This paper presents a ìtime-to-buildîtheory of supply chains which implies a key role for the Önancing of working capital as a determinant of supply chain length. We apply our theory to o§shoring and trade, where Örms strike a balance between the productivity gain due to o§- shoring against the greater Önancial cost due to longer supply chains. In equilibrium, the ratio of trade to GDP, inventories and productivity are procyclical and closely track Önancial conditions.