What is Opportunity Cost

One of the firm's financial objectives is to minimize the time between making the payment for inputs and receiving payment for the outputs – the period for which working capital financing is required in the supply chain management process. In an attempt to reduce the level of working capital, a firm has to achieve some goals: to minimize cash available, reduce accounts receivables, extend its accounts payable, and shorten inventory days. To achieve these goals supply chain activities should be related with working capital requirements. The aim of this chapter is to provide an overview of the relationship between supply chain management and working capital management. A theoretical framework is proposed as an evidence to prove the relationship between supply chain activities and working capital components. Consequently, this chapter investigates how improvements on working capital components can add value to the supply chain process.