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Savings/ROI
   
e-Sourcing led reduction in COGS
5%
10%
15%
Revenue ($M)
200
200
200
200
COGS - Materials ($M)
110
104.5
99
93.5
COGS - Labor ($M)
45
45
45
45
Gross Margin
45
50.5
56
61.5
Op Expenses ($M)
25
25
25
25
Net Income (pre-tax) ($M)
20
25.5
31
36.5
% increase in Net Income
28%
55%
83%

1
Assumes an organization where material component of COGS is 55% of revenue, labor component of COGS is 22.5% and operating expenses are 12.5% of revenue.
2
A 10% reduction in COGS can lead to a 55% increase in net income

 

 
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