1. Supply Chain Efficiency Measuring Cash to Conversion Cycle

2. Inventory Turnover (IT) = Total cost of goods sold /Average inventory value = # of times you turn your inventory annually Inventory Days’ Supply (IDS) = 365 days/IT = how many days inventory you keep Accounts Receivable Turnover (ART) = Total revenue/Average accounts receivable = # of times you turn your accts. rec. annually Accounts Receivable Days’ Supply (ARDS) = 365/ART = how long it takes to get $ owed paid to you Accounts Payable Turnover (APT) = Total revenue/Average accounts payable = # of times you turn your accts. payable annually Accounts Payable Days’ Supply (APDS) = 365/APT = how long you take to pay your bills

3. Chapter 9 Dell’s Supply Chain Cash-to-Cash Conversion Cycle Dell’s Inventory Turnover = Cost of Goods Sold/Average Inventory Value = $29.1 billion/$.306 billion = 95.1 times per year (see page 366 in the book) For 2003, The inventory days’ supply, which Dell calls "inventory velocity," was IDS = 365 days/IT = 365/95.1 = 3.8 days ART = Revenue/Ave. accts. Receivable = $35.4 billion/$2.586 billion = 13.69 times per year ARDS = 365/13.68 = 26.8 days APT = Revenue/average accounts payable = $35.4 billion/$5.989 billion = 5.91 times per year APDS = 365/5.91 = 61.8 days

4. Chapter 9 Dell’s Supply Chain Cash-to-Cash Conversion Cycle Cash-to-Cash Conversion Cycle = IDS + ARDS - APDS Therefore, in 2003, Dell's cash-to-cash conversion cycle is C2C = 3.8 days + 26.8 days – 61.8 days = - 31.2 days. The negative value means that Dell receives customers’ payments (accounts receivable) 31.2 days, on average, before Dell has to pay its suppliers (accounts payable). This means that Dell's value chain is a self-funding cash model!