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Best Practice Database
Business Operations » Supply Chain
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This 36-page document highlights inventory and cash management strategies as well as productivity initiatives in supply chain management at best-in-class companies. Data is from a benchmark survey of 27 leading companies. The document also includes best practices and productivity initiatives from these companies and other best-in-class organizations. Among the initiatives discussed are build-to-order (BTO) or mass customization, collaborative planning forecasting and replenishment (CPFR), vendor managed inventory (VMI), available to promise (ATP), cross-docking and outsourcing to third-party logistics providers.
· Inventory days of supply
· Days sales outstanding
· Days payables outstanding
· Cash-to-cash conversion
· Productivity initiatives
· Best-in-class analysis
SAMPLE KEY METRICS
· Performance for inventory days of supply
· Performance for days sales outstanding
· Performance for days payables outstanding
· Cash conversion cycle across the benchmark class
· Supply chain performance programs implemented
· Supply base management programs implemented in the benchmark partners
An important measure of financial management in the supply chain is the cash-to-cash conversion cycle. Usually defined as the time it takes to take a dollar, purchase raw materials, manufacture, sell, distribute, and collect on sales.
One method of practically calculating this ratio is as follows:
CCC = DSO + ISO – DPO
Cash Conversion Cycle
One respondent boasts a cash conversion cycle of negative 7 days. 1/3 of reporting companies have a CCC of < 50 days; 1/3 are between 50 and 100 days; and 1/3 are greater than 100 days.