Performance Measures for Supply Chain Management (back to catalog)

OverviewSample 1Sample 2Sample 3Sample 4Sample 5Sample 6About the Author

...In capital-intensive industries such as semiconductors or oil and gas, the production facility is very expensive. The cost of raw materials may be relatively low, and the cost of finished goods typically includes an allocation for use of the expensive capacity. Consider the following example:

Unit raw material cost: $1.00
+ Allocation for production capacity use:8 $9.00
Fully-allocated cost per unit: $10.00

Here the accountants would say the cost of a unit of finished goods is $10.00. Their job is to allocate all costs using generally accepted accounting principles (GAAP), but as important as GAAP is for accounting, it doesn't always contribute to good management decision-making. Suppose you found a way to reduce your finished goods inventory by 100,000 units, for example by using a faster delivery mode to your customers. Using the $10/unit standard cost valuation, you might think that you would be saving $1 Million. But think about it for a moment: if you reduced finished goods inventory by that many units, what would you really save in cash? Select your answer below:

Choice Answer
$1 Million

$100,000

$10,000

$0
8 Obtained by dividing the amortized cost of the plant by the number of units produced in a year, for example.

Buy

List Price: $60 -

Related Promotions

Save $25 on "Fundamentals of Supply Chain Management" bundle; buy modules SCM102, SCM103, SCM104, SCM105, and SCM106 together and save $25 (see course catalog for details)

SCM105 Specifications

Title: Performance Measures for Supply Chain Management

Rating:
4.3 / 5  (1106 ratings)

Total Reading Time: Approx. 1 - 2 hours (for average readers)

Word Count: Approx. 11,000 words

Author:

Certificate: Counts toward Fundamentals of Supply Chain Management

Datasheet:  Download

Contents

  1. Introduction
  2. Alignment of Metrics with Business Strategy
  3. Service Metrics - Build-to-Stock
  4. Service Metrics - Build-to-Stock (continued)
  5. Service Metrics - Build-to-Order
  6. Inventory Metrics
  7. Speed Metrics
  8. Financial Metrics
  9. Bullwhip Metric
  10. "Bad" Metrics
  11. Applying Metrics Across the Entire Supply Chain
  12. Conclusions
  13. Test Your Knowledge
  14. Feedback
HomeProductsCreate AccountQuestionsAboutContactSeminarsPrivacy PolicyLicense/Terms of Use
© 2001-2017 Supply Chain Online, LLC. All Rights Reserved. 771 Cathedral Drive, Sunnyvale, California 94087