Using The Consignment Inventory To Improve Working Capital Management

Effective working capital management can improve the overall operational efficiency of an enterprise and enhance its competitive strength.The case enterprise concerned in this article,RK Chemical(RK),is a chemical company that produces flame retardants.It belongs to the fine chemical industry.Due to factors such as the industry environment,it faces difficulties in financing,so the management of operating funds is particularly important.The inventory management method is one of the important factors that may affect the management of working capital.Traditional inventory management methods usually only consider the interests of the enterprise itself.This has certain limitations and drawbacks in the current supply chain environment,and it may also have a negative impact on the company's working capital management.Therefore,a supply chain-based inventory management method emerged.It comprehensively considers the interests of the supply and demand sides to achieve the best of the entire supply chain.RK uses consignment inventory management methods in its inventory management and cooperates with suppliers to manage raw material inventory.This article look insight to discover problems in the management of its working capital through analysis of RK's financial indicators.Among them,the more prominent is the problem of the backlog of raw materials in inventory.The company therefore adopted a consignment inventory model.This article analyzes the RK consignment inventory method,and implementation process.Through the horizontal and vertical comparison of indicators it is found that the application of consignment inventory model reduced the occupation capital of raw materials,reduced the inventory backlog,and increased the turnover rate,as a result,it improved the management of corporate working capital.Based on the experience of and lessons from RK,this paper attempts to propose a reference proposal for the similar enterprises to adopt consignment inventory model to improve working capital management.On the one hand,the research significance of this paper is embodied in theory.Through the comparison of the operating funds management before and after the application of the RK chemical consignment inventory model,the effectiveness of the consignment inventory model in the management of corporate working capital is analyzed and the current research is supplemented.On the other hand,it is reflected in the practical value.By analyzing and summarizing the implementation process of the RK chemical consignment inventory model,it provides a reference for the promotion of similar models in this model.