Operating Working Capital (OWC) Optimization

Client Challenge

Supply markets are impacted by: 

• Material shortages and increased lead times
• Long order fixations and lack of flexibility
• Increased raw material prices  

Customer markets are influenced by:

• Strong demand changes due to short-term decisions of governmental subsidies
• Deviating market trends with short term fluctuations
• Unsatisfying forecast accuracy 

H&Z Approach

H&Z leveraged their expertise in working capital-backed projects to support the OWC optimization of Vaillant Group. Collaborating closely with Vaillant Group, the team worked through three workstreams.

The first workstream focused on reducing inventory levels by conducting an as-is analysis and benchmarking OWC performance (DIO, DPO, and DSO), setting top-down targets for sustainable OWC levels, and defining short- and long-term measures to achieve these targets. The second workstream aimed to future-proof the S&OP process by analyzing the current process's maturity level, identifying pain points, and deriving optimization measures. The third workstream concentrated on establishing a sustainable integrated steering and reporting system, including KPIs and clear responsibilities.

After deriving improvement measures and concepts, H&Z worked hand in hand with cross-functional project teams to support the implementation of solutions, quick wins, and lighthouse projects.

Results

The project team achieved remarkable results by reducing and reversing the trend of DIO and inventory increase. By enriching strategic objectives and KPIs, they established a more forward-looking perspective. Long-term inventory forecasts significantly improved, ensuring more reliable planning.

The organization and governance were strengthened with a sharper focus on OWC, and S&OP processes were enhanced including better interfaces and comprehensive training concepts.

An OWC mindset was successfully established throughout the organization, leading to sustained improvements and optimized working capital management. This holistic approach ensured lasting benefits and alignment with strategic goals.

About Vaillant

The Vaillant Group is an international company headquartered in Remscheid, Germany, which operates in the fields of heating, ventilation and air-conditioning technology. As one of the global market and technology leaders, the Vaillant Group develops and produces customised products and systems and provides services for home comfort. The product portfolio ranges from efficient heating appliances based on conventional energy sources to system solutions for the use of renewable energies. In the 2023 financial year, the company, which has been family-owned since it was founded in 1874, generated sales of around €3.8 billion with 17,500 employees.