4.Chapter 11- Economics of The Supply Chain - 10 Marks

A company with a group of grocery stores spends 70 percent of their sales in the supply chain and has a net profit margin of 4 percent. The operations department working with IT just initiated an Internet-based inventory management program that is expected to save the group $500,000 per year. This $500,000 goes directly to profit. Use Table 11.4 in the textbook

A Operations Management Sustainability and Supply Chain Management, Third Canadian Edition.pdf - Adobe Acrobat Pro DC (32-bit) X File Edit View Sign Window Help Home Tools Operations Manag... x Subscribe (? T 427 (447 of 856) O (+ 109% Search tools Chapter 11 Supply Chain Management 427 Create PDF Hau Lee Furniture Inc. spends 50% of its sales dollar in the supply chain and has a net profit of 4%. Hau wants to know how many dollars of sales are equivalent to supply chain savings of $1. EXAMPLE | 1 Combine Files APPROACH Table 11.4 (given Hau's assumptions) can be used to make the analysis. Profit Potential in the Supply Chain SOLUTION Table 11.4 indicates that every $1 Hau can save in the supply chain results in the same BE Edit PDF profit that would be generated by $3.70 in sales. Percentage of Sales Spent in the Supply Chain Table 11.4 Request Signature. Dollars of Additional Sales Percentage Net Profit Needed to Equal $1 Saved of Firm 30% 40% 50% 60% 70% 80% 90% Through the Supply Chain Le Fill & Sign $2.78 $3.23 $3.85 $4.76 $6.25 $9.09 $16.67 N $2.70 $3.13 $3.70 $4.55 $5.88 $8.33 $14.29 Export PDF 00 0 A $2.63 $3.03 $3.57 $4.35 $5.56 $7.69 $12.50 $2.56 $2.94 $3.45 $4.17 $5.26 $7.14 $11.11 Organize Pages 10 $2.50 $2.86 $3.33 $4.00 $5.00 $6.67 $10.00 "The required increase in sales assumes that 50% of the costs other than purchases are variable and that half the remaining costs Send for Comme. (less profit) are fixed. Therefore, at sales of $100 (50% purchases and 2% margin), $50 are purchases, $24 are other variable costs, $24 are fixed costs, and $2 are profit. Increasing sales by $3.85 yields the following: $ 51.93 (50% of $103.85) Comment Purchases at 50% Other Variable Costs 24.92 (24% of $103.85) Fixed Cost 24.00 (fixed) Profit 3.00 (from $2 to $3 profit) Trial Expired $103.85 Buy now to restore full access to Through $3.85 of additional sales, we have increased profit by $1, from $2 to $3. The same increase in margin could have been Acrobat. obtained by reducing supply chain costs by $1. Subscribe Now | Activate W EN FREE] 7:34 AM N P O 29/03/2021