Understanding working capital in the watchmaking industry

Defining working capital for a watch manufacture

Working capital requirement (WCR) is a fundamental financial concept. It is calculated as follows:

WCR = Inventory + Accounts receivable – Accounts payable

For any industrial company, working capital represents the amount of money tied up in the operating cycle: what the company has already spent (materials, components, labor hours) but has not yet collected. The longer and costlier the cycle, the higher the working capital requirement.

In a watch manufacture, this calculation takes on a particular dimension. Producing a complex mechanical movement can involve several hundred distinct components — mainplates, bridges, wheels, levers, hairsprings, jewels — whose manufacturing spans months, even before the watch is assembled and cased. Every component sitting in the workshops, every subassembly waiting for the next operation, every batch of dials being finished represents watchmaking work-in-progress tied up on the balance sheet.

Why working capital is structurally high in watchmaking

Long production cycles: from 6 to 24 months

Unlike high-volume industries where a product can be manufactured and delivered in a few days, a watch manufacture lead time often stretches over six months at minimum and can exceed two years for high-watchmaking pieces or very limited series. This exceptional watchmaking lead time stems from the multiplicity of operations: precision machining, surface treatments, bar-turning, hand finishing (chamfering, circular graining, Côtes de Genève), clean-room assembly, chronometric testing. Each step can involve waiting times between workshops or at subcontractors.

A multi-level bill of materials (BOM) of exceptional depth

A mechanical watch caliber has, on average, several hundred components — some grand-complication movements carry more than a thousand. These parts are organized in tree-structured bills of materials at multiple levels: raw materials → ébauches → intermediate semi-finished parts → subassemblies → finished product. At each level, a stock, a work-in-progress item, a blocking point can potentially appear. Managing this complexity is at the heart of the watchmaking working capital challenge for planners.

A high proportion of semi-finished stock

In most industries, finished-goods inventory dominates the balance sheet. In watchmaking, it is watchmaking semi-finished stock that represents the largest share of current assets. A component such as a hairspring or a rotor can go through a dozen operations before being integrated into a movement. At each stage, if synchronization is imperfect, batches wait — sometimes for weeks — before moving to the next step. This work-in-progress mechanically inflates watchmaking working capital.

Limited series with many references

The luxury market demands a broad, diverse offering: dozens of active references, limited editions, variations in material, dial, or strap. This multiplicity of SKUs complicates watchmaking production planning: you have to manage short runs, components dedicated to a single reference, and production campaigns that are hard to optimize. The temptation to produce “ahead” to smooth the workload is strong, but it directly feeds work-in-progress and therefore working capital.

The watchmaking specifics that make working capital hard to control

A highly fragmented value chain

Swiss watchmaking has historically relied on a dense fabric of specialized subcontractors, concentrated in the Jura Arc — from the Bernese Jura to the Vallée de Joux, by way of Neuchâtel and La Chaux-de-Fonds. Dial makers, case makers, bar-turners, polishers, hairspring manufacturers: each trade is often carried out by a separate SME, with its own lead times, its own capacity constraints, and its own order books. This fragmentation is a source of artisanal excellence, but it mechanically lengthens watchmaking lead times and multiplies the entry points of uncertainty into the chain.

When a subcontractor is saturated or in difficulty, lead times lengthen, batches stay blocked, and watchmaking work-in-progress accumulates. In 2024, the FH noted that subcontractors had been hit harder than the major houses by the slowdown in demand, with order postponements or cancellations that imposed strong uncertainty on their order books. (Source: Federation of the Swiss Watch Industry, 2024 report)

Demand variability and the bullwhip effect

Demand in luxury watchmaking is closely tied to the global macroeconomic climate and, above all, to consumption dynamics in Asia. In 2024, China recorded a drop in its purchases of Swiss watches of -25.8%, a steeper decline than during the Covid-19 pandemic. (Source: FH / EPHJ, 2025) This volatility generates a phenomenon well known in supply chain management: the bullwhip effect. Variations in orders from final distributors translate, moving up the chain, into amplified fluctuations at subcontractors and manufactures. Watchmaking production planning then becomes a balancing act: not producing too much, so as not to weigh down working capital, nor too little, so as not to miss the recovery.

The delicate balance between exclusivity and volume

A high-watchmaking manufacture is not a factory producing millions of units a year. Scarcity is often a commercial argument, but it requires particularly fine production management. Producing too much of a model risks devaluing its image and creating overstock that is hard to sell off; producing too little creates shortages and delivery delays that frustrate retailers. Striking this balance requires a reliable view of load, capacity, and flows — which remains a major challenge when watchmaking industrial planning still relies on Excel files or poorly synchronized processes.

Precious materials and their direct impact on working capital

Gold, platinum, and special alloys (such as Nivachron for hairsprings) represent a significant share of the cost price of a luxury watch. These materials are sometimes bought months before being integrated into a finished product, and their prices can fluctuate significantly. The capital tied up in precious metal within raw-material inventory weighs heavily on the watchmaking industry's industrial working capital — and this regardless of how well production is organized.

The key role of WIP and lead time in working capital

How WIP artificially inflates working capital

Watchmaking work-in-progress, or WIP (Work In Progress), refers to all the semi-finished parts engaged in the manufacturing process but not yet turned into a finished product. They appear on the company's balance sheet as tied-up assets. The higher the WIP, the tighter the watchmaking working capital.

The causes of WIP accumulation are multiple and often systemic. Production launched too early relative to real needs is one of the main ones: a production manager, to smooth the workload or reassure the teams, will release work orders well before the date the part is actually needed. If watchmaking scheduling is not precise, this head start turns into waiting and batches pile up in front of bottlenecks. Poor synchronization between workshops is another frequent cause: workshop A produces at its own pace without visibility into the availability of workshop B, which is supposed to take over. Watchmaking work-in-progress then stagnates between two operations, sometimes for several weeks.

Reducing lead times as a financial lever

Reducing semi-finished stock

Acting on manufacture lead time is one of the most powerful levers for reducing watchmaking working capital. By compressing the time between the launch of a component and its integration into the finished product, you mechanically reduce how long the material stays “trapped” on the balance sheet. Every week saved on the production cycle can represent hundreds of thousands of francs freed up in cash for a mid-sized manufacture.

Lowering WIP (Work In Progress)

WIP reduction is both an operational and a financial objective. Operationally, less work-in-progress on the floor means better visibility, shorter queues in front of bottlenecks, and greater responsiveness. Financially, lower WIP translates directly into lower working capital.

Freeing up cash

This is the ultimate goal: by reducing watchmaking semi-finished stock and work-in-progress, the manufacture frees up cash that can be reinvested in innovation, in certifications, in capacity, or simply set aside to weather difficult demand cycles like that of 2024.

Better watchmaking production planning and more precise watchmaking scheduling make it possible to manage these flows with far greater finesse, synchronizing workshops and releasing work orders at the right time: neither too early nor too late.

Why planning and scheduling are at the heart of the matter

The limits of Excel planning in a complex environment

Many mid-sized manufactures still run their watchmaking production planning from Excel files, sometimes very sophisticated ones. This approach has its merits — flexibility, easy adoption — but it quickly reaches its limits in an environment as complex as watchmaking. Formatting the data can take several hours every day. Simulations are slow and unreliable. Visibility into load/capacity is insufficient to anticipate bottlenecks. And when the plan changes — which happens constantly in production — the planner has to rebuild everything manually.

The result: decisions are made on partial or outdated information. Work orders are released without certainty about resource availability. Watchmaking work-in-progress accumulates. And working capital stays stubbornly high.

The impact of poor scheduling on working capital

Faulty watchmaking scheduling is one of the main generators of unnecessary work-in-progress. Early launches on series that will not be needed for several weeks tie up material and capacity. Poor priority management — when operators do not know in what order to process the work orders — creates uneven queues where urgent parts wait behind lower-priority batches. The resulting buildup of work-in-progress weighs directly on industrial working capital.

Toward a more synchronized and dynamic approach

The answer to these dysfunctions is methodological before it is technological. What is needed is a reliable load/capacity view updated in real time, the ability to simulate different scenarios without spending hours rebuilding files, prioritization driven by customer delivery dates rather than by production habits, and global flow management rather than local optimization workshop by workshop.

These principles, long reserved for large manufactures with dedicated resources, are today within reach of industrial SMEs thanks to modern watchmaking industrial planning tools, designed to integrate quickly with existing systems (ERP, MES) without requiring months of deployment.

How to reduce working capital without weakening production

Act on 4 industrial levers

1. Reducing work-in-progress

The first lever is discipline in releasing work orders. Launching less early, with better visibility into resource availability, immediately reduces watchmaking work-in-progress without touching the volume produced.

2. Multi-level synchronization

Synchronizing workshops and subcontractors — that is, ensuring each operation receives the parts it needs at the right time, neither too early nor too late — is the most structuring lever for WIP reduction. It requires shared visibility into the progress of work orders at every level of the bill of materials.

3. Dynamic priority management

In a manufacture managing several dozen active references simultaneously, watchmaking scheduling cannot be static. Priorities change according to customer orders, supplier disruptions, and machine breakdowns. A dynamic priority-management system makes it possible to redirect resources in real time, without losing sight of the overall plan.

4. Load/capacity anticipation

Anticipating pressure points — a workstation saturated in two weeks, a component whose procurement lead time will create a bottleneck — makes it possible to act upstream rather than endure. This is the difference between reactive watchmaking production planning and proactive planning that structurally reduces working capital.

The need for a global view

Too often, efforts to reduce watchmaking working capital focus on one workshop, one line, one product. But working capital is by nature a global indicator. It can only truly be controlled through a cross-functional approach that brings finance, supply chain, and production into dialogue around shared data and common objectives. This convergence is often the main transformation to undertake, even before talking about a tool or a method.

For manufactures that want to make progress on this topic, solutions specialized in watchmaking industrial planning exist, designed to address the industry's specifics while remaining accessible to teams without dedicated IT resources. Oplit supports several players in the watchmaking industry on this journey: discover our approach dedicated to watchmaking.

Conclusion: mastering working capital is a strategic challenge for the watchmaking industry

Watchmaking working capital is not a financial problem in the narrow sense of the term. It is above all a revealer of a manufacture's organizational maturity: the quality of its watchmaking production planning, the precision of its watchmaking scheduling, its ability to synchronize dozens of workshops and subcontractors around a realistic, dynamic plan.

In a context where Swiss watch exports declined in 2024 and where forecasts for 2025 remain uncertain, mastering industrial working capital becomes a competitive advantage in its own right. The manufactures that can reduce their watchmaking semi-finished stock, manage their watchmaking work-in-progress, and compress their manufacture lead time will be not only financially stronger but also more agile in the face of market reversals.

Compressing watchmaking working capital is not a question of size or financial means: it is a question of method, data, and the right tools. The levers exist. The first manufactures to pull them systematically will gain a decisive edge over their competitors and over the crisis cycles to come.

To explore how to optimize your planning and reduce your work-in-progress, visit oplit.com.