Changes in quarterly sales and production patterns, volatility in commodity prices and currency movements were some of the primary drivers of WC performance in 2011.
In 2011, the working capital (WC) performance of companies in the US has improved, but stalled in Europe, compared with 2010.
This year’s survey, which focuses on the largest 2,000 companies by sales in the US and Europe, has been expanded to include a review of the WC performance of companies across six additional regions and countries — Asia; Australia and New Zealand; Canada; Central and Eastern Europe; Japan and Latin America.
Results for the US show an accelerated improvement in WC performance compared with the prior year, while Europe’s flat performance contrasts sharply with the gains achieved in 2010. In both cases, WC performance should be viewed in the context of extremely challenging economic conditions and the unparalleled disruptions to supply chains following natural disasters in Asia.
For companies headquartered outside the US and Europe, the WC challenges are no less acute. Our analysis reveals a considerable disparity in WC performance between these businesses.
While part of this gap may be explained by variations in market characteristics, payment practices and supply chain infrastructures, there are also marked differences in the degree of management focus on cash and process efficiency.
While there are signs of modest improvement in corporate confidence for the global economy, according to the latest edition of the Global Capital Confidence Barometer, businesses still remain understandably cautious. In this context, it is therefore important for industry leaders to continue implementing truly effective WC management strategies.
Arguably, many of the most readily available opportunities for WC improvements have already been exploited, or traded off against sales growth or margin expansion. Yet the wide variations in WC performance between different companies in each regional industry point to the potential for further significant gains.
Learn more about this year’s working capital analysis: