Ways Out of the Working Capital Trap: Empowering Self-Financing Growth Through Modern Supply Management (Professional Supply Management Book 1)

"Especially in times of an economic boom following a crisis, companies have to deal with the phenomenon of the "working capital trap," which signifies a company's increasing need for financial liquidity in times of hindered access to debt capital, caused by the increasingly restrictive credit approval processes of financial institutions. As a consequence of cost savings, this situation is often reinforced by a low level of inventory. This book takes up the problem and shows ways of escaping the "trap" by identifying and strengthening in-house financing potential. First, different operating ratios will be introduced. These refer to the amount of capital committed to the flow of goods and to the amount of in-house financing possible. Subsequently, methods for consolidating in-house financing that are affected by procurement processes will be presented from the company's and the supply chain's perspective. From a company's perspective, the methods for consolidating the amount of in-house financing over the following topics:/ The Management of Payment Terms / Inventory Management / Product Group and Supplier Management From the supply chain's perspective, the following methods for extending the possible amount of in-house financing will be discussed:/ Finance-Oriented Supply Chain Sourcing / Supply Chain-Oriented Supplier Financing / Collaborative Cash-to-Cash Management / Collaborative Cash Pooling and Netting / Supply Chain Financing Platforms The conceptual models will be clarified using a practical example from the automobile industry. Finally, the "Procurement Value Added" (PVAA(c)) approach will be presented, a concept that measures the contribution of procurement to the company's success"--EBL Especially in times of an economic boom after a foregoing crisis, companies have to deal with the phenomenon of the "working capital trap". The "working capital trap" signifies a company's increasing need for financial liquidity in times of hindered access to debt capital, caused by the increasingly restrictive credit approval processes of financial institutions. As a consequence of cost savings this situation is often enforced by a low level of inventory. This book picks that problem up and shows ways of escaping the "working capital trap" by identifying and strengthening in-house financing potential. First, different operating ratios will be introduced. These refer to the amount of capital committed to the flow of goods and to the possible amount of in-house financing. Thereafter, methods for consolidating in-house financing that are affected by procurement processes will be presented from the company's and the supply chain's perspective. From a company ́s perspective, the methods for consolidating the amount of in-house financing cover the following topics: • The Management of Payment Terms • Inventory Management • Product Group and Supplier Management From a supply chain ́s perspective, the following methods for extending the possible amount of in-house financing will be discussed: • Finance-oriented Supply Chain Sourcing • Supply Chain-oriented Supplier Financing • Collaborative Cash-to-Cash Management • Collaborative Cash Pooling and Netting • Supply Chain Financing Platforms The conceptual models will be clarified using a practical example from the automobile industry. Finally, the "Procurement Value Added" (PVA©) will be presented, a concept that measures the contribution of procurement to the company ́s success Especially in times of an economic boom following a crisis, companies have to deal with the phenomenon of the "working capital trap," which signifies a company's increasing need for financial liquidity in times of hindered access to debt capital, caused by the increasingly restrictive credit approval processes of financial institutions. As a consequence of cost savings, this situation is often reinforced by a low level of inventory. This book takes up the problem and shows ways of escaping the "trap" by identifying and strengthening in-house financing potential. First, different operating ratios will be introduced. These refer to the amount of capital committed to the flow of goods and to the amount of in-house financing possible. Subsequently, methods for consolidating in-house financing that are affected by procurement processes will be presented from the company's and the supply chain's perspective. From a company's perspective, the methods for consolidating the amount of in-house financing over the following topics: The Management of Payment Terms, Inventory Management and Product Group and Supplier Management From the supply chain's perspective, the following methods for extending the possible amount of in-house financing will be discussed: Finance-Oriented Supply Chain Sourcing, Supply Chain-Oriented Supplier Financing, Collaborative Cash-to-Cash Management, Collaborative Cash Pooling and Netting, Supply Chain Financing Platforms. The conceptual models will be clarified using a practical example from the automobile industry. Finally, the "Procurement Value Added" (PVA©) approach will be presented, a concept that measures the contribution of procurement to the company's success. Front Matter....Pages i-x Call for Action: From Financial and Economic Crisis to Working Capital Trap....Pages 1-6 Determination of the Internal Financing Power of Corporate Growth via the Self-Financeable Growth Rate....Pages 7-12 Strengthening Internal Financing Power Using Cash-to-Cash Cycle Optimization....Pages 13-20 Measures for Strengthening Internal Financing Power from a Corporate Viewpoint....Pages 21-53 Measures for Strengthening Internal Financing Power from a Supply Chain Viewpoint....Pages 55-73 Case Study: Increasing Internal Financing Power of a Supplier in the Automotive Industry....Pages 75-80 Measuring Procurement Contribution to Corporate Performance using the “Procurement Value Added”....Pages 81-85 Conclusion....Pages 87-89 Back Matter....Pages 91-94