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EY: Cash on the Road 2014

EY's latest analysis of top auto suppliers shows an improvement in working capital from the previous year.

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EY's latest analysis of top auto suppliers shows an improvement in working capital from the previous year. In general, companies in North America and Europe reported better working capital results, while those in Japan saw their performance deteriorate.

Wide performance gaps between automotive supply companies in different regions may partly be as result of variations in business models and customers served. But they also highlight fundamental differences in the relative sharpness of management focus on cash and the effectiveness of working capital management processes.

EY's research indicates that the leading 50 automotive suppliers have as much as $51 billion of cash unnecessarily tied up in working capital. This figure is equivalent to 10% of their combined sales.

To unlock the benefit of working capital, automotive suppliers will need to drive continuous operational and structural improvements, addressing "root and branch" aspects of WC policies, processes and metrics.

EY says key initiatives should include:

Managing working capital as a strategic initiative

Further streamlining supply chains

Closer collaboration and process alignment with carmakers and suppliers

Better coordination among supply, planning, manufacturing, procurement and logistics functions and processes

Improved billing and cash collections

More robust supply chain risk management policies

Actively managing the trade-offs among cash, cost, service levels and risks

 

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