Bridging the Gap: a look at our 2015 Working Capital Survey for the Industrial Manufacturing sector

24 February 2016

Industrial manufacturing companies benefitted from significant growth last year. The sector remains one of the most capital intensive and future growth will require significance cash and investment to sustain it.

We know manufacturing leaders are finding the decisions on where to invest their capital wisely very challenging. Part of the solution is to ensure that through efficient management of companies, cash flows come out in sensible time frames, are not trapped, and therefore provide the crucial resources required to reinvent and grow.

We know cash generation is key for continued growth, but this has not translated into an increased focus on working capital. We know this because we’ve reviewed the working capital performance of over 1400 global companies in the industrial manufacturing sector. We found that working capital performance has plateaued and identified over €141billion of working capital, which the industry could release with effective working capital management.

Working capital is the cheapest source of cash, and based on our experience, can be released through more effective management. We’ve work with many businesses to release working capital and increase liquidity, which can be used for strategic investments or the reduction of debt. Effective working capital management (WCM) is vital in any business and if WCM processes break down, businesses are at risk. In fact, it could be argued that working capital is more important in the industrial manufacturing sector; where companies incur substantial upfront costs for materials and labour in the production cycle, before receiving payments after their products have been made and delivered.

So where do you start? The fundamental principles of working capital are clear: reduce inventory and receivables whilst increasing payables balances. But many companies find it hard to optimise working capital sustainably due to the complexity of operations. That’s where we can help.

How are you performing? Our working capital data explorer will help you assess your performance against your peers. Our recent survey will provide you with an overview of the industrial manufacturing sector working capital performance.

Daniel Windaus | Working Capital Partner
Email | Tel: +44 (0) 20 7804 5012

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