Inventory Turnover is the traditional metric for judging the effectiveness of a

Question

Inventory Turnover is the traditional metric for judging the effectiveness of a supply chain. C2C (Cash-to-Cash) is quickly supplementing, and some experts say, replacing Inventory Turnover as the major supply chain metric.

There is no section in our textbook on C2C, so this question will require your research on the subject. There is, however, much information in our textbook concerning inventory turnover, so please review it carefully.

Why do you think that there is now an emphasis on C2C?

Discuss some companies that excel in C2C and tell us how they do that. (Be sure to give credit to your research sources so that we can learn from your research.)

Explanation / Answer

Cash-to-Cash (C2C) is measured by taking into consideration the accounts receivable, inventory and accounts payable data, facts and figures. It is defined as total sales days unpaid plus the days of inventory minus the day’s payable outstanding. It is also sometimes significant to reimburse the dealers earlier to be much more cost-effective as it can convey price cuts from the dealers for early payment which can help to reduce the overall total expenditures.

C2C metric is considered to be a very significant tool as it facilitates to correlate inbound material activities with dealers through business processes and outbound trade events with consumers. C2C proposes augmented prominence and reflects more asserted variables, escalates enhancement of judgments in the supply chain and assists dealer decision making by eradicating the ambiguity and improbability of consumer activities.

The short-range purposes of supply chain management (SCM) is primarily to escalate efficiency and reduce inventory and cycle time while the long-standing objects are principally related to market share growth and revenue for all participants in the supply chain.

Some of the inventory policies and approach can be put to use for enhancing the flexible inventory days of supply with instantaneous inventory persuasion for instance using innovative knowledge and expertise such as RFID which can help to make available real-time inventory facts and figures all through the supply chain.

Collective preparation, anticipation, replenishment and coordinating supply and demand policies, strategies and approach can facilitate to attain and accomplish robust and solid commercial business performance which can be reflected in terms of augmented earnings per share, return on assets and net profit margin.

C2C standards and point of reference to great extent depends on industry however study have shown that the best-in-class businesses have a tendency to have a cash conversion cycle of less than a month irrespective of business. In contrast the moderate C2C dimension shows a discrepancy varying from one organization to another for instance 70 days for computers and electronics businesses to 85 days for drug companies and a cycle of over 95 days for communication businesses.

The C2C cycle is a multifaceted metric comprising of supply chain measurements such as inventory, payable and receivable days. A smaller cycle reflects that the organization is slenderer and that funds are spending less time in the hands of others as an alternative of being functional to the fundamental business processes.

A further study of more than 20,000 publicly operated businesses have shown that there was a direct correlation when they were able to display lower C2C cycles then they were able to show better cost-effectiveness and productivity which was roughly exhibited approximately around 70% of cases.

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