Inventory management writting assignment | Management homework help

{Current Date}

Subject: {Company #1} vs. {Company #2} on Hand Analysis

From: {Your Name}

Introduction: {Provide a summary comparison of the two companies, including items such as what business they are in, annual sales, number of stores, number of distribution centers, etc. Include any company strategy differences such as target markets, price points, etc.} – an example is provided below. However, if you use the same words and replace the names and numbers, you will have points deducted. Create your own comparison summary!!!

Dollar General is a discount retailer with annual sales of $19.23 billion out of approximately 12,575 stores supported by 13 distribution centers. Dollar Tree is also a discount retailer (with subsidiaries Dollar Tree Canada and Family Dollar) with $18.54 billion in sales from 13,851 stores supported by 23 distribution centers. Dollar Tree stores are focused on items priced at $1.00. Family Dollar stores are comparable to Dollar General and Fred’s discount stores. 

Results: Days in Inventory = Inventory / Daily COGS. 

Company

Cost of Revenue 

(Millions)

Inventory

(Millions)

Daily

COGS

Days of Inventory

Dollar   General

$15,203.96

$3,258.78

41.6547

78.2

Dollar   Tree

$14,324.50

$2,865.80

39.2452

73

** It is acceptable to provide a table like the one above with your companies’ data

{Detail your calculations in this section} 

Dollar General calculations: 

Days of inventory = Inventory / Daily COGS = $3,258.78M / $41.6547M/d = 78.2 days

Dollar Tree calculations: 

Days of inventory = Inventory / Daily COGS = $2,865.80M/$39.2452M/d = 73.0 days 

{In this section, provide your analysis of the results} – an example is provided below. However, if you use the same words and replace the names, you will have points deducted. Create your own comparison summary!!!

The results are close enough to be believable. Interestingly, the days of inventory numbers favor Dollar Tree, yet the key stats and ratios generally favor Dollar General. I suspect the differences are due to slight differences in the nature of their operations. Even though both companies are in the same industry, Dollar Tree has a different business model in terms of variety and price points than Dollar General. 

{In this section, provide your improvement opportunity suggestion} – an example is provided below. You may use the same concept to determine savings. 

Improvement opportunity: If Dollar General could achieve the same Days in Inventory as Dollar Tree (same cost of sales, but reduced inventory to support the sales), DG could reduce their first-year inventory expenses (cash flow) by $218.04 million and reduce their annual inventory carrying cost by $54.51 million, as shown in the following calculations.   

In order to evaluate the improvement opportunity, you must calculate the following:

New Inventory Level = New Days in Inventory X Existing daily COGS = 73 Days X $15,203.96 million / 365 Days = $3,040.79 million. 

Reduction in inventory = Old Inventory – New Inventory = $3,258.78 million – $3,070.79 million = $218.04 million. 

Annual savings = Inventory reduction x carrying cost rate = $218.04 million X 0.25 = $54.51 million.