Weeks of supply average aggregate inventory value

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Weeks of Supply : Average aggregate inventory value divided by weekly sales (at cost). From an inventory cost perspective, the lower the weeks of supply, the better the performance Inventory Turnover Ratio: Annual sales (at cost) divided by the average aggregated inventory value. The greater the turns, the lower the average inventory levels, the better the performance
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Inventory Measures Inventory Measures Average inventory = $2 million Average inventory = $2 million Cost of goods sold = $10 million Cost of goods sold = $10 million 52 business weeks per year 52 business weeks per year Weeks of supply = = 10.4 weeks Weeks of supply = = 10.4 weeks $2 million $2 million ($10 million)/(52 weeks) ($10 million)/(52 weeks) Inventory turns = = 5 turns/year Inventory turns = = 5 turns/year $10 million $10 million $2 million $2 million Example 9.1
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Measures of Supply- Chain Performance (II) * Links to Financial Measures: The performance of Supply- Chain Management is closed linked with firm's key financial measures, such as: (a) Current Assets (b) Working Capital (c) Contribution Margin
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Supply- Chain & Operations Strategy Links to Operations Strategy: It is important for a firm to link its competitive priorities with its supply- chain network to support the firm’s operations strategy. Supply chains can be designed to achieve certain competitive advantages. Efficient Supply Chains vs. Responsive Supply Chains: Efficient supply chains- to minimize inventories and maximize efficiency of the members of the supply chain. Demands are highly predictable, new product introductions infrequent , and variety is minimal . This design supports low cost operations, consistent quality, and on time delivery. Responsive supply chains- to react quickly to marketing demands. Demand predictability is low and the firm offers a high degree of products variety. The focus is on reaction time, and the primary competitive priorities are development speed , fast delivery times , customization , volume flexibility , and high performance design .
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Supply- Chain & Operations Strategy (II) Design of Efficient vs. Responsive supply chains: Efficient supply chains- include line flows; low capacity cushions; low inventory investments; and short lead times Responsive supply chains- include flexible flows; high capacity cushions, inventory as needed for fast delivery, and lead times are aggressively shortened (even if costs increase)
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Supply-Chain Environments Supply-Chain Environments TABLE 9.2 ENVIRONMENTS BEST SUITED FOR EFFICIENT AND RESPONSIVE SUPPLY CHAINS Factor Efficient Supply Chains Responsive Supply Chains Demand Predictable, low Unpredictable, high forecast errors forecast errors Competitive Low cost, consistent Development speed, fast priorities quality, on-time delivery times, delivery customization, volume flexibility, variety, top quality New-service/ Infrequent Frequent product introduction Contribution Low High margins Product variety Low High
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Supply-Chain Design Supply-Chain Design TABLE 9.3 DESIGN FEATURES FOR EFFICIENT AND
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