Chapter 11 - Oprtn Mngmnt Spply Chn Mngmnt

Chapter 11 - Oprtn Mngmnt Spply Chn Mngmnt


11.1 Choose a local establishment that is a member of a relatively large chain. From interviews with workers and information from the Internet, identify the elements of the supply chain. Determine whether the supply chain supports a low-cost, rapid response, or differentiation strategy (refer to Chapter 2 ). Are the supply chain characteristics significantly different from one product to another? The production network is made up of four parts. The following are some of them: ● Demand management is the process of managing client demand. The leading organization informs merchant organizations about the item's requirement and requests that they furnish the item within the specified time range. The vendor corporation increases its seriousness on the lookout while simultaneously expanding the breadth of doing more business by providing clients with things according to demand on time. ● During the time spent in the shop network, communication becomes increasingly important. Effective communication allows all members of the production network to provide useful and supporting information, which helps supply chains run more smoothly in the long run. Compelling communication also aids the many personnel in the stock with anchoring to modify their methods in response to demand and meet up to expectations. ● Both the lead organization and the merchants' stock costs are reduced as a result of integration. As a result, during the time spent in the inventory network, integration is a critical factor. Walmart is a prime example of network integration in the manufacturing process. Walmart has successfully and efficiently integrated several retail network cycles with its various merchants. This has resulted in a significant reduction in stock costs as well as a reduction in handling time. ● Collaboration helps the lead with companying as well as the seller organizations move critical data to work on the cycles successfully. With the changing climate, collaboration on various fronts becomes unavoidable. 11.2 Hau Lee Furniture, Inc., described in Example 1 of this chapter, finds its current profit of $10,000 inadequate. The bank is insisting on an improved profit picture prior to approval of a loan for some new equipment. Hau would like to improve the profit line to $25,000 so he can obtain the bank’s approval for the loan. a) What percentage improvement is needed in the supply chain strategy for profit to improve to $25,000? What is the cost of material with a $25,000 profit? To increase overall profits by $ 25,000 from the existing level of $ 10,000, an increase of 25000 - 10000 = $15000 is required. For a profit increase of $ 15,000, the matching procurement plan will cut the cost of goods by $ 15,000 (current cost of goods = $ 60,000). As a result, the lowered material costs are $ 60,000 - $15,000 = $45,000. Therefore, the percentage improvement is required in the asset plan = (15,000 / 60,000) x 100 = 25% Percentage improvement required for skills communication strategy = 25% Cost of living $ 25,000 profit = $ 45,000 b) What percentage improvement is needed in the sales strategy for profit to improve to $25,000? What must sales be for profit to improve to $25,000? Allow revised sales value = S Because the percentage of expenses (60%) and the percentage of production costs (20%) stay unchanged, the total value of the production and production items will be = 0.6 S + 0.2.S = 0.8.S when the sales value = S is revised. Fixed cost (always unchanged) = $ 10,000 Profit = $ 25000 Since, Sales = Cost of goods + Production costs + Fixed costs + Profit Therefore, S = 0.6.S + 0.2.S + $ 10,000 + $ 25,000 Or, S = 0.8.S + 35000 Or, 0.2.S = 35000 S = 35000 / 0.2 = 175,000 Percentage improvement is required in marketing strategies = ((Updated Sales Value - Actual Sales Price) / Real Sales Price) * 100 = (175,000 - 100,000) / 100,000 * 100 = 75% Sale of development benefit for $ 25,000 will be $175,000 Percentage development required for sale strategy = 75% 11.3 Kamal Fatehl, production manager of Kennesaw Manufacturing, finds his profit at $15,000 (as shown in the statement below)—inadequate for expanding his business. The bank is insisting on an improved profit picture prior to approval of a loan for some new equipment. Kamal would like to improve the profit line to $25,000 so he can obtain the bank’s approval for the loan. a) What percentage improvement is needed in a supply chain strategy for profit to improve to $25,000? What is the cost of material with a $25,000 profit? Because sales are closely tied to supply chain efficiency, proper systematic management and effectiveness are essential in the supply chain to increase sales. Existing profit 15,000 New profits 25,000 Incremental profit required 10,000 Existing cost of supply chain purchases 175,000 So, reduction in cost required 10,000 New cost of supply chain purchases 165,000 Percentage reduction 5.71 b) What percentage improvement is needed in a sales strategy for profit to improve to $25,000? What must sales be for profit to improve to $25,000? ( Hint: See Example 1 .) Sales 100 Cost of production 70 Other cost 12 For every $ increase in sales in % age 18 Existing sales 250,000 Incremental profits 10,000 Incremental sales required 55,555.56 New sales 305,555.56 Incremental sales (%age) 22.22 11.4 Using sources from the Internet, identify some of the problems faced by a company of your choosing as it moves toward, or operates as, a virtual organization. Does its operating as a virtual organization simply exacerbate old problems, or does it create new ones? Many large and small businesses, particularly service organizations, have converted to a virtual platform since the pandemic shows no signs of abating. One such organization that I am familiar with is an IT service provider situated in the Middle East. The company started operations in 2016 and employs 450 workers. It primarily works with retail e-commerce clients, supporting them with website and mobile app maintenance. The following are the challenges that this company has faced since moving to a virtual environment: 1. Because team communication has worsened, joint job completion durations have increased. 2. Because it was easier to hold client meetings in a physical location, new client acquisition has suffered. 3. The deployment of new operational processes has harmed security, and there have been some serious breakdowns. 4. Attrition has increased as the number of team connections has fallen drastically, and one-on-one connections that were widespread in the physical area have declined significantly. This problem had faded before the epidemic, but it has recently reappeared. 5. Remote infrastructure has become more expensive. This was never the case because the actual office possessed all of the essential infrastructure, but the cost was suddenly doubled. Working remotely has surely presented new obstacles. 11.5 Baker Mfg. Inc. (see Table 11.9 ) wishes to compare its inventory turnover to those of industry leaders, who have turnover of about 13 times per year and 8% of their assets invested in inventory. a) What is Baker’s inventory turnover? Inventory turnover = cost of sales/inventory = 21,500/1,250 = 17.2 times per year b) What is Baker’s percent of assets committed to inventory? Percentage of assets committed to inventory = inventory/total assets x 100% = 1,250/16,600 x 100 = 0.0753 x 100 = 7.53% c) How does Baker’s performance compare to the industry leaders? Baker's percentage of assets devoted to inventory is 7.53 percent, but the industry's is 8%, implying that Baker's performance is 0.47 percent worse than the industry's. 11.6 Arrow Distributing Corp. (see Table 11.9 ) likes to track inventory by using weeks of supply as well as by inventory turnover. a) What is its weeks of supply? Weeks of supply = (Inventory/cost of sales) x 52 = (1,000/13,500) x 52 = 0.0741 x 52 = 3.8532 or 4 weeks to be approximately b) What percent of Arrow’s assets are committed to inventory? Inventory to asset = (Inventory/Total assets) x 100 = (1,000/8,600) x 100 = 0.1163 x 100 = 11.63% c) What is Arrow’s inventory turnover? Inventory turnover = cost of sales/inventory = 13,500/1000 = 13.5 times per year d) Is Arrow’s supply chain performance, as measured by these inventory metrics, better than that of Baker in Problem 11.5? No. Because Arrow invests a tiny percentage of its revenue in inventory, it has a higher turnover rate than Bakers. 11.7 The grocery industry has an annual inventory turnover of about 14 times. Organic Grocers, Inc. had a cost of goods sold last year of $10.5 million; its average inventory was $1.0 million. What was Organic Grocers’ inventory turnover, and how does that performance compare with that of the industry? Given: Annual Inventory of Grocery Industry: 14 times Cost of goods sold last year: $ 10.5 million Average Inventory: $ 1 million Inventory turnover ratio = Cost of goods sold/Average inventory = 10.5/1 = 10.5 times 11.8 Mattress Wholesalers, Inc., is constantly trying to reduce inventory in its supply chain. Last year, cost of goods sold was $7.5 million and inventory was $1.5 million. This year, cost of goods sold is $8.6 million and inventory investment is $1.6 million. Given: Last year: Cost of good sold = $7.5 million Inventory = $1.5 million This year: Cost of good sold = $8.6 million Inventory = $1.6 million a) What were the weeks of supply last year? Weeks of supply last year = Inventory / (Cost of goods sold/52) = 1.5 / (7.5/52) = 1.5 / 0.1442 = 10.40 weeks b) What are the weeks of supply this year? Weeks of supply last year = Inventory / (Cost of goods sold/52) = 1.6 / (8.6/52) = 1.6 / 0.1654 = 9.67 weeks c) Is Mattress Wholesalers making progress in its inventory reduction effort? Yes, it has been reduced. As a result, we may conclude that the mattress wholesaler has been able to reduce inventory and proceed in its inventory reduction efforts.
May 29, 2022
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