Kimberly-Clark focused on its cash conversion cycle with the goal of reducing it by two to three days. The cross-functional, cross-regional project worked so well that the company actually cut the time by 15 days, says Jun Wang, assistant treasurer for global liquidity. That translated into a $900 million reduction in working capital for 2009 and contributed to an overall improvement in return on invested capital of 160 basis points. The $900 million was used to pay down debt, increase the pension contribution, and invest in business and acquisition opportunities.
To reinforce its working capital priority, Kimberly-Clark aligned performance reviews and compensation to reflect the achievement of project goals, according to Wang.
The three-pronged initiative involved inventory, receivables and payables. The inventory segment worked particularly well. The company cut the time it holds inventory by 10 days, partly by controlling and curtailing production with lean and run-to-quantity concepts. Stock-keeping unit rationalizations helped it gauge how much it could cut production and still have the stock it needs to fill customer orders, Wang explains. Kimberly-Clark trimmed lease and redistribution costs by vacating all 23 overflow warehouses and shedding the lease payments they entailed. Transportation costs were also reduced in the process.
Recommended For You
Days payable were extended through a multilayered strategy that included longer terms linked to a supply chain finance program through Citigroup that allows key suppliers to get discounted invoices paid sooner by the bank, Wang says. The company also signed up for Citi's electronic invoicing solution to create AP efficiencies and reduce paperwork for both itself and its suppliers.
For receivables, Kimberly-Clark put muscle and talent behind its collection efforts, especially in Europe, and was able to cut DSO.
"We instilled a 'days' mentality," Wang says, "heightening awareness throughout the company of the days it takes to convert inventory into sales and of the gap between days sales outstanding and days payable outstanding."
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
