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Cash is King for Justifying Supply Chain Projects

Supply chain investments must be justified based on improvement to cash flows, according to Steve Banker in an article for Forbes. If profit improvement merely results from supply chain savings, that is not good enough. There can be a disconnect between what supply chain professionals know is healthy for the business and what executives think is healthy though. A big example of this is that supply chain pros know that staying lean and keeping the least inventory possible is a best practice, but executives might think that more inventory is actually good for profit margins. This is due to a set of calculations that artificially inflate profits when there is more inventory in stock, but such calculations of supposed health will cause havoc in the long run. For a more in-depth discussion, you can read Banker’s full article here: http://www.forbes.com/sites/stevebanker/2014/11/03/when-it-comes-to-justifying-supply-chain-projects-elvis-is-dead-cash-is-king/

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