Best performers care about working capital optimization

Filed in archive Best practice on August 10, 2007

Aberdeen Group has recently published a report with the title "working capital Optimization: Improving Performance with Innovations and New Technologies in Inventory Management and Supply Chain Finance". This report which is based on a survey of more than 400 professionals in supply chain and finance area emphasizes the importance of working capital optimization for global trade companies. In its survey, Aberdeen found that 65% of respondents thought working capital optimization was a high priority for their companies.

The top twenty percent of performers in the study (Best in Class) have an average cash conversion cycle that is 5-6 times shorter than that of the rest of survey participants. Best in Class companies in this study are:

1.6 times as likely to be using supply chain/ inventory visibility technology. Firms that are using this technology are:
- Twice as likely to have reduced total landed costs over the past 2 years
- 2.4 times as likely to have reduced inventory levels since 2004
- 3 times as likely to have faster-than-average order-to-delivery Cycles
- Twice as likely to have reduced lead times & lead time variability from international locations in the past 2 years
- Almost twice as likely to report increased global supply chain budget accuracy over the past 2 years

Twice as likely as Laggards to have access to receivables/ payables/inventory financing at various stages in their supply chains. Firms with this capability are:
- Almost twice as likely to have reduced their cash conversion cycle over the past 2 years
- Fifty percent more likely to have improved their return on Capital