Protean Supply Chains: Ten Dynamics of Supply and Demand Alignment

CHAPTER 12Financial Dynamism

During the Great Recession (December 2007 to June 2009), more companies than in the past realized the connection between well-run supply chains and profitability. Clearly, chief executives have always understood that controlling costs in procurement, manufacturing, and distribution was critical to improving the bottom line. But in an anemic economy, there was a renewed sense of urgency to wring more cash from their operations, particularly the supply chain.

During the last few years, corporations have accumulated huge piles of cash and financial assets, what Bain & Company has called a “superabundance of capital.” A global management company based in Boston, Bain has estimated that the total financial assets held by corporations exceeded $600 trillion. And they expected that number to reach $900 trillion by 2020. That's gigantic! To put that number in perspective, bear in mind that in 2013, the U.S. economy—the nation's entire output of goods and services—was worth about $16 trillion. What's even more interesting is how much of those assets are plain old cash. Bain estimates the cash holdings of corporations extend beyond $1.8 trillion.

Not surprisingly, in response to the adverse economic headwinds of the last few years, corporations have become masters of cash liberation. A 2011 best practices report done by the group American Productivity Quality Center (APQC) and the consulting and audit firm Protiviti noted that companies—led by chief financial ...