Days Inventory Outstanding: Leveraging Liquidity within the Supply Chain

Excessive or inefficient inventory management leads to tied-up capital which reduces a firm’s liquid assets. Days Inventory Outstanding (DIO) - measuring the duration of capital being tied-up in inventory - remained almost unchanged during the past decade. Results of our study indicate that firms where supply chain management is represented in the top management achieve on average a DIO reduction of 4.5 days compared to other firms in the same industry. This amounts to a cash release of 92.7 million US-Dollars which equals 8.7 % of the firms’ inventory and 1 % of the firms’ turnover. Furthermore, it helps firms to outperform their peers in average by a five percentage points higher Return on Capital Employed (ROCE).