Working Capital Productivity, transaction costs and Demand chains

I recently wrote about the productivity of working capital, and my view that the productivity of the capital was a revised calculation that all businesses should consider.

Clearly, the best way to increase the productivity of the capital required to run the business, is to reduce the cycle time of processes in the business. Use inventory quicker, collect debts quicker, increase the throughput productivity of operational assets, reduce those activities that do not add to the customers experience.

All of those factors are internal to the business, and mostly we are pretty aware of them.

The emerging opportunity increasingly recognised by successful enterprises is the necessity to increase the collaboration between the sequential value adding points in a demand chain, by reducing the transaction costs that occur between firms in the chain. In effect, “Lean” for the supply chain, by reflecting the customers demand patterns back through the chain.

This is the core of the success of Toyota over 40 years, and as the world recession recedes, the enterprises tht emerge from the chaos will be different to those that went in, and there will be a far greater focus on transaction costs through the chain.

About strategyaudit

StrategyAudit is a boutique strategy and marketing consultancy concentrating on the challenges of the medium sized manufacturing businesses that make up the backbone of our economy. The particular focus is on their strategic and marketing development. as well as the business and operational efficiency improvements necessary for day to day commercial survival. We not only give advice, we go down "into the weeds" to ensure and enable implementation.
This entry was posted in Demand chains, OE, Operations and tagged , , , , . Bookmark the permalink.

1 Response to Working Capital Productivity, transaction costs and Demand chains

  1. Pingback: Value chain sustainability. | Strategyaudit's Blog

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