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Chapter_10_Supply_Management

Chapter_10_Supply_Management - Supply Management The Eli...

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The Eli Broad College of Business, Michigan State University, 2011 Supply Management Supply Management
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2 The Eli Broad College of Business, Michigan State University, 2011 Purchasing View of the World The Purchasing Viewpoint Supplier Purchaser Purchasing Initiative Marketing Response Supplier Purchaser Marketing Initiative Purchasing Response The Marketing Viewpoint
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3 The Eli Broad College of Business, Michigan State University, 2011 Importance of Purchasing In the average manufacturing firm purchased goods and services account for 55% of every dollar of revenue the firm takes in. Direct labor costs account for only about 10% of the sales dollar
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4 The Eli Broad College of Business, Michigan State University, 2011 Potential Payoff Beginning Position Sales Revenue $100,000,000 Purchases(55%) 55,000,000 Labor (15%) 15,000,000 Other (22%) 22,000,000 Pre-tax profit (8%) 8,000,000
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5 The Eli Broad College of Business, Michigan State University, 2011 Potential Payoff (cont’d) Reduce purchase cost by 10% Increase sales by 68% Reduce labor cost by 36% Sales $100,000,000 $168,000,000 $100,000,000 Purchases 49,500,000 92,400,000 55,000,000 Labor 15,000,000 25,200,000 9,600,000 Other 22,000,000 36,960,000 22,000,000 Pre-tax Profit 13,500,000 13,440,000 13,400,000
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6 The Eli Broad College of Business, Michigan State University, 2011 A firm’s strategic objectives are better met when effective supply management: Ensures timely availability of resources Reduces total cost (not just purchase price) Enhances quality Enables access to technology and innovations Fosters social responsibility Effective Supply Management
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7 The Eli Broad College of Business, Michigan State University, 2011 Supply Risk : probability of an unplanned, event that negatively affects a firm and its ability to serve customers - Delays and disruptions - Thefts of intellectual property - Price increases - Product safety problems Effective Supply Management
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8 The Eli Broad College of Business, Michigan State University, 2011 Total Cost of Ownership (TCO) : sum of costs incurred before, during and after a purchase Before : costs of finding, assessing and selecting a supplier During : costs of buying and receiving items After : costs and risks of storing and owning items including those incurred after sale to customers Effective Supply Management
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