The impact was:-
i)Increased revenue by $22M
ii)Reduced inventory by 1.8 million pair. Based on the COGS of 45%, this could mean a reduction in inventory of close to $10M. iii)There is very little increase in SG&A as not much was spend in terms of sales effort. iv)AR increased significantly with some of the promissory notes are payable in June 1994 (6 months after sale) v)Probably increase marketing, promotional and expenses related to discounts in the subsequent year due to “Premier Vision” plan.
This impact is significant.
From the statements, B&L reported a 13% YoY increase in sales revenue. However, exhibit 6 showed that there was a decline in market demand for conventional lenses, but an increase in both planned replacement and disposal lenses. B&L does not produce either of those products, yet the reports indicated a healthy growth in revenue. This increase was largely due to sales revenue recognized from the 1993 large volume shipment to the distributors, transferring inventories from B&L to various distributors and recognized as revenues to B&L. This strategy not only increased the revenue for the year significantly but also reduced the excess inventory held by B&L, and increased their AR significantly, thus portraying a positive outlook on the Balance Sheet.
2.Does the new distribution and sales strategy make sense from an operational standpoint? Why or why not?
The main advantages of the new distribution and sales strategy are as follows: -Marketing resources would be immediately freed up to focus on the disposable market -B&L need to hold less inventory for the conventional lens -Possibly lower distribution cost due to shipment consolidation. B&L only need to ship to distributor warehouse instead of final customer location. Since distributor orders can be combined and shipped in...