Successful supply chain strategies will consider many factors besides price; such as quality, reliability, stability, how well their technology integrates as well as plethora of other strategic considerations. Therefore since many of these factors are intangible in nature it is hard to quantify and contrast alternate supply chain possibilities. For example, if a low cost leader supplier isn't able to meet deadlines consistently then the costs associated with the disruption may greatly exceed any benefits gained from a lower unit price. This type of consideration makes comparative models very difficult to develop.
6. Compare and contrast the contribution approach with the net profit approach in cost/revenue analysis.
The contribution approach separates costs into fixed and variable costs and is often used in variable pricing situations to analyze the benefits of differentiated pricing models. For example, if a firm produces a product for ten dollars and produces this product at ninety percent capacity and has an opportunity to use the excess capacity to produce another good that sells for five dollars per unit. If a manager were to strictly rely on the net profit approach then selling a lower priced good may not appear to be that attractive. However, since the contribution approach separates the fixed and variable costs, then helps to illustrate the benefits achieved by these measures by producing the lower priced good. The disaggregated unit cost may appear higher than the contribution approach utilization of variable cost. This could potentially result in total losses to revenue by not considering the effects of the cost savings incurred by spreading out the fixed costs by producing more units. Furthermore this approach is often used as a metric to generate custom pricing estimates on custom production items.
8. Suppose you have been asked by a firm to assess the impact on a return on assets of outsourcing transportation. Currently the firm uses a private truck fleet and is considering a switch to a for-hire transportation company. Which aspects of the strategic profit model would be affected?
The impact of outsourcing transportation would most likely impact the return on assets in a positive manner since the total amount invested would be reduced through liquidation of the assets need to perform the deliveries. Concentrating on the business' core competencies, the areas that add the most value to the products, will generally offer the organization the most return on investment. This could potentially decrease the overall net profit and the margins received if the in-house transportation operates more efficiently and provides greater value than the outsourced partner. However, the greatest impact on the strategic profit model would occur from investing in the business processes that offer the most return on investment. Therefore if the company liquidates its fleet and re-invests on highest value added process then it would increase its margin and reduce risk simultaneously.
10. How does the Sarbanes-Oxley Act impact requirements for logistics performance measurement?
The Sarbanes-Oxley Act (SOX) of 2002 increases the compliance requirements for logistics performance measurements to be reported to the regulating bodies. This affects supply chain management in several primary areas (Nadler & Kros, 2008). The first is that it introduces the reporting of off-balance sheet items which may include such things as when a vendor maintains a consignment inventory on site. Another is that it requires supply chains to publish internal controls and audit information. Finally, there are enhanced financial disclosure requirements placed upon accounting. These requirements add a layer of complexities to SCM. According to this journal article, the requirements of SOX have had mixed responses from supply chain managers when questioned in the form of a survey by the authors. Some managers felt minimal effects while others stated that the compliance pressures reduced their ability to compete in a global market.
(2007). Chapter 7 Demand Forecasting in a Supply Chain. In Supply Chain Management. Pearson Education.
Nadler, S.S., & Kros, J.F. (2008). An INTRODUCTION to SARBANES-OXLEY and ITS IMPACT on SUPPLY CHAIN Management. Journal of Business Logistics, 241-255.
Rabren, J. (2010). Technology, Integration and Data Drive Supply Chain Visibility. Material Handling Management, 42.
Setijono, D., & Dahlgaard, J. (2007). Customer value as a…