Strategic Supply Chain Management - Supply Chain Online

268 Strategic Supply Chain Management
is notable that a greater portion of their inventory is in finished goods,
whereas a smaller portion is tied up in raw materials and work in progress
(WIP). The BICCs are operating with only about one month of inventory
versus two to three months for other companies (see Figure A-7).
BICCs also are able to respond to increases in demand by obtaining
labor, materials, or manufacturing capacity needed to react to a 20 percent
unforeseen increase in demand within about 3 weeks, compared with
about 8 to 10 weeks for the other companies (see Figure A-8).
By definition, significantly lower inventory days of supply are
highly correlated with lower cash-to-cash cycle time, which represents the
days of inventory plus days of receivables net days of payables. Somewhat
shorter cash-collection and accounts-payable cycles translate to about 3
weeks for cash-to-cash cycle time for BICCs versus 9 weeks for median
companies and more than 16 weeks for WICCs (see Figure A-9).
In addition to lower inventory financing costs, BICCs showed lower
supply chain management costs. While the percentage of revenue spent
on supply chain IT assessments and supply chain-related finance and
FIGURE A–6
BICCs’ higher forecast accuracy.
82%
80%
78%
76%
74%
72%
70%
Unit
Dollar
BICC Median WICC
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