Dan Ginsberg's 'Working capital takes top priority in 2023'

The current economic climate is vacillating and uncertain; under those conditions, corporate attitudes toward working capital availability may have become stuck in cost-cutting mode past the point where that approach is advantageous. While working capital should take top priority in 2023, the best approach to accessing it has changed.

According to Dan Ginsberg, Managing Director, Private Equity at SGS Maine Pointe, “Today’s era presents an opportunity to craft something much more long-lasting and effective, which contributes sustainably to the bottom line. This more thoughtful approach builds on the three pillars of working capital optimization: releasing cash, reducing cost, and improving service.”

In his recent article in PE Hub, Ginsberg recommends aligning the end-to-end supply chain so that, for example, sales lines up with inventory and with customer expectations of service. Cost-cutting can result in poor inventory control and high rates of customer dissatisfaction, ultimately leading to lower revenue.

A more holistic strategy relies on collaboration and optimization across functions, reaching into every office and line of business in the company. This strategy not only results in greater visibility and control over sales, inventory, operations, and procurement (SIOP), it also allows the company to access its maximum cash potential.

At SGS Maine Pointe, a holistic view is built into all of our engagements. By raising the maturity of procurement, operations, and logistics simultaneously, we deliver the three-pronged impact recommended by Ginsberg: releasing cash, reducing costs, and improving service levels. Using advanced data analytics coupled with leadership and organization improvements, we develop a single source of true and actionable data that reveals the greatest opportunities for capital optimization.

According to Ginsberg, “A balance of optimizations across inventory, receivables, and payables, will encourage a continuous cash culture and allow service levels to improve while reducing cost at the time.” To reach that goal, companies need to rethink old responses rooted in simple cost cutting and take a larger view of their entire company.