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  • Impact of Inventory

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    Arvind Garg
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    This document discusses how improper inventory management can significantly reduce gross profits for a company with annual COGS of Rs 12,000 lacs. The analysis shows that by improving inventory turns from the current level of 2 to between 3-6, the company could gain Rs 1,040,000 to Rs 2,480,000 per year, representing a 10-50% increase in gross profits depending on current inventory management practices. Improved inventory management could help reduce costs from carrying inventory, storing it, holding it, and inventory becoming obsolete or lost to theft or damage.

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    what impact inventory has on industry

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    This document discusses how improper inventory management can significantly reduce gross profits for a company with annual COGS of Rs 12,000 lacs. The analysis shows that by improving inventory turns from the current level of 2 to between 3-6, the company could gain Rs 1,040,000 to Rs 2,480,000 per year, representing a 10-50% increase in gross profits depending on current inventory management practices. Improved inventory management could help reduce costs from carrying inventory, storing it, holding it, and inventory becoming obsolete or lost to theft or damage.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    4 views1 page

    Impact of Inventory

    Uploaded by

    Arvind Garg
    This document discusses how improper inventory management can significantly reduce gross profits for a company with annual COGS of Rs 12,000 lacs. The analysis shows that by improving inventory turns from the current level of 2 to between 3-6, the company could gain Rs 1,040,000 to Rs 2,480,000 per year, representing a 10-50% increase in gross profits depending on current inventory management practices. Improved inventory management could help reduce costs from carrying inventory, storing it, holding it, and inventory becoming obsolete or lost to theft or damage.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
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    of 1

    How inventory eats into profits ..

    Workings are illustrative for annual Rs 12000 lacs COGS

    Inventory carrying Our Analysis indicate a significant opportunity of 10 to 50% of gross profits
    of benefits by proper inventory management and control practices
    costs
    depending upon ‘as is’ inventory turns
    Space cost
    Revenue (Rs Lacs) 16,000.00
    Manpower COGS (Rs Lacs) 12,000.00
    Gross Profit (Rs Lacs) 4,000.00
    Deterioration Inventory Turns (Numbers) 12 6 4 3 2
    Months of inventory ( Months) 1 2 3 4 6
    Finance costs Total losses at current levels of capacity
    290.00 180.00 1,070.00 1,360.00 1,940.00
    utilization and performance (Rs Lacs)
    Time to market
    Total Gain Opportunity (Rs Lacs) 1,040.00 1,280.00 1,760.00 2,000.00 2,480.00
    Obsolescence
    Pilferage These numbers illustrative for Indian MSME sector chiefly the manufacturing
    sector. Assumed WACC = 7.5%, and shall vary for industries and organizations
    Production Loss

    arvind consulting group | www.arvindconsulting.com | +91 9910326249 | arvind@acgletters.com

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