From recovery to growth in the face of supply chain instability
The corporate focus is shifting from stabilise and survive to recovery and growth. But unstable supply chains are disrupting operations and heightening the pressure on working capital, the cash needed to run day-to-day operations.
Working capital is the no. 1 reason for change management and restructuring
Increase in Net Working Capital days
Net debt reached a five-year-high and return on invested capital (ROIC) a five-year-low
of respondents in manufacturing rank supply chain issues as a key concern
Net working capital (NWC) days reached a five-year-high in 2020, driven by the shock and uncertainty of the COVID-19 pandemic. While many of the spikes in working capital had unwound by mid-2021, the ending of government support, elevated levels of debt and ongoing supply chain disruption all mean that capital efficiency has to be front of mind as we go into 2022.
The pandemic exposed the slow reaction of supply chains to external shocks, leading to a significant rise in NWC. This lack of agility in adapting working capital levels to disruptive external events is a concern as we face continued challenges in the global supply chain. The heightened complexity and lack of visibility over most supply chains also mean that the move from ‘just in time’ to ‘just in case’ planning in order to manage supply risk may bring further working capital challenges. That is why 65% of executives in our survey named working capital efficiency as the main objective for change management and restructuring activities.