Every business wants to get more benefit from its operating cash flows and to fine tune its supply chain, but managing working capital and inventory can be tricky.
So this is always going to be a core area of interest and one which will draw systems development and data analysis. Xmas in the time of Covid will probably introduce a few new wrinkles, too.
Recent work in this field reminded me of the game I built in 2018 to show how algorithms can vastly augment human decision making in even very simply inventory and working capital management scenarios, so I revisited the game and pulled together this short video: Vizier Liquidity Game
Note: The video shows text, so you may want to click on the gear icon at the bottom of the Youtube video window and set resolution high at 1080 pixels.
The premise of the game is very simple: you are a reseller with an existing order book for the next fifteen months, and you suddenly learn that you will be able to sell as many goods as you can get manufactured.
But for every product you order in to resell, you must pay your manufacturer to make it a couple of months before you can sell it. Then, once you have sold it, there is a lag in how your customers pay you.
The catch in the game is that you have to guess how many goods you can order in during the without running out of cash window whilst the fortunate situation of high demand exists.
To make it more interesting, you can test how well your performance stacks up against an algorithm.
It can be quite eye-opening to see how far short of computer performance gut feel and guesstimation fall. Obviously there are many more variables that go into inventory and working capital management than are modelled in this game, but Excel models of business activity are also much more comprehensive.
One of the great things about models is that they are so dispensable - you can trial scenarios and watch them succeed or fail and all it costs is the time to plug in new assumptions and check the results - not that different to playing a game, but with the opportunity for a great payoff if you can fix on a winning scenario and implement it.
If you are questioning whether you are making the best use of these resources, then you might want to see what some Excel model augmentation can do for your business.