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From Efficiency to Supply Chain Resilience: What It Changes in Working Capital
Just-in-time is giving way to just-in-case. But resilience has a price — frozen working capital. How inventory growth, supplier deferrals, and SCF programs are reshaping the cash conversion cycle in 2026.
For several decades, companies built their supply chains on the just-in-time (JIT) principle — minimal inventories, no warehouses, stable flow movement without interruption. This worked as long as the world was predictable. With growing geopolitical uncertainty, businesses realized: saving on inventories results in production stoppage when something goes wrong.
An example is the functional closure of the Strait of Hormuz in 2026: traffic fell from 125 vessels per day to a handful, directly hitting supply chains.
In response, companies began restructuring — building up reserves, finding second suppliers, moving production closer to markets. This is called the transition from Just-in-Time (JIT) to Just-in-Case (JIC), from efficiency to resilience.
But this strategy has a cost: frozen working capital. The main reason for this growth is inventories. The DIO metric now explains almost 80% of the working capital cycle level. In the cycle structure, inventories have become the main factor determining its duration.
At the same time, Allianz Trade data show industry differences: in some sectors, inventories are growing structurally and for the long term; in others, it is a reaction to a specific shock.
According to a Proxima survey (conducted in July 2026 among 515 CEOs of companies with turnover from $500 million), 72% of executives are willing to accept purchase price increases of more than 10% for the sake of supply resilience. More than half of CEOs (51%) admit: their business would not withstand even three weeks of serious disruptions without operational problems.
The gap between willingness to pay and actual vulnerability is the key problem: companies declare resilience as a priority, but real capabilities are limited.
What Resilience Means in Operational Terms
Supply chain management, according to a Gallagher survey dated February 17, 2026, has become a strategic priority for boards of directors. 86% of companies have experienced supply chain losses over the past year, and only one-third are fully insured. The survey was conducted in November 2025 among 1,200 executives (UK, US, Canada, Mexico, Brazil, Australia, Ireland).
Here are the measures companies typically take:
Increasing warehouse inventories to protect against supply interruptions. This creates frozen working capital.
Finding and certifying additional suppliers to avoid dependence on one. But this requires costs for audits, certification, and maintaining relationships. As a result, purchase prices and supply management time increase.
Moving production closer to markets, regionalization. This makes routes longer, adds intermediaries, and increases costs.
Creating backup routes. Companies build excess warehouse infrastructure and maintain backup delivery routes. This requires capital investment and higher operating expenses.
Supply chain transparency. Companies invest in systems that show what is happening beyond the first tier of suppliers. This allows assessing risks at second-tier suppliers in advance, which may remain unnoticed until a real crisis occurs. Each of these measures translates risk into real costs — money is frozen in inventories, purchase prices rise, or capital investment is required. Supply resilience is not free, and this is where the cost arises that is reflected in the working capital cycle.
How This Affects the Working Capital Cycle
The cash conversion cycle (CCC) is the total duration of inventory, receivables, and payables turnover. It consists of three parts:
DIO;
DSO;
DPO.
The transition to resilience changes each of them.
Inventory growth means growing need for money. Companies hold more goods in stock to hedge, but they do not generate income until sold.
The situation varies across industries. According to Allianz Trade, in Asia, the region with the longest cycle (70 days), 12 out of 20 sectors increased their working capital cycle. The largest increase was shown by automotive suppliers, paper, metallurgy, and textiles (+3 days each).
In electronics and transport equipment manufacturing, indicators, on the contrary, improved. This reflects industry heterogeneity: companies' reactions to changes depend on the structure of their supply chain and the length of the production cycle.
To compensate for inventory growth, many companies try to delay payment to suppliers. But this only shifts the problem onto them. According to Aon, in the Asia-Pacific region, companies wait an average of 79 days for payment, and in China — 99 days.
The Aon report "Working Capital Benchmarking Report APAC 2026" was published in August 2026. The sample — 3,805 public companies in the Asia-Pacific region (14 markets, 21 industries), with data taken from audited financial statements.
According to an annual supplier survey conducted by SAP Taulia in November 2025 among 10,000 companies from 129 countries, only 37% of companies pay on time, and 18% of suppliers wait 1–15 days longer than the due date.
However, by extending payment deferral, the buyer creates a cash gap for the supplier and undermines the very resilience it is trying to build.
Large companies have more opportunities: they can negotiate deferrals and hold inventories. SMEs are limited in this regard — they have less access to financing and bargaining power.
Statements vs. Reality: What the Numbers Say
Company executives often state in surveys that supply chain resilience is their top priority. But the numbers say otherwise. According to Allianz Trade, the global working capital cycle (CCC) in 2025 grew by half a day and reached 67 days. This is approximately 3 days above the 10-year average and close to the 2023 maximum of 68 days. Growth is not stopping — CCC has settled on a structurally high plateau.
Why declarations and reality diverge:
Companies may have accumulated inventories in response to a specific crisis (e.g., the closure of the Strait of Hormuz or new tariffs), rather than restructuring the model for the long term.
Inflation distorts the picture: inventory growth in monetary terms looks larger than in physical volumes.
Deloitte data show that the improvement in CCC by 0.9 days in 2025 was achieved through inventory reduction (DIO) and increased payment deferrals (DPO). At the same time, receivables collection periods (DSO) increased — companies could not accelerate cash collection from customers.
Important caveat: these data come from a different study with a different methodology. Allianz Trade assesses the global picture, while Deloitte covers more than 2,300 specific companies. Therefore, their conclusions do not contradict but complement each other. Deloitte shows tactical improvements at the firm level, while Allianz shows the structural trend in the global market.
Conclusion: the improvement in the cycle in 2025 was achieved mainly through tactical, not structural, measures. The effect proved short-term and unsustainable. Companies used two quick but exhaustible levers: selling off part of accumulated inventories (DIO) and increasing payment deferrals to suppliers (DPO). At the same time, problems with collecting payments from customers (DSO) even worsened. This is a classic example of how the tactics of "winning" on one metric results in deterioration of another.
What Changes in Financing
Inventory growth means companies need more money to finance it. But inventories are considered less quality collateral than receivables. They are subject to physical, seasonal, and obsolescence depreciation, and their liquidation value depends on the depth of the secondary market. Therefore, inventory-backed loans are more expensive and less accessible, especially for small businesses.
Receivables (money owed by customers) are considered more reliable collateral because they are more predictable and easier to convert into cash.
To avoid taking money away from suppliers, companies use supply chain finance (SCF) programs. In such schemes, the bank pays the supplier early against the obligation of a large buyer. The supplier receives money, the buyer retains the deferral. But these programs are increasingly coming under scrutiny from regulators and rating agencies — they can hide a company's real debt.
Since 2022, the US accounting standard (FASB) requires disclosure of information about such programs for reporting periods beginning after December 15, 2022. This requirement has an international analogue: in May 2023, the IASB amended IAS 7 and IFRS 7, which apply to periods beginning on or after January 1, 2024.
For companies reporting under IFRS, this means that disclosure became mandatory from 2024 — a year later than the US standard.
Credit analysis is important. When a lender sees that a company's inventories are growing, it looks at the context. If revenue is also growing, this is normal business development. If revenue is not growing but inventories are piling up, this is a warning signal. The same event can be a sign of growth or problems depending on what is happening with sales.
| Criterion | Minimal Inventory Model (JIT) | Increasing Safety Stock | Duplication and Diversification of Suppliers | Extending Supplier Payment Deferral |
|---|---|---|---|---|
| What Changes in the Working Capital Cycle | Minimal DIO | DIO grows significantly | DIO grows moderately | DPO grows, DIO stable |
| Where Risk Is Shifted | To the supplier (in case of disruption) | To the buyer's balance sheet | Distributed among suppliers | To the supplier |
| Impact on Financing Need | Minimal | High | Medium | Short-term — decrease, long-term — increase |
| Applicable Financing Instrument | Not required | Inventory financing | SCF programs | SCF / reverse factoring |
| Main Limitation | Vulnerability to disruptions | Storage cost | Management complexity | Undermining supplier resilience |
Conclusions
To distinguish a structural change from a one-off purchase, look at inventory turnover in days (DIO) in dynamics. If DIO grows while revenue and turnover are stable, this is a structural change. If turnover falls, this may be overstocking. Use industry benchmark data to compare with competitors.
Questions to ask before extending supplier deferral:
how will this affect the supplier's liquidity?
does it have alternative sources of financing?
will this undermine its ability to meet obligations?
Extending deferral without supporting the supplier can create a cash gap and increase the risk of supply disruption.
For inventories, use inventory financing or working capital financing. For receivables — factoring or invoice discounting. For extending deferral — SCF programs that allow the supplier to receive money earlier without increasing pressure on its liquidity.
These conclusions are not applicable to industries with a very short cycle (e.g., food retail), where inventories turn over in days, not months. Also, the conclusions may not work for small businesses that do not have access to complex financing instruments, and whose bank limits are tightly constrained.
Frequently Asked Questions (FAQ)
Why does extending supplier payment deferral worsen the supply chain resilience that the company is trying to improve?
Because supply chain resilience requires all links to be stable. By extending deferral, the buyer creates a cash gap for the supplier. If the supplier cannot withstand it and curtails supplies or leaves the market, the chain becomes less resilient than it was. This shifts the problem to the weaker link.
Why is inventory financing more expensive than receivables financing?
Inventories are considered less liquid and more risky collateral. Receivables are a right to claim money, which is more predictable and easier to value. Inventories can spoil, become obsolete, or lose value, and are harder to convert into cash in the event of default.
How does the decision to build up safety stock affect a company's credit rating and access to financing?
Increasing inventories by itself does not lower the rating, but it can affect the assessment of creditworthiness if it occurs without corresponding revenue growth. Rating agencies and banks look at the dynamics of the working capital cycle: if DIO grows faster than revenue, this is a signal of possible liquidity problems.
If a company can explain inventory growth by strategic reasons (supplier diversification, production relocation) and confirm this with DIO stability relative to revenue, absence of growth in illiquid stock, and confirmed demand, such growth can be perceived positively — as a sign of mature risk management.
