The Impact of the Supply Chain Crisis on Working Capital

Commentary

Working capital is always a hot topic – but never more so than now. Depending on how you count, most businesses are facing double, triple or more whammies:

• Difficulty obtaining supplies, resulting in lost sales, or seasonal goods arriving too late for the season (one participant is in the apparel industry, where this is crucial).
• Manufacturing inventories building up, as products cannot be completed or sold due to one or two missing components – but the rest have been bought and paid for.
• Supply chain management building extra inventory buffers
• Difficulty managing FX hedging programmes, as future cash flows become even harder to predict and forecast
• And, of course, this is all happening against an environment of rising interest rates, which increases the cost of holding inventory
• Margin pressures, due to increased shipping costs – especially given the increased use of emergency shipments, which come outside the agreed rates
• Coupled with inflation and recession risks, there is an increasing concern over distributors’ being left with unsold inventory, with an accompanying credit risk

As always, we had a lively discussion – I encourage you to....please Log In to continue