Working Capital Management: Cross-Functional Best Practices. Renita Wolf Arizona Desert Summit Financial Conference September 14, 2017

Transcription

1 Working Capital Management: Cross-Functional Best Practices Renita Wolf Arizona Desert Summit Financial Conference September 14, 2017

2 Agenda The Challenges Cross-functional Approach Essential Components of Working Capital Key Performance Indicators Best Practices Case Study 2017 Poe Wolf Partners. All rights reserved. 2

3 The Challenges Limited access to needed information Lack of formal structure Too many stakeholders and perspectives Time constraints 2017 Poe Wolf Partners. All rights reserved. 3

4 Cross-functional Approach 4

5 Essential Components of Working Capital Cash Conversion Cycle Inventory Accounts Payable Accounts Receivable 2017 Poe Wolf Partners. All rights reserved. 5

6 Key Performance Indicators ($ in million) Revenue $12,000 $10,000 Cost of goods sold $4,000 $3,200 Inventory $1,600 $2,500 Accounts receivable $680 $640 Accounts payable $1,100 $1,300 Average inventory Average accounts receivable Average accounts payable Days inventory outstanding Days sales outstanding Days payables outstanding Cash conversion cycle ( $1,600 + $2,500) /2 = $2,050 ($680 + $640) / 2 = $660 ($1,100 + $1,300) /2 = $1,200 $2,050 / ($4,000/ 365 days) = days $660 / ($12,000 / 365 days) = 20.1 days $1,200 / ($4,000 / 365 days) = days = 97.7 days 2017 Poe Wolf Partners. All rights reserved. 6

7 2017 CFO/Hackett Group Working Capital Scorecard 7

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11 Best Practices Align operational processes Engage executive-level support Centralize and standardize Cross-functional approach ERP data 2017 Poe Wolf Partners. All rights reserved. 11

12 Best Practices Cash flow drivers Analyze and measure Customer to business model Quality and productivity tools Change-management 2017 Poe Wolf Partners. All rights reserved. 12

13 Best Practices Data integrity Manage risk Self-service Electronic transactions 2017 Poe Wolf Partners. All rights reserved. 13

14 Case Study 2017 Poe Wolf Partners. All rights reserved. 14

15 Agilent Technologies, Inc. Business Groups Life Sciences and Applied Markets Diagnostics and Genomics Agilent CrossLab Support Groups Research Laboratories Global Infrastructure Organization Order Fulfillment Organization 2017 Poe Wolf Partners. All rights reserved. 15

16 Revenue USD Mil $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $ Poe Wolf Partners. All rights reserved. 16

17 Business Group Revenue $662M, 16% Life Sciences & Applied Markets Group $2,046M, 51% CrossLab Group $1,330M, 33% Diagnostics & Genomics Group Operating Income, % margin: Life Sciences $380M, 19%, CrossLab Group $299M, 23%, Diagnostics $88M, 13%, Other Expenses ($245M) 2017 Poe Wolf Partners. All rights reserved. 17

18 Operating Income USD Mil $1,200 Operating Income $1,000 $800 $600 $400 $200 $ Poe Wolf Partners. All rights reserved. 18

19 Operating Margins % of Revenue 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% COGS SG&A R&D Other Operating Margin 2017 Poe Wolf Partners. All rights reserved. 19

20 Operating Margins % of Revenue Revenue 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% COGS 46.6% 45.2% 44.7% 48.9% 46.2% 46.7% 47.5% 51.0% 51.2% 49.5% Gross Margin 53.5% 54.8% 55.4% 51.2% 53.8% 53.4% 52.6% 49.0% 48.8% 50.5% SG&A 33.4% 31.4% 29.4% 35.8% 32.2% 27.3% 26.5% 30.4% 29.6% 29.4% R&D 13.2% 12.6% 12.2% 14.3% 11.2% 9.8% 9.7% 8.7% 8.8% 8.2% Other 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Operating Margin 6.9% 10.8% 13.8% 1.0% 10.4% 16.2% 16.3% 9.9% 10.4% 12.9% Net Int Inc & Other 5.7% 1.6% 0.3% -0.9% 2.3% -0.6% -1.1% -2.4% -4.7% -1.0% EBT Margin 12.6% 12.4% 14.1% 0.2% 12.7% 15.6% 15.2% 7.5% 5.7% 11.9% 2017 Poe Wolf Partners. All rights reserved. 20

21 Operating Margins USD Mil Revenue 4,973 5,420 5,774 4,481 5,444 6,615 6,858 3,894 4,048 4,038 COGS 2,315 2,451 2,578 2,189 2,514 3,086 3,254 1,987 2,072 1,997 Gross Margin 2,658 2,969 3,196 2,292 2,930 3,529 3,604 1,907 1,976 2,041 SG&A ,752 1,809 1,817 1,184 1,199 1,189 R&D Other Operating Margin Net Int Inc & Other (40) 126 (39) (76) (93) (190) (42) EBT Margin ,032 1, Poe Wolf Partners. All rights reserved. 21

22 Accounts Receivable USD Mil $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $ Poe Wolf Partners. All rights reserved. 22

23 Accounts Payable USD Mil $600 $500 $400 $300 $200 $100 $ Poe Wolf Partners. All rights reserved. 23

24 Inventory USD Mil $1,200 $1,000 $800 $600 $400 $200 $ Poe Wolf Partners. All rights reserved. 24

25 Cash Conversion Cycle Days (50) (52) (45) (51) (59) (57) (52) (81) (65) (53) (100) Days Inventory Outstanding Days Sales Outstanding Days Payables Outstanding Cash Conversion Cycle 2017 Poe Wolf Partners. All rights reserved. 25

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27 Contact Information Renita Wolf Poe Wolf Partners Web: Phone: (719) LinkedIn: linkedin.com/in/renitawolf 2017 Poe Wolf Partners. All rights reserved. 27