Normet is a fast growing multinational company offering solutions for underground mining and tunneling. The company has expanded from local to global in a short period of time. Companies with such a growth pace usually face challenges both with securing the cash flow as well as with building the structure and common ways of working needed to grow profitably.
Normet management identified these challenges and together with Capacent a working capital optimization project was launched in the beginning of 2017. The project started with identifying the main operative drivers for the high level of working capital that was causing cash flow challenges. A maturity assessment was done on the processes driving working capital followed by the creation of an action plan on how to improve for instance the inventory management, collection and order to delivery processes.
The project’s financial target was set by the team at approximately a 20% reduction of working capital during the project duration, with the expectation of reaching a total of 25% reduction a year later, as some of the actions were longer term. The project target was met when the project was about half way. Another important target was to ensure efficient governance and working practices within the Normet Group. Working capital optimization is about improving efficiency in the company’s core processes and it is very typical that the actions taken will have a positive effect on the company profit as well. This is the case also in the Normet project where for instance the gate model will impact both the cash flow and profit positively.
“Working with Capacent our service organization learned the big picture challenge and dependencies within the whole NWC playfield. With proper reporting, governance and discipline put in place, we received good results that motivated the organization to continue improving.”
– Mikko Immonen, Senior Vice President Services business line,
Some of the key elements that were crucial for the project’s success were
‒involving the organization from sales to procurement and management to shop floor in the activities identified
‒educating the organization to understand and consider the effect on cash flow of decisions taken every day
‒providing best practices and tools as well as practical support to negotiate and argue terms that improve cash flow
‒setting up governance, reporting and discipline needed to achieve good results
‒ensuring fast corrective actions when needed through a seamless cooperation between Capacent and Normet top management
“The Capacent consultants gained our trust at an early stage by ensuring they have a thorough understanding of the problem at hand and bringing their expertise and best practices that together with our people are being adjusted to match our situation. They have coached our key persons through the implementation making them believe in that the change truly is possible to achieve. This project is actually the first one where I solely have received positive feedback from the organization on using external consultants. And I also appreciate the fact that other areas that need management attention have been identified during this project.”
– Robin Lindahl, President and CEO, Normet Group