{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Chapter 10 & 11

Chapter 10 & 11 - BUS 370 Sourcing Decisions and...

Info icon This preview shows pages 1–12. Sign up to view the full content.

View Full Document Right Arrow Icon
BUS 370: Sourcing Decisions and Purchasing Chapters 10 and 11 Donavon Favre College of Management North Carolina State University 1
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Chapter Objectives Be able to: Describe why sourcing and purchasing are critical. Develop a total cost of ownership model. Discuss the various strategic issues surrounding sourcing decisions and identify some of the key factors favoring one approach over the other. Perform a simple total cost analysis. Explain what a sourcing strategy is, and show how portfolio analysis can be used to identify the appropriate sourcing strategy for a particular good or service. Show how multicriteria decision models can be used to evaluate suppliers, and interpret the results. Discuss some of the longer-term trends in supply management and why they are important. 2
Image of page 2
Why Purchasing is Critical To compete globally, you need to purchase globally Global purchasing efforts are supported by advances in information systems The Changing Global Competitive Landscape 3
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Financial impact – on average, cost of materials consumes over half of a manufacturer’s revenue Industry Cost of Materials Value of Shipments Food 53.5% Furniture & related products 45.8% Chemicals 46.2% Rubber & plastics 49.0% Fabricated metal 45.3% Computers & electronics 42.8% Transportation equipment 60.5% All manufacturers 52.5% 4
Image of page 4
Financial Impact of Purchasing Earnings and Expenses ($M) Sales $26,491 COGS $18,465 Pretax earnings $2,359 Selected Balance Sheet Items ($M) Merchandise inventory $3,968 Total assets $16,109 Lowe’s Company Every dollar saved in purchasing increases pretax profit by one dollar Every dollar saved in purchasing inventory lowers total assets by one dollar 5
Image of page 5

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Earnings and Expenses ($M) Current With 3% saving Sales $26,491 $26,491 COGS $18,465 $17,911 Pretax earnings $2,359 $2,913 Selected Balance Sheet Items ($M) Merchandise inventory $3,968 $3,849 Total assets $16,109 $15,990 3% purchasing reduction in COGS Pretax earnings increase by $554 (23.4%) ROA increases from 14.6% to 18.2% Financial Impact of Purchasing 6
Image of page 6
Quality Delivery Ability to exploit new technologies Performance Impact Why Purchasing is Critical 7
Image of page 7

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
$10 $2 99.8% 95% Overnight delivery 1 day to 3 weeks Supplier A Supplier B Cost per valve % Good Delivery Lead Time Sourcing dialysis machine valves Total Cost of Ownership 8
Image of page 8
Effect of defective dialysis machine valves Interruption in patient treatment Rescheduling difficulties Reduction in the effective capacity for dialysis Possible medical emergencies Estimated cost of a failed valve = $1,000 Total Cost of Ownership 9
Image of page 9

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Supplier A Supplier B Valve costs Failure costs Backup inventory Total costs Sourcing 50 dialysis machine valves 50 x $10 = $500 50 x $2 = $100 0.2% x 50 valves x $1,000 = $100 5% x 50 valves x $1,000 = $2,500 1 valve x $10 = $10 3 valves x $2 = $6 $610 $2,606 Total Cost of Ownership 10
Image of page 10
Insourcing – The use of resources within the firm to provide products or services Outsourcing – The use of supply chain partners to provide products or services Sourcing decisions are high-level, often strategic decisions that address: Do we use resources within the firm or will the material or service be provided by supply chain partners?
Image of page 11

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 12
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern