What benefit does a Negative Operating Cycle get you?
February 17, 2012 12:19 PM Subscribe
What benefit does a Negative Operating Cycle get you? Other than just cash on hand. Amazon has a lot of cash because they practice Just In Time inventory management & sell out of their products before the bill for that product comes due. Other companies pay the bill first & then wait for the stock to sell out to recoup their money. Aside from the benefit of having cash on hand, what benefit do you get from this?
posted by MesoFilter to Work & Money (19 answers total) 4 users marked this as a favorite
I recently stumbled on this slide
from this excellent presentation
, which led me to this NY Times article
about Amazon's Negative Operating Cycle.
This has me wondering - what are the specific benefits? Why were stock investors so excited about this concept?
I have my own conjecture about how this benefits them and I think I'm fairly on the mark- but I want to ask the hive mind to see if there's a better, more accurate answer out there. I'll share my thoughts on this after a bit (I don't want to influence the response too much one way or the other).
Also how realistic is it that Amazon sees money from goods sold in 2 days? I'm not really aware of many payment processors that do that, but if they're their own payment processor then it would make more sense that they could get money in 2 days from Visa etc. directly.