Weathering global turbulence: optimizing cash-flow
All interviewees are keeping particularly close tabs on working capital management at the moment, mindful of the potential for loss of control as inflation rises sharply.
Zijian Zheng is Global Planning Manager at Gates Corporation, in Denver, Colorado in the US. The company makes power transmission belts and fluid power products, which are used in diverse industrial and automotive applications, as well as bicycles. With so many moving parts, both literally and in the global economy currently, having central control is crucial.
“There will always be something we cannot anticipate, so an agile supply chain is really important – and ideally one that is centrally organized,” Zijian says. “While some big corporations have segmented supply chains, where certain people manage scheduling, others manage material planning, and others again look after demand planning, this could create risk if those people don't talk to each other. In a centralized model, people sit around a table and talk to each other/share information, so they can react in a really short time. It helps with planning, and protecting the future - especially right now when there’s so much uncertainty.”
There will always be something we cannot anticipate, so an agile supply chain is really important – and ideally one that is centrally organized
Global Planning Manager | Gates Corporation
At a multinational science and technology company, Johanna operates at the interface between procurement and finance, reporting on financial KPIs and helping senior management to understand the financial impact of procurement. Getting this across in a meaningful way is particularly critical at the moment, because of the direct bearing on cash flow and its role to position the organization well for changes in the market.
“Cash flow is super critical today, and much of this is on the back of COVID-19,” she says. “On the one hand it created challenges in supply chain, as we know. But in some industries in particular, including life sciences, the pandemic also created a lot of opportunities in terms of new growth potential, which we need to be able to respond to. That could be by increasing production capacity, for instance.”
“So now comes the challenge in dollar terms,” she continues. “You might say, ‘right, everyone, let’s just pull together and reduce inventory and free up as much capital as possible’, but that's a really bad idea at the moment as now more than ever companies need back-up stock.”
“It’s a complex picture, and probably the biggest challenge is to keep the balance, maximizing cash/working capital while doing no harm on the supply chain or on the production side. In my experience, working capital is really difficult to explain to the business, too: it can seem so abstract. And it can take multiple people joining forces to improve it.”
It’s a complex picture, and probably the biggest challenge is to keep the balance, maximizing cash/working capital while doing no harm on the supply chain or on the production side.