MGMT 3620 Days On Hand Analysis Executive Summary Assignment Background: Days on Hand provides a metric for comparison of supply chain operations within the same industry. Days in inventory represent the average number of days a company holds its inventory before selling it. 1 A lower number of days indicates a lower cash investment and less inventory on the floor. This results in less floor space needed, less chance for obsolescence and less chance for damage and theft. Days on Hand is calculated by dividing the Inventory by Daily COGS. Annual COGS (Cost Of Goods Sold, Cost of Revenue, or Cost of Sales) is found on the Income Statement and Inventory is on the Balance Sheet. (See the section on Measuring Supply Chain Performance in Chapter 11 of our text.) An improvement in operational efficiency, as indicated by a lower Days on Hand, 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 (you are operating off of already purchased inventory) and therefore, a positive cash flow impact equivalent to the reduction in inventory. You cannot just declare a lower inventory level. Reducing inventory without reducing the need for inventory (i.e., variation in lead time, forecast accuracy, or quality) results in problems in operations and customer service. Assignment: Compare the 2017 Days on Hand results for Nike and Under Armour. Write an executive summary (two page, double spaced, 12 pt Georgia or Tahoma font) detailing the daily Cost of Goods Sold, respective days of inventory for 2017 and the potential financial impact if the under-performing company could match the Days on Hand measure of the higher-performing company (by improving processes so that they would require less inventory to operate). Assume a 25% carrying cost ratio. 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 (difference in size is not adequate). See the provided example. Daily COGS = Annual COGS / 365 Days Days on Hand = Inventory / Daily COGS