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Optimize your Supply Chain to improve Cash Flow

Effective supply chain management is an imperative for companies that strive for excellence in the market place and establish their supremacy in a world that is exceedingly competitive. Supply chain refers to the integrated approach to various processes, systems and people that help in the transformation of resources into finished product or service and is instrumental in transferring the same from the producer to the customer. The supply chain is thus a complex amalgamation of various entities that are involved in ensuring that the end product reaches the customer and is central to the value making process of the organization. Disparate and often physically separated corporate entities and enterprises are made use of in the supply chain in order to achieve the overall objectives of the company in question.

In these days of economic need and recession, a company’s cash flow situation often determines the difference between success and failure. There are various ways in which effective supply chain management can have a very positive impact on your cash flows. Take for instance, the production efficiency and effectiveness. At the very beginning, material procurement and storage is extremely important in ensuring effective cash flow positions for your business. It is quite imperative that one strikes advantageous deals with vendors so that materials are obtained at lower costs.

If you consider machine optimization, higher run times and lower downtimes as well as lower costs on maintenance will lead to more positive cash flows and stop cash flow leakages. Effective production planning and control systems are also essential to estimate demand and meet it in a just-in-time kind of model so that inventory carrying costs may be minimized leading to better cash flow positions.

One of the most important parts of the supply chain is labor, as it is human endeavor that is responsible for ensuring that various aspects of supply chain are integrated and work well to achieve organizational results. Minimizing losses in man-hours and productivity by reducing instances of absenteeism, low efficiency and the like is quite significant from the point of view of cash flow management. When it comes to logistics, aspects like transportation, storage and warehousing are quite essential to ensure business success. Any problems with respect to carrying and forwarding operations can mean holding up of inventory and locking up of cash, which is detrimental to the company’s overall cash flow position.
In brief, if you want to improve your cash flow, you will need to optimize your supply chain management.

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