Working Capital

Study 23/24
The Return of ‘Cash is King’

Launch
 Contents
1 4 5 9 12

Executive At a glance Improvements Economic trends Spotlights on

Summary in the face of and priorities regions, sectors
challenging ahead and company sizes
conditions

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working capital and Contacts
Contents At a glance Improvement Economic trends Spotlights Digitising WC How we can help Authors & Contacts 1

Executive Summary

Executive Summary
Cash is king once again. As persistently high inflation and The working capital management (WCM) landscape has seen
interest rates force up borrowing costs, making the most a marked shift in recent months. After a challenging few years,
efficient use of available cash is now more critical than supply chains are now stabilising, with the Global Supply
Chain Pressure Index reaching an all-time low in May 20231.
ever. Large corporations are harnessing their tech-enabled
management capabilities to optimise working capital. In last year's PwC Working Capital Study, there were tentative
But most small and mid-sized companies are still signs of recovery and stabilisation in working capital positions.
behind the curve. And while there are glimmers However, the subsequent impact of further rises in inflation
of economic recovery ahead, a still fragile and interest rates have reinforced the importance of cash
outlook demands care and caution from and working capital optimisation. The analysis of 17,000
a WCM perspective. global corporations we carried out for this year’s report also
highlights the growing focus on working capital as a key
financial performance indicator.

Daniel Windaus
Partner,
Working Capital Optimisation

1 Global Supply Chain Pressure Index (GSCPI) –

FEDERAL RESERVE BANK of NEW YORK (newyorkfed.org)
Contents At a glance Improvement Economic trends Spotlights Digitising WC How we can help Authors & Contacts 2

Executive Summary

Cashing-in Reduced supply chain pressure Uncertain economic prospects

call for caution
The results are encouraging, albeit with important The general reduction in supply chain disruption
caveats. Overall working capital days (the level of has allowed companies to manage inventories more Even if the rises in inflation and interest rates may
net operating working capital held by businesses efficiently, rather than falling back on a ‘just in case’ be tailing off, they are likely to remain high for
relative to their sales) have improved across most stocking approach, which eases uncertainty some time to come. This underlines the continuing
major economies in our study. This improvement over availability, but creates excessive amounts need for careful WCM in bolstering liquidity and
is especially pronounced in the EU, which normally of working capital. The change of tack in inventory cushioning any further shocks ahead. In particular,
shows higher relative levels of working capital. management is especially evident in the EU the still fragile and uncertain economic outlook
and Asia. increases the need to consider forward investment
In previous years, companies tended to manage
in inventories to cover future sales, tighten up the
working capital by stretching supplier payments
management of outstanding payment exposure and
and terms. But the latest improvements mainly
guarantee surety of supply.
stem from the asset side of working capital through
better management of customer collections and
closer control of inventories. Between receivables
and inventories, we’ve seen an estimated €600bn
reduction in nominal working capital requirements
on the asset side, relative to what we would have
seen on prior year trends. More than €250bn of this
has come from the EU alone.
Contents At a glance
Executive Summary
Improvements are still driven
by large companies
Moreover, behind the overall improvements, the
picture is more mixed. The positive developments
in working capital ratios, and the gains made in
receivables and inventories, are concentrated in
larger and more mature companies. When looking
at the mid-cap and smaller organisations, there
remains a clear disparity between the key ratios and
improvements realised.
Improvement Economic trends Spotlights Digitising WC How we can help Authors & Contacts 3
Dividends
Technology steps into the workforce gap Rich dividends
Although the improved efficiency of WCM is With WCM challenges come further opportunities.
encouraging, the challenge of attracting and Our analysis shows a potential €1.5tn of excess
retaining enough staff to run key processes working capital available, highlighting the rich
continues. Experienced professionals are dividends that a renewed focus on cash and
in short supply in most developed markets. WCM can bring.
The digitisation of working capital processes
is therefore increasingly important. But
technology isn’t a silver bullet. With so much
choice, selecting the right tools and defining
a solid business case can be challenging. In
turn, implementation impacts on a wide range
of stakeholders, underlining the importance of
organisation-wide understanding, buy-in and
change management.
Contents Executive Summary
At a glance
At a glance
Net Working Capital
2.6% 3-6.7x 1.4%
decrease in
NWC days
Net Working Capital
(NWC) has continued
to decline relative to
revenue growth as
supply chain disruption
eases and pressure
on payment practices
begins to move the dial.
Improvement
High interest rates
are prompting an
increased focus on cash
higher western
market interest rates*
High interest rates are
having a significant impact
on costs of capital, meaning
that working capital will
not come as cheap as in
prior years.
*compared to January 2020
Economic trends Spotlights Digitising WC
Early signs of Cash reserves
economic recovery
growth projection
in OECD countries
There are indications
that global economies
have seen the worst of
inflation, and interest
rates are expected to
stabilise, leading to a
fragile but optimistic
view on economic
growth. But while
the outlook remains
uncertain, working
capital needs to be
closely managed.
How we can help
11%
decline in
cash days
Cash reserves decline
for a consecutive year
relative to operating
costs, as companies
look to return to pre-2020
cash levels to combat
interest rate rises.
Authors & Contacts 4
EU leading the way
2.6
day improvement
in NWC days
The EU saw the most
significant decrease in
NWC days (2.6 days),
seeing large reductions
in DSO (6.7 days) and
DPO (11.5 days) as
governments continue
to roll out payment
terms regulation.
Contents Executive Summary At a glance Economic trends Spotlights Digitising WC How we can help Authors & Contacts 5

Improvement

Improvement in the
face of challenging
conditions
Contents Executive Summary At a glance Economic trends Spotlights Digitising WC How we can help Authors & Contacts 6

Improvement

Against a backdrop of increasing inflation, global

revenues have continued to grow, adding to the Figure 1: Net working capital and working capital days
recovery seen in 2021. Largely in line with this revenue
growth, we’ve seen a continued build-up of nominal
50 8
working capital, though input costs are also increasing.
Companies have managed to keep this parallel growth
in their favour, resulting in a decrease of 1.1 days of 47.9 48.2
cash tied up in net working capital (NWC). But looking
below the surface, we see different stories within
the finance and supply chain dynamics which drive 40 43.0 43.0
41.9
working capital.
7
Both days sales outstanding (DSO) and days payables
outstanding (DPO) have fallen, with DSO dropping by
6.0%, down 3.1 days, and DPO decreasing by 6.2%, down
4.5 days. These movements are influenced by a number
30

NWC Days
of factors, most notably the continued trend in the EU
6.1
(and other regions to a lesser extent) of payment terms

€’tn
regulation, which is limiting the ability of large buyers and
5.8 6
sellers to dictate favourable terms from their suppliers
and customers. Along with these regulatory restrictions, 5.6
concerns over credit risk and input cost increases have
20
led to a tightening of credit from suppliers. 5.3

5
10 4.6

0 4
2018 2019 2020 2021 2022

Source: PwC analysis

Contents Executive Summary At a glance Economic trends Spotlights Digitising WC How we can help Authors & Contacts 7

Improvement

Days inventory outstanding (DIO) has seen a marginal fall

Figure 2: DSO, DIO and DPO trend
of 2.7%, down 1.6 days, as global supply chains continue
to become more predictable. While some industry-specific
supply chain issues remain, by-and-large companies are
now better able to forecast and manage supply and demand 51.8
51.9
factors, having equipped themselves to handle the volatile 49.2 48.7
environment of the past few years. 45.9

DSO
These movements have come together to improve working 3.4 2.7
capital performance. But while many companies are rising
to the economic challenge of improving NWC, the pressure -0.1 -3.1
to cut working capital requirements will continue.
Equity markets want to see profitable growth and return
on capital, with WCM one of the keys to achieving this.

70.6
66.1
60.4 60.1 58.5

DIO
-4.5 -5.7 -0.3 -1.6

72.7 72.5
67.8 67.5 67.9

5.2
DPO

-0.2 -0.3 -4.5

2018 2019 2020 2021 2022

Source: PwC analysis
Contents Executive Summary At a glance Economic trends Spotlights Digitising WC How we can help Authors & Contacts 8

Improvement

Businesses have continued to reduce the cash cushions

Figure 3: Cash days (to cover operating expenses) and net debt to EBITDA trends
built up over 2020-21. But cash days still exceed
pre-pandemic levels. Many of the traditionally capital-
intensive industries – such as industrial manufacturing,
2018 46
aerospace & defence, and engineering & construction –
have also seen a reduction in their normally high cash days.
In fact, chemicals is the only sector that has posted an
2019 51 increase.

In line with this trend, net debt levels are declining relative
2020 68 to EBITDA, reaching a five-year low of 1.83. Under the
surface, however, many sectors increased their relative net
debt levels – not just in defensive sectors like healthcare –
but also retail, technology and entertainment & media. The
2021 61
overall decline was mirrored in all regions with the exception
of Asia, which saw a marginal increase.

2022 54

Cash days
0 10 20 30 40 50 60 70
(to opex)

2018 2.08

2019 2.28

2020 2.40

2021 1.99

2022 1.83

Net debt/ 0% 50% 100% 150% 200% 250%

EBITDA

Source: PwC analysis

Contents Executive Summary At a glance Improvement Spotlights Digitising WC How we can help Authors & Contacts 9

Economic trends

Economic trends
shaping priorities
ahead
Contents Executive Summary At a glance
As the global economy begins to emerge from the turbulence of recent years, there are three key macroeconomic trends that could impact the performance of working capital.
Improved growth prospects
The global economic outlook has
improved significantly since our last
report. The OECD now expects that
the UK, the Eurozone and the US will
grow in 2023 by 0.3%, 0.9%, and 1.6%,
respectively – and 1.4% across the
OECD1. Economic growth is expected
to then gradually pick-up from 2024
onwards as inflation returns to more
normal levels and the squeeze on
consumer incomes eases. However,
the projected growth is fragile.
1 OECD Economic Outlook, June 2023
2 ONS
3 ONS
4 OECD Stat
Improvement
Economic trends
The UK economy has largely recovered
from COVID-19, with real GDP estimated
to be around 0.2% above pre-pandemic
levels. Recently, however, the UK
economy has essentially flatlined, with
no economic growth in the three months
to May 2023. The main reason is that
consumer-facing sectors remain just
under 9% below pre-pandemic levels2.
Spotlights Digitising WC How we can help
Headline inflation coming down, but core inflation is proving persistent
Headline inflation has fallen in most of
the world’s major economies. UK CPI
inflation was 7.9% in June 2023, down
from a high of 11.1% in October 20223,
while inflation sits around 3% in the US
and 5.5% in the Eurozone. Core inflation
rates have come down too, but to a
lesser extent, while the pace of the
decline has slowed. Even in the US,
where headline inflation has fallen back
the fastest, core inflation remains at
4.8%4. The historical evidence suggests
that core inflation tends to lag behind
headline inflation. The latter includes
short-term movements in energy and
food, so we expect that it will trend
downwards, but it may take longer than
initially anticipated.
Authors & Contacts 10
In the coming months, we expect CPI
inflation to fall back further in the UK.
The 17% cut to the household energy
price cap should reduce inflation by
another percentage point, while our
modelling indicates that the price cap
could fall by a further 5% in October.
There is also good reason to suggest
that food inflation has peaked.
The combination of these factors should
see CPI inflation get closer to 5% by the
end of 2023. Though inflation is unlikely
to return to target until 2025 as services
and core goods inflation persist.
Contents Executive Summary At a glance Improvement Spotlights Digitising WC How we can help Authors & Contacts 11

Economic trends

Interest rates still rising but nearing the peak

Figure 4: International forward interest rates, %
Central banks across the world have continued to tighten
monetary policy and roll back quantitative easing. 6
The Bank of England base rate now stands at 5.25%,
following fourteen consecutive rate rises. While the US
federal funds rate target range now stands at 5.25% to
5
5.50%, and the ECB deposit facility at 3.75%5.

Although headline inflation has fallen back, central banks will UK

need clearer signals that domestic sources of inflation have
moderated before they are able to stop increasing interest 4
rates. The Bank of England Monetary Policy Committee
has made it clear that it will pay close attention to the latest US
developments in labour market conditions, wage growth and
3
services price inflation. Signs of more persistent pressures
will mean that further tightening in monetary policy Eurozone
is required.

2 Projections in August 2023

5 Bank of England MPR - Aug 2023

1 Federal funds rate

Bank rate

ECB Deposit rate

-1
2020 2021 2022 2023 2024 2025 2026

Source: Bloomberg Finance, BoE Monetary Policy Report – August 2023

Note: All data as of 25 July 2023. The forward curves are estimated using the instantaneous forward overnight swap rates in the 15 working days to 25 July 2023.
Federal funds rate is the upper bound of the target range.
Contents Executive Summary At a glance Improvement Economic trends Digitising WC How we can help Authors & Contacts 12

Spotlights

Spotlights on
regions, sectors
and company sizes
Contents Executive Summary At a glance Improvement Economic trends Digitising WC How we can help Authors & Contacts 13

Spotlights

Regions
Figure 5: NWC, DSO, DPO and DIO trends by region
While all leading economic regions saw a decline in the three Eurozone UK North America Asia
areas of NWC, the impact has been uneven.
63.5
58.8 59.2 57.6
The most significant movement in NWC and its underlying 52.2 52.4
54.8 56.0
49.3 48.9
44.2 44.7 44.6 42.4
DSO and DPO metrics has been in the EU (2.6 days 40.9 41.3 41.7 42.7 42.1 39.8

DSO
reduction). The continued rollout of payment terms -6.7 -2.2 -0.6 -2.3 -4.3 -1.6

directives is driving a major reduction in both DSO (6.7 0.1 2.4 1.2 3.2 0.5 0.0 0.4 1.0 9.9 4.8

days) and DPO (10.7 days), taking both to five-year lows.

This pressure is being seen more in DPO, with many of
the smallest businesses outside of the scope of this study
81.3
having additional protections (e.g. independent agricultural
66.1 65.5 66.6 64.0 66.0 67.2 65.8
suppliers). The trend is likely to continue as EU states bring 61.7 62.3 61.2 56.6
67.3 64.5

in legislation which takes the directives further. In addition 47.7

43.1 43.2 45.6 44.5 44.2
-0.5 -4.4 -0.7 -2.0 -17.3 -1.5

DIO
to DSO and DPO improvement, the EU also saw a 4.4-day
0.6 3.7 8.9 10.7 0.1 2.4 -1.1 -0.3 2.0 1.2
reduction in DIO, reaching a five-year low.

While not a part of the EU payment terms directives, the

UK has also seen notable reduction in DSO (2.2 days) and
DPO (2.5 days) in the wake of similar pressures on payment 84.3
78.4 82.2 78.3 79.3 78.7
74.6 73.4 75.8
terms. Along with these reductions, the UK saw a fall in DIO 71.5
62.6 63.7 61.2 59.5
of 2 days, all building toward a 1.9 day decrease in NWC 51.1
59.6 56.2 55.8 59.9 57.1
DPO

days. While generally trending downwards, the contraction -1.2 -10.7 -2.5 -0.4 -2.8 -5.6 -2.8
of NWC requirements in the UK has not been as pronounced 4.9 3.9 8.5 3.0 1.1 3.7 0.4 1.0 5.0

as the EU, with performance still 2.5 days higher than in

2019 and all metrics above 2018 levels.

The margins of improvement in the US and Canada have

51.4
not been as substantial. However, the region has always 47.8 46.6 44.6 46.5 48.8 50.0 49.4
NWC Days

44.8 46.4 44.6

operated with lower working capital requirements when 43.3 42.0 42.1
38.5
compared to other major regions. NWC saw a reduction of 32.6 33.3 33.4
31.9
-1.8 -2.6 -1.3 -1.9 31.2 -4.9 -0.6
0.7 days, with a small improvement in DIO of 0.3 days and
1.5 1.6 3.6 5.7 0.7 0.1 2.3 1.2
larger movements in DSO (2.3 days) and DPO (2.8 days). -0.7
-1.5
On the other end of the scale, Asia has traditionally run
at higher levels of NWC on all fronts, and saw a similar
marginal reduction in NWC days (0.6 days), with a noted
2018

2019

2020

2021

2022

2018

2019

2020

2021

2022

2018

2019

2020

2021

2022

2018

2019

2020

2021

2022
improvement in DIO of 1.5 days.

DSO DIO DPO NWC Days Difference Source: PwC analysis

Contents Executive Summary At a glance Improvement Economic trends Digitising WC How we can help Authors & Contacts 14

Spotlights

Sectors Figure 6: Year on year change in asset days & DPO by sector

At a sector level, a number of working capital winners

and losers have emerged this year.
Difference in NWC Days
Aerospace, defence
While overall NWC fell by 2.6%, the improvements were
-3.9 3.9 & security
largely driven by a handful of sectors with substantial
boosts (energy & utilities and transportation & logistics most
Industrial
prominently). The gains were offset by dips in a number of 5 manufacturing Engineering
sectors (especially retail), rather than an impact that was felt & construction
evenly across sectors. Communication

As disruption to supply created a seller’s market and Healthcare

Automotive
prices increased in energy & utilities, both asset days and Pharma &
0
payables days decreased substantially (12.2 and 11.9 days life sciences
respectively), driven primarily by oil & gas related industries.
Transportation Metals &
The sector has continued to maintain tight control on

Difference in DPO
& logistics mining Retail
receivables during these price increases, with reduced
volatility in demand allowing the sector to operate on a more Consumer
-5 Hospitality
stable inventory position.
and leisure Forest, paper
Transportation & logistics has seen similar gains as it exits & packaging
Technology
from a period of significant volatility, which is reflected
in decreases in both asset days and payables days (5.1 Chemicals
and 3.0 respectively). With the industry having invested -10
Energy &
heavily in streamlining services to customers, the asset day utilities
improvement has outstripped the DPO decline, while the
already slim inventory requirements have remained the same.

While performance varied substantially across the sectors, -15

Entertainment
NWC improvement has generally correlated with movements & media
in Return on Invested Capital (ROIC). Large increases in ROIC
across three of the five sectors has resulted in a higher NWC
improvement than the average.
-13 -12 -11 -10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4
Difference in Asset Days

Source: PwC analysis

Contents Executive Summary At a glance Improvement Economic trends Digitising WC How we can help Authors & Contacts 15

Spotlights

Figure 7: Net Working Capital quartile spread by sector Upper quartile Median performance Lower quartile

150 130
126 122
120 108 110
95 99 109
91
90 78 80
DSO

80 75 77 65 73 73
71 61 67 73 59
60 59 59 56 56 49 43
50
41 46 47 38 50 48 38
30 43 45 45 40
32 37 32 36 24 22
24 20
0 17
9 8
250
211
200
167 164
143 141
150 120
129
120 138 129
DIO

110 112 114 106

100 89
83 84 91
80 75 78 78
70 46 84 65
50 47 53 36 46 36
50 51 56 49 50
43 21 6 25 33 12
0 9 12 7 14 0 11 7 10 2
200
152
150 129
117 120
112 110 106 106
97
DPO

100 89 82 84 86
91 80 73 72
70 60
60 65 60 61 56 63 56
50 54 47 54 46 51
52 42 40 36
36 39 33 34 41
28 30 33 28 32 25 31 32
0 23 22 21
200
170
144 149
150 135 131
NWC Days

101 120 120 113 115

107 103
106 95
100 99
83 71 70 88 82
60 81 74
60 65 62 69 46
59 67 53
50 40
45 31 43 48 46 44
33 34 25
28 30 25 14
0 14 8 6 -1 14 7
Aerospace,
defence
& security

Automotive

Chemicals

Communications

Consumer

Energy
& utilities

Engineering
& construction

Entertainment
& media

Forest, paper
& packaging

Healthcare

Hospitality
& leisure

Industrial
manufacturing

Metals
& mining

Pharmaceuticals
& life sciences

Retail

Technology

Transportation
& logistics
Source: PwC analysis
Contents Executive Summary At a glance Improvement Economic trends Digitising WC How we can help Authors & Contacts 16

Spotlights

Figure 9: DSO, DIO and DPO trend

Company size 80.1
80 81.7 80
Improvements in NWC have been primarily driven by large 80.5 80.9 78.3
companies. Both medium- and small-sized companies 77.9 78.4 77.3
actually saw a deterioration in NWC days, 3.6 and 3.2 days
78.4
78.1
70 71.7 71.8 71.3 76.7
respectively. 74.5
75 74.0
67.5 67.3
Whilst there was an overall decrease in DPO, however, it’s
more pronounced in large companies (4.6 days), as much
74.0
60
72.9

DPO
DSO
of the prompt payment legislation is targeted towards larger 72.2 71.9
buyers who can use their power to influence payment term
70
negotiations. However, small and mid-sized companies did 50
see a decrease as well (2.8 days and 1.7 days respectively). 49.5 49.8
47.2 46.7 67.4 67.3
Small and mid-sized companies experienced relatively little 67.0
40 43.7
movement in DSO, which has remained higher than pre- 65
2020 levels. Large companies saw a 3.1 day decrease and
2018 2019 2020 2021 2022 2018 2019 2020 2021 2022
an improvement to below 2019 levels. In DIO, the trends for
large companies and small and mid-sized companies vary
90 90
even more. While large companies noted an improvement
of 1.6 days, both small and mid-sized companies saw a 87.9
86.8
deterioration - 3.2 and 2.3 days respectively. 84.5 83.7 84.7
80 82.3 81.9
80 81.2
80.3 79.0 79.4
70.2 76.2 70 72.7
69.1

NWC Days
70
71.5 70.3 65.2 66.3
DIO

69.1 64.8
60
65.3
60
58.9 50
58.4
56.8
45.8 46.0 39.9 40.1 39.1
50 40
2018 2019 2020 2021 2022 2018 2019 2020 2021 2022

Source: PwC analysis

Large company Medium company Small company

( >€1bn turnover) (€500m – €1bn turnover) (€50m – €500m turnover)
Contents Executive Summary At a glance Improvement Economic trends Spotlights How we can help Authors & Contacts 17

Digitising WC

Digitising
working capital
Contents Executive Summary At a glance Improvement Economic trends Spotlights How we can help Authors & Contacts 18

Digitising WC

The shortage of skilled labour, including Figure 10: Solution landscape

fewer Working Capital professionals, is also
a factor impeding the effectiveness of WCM, Supplier Buying
Dynamic credit
especially in developed economies. Contract lifecycle, risk & portals
management
management performance
The digitisation of working capital processes to E-Invoicing Collections
optimise performance has therefore taken on even more platforms
importance, both in managing capacity through automation
and in simplifying complex decisions with the support
of real-time data analysis and insights. As the solution Factoring
graphic highlights, however, the scale and breadth of O2C Intelligent cash P2P E-Invoicing
available workflow and ancillary technologies that now application
exist to complement underlying ERPs is large and complex. Sourcing &
This makes selection of suitable solutions a significant onboarding
challenge for most companies, especially when factoring
in the ever-increasing security, data, integration and Contract Strategic
Online
governance requirements. management sourcing
payments &
portals Sustainability

Process
mining NWC

Cash
Insights & forecasting
analytics

Multienterprise
Integrated planning
demand planning
F2F

Supply chain
Digital supply
design and
Supply planning chain twins
modelling
Contents Executive Summary At a glance Improvement Economic trends
Order to Cash
State of play
Some level of automation such as order processing, invoicing and cash allocation
has long been the standard for businesses, traditionally relying on heavy system
configuration. This has generally left a number of exceptions to be manually managed,
while creating the need for additional configuration to keep pace with internal or
external changes.
Companies that are embracing the latest technology are able to achieve significantly
higher levels of automation with close to no manual intervention, while also maintaining
flexibility and scope for change. The largest challenge faced by businesses across the
order to cash (O2C) cycle remains the ability to efficiently collect on invoices. Technology
is not only being used to automate customer interactions – for example dunning – but
also to help collection teams pinpoint the contacts where their limited time can be most
valuably used.
Disruptive technologies
Several disruptive technologies are reshaping the O2C domain, fundamentally altering
how businesses handle credit management and collections efficiency. Artificial
intelligence (AI) and machine learning are being deployed to predict customer behaviour
and identify potential delays in payment, allowing companies to react rapidly to potential
credit risk issues, and influence decision-making in collections.
Machine learning is becoming increasingly adept at a variety of internal processes as
well, in particular cash application, where the matching of remittance to payments had
previously relied on a human eye. Instead, transactions can now be fed through an
automated process to ingest various data streams and continually improve accuracy
and efficiency.
AI can now be deployed in deduction and dispute management, with the ability to read
natural language and automatically categorise, allocate and suggest resolutions. In some
controlled cases, AI can entirely resolve the issue without intervention.
Spotlights How we can help Authors & Contacts 19
Digitising WC
Source to pay
State of play
Procurement has become crucial in managing market and supply risks, with technology
playing a vital role in cost control, supply chain transparency and resilience. Procurement
leaders are increasingly being challenged to sharpen efficiency, optimise procurement
processes and meet expanding sustainability targets.
Disruptive technologies
In the drive for efficiency, large best-in-class providers and agile entrants are disrupting
the source to pay (S2P) landscape through highly tactical source-to-contract processes,
as well as transactional and volume-based purchase-to-pay processes. Demand is
increasing for solutions which are fully integrated and interoperable with upstream and
downstream processes such as supplier relationship management, contract lifecycle
management and third-party risk.
The combination of AI, machine learning and natural language processing is playing
a key role in contract and tender authoring, as well as accelerating sourcing decision-
making. These developments are also being harnessed to generate insight into spend,
including duplicative payments and monitoring risk and controls across payment
authorisation processes.
Large parts of the S2P cycle are also moving over to the cloud, allowing users to
engage with processes in a far more agile way, while also reducing the burden on
IT teams to maintain and scale the technology foundation through business growth
or transformation.
A number of emerging technologies are focusing on sustainability, covering supply chain
transparency, renewable energy adoption and carbon and waste reduction control, as
well as ethical labour practices.
Contents Executive Summary At a glance Improvement Economic trends
Forecast to fulfil
State of play
Established technology has typically aimed to automate or facilitate supply chain
planning decision-making, or through the use of predictive analytics to improve forecast
accuracy. Manufacturers are increasingly embracing the integration of cloud computing
and advanced AI technologies to do this.
The supply chain disruptions of recent years have put these technologies further under
the spotlight and heightened the focus on agility and resilience. Inflationary pressures
may spur some industries to revert to pre-pandemic ‘just-in-time’ strategies to better
balance inventory investments against service. Overall, however, the use of technology
to increase supply chain agility and responsiveness remains a key priority.
Disruptive technologies
Disruption to the supply chain planning solution landscape is primarily focused on an
increased integration of AI and machine learning in the end-to-end planning cycle in
combination with other technologies. Examples include using internet of things (IoT)
enabled-devices to capture real-time data on customer demand. When combined with
AI and machine learning for advanced analytics, the IoT tracking can lead to improved
forecast accuracy, allowing organisations to respond to changing marketplace dynamics
earlier and with greater confidence. As these solutions come together, they can help to
intelligently automate processes and speed up the planning decision-making process.
Further developments include the increasing use of ‘digital twin’ technology to manage
risk through scenario modelling. Taking this one step further, companies that are able
to synchronise and execute planning processes beyond their own four walls and across
the entire supply chain will reap the greatest rewards. The increasing importance of
environmental, social and governance (ESG) factors globally means that the use of
supply chain technology to facilitate transparency and reporting on sustainability will also
become a key differentiator.
Spotlights How we can help Authors & Contacts 20
Digitising WC
Making the most of technology
Deploying technology can deliver a number of key benefits, including
better transparency, evidence based decision making, process agility,
and reduced error rates. All of which ultimately improved working
capital performance and process efficiency. However, technology will
not deliver performance in isolation and also brings its own challenges.
The primary challenge to overcome is the upfront investment required
to implement these advanced technologies. This demands a clear and
compelling business case to secure investment from executives and the
necessary buy-in from the wider stakeholder community.
Assembling the data needed to develop a robust business case can be
challenging, especially where data in legacy systems and processes
is of poor quality or unavailable. The challenges can be compounded
by the complex landscape of business solutions and the integration of
data and security and governance requirements, along with the need to
attract and retain a workforce who have the necessary skills to operate
and maintain these digital technologies.
Even once these initial hurdles have been successfully navigated,
implementation can be problematic. These kinds of technologies affect
a wide range of stakeholders rather than just the teams most directly
involved in the decision-making. This means that full transformation is
required. The big risk is believing that new systems are a silver bullet. In
reality, realising the benefits requires effective buy-in, skills and change
management to solve issues and transform operations.
Contents Executive Summary At a glance Improvement Economic trends Spotlights Digitising WC Authors & Contacts 21

How we can help

How we can help

Contents Executive Summary At a glance Improvement Economic trends Spotlights Digitising WC Authors & Contacts 22

How we can help

How we can help

PwC’s operational and specialist Working Capital team supports company management to realise cash improvements at pace,
improve operational processes, deploy supporting technology, and drive organisational transformation.

Where and how we could help you to release cash from Working Capital?

Data analytics and insights Working capital operating model design Cash culture implementation and training

Operational process improvements Commercial negotiation and terms optimisation Select and integrate enabling technologies

Cash forecasting process and reporting Short term cash sprints Provide surge capacity and managed service
Contents Executive Summary At a glance Improvement Economic trends Spotlights Digitising WC How we can help 23

Authors & Contacts

Authors &
Contacts Authors

Daniel Windaus
Partner, Working Capital Optimisation
T: +44 7725 633420
E: daniel.windaus@pwc.com

Andrew Brady
Working Capital Specialist
T: +44 7483 417068
E: andrew.brady@pwc.com

Special Contributions from:

Barret Kupelian
UK Chief Economist
Contents Executive Summary At a glance Improvement Economic trends Spotlights Digitising WC How we can help 24

Authors & Contacts

Contacts

Global Centre of Excellence – UK

Daniel Windaus Stephen Tebbett
daniel.windaus@pwc.com stephen.tebbett@pwc.com

EMEA North America

Denmark Italy Switzerland USA

Rene Brandt Jensen Andrea Boin Alain Fares Analisa DeHaro
rene.brandt.jensen@dk.pwc.com andrea.boin@pwc.com alain.fares@pwc.ch analisa.deharo@pwc.com

Finland Middle East Benelux Rob Vettoretti

r.vettoretti@pwc.com
Michael Hardy Dan Georgescu Danny Siemes
michael.hardy@fi.pwc.com dan.georgescu@pwc.com danny.siemes@pwc.com

Canada
France South Africa Turkey Joe Rafuse
Arthur Wastyn Emma Whalley Arzu Sahin joe.rafuse@pwc.com
arthur.wastyn@pwc.com emma.b.whalleyhands@pwc.com arzu.sahin@pwc.com

Asia
Germany and Austria Spain
Hong Kong & China
Daniel Steiner Francisco J. García Oliva
daniel.steiner@pwc.com francisco_jose.garcia.oliva@pwc.com Peter Greaves
peter.greaves@hk.pwc.com

Japan

Yusuke Onishi
yusuke.onishi@pwc.com
pwc.co.uk/workingcapital

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