“Negative Working Capital” at Amazon

Amazon also benefits greatly from its advanced inventory management methods and ability to negotiate beneficial payment terms with vendors. The company sells such a large volume of merchandise, and can predict customer demand so accurately, that it generally sells products within 65 days, before it has to pay suppliers for them.

That arrangement, which analysts call “negative working capital,” is unusual outside of grocery stores and allows Amazon to avoid the huge capital charges associated with buying and storing such a broad line of inventory.

via Will Amazon Become the Wal-Mart of the Web? – NYTimes.com.


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