We use cookies to provide you with a better experience. By continuing to browse the site you are agreeing to our use of cookies in accordance with our Cookie Policy.
  • INDUSTRY PRESS ROOM
  • SUBMISSIONS
  • MEDIA FILE
  • Create Account
  • Sign In
  • Sign Out
  • My Account
Free Newsletters
  • MAGAZINE
    • Current Issue
    • Archives
    • Digital Edition
    • Subscribe
    • Newsletters
  • STRATEGY
  • GLOBAL
  • LOGISTICS
  • MANUFACTURING
  • PROCUREMENT
  • VIDEO
    • News & Exclusives
    • Viewer Contributed
    • CSCMP EDGE 2022 Startup Alley
    • Upload your video
  • PODCAST ETC
    • Podcast
    • White Papers
    • Webcasts
    • Events
    • Blogs
      • Reflections
      • SCQ Forum
    • Mobile Apps
  • MAGAZINE
    • Current Issue
    • Archives
    • Digital Edition
    • Subscribe
    • Newsletters
  • STRATEGY
  • GLOBAL
  • LOGISTICS
  • MANUFACTURING
  • PROCUREMENT
  • VIDEO
    • News & Exclusives
    • Viewer Contributed
    • CSCMP EDGE 2022 Startup Alley
    • Upload your video
  • PODCAST ETC
    • Podcast
    • White Papers
    • Webcasts
    • Events
    • Blogs
      • Reflections
      • SCQ Forum
    • Mobile Apps
Home » Companies struggle to build "cash culture"
Forward Thinking

Companies struggle to build "cash culture"

February 22, 2010
Supply Chain Quarterly Staff
No Comments

Although cash generation remains a top priority for many companies during the current economic downturn, most organizations have failed to build a corporate culture that can realize that goal. That's the key finding of a study conducted by the consulting firm REL, a division of the Hackett Group Inc. REL specializes in working capital management.

Nearly 95 percent of the 50 "Global 1000" companies participating in the study had implemented initiatives in at least three of the four key areas affecting their ability to free up cash: receivables, payables, spend management, and inventory optimization. Most respondents, however, had not implemented a number of requisite steps to bolster those efforts. For example, only about 60 percent had a steering or project management committee in place. The study found that companies without a steering committee were over three times more likely to describe the impact of their cash-generation efforts as "neutral" or "ineffective."

REL also found that cash-generation programs were far more effective in companies where "C-suite" executives got directly involved; 90 percent of respondents from those companies said their cash-generation programs were successful. Companies that did not have direct support from top management were 40 percent less likely to claim that their programs worked well.

Measurement and accountability were important for building a cash-focused culture. Yet the researchers found that many companies do not factor in the cost of capital relative to such activities as receivables, payables, and inventory. The report further noted that applying a companywide cost of capital as a metric proved critical to achieving a lower working-capital-to-sales ratio. Still, less than one-third of all companies surveyed said they applied a corporate cost of capital to business units' profit and loss.

Employee incentives also played a role in encouraging better use of capital. Companies that included cash-generation and working-capital targets in performance-based compensation programs required significantly lower working capital. Incentives typically were inconsistently applied, however: Although nearly all senior managers had working-capital incentives, incentives were available to only 60 percent of staffers who were responsible for sourcing.

REL's report, "Blueprint for a Cash Culture," is available free with registration at the organization's Web site.

    • Related Articles

      Companies struggle to find profits from omnichannel retailing

      Survey: Companies focus on cash flow in wake of COVID-19

      Health-care industry continues to struggle with managing inventory

    Recent Articles by Supply Chain Quarterly Staff

    More women join trucking industry as technicians

    GE Appliances unveils $450 million upgrade to manufacturing plant in KY

    Freight technology provider Loadsmart acquires computer vision platform provider

    You must login or register in order to post a comment.

    Report Abusive Comment

    Most Popular Articles

    • Wabash opens trailer manufacturing facility in Indiana

    • Six defining challenges of omnichannel fulfillment

    • Postal advocacy group says “excessive” July 9 stamp price hike will hurt consumers

    • California bill would require large corporations to disclose their greenhouse gas emissions

    • How companies can lower their ESG footprint through smarter procurement

    Featured Video

    8757b894 244c 4429 b5d8 e6df7b479d82

    Penalties for Wood Packaging Material Violations

    Viewer Contributed
    Our Services Include: Customs Broker Denver Freight Forwarder Denver Global Logistics Denver Cargo Insurance Denver Customs Bond Denver Customs Clearance Denver Customs Duty Denver Isf Filing Denver More details: Phone : 281-445-9779 Email: info@gallaghertransport.com Website: gallaghertransport.com

    FEATURED WHITE PAPERS

    • Five questions to ask before electrifying your indoor forklift fleet

    • Operator assist system myths busted

    • Three layers of forklift safety: Promoting operating best practices

    • The Complete Guide to Automated Packaging

    View More

    Subscribe to Supply Chain Quarterly

    Get Your Subscription
    • SUBSCRIBE
    • E-NEWSLETTERS
    • ADVERTISING
    • CUSTOMER CARE
    • CONTACT
    • ABOUT
    • STAFF
    • PRIVACY POLICY

    Copyright ©2023. All Rights ReservedDesign, CMS, Hosting & Web Development :: ePublishing