in Inventory provide

Days On Hand Analysis - Executive Summary Assignment

Background: Days on Hand or Days in Inventory provide a metric for comparing supply chain operations within the same industry. The Days in Inventory metric represents “the average number of days a company holds its inventory before selling it.” A lower number of days indicates a lower cash investment and less Inventory on the floor. Less Inventory on the floor results in less floor space needed, less chance for obsolescence, and less chance for damage and theft.

Calculate Days on Hand by dividing the inventory dollars by daily COGS. Annual COGS (Cost Of Goods Sold, Cost of Revenue, or Cost of Sales) is on the Income Statement, and Inventory is on the Balance Sheet. For Target, use the Inventory and Cost of Sales with the January 28, 2023 date since this is the end of Target’s fiscal year (representing 2022 data). For Walmart, use the Inventory and Cost of Sales with the January 31, 2023 data since this is the end of Walmart’s fiscal 2022 year. These financial documents are in the company’s annual report, Form 10-K. Look for the “Financial Statements and Supplementary Data” section. (Refer to the Measuring Supply Chain Performance section in Chapter 11 of the text.)

As indicated by fewer Days on Hand, improvement in operational efficiency yields two financial benefits. First, the reduced inventory results in a lower inventory carrying cost. Second, the reduced inventory results in a first-year reduction in expenditures (operations based on already purchased Inventory) and, therefore, a positive cash flow impact equivalent to reducing Inventory.

You cannot just declare a lower inventory level. You can not reduce Inventory without reducing the need for Inventory (i.e., variation in lead time, forecast accuracy, or quality). Reducing Inventory without reducing the need results in problems in operations and customer satisfaction.

Assignment: Compare the Walmart 2022 Days on Hand results to the Target 2022 Days on Hand results. You can find the data you need in the companies’ annual reports online. Write an executive summary (follow the model provided) detailing the daily Cost of Sales for each year, respective days of Inventory for 2022, and the financial impact of the different inventory levels as measured by the Days on Hand measure. Assume a 25% carrying cost ratio. There is information on how to do these calculations in the example provided.

Be careful to use the correct units for the financial impact. (Financial numbers in Income Statements and Balance Sheets are often in $ millions.) Also, comment on any other noticeable differences in performance or situation. Provide the date for the financial information.

Explain differences in performance (merely stating that a difference in size exists is inadequate).

Submit to D2L a single Word document, single-spaced, 12 pt font. Your submission must follow the template format provided on page 3 of this document. The other document in this Dropbox provides instructions and examples for completing your analysis. Your document must precisely follow the template provided (including headers and tables), or you will receive a grade reduction. Replace all red font material with your original content. Change the font to black. Do not submit any material in red font, or you will receive a grade reduction. Correct grammar and punctuation are expected in this assignment and will be a component of your grade. Get help if you need it (Grammarly is one option). Use expressive language. Be careful about using the word “very” (what does that mean?). Submit one file with the filename DaysOnHand.docx.

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USE THIS FORMAT, BUT DO NOT INCLUDE ITEMS IN RED FONT

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Date: Current Date

Subject: Walmart 2022 vs. Target 2022 Days on Hand Inventory Analysis

From: Your Name

Company Summaries: Insert company summary information narrative here

Results:

Company	Cost of Sales ($ Millions)	Inventory ($ Millions)	Daily COGS $ (2 decimal point accuracy)	Days of Inventory (2 decimal point accuracy)
Walmart 2022
Target 2022

Results Calculations:

Company Name #1	Daily COGS $ = 99999 / 999 = 9999
	Days of Inventory = 99999 / 9999.99 = 99.99
Company Name #2	Daily COGS $ = 99999 / 999 = 9999
	Days of Inventory = 99999 / 9999.99 = 99.99

Analysis: Insert analysis narrative here

Improvement opportunity: Insert your improvement opportunity analysis and conclusions here.

Performance Savings Analysis:

New Inventory Level	99.99 X 9999.99 = 99999.99
Reduction in Inventory	99999 – 99999.99 = 99999.99
Annual Savings	99999,99 X carrying cost = $999999.99

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