The capital restriction for new investments makes companies seek to maximize the return on capital employed. To do this, it is necessary to generate the maximum possible result with the minimum possible amount of capital and assets.
The strategic profit model allows you to evaluate the relationship between inventory and financial indicators. This model is used to calculate the Return on Net Equity (RSPL), which represents the return on the shareholder's capital. This model is generally used to generate scenarios and test sensitivity analyzes of the impact of changes in asset accounts, such as inventories.
Figure 1: Strategic profit model – Source: ILOS
As can be seen in the model represented above, there are some factors that can be changed to obtain a greater return on assets. Reducing stock levels and increasing product turnover is one of the easiest and quickest ways to achieve this, which means that the financial area of companies often puts pressure on the logistics area to reduce the value in stock.
Furthermore, reducing the level of stock also has other positive impacts on the company's results and its indicators, such as a lower need for working capital and a lower probability of forming obsolete or out-of-date stocks, which mitigates loss records. in the financial statements. More indirectly, this reduction can also allow the company to use a smaller warehouse, reducing relevant fixed costs.
However, maintaining an excessively low inventory, although it may seem like an efficient approach to freeing up capital, can negatively impact profit and, therefore, the ability to generate a return on investment. Inadequate inventory management can result in shortages of essential products, hindering the company's ability to meet market demand. This lack of availability can lead to the loss of sales and customers, directly impacting revenue, which makes up the numerator of the equation.
Furthermore, the costs associated with urgent replacement processes and the risk of not taking advantage of business opportunities due to lack of stock also generate additional costs and compromise profitability. Therefore, finding an appropriate balance in inventory management is crucial to preserving profit and ensuring a sustainable return on investments made.
To achieve this balance, it is essential to use a supply policy that adheres to the company's reality and aligned with its strategy, in addition to real and updated parameters. Improving demand forecasting and seeking suppliers with shorter lead times are also initiatives that can be adopted to reduce the need for inventories, freeing up working capital and growth potential at a lower cost.
To better understand the impact of logistics operations on the company's financial performance, ILOS makes available to the market the course FINANCE FOR LOGISTICS AND SUPPLY CHAIN EXECUTIVES. The course of INVENTORY MANAGEMENT IN THE SUPPLY CHAIN presents different supply management models and teaches how to correctly size inventory.
Fernanda Monteiro
More than 11 years of experience in training and consultancy projects, focusing on Logistics and Supply Chain. In consultancy, he carried out projects such as Transformational Logistics Plan, Diagnosis of logistics operations, Strategy and Calendarization of Transport Operations, Measuring the Cost of Serving, Market Study, Mapping of Inventory Reduction Opportunities, Review of the S&OP Process, Management Plan Training and Implementation of Commercial Processes in companies such as Nestlé, Raia Drogasil, Ipiranga, Lojas Americanas, B2W, Coca-Cola, Andina, Embraco, Martins Atacado, Loja do Mecânico, Santo Antônio Energia, Ecoporto and Silimed. She is currently one of the teachers of the Inventory Management Course taught every six months by ILOS. She worked on the development and management of Online Courses in Logistics and Supply Chain, Supply Processes, Demand Planning, Inventory Management and Industrial Management. Still in the training area, she was responsible for applying ILOS business games in companies such as Raia Drogasil, Fibria, NEC, Novartis and Moove.
