Global enterprises frequently optimize working capital to release cash and fuel their pursuit of strategic objectives. The COVID-19 pandemic has spawned unprecedented market dynamics, intensifying the need for cash efficiency and liquidity in order for some companies to remain viable. Common challenges such as poor visibility into working-capital performance, fragmented processes, a lack of supporting tools and a weak cash culture are only magnified in the current economic environment.
Difficult times lie ahead. The retail, manufacturing, hospitality and transportation sectors will be particularly hard hit as the additional strain on their supply chains and operations negatively impact their cash position. Unfortunately, simply extending supplier terms will not be a solution, as doing so would further jeopardize the extended supply chain.
Wipro CapitX can help companies rapidly identify, quantify and realize cash improvements across payables, inventories and receivables. Based on a powerful data-driven diagnostic engine, CapitX assesses the current level of working-capital effectiveness and efficiency based on system-of-record transactions and rapid evaluations of quantified cash opportunities.
Wipro enables businesses with this proprietary tool to simplify and streamline processes, eliminate waste and maintain a balance between cash, cost and service trade-offs. In turn, this can help them to reduce stock, decrease replenishment times, optimize cash-collection and payment cycles, and perform a variety of other functions.
In one instance, a leading global medical-devices company has used CapitX to enhance its inventory management processes, improve inventory accuracy by 15% and reduce the cycle time to refresh inventory data in the supply chain by 50%.
In another case, $40-billion power and automation leader achieved a 15-20% reduction in physical inventories, which was worth $45 million and realized within a 6-9 month horizon.
In a third scenario, a global communications and telecom installer suffering delays in Accounts Receivables collection and high Days Sales Outstanding (DSO) utilized CapitX to reduce its DSO from 52 to 44 days and quickly realize $9 million of customer cash.
CapitX projects typically deliver a cash release of 5% of revenue as follows:
- Gross Working Capital: Reduced by 15% – 45%
- Days Payable Outstanding: Increased by 10% – 30%
- Days Inventory Outstanding: Reduced by 15% – 40%
- Days Sales Outstanding: Reduced by 15% – 40%
Some of the immediate cash-release levers include the following elements, each of which can be deployed within 6-8 weeks and enable the enterprise to realize benefits within 12 weeks:
Multinational companies across sectors have used Wipro CapitX to establish the building blocks of a sustainable cash culture. By uncovering the underlying causes of excess working capital and addressing the often-hidden interdependencies, CapitX can help companies maximize the benefits of a working-capital program by analyzing the entire value chain, from product design to manufacturing, from sales to collections, and from sourcing to payment.
In challenging economic times like those stemming from COVID-19, taking steps to optimize working capital can be a critical tool for companies to remain viable and prepare themselves for an uncertain future.