Three major Japanese watch industry companies, namely Casio, Citizen and Seiko announced their latest financial results (as of the end of December 2020)

Sales in FY 2020 ending at the end of March 2021 expected to decrease by double digits compared to the previous year, and ordinary income was Casio only expected to be in the black. The performances of the three companies in FY2018 were at the same level, and the three-year medium-term plans were expected to grow steadily in FY2021.

Although there is an improvement trend in the October-December period of 2020, a significant downward revision is expected for FY2020.

The factors are the COVID-19 damage and the sharp decrease in inbound demand.

As far as CCC (Cash Conversion Cycle) is concerned for latest 15 quarters (FY2017 – FY2020 3Q),  it turned out that Accounts receivable and accounts payable decreased due to a decrease in sales, but inventory turnover days are getting deteriorated which resulted in worsening working capital.

In other words, it can be said that working capital reduction = inventory reduction.

Cashio’s reforms aimed at flexible production that is directly linked to demand

[Current situation] System to decide the production plan for 3 months ahead on a monthly basis

[Reform] System to decide production plan for 2 months ahead on a weekly basis

To build a corporate structure that responds to change

In an industry where demand is difficult to predict due to corona stagnation, change point management is more important than goal management, and the swift adaptability to change is required.

1. Evolve make-to-stock.

2. Shorten the planning cycle

3. Shorten lead time for each process

4. Problem-solving PDCA

5. Chain of visualization of management and visualization of autonomy

https://ifc-consulting-ltd.jimdo.com/ccc-analysis/

CCC Analysis for MRO (Maintenance Repair and Operations) industry in Japan under COVID-19

COVID-19 has had a tremendous impact on the global manufacturing industry.

Let's check the activities of TRUSCO NAKAYAMA and MonotaRO, which won the 18th Porter Prize.

The name of the award is derived from Professor Michael E. Porter of Harvard University, a leading authority on strategy with a longstanding interest in Japan.

TRUSCO NAKAYAMA mainly sells MRO face-to-face, and MonotaRO mainly sells through internet

Features of 1Q:

-TRUSCO NAKAYAMA's sales are lower than the previous year. Although inventory adjustments were made, inventory turnover was 96 days, up from 89 days in the previous year, and as a result, CCC deteriorated by 8 days to 109 days.

-MonotaRO sales increased by 20% year-on-year, both inventory and working capital increased, but inventory turnover was shortened by 3 days to 40 days. As a result, CCC shortened by 3 days to 43 days

Features of 2Q:

-TRUSCO NAKAYAMA's sales are down 8% year-on-year, but inventories are below 9 years. Inventory turnover has been shortened by 4 days to 85 days. As a result, CCC was shortened by 3 days to 102 days. Gross margin worsened by 1.9 points

-MonotaRO sales increased 17% year-on-year. Although inventory and working capital will increase, inventory turnover will be shortened by 2 days to 40 days. As a result, CCC was shortened by 2 days to 44 days. Gross profit margin improved by 0.2 points

What is the difference in inventory turnover between the two companies?

Compared to about 5,500 companies centered on manufacturing industry for TRUSCO NAKAYAMA, MonotaRO has 5.2 million trading accounts, which can be said to be the result of compensating for the decrease in demand for small and medium-sized enterprises with demand for individuals.

In terms of market capitalization on November 2, 2020, MonotaRO's market capitalization is about 1.4135 trillion yen, which is 7.8 times that of TRUSCO NAKAYAMA, and the evaluation in both companies' markets is clear.

CCC Analysis for Apparel industry in Japan under COVID-19

COVID-19 has had a tremendous impact on the global apparel industry.

In particular, the world's largest Inditex (Spain), which develops "ZARA" etc. has decided to close a large number of stores and expand online.

Specifically, they will close up to 1200 stores, which is 16% of the total by 2021, considering the further digitization in anticipation of changes in consumer behavior after COVID-19 and focus on management resources to shift a quarter of sales through online by 2022. 

COVID-19 has a great influence on store management and investment planning in addition to inconsistency between demand and supply.

Supply chain management priorities for the Japanese apparel industry

According to the survey conducted by Yano Research Institute Ltd.

As for Supply Chain Management (SCM) priority issues (multiple answers) for apparel companies,

#1 is "minimization of inventory" was at 54.7% and when combined with the reduction of inventory disposal amount of 6.7%, the inventory-related is 61.4%.

(75 apparel suppliers and retailers)

CCC status for Fast Retailing and Shimamura is analyzed.

CCC Analysis for Sporting Goods Industry

After declaration of COVID-19 as a pandemic by WHO in March, the sporting goods industry was hit hard by operations such as a temporary suspension of production, restraint on going out, restraint on sales of sporting goods shops and facilities, postponement of sports events, etc.

Sales: Seven major companies in Japan, the US, and Europe fell about 30% to 50% year-on-year

Inventories: At the end of June, the inventories increased by about 20% to 50%.

Working capital: Cash flow deteriorates as inventory increases

Let's check the cashing speed (CCC)

Accounts receivable turnover: 5 companies excluding Nike and Adidas deteriorated

(Especially Under Armour deteriorates by 19 days)

Inventory turnover days: Each company records the number of turnover days nearly doubled

Accounts payable (DPO): 6 companies except Nike postponed payment turnover days significantly 

In this case, as possible factors

Accounts receivable: Delayed actual collection of payment or postponed terms to record sales

Inventory: Increase in inventory on hand due to decrease in sales, or movement of already ordered inventory (in transit)

Accounts payable: Payment delay due to poor cash flow

Trends for the latest 13 quarters