Rapid cash conversion is a vital indicator of business health. Slow cash conversion i.e. high working capital is a burden on a company’s finances, a drag on its growth and a depressant on the share price.
Few businesses outside of the consumer goods sector succeed in maintaining both low inventories and favourable net payment terms – If the leading life sciences businesses achieved consumer goods levels of supply chain cash conversion, this would release over $350BN of cash across the sector.
This study takes a 5 year view of supply chain cash conversion in over 100 manufacturing companies. These companies include representatives of five major manufacturing sectors; aerospace and defence; automotive; consumer goods; industrial engineering, and life sciences.
This is the result of ongoing research over several years, with the analysis based upon publicly available data and the interpretation based upon engagement with the key players in each sector.
Comparison is made between the sectors identifying the best and worst performers as “cash kings and “cash casualties” and also those whose working capital performance makes them “supply chain supporters” or “supply chain dependants”.
This report examines the life sciences sector in detail, applying the study criteria at company level and identifying the best and worst performers in a sector which has significant opportunities for improvement.
The life sciences sector has the highest levels of working capital and therefore we have categorised the sector overall as a ‘cash casualty’ with an average 149 day cash conversion cycle (consumer products turn their cash seven times faster). In addition there are significant diferences between life sciences companies, indicating some potential for individual improvement.
Our report provides a snapshot of how the life sciences industry is handling cash conversion challenges and provides a series of recommendations to help overcome them.
The full PA report on cash conversion and inventory management in the life sciences sector is now available for download. Click for more information as to how PA Consulting Group can help your organisation understand:
PA has significant experience of diagnosing, designing and implementing improvements in cash conversion across a number of sectors. For further information and examples please contact us