Gross Margin (GM)

Gilad Issar and Liat Ramati Navon

Chapter 10 in Operational Excellence, 2016, pp 41-43 from Springer

Abstract: Abstract In order to reach a high Gross Margin, which supports the company’s financial health, operations always need to keep an assurance of the product’s supply to the customer and a control over the product’s cost of goods (COGs) together with all of the other operations cost parameters. This can be achieved by translating the operations KPI to the P&L GM improvement goals. Since the operation’s KPI, such as cycle time and yield, are not expressed in financial terms or directly in the amount of money saved, we need to convert the operation’s KPI to a percentage of the gross margin. Every department in the operation needs to translate its operational metrics and numbers into Gross Margin saving goals, in percentages. Besides reaching the goal of cost saving and P&L strengthening, gross margin improvement projects are an excellent opportunity to encourage people to express their innovation in projects, such as cycle time, COG and yield improvements.

Keywords: Gross margin; P&L; Percentage goals; COGs; KAIZEN; Cost reduction; Flow through (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:spr:mgmchp:978-3-319-20699-8_10

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DOI: 10.1007/978-3-319-20699-8_10

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