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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% |
|
|
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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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