A model for working capital management in the inter-organisational context

Abstract

The purpose of this paper is to introduce a concrete model for working capital management on operational level in an inter-organisational value chain. With the model, working capital committed to a product can be observed through the whole value chain. The value chain partners can manage working capital holistically through a collaborative view as well as benchmark their own position in the value chain. The scenarios presented in the paper demonstrate how inter-organisational working capital management actions can decrease financing costs caused by working capital. Opportunities for value creation and improvement of efficiency can be found for example through reduction of the cycle time of inventories, reduction of product costs, inventory shifting, using shorter payment periods, and by taking advantage of different costs of capital.