Week 4 Workshop Solutions

# Week 4 Workshop Solutions - SOLUTIONS TO PROBLEMS PROBLEM...

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SOLUTIONS TO PROBLEMS PROBLEM 15.33 (40 minutes) Supplier costs analysis; supplier performance measures; supplier selection: builder 1 & 2 Activity Cost per unit of activity driver \$ Wallace Lumber Gromit Supplies Sean Insulation No. of activitie s \$ No. of activiti es \$ No. of activiti es \$ Unit level Downtime: poor material 200 10 2 000 0 0 2 400 Order level Order material 250 40 10 000 48 12 000 30 7 500 Receive order 180 40 7 200 60 10 800 38 6 840 Inspect order 300 40 12 000 60 18 000 38 11 400 Return material 220 5 1 100 4 880 15 3 300 Pay supplier 190 12 2 280 48 9 120 12 2 280 Dispute invoiced amount 560 2 1 120 0 0 13 7 280 Supplier related Supplier relationship mgr \$90 000 0.20 18 000 0.60 54 000 0.20 18 000 Total supplier activity costs \$53 700 \$104 800 \$57 000 Purchase cost 120 000 150 000 74 000 Total cost of ownership \$173 700 \$254 800 \$131 000 Supplier performance index 0.4475 0.6987 0.7703 3 Gromit Supplies is the most expensive supplier to deal with in absolute terms, due to the highest supplier activity costs, but proportional to the value of orders Sean Insulation is a poorer performer due to having the highest supplier performance index. The high costs of Gromit are mainly due to the high number of orders, inspections and payments to suppliers and the large number of orders and receipts. Sixty per cent of the time of

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• Spring '14
• supplier, Supplier Performance, Sean Insulation

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