HBR Guide to Finance Basics for Managers

Working Your Assets toBoost Your Growth

By focusing their supply chains on better serving the needs of customers, companies can boost their return on invested capital.

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:

Companies most often focus on growing ...