Chapter 10 Part 1 (Intro to SCM, Inventory Turnover, Weeks of Supply)
What is the difference between Outsourcing and Off-Shoring? 1. Outsourcing means taking some specific but limited function that your company was doing in-house (research, call centers, accounts receivable) and having another company perform that function. 2. Off-Shoring means moving the whole factory to another country. Products are produced the same way only with cheaper labor, lower taxes, subsidized energy, and lower health care costs.
Supply chain comes from thinking about a chain and any break in the link disrupts the supply of goods or services. There has been an increase in interest in SCM because it is seen as a means of achieving significant competitive advantage. Illustrate how a savings in SCM or Logistics equates to a substantial Sales Revenue. A savings of $100K in SCM with a company with Gross Profits of 7.5% equates to increased revenue of $750K. Inventory serves as a buffer. Since Inventory is tied up at each link in the chain, it also ties up money at each stage. It is important that each link is synchronized to minimize the amount of inventory at each link. The efficiency of the supply chain can be measured based on the size of the inventory investment. The total inventory investment is measured relative to the total cost of the goods that are provided through the supply chain. Two common measures are used to evaluate SC efficiency which are Inventory turnover and Weeks of inventory.
Inventory turnover = Cost of goods sold / Avg. aggregate inventory value Weeks of supply = (Avg. aggregate inventory value / Cost of goods sold)(52 ) There is an adversarial relationship between Supply chain partners as well as a dysfunctional industry practices such as a reliance on price promotion. Example…Car promotions in September or Year End Inventory Sales. Big sale in Dubai in February.
The bullwhip effect is a phenomenon of variability magnification as we move...
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