The Effect of Supply Chain Management Practices on Cash Conversion Cycle

This paper examines the impact of supply chain management (SCM) practices on the cash conversion cycle (CCC) of non-financial firms in Pakistan, addressing challenges like inefficient cash flows, extended payment periods, and limited access to credit. The research addresses the theoretical advancement of how SCM practices such as Just-in-Time (JIT), Supplier Responsiveness, and Information Sharing can optimize CCC components-Days Inventory Outstanding (DIO), Days Receivable Outstanding (DRO), and Days Payable Outstanding (DPO) to enhance financial performance, a relationship underexplored in emerging markets. The study employs Partial Least Squares Structural Equation Modeling (PLS-SEM) to analyze survey data from 115 supply chain managers, alongside financial data from 2010 to 2023. The key findings reveal that Supplier Responsiveness and Information Sharing significantly reduce CCC components, improving liquidity and operational efficiency. Theoretically, the study extends Resource-Based Theory (RBT) and Dynamic Capability Theory (DCT) by demonstrating the role of SCM as an external resource for competitive advantage. Managerially, it provides practical strategies for enhancing cash flow, reducing inventory holding costs, and improving profitability. Societally, it highlights the role of efficient supply chains in fostering economic resilience, sustainability, and job creation in developing countries, particularly in volatile economic contexts like Pakistan.