Revenue spend on Suppliers Manufacturing sector • In manufacturing, the supply a

Question

Revenue spend on Suppliers Manufacturing sector • In manufacturing, the supply area represents by far the largest single category of spend, ranging from 50 to as much as 80% of revenue. • The average manufacturer spends over half of its total revenue, that is, approximately 56 cents out of every dollar of revenue on managing purchased goods and services, and this is often in the form of inventory located in warehouses, in transit, or even on location at customer sites. Retail Sector In retailing, wholesaling, and high-tech industries the figure can be even higher Example: major retailer in the home improvement sector: • pre-tax profit margin is 5.8% ($168,253/$2,915664) This means that every dollar of sales generates a little less than 6 cents in pre-tax profit. the ROA is 2.7% ($168,253/$6,344,651). ACTIVITY 2 1. What strategic initiatives do you think could help improve these figures?

Explanation / Answer

Strategic initiatives that can improve profit margins are discussed separately for manufacturing sector and retail sector as follows:

Although Manufacturing is the largest middle market sector and it contributes towards the growth of the country, yet revenues generated do not tend to generate desired increase in profits.The profit margins can be improved by taking some strategic initiatives.Theses are pointed out as follows:

Retailing sector is at boom, still profits gained per dollar sales generates mere 6 cents of pre-taxed profit. There is a tremendous need to take strategic initiatives in order to improve this figure. Some are mentioned as follows:

It is important to adopt a standardized process in order to identify, improve and review margins on a regular basis. The above strategic measures can help improve profit margins in manufacturing and retail sectors.

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