The recently published REL Surveys of working capital performance of the top 1000 companies in Europe and USA- see - Europe and USA - show that they have the same level of overall working capital tied up in the business: 6% of GDP. The performance has been mixed between the two regions:

• in Europe there has been improvement in days outstanding on DWC, DSC and DIO, but a deterioration in DPO:

       Source & Copyright©2014 - REL

• in USA all components of working capital – days sales outstanding (DSO), days inventory outstanding (DIO) and days payables outstanding (DPO) stayed relatively flat from 2012 to 2013. DSO stood at $331 billion and 36.3 days (a reduction of 0.1 days from 2012), DIO remained flat at 29.6 days ($423 billion), while DPO increased by 0.1 days from 46.5 to 46.6 days ($266 billion).

Days Inventory outstanding remains the largest single working capital improvement opportunity in the USA, while Europe the biggest opportunity is in A/R:

 regions:

• USA:
• ​
  • Source & Copyright©2014 - REL
• Europe:
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                Source & Copyright©2014 - REL

Concerns about sustainability of improvements

In both Europe and the USA REL have concerns about the sustainability of the working capital improvements.

In Europe:

• only one company in the survey that improved all three constituent elements of DWC over the period
• over the past five years: just 9 to 12% of the companies in the survey achieved year-to-year DWC improvements over three consecutive years
• remainder of companies experienced at least one year in the past three years where this deterioration exceeded 5%
• the overall substantial decline in free cash flow, which fell by 18%.

In the USA REL have found that companies continue to struggle with maintaining or improving working capital performance year-on-year:

• only 99 companies (10%) have managed to improve working capital year-on-year for three years
• no company has managed to achieve improvement across all of the three areas of working capital (inventory, payables and receivables).

REL believe that their findings suggest that, in both regions, once companies enhance their working capital efficiency, focus is turned elsewhere and previous gains are lost or reduced.

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CTMfile take: Focus on maintaining and improving working capital efficiency is vital in both bad times and good times. When good times return, then the focus should increase otherwise the disciplines will slip and cash will fly away as happened in the USA last year, and as UPS's Ernie Caballero predicted in April 2013.