As a manufacturer of bearings and power transmission components, we
are thinking of providing faster delivery for free to our customers
(industrial distributors and original equipment manufacturers). While
we all agree sales will increase, we don't agree on how much. This is
needed for planning and forecasting purposes. My question is:

If a bearing, gearing or coupling manufacturer were able to provide a
day or two faster service, by what percentage would their sales
increase?

Dotell --

Why not survey your customers to ask that question?  Some may be using
just-in-time manufacturing (or planning a similar system) and provide
you valuable information about how & why to provide the service.  You
may find that their methods of measuring response times are different
than yours.  There's lots of information that goes along with
answering this question, including how many days of your product they
typically keep in stock for manufacturing (and how much is for service
parts).  And you may find other factors -- such as use of EDI -- are
important to certain customers.

A final note: with a cost-of-capital of 10%, it's often assumed that
inventory carrying costs are 20% (more than 1.5% per month).  That
alone gives you a start at estimating cost savings.

Best regards,

Omnivorous-GA

Thank you. Surveying our customers is a good approach and will take
some time. I was hoping to find a quick answer based on empirical
research.

Dotell --

Might I suggest a Google search strategy using the following.  You'll
probably find some of the studies useful in designing a survey
instrument -- and in understanding the issues.  Many are related to
freight costs --
and they're complex, with issues related to the specific companies involved:

Google search strategy:
inventory + "carrying costs"

Best regards,

Omnivorous-GA