Robert F. Byrne

With supply chain executives playing a more prominent role in the boardroom, the ability to articulate how their organization creates shareholder value is becoming an important skill. A good place to start this discussion is with the cash conversion cycle – the least understood but most important supply chain metric because it drives shareholder value and return on capital. The cash conversion cycle provides a measure of how fast a company can convert funds invested in materials into cash from the sale of finished goods. A decreasing cycle means that management is doing a more effective job using its resources…

Behind every strong supply chain is a healthy inventory that carefully balances service with cost: too much stock ties up valuable working capital that could otherwise be used to grow the business, while too little stock compromises service objectives and impairs revenue growth. Striking the right balance is the key to achieving long-term profitable growth and is especially important in Asia where volatile markets and changes in consumer demand continually challenge manufacturers. The three fundamental drivers influencing inventory targets are service, lead times and volatility. Service levels are dictated by the customer strategy and tend to be inflexible. Lead times…