b&l 1993 case
2. Does the new sales and distribution strategy make sense from an operational standpoint?
• Consumers have to deal with distributors for contacts, but with B&L for other items – confusion for consumers
• B&L has more cash and fewer assets in inventory – better for B&L
• Gives them financing (steady cash flow on promissory notes and profits) for other goods
• Allows them to engage in other goods
Advantages: Marketing resources immediately freed up to focus on the disposable contact lens market Lower SG&A expenses with new distribution plan Less inventory held by B&L for conventional lens, more in receivables Possibly lower distribution cost due to shipment consolidation (only shipped to distributor (32 of them) instead of shipping to final customer location)
Disadvantages: Damage relationship with distributors by forcing them to buy the product at high volumes Additional expenses of new product (unknown)
1. What is the impact of the December 1993 shipments of conventional lenses on the 1993 financial statements? Is it significant?
There was a $22 million inventory sold to distributors which provided B&L with positive net sales.
Increase revenue by $22 million
Reduced inventory by 1.8 million pair of contacts; based on COGS of 45% this could mean a reduction in inventory of close to $10 million
Little impact on SG&A – little spent on sales effort
AR increase (promissory notes payable June 1994)
Some increase in marketing, promotional and expenses related to discounts in Premier Vision plan
SIGNIFICANT: B&L reported a 13% year over year increase in sales revenue, despite a decline in market demand for conventional lenses – increase in both replacement and disposal lenses (which B&L does not produce)
Results of decrease in inventory: Increased revenue significantly & reduced excess inventory held by B&L, increased AR significantly; portrays positive outlook on Balance Sheet.
• Consumers have to deal with distributors for contacts, but with B&L for other items – confusion for consumers
• B&L has more cash and fewer assets in inventory – better for B&L
• Gives them financing (steady cash flow on promissory notes and profits) for other goods
• Allows them to engage in other goods
Advantages: Marketing resources immediately freed up to focus on the disposable contact lens market Lower SG&A expenses with new distribution plan Less inventory held by B&L for conventional lens, more in receivables Possibly lower distribution cost due to shipment consolidation (only shipped to distributor (32 of them) instead of shipping to final customer location)
Disadvantages: Damage relationship with distributors by forcing them to buy the product at high volumes Additional expenses of new product (unknown)
1. What is the impact of the December 1993 shipments of conventional lenses on the 1993 financial statements? Is it significant?
There was a $22 million inventory sold to distributors which provided B&L with positive net sales.
Increase revenue by $22 million
Reduced inventory by 1.8 million pair of contacts; based on COGS of 45% this could mean a reduction in inventory of close to $10 million
Little impact on SG&A – little spent on sales effort
AR increase (promissory notes payable June 1994)
Some increase in marketing, promotional and expenses related to discounts in Premier Vision plan
SIGNIFICANT: B&L reported a 13% year over year increase in sales revenue, despite a decline in market demand for conventional lenses – increase in both replacement and disposal lenses (which B&L does not produce)
Results of decrease in inventory: Increased revenue significantly & reduced excess inventory held by B&L, increased AR significantly; portrays positive outlook on Balance Sheet.