Dell and Supply Chain Management

Hoovers Today , Dell operates one of the highest volume Internet commerce sites in the world

Dell 's negative cash conversion cycle

Dell has made a journey from the position of prepaid inventory to negative cash conversion stage . The cash conversion cycle can be termed as the number of days between payment for raw materials and receipt of cash on selling goods from that raw material . The lower the number of days the shorter the firm 's money is tied up in operations and the company will have quick cash flow into

the business

Generally companies announce the payment terms in the billing policy . A company which has quick money from sales and need not do the immediate pay for the supplies it get from suppliers , has a better financial position than its competitors . And when a company pays to its suppliers after it get payment from its buyers , the condition is called having a negative cash conversion cycle

Dell executes a 44days negative cash conversion cycle . This says that Dell 's products are converted into cash before the company actually pays for them to its suppliers . Such payment upfront is the result of high demand for the product and supplies of the company

Though such negative cash conversion is entertained by many big enterprises , Dell is assumed as first PC retailer to enjoy such competitive cash management approach

Usually Dell pays to its suppliers between 30-60 days after receiving the material and gets the payment from its buyers within 15-30 days

According to Stevens Dell 's cash conversion cycle is determined in the following way : Add Dell 's receivables , i .e . days sales outstanding and days sales in inventory , then subtracts days of payables . In the last quarter of 1999 , Dell 's accounts receivables stood at 36 days but its...