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Manufacturing KPI Dictionary
Cash Conversion Cycle: definition, formula and manufacturing interpretation
Understand cash conversion cycle and how to use it in manufacturing analysis.
Cash Conversion Cycle
Cash Conversion Cycle
Formula: DSO + DIO − DPO
Use the KPI with product, plant, customer, supplier and period context where appropriate. Connect changes to operational and financial drivers.
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Practical interpretation and manufacturing use
The cash conversion cycle combines inventory, receivables and payables to estimate how long cash is tied up in the operating cycle.
Formula
CCC = DIO + DSO − DPO
How to use this KPI
- Track the three components separately so the driver of change is visible.
- Use SKU, customer and supplier analysis to identify concentrated opportunities.
- Evaluate working-capital changes alongside production and service requirements.