Best-In-Class Companies Focus Cross-Functional Teams on Working Capital

Many different factors affect the working capital of an enterprise. The levers of management reside in different internal management departments. External forces create pressure from different sources, at different times, and in different ways. Working capital management is far more complex than it used to be. No single company department can “own” the problems—the whole enterprise does.

Best-in-Class companies recognize that working capital solutions involve multiple areas of management, including external resources such as banks, suppliers and customers. They are keenly aware that a decision that maximizes return in one area of the supply chain will have a negative impact on another area, perhaps reducing gains for the company on the whole.

So, successful Best-in-Class companies create multi-functional teams that examine the situation, create Working Capital Policy, and then manage and measure the performance throughout the enterprise. The process they follow includes:

• “C” Level Leadership. Program leadership is delivered by a Steering Committee comprising at least the CFO, COO, and CEO. In some organizations, additional “C” level officers are included. If the organization has a Chief Supply Chain Officer, they become the “Project” Sponsor.
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• The team is selected from among the Directors and Senior Managers, front-line executive managers of the different functional areas who have more direct contact with problems and a better sense of their context. These areas include:
  • • Marketing/Sales/Store Operations
  • • Inventory Management/Procurement
  • • Finance and Accounting
  • • Logistics and Distribution
  • • Human Resources
  • • Information Technology
• The Steering Committee creates the charter for the group—the rules for engagement and goals for the team to follow. They also create expectations for reporting and delivery of actionable solutions.
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• The team examines the end-to-end supply chain. Successful team efforts often use outside guidance to more quickly generate innovative solutions. Solutions are defined and measurement metrics identified.
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• Proposed solutions are piloted and assessed for impact. Successful pilots are promoted into production, and failures are examined to determine cause of failure and to see what modifications may be needed. Often failures uncover previously unknown issues.
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• The team reports progress in live meetings to the Steering Committee on a regular schedule and format.

An integrated approach is required to optimize Working Capital management across the enterprise to create operating cash flow growth. Leadership from the top and cross-functional effort are required for success; they are not optional.

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