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 / Summer 2009 / Issue 55(originally published by Booz & Company)


$950 Billion in Extra Capital

Each of these steps can free up capital. But to fully realize the potential for savings, the team needs to go much further and look at the organization’s activities more holistically. They must scrutinize the list of measures that the company plans to undertake and consider the ways in which these measures might reinforce one another’s impact.

One effective way to accomplish this, developed at Booz & Company over the past 25 years, is the ISSR analysis, named for the domains in which these seemingly separate measures interrelate. The inherent domain represents changes in the nature of the product or service; for example, can products be redesigned so that they use common components? The structural domain involves supply chain assets; can supplier relationships, the factory operations and footprint, and the customer base be structured to minimize inventory requirements at a given service level? The systemic factors in a company involve its management and organizational practices. For example, could optimized service policies and lean business processes help the company use working capital assets sparingly? Finally, in the realized domain, incentives and other factors influence the way people drive execution. For example, should there be a mini–training session, reinforced by a set of incentives, to motivate and guide employees to consider the cost of capital when they make operating decisions, especially when those employees are working together across the accounts receivable and accounts payable functions?

The road ahead will be difficult. It’s incumbent upon executives not only to manage but also to enhance their balance sheets during this challenging period. Given the amount of excess cash on corporate balance sheets, there appears to be ample opportunity for substantial improvement.

Author Profiles:

  • Barry Jaruzelski is a partner with Booz & Company in Florham Park, N.J. He leads the firm’s work for high-technology and industrial clients and specializes in corporate and product strategy, product development efficiency and effectiveness, and the transformation of core innovation processes.
  • Conrad Winkler, a partner with Booz & Company based in Chicago, is an expert in manufacturing strategy, manufacturing transformation, and supply chain management. He is the coauthor of Make or Break: How Manufacturers Can Leap from Decline to Revitalization (McGraw-Hill, 2008).
  • Eric Dustman is a principal with Booz & Company in Chicago who specializes in operations strategy, including manufacturing, supply chain, and asset effectiveness involving industrial, automotive, consumer, and high-technology companies.
  • Also contributing to this piece was Booz & Company Senior Associate Lee Talbert.
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