Supply chain improvements
After looking at the financial performance of U.S. Steel Corporation (X) in 3Q14, let’s now analyze its operational performance. Supply chain improvement has been one of U.S. Steel’s focus areas under the Carnegie Way program. In simple terms, supply chain means managing the flow of raw materials and finished goods. The supply chain for a company consists of its suppliers and customers. How is U.S. Steel (X) managing its supply chain?
The above chart shows U.S. Steel’s (X) optimization of supply chain since Q313. The following provides information on these statistics:
- Days payable outstanding. This represents the average number of days taken by a company to pay its suppliers. From a company’s perspective, the more days it takes to pay its suppliers, the better it is. By delaying payments to suppliers, a company can delay its cash outflow. The chart shows the trend in this metric. As you can see, days payable outstanding have increased over previous quarters.
- Days sales outstanding. This represents the average number of days taken by a company to collect payments from its customers. As you can see in the previous chart, days sales outstanding figures have come down over previous quarters. This means that U.S. Steel is taking fewer days to collect payments from its customers. This is a positive signal for investors of U.S. Steel (X).
Supply chain management is a key focus area for all major steel companies. Some of the major steel companies in the United States are ArcelorMittal (MT), Nucor (NUE), and AK Steel (AKS). The industry can also be assessed through State Street Global Advisors (or SPDR) Standard & Poors (or S&P) metals and mining exchange-traded fund (or ETF) (XME).
U.S. Steel (X) has been working to strengthen its balance sheet under the Carnegie Way program. In the next part, we’ll learn more about U.S. Steel’s key balance sheet ratios.