• Advertise
  • Contact Us
  • About Us
  • Supplier Directory
  • Login
  • Subscribe
  • Logout
  • My Profile

  • CORONAVIRUS
  • LOGISTICS
    • Air Cargo
    • All Logistics
    • Express/Small Shipments
    • Facility Location Planning
    • Freight Forwarding/Customs Brokerage
    • Global Gateways
    • Global Logistics
    • Last Mile Delivery
    • Logistics Outsourcing
    • LTL/Truckload Services
    • Ocean Transportation
    • Rail & Intermodal
    • Reverse Logistics
    • Service Parts Management
    • Transportation & Distribution
  • TECHNOLOGY
    • All Technology
    • Artificial Intelligence
    • Cloud & On-Demand Systems
    • Data Management (Big Data/IoT/Blockchain)
    • ERP & Enterprise Systems
    • Forecasting & Demand Planning
    • Global Trade Management
    • Inventory Planning/ Optimization
    • Product Lifecycle Management
    • Sales & Operations Planning
    • SC Finance & Revenue Management
    • SC Planning & Optimization
    • Sourcing/Procurement/SRM
    • Supply Chain Visibility
    • Transportation Management
  • GENERAL SCM
    • Business Strategy Alignment
    • Education & Professional Development
    • Global Supply Chain Management
    • Global Trade & Economics
    • HR & Labor Management
    • Quality & Metrics
    • Regulation & Compliance
    • SC Security & Risk Mgmt
    • Sustainability & Corporate Social Responsibility
  • WAREHOUSING
    • All Warehouse Services
    • Conveyors & Sortation
    • Lift Trucks & AGVs
    • Order Fulfillment
    • Packaging
    • RFID, Barcode, Mobility & Voice
    • Robotics
    • Warehouse Management Systems
  • INDUSTRIES
    • Aerospace & Defense
    • Apparel
    • Automotive
    • Chemicals & Energy
    • Consumer Packaged Goods
    • E-Commerce/Omni-Channel
    • Food & Beverage
    • Healthcare
    • High-Tech/Electronics
    • Industrial Manufacturing
    • Pharmaceutical/Biotech
    • Retail
  • REGIONS
    • Asia Pacific
    • Canada
    • China
    • Europe
    • Latin America
    • Middle East/Africa
    • North America
  • THINK TANK
  • PODCASTS
  • VIDEOS
  • WHITEPAPERS
Home » Consumer Products Companies Flunk the Working Capital Test

Consumer Products Companies Flunk the Working Capital Test

December 17, 2008
From AMR Research/Lora Cecere, C.J. Wehlage

The 2007 working capital results are in. Once again, consumer products (CP) companies have flunked. This is the fourth consecutive year that the industry has underperformed against other industry sub-segments. Each year, CFO Magazine works with REL to publish the working capital scorecard, which ranks the working capital performance of the largest public companies headquartered in the United States. The analysis, based on prior-year annual reports, is a good barometer of year-over-year performance.

Consumer products fail the working capital test:
This year, 57 industry segments were evaluated on working capital performance. Most of the sub-segments improved, with 61% showing year-over-year improvements and an average 8% improvement overall. In contrast, the consumer products (CP) sub-sectors of beverages, food products, and consumer packaged goods (CPG) all performed below the average.

Why the struggle? Many of the technology investments in the industry were justified by inventory reductions. Despite the fact that over 80% of CP companies have ERP and advanced planning and scheduling (APS) systems, they continue to underperform. Does this mean that technologies do not lead to a reduction in working capital?

No. Instead, it means that working capital reductions need more than technology. What is the basis of our conclusion? There are equal numbers of winners and laggards with sophisticated ERP, APS and multi-tier inventory optimization technologies.

Rethinking the value chain:
In a recession, cash flow becomes even more important. Despite the proliferation of collaborative tactics like vendor-managed inventory (VMI) and continuous planning, forecasting, and replenishment (CPFR), companies have not fundamentally improved the levels of inventory and improved working capital in the value network.

A major opportunity for CP manufacturers lies in rethinking the value chain to reduce the bullwhip effect--and the reduction of subsequent waste--for suppliers. Until CP companies roll up their sleeves and attack the value network more holistically, there will be spotty gains, with more and more power going to Wal-Mart.

In a recent research study of 190 companies on logistics, AMR Research asked CP companies to rate themselves on inventory management. On a scale of 1 to 10, with 10 being excellent as a core competency, 60% of CP companies rated themselves as having inventory management as a core competency. While we will let you draw your own conclusions, we believe that most companies overstate their competency in the areas of working capital reduction and inventory management. Despite millions of dollars of technology investments intended to solve the inventory problem, the greatest opportunity lies in recognizing the gap in traditional CP processes--mainly ownership and reward systems--and getting serious about fixing the problem.

Complexity and leadership matter:
One of the industry issues in consumer products is managing the increasing complexity of the product portfolio. This product proliferation results in an increase in demand error with a subsequent increase in inventory levels. Ironically, the greatest product complexity occurs in companies with revenue of $5B to $20B.
AMR Research

RELATED CONTENT

RELATED VIDEOS

SC Planning & Optimization Supply Chain Visibility Consumer Packaged Goods Retail
KEYWORDS consumer packaged goods Retail SC Planning & Optimization Supply Chain Visibility
  • Related Articles

    DynaSys Leadership White Paper DSCP for Consumer Products: How Can Consumer Products Companies Compete as Supply Chains Grow in Complexity?

    How Supply-Chain Finance Can Help Companies Protect Working Capital

    Holistic Supply Chain Management: A Focused Approach to Supply Chain Management through the Lens of Working Capital Management

  • Related Events

    Building a hyperconnected supply chain: The three levers of transformation

From AMR Research/Lora Cecere, C.J. Wehlage

Consumer Products Companies Flunk the Working Capital Test

More from this author

Wake up to Coronavirus Updates and the latest Supply Chain News!

Subscribe to our Daily Newsletter

Timely, incisive articles delivered directly to your inbox.

Popular Stories

  • Coronavirus-watch-Armada

    Virus Update: Biden Unveils National Strategy; Pfizer Says It’s Willing to Sell Vaccine to States

    Coronavirus
  • Can Employers Require Employees to Get the COVID-19 Vaccine? Part 1

    Watch: Can Employers Require Employees to Get the COVID-19 Vaccine? Part 1

    Coronavirus
  • U.S. Vaccine Rollout Hindered by Faulty Coordination, Messaging

    WHO Fumes at Western Drugmakers As China Fills Vaccine Void

    Coronavirus
  • Smartphones

    Podcast | Why We Need to Ramp Up Recycling of Old Tech

    Logistics
  • Car Industry

    A Year of Poor Planning Led to Carmakers’ Massive Chip Shortage

    Technology

Digital Edition

Scb home issue 27

2020 Supply Chain Innovator of the Year

VIEW THE LATEST ISSUE

Case Studies

  • LSP Saves Customer $1.5 Million a Year With MPO Global Inbound Management

  • Auto Supplier Wows Key Client Using riskmethods Supply Chain Savvy

  • Integrating Shipping and Compliance Saves Conglomerate Millions

  • How a Consumer Goods Giant Upped Its On-Time Delivery Performance

  • LSP Wows Global Client, Quickly Advances to Become End-to-End Provider

Visit Our Sponsors

6 River Systems ArcBest Armada
aThingz BluJay Burris Logistics
DSC Logistics DCSA (Digital Container Shipping Association) DHL Resilience360
Genpact GEP Honeywell Intelligrated
Infor Logility Magnitude Software
MPO Old Dominion Oliver Wight
OpenSky Ports America Purolator
QAD Precision Red Classic Riskmethods
TGW Systems Transportation Insights Watson Land Company
Westfalia Technologies Workjam Yang Ming
  • More From SCB
    • Featured Content
    • Video Library
    • Think Tank Blog
    • SupplyChainBrain Podcast
    • Whitepapers
    • Webinars
  • Digital Offerings
    • Digital Issue
    • Subscribe
    • Manage Your Subscription
    • Newsletters
  • Resources
    • Events Calendar
    • SCB's Great Supply Chain Partners
    • Supplier Directory
    • Case Study Showcase
    • Supply Chain Innovation Awards
    • 100 Great Partners Form
  • SCB Corporate
    • Advertise on SCB.COM
    • About Us
    • Privacy Policy
    • Contact Us
    • Data Sharing Opt-Out

All content copyright © 2016 - 2018 Keller International Publishing Corp All rights reserved. No reproduction, transmission or display is permitted without the written permissions of Keller International Publishing Corp

Design, CMS, Hosting & Web Development :: ePublishing