How controlling inventory can help improve cash flow

Unsold inventory restricts cash flow. But decreasing the amount of product stock your company holds in storage isn’t guaranteed to increase cash flow. That’s because spikes in demand or supply chain disruptions can hurt sales volumes if you’re not maintaining product surpluses as a buffer.

A just-in-time (JIT) approach to inventory helps solve that dilemma by aligning replenishment more closely with customer demand.^{Disclosure 1} In the process, it can reduce working capital and boost cash flow while minimizing the risk of missed sales.

What makes all that possible? A just-in-time approach helps improve supplier reliability, strengthens transportation performance, and improves real-time inventory visibility. Successfully implementing just-in-time inventory management strategies can potentially free up cash flow by:

• Lowering carrying costs
• Improving inventory turnove
• Identifying and removing nonessential buffer stock

But to realize these benefits, you’ll need to invest in the tools and expertise that enable a just-in-time approach. With the help of your Truist relationship manager, you can access insights from logistics, supply chain, and tech specialists. Then, your relationship manager can help you consider financing tailored to your specific goals and needs.

Micro-fulfillment centers

Conventional warehousing and storage options can present logistical limitations. When a company relies on one or two large warehouses, products may need to be shipped hundreds or thousands of miles to reach customers. Most of those shipments will be at a disadvantage to meet faraway customers' expectations for fast delivery. If they don’t meet those expectations, cash flow may suffer as a result.

Micro-fulfillment centers (MFCs) are smaller, predominantly automated facilities situated closer to end customers that help reduce shipping costs. MFCs can help reshape your distribution network and reposition your inventory.^{Disclosure 3} Done effectively, this strategy makes it easier to maintain and improve service levels; it should also help minimize overall inventory requirements companywide.

With smart financing guidance from your relationship manager and careful planning from logistics experts, MFCs can benefit your company by:

• Positioning inventory closer to demand
• Shrinking your shipping costs during the final stages of delivery
• Improving delivery speed
• Reducing the need for excess stock
• Cutting back on central warehousing square footage

Understandably, financially and logistically coordinating the acquisitions of land, automation tech, and systems integration services needed to reap those benefits can be a capital-intensive process.

Your relationship manager is ready to work with you. They’ll bring their own know-how and specialized Truist team members. Together, you and this team will work to develop an inventory, shipping, and storage strategy that creates better cash flow.