OPERANNG OPPORTUNITIES

WALLY LYNCH Paid Associates

PO. Box 741623 Dallas, Tx.75243 l) ntcEs, performance, portabiliry I and compatibility have all improved to the point where it almost makes no sense for any lumber and building material dealer to be without capabilities provided by computers.

The dog and pony shows freely available from the many sellers serving this industry quickly illustrate the features and benefits. One finds a commonality of improvement percentages suggested by each of these specialists that center in four areas.

INVENTORY - A computer will provide the wherewithal to manage unit control so well that the user will require about 12% less inventory. This means that for every $75,000 in merchandise now required to sustain $ 100.000 in sales. $9.000 less will be needed. At 100/o interest this is $900 per year

RECEMBLES - A computer will allow management to better handle receivables by 130/0. Thus for every $100,000 in receivables, $13,000 less will be required to fund this expense. At 100/o interest this is $1,300 per year in cost reduction.

GROSS MARGINS - Computerized pricing control on average generates 30/o more gross margin than manually managed pricing. On $100,000 in sales, this is $3,000 annually in additional gross income.

STORAGE - Better unit control through mechanization means fewer dollars invested, thus reduced space requirements. The average savings is 150/0. If occupancy costs are 5% of sales of $ I 00,000, 1 5%r of $5,000 is $750 per year in additional usable space. This is a total alleged computer performance benefit of $5,950 annually.

A real live company went through just such an evaluation on their $1,000,000 in volume and $750,000 in cost ofgoods sold. The results were predictable.

INVENTORY - 120/o X $750,000 : $90,000X l0o/n: $ 9,000

RECEMBLES - $12s,000 (45 days) X l0o/o: $12,500

GROSS MARGINS - 3o/oX $1,000,000: $30,000

STORAGE - 5% x $1,000,000 : $s0,000 x 1s%: $ 7,500

Potential Total

DOLLAR BENEFITS - $59,OOO

There were two interesting sidelights within the analysis. First, the company's pre-tax profits on $1,000,000 in sales were $22,000, or 2.20/o. The dollar benefits of computerizing were $59,000, or 5.900/o of sales. The company in essence could look forward to pre-tax profits, after the computer was paid for, of 8.100/0. A whopping 268% increase.

The other interesting aspect of the experience came about when the benefit percentages were challenged. At 1000/o of amounts claimed benefits, profits improve $59,000; at 500/o profits increase $29,500. lf industry claims are only 370/o accurate, pre-tax profits double and even at l0% accuracy, pre-tax profits grow by $5.900. an increase of almost 27010.

Volume may cure problems but computers sure enrich profits.