Short-term cash impact, long-term resilience
Why is balancing cash, cost, and service so important?
In the process industry, service, quality, and safety are the benchmarks against which every change must be measured. They determine whether plants operate reliably and delivery commitments can be met. Malfunctions, emergency measures, quality losses, or costly replacements cannot offset cost savings.
That is why we do not start with a cost-saving target, but with clear guidelines: What is the minimum service level that must be achieved or maintained? And which metrics define this in a binding way? Typical examples include OTIF, quality metrics, safety requirements, and critical asset performance indicators.
Once these guidelines are in place, the Cash–Cost–Service triangle becomes the guiding management logic, with the service level effectively fixed. Within this framework, the other two dimensions are optimized step by step. This approach ensures that rapid improvements are achieved and sustainably embedded without jeopardizing operational performance.
From Concept to Impactful Execution
We have designed our program to minimize funding requirements and enable self-financing through realized impact. In the short term, we prioritize freeing up cash and using this financial flexibility to fund the next steps. We then secure the impact through structural cost measures and transition it into a sustainable long-term model.
The Cash–Cost–Service triangle serves as the guiding compass throughout this process, while the service level is established as a fixed benchmark. Within this framework, we proceed in stages. This keeps the sequence clear, and each measure can be managed effectively. Together, we define the key performance indicators (KPIs) used to establish the service level. In our experience, these typically include OTIF, quality metrics, safety requirements, and critical thresholds for system performance. Every measure in the program is evaluated against these metrics. If a measure puts the service level at risk, an alternative solution or a conscious management decision is required. This prevents measures from creating unforeseen additional costs that ultimately erode the intended impact. Once the framework is in place, we address cash management measures that are seamlessly integrated across the three key metrics: Days Inventory Outstanding (DIO), Days Sales Outstanding (DSO), and Days Payables Outstanding (DPO). On the DIO side, we reduce inventory levels and lead times by jointly adjusting planning parameters, batch sizes, safety stock levels, and replenishment logic, thereby freeing up tied-up capital without compromising the established service level. AI-supported demand forecasting methods enable more precise demand forecasting and help align inventory consistently with actual demand while specifically reducing excess inventory. In addition, Advanced Planning and Scheduling (APS) is used to achieve greater transparency and control by creating detailed production plans and simulating alternative planning scenarios. At the same time, we accelerate cash inflow through DSO by consistently streamlining the order-to-cash process, setting up acceptance and billing procedures properly, and effectively managing accounts receivable. Within procurement, we optimize payment terms to support liquidity and enhance process discipline through the purchase-to-pay process. We deliberately begin with a limited number of clear priorities and launch a focused implementation wave designed to deliver rapid, visible impact. The next step is to make the cost base more flexible while adhering to the defined parameters. Key levers include: Additional measures include outsourcing non-core activities where governance and quality can be reliably maintained, as well as supplier and contract models that provide flexibility in volumes and service levels. Efficiency programs across the value chain help reduce downtime, idle time, and non-value-adding activities. We quantify the impact, translate it into an operating model, and embed implementation through routines, governance, and clear responsibilities. In the final phase, we integrate the improvements into a structure that ensures long-term competitiveness, enabling us to systematically evaluate decisions regarding locations and production networks. As a result, the company will be more resilient following the transformation and able to adapt flexibly to market conditions.Stage 1: Establish Service Levels as a Benchmark
Stage 2: Unlocking Cash Systematically
Stage 3: Increasing Cost Flexibility and Securing Sustainable Impact
Stage 4: Embedding Resilience Through Footprint and Asset Network Optimization
What does the consulting approach look like as an integrated system?
At its core the approach is a clear sequence, guided by the Cash–Cost–Service Triangle:
What Is the Outcome for C-LEVEL EXECUTIVES?
- CFO: Faster cash flow and greater control over capital tied up and the cost base.
- COO: More stable performance amid fluctuating capacity utilization, clear processes and management logic. as well as fewer operational inefficiencies.
- CEO: A sustainable path to competitiveness that delivers results in the short term while laying the groundwork for long-term decisions.
Where do you really stand in the competitive landscape?
With Horn & Company’s free high-level Benchmarking service, you’ll gain a clear overview of how your company stacks up against the competition. We analyze key performance indicators and provide a transparent assessment of where you stand in terms of cost structure, capacity, and efficiency.
The result: a well-founded initial assessment with specific recommendations for action and areas for improvement, serving as a foundation for further discussions.
