Balancing Financial Settlement and Inventory Levels Remain Key Concerns For Supply Chain Managers

Balancing Financial Settlement and Inventory Levels Remain Key Concerns For Supply Chain Managers

U.S. companies made only marginal improvements in their ability to collect from customers and pay suppliers in 2013, while showing no improvement in how well they managed inventory, according to the 16th annual working capital survey from REL a division of the Hackett Group, Inc.

“For inventory, the global marketplace has made issues like demand planning more important than ever before,” says Analisa DeHaro, Associate Principal for REL. “Companies need to factor in lead times that may not have been an issue when manufacturing was done closer to home. The best companies are becoming more savvy about this, and are more effectively balancing the various elements of inventory management.”

The amount tied up in excess working capital at nearly 1000 of the largest public companies in the U.S. is over a trillion dollars, according to the REL research.

The U.S. economy was slow but stable, with gross domestic product increasing by 3.2 percent in 2013. But at the same time, the REL research found that gross margins decreased by 0.3 percent, indicating that companies are spending more internally to generate revenue.

The researchers also found that companies are continuing to borrow, using low interest rates to improve their cash position, with cash on hand increasing by 12 percent, or $110 billion. At the same time, companies continued to ramp up capital expenditures, which have risen by 43 percent over the past three years.

The value of total net working capital rose by 3.2 percent in 2013, and days working capital improved by less than 1 percent. While days sales outstanding and days payable outstanding improved only slightly, days inventory on hand showed no change at all.

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