Inventory Capital

Inventory capital refers to the total investment in inventory, specifically 

Using Equations 1.1 through 1.4, we can state that increasing the inventory turns will impact the other inventory measures as follows (assuming the same annual demand)  

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Hence WACC is applied two times in the model to calculate inventory capital costs and to discount period profits. This approach is used in payment plans, where interests for investments paid in each period are also discounted with an interest rate to calculate the net present value. 

Transportation value variables are transportation costs ( for V p, e, /, /2 e /7 8, / e / in the transportation-lane specific currency as transit inventory value vTpel t and transit inventory capital costs t, V p,e,lMer,teT. 2... 

Detailed transit inventory capital costs are measured for each period in the transportation lane-specific currency. 

Inventory capital costs in the foreign currency are calculated on inventory values using the interest rate term. 

Inventory capital costs per period in the base currency are calculated summing up product-location specific inventory value and applying the interest calculation term. 

Management of business rules, supply chain performance, data collection, inventory, capital assets, transportation, planning configuration, regulatory requirements and compliance, and supply chain risk... 

Manage inventory, capital assets, incoming product, supplier network, import/ export requirements, supplier agreements, and supply chain source risk... 

Manage deliver business rules, performance, information, finished product inventories, capital assets, transportation, product lifecycle, import/export requirements, and supply chain deliver risk... 

We will demonstrate in this section that improvement in some selected supply chain metrics also results in improvements in some important financial metrics of the firm, which should, of course, be closely correlated with its overall business performance. To illustrate this relationship, let us consider several interrelated inventory measures—inventory turns, days of inventory, and inventory capital— and how they affect some important financial measures—return on assets, working capital, and cash-to-cash cycle. 

ROA provides a general proxy for the overall operational efficiency of a company—that is its ability to utilize assets (input) to generate profits (output). Since inventory capital is included in the total assets, reducing inventory capital may increase ROA for the same annual income, as long as it decreases assets in total (see "Working Capital" below for details). 

Recall that while inventory is part of working capital, so is cash. Thus, if an increase in inventory turns reduces inventory capital by shifting it to cash, there is no net change in assets or working capital. 

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