The article analyses the “pros” and “cons”of different strategies to be adopted to manage and avoid workingcapital crisis situations in any organisation. The working…
Abstract
The article analyses the “pros” and “cons” of different strategies to be adopted to manage and avoid working capital crisis situations in any organisation. The working capital position depends on many organisational parameters which are interrelated and interdependent, and also vary over time. In such a situation, the use of a system dynamics approach has been advocated to reflect the relevant dynamic cause‐and‐effect relationships for the development of appropriate long‐term and short‐term strategies.
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Presents an approach for assessing the overall performance index(i.e. the relative value) of the suppliers asset base of anorganization. Four sets of end‐result variables, for…
Abstract
Presents an approach for assessing the overall performance index (i.e. the relative value) of the suppliers asset base of an organization. Four sets of end‐result variables, for example the total service level (i.e. service level and its reliability), the total quality level (i.e. quality and reliability), the after‐sales service level and the effective price level have been considered to reflect a supplier′s performance. Appropriate surrogate measures for assessing these variables have been suggested. The performance level of a supplier has been judged in relation to the nature of the item, its importance, criticality, situational context in which the supply has been made and the proportional volume of the total requirements supplied by that supplier. This is expressed as an overall performance index for the supplier. A study has been carried out in a small‐scale engineering unit to assess the relative value of its suppliers asset base for a five‐year period relative to the base period. The suppliers asset base has been found to be appreciating over the years reflecting the effectiveness of managing it.
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M.K. Kolay and K.C. Sahu
Proposes a method to assess the relative value of organizationalhuman resource (HR) based on total performance. The total performance ofthe man‐machine resource base of an…
Abstract
Proposes a method to assess the relative value of organizational human resource (HR) based on total performance. The total performance of the man‐machine resource base of an organization includes its profitability together with how it affects the interests of consumers, the national economy and society (i.e. other than profitability performance). The total performance thus achieved, judged in relation to the plant base used, reflects the productivity of HR. Such a productivity level achieved by the HR viewed in relation to the man‐related cost reflects the “external value” of HR. The impact of certain uncontrollable external factors (which may not be attributable to HR) has been assessed on the organizational total performance to reflect the controllable dimension of HR value, i.e. the “internal value” of organizational HR. The proposed method has been applied in an integrated iron and steel plant to study its HR value over a ten‐year period.
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This study empirically examines the relation between profitability and liquidity, as measured by current ratio and cash gap (cash conversion cycle) on a sample of joint stock…
Abstract
This study empirically examines the relation between profitability and liquidity, as measured by current ratio and cash gap (cash conversion cycle) on a sample of joint stock companies in Saudi Arabia. Using correlation and regression analysis the study found significant negative relation between the firm’s profitability and its liquidity level, as measured by current ratio. This relationship is more evident in firms with high current ratios and longer cash conversion cycles. At the industry level, however, the study found that the cash conversion cycle or the cash gap is of more importance as a measure of liquidity than current ratio that affects profitability. The size variable is also found to have significant effect on profitability at the industry level. Finally, the results are stable over the period under study.
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Harsh Pratap Singh and Satish Kumar
The purpose of this paper is to review research on working capital management (WCM) and to identify gaps in the current body of knowledge, which justify future research…
Abstract
Purpose
The purpose of this paper is to review research on working capital management (WCM) and to identify gaps in the current body of knowledge, which justify future research directions. WCM has attracted serious research attention in the recent past, especially after the financial crisis of 2008.
Design/methodology/approach
Using systematic literature review (SLR) method, the present study reviews 126 articles from referred journal and international conferences published on WCM.
Findings
Detailed content analysis reveals that most of the research work is empirical and focuses mainly on two aspects, impact of working capital on profitability of firm and working capital practices. Major research work has concluded that WCM is essential for corporate profitability. The major issues with prior literature are lack of survey-based approach and lack of systematic theory development study, which opens all new areas for future research. The future research directions proposed in this paper may help develop a greater understanding of determinants and practices of WCM.
Practical implications
Till date, literature on classification of WCM has been almost non-existent. This paper reviews a large number of articles on WCM and provides a classification scheme in to various categories. Subsequently, various emerging trends in the field of WCM are identified to help researchers specifying gaps in the literature and direct research efforts.
Originality/value
This paper contains a comprehensive listing of publications on the WCM and their classification according to various attributes. The paper will be useful to researchers, finance professionals and others concerned with WCM to understand the importance of WCM. To the best of the authors’ knowledge, no detailed SLR on this topic has previously been published in academic journals.
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Fred Lemke, Keith Goffin and Marek Szwejczewski
Supplier partnerships can be the key in enhancing the performance of manufacturing companies. Consequently, partnership has been strongly recommended by academics and…
Abstract
Supplier partnerships can be the key in enhancing the performance of manufacturing companies. Consequently, partnership has been strongly recommended by academics and practitioners alike. Surprisingly, the concept of partnership is only poorly understood. Many authors have identified the advantages that it can bring but far less has been published on the attributes of partnership itself. What is known is that partnerships are “close” relationships and thus, the level of relationship closeness is an appropriate angle for exploring supplier partnerships. Research was conducted using the repertory grid technique with an exploratory sample of ten managers from four German engineering companies. It revealed that supplier partnerships are very different from other forms of relationship and identified five distinct attributes of partnerships. These findings have a number of implications for both practitioners and researchers.
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Thuy Duong Oesterreich and Frank Teuteberg
Despite the advantages that the VoFI approach offers compared with traditional capital budgeting methods, its application for the appraisal of information technology (IT) and…
Abstract
Purpose
Despite the advantages that the VoFI approach offers compared with traditional capital budgeting methods, its application for the appraisal of information technology (IT) and information systems (IS) investments in both research and practice is not widespread to date. Given the static nature of the generic VoFI table, the method reaches its limits in its financial plan form because it is unable to investigate the dynamic behaviour of complex investment calculations. To date, there has been no attempt to address these shortcomings to advance the use of VoFI as a useful and valid capital budgeting method in finance and accounting. Therefore, the purpose of this study is to address this research gap and aim at developing a ‘dynamic’ VoFI model that integrates all input variables and target measures of a VoFI table and visualises the causal relationships among these variables.
Design/methodology/approach
The ‘dynamic’ VoFI model is developed through System Dynamics (SD) modelling to enhance the strength of the VoFI concept as an instrument for visualising the financial implications of investments in IT and IS at the corporate level. Case study research is used as a research method to study the behaviour of the developed model. The validity of the model is demonstrated by conducting simulation runs in Vensim software. In addition, probabilistic sensitivity analyses are performed to account for the impact of uncertainty on the main model variables.
Findings
The results demonstrate the usefulness of SD modelling for extending the generic VoFI concept by integrating risk analyses and providing a new strategy of data analysis and data presentation different from the typical financial plan form. Furthermore, the dynamic VoFI model enables the visualisation of interdependencies among the various variables incorporated in the VoFI financial plan, which significantly enhances the conceptual understanding of the investment and its financial consequences.
Originality/value
The integration of the VoFI concept into an SD model helps researchers and practitioners to enhance their conceptual understanding of this method. This thus increases its acceptance and popularity as a practical capital budgeting method, especially for the financial assessment of IT and IS investments. The VoFI model proposed in this paper should also enable analysts and decision makers to become more conscious of the interdependencies between the assumptions made for an appraisal and the quantitative results.
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The article highlights potential mismeasurement in working capital allocations among academicians and practitioners and revisits the relationship between firms' working capital…
Abstract
Purpose
The article highlights potential mismeasurement in working capital allocations among academicians and practitioners and revisits the relationship between firms' working capital and productivity, as evident from their values.
Design/methodology/approach
The research design acknowledges the relative role of firms' working capital vis-a-vis other assets in generating revenue, thereby effectively accounting for the overall asset efficiency in influencing firm value. The authors use a multivariate framework to draw inferences from the marginal impact of working capital and its components on firm value while controlling for asset utilization.
Findings
The authors find that, after accounting for asset utilization, the marginal impact of working capital and its components on firm value is quite weak. The results are consistent with the hypothesis that firms' trade-off between short-term and long-term assets per se should not have any value implications. After controlling for their asset turnovers, the authors find that higher allocations to working capital relative to other assets are not necessarily value-destructive. The findings contrast with the past literature.
Research limitations/implications
The article, through its analytical and empirical insights, suggests that working capital allocations should be measured by managers and academicians relative to firms' other asset rather than their sales. Firm values should, therefore, be compared based on firms' overall asset utilization rather than inter-temporal allocations to short-term versus long-term assets.
Originality/value
Contrary to the existing literature so far, the article explicitly acknowledges the relative role of firms' other assets, and hence the overall asset utilization, to infer the marginal impact of working capital on firm value.
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Keith Goffin, Marek Szwejczewski and Colin New
Shows that manufacturing companies place a strong emphasis on the role of supply‐chain management ‐ the management of supplies, suppliers, inventory and distribution. Much of the…
Abstract
Shows that manufacturing companies place a strong emphasis on the role of supply‐chain management ‐ the management of supplies, suppliers, inventory and distribution. Much of the literature talks about the trend to reduce supplier base. Database analysis gave empirical evidence of this trend in UK manufacturing companies ‐ 201 companies from different industrial sectors cut their supplier base over the last four years, by 9 per cent in the household products sector and approximately 35 per cent in the process, engineering and electronics sectors. Reports on further research at four companies, looking at their experiences with suppliers and establishes that a key reason for supplier base reduction is to free time to manage the remaining suppliers more effectively. Identifies the criteria used for supplier selection and reasons why single‐sourcing was avoided. Suggests that these findings on supplier management have implications for both researchers and managers in industry.
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Basim Al‐Najjar and Martin Jacobsson
To develop and test a model and software‐based support system for better understanding of the interactions between man‐machine‐maintenance‐economy (MMME), and enable…
Abstract
Purpose
To develop and test a model and software‐based support system for better understanding of the interactions between man‐machine‐maintenance‐economy (MMME), and enable cost‐effective decisions.
Design/methodology/approach
The study is based on published knowledge and experience within maintenance, maintenance organization and production, and a case study.
Findings
Development of a model describing interactions between man‐machine‐maintenance‐economy interactions and MMME software module. MMME test shows its ability to identify, quantify, assess and follow up losses in production time which is necessary when planning effective maintenance actions.
Research limitations/implications
In the paper the focus is to quantify production time losses in order to identify the root causes of the problem. The case study is performed at a manufacturing plant for truck engines.
Practical implications
A systematic approach of how to quantify and evaluate losses in production time in order to identify problems and problem areas within the production. This approach is discussed and motivated with the aim of achieving more cost‐effective decisions in maintenance.
Originality/value
The model and software application developed enables a structured way of analyzing production time losses in order to find cost‐effective solutions to the problems. The model is very flexible enabling it to be customized for a wide spectrum of branches.