DECISION POINTThe analysis indicate

DECISION POINTThe analysis indicates that management must improve the inventory turns by 20 percent. Management should improve its order fulfillment process to reduce finished goods inventory. Supply chain operations can also be improved to reduce the need to have so much raw materials and work-in-process inventory stock. It will take an inventory reduction of about 16 percent to achieve the target of six turns per year. However, inventories would not have to be reduced as much if sales increased. If the sales department targets an increase in sales of 8 percent ($10.8 million), inventories need only be reduced by 10 percent ($1.8 million) to get six turns a year. Management can now do sensitivity analyses to see what effect reductions in the inventory of specific items or increases in the annual sales have on weeks of supply or inventory turns.