A balance sheet item that shows the amount a company paid for the inventory it has on hand at a particular point in time
The ratio of earnings (profit) to sales (revenue) for a given time period
Decreasing the money spent on purchasing functions increases profit FASTER than increasing revenue as a result of marketing and sales. Every $1 saved in purchasing, lowers COGS by $1 and directly contributes $1 to bottom line profits.
Profit Leverage Effect
= COGS / Sales Revenue
Pretax Profit Margin =
=Pretax Profit / Sales Revenue
Profit Leverage Effect: Sales must increase by ___FORMULA___ to have the same effect
[COGS Savings] / [Pretax Profit Margin]
MAVERICK SPENDING DEFINITION
BUYING RAW MATERIALS AT RETAIL
CALCULATE DIRECT LABOR COST PER UNIT
6 STEPS OF Strategic Sourcing Process
5 Qualitative sourcing criteria from Bauer SCM Recruiting Companies: SSQDC
1. Safety: Internal and External
2. Sustainability: Green and Ethics
3. Quality: Consistency, Conformance, Service
4. Delivery: Reliability, Speed, Capacity
5. Cost: Total Cost of Ownership
RFQ STANDS FOR
-Request for Quotation
Price of the good or service is tied to the cost of some other key input(s) or other economic factors
Terms and conditions for a purchased service that indicate, among other things, what services will be performed and how the service provider will be evaluated
Statement of work (or scope of work) –
(EFT) STANDS FOR
§Electric Funds Transfer
(SRM) STANDS FOR
Supplier Relationship Management
(RFI) STANDS FOR
request for information
2 Processes Designs
1. §Product-based layout (continuous flow & production lines)
2. §Functional layout (job shop & batch manufacturing)
§A type of layout where resources are arranged sequentially, according to the steps required to make a product
§Used for products with identical or highly similar designs
§Think about the process used to make sandwiches at Quiznos or Subway
§Product-based layout (continuous flow & production lines) CHARACTERISTICS
§A type of layout where resources are physically grouped by function
§Used for products with high degrees of customization or expertise required
§Think about the process you must go through to sign up for and pay for classes
§Functional layout (job shop & batch manufacturing) CHARACTERISTICS
5 Process Types
§Continuous Flow Processes
§Fixed Position Layout
§Continuous Flow Processes DEFINTION
A process that produces highly standardized products using a tightly-linked, paced sequence of steps.
§Example products: oil, gas, oils, beverages, fluids, yarn and fabric
A process used to produce a narrow range of standard items with identical or highly similar designs.
§Examples: high-volume standardized products such as automobiles, candy bars, paper, pens
§Production Line DEFINITION
A process used to make a wide variety of highly customized products in quantities as small as one
§Job Shops DEFINITION
§Batch Process DEFINITION
A process where items are moved through the different manufacturing steps in groups or batches.
§Examples: mass-market consumer products such as hand tools, computers, clothing, shoes, books, packaged food items, office furniture, etc.
Job Shop & Batch Processes
-Functional Layout- CHART
A type of manufacturing process in which the position of the product is fixed.
§Examples: shipbuilding, construction projects, and traditional home building.
A group of processes that seeks to combine the characteristics, and hence advantages, of more than one of the classic processes.
§Machining centers – machines or series of machines that complete several manufacturing steps
§Group technology/Cellular Layout – Dedicating equipment and people to producing all the products within a product family
§Hybrid Manufacturing Process DEFINITION
A set of products that require similar processing
4 LEVELS OF Product Customization
Products that require no customization.
§Make-to-stock (MTS) –