What is the Cash Conversion Cycle of the Supply Chain?

When Cash Is The King – Business Networks Triumph

The story repeats in industry after industry whenever testing times arrive, as they eventually do in most industries.

In fact, the data from a systematic study carried out by the Aberdeen Group reveals two critical insights.

Firstly, the companies with more robust business networks have far superior Cash conversion cycles (we will discuss the cash conversions cycles in chapter 7) – nearly 6 times better cash conversion cycle .

Take a look at figure 1 below:

Cash Conversion of Supply Chain

Secondly, and more importantly, their cash conversions cycle improved during the 2 years of testing times leading up to the global financial crisis,

while the rest of the industry went backward. As you can see in figure 2,

92% of business network masters have improved their cash-to-cash cycle over the two years leading up to the Global Financial Crisis (GFC) while only

18% of business network laggards have improved it, while for 29% of them it became worse.

Cash Cycle of Supply Chain

Is the result shown in figure 2 surprising?
Hardly, if you reconsider the story of Nokia vs. Ericsson.

Same catastrophic fire nearly decimated one company while leaving the other one even stronger to face onslaught of another heroic business network –

that of iPhones. In the book The 5-STAR Business Network, we examine that story in

In chapter 8 when we discuss how New Product Development cycles are shortened immensely by appropriate use of robust business networks .