Unlocking $30m+ in cash flow while reengineering Supply Chain for sustainable growth and gains

Vision

Fuel for growth

A European-based generics manufacturer producing high-quality affordable generics and speciality drugs, wanted to find ways to maintain exceptional levels of service while becoming a better customer and supplier. It needed to close the year with a healthy quality of earnings and cash flow to fuel its ambitious plans for growth.

Challenge

Interest rates ignite change

Pre-Covid, company growth was quickly accelerating, and efforts were focused on building its portfolio, customer base, service levels, and sales. When Covid brought supply chain disruption, Product Supply teams ramped up efforts to secure supply and production to seamlessly meet demand. 

At the time, interest rates were low, and capital used to drive growth was not of concern – delivering great service and protecting patients came first. But fast forward post Covid, disruption worsened, supply and demand fluctuated, and interest rates rose. This sparked a need to unlock working capital and minimize borrowing to continue its trajectory for growth.

An inventory spanner in the works

A recent rapid rise in inventory was tying up capital. Thought to be an isolated issue, the CFO turned to Genioo for our expertise in reducing inventory to convert excessive inventory into cash. Short-term inventory fixes were hurting the business and the deeper needs of the CFO, Head of Product Supply, and commercial leads – to reduce inventory while driving working capital and maintaining high service levels – would benefit from a more holistic approach and sustainable approach to address the underlying drivers

Solution

Boots on the ground

Efforts to close the year in a strong position, amplified urgency and opinions. And this made it hard to cut through the noise. Decisions needed to be grounded in transparency and reality. A two-week diagnostic enabled leaders to get firsthand oversight of opportunities and challenges. Talking to teams on the ground at manufacturing sites and surveying a further12 people engaged the broader team and gave everyone a voice in shaping the supply chain’s future.

A two-step approach demands quick action and top team alignment

Step one – Stop the bleeding

Working alongside Finance and TechOps, we took immediate action to address excess inventory of $86+ million. We tightened supply and demand planning to reduce DIO, worked with suppliers to cancel outstanding POs, and looked at where excess stock could be sold. Cash released could then be reinvested back into CAPEX to further growth.

Step two – Treat the root cause not the symptoms

The challenges had driven a lot of silo thinking. Commercial’s desire to secure supply and service levels meant TechOps’ production planning and schedules had disconnected from actual market demand, resulting in cash trapped in inventory. Unable to finance growth with working capital, cross-functional alignment became critical to smooth friction and move forward.

Our proprietary Success Planning methodology and Top Team Alignment (TTA) workshop reconciled leadership perceptions with the reality of diagnostics. Well-orchestrated and honest discussions enabled execs to articulate success and agree on a roadmap with six priority workstreams.

Each workstream had a client lead, cross-functional team – to deepen understanding and ownership – and the support of our experts in data, inventory, supply, and demand. The workstreams defined concrete KPIs and co-shaped their plans to execute against the roadmap and deliver:

1. A connected supply ecosystem: A redesigned global supply chain organization with clarified roles and responsibilities and new ways of working to strengthen cross-functional collaboration.
2. Trusted systems and data: Connected systems and consolidated data to accelerate accurate reporting and insights. An executive dashboard created a single source of truth for faster more confident decision-making.
3. Timely closing and insights: Frictionless closing processes and power-BI tools to enable timely month-end reporting. Daily visuals of inventory levels and S&OP and production planning to inform actions.
4. Rigor in S&OP: Stringent production planning and S&OP processes to mitigate production downtime. Validation of ad hoc market requests to enable flexibility in schedules and meet customer service and sales levels.
5. Enhanced supply and demand planning: Improved planning and forecasting deepened Commercial’s ownership of service levels and appreciation of the risk of write-offs for TechOps. Product segmentation, cross-functional insights, and defined KPIs, enabled a One Team approach to the prioritization of products to maintain service levels.
6. Healthier supplier relationships: Supply Chain and Procurement worked together to strengthen supplier relationships and stabilize supply across its external supplier organization (ESO) of 70+ suppliers. An in-person supplier event deepened connections, trust, and transparency with its 25 top suppliers.

Strong governance and regular huddles enabled reviews of the challenges, changes, and KPIs and kept all workstreams connected to the overall roadmap.

Impact

Driving impact now and for the future

In the first eight months we delivered:

• A $35m reduction in gross inventory (8%)
• A 30+ day DIO reduction (17%)
• A 35%+ reduction of excess stock which unlocked $30m+ trapped cash

From the outset, everything was designed and built to work in reality and hand back to business process owners to carry forwards. The full value of this complex large-scale transformation will be realized in years to come.

More importantly, the team’s quick pivot to stem the inventory cash leak. showed a willingness and ability to work as One Team to design a future, improve trust and transparency, and build a cross-functional community working to meet everyone’s long-term needs.

The team now understand and believe in the benefits of tackling opportunities and challenges together and can take this new way of working forward to always reach the best outcomes for their customers, suppliers, and themselves.