F0025: Working Capital Decision Framework

Context

Context: Working Capital decisions recur frequently and interpretations of inventory turns and DSO vary by team. A shared decision standard is required to stay within inventory constraints and maintain accountability. Without it, teams reach different conclusions and coordination costs rise. The organization needs consistent rationale across regions.

Options

• Option A: Maintain the current working capital approach to minimize near-term risk, with limited upside. Impact is contained.
• Option B: Adjust working capital in phases and monitor inventory turns and DSO before scaling. Risk stays moderate.
• Option C: Redesign working capital and redefine the inventory reduction vs stockout risk to pursue larger gains. Upfront effort is higher.

Decision

Decision: Select Option B. Start within inventory constraints, expand only if inventory turns and DSO improves, and define stop conditions along with the next review date. Document owners and scope boundaries explicitly. Clarify approval checkpoints.

Rationale

Rationale: Option B preserves operational stability while providing measurable evidence. It limits downside under inventory constraints and allows gradual adjustment of the inventory reduction vs stockout risk. Stakeholder buy-in is stronger because accountability and sequencing are clear. The phased approach also improves learning quality. It leaves room to pivot if results disappoint.

Risks

• Weak measurement design makes it impossible to judge changes in inventory turns and DSO. Results may be disputed.
• Insufficient resourcing leads to partial execution and diluted results. Momentum may fade.

Next

Next: Confirm scope and owners, align on how inventory turns and DSO will be measured, and share the risk register with mitigations before the next review. Set deadlines for evidence collection and update cadence. Publish a short summary to stakeholders.