What is the monetary value of your improvement

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You are working on an inventory management project at a small shoe retailer. You determine that more frequent cycle counts on high volume items is an improvement that will mitigate the risk of stock-outs on this popular SKUs. Each cycle count will take a total of 25 hours of time per week to do. The personnel doing the counts are compensated at a rate of $15.00 per hour. Analysis of historical data and discussions with management suggests that 12 lost sales per week occur on these high volume SKUs and the monetary effect of that is $1,200. In talking to management, more rigorous counting of on-hand inventory each week could help keep inventory on these high moving items more accurate. They hope that this process can lower lost sales by 50% and base that on their judgment of other SKUs which are not as high in volume but they lose sales on due to wrong color, size etc. Your benchmark data reveals that cycle counting can help but with long order lead times (3 to 4 weeks) it may be hard to have a dramatic reduction like this so you lower the estimate by half.

What is the monetary value of your improvement?

What is the ROI on the improvement?

Reference no: EM132222653

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