Working Capital Minded Supply Chain and Procurement Management in Manufacturing Operations

The importance of working capital management to businesses is undeniable as many collapses were not caused by a lack of profitability but, rather, by shortages in cash (Nuhiu and Dermaku, 2017). An increased focus on working capital has been noted since the financial downturn of 2007-2008 because of that the access to borrowed capital became more expensive. This results in prompting businesses to pass on the burden of working capital to the downstream supply chain by delaying payments (Duggal and Budden, 2012; Haron and Nomran, 2016). The general objective of working capital management is to reduce it to a point where current assets, which are made up of inventories and accounts receivable be financed from current liabilities, which are made of accounts payable (Sagner, 2014). This usually is overlooked by practitioners who tend to be measured based on cost and operational efficiency, rather than on the cash impact of their daily activities (DeSmet, 2018). Hence, the purpose of this chapter is to identify mainly the supply chain and procurement practices that consider working capital. This chapter summarizes findings from the literature in a working capital maturity matrix, listing the practices that impact the working capital.