The Impact of the Supply Chain Crisis on Working Capital

Report date: 
26 Sep 2022

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

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Contributors: 
Topics covered in this report: 
Supply Chain Finance, Supply chain, Working Capital, Inventory, Procurement
Service providers discussed in this report: 
C2FO, Prime Revenue, Nexus

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