Forecasting Inventory Needs for Apple

Apple raises brand awareness by creating adverts and allowing their stocks to be released online. This can be effective because potential customers will know whether not to purchase a product based on the stocks.

Inventory Method: The inventory amount for the year ended 12/31/2016 is $14,760,000,000 which is an $759,000,000 increase from the previous year. CVS uses the lesser of the weighted average cost or market value when determining the value of inventory. Inventory is verified for accuracy by regularly doing physical counts in all locations. Between physical counts, CVS uses sales results from previous years to accrue the estimated physical loss. These estimates are determined for each individual store and warehouse separately to ensure the most accurate information possible is reported. CVS has decided to use a new method available after annual periods beginning after 12/15/2016 known as the lower of cost and net realizable value to replace using

In the past few years, they have experienced a significant increase in inventory days. Not having attractive inventory leads to a decrease in sales and an increase in discounts and write offs leading to further decreases in EBITDA Margins. In 2009, the inventory turnover took 215 days. This is significantly above Le Chateaus competitors, for example Reitman’s inventory took only 72 days (Annual Report 2010). This means it takes Le Chateaus three times as long to sell inventory compared to their competitors. To make matters worse, this trend has been exacerbated in recent years. Le Chateau’s turnover has ballooned to a staggering 341 days while Reitman’s has kept inventory turnover stable at only 76 days.

Inventory levels over the past 4 years have remained on an increasingly consistent track as their revenue has risen. According to Best Buy (2010), this rise in revenue and assets is partly due to the fact that they enter new markets and open new stores across the world. The latest opportunities that they have come across include new stores in Europe and other areas overseas. This is new territory for Best Buy but has been a successful venture based on their flexibility with their inventory systems that they have in place. The following table presents the last five year financial highlights according to the Financial Statements and Supplementary Data of Annual Report on Form 10-K. (Investor Relations, 2010) Five-Year Financial Highlights

Another risk for Laramie deals with the percentage of inventory it has on hand from 2008 to support the current amount of sales. Laramie’s inventory to sales percentage increased 16.4% from 2007 to 2008. Therefore, this increase shows either that Laramie has trouble keeping inventory accounts down or net sales are slowing relevant to the amount being produced. Also, the increase shows Laramie may have overstated inventories meaning there may be an existence issue. There is a need for further attention to the potential overstatement of inventories because the increase in inventory to sales shows that Laramie is not using its resources efficiently.

This causes more trade debt, which means a higher the tax penalty. Furthermore, age of payables has increased from 98 to 154 days, nearly tripling over the last four years. This is damaging to the image and trustworthiness of the company, even causing issues from the bank trusting them with grant of loan. Having a large amount of inventory can conclude additional problem involving cost of capital, maintenance cost, aging inventory and the cost of space or storage. This therefore proves the poor management skills that are required to operate a booming and profitable business.

The Board is currently proposing a new simplified guidance on the measurement of inventory. The Board suggests that inventory should be measured at the lower of cost and net realizable value, eliminating the old guidance of measuring inventories. The Board defined net realizable value in ASC paragraph 330-10-20 as “Estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.” The new guidance should help companies to disclose the measurement of inventory more concisely and reduce the cost to account for them. In addition to that proposal, the Board are also aligning with the measurement of inventory with International Financial Reporting Standard. According to IFRS No. 2, inventories are required to be measured at the lower of cost and net realizable value. IAS No. 2 defined net realizable value as “the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.” This definition is aligning with the definition under

When compared with the industry, the inventory turnover of S&S Air of 21.43 times is well above the industry upper quartile of 10.89 times. This indicates that S&S Air is much more efficient than the industry average at inventory management.

Apple Inc. is one of the largest technology companies in the world. The company develops consumer electronic gadgets such as smartphones, computers, desktops, laptops, iPods and tablets. The company was formed in 1976 by Steve Jobs with an intention of making computers but later it changed its focus to include the manufacturing of consumer electronics. However, the company was dealt a big blow when its chief executive officer and founder Steve Jobs died. The company will therefore have to search for ways in which it will maintain its market dominance as well as capture new and emerging markets. This research therefore seeks to establish how Apple forecasts demand and manages its inventory (Apple Computer Inc., 2006).

Also, due to the requirement that AEO must enter in to production agreements with suppliers far in advance in order to guarantee inventory, they are even more exposed to fluctuations in consumer preference or economic changes such as a drop in consumer confidence or discretionary spending. AEO appears to typically have an inventory turnover ratio of approximately 6, which is lower than the industry average of 10. This means that AEO on average takes longer to sell its inventory and means that they must forecast demand effectively or risk excess inventory. In terms of a material misstatement, it is imperative that

Asset turnover has trended downward slightly from 1.46 in 1983 to 1.32 in 1986 due to a decline in inventory turnover (3.99 in 1983 and 3.16 in 1985). In addition, any AMT"s product sits in inventory 255 days before being sold (for 1985). The fixed asset turnover ration has trended upward (from 14.6 in 1983 to 17.1 in 1985) indicating low capital intensity.

Its activity during 2008 as measured by the cost of goods sold was $74,000 ‎‎(COGS). It therefore had an inventory of turnover of 2.55 (74,000/29,000) times. This represents an ‎improvement from 2.04 (43,000/21,000) times in 2005.‎

With this company the inventory management ratios further indicate that there may be an issue with inventory and inventory controls. The inventory turnover ratio is lower than the industry average and the days’ sales in inventory are high. A company wants to turn inventory quickly to reduce storage costs, and

Apple’s renowned for their brilliant abiltity to cope with changes in market demand. They strictly control every aspect of the supply chain to ensure that both the distribution and supply-and-demand relationship are near perfect. They use a Make-To-Stock method of Supply Chain Management that allows customers to walk into any Apple Store and make a purchase the same day, which is coupled with an extremely low inventory level that means the system has nearly Make-To-Order characteristics. Apple uses SAP (Systems, Applications & Products in Data Processing), a German Enterprise Resource Planning software, to power the global supply chain and implement a strategy to “purchase raw material and reserve manufacturing capacity ahead of time “ [1] in order to make this possible.

Reviewing Exhibit 1 it is indicative that each year their actual inventory ratio continued to increase as opposed to decreasing. Keeping inventory in stock is good for clients but bad for capital when it remains on the shelves and doesn’t sell as quickly as you are producing it.