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. 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.) 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.

Explanation / Answer

C2C is a liquidity ratio which measures the company's ability to meet cash needs by determining the duration between payment of accounts payable for purchase of firm's inventory and collection of accounts receivable for the sale of the inventory. Cash flow can be improved by supply chain practices by reducing cash to cash cycle time, freeing up the working capital that can be invested for business growth and expansion. C2C apparently has an impact on financial metrics such as profitability, capital utilization and growth. C2C is drawing increased attention, this is because while traditional corporate liquidity measures such as financial ratios such as current ratio, quick ratio, net working capital are static in nature, operating cash flows (from mobilizing inventory and investment) are sensitive to fluctuations in revenue and earnings.

Some companies that excel in C2C are Samsung, Proctor & Gamble and Toyota. These companies have largely outperformed their peer companies in delivering excellent results in C2C. These companies have been successful in C2C, because of discipline and end to end vision.

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.