Few Companies Focus on Optimizing Collections, Payables, Inventory
The new US REL Working Capital Survey for 2014 demonstrates that supply chain managers have a lot of work to do in balancing their books
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As noted in our news section, the new US REL Working Capital Survey for 2014, demonstrates that supply chain managers have a lot of work to do in balancing their books.
This annual research, which examines how well large US companies pay suppliers, collect from customers, and manage inventory, has significant details on the payables side,
Here, researchers have seen payables performance declining over the past three years, with companies paying significantly faster. But for 2013, that trend reversed somewhat, with Days Payable Outstanding increasing by about 1 percent to 32 days.
Overall, companies showed little to no improvement in working capital this year. The opportunity for improvement is now over $1 trillion, or nearly 6 percent of the US gross domestic product. About $266 million of this gap is in payables optimization, as top performing companies by industry pay their suppliers nearly 50 percent slower than typical companies, taking over 10 days longer to pay.
The survey, which is based on an analysis of financial data reported by nearly 1,000 of the largest US public companies, also found that companies are continuing to pad their balance sheets with borrowed cash as they ramp up capital expenditures.
The survey also saw a dramatic improvement in free cash flow – a critical indicator of the health of corporate cash flows which represents the cash companies are able to generate after laying out money to maintain or expand their asset base.
About the AuthorPatrick Burnson, Executive Editor Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]
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