Medical devices A manufacturing company producing medical devices reported $60,000,000 in sales over the last year.At the end of the same year,the company had an average inventory of $20,000,000 worth of ready-to-ship medical devices.When analyzing operations,we know that inventory turns=1 flow time. Assuming that units in inventory are valued(based on COGS)at $1000 per unit and are sold for $2000 per unit,how fast does the company turn its inventory? 1-9 2008 by ProE.Junkiao Ren More interesting observations: Little's powerful law with Cost of Goods Sold Dell has a COGS of $20 B per year The cost of the Dell's annual sales is 20 B Dell annually spends $20 B,which can be thought as the thruput in terms of dollars.Hence,thruput=$20 B Dell keeps $391 M worth of inventory,what is the flow time of Dell products? ■391/20,000=0.01955year=0.23 months=7days HP,COGS=$25.263 B per year,inventory $2 B,so flow time of HP products is 2/25.263 =0.079 year =0.95 months =28 days 7 days vs.28 days is a measurement of Dell's supply chain efficiency vs.HP's. What is Dell's secret? 1-10 2008 by ProE.Janbiao Ren1-9 PowerPoint Presentation to accompany Operations Management © 2008 by Prof. Jianbiao Ren „ A manufacturing company producing medical devices reported $60,000,000 in sales over the last year. At the end of the same year, the company had an average inventory of $20,000,000 worth of ready-to-ship medical devices. When analyzing operations, we know that inventory turns = 1 / flow time. Assuming that units in inventory are valued (based on COGS) at $1000 per unit and are sold for $2000 per unit, how fast does the company turn its inventory? Medical devices 1-10 PowerPoint Presentation to accompany Operations Management © 2008 by Prof. Jianbiao Ren More interesting observations: Little’s powerful law with Cost of Goods Sold „ Dell has a COGS of $20 B per year „ The cost of the Dell’s annual sales is $ 20 B „ Dell annually spends $20 B, which can be thought as the thruput in terms of dollars. Hence, thruput=$20 B „ Dell keeps $391 M worth of inventory, what is the flow time of Dell products? „ 391/20,000 = 0.01955 year = 0.23 months = 7 days „ HP, COGS=$25.263 B per year, inventory $2 B, so flow time of HP products is „ 2/25.263 = 0.079 year = 0.95 months = 28 days „ 7 days vs. 28 days is a measurement of Dell’s supply chain efficiency vs. HP’s. „ What is Dell’s secret?