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Amazon applies Lean accounting principles to its supply chain. Requirements: Calculate the Total Cost of Ownership (TCO) for Amazon's fulfillment centers, where initial costs were

  • Amazon applies Lean accounting principles to its supply chain.
  • Requirements:
    • Calculate the Total Cost of Ownership (TCO) for Amazon's fulfillment centers, where initial costs were $50,000,000, annual maintenance costs are $2,000,000, and the lifespan is projected to be 20 years.
    • Recommend strategies to minimize TCO.
    • Explain the importance of managing TCO in Lean supply chain practices at Amazon.
    • Present a table showing the breakdown of TCO components and potential savings.

Metric

Calculation

Value

Total Cost of Ownership (TCO)

Initial Costs + (Annual Maintenance × Lifespan)

$50,000,000 + ($2,000,000 × 20 years)

Target TCO Reduction

Reduced Initial Costs + (Reduced Maintenance × Same Lifespan)

$X

Financial Impact

Cost savings and improved profitability

$Y

Impact on Balance Sheet

Improved asset management and liquidity

$Z

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