Inventory Curve
Looking at inventory performance improvement through a different lens.
Strategic Profit Model
The Strategic Profit Model (also know as the DuPont Model) gives a visual view of an organization's finances and provides the ability to understand and analyze financial performance and return on investment (ROI).
The tool provides visibility to the inter-relationship between the three major categories that contribute to ROI: Margins, Asset Utilization and Capitalization through combinations of debt and equity.
Everything has an impact on ROI and the bottom line. ROI can be improved by:
- Increasing the net profit through price management, expense control or process and productive improvements.
- Increasing inventory and accounts receivable turnover.
- Managing capitalization.
Commentary
I use the Strategic Profit Model to compare the financial performance of different companies in the same industry. Insight can be gained into business models used and differences in strategy. I've also used the model to compare operations of the same organization at different points in time.
When developing plans for major projects such as a new computer system, the Strategic Profit Model has been valuable to evaluate "what if" scenarios.
The Strategic Profit Model can be used as part of training programs to not only show the financial relationships, but how Functional areas and even specific jobs contribute to ROI.
If you have questions or would like to discuss how Strategic Profit Model can be used within your organization, please feel free to contact me at David.Armstrong@inventorycurve.com.
