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...our final "speed" metric is the so-called cash-to-cash cycle, or cash conversion cycle (briefly described in modules SCM101 and SCM104). Here we try to approximate the average time between a company's outlay for materials and labor to build a product and the moment the company gets paid for selling the product. This length of time is approximated by:
| Cash-to-Cash Cycle = | Inventory (days' supply) |
+ | Accounts Receivable (in days) |
– | Accounts Payable (in days) |
...Recall days of supply of inventory ("days of inventory") from the prior discussion of inventory metrics; this is the average time inventory waits in a warehouse. Accounts receivable is the number of days it takes to collect payment from your customers, and accounts payable is how long you wait to pay your suppliers. For example, if a company had 45 days of inventory, and its accounts receivable were 30 days and its accounts payable were 35 days, then the calculation would be:
In this case your cash-to-cash cycle is 40 days from the moment you pay for raw materials to the time you get paid from customers...
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SCM105 Specifications
Rating:
(874 ratings)Total Reading Time: Approx. 1 - 2 hours (for average readers)
Word Count: Approx. 11,000 words
Author: Dr. Warren H. Hausman
Professor of Management Science & Engineering, Stanford University
Certificate: Counts toward Fundamentals of Supply Chain Management
Datasheet: 
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Contents
- Introduction
- Alignment of Metrics with Business Strategy
- Service Metrics - Build-to-Stock
- Service Metrics - Build-to-Stock (continued)
- Service Metrics - Build-to-Order
- Inventory Metrics
- Speed Metrics
- Financial Metrics
- Bullwhip Metric
- "Bad" Metrics
- Applying Metrics Across the Entire Supply Chain
- Conclusions
- Test Your Knowledge
- Feedback