An organization faces a cash constraint when it has sufficient orders, but it is unable to deliver on time due to inputs shortage as vendors refuse to provide more credit. Shortage of cash impacts sales and throughput non-linearly. If not addressed, it can rapidly lead the company into financial distress.
This unusual situation calls for quick decision-making. It also requires a deep understanding of cash-to-cash cycle time and cash velocity. Often, the conventional metrics and review systems do not provide the right answers swiftly. Most employees, including senior leaders are unable to see the impact of their actions on cash flow. Participants will be introduced to the importance of cash through an interactive computer based Casino Game. The simulation will help participants understand basics of cash allocation and cash flow planning.
In this workshop, participants will be guided through a case study and go through various scenarios using a Cash Constraint computer simulation to understand the impact of cash on throughput, on time in full (OTIF), sales and profit. Some of the important questions that would be addressed are:
- What is cash constraint and how is it different from cash shortage?
- How to calculate cash velocity?
- How to prioritize and allocate cash among different orders?
- How to induct additional cash – several small amounts or one-time large induction of funds?
- What is the right rate of interest to borrow money?
- Does it make sense to provide discounts to customers during a cash constraint?