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Modifying
Modifying the cash conversion the cash
cycle: revealing concealed conversion cycle
advance payments
Anna-Maria Talonpoika, Sari Monto, Miia Pirttilä and Timo Kärri 341
Department of Industrial Management,
Received 11 December 2012
Lappeenranta University of Technology, Lappeenranta, Finland Revised 17 May 2013
Accepted 3 July 2013
Abstract
Purpose – The cash conversion cycle (CCC) is widely used in the academic studies of working
capital management and supply chain efficiency. The purpose of this paper is to introduce a
modification of this measure that takes into account advance payments as a component of operational
working capital.
Design/methodology/approach – A new measure, the modified cash conversion cycle (mCCC) is
introduced and tested with empirical data of companies in Helsinki Stock Exchange.
Findings – The mCCC reveals the real efficiency of operational working capital in companies that
receive advance payments to a remarkable extent.
Research limitations/implications – The mCCC can be used in empirical analysis in academic
studies. In this paper, the empirical data are used only for testing the mCCC. The paper concerns
received advance payments, but the mCCC can also be extended also to other components of operational
working capital ignored by the traditional CCC.
Practical implications – The paper offers insights into the variations of CCC for class teachers,
and business practitioners, particularly financiers, who deal with operational working capital, cash
flow predictions and calculations.
Originality/value – There are current items that may have a remarkable effect on operational
working capital, but traditionally only inventories, accounts receivable and accounts payable are
discussed. The authors argue that also other current items should be taken into account, if they affect
the efficiency of operational working capital. The new mCCC is encouraged to be used instead of the
CCC when observing working capital management.
Keywords Working capital, Advance payment, Cash conversion cycle,
Financial supply chain management
Paper type Research paper

1. Introduction
The processes and performance of companies need to be measured in order to manage
them successfully (Kohlbacher and Gruenwald, 2011). The efficient management and
new improvements in processes require specific measurements that give detailed
information to managers and researches (Schläfke et al., 2012). The information needed
is diverse and therefore also the single measurements and measurement systems
are different. Managers need information, in practice measurements, which identify the
nodes of the processes which affect the performance of the companies (Mehrabad et al.,
2011). The information provided by the measurement system enables that the processes
or management procedures can be improved (MacBryde et al., 2012).
In this paper, we focus on improving one dimension of performance measurement – International Journal of Productivity
working capital management. The goal of working capital management is to use the and Performance Management
Vol. 63 No. 3, 2014
pp. 341-353
r Emerald Group Publishing Limited
The authors would like to thank the anonymous reviewers for their comments and suggestions, 1741-0401
which have improved the quality of the paper. DOI 10.1108/IJPPM-12-2012-0130
IJPPM cash committed to the business processes effectively (Gill and Biger, 2012). Efficient
63,3 working capital management can add value to the company, ensure liquidity, and
improve profitability (e.g. Deloof, 2003). Efficient working capital management affects
the free cash flow directly and increases the value of the company. Bahri et al. (2011)
argue that there is no transcendent way to measure working capital management and
its efficiency. Previous academic literature in finance and supply chain management
342 concentrating on operational working capital has measured the efficiency of working
capital management with cycle time (e.g. Farris and Hutchison, 2002; Garcı́a-Terual
and Martı́nez-Solano, 2007), and uses typically the cash conversion cycle (CCC), also
called the cash-to-cash cycle.
The CCC presents days required to turn cash outflow into cash inflow, i.e. the time
cash is tied up into the processes of a company. It considers the cycle times inventories,
accounts receivable, and accounts payable. These components are the main items of
operational working capital, but there are also other items of working capital which
may have a remarkable effect on efficient operational working capital management.
For example, advanced payments are trade flows negotiated between a supplier and
a customer, and can be considered as a component of operational working capital. In
businesses where advance payments are important, they should be taken into account
as a component of the CCC when observing the efficiency of operational working
capital management. The company has to recognize the components important for it.
For example, received/paid advance payments or tax items can be these components.
The purpose of this paper is to introduce a new measure, the modified cash
conversion cycle (mCCC). This measure includes other components of working capital
in the calculation of the cycle time of operational working capital (CCC). This paper
takes the first step toward developing the mCCC by introducing it with received
advance payments as a new component of operational working capital. The new
measure is tested empirically with data gathered from companies listed in Helsinki
Stock Exchange (NASDAQ OMX Helsinki). The empirical test shows that in some
industries and companies, other components of operational working capital, e.g.
received advance payments, have an important role when operational working capital
performance is monitored.
A lot of companies were affected by the recent financial crisis. Credit was not
easily available and companies needed to discover new sources of finance. Received
advance payments became one possible method to finance the business operations.
Advance payments are typically connected to project business (e.g. Berends and
Dhillon, 2004), but also other companies can receive them. Advance payments are
considered to be a part of net working capital, but they have not been connected to
the context of operational working capital management and the CCC, even though
several companies acknowledge the role of advance payments in working capital
management in practice, and corporate analyzers often calculate advance payments
when analyzing the performance of a company. To reflect the reality better, advance
payments should be included in the measurement of the efficiency of working capital
management in academic research as well.
In this paper, only received advance payments are considered as a new component
added to the CCC. We have left other possible components, such as paid advance
payments and taxes, out of the paper in order to simplify the focus and versatile
reporting practices of other components in annual reports. However, following the
practice introduced in this paper (see Figure 5), the mCCC can be submitted to analyzing
other components included in operational working capital management as well.
 The paper contributes to the academic discussion of efficient working capital Modifying
management, which has been active lately due to the challenging financial environment the cash
(e.g. Farris and Hutchison, 2002, 2003; Gupta and Dutta, 2011; Hofmann and Kotzab,
2010; Mullins, 2009). In addition, the paper offers insights into the variations of CCC conversion cycle
for class teachers, and business practitioners, who deal with working capital and cash
flow predictions.
The paper is divided into five sections. The next section contains a literature review 343
on the measures of working capital. Section 3 introduces the new mCCC measure.
The empirical testing of the new measure is presented in section 4. Conclusions and
recommendations for further research are included in the final section.

2. Measuring of working capital in the academic literature

Working capital management is problematic, as it involves different departments in a
company and can be viewed from different aspects (Farris and Hutchison, 2002).
It is difficult to determine the optimal level of working capital, and working capital
management is balancing between the risks related to a too low level of working
capital and investments in current assets (Garcı́a-Terual and Martı́nez-Solano, 2007).
The measures of working capital can be categorized into position measures, activity
measures and leverage measures (Smith and Begemann, 1997).
In the 1980s, working capital was seen as a part of liquidity management
(e.g. Gentry, 1988) and the position measures current ratio and quick ratio were
common measures of working capital. A great amount of (net) working capital
represented a strong liquidity position. The activity measures based on turnovers
and cycle times replaced the position measures when the efficiency of assets was
acknowledged as well (Richards and Laughlin, 1980). Leverage measures concern the
relation between long-and short-term finance and assets (e.g. long-term loan capital/net
working capital, accounts receivable/accounts payable) and are frequently used in the
academic literature (Smith and Begemann, 1997).
The academic literature of finance has used all kind of measures and the traditionally
concentrated on net working capital (e.g. Emery, 1984). Operational working capital
including only inventories, accounts receivable and accounts payable measured with
activity measures has gained more attention in the 2000s both in finance and in supply
chain management (e.g. Deloof, 2003; Garcı́a-Terual and Martı́nez-Solano, 2007; Lazaridis
and Tryfonidis, 2006; Gupta and Dutta, 2011). Supply chain management emphasizes the
activity measures as a measures of the efficiency of a supply chain (Grosse-Ruyken et al.,
2011; Farris and Hutchison, 2002, 2003; Hofmann and Kotzab, 2010).
The CCC has gained a strong position as a measure of operational working capital
management in the academic literature. It ignores the financial components of net
working capital, such as cash, marketable securities, and short-term loans, and
concentrate of the operational components. The cycle times of inventories as well as
financial flows of accounts receivable and accounts payable are merged in the CCC.
The previous literature contains different versions of the CCC. A simplified version
of the CCC, introduced by Filbeck and Krueger (2005), is called cash conversion
efficiency (CCE). It examines the efficiency of working capital management through
operating cash flow and sales. The CCE shows the percentual efficiency of working
capital management.
The weighted cash conversion cycle (WCCC) developed by Gentry et al. (1990)
provides more accurate information than the traditional cash conversion cycle.
It focusses on the real engagement of resources in the working capital process.
IJPPM The WCCC takes account of the cycle times of working capital components, and
63,3 also the monetary value of the components in the same measure. The advanced cash
conversion cycle (ACCC), evolved by Viskari et al. (2012), is based on the principles of
the WCCC, but is directed to operational use instead of the company level. The ACCC
can be used to evaluate the efficiency of working capital management, for example at
the customer, product and order level.
344 Advance payments are cash payments that are paid to the supplier before the
product or service is delivered. Received advance payments are considered as
current liabilities in the balance sheet, i.e. they reduce the amount of working capital
investment similarly to accounts payable. Mateut and Zanchettin (2013) have found
empirical evidence that advance payments can be used to complement the trade credit
system. Thangam (2012) shows by mathematical modeling that advance payments
function for a supplier similarly as the discounts of early payments under trade credit
terms. However, according to the authors’ knowledge, advance payments have not
been widely connected to operational working capital management. The scarce
research on advance payments has focussed mostly on studies of financial statements
and taxation. It should also be noted that working capital management has not been
widely discussed in the academic literature (Viskari et al., 2011).

3. mCCC
In this section, we extend the traditional cycle time of working capital (CCC) to consider
also advance payments, and introduce the mCCC. We argue that advance payments
should be added to the calculation of the cycle time of operational working capital
to reflect the real cash movements in a company and the efficiency of operations.
Many companies have significant amounts of advance payments. The mCCC gives a
more accurate view on the efficiency of working capital management in these
companies. Advance payments can be seen as the operational items of working capital,
such as accounts receivable and accounts payable. The mCCC visualizes the fact that
prepayment is one term of payment, as any other trade credit term which determines
the length of the cycle time of accounts receivable. Industries have very different
practices in the utilization of advance payments. The CCC, which does not take
prepayments into account, may offer faulty results about the efficiency of working
capital management.
The mCCC is based on the CCC, and it is reasonable to introduce the CCC first at the
equation level. Shin and Soenen (1998) calculate the CCC as according to Equation (1).
In addition, Figure 1 shows the basic logic behind the CCC and how it is constituted
from the cycle times of three components of working capital. The shorter the CCC is,
the more efficiently is the operational working capital managed:
CCC ¼ DIO þ DSO  DPO ð1Þ

where CCC, cash conversion cycle; DIO, days of inventory outstanding; DSO, days of
accounts receivable outstanding; and DPO, days of accounts payable outstanding.
Inventory  365
DIO ¼ ð2Þ
Net Sales

Accounts Receivable  365

DSO ¼ ð3Þ
Net Sales
 CCC
Modifying
the cash
conversion cycle

DIO
345

DSO

DPO

t0 t1 t2 t3 Figure 1.
Time (days) The cash conversion cycle
Purchase Cash outlay Product sales Cash received

Accounts Payable  365

DPO ¼ ð4Þ
Net Sales
The mCCC is calculated through the same pattern as the CCC, including the DIO, DSO,
DPO and a new component added to the equation, days of advanced payments
outstanding (DAO) (Equation (5)). The calculation of DAO is analogous to the other
components (Equation (6)):

mCCC ¼ CCC  DAO ð5Þ

Advance Payments  365

DAO ¼ ð6Þ
Net Sales
Figure 2 shows the logic of the mCCC. The other components familiar from the CCC
remain the same and the DAO is added. Advance payment reduces the time cash is tied
up into the operating cycle. Advance payments may be paid in one installment or there
may be several installments. A part of the price is usually paid after the product has
been delivered with the traditional trade credit term. If the DPO is seen as an item to
finance inventories, advance payments can be seen as an alternative for having
accounts receivable in the balance sheet.

4. Empirical testing
4.1 Data
The purpose of the empirical testing is to test the new measure in practice. The aim
is to show that the CCC is in some cases too narrow a measure for the efficiency of
operational working capital management and that the mCCC provides a more realistic
view. The testing has been conducted through basic statistical analysis (averages).
We have tested the new measure with Helsinki Stock Exchange data, which consists
of 121 companies from ten industries. This approach has allowed us to analyze
companies from different branches and ensure the availability and cohesion of the data.
We have left out financial companies due to their different capital structures, as well as
IJPPM mCCC
63,3

DIO DAO
346

DSO

DPO
Figure 2.
The modified cash t0 t1 tA t2 t3
conversion cycle Time (days)
Purchase Cash outlay Advance payment Product sales Cash received

a few other companies with imperfect information for the calculation of the CCC and
the mCCC. The final sample includes 108 companies. Figure 3 shows the distribution of
the sample companies in branches. The branch Others consists of one Oil and Gas firm,
one from Telecommunications and one categorized as Utilities by Helsinki Stock
Exchange. Figure 3 also shows the average CCC and mCCC in each branch.
The data are publicly accessible, and the sample was collected from 2010 annual
reports during January 2012. All the studied companies had conducted their financial
statements according to the International Financing Reporting Standards (IFRS).
The companies may have assessed their belongings differently, but the basic principles
were the same in every company in the sample.
In order to illustrate the importance of mCCC as a measure of working capital
management, the sample was divided into two groups according to whether a company
received advanced payments (advance payments group) or not (comparison group).
The purpose was to compare the efficiency of working capital management measured by
the CCC and the mCCC in companies that receive advance payments and those that do
not. A total of, five days was the critical value of the DAO which determined to which
group a company belonged. The use of five days as critical value was drawn from
the data. The cumulative distribution of the companies showed that about 60 percent of
the companies have a DAO of less than five days, which follows the Pareto principle
quite well. In addition, the statistical difference of means was tested. The DAOs of the
groups differed statistically significantly from each other (Mann-Whitney U-test, sig.
0,000) while the DIO, DSO and DPO did not differ statistically. A total of, thirty-eight
companies with a DAO of five days or longer belonged to an advance payments group,
and the remaining 70 companies with a DAO shorter than five days formed a
comparison group. Table I shows the descriptive statistics of the sample and the groups.
It can be seen that advance payments are not very common, as the median of the DAO
for all companies is one day. However, the DAO varies between 0 and 160 days, and the
median DAO in the advance payments group is 24 days. It seems that the advance
payment group does not manage the working capital as efficiently as the comparison
group regarding the CCC. The median CCC in the advance payments groups is 75 days
and only 63 days in the comparison group. The variance of the CCC is huge, as the values
vary between 117 and 452 days. The longest CCC can be seen in the advance payments
 Others
3%
Basic Materials
8%
Modifying
the cash
Technology
16% conversion cycle
Consumer Goods
12%

347
Consumer Services
9%

Financials
12%
Industrials
36%
Health Care
4%

160
135 CCC mCCC
140

120

100
83 85
Days

78
80 73
59
60 54
37 39 36
40
24
Figure 3.
20 11 11 9 The branches of Helsinki
0 Stock Exchange and their
Basic Consumer Consumer Health Industrials Technology Others average CCC and mCCC
Materials Goods Services Care

Total sample Advance payments group Comparison group

108 38 70
Number of companies Med. Min. Max. Med. Min. Max. Med. Min. Max.

DIO 40 0 421 24 0 421 44 0 152

DSO 52 2 222 65 17 163 51 2 222
DPO 25 6 212 24 8 114 26 6 212
DAO 1 0 160 24 5 160 0 0 4
CCC 66 117 452 75 11 452 63 117 197 Table I.
mCCC 57 117 367 43 48 367 63 117 196 Descriptive statistics

group and the shortest in the comparison group. The view about efficient working
capital management changes when the mCCC is observed. The median mCCC is shorter
in the advance payments group (43 days) than in the comparison group (63 days).
There is also great variance in the values of the mCCC, from 177 to 367 days.
IJPPM 4.2 Comparing the CCC and mCCC
63,3 A different picture of efficiency provided by the CCC and the mCCC can be detected
when examining the cycle times. Figure 4 shows the average cycle times of working
capital and their components in the advance payments group and the comparison
group. If a company receives advance payments, their role is usually remarkable.
The average DAO in the advance payments group is 35 days. The DAO has a
348 significant effect on the cycle time of working capital in the advanced payments group,
and the view of efficient working capital management changes totally depending on
whether the CCC or mCCC is observed.
The role of other components of operational working capital differs in compared
groups – there are similarities but there are also differences. The DSO is the longest
component in both groups before the DIO and the DPO. The average DSO is longer in
the advance payments group than in the comparison group. This supports the finding
of Mateut and Zanchettin (2013) that trade credit and advance payments are rather
complementary than substitutes. Companies in the advance payment group have a
slightly longer DIO than the comparison group, which is reasonable, if advanced
payments are received for financing long operating cycles (i.e. in projects business).
The companies in the advance payments group have a longer DAO than DPO.
A company can receive advance payments before the capital is contracted into the
inventories and it does not need a long period for accounts payable, because it already
has sufficient amount of cash to conduct business. The situation is different in the
comparison group, where only the accounts payable reduce the cycle time of working
capital and the need for working capital finance.
There were 11 companies in the sample that had a negative mCCC and five
companies that had a negative CCC. This means that six companies received advance
payments to the extent that their cycle time of working capital turned negative because
of advance payments. The 11 companies with a negative mCCC do not need to invest in
working capital as their customers and suppliers finance their operations. It has been
argued that a negative CCC can be achieved with efficient management of inventories

100
Advance payments group Comparison group 89
90

80

70 65 63 63
60 54 54
51
Days

50 44

40 34 35

30 27

20
Figure 4.
Average cycle times of 10
working capital in the 1
analysis groups 0
DIO DSO DPO DAO CCC mCCC
and receivables, but above all by stretching the payment time to the suppliers. Modifying
This analysis shows that advance payments from the customers can also be a way to the cash
achieve a negative cycle time of working capital.
There were 73 companies in Helsinki Stock Exchange (68 percent) which received conversion cycle
advance payment to some extent. The number of these companies is significant.
Especially the companies in the advance payments group should use the mCCC to
assess the efficiency of working capital management. Most of the companies did not 349
receive large amounts of advance payments because the focus of terms of payments
was still trade credit.

4.3 The mCCC in industries receiving advance payments

The companies of the advanced payments group were divided into four industry
categories for closer examination, which are more specific than the branch
categorization by Helsinki Stock Exchange (Figure 3). Of the total 38 companies
in the advance payment group, 13 were project companies, ten ICT companies, five
publishing companies, and ten other companies in various fields. Figure 5 shows the
results of the analysis of the average components of the mCCC in these categories.
The cycle times of the mCCC components vary interestingly between different
categories. Project companies have relatively long mCCCs because of the type of
business. Project companies have a long DIO compared to the other industries. This
group included several construction companies with large inventories. ICT companies
often do only services, and thus they do not need inventories, but have a long DSO
instead. The long DSO can be explained with the fact that ICT companies in most cases
give their customers time to test the new system before the customer has to pay
the final installment. The publishing companies have the shortest mCCCs as both the

150

100

50
Days

0
project ICT publishing others

–50 Figure 5.
Average cycle times of the
components of the mCCC
within the advance
DIO DSO DPO DAO mCCC payments group
–100
IJPPM average DIO and DSO are relatively short compared to the average DAO. The DPO
63,3 is almost the same in all these three industries. As discussed above, the accounts
payable does not have a very significant meaning as a source of finance when
also advance payments are received and the DAO is fairly long. The meaning of the
DPO is higher in the others group, as the DAO is shorter than in the three categorized
industries. The others group is the mixture of the previous. They have the shortest
350 DAO and the longest DPO, but they resemble the project companies in the DIO
and DSO.
Even though the project, ICT and publishing industries receive relatively lot of
advance payments, there are different reasons behind this practice. The project nature
of business affects the amount of advance payments in project and ICT industries.
Most ICT companies provide only services, which are conducted as projects. In projects
lasting several years, for example in the construction industry, advance payments
are usually essential for the supplier to be able to finance the long operating cycle. It is
common that project companies have heavy balance sheets in general, as also fixed
asset investments are relatively great. It would be unreasonable for them to invest
working capital to that extent and carry all the financing costs of working capital
as well. The amount of advance payments is not constant and axiomatic, however.
It is a negotiation issue between the supplier and the customer. Advance payments are
usually some percentage of the total price of the project, and they are paid in several
installments during the project.
The ICT companies had the longest DAO on average. This is partly explained by
the project nature of the industry and partly by the dependency of customers on ICT
services. The companies in the ICT industry in this sample were basically small or
medium sized. They need advance payments to be able to conduct the projects.
The ICT industry is still relatively new and formulating its business patterns, but it
appears that advance payments have become a standard procedure in the industry.
The publishing companies are slightly different, as the business does not have the
same kind of projects as the ICT and project industries, although book publishing
has project features, as the companies print one edition of a book at a time. In this
analysis, publishing was the only industry close to consumers with remarkable
advance payments. Magazines and newspapers are usually paid in advance in order to
get them delivered at home. Annual subscriptions are more common than buying
single copies. The consumers are used to this practice of advance payment. The system
is very beneficial for the publishing companies as they may achieve even a negative
mCCC. On the other hand, the companies would not probably survive if they did not get
advance payments.
Advance payments are beneficial for the supplier as well as the customer in the
value chain context. One of the major reasons for both parties is smoothing the cash flow.
The supplier will receive cash when it is needed in the operating cycle and the customer
does not have to pay the whole price at once. For the supplier, advance payments are
a source of finance instead of external loans. In addition, advance payments secure
the supplier against a credit risk related to the customer. For the customer, advance
payments may be justifiable when the availability of a product or service is critical or
uncertain. With prepayment, the customer can promote the supply of the critical item
and secure itself against the risk of supply delays.
We would like to point out the benefit of style of analysis presented in Figure 5.
When the cycle times are presented in this kind of a bar chart, the components of
working capital can be added and removed depending on the desired viewpoint.
5. Conclusions Modifying
This paper has introduced an extension to the widely used measure of working capital the cash
management, the CCC. The new measure, the mCCC makes it possible to add other
components of working capital beside traditional DIO, DSO and DPO in the observation conversion cycle
of efficient working capital management through a cycle time. The mCCC is demonstrated
by adding the cycle time of advanced payments (DAO) to the cycle time of working
capital. As an operational item of current liabilities, advanced payments should be 351
considered when observing the efficiency of operational working capital management.
Our empirical test, conducted with financial statement data from quoted companies,
showed that advanced payments can have a remarkable effect on the cycle time of
working capital, and the view of efficiency changes significantly depending on whether
it is measured with the CCC or the mCCC. In addition, as the level of advance payments
differs, measuring just the CCC would skew company comparisons. The CCC is a good
measure in general, but it does not give a realistic picture of the efficiency of working
capital management in all industries. For example project business, ICT industry and
publishing receive advance payments, and the cycle time of working capital among
these industries was on average 35 days shorter when the mCCC was used instead
of the CCC.
This paper has offered a first look at the mCCC and the possibilities to extend the view
of efficient operational working capital management in advance payments and beyond to
the other components of working capital. This paper will be beneficial for the academic
world as well as for business practitioners. The academic discussion on efficient working
capital management has gained interest in the past few years. This paper adds to the
discussion by bridging the gap between the financial and operational views of efficient
working capital management with variations of the CCC. More comprehensive measures
are needed for working capital management in practice. This paper offers insights into
efficient operational working capital management to practitioners and teachers who deal
with working capital management and cash flow predictions.
This study opens new research avenues for the future. First, advance payments
should be studied with a larger international context to find out more about the role
of advance payments and opportunities to use them as source of more efficient
operations and internal finance. Second, this paper has been limited to the received
advance payments as an example of component which is important when observing
the efficient of operational working capital management. This paper has introduced
one way to view the components of working capital in an illustrative manner (Figure
5), which can be adopted in future studies with other components. Third, there are
several studies focussing on the relation between the CCC and profitability. It would
be interesting to see if the mCCC would change the negative relationship found in
several studies (e.g. Deloof, 2003; Garcı́a-Terual and Martı́nez-Solano, 2007; Lazaridis
and Tryfonidis, 2006). Lastly, this paper has argued that advance payments could
have a significant role when aiming at efficient supply chain management, and this
should be studied further.

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About the authors

Anna-Maria Talonpoika (MSc) is a Doctoral Student in the School of Industrial Engineering and
Management at the Lappeenranta University of Technology, Finland. She received her MSc
(Tech) in industrial management in 2012 and after that she has worked in the academia. Her
research interests include capital, capacity, and cost management. Her doctoral studies focus on
measuring and managing net working capital.
Dr Sari Monto (DSc) is a Post-Doctoral Researcher in the School of Industrial Engineering
and Management at the Lappeenranta University of Technology, Finland. She received her
DSc (Tech) in industrial management in 2013. Her research interests include financial supply
chain management, accounting in networks, and cost management. Her dissertation was
related to working capital management in inter-organizational context. Dr. Sari Monto is the
corresponding author and can be contacted at: sari.monto@lut.fi
Miia Pirttilä (MSc) is a Doctoral Student in the School of Industrial Engineering and
Management at the Lappeenranta University of Technology, Finland. Her research interests
include capital, capacity, and cost management. Her doctoral studies focus on working capital
management in value chain context.
Timo Kärri is a Professor (acting) in the School of Industrial Engineering and Management
at the Lappeenranta University of Technology, Finland. He received his DSc (Tech) in industrial
management in 2007. His dissertation considered timing of capacity changes in capital intensive
industries and the current research interests include capital, capacity, and cost management.

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