Reduce Your Working Capital—Are Your Efforts Working? March 3, 2008
Posted by mhattoninovis in Actionable Intelligence.Tags: actionable intelligence tools, financial supply chain, Robert Bowman
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Do you know what impact your supply chain activities have on your revenue and cost streams? What does one extra day of inventory mean to your cost of goods sold? What is the financial impact to your business when you pay a supplier too soon, or a customer pays you too late? These are the types of questions that some of the best in class companies are answering these days, and by doing so, are driving significant reduction in working capital and freeing up cash for other investments.
If the opportunity to utilize your supply chain to impact your business financially is of interest to you, then an article by Robert J Bowman posted on supplychainbrain.com (Where’s the Money? It’s Trapped in Your Supply Chain) is an excellent read. Robert does a great job of highlighting the challenge and capturing some of the possible solutions. In short, the 2,000 largest companies in the US and Europe have over $1 Trillion of cash tied up in working capital. Why?
- Customers paying too late
- Suppliers being paid too early
- Inventory moving too slowly through the supply chain
The solution? Connect your Finance group with your Supply Chain group. Undertaking this measure can lead to significant improvements in your supply chain that have direct impact on your company’s financial position. Taking a financial view into your supply chain can ultimately help you improve inventory levels, increase days payable outstanding, and lower cost of goods sold.
T o achieve these results, companies are utilizing technology to drive inventory optimization, collaboration and visibility. Best in class companies are twice as likely to be using actionable intelligence tools to provide a ’single version of the truth.’
Is your company moving down this path?
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[...] Based on a recent survey given by SCMR, large companies with more than a billion dollars in revenue are putting supply chain visibility as well as performance measurement at the top of their list for technologies they hope to adopt. While midsize companies under $1 billion seem to share the same need with large companies for integration both inside and outside their enterprise, they reportedly place more importance in supply chain network design. One interest that seems to span both mid and large companies is inventory optimization. [...]