A campaign to promote cash consciousness and modify behavior paid off for Sustainment Systems Inc., a St. Louis-based division of DRS Technologies, a defense and aerospace provider. When the Cash Is King campaign kicked off in 2008, free cash flow was 87% of operating income. By last year, it was up to 131%. One reason: inventory turnover shot up from 4.0 annual turns in 2008 to 8.1 in 2010. Average days sales outstanding were driven down from 26.5 days to 23.6 days, while days payable outstanding rose from 35.2 in 2009 to 39.8 last year.
To change the numbers, SSI changed awareness. “By 2008, after two distracting mergers, free cash flow was deteriorating because many employees did not truly understand how their decisions impacted cash,” reports Kathy Kroupa, vice president of business operations. “Many departments were making decisions that best served their department or contract, often unaware that their actions were also having a negative impact on cash.” New thinking had to reach the people negotiating contracts and proposing projects, as well as those managing production and dealing with supply chain strategy, she says.