Chapter 11 Global Sourcing and Procurement
CHAPTER 11
GLOBAL SOURCING AND PROCUREMENT
Review and Discussion Questions
3. Describe the differences between functional and innovative products.
Functional products are staples that people buy in a wide range of retail outlets. Typically,
they do not change much over time, have low profit margins, stable predictable demand and
long life cycles. Innovative products, on the other hand, give customers additional reasons to
buy. Fashionable clothes and personal computers are examples of innovative products.
Innovative products have short life cycles, high profit margins, and volatile demand.
4.
What are characteristics of efficient, responsive, risk-hedging and agile supply chains? Can a
supply chain be both efficient and responsive? Risk-hedging and agile? Why or Why not?
Efficient supply chains are designed to minimize cost that requires high utilization,
minimizing inventory, and selecting vendors based primarily on cost and quality, and
designing products that are produced at minimum cost. Market-responsive supply chains are
designed to minimize lead time to respond to unpredictable demand, thus minimizing
stockout costs and obsolete inventory costs. Risk sharing supply chains are those that share
resources so that risks in the supply chain can be shared. Agile are those supply chains that
are flexible while still sharing risks of shortages across the supply chain. Generally, these
supply chains carry excess capacity and higher buffer stocks. Vendor in responsive supply
chains would be selected for speed, flexibility, and quality. It is possible to be both efficient
and responsive, and both Risk-hedging and Agile, but Exhibit 10.4 helps illustrate why
supply chains are generally not both.
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Chapter 11 Global Sourcing and Procurement
3.
The problem tells us that we sell 4,000 QUARTER pound burgers a week, therefore we sell 1,000
pounds a week, and each pound of hamburger costs $1.00. The problem also tells us that on
average, the store has 350 pounds of inventory on hand. By dividing the Cost of Goods Sold by
Average aggregate Inventory Value, We can figure the Inventory Turns. This means that their
inventory turns 148.6 times a year.
* 52 = .35
4.
Sales (Total
Quarter):
United States
Canada
Europe
Cost of Goods
Sold (Total
Quarter)
Raw Materials at
Louisville Plant
(End-of-Quarter)
Work-in-Process
and Finished
Goods at the
Louisville Plant
(End-of-Quarter)
Quarter 1
(January
Through
March)
Quarter 2 (April
Through June)
Quarter 3 (July
Through
September)
Quarter 4
(October
Through
December)
300
75
30
350
60
33
405
75
20
375
70
15
280
295
340
350
50
40
55
60
100
105
120
150
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Chapter 11 Global Sourcing and Procurement
Distribution
Center Inventory
(End-of-Quarter):
United States
Canada
Europe
25
10
5
27
11
4
23
15
5
30
16
5
Total Inventory
190
187
218
261
1.5
1.6
1.6
1.3
Inventory
Turnover
Q1
Q2
Q3
Q4
If you were given the assignment to increase inventory turnover, what would you focus on?
Why?
To increase the inventory turns, a firm needs to reduce the amount of inventory or increase sales
or both. To increase turns, the item most readily within our control is the amount of inventory
that the firm has on hand. The Work-in-Process is the most obvious target for reduction.
The company reported that it used 500M worth of raw material during the year. On average, how
many weeks supply of the raw material are on hand at the factory?
The 500M does not come into play in this problem.
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