Stale Dough
The COO shares that Goldcrest spends an average of $8,000 per store per month on raw ingredients. Waste and spoilage currently runs at 15% of ingredient spend. The operations team believes better inventory management could bring spoilage down to 5%. Assume 60 stores and 12 months in a year. How much annual savings does this represent, and what is the margin impact if Goldcrest's total annual revenue is $120M?
Case Exhibit
Rounding is standard practice in case interviews and almost always permitted with a quick ask. Both approaches are shown where relevant.
Step 1: Calculate total annual ingredient spend
$8,000 x 60 stores x 12 months = $5,760,000. Rounded: $8,000 x 60 x 12 = ~$5.8M. Clean enough to use precise figure: $5.76M per year.
Step 2: Calculate current vs. target spoilage cost
Current spoilage: $5.76M x 15% = $864,000 per year. Target spoilage: $5.76M x 5% = $288,000 per year. Savings: $864,000 - $288,000 = $576,000 per year. Rounded: ~$580K
Step 3: Calculate margin impact
$576,000 / $120M revenue = 0.48 margin points. Rounded: ~0.5 margin points
Step 4: Contextualize
Spoilage reduction alone recovers less than 1 point of the 7-point margin decline. This tells us inventory management is a useful operational fix but not the primary lever. The more significant opportunity likely sits in addressing the underlying commodity cost increases through supplier renegotiation, hedging, or recipe reformulation, which together represent the full COGS increase of roughly 6 points of revenue.
