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Thursday, September 02, 2010
Thursday, September 02, 2010
Latest Procurement News
Posted: Friday, January 15, 2010, 9:18AM
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KNOWLEDGE MANAGEMENT TAGS
"Supply Chain Management"
Supply chain cash flow 'smoothes out' for US firms
New supply chain monitoring research indicates that cash flow for US firms has been widely "smoothing out".The December 2009 Supply Chain Index (SCI) report from business credit bureau firm Cortera indicates that retailers and suppliers have been reducing inventories in 2009 to better meet cautious sales targets as they learn lessons following a tough 2008 holiday shopping season.
The data, which is based on payment activities of approximately 350,000 US businesses, marks the second consecutive month of conditions historically seen in the months following a holiday shopping season, but rarely seen during peak shopping months.
According to the report, in recent years, payments and related cash flow throughout the supply chain have slowed as various stakeholders took on more trade related debt as they built up seasonal inventories: "In such "normal" conditions, payments increased and debt became more current in January, as fresh cash received from holiday sales in November and December was used to pay suppliers and quickly sped its way through the supply chain," it stated.
"In contrast, Cortera's December 2009 SCI showed such behaviour occurring during - not after - the holiday season. This provides further evidence to widespread reports that retailers were employing more cautious, upfront inventory strategies with little expectation of replenishing stock throughout the shopping season."
The Cortera SCI tracks late payments against agreed upon terms, measuring late accounts receivable (Late A/R), excessively late accounts receivable (Late A/R >30 days), and overall average days beyond terms (Average DBT).
"Timelier than usual payments, during what is historically a period of high near-term debt, suggest that businesses were likely more conservative in their forecasting and thus kept production and related inventory lower than in past years. That, in turn, could reflect less of a strain on cash flow than is typically seen during the holiday shopping season," said Jim Swift, president and CEO, Cortera.
"In this environment, businesses should seek greater understanding of the risks associated with both customers and suppliers, since ripple effects through the supply chain impact the cash flow of companies down the line."
Procurement Tag - Supply Chain Management
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