Where Working Capital Hides in Your Supply Chain

Your bridge to growth may already be sitting inside the operation.

Many mid-market CFOs have meaningful working capital tied up in their supply chains without a clear view of where it is, why it is there, or what it is costing the business.

The opportunity is rarely hidden in an exotic financial instrument or a complicated accounting issue. More often, it is sitting in familiar operating decisions that have not been revisited as the business, customer demand, supplier base, or growth strategy has changed.

At Kaiban Consulting, we see working capital as an operating and capital-allocation issue. It is shaped by how the organization plans demand, sets inventory policies, manages suppliers, negotiates payment terms, and decides which risks are worth carrying.

For CFOs and COOs, the question is not simply how to reduce inventory or extend payment terms. The question is whether capital is actively supporting growth, service, and resilience—or quietly being absorbed by yesterday’s operating model.

The Capital Is Usually in Three Places

Working capital is often trapped in excess safety stock built for demand patterns that no longer reflect the business.

Many organizations continue to hold inventory based on quarterly planning cycles, outdated service assumptions, old lead times, or forecasts that have not been recalibrated. That inventory may have been a sensible protection against uncertainty at one time. But when the business model changes, the same inventory can become cash that is no longer earning an adequate return.

The second source is payment terms that were negotiated years ago and never revisited.

Supplier terms are often treated as settled once a contract is signed. Yet vendor capabilities, interest rates, buyer purchasing power, service expectations, and strategic priorities all change over time. A term that made sense five years ago may now be working against the organization’s cash-conversion goals.

The third source is the vendor relationship itself.

In many cases, a company is effectively funding a supplier’s working capital through inventory commitments, order patterns, payment timing, or inefficient replenishment practices. That may be unavoidable in a strategic relationship, but it should be a deliberate decision—not an accidental outcome of an unmanaged process.

The 90-Day Opportunity

Companies that improve working capital in 90 days are not using a secret financial strategy.

They are asking direct operational questions, bringing finance and operations into the same conversation, and acting on the answers.

The first question is: where is the cash conversion cycle actually breaking down?

A cash conversion cycle is affected by how long inventory sits before it is sold or used, how quickly customers pay, and when the organization pays suppliers. When those levers are managed separately, cash can remain trapped without anyone owning the full picture. A practical review looks for the specific products, suppliers, categories, and workflows that are extending the cycle—not just the average number on a dashboard.

The second question is: which vendors would trade better service, stronger commitments, or a more reliable forecast for faster payment?

The goal is not to pressure suppliers indiscriminately. It is to understand the economics and incentives in the relationship. Some suppliers may value earlier payment, longer commitments, better demand visibility, or more predictable order patterns. In return, the buyer may be able to secure improved service, better availability, more favorable pricing, or terms that strengthen both parties’ cash position.

The third question is: what is the real cost of holding safety stock designed for a different business model?

Safety stock is not automatically waste. It protects customer commitments, reduces exposure to supply disruption, and gives operations time to respond to variability. But every unit of inventory also uses cash, storage capacity, management time, and risk tolerance. The right level of safety stock should reflect current demand patterns, supplier performance, lead-time volatility, product criticality, and the actual cost of a stockout.

Treat Working Capital Like a P&L Lever

Working capital is often viewed as a balance-sheet topic, while revenue, margin, and operating expense receive the daily attention of the P&L.

That separation creates a missed opportunity.

Inventory levels, payment terms, and supplier design affect cash flow, service performance, risk, and growth capacity. They also shape how much capital leaders have available to invest in new products, people, technology, acquisitions, debt reduction, or customer experience.

When working capital is treated with the same operational rigor as a P&L line item, leaders can make clearer trade-offs. They can determine where holding more inventory protects profitable growth, where supplier terms should change, and where cash is being consumed without creating enough value in return.

The Kaiban Perspective

Talon’s perspective is that the supply chain is where capital-allocation decisions become operational reality. Working-capital improvement does not come from a finance-only exercise. It comes from aligning finance, planning, procurement, operations, and supplier relationships around the choices that determine how cash moves through the business.

Sherrie’s perspective is that growth becomes more sustainable when leaders can see the operational processes that either create or constrain cash. When teams share clear ownership, data, and decision rights, they can convert working-capital opportunity into capacity for growth instead of treating it as an annual clean-up exercise.

Kaiban’s consolidated view is simple: mid-market companies should not need a crisis, an acquisition, or a lender request to examine the capital trapped in their supply chain. Fortune 500 teams review these levers regularly. Mid-market leaders can apply the same discipline with a focused operating review and a practical execution plan.

A Question for CFOs and COOs

What would change if you treated working capital like the P&L line item it is?

If your organization wants to identify where cash is tied up in inventory, supplier terms, and operating workflows, Kaiban Consulting can help. We work with CFOs and COOs to map the cash-conversion cycle, assess the trade-offs behind inventory and vendor decisions, and build a targeted plan to improve cash flow while protecting service, resilience, and profitable growth.