1. Aggregate & Component Productivity Measures Presented by: Derek Leslie Chris Rice Karl Schaub

2. What Is Productivity??? “The ratio of the quantity and quality of units produced to the labor per unit of time” Basically you want to make more PROFIT (output) from less EXPENSE (input)

3. Aggregate Productivity Measures What they tell you…. If your company is in sync with vision and mission statements. If long and short term goals are being met. Basically the overall health and direction of your company.

4. Component Productivity Measures These measures compartmentalize a business for more specific performance measures. What they tell you…. Productivity in specific areas. Make it more clear where the company has problems or is excelling.

5. Who Uses These Measures? A company who wants to know if they are meeting goals A company who wants to remain profitable Any company who wants to continue their success More specifically MANAGERS use these measures to continue directing their company

6. Who Calculates These Measures? Finance calculates these measures They are calculated daily And by the second A manager will know how the company is doing at any point of any day

7. What Is Changing These Measures? TECHNOLOGY TECHNOLOGY TECHNOLOGY Like anything else Technology is improving these measures Managers have access to extremely accurate measures that were impossible to calculate 20 years ago

8. Examples Of Companies Who Are Using Technology Successfully Wal-Mart Home Depot Sears and other large retailers They have invested in this technology to be more effective in their markets.

9. Example: Wal-Mart Invested large amounts of money in their own distribution center They monitor by the second turn-over time, sales per sq. foot, sales per store, etc. They deal with suppliers on their terms only This allows them to maintain control of their productivity.

10. Major Productivity Measures Corporate –Turnover –GMROII –Sales per square foot –Sales/Profit per employee Store Level –Average Transaction –Items Per Ticket –Conversion Rate

11. Turnover Rate Measures the velocity of movement of stock Is important because stock costs money and inventory is fragile Is a key productivity measure and has moved very little in the past 25 years Sales/Average Inventory=Turnover

12. Gross Margin Return On Inventory Investment (GMROII) Measures how well we have invested the money given to us for inventory Is the only ROI formula to return a currency not a percentage Often used to compare category performance in a company Also used to compare our company to others Gross Margin Dollars/Average Inventory at Cost= GMROII

13. Sales Per Square Foot Measures productivity of space Space should follow sales Space costs money and higher sales on existing space is productive Sales/Square Feet Selling Area=Sales per Square Foot

14. Sales/Profit Per Employee Payroll is one of the greatest “inputs” while sales and profit is the “output” Key measure of productivity of our people is the sales/profit per employee calculation Sales or Profit/Total Number of Employees= Sales/Profit Per Employee

15. Average Transaction How much does the average customer spend in your store Critical number as it measures your ability to sell more of what you have to customers you already have It should always be improving! Sales/Number of Transactions=Average Transaction

16. Items Per Ticket Measures how many items the average customer purchases Highly correlated to performance of suggestion and add-on selling Should be increasing! Total Items Sold/Total Transactions= Items Per Ticket

17. Conversion Rate (aka Close Ratio) How many customers out of 100 who enter your store to make a purchase Measures how well you “convert” shoppers to buyers The higher the conversion rate the better Total Transactions/Total Customer Traffic=Conversion Rate

18. Technology Most Important Technology Today For Business –Spreadsheets –Why?

19. Spreadsheet Technology For Accountants –Recording the Past –Mistakes –Important for Potential Investors

20. Spreadsheet Technology In Finance –Forecasting –Productivity Measures –Looking at all Possible Scenarios

21. Closing Productivity Measures –Their Importance Technology and Spreadsheets –Accounting and Finance –Forecasting

22. Questions