Cash flow optimisation keeps your business on financial track
Using AI to optimise your supply chain doesn't just ensure the smooth flow of stock, it can also optimise the flow of cash to keep the business running smoothly.
Every business has its cash flow challenges which, if left unchecked, can hurt the bottom line. It's a complex problem with a lot of moving parts. Many businesses assume it's one of those problems which can't be solved; an unavoidable cost of doing business.
Just as AI can be used to optimise the flow of stock along your supply chain, it can also be used to optimise the flow of cash. If you don't view your supply chain as a financial function of the business, you might be leaving money on the table.
One way to conceptualise your supply chain is a vehicle for meeting customer expectations, with products and cash flowing through the business in opposite directions. CTM File have a great illustration of this notion which can be found here.
A stockout of a popular product leads to lost sales, delayed sales or sales cannibalisation. Discovering an item is on backorder and delivery is delayed can also lead to abandoned carts or cancelled orders. This only gets harder to track the more complicated the supply chain gets (read more in our piece on Multi-echelon Supply Chain). All of this leads to a loss or delay in revenue, which impacts cash flow.
On top of this, you have the issues of business reputation and customer disappointment, which can be difficult to model, but can also snowball with negative reviews and vocal or influential customers. Especially if you don't have good processes in place to capture exactly what happens when you fail to satisfy their needs the first time.
In the event of an unexpected stockout which hurts the business, you might err on the side of caution and order more stock than you need. Crude efforts can make the situation worse, as the problem swings the other way and creates a whiplash effect.
Remember, excess safety stock takes up warehouse space which could have been used to bring in new stock. It also ties up cash that could have been invested elsewhere in the business, such as on advertising.
So, what to do?
Under a simple rules-based system, often the best businesses can do is to aspire to avoid blockages by setting minimum stock levels. The aim is simply to maintain the flow, not optimise it, because there's no ability to take a high-level macro view of how cash flows through the supply chain.
AI-based cash flow optimisation lets you take this high-level view and optimise for the financial priorities of the business. There's no need to get bogged down in constantly honing a complex setting of rules. Instead, you specify the required high-level outcomes and it determines the optimal course of action to achieve them.
SMEs might assume these kinds of tools are only for the big end of town, but the financial models of large corporates are so complex that it's a much larger challenge. The SME space is most ripe for disruption, it's where AI-based optimisation cash flow can deliver a real competitive advantage.
If the ebbs and flows of cash through your supply chain are choking the business, AI-based cash flow optimisation can help open the floodgates.
Want to know more about inventory management and replenishment? Head here to find out how AI can help you avoid stock-outs, or here to learn all about the things you need to consider before implementing AI. You can also see our platform in action via our case studies - including how we helped a wholesale distributor reduce stock-outs by 24%.Once you’ve had your fill of content from our blog, why not drop us a line here.