lot of money is tied up in receivables. Luckily, there are certain ways to lower receivables and increase cash position.

Let’s have a look at the general framework for receivables reduction

Imagine that you are working for a smartphone producer that considers direct distribution. In this lecture, we will start the case study where your task will be to check whether it makes sense or not

I will show you in this lecture what KPI I the retail business model driven by. This will help you understand the modeling in Excel done in next lectures

Here I will show you how to model the Retailer business in Excel.

Here I will show you how to model the Retailer business in Excel.

Here I will show you how to model the Retailer business in Excel.

We are returning to the case study where we try to model the SMCG business - smartphone producer that wants to set-up his own retail chain

We are returning to the case study where we try to model the SMCG business - smartphone producer that wants to set-up his own retail chain

In this lecture, I will show you the solution to the previously introduced case study

In this lecture, I will show you the solution to the previously introduced case study

In this lecture, I will show you the solution to the previously introduced case study

In this lecture, I will show you the solution to the previously introduced case study

Imagine that you have bought a firm providing Data Science services. You will mainly use a Debt put on the purchased firm but there is still a Cash Gap you have to take care of

A few information about the firm that we will be analyzing

• The company has 500 Data Scientists

• 80% of their time is billable hours

• Customers pay on average EUR 48 K fee per Data Scientist

• Consider 8 scenarios

In this lecture we will solve previously introduced case study

In this lecture we will solve previously introduced case study

In this lecture we will solve previously introduced case study

In this lecture we will solve previously introduced case study

In this lecture we will solve previously introduced case study

In this lecture we will solve previously introduced case study

After that in the next section we will have a look how you can generate additional cash by improving payables. Most companies have plenty of suppliers that they have to pay for their services and goods. A lot of additional cash can be generated by optimizing the payables.

Let’s have a look at the general framework for payables improvement

• Renegotiate Payment Terms

• Consolidate suppliers

• Look for new suppliers

• Barter

• Reverse Factoring

• Consignment Stock

• Change frequency of purchasing

• Change the moment of issuing the invoice

• Use Faster Transport

Imagine that you have bought a firm providing Data Science services. You will mainly use a Debt put on the purchased firm but there is still Cash Gap you have to take care of

A few information about the firm that we will be analyzing

• The company has 500 Data Scientists

• 80% of their time is billable hours

• Customers pay on average EUR 48 K fee per Data Scientist

• Consider 8 scenario

Now we will concentrate on improving the cash by looking at the payables

In this lecture, I will show you the solution to the previously introduced case study

In this lecture, I will show you the solution to the previously introduced case study

In this lecture, I will show you the solution to the previously introduced case study

In this lecture, I will show you the solution to the previously introduced case study

In this lecture, I will show you the solution to the previously introduced case study

Another way to improve the cash position is to restructure the debts you have and to make them cheaper to service or change the schedule of payments. In this section, we will discuss the general framework and we will have a look at case studies.

Let’s have a look at the general framework for debt restructuring

• Consolidate & Refinance Debt

• Switch from short-term to long-term financing

• Change the timing of payments

• Use alternative financing i.e. Leasing

• Swap Debt for Equity

• Issue new shares including IPO

• Hide Debt i.e. reverse factoring

• Others

Imagine that you are working for a PE fund that has just bought a low-cost fashion Retailer. You have to estimate the impact of debt restructuring efforts they are considering

1. A few information about the firm that we will be analyzing

2. The company has 200 stores and adds 50 new ones every year

3. The PE bought them using only high yield debt (12% interest rate)

4. They consider 4 scenarios to restructure Debt

5. Analyze and propose the optimal solution

In this lecture, I will show you the solution to the previously introduced case study

In this lecture, I will show you the solution to the previously introduced case study

In this lecture, I will show you the solution to the previously introduced case study

In this lecture, I will show you the solution to the previously introduced case study

In this lecture, I will show you the solution to the previously introduced case study

In this lecture, I will show you the solution to the previously introduced case study

In this lecture, I will show you the solution to the previously introduced case study

Many managers forget that one of the ways to get more cash is simple to increase the margins or revenues. This may help you, under certain conditions, improve your cash position. We will discuss main methods and we will have a look at case studies

Here I will show you the general framework for increasing the sales in FMCG

Here I will show you the general framework for increasing the sales in retail

Here I will show you the general framework for decreasing the costs in retail

Here I will show you the general framework for increasing the margin in retail

Imagine that you are working for a cosmetics producers. And you have to increase his profitability   

In this lecture, we will solve the previously introduced case study

In this lecture, we will solve the previously introduced case study

Imagine that you are working for a fashion discounter that operates a retail chain in Eastern Europe. In this lecture, we will find ways to increase the profitability

In this lecture, we will solve the previously introduced case study

In this lecture, we will solve the previously introduced case study

In this section, we will have a look at how you can save cash by revising investments and picking the right ones from the point of view of your cash position.

We will discuss how you can improve the cash position by revising investments.

We will start by sharing some general thoughts on investments, why we do them, and what we want to achieve. We will use this to, later on, define the way we calculate the expected returns and to check whether the investment makes sense or not.

Different animals are investments in bottlenecks. Here we don't' look at cost savings but rather the greater impact we can make on the EBITDA. This is what we will analyze in the next few lectures.

In this lecture, we will solve the previously introduced case study

In this lecture, we will solve the previously introduced case study

In this lecture, we will solve the previously introduced case study

In this lecture, we will solve the previously introduced case study

In the next lectures, we will see how to calculate whether an investment that will help us save costs makes sense or not. This time around we will do it for a retailer and we will see whether an investment in LED bulbs makes economic sense.

In this lecture, we will solve the previously introduced case study

In this lecture, we will solve the previously introduced case study

In this lecture, we will solve the previously introduced case study

In this lecture, we will solve the previously introduced case study

In some cases in order to improve the cash position of your firm you are forced to do more drastic moves. This requires a change to the strategy as well. We will discuss this issue in this section.

Let’s have a look at the general framework for strategic moves

• Slow down growth

• Sell-non-core assets

• Sell some business units

• Split the firm

• Use fewer assets for the business

The last way to boost your profits without scaling is to get rid of non-core assets. In this lecture, we will discuss the general rules for identifying which assets should be sold

In the next 3 lectures, I will show you how to sell non-core assets. We will use the case of cosmetics producer

Here I will show you the solution to the previously introduced case

Here I will show you the solution to the previously introduced case

In this section we will have a look how you can generate cash, improve liquidity by reducing costs.

Here I will show you the general framework for decreasing the costs

We will adjust the cost reduction framework to FMCG & Retail

Here I will into a little bit more detail on how to do  reduce costs in Sales and Marketing

Here I will show you the general framework for decreasing the costs of stores in retail

Here I will show you the general framework for decreasing the costs in the head office in retail

In this section, I will show you how to identify the so-called quick wins – in other words, big savings that you can easily achieve, implement. We will start with 2 general frameworks (80/20 and low hanging fruits) and I will show you how we can apply it to find the projects that will generate big savings

In this lecture, I will show you how to use in practice the 80/20 rule also known as Pareto principal

In this lecture, we will talk briefly about applying the low hanging fruits in practice. I will show you the principles of using it as well as a practical example

Let’s look at how the quick win framework looks for savings. We will look at 2 dimensions:

• What is the potential savings we can achieve

• How easy it is to implement it?

We will have thanks to 4 categories of projects that we can consider:

• Cow savings – easy to kill and big

• Elephant – difficult to catch yet big

• Chicken savings – easy to kill yet you need to kill a lot of them not to be hungry

• Bat savings – small and difficult to catch

Remember that the potential reduction in costs depends on 2 elements: potential percentage cost reduction and the cost starting point:

• Potential % cost reduction

• Cost starting point

We will discuss this in this lecture

Imagine that you have to identify quick wins in cost reduction for an international chain of drugstores. We know their cost structure

• A few information about the firm that we will be analyzing

• They have 4 000 stores

• We have their cost structure

• They have sent us a list of projects that will help them reduce costs

• Estimate the potential and group them using the quick wins framework

In this lecture, we will solve the previously introduced case

In this lecture, we will solve the previously introduced case

In this lecture, we will solve the previously introduced case

There are some ways to estimate the potential reduction in costs

• Get benchmarks

• Carry out a 1-day audit

• Measure a sample

• Ask experts

• Ask suppliers of tools / IT solution / machines

• Organize auction / tender

• Do a consulting project with a consulting firm

In this section, I will show you how you can cut costs by reducing the usage of certain things that your firm is using

Imagine that you are analyzing a newly bought company that is providing Data Science services. Your boss wants you to look at usage and decide what to reduce

A few information about the firm that we will be analyzing

• The company has 500 Data Scientists

• You got data on what Software and tools they use

• Eliminate things they don’t use

In this lecture, I will show you the available for the case study data

In this lecture, I will show you the available for the case study data