When a company operates in a vendor-managed inventory (VMI) environment, the cash-to-cash cycle time for the buying firm begins when it:
When a company operates in a vendor-managed inventory (VMI) environment, the cash-to-cash cycle time for the buying firm begins when it:
In a vendor-managed inventory (VMI) environment, the vendor manages the inventory levels of the buyer, and the buyer typically pays the vendor upon receipt or shortly thereafter. Therefore, the cash-to-cash cycle time for the buying firm begins when it processes payment for a replenishment order, as that is when the financial transaction impacting cash flow occurs.
In a vendor-managed inventory (VMI) environment, the cash-to-cash cycle time for the buying firm begins when it places a replenishment order. This is because the vendor is responsible for managing the inventory levels of the buyer, and the buyer only pays for the inventory when it is shipped from the vendor.