Inventory carrying costs is the amount spent by a business to stock and store items before they’re sold. Carrying costs are usually 20% to 30% of the value of a company's inventory.
A business’s contribution margin—also called the gross margin—is the money left over from sales after paying all variable expenses associated with producing a product.
Your lead time is how long it takes to process, prepare materials, manufacture and deliver your order.
Service level is the probability of avoiding stock-outs in the next replenishment cycle, meaning it reflects how well you meet customer demand without losing sales.
Steps to Calculate Service Level:
Please provide an estimate of revenue increase per 1% of service level improvement. Key factors to consider are the impact of sales lost due to stock outs as well as increased revenue from greater responsiveness.
DD Tech clients achieve service levels of 95% to 99%. Use the toggle to see the potential annual benefits of different service levels.
Compressing lead time enables you to compete more effectively in the market. Please provide an estimate of revenue increase per 5 days of lead time compression.
DD Tech clients typically reduce lead times by 30%. Use the toggle to see the potential annual benefits of different lead times.
DD Tech clients reduce inventory by 20-40%. Use the toggle to see the potential annual benefits of different inventory levels.