Evaluating business case justification through financial and operational analysis

¶ … save five percent of the company's sales and one is using last year's sales as a yardstick, that would be a saving of about $5.485 million. However, there are indeed some questions that have to be answered. First, it has to be deciphered what the sales would be for the year during which the improvements are being done, not to mention the years after that. If the sales projections over the next three to five years are not all that great or the sector or wider economy is sputtering, it would be hard to justify the project. If sales are consistent, there would indeed be a business case for the project as the project would pay for itself in six months. However, it has to be defined and figured out how much productivity and movement would be lost while the improvements are being made. Indeed, one third of the supply chains in the company would be affected.

Question 2

It would seem there is a good business case but there are two things that would need to be answered to. First, there is the matter of how long it would take to get the changes done and how much of a financial drain this would cause on the usual revenues and output. Second, if company B is operating at 95% capacity, at least some of these changes would be potentially wasted as the output gains could not be fully offset by the fact that the supply chain is nearly maxed out. It would be a bit hard to justify this case as is without a concurrent expansion in capacity. Otherwise, the money spent might be wasted. The $111M alone on the raw materials would pay for the project nearly five times over but the real cost savings would be less than $100M if capacity is maxed out as a result of the improvements (Enslow, 2016).

Question Four

Decreasing costs and its linkage to an improved supply chain and time spent moving a product is simple. When it comes to moving materials, supplies or finished product, there should be as little wasted motion or time as possible. For example, materials and supplies that are heavily and commonly used should be closer to the front lines while ones that are less common to rare should be further away. Another example would be lumping as many shipments as possible into one batch so as to keep costs down while keeping time low as well. There are opportunity costs with every decision made but there is always the best case scenario from a business standpoint and the supply chain system should be constructed in a way to keep time spent as low as possible while also doing the same for cost. Doing this consistently and over time will be a boon to a company's bottom line (O'Byrne, 2016)