Supply Chain CASH & CAPITAL KPIs Use Case
Digging for cash within your supply chain
A precision custom metal stamping and machined components manufacturer in Greenfield, Indiana, has been family-owned for nearly six decades. They have add-on plants in Columbus, Ohio, and Marietta, Georgia, completed in 18 months. A third acquisition is under due diligence.
Two acquisitions and 18 months in, the board was happy to see revenue growing — but the finance team saw some problems brewing.
When working capital grows faster than sales
WORKING CAPITAL % OF REVENUE | FCF CONVERSION | ROIC | FIXED ASSET TURNOVER | CAPITAL INTENSITY
Karen, the CFO, knew ROIC, return on invested capital — currently in the 6% range — would take a hit from the goodwill and stepped-up invested capital that came with both deals. That's expected. What concerned her was that 18 months after the first close, the trajectory wasn't improving the way it should. ROIC was being reported to the Board, but working capital as a percentage of revenue wasn't being tracked as the business scaled.
Two acquisitions in 18 months had changed the inputs significantly — customer base, supplier relationships, payment terms, inventory profiles across Greenfield, Columbus, and Marietta — and the ratio had drifted badly. By the time the working capital bridge was built across all three plants, it was clear that the expansion was having an outsized negative impact on cash usage.
Extended payment terms, accepted as culture
Days Sales Outstanding varied significantly by plant. Marietta was running materially slower collections than Greenfield, with DSO regularly exceeding 70 days against stated terms of 45 days net. This wasn't a process failure — it was a cultural one.
A customer-first posture, carried over from the pre-acquisition ownership, had made flexible payment terms part of how relationships were managed. Nobody had pushed back because nobody had looked at what it was costing. When you consolidate DSO across Greenfield, Columbus, and Marietta and express it as a working capital percentage of revenue, the cost of that culture becomes a cash constraint on the business.
Track the right supply chain KPIs
Supply chain excellence is not confined to warehouses and logistics—it radiates outward, transforming every corner of the enterprise. When supply chain operates at its peak, the entire organization elevates.
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Capital tied up in the wrong places
Underneath the working capital problem was a deeper capital question. The business had a strong instinct to control all aspects of manufacturing — understandable for a family-owned company that had built its reputation on what it made and how it made it. Across Greenfield, Columbus, and Marietta with a broadening product mix, that instinct was showing up in the capital base in ways that standard utilization metrics didn't surface. Equipment was running. Fixtures were occupied. But return on those assets, measured against the actual cost of capital deployed, was dragging ROIC further from where it needed to be and pushing capital intensity in the wrong direction.
Karen put it plainly in a conversation with Greg, the Sales VP: "We're financing our suppliers and our customers at the same time. We could get a better return on our investment buying T-Bills."
Where the datacenter opportunity intersected
The Columbus plant add-on carried real excitement for a reason: datacenter opportunities in the area, specifically for fixtures and hardware supporting cooling infrastructure buildout. Supporting that opportunity meant capital investment — tooling, qualification, capacity preparation. Pursuing it with a deteriorating working capital position and ROIC trending in the wrong direction was a credibility problem. The two tracks had to move together: working capital improving while the new vertical was being targeted.
The resulting decision to pursue outsourcing for some of the process steps that required investment changed the capital equation significantly. A mechanical sub-assembly manufactured internally — and requiring continued investment in new technology — was outsourced instead after the datacenter customer's cost and cycle time scrutiny highlighted a lack of cost competitiveness. The Capex was freed. Capital Intensity improved. The new supplier relationship brought process expertise Lakefield hadn't developed internally, and surfaced materials cost inefficiencies that had been invisible inside the integrated production model.
Technology considerations
Invoice processing across Greenfield, Columbus, and Marietta was largely manual, with offline approval in two of the plants. The right target state was touchless invoice processing — automated three-way match with exception-only human review. But the path there started with process and data quality, not platform selection.
Clean payables records, receipts prioritized at the dock, approval workflow tiered by invoice value. Both ERP systems held the data needed for working capital reporting across all three plants; neither was configured to produce it. A consolidated reporting layer made possible by an AI layer across all three ERPs was the logical next step.
What moved
Working Capital as a percentage of revenue became a monthly management report across all three plants. Touchless invoice processing entered implementation. AR collections discipline was standardized across all three plants, measurably shortening DSO. FCF Conversion improved as the working capital drag reduced — freeing cash that had been tied up in slow collections and excess payables cycle time. The outsourcing decision freed Capex and began moving capital intensity in the right direction. Double-digit ROIC was looking achievable by year end — a direction the operating metrics were already pointing toward.
Karen said it plainly: "Twelve months ago I couldn't reliably forecast our ROIC. Now I can tell you where it is, why it's moving, and what's driving it."