Working Your Assets to Boost Your Growth

by Miles Cook, Pratap Mukharji, Lorenz Kiefer, and Marco Petruzzi

Supply chains can account for a staggering 80% of an organization’s costs. And at product companies, up to 60% of net assets go toward inventory, plants, warehouses, and other supply chain assets. Yet companies seldom look at supply chain improvements as a way to boost return on invested capital, or ROIC.

Calculating ROIC can be a little complex, but here’s how it’s usually done:

Earnings – Interest Expense (with an Adjustment for the Tax Benefit of Interest Costs)

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Total Assets – Cash – Non-interest-bearing Current Liabilities

Companies most often focus on growing ROIC by building up the numerator: earnings. But shrinking ...

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