| Scene 1: The hook |
| 1 |
Inventory shelves with mixed products. A few products highlight in red. |
VO: When it comes to inventory management, looks can be deceiving. Some products fly off your shelves as fast as you can stock them, but quietly drain your cash. Others turn more slowly, yet may be your undercover superstars. |
| 2 |
A toolbox opens to reveal tools. |
VO: When it comes to managing inventory, the difference between guessing and knowing comes down to the tools you use. |
| Scene 2: What GMROI is |
| 3 |
On-screen text: “GMROI” expands into “Gross Margin Return On Investment.” Inventory image with an arrow pointing to a dollar sign. |
VO: One of the most powerful and most overlooked tools available is GMROI. If you are not familiar with it, you are not alone. GMROI, or Gross Margin Return On Investment, measures how well your inventory turns into profit. |
| 4 |
A multitool appears. |
VO: It compares the profit you make to the value of the inventory you carry, so you can see which products are earning their space and which are not. This calculation only applies to inventory you have on hand. It doesn’t apply to direct or drop ship orders. But GMROI is more than a margin metric. It is a decision tool. |
| 5 |
One tool folds out from the multitool. |
VO: It shows you how profitable, or how costly, a product, a product line, or even your entire inventory really is. |
| Scene 3: What GMROI does for you |
| 6 |
A second tool folds out. |
VO: It helps you spot products that are dragging down your margins so you can adjust your sales mix. |
| 7 |
A third tool folds out. |
VO: It highlights where you may be overpaying, giving you leverage to negotiate better costs. |
| 8 |
A fourth tool folds out. |
VO: And it shows where you are carrying too much stock, so you can free up cash and space. |
| Scene 4: The formula |
| 9 |
A blank equation on a chalkboard. |
VO: Before we look at how to use GMROI, let’s break down how it works. |
| 10 |
The equation fills in step by step: Sales − COGS = Gross Margin; Gross Margin ÷ Average Inventory Value. |
VO: Start with your sales. Subtract your cost of goods sold. That gives you your gross margin. Then divide that by your average inventory value. |
| 11 |
The ×100 multiplier is added to the equation. |
VO: Most people multiply the result by one hundred to make it easier to read as a whole number. |
| Scene 5: Example 1, a single product |
| 12 |
Image of a widget. The GMROI equation appears with labeled terms. |
VO: Once you have the formula, you can apply it to any product, category, or location in your business. Let’s look at a single product. A widget. |
| 13 |
“Sales” is replaced with $11,000. |
VO: Our widget generated eleven thousand dollars in sales. |
| 14 |
“COGS” is replaced with $9,000. |
VO: It cost nine thousand dollars to purchase. |
| 15 |
The numerator resolves to $2,000. |
VO: That leaves us with a gross margin of two thousand dollars. |
| 16 |
“Average Inventory Value” is replaced with $1,800. |
VO: The average inventory value on hand was eighteen hundred dollars. |
| 17 |
The final result displays: GMROI ≈ 111. |
VO: Run the calculation and the GMROI comes out to about one hundred eleven. |
| 18 |
A positive indicator (green check or upward arrow) appears beside the result. |
VO: That means for every one hundred dollars of inventory, this product generated about one hundred eleven dollars in gross margin. This is a product you want to keep in stock and potentially invest in. |
| Scene 6: Example 2, a product line |
| 19 |
The base formula returns in words. A “Brand X” label or logo is added. |
VO: This works for more than just single products. Let’s look at a full product line. Brand X. |
| 20 |
“Sales” is replaced with $89,000. |
VO: Brand X generated eighty nine thousand dollars in sales last quarter. |
| 21 |
“COGS” is replaced with $80,000. |
VO: It cost eighty thousand dollars to purchase. |
| 22 |
The numerator resolves to $9,000. |
VO: That leaves a gross margin of nine thousand dollars. |
| 23 |
“Average Inventory Value” is replaced with $12,000. |
VO: But the average inventory value was twelve thousand dollars. |
| 24 |
The final result displays: GMROI = 75. |
VO: Run the calculation and the GMROI is seventy five. |
| 25 |
A negative indicator (red X or downward arrow) appears beside the result. |
VO: That means for every one hundred dollars of inventory, you only generated seventy five dollars in gross margin. This product line is underperforming. Worse than that, you’re losing twenty-five cents on every dollar you spend to purchase it from your supplier. It’s time to renegotiate or remove Brand X from your inventory. |
| Scene 7: Wrap-up and series tease |
| 26 |
The first (widget) equation returns on screen. |
VO: GMROI shows you how much money you are making or losing for every dollar of inventory you carry. In the first example, each dollar of inventory generated a positive return. |
| 27 |
The second (Brand X) equation replaces it, then the screen clears. |
VO: In the second example, each dollar of inventory reduced your overall return. |
| 28 |
Three icons appear representing inventory, analysis, and negotiation. |
VO: This is the difference between guessing and managing. With GMROI, you can see exactly where your inventory is working for you and where it is working against you. In upcoming videos, you will learn how to use GMROI to improve inventory performance, test “what-if” scenarios, and negotiate from a stronger position. |