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Case recommendations for Supply Chain Management

Case recommendations for Supply Chain Management - Finance...

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Finance 2011 Case recommendations for Supply Chain Management Class on October 18 th , 2011 DVD 4 Less Problem The web-company is producing high-end DVD Player uses Economy of Scales effects and is therefore able to sell the DVD-Players for 200$ less than the high-end competitors Receives 112,000 orders for DVD-Players per year. Sells each for 500$ and gains a profit of 200$ per player Only 97% of the orders are shipped correctly. In order to try to keep these 3% customers the spend a lot of money (20$ rehandling cost, 35$ invoice reduction) They have a high debt of $30Mio. With 10% interest rate. In addition the costs for transportation are 1,950,000$ and the warehousing costs average $1,460.000 annually High inventory average of 5$ million and carrying costs of 25% Large fixed asset base with a value of 64 million$ Outsources its warehousing operations and inventory management for operating costs of $500,000 Recommendation The outsourcing seems to be a good decision, since on a cost basis they save $760,000, they manage to reduce inventory by 30% and improve their correct order fill rate to 99%.
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