Case 9 Thor
Benchmarking Thor Industries’ Inventory Management - Group 2
Teddy Dwork, Alexa Esquivel, Noelle Fennessy, Alec Madow, Marc Milgrim
1.
Inventory Share of Total Assets
Net Accts Rec. Share of Total Assets
Gross Profit Percentage (GP/Sales)
SG&A Percentage (SG&A/Sales)
2008
15.3%
14.7%
12.2%
6.7%
2007
16.0%
16.7%
12.7%
6.2%
2.
2008
5.8%
13.2%
20.2
25.3
2007
6.9%
17.6%
22.7
24.7
Return on Sales = EBIT/Revenue
Return on Equity = NI/Inv
Days Receivable = AR/(sales/365)
Days Inventory= (Avg Inv/COGS) x 365
3.
Winnebago
GP % =
Return on sales=
Return on Equity=
Days Receivable=
Days Inventory=
2008
5.7%
(1.6%)
1.6%
5.7
67.9
Skyline
GP %=
Return on sales
Return on equity
Days Receivable
Days Inventory
2008 7.6%
(1.84)
(3.3%)
22.1
13.6
4.
Restated Inventory= LIFO Inventory+LIFO reserve
Days Inventory Restated= (Avg Inv/COGS) x 365 days 007
2
11.4%
6.3%
19.9%
12.7
42.2 007
2
10.4%
(0.7%)
1.5%
22.7
12.2
Thor
181,664
29.64 days
Winnebago
147,913
91.04
5. According to the data, Thor is managing its inventory well relative to its competition. Although they aren’t lowest in inventory turnover time (Skyline is), Thor has the highest return on sales and return on equity. Switching to a just in time inventory system, in other words, making more purchases of smaller quantities throughout the year would free up cash to be invested in other parts of Thor’s operations. The just in time inventory system would reduce Thor’s inventory turnover ratio, and as long as it would not sacrifice quality and profit we recommend switching to this more efficient inventory system.
6.
Inventory Share of Total Assets
Net Total Accts Receivables Share of Total Assets
Gross Profit Percentage
2013
11.5%
18.5%
13.1%
2012
15.0%
18.7%
12.1%
SG&A Percentage
Return on Sales
Return on Equity
Days Receivable
Days Inventory
6.0%
6.9%
17.1%
27.7
22.0
5.6%
6.7%
14.3%
32.1
24.8
Thor’s inventory management now relative to their inventory management in 2007 and 2008: Thor made positive
Teddy Dwork, Alexa Esquivel, Noelle Fennessy, Alec Madow, Marc Milgrim
1.
Inventory Share of Total Assets
Net Accts Rec. Share of Total Assets
Gross Profit Percentage (GP/Sales)
SG&A Percentage (SG&A/Sales)
2008
15.3%
14.7%
12.2%
6.7%
2007
16.0%
16.7%
12.7%
6.2%
2.
2008
5.8%
13.2%
20.2
25.3
2007
6.9%
17.6%
22.7
24.7
Return on Sales = EBIT/Revenue
Return on Equity = NI/Inv
Days Receivable = AR/(sales/365)
Days Inventory= (Avg Inv/COGS) x 365
3.
Winnebago
GP % =
Return on sales=
Return on Equity=
Days Receivable=
Days Inventory=
2008
5.7%
(1.6%)
1.6%
5.7
67.9
Skyline
GP %=
Return on sales
Return on equity
Days Receivable
Days Inventory
2008 7.6%
(1.84)
(3.3%)
22.1
13.6
4.
Restated Inventory= LIFO Inventory+LIFO reserve
Days Inventory Restated= (Avg Inv/COGS) x 365 days 007
2
11.4%
6.3%
19.9%
12.7
42.2 007
2
10.4%
(0.7%)
1.5%
22.7
12.2
Thor
181,664
29.64 days
Winnebago
147,913
91.04
5. According to the data, Thor is managing its inventory well relative to its competition. Although they aren’t lowest in inventory turnover time (Skyline is), Thor has the highest return on sales and return on equity. Switching to a just in time inventory system, in other words, making more purchases of smaller quantities throughout the year would free up cash to be invested in other parts of Thor’s operations. The just in time inventory system would reduce Thor’s inventory turnover ratio, and as long as it would not sacrifice quality and profit we recommend switching to this more efficient inventory system.
6.
Inventory Share of Total Assets
Net Total Accts Receivables Share of Total Assets
Gross Profit Percentage
2013
11.5%
18.5%
13.1%
2012
15.0%
18.7%
12.1%
SG&A Percentage
Return on Sales
Return on Equity
Days Receivable
Days Inventory
6.0%
6.9%
17.1%
27.7
22.0
5.6%
6.7%
14.3%
32.1
24.8
Thor’s inventory management now relative to their inventory management in 2007 and 2008: Thor made positive