The cash-to-cash cycle

In any business, a critical measure of performance is the ‘cash-to-cash’ cycle.

There is the ‘opportunity cost’ – in other words, whilst cash is locked up in the
pipeline it cannot be put to use elsewhere in the business or, indeed, invested
elsewhere.
Taking time out of the pipeline will bring with it many benefits, including:
 A one-off release of capital
 A continuing benefit through the reduced cost of financing a shorter pipeline
 Shorter response times, and hence higher service levels
 Less vulnerability to market-place volatility
 More flexibility in meeting precise customer requirements (e.g. options,
pack sizes, colours, etc.).
If time in the pipeline can be compressed, then it is likely that both the fixed and
variable costs can be reduced  greater sales.

There are three dimensions to time-based competition:

1. Time to market
2. Time to serve
 3. Time to react
Time to react
Volatile markets have become the norm in many industry sectors. The reality is
that forecasting technology is as good now as it probably ever will be. The real
challenge is to seek ways in which we can become less dependent upon the
forecast.
The reason why so much logistics activity is forecast-dependent is the long lead
times. The longer the lead time, the further ahead we need to forecast. The longer
the lead time, the greater the forecast error.