The Hackett Group Manager Damon Rottermond talks with Director Shawn Townsend and Director Istvan Bodo discuss findings from The Hackett Group’s 2022 Working Capital Survey.Show NotesWelcome to The Hackett Group’s “Business Excelleration Podcast,” where week after week we hear from experts on how to avoid obstacles, manage detours and celebrate milestones on the journey to world-class performance. Today’s episode is hosted by Damon Rottermond, finance transformation managing consultant at The Hackett Group. He is joined by István Bodó and Shawn Townsend, both directors in The Hackett Group Technology Transformation practice. The discussion today is centered around the key findings of The Hackett Group’s 2021 US Working Capital Survey, how companies fared post-pandemic, what could come next in 2022 and what companies should be doing right now to inflate themselves. Shawn starts off by sharing that this is the first year since 2010 where the three main measures of working capital all exhibited positive trends. These include days payables outstanding (DPO), days sales outstanding (DSO) and days inventory outstanding (DIO). He states that the most notable improvement this past year was the DIO, which improved by 2%. The three main industries that drive DIO are pharma, oil and gas, and biotech. These improvements more than offset the supply chain issues throughout the year. Next, DSO improvement saw a 2% improvement as well. The top three industries driving that improvement are airlines, machinery and recreation of products. These industries all have a strong business-to-consumer component and typically fare well through the economic rebound. Lastly, the DPO, or payable side, also saw a .5% day improvement last year even though the rate of improvement has slowed. The slower growth of improvement is driven by two factors: supply chain bottlenecks and companies reaching upper limit of payment extension for the region. Supply chain finance is doing well and driving part of that improvement. István then describes the best- and worst-performing rank of companies in 2021. The pandemic triggered deterioration in 2020, with airlines, hotels and immigration being the hardest hit during the COVID-19 pandemic. These industries moved from the worst performing to the best performing in 2021. Digitalization and higher margins were behind this economic rebound. A strong demand and use capacity led to higher prices in the airline industry. Internet and catalog retail was one of the top 10 performing industries during the pandemic, but the cash conversion cycle degraded significantly by 13%. Looking ahead, they believe capital restraints will remain in this industry. In addition, there was a cash conversion cycle of deterioration in the categories of household and personal. In addition, Shawn talks about the change in revenue. Typically, there is a 4%-5% change, but this year they saw a 22% increase. The top three industries driving this change are gas, airlines and mining. These companies not only bounced back, but saw a 12% increase in margin since 2020. These companies manage to remain profitable despite raw material and labor pressures. On the cash on hand side, there has been a sharp increase with 13% of revenue and is almost back to pre-pandemic levels. Also, despite the revenue increase, excess working capital grew as well in 2021. Excess working capital is the working capital opportunity. The top 1,000 companies have nearly $1.7 trillion in excess working capital, which is up nearly 28% since 2020 from $1.29 trillion. To break down the working capital areas, the opportunity includes $627 billion in inventory, $533 billion in receivables and $498 billion in payables...A complete list of show notes is available here for download.