Deconstructing the Supply Chain

Corporate finance executives perform a supply-chain-management balancing act that grows more unsettling by the day. If inventories swell, costs rise and profit plummets. If inventories get too thin, stock-outs add cost and also reduce profits. Managing an increasingly global supply chain is akin to walking a never-ending balance beam -- while wearing a blindfold. Indications of growing supply chain risk have become increasingly visible over the past two years as days inventory outstanding (DIO) continued to grow among the 1,000 largest U.S. companies, a trend intricately linked with the growing use of offshore manufacturers, according to an annual working capital study published by REL Consultancy Group (see chart).