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CSCP: Certified Supply Chain Professional
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A company finds that one of its warehouses is out of capacity to store products. Expanding the physical size of the warehouse is not an option. The most appropriate solution would be to increase the:
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A company's annual cost of goods sold is $350 million, and inventory carrying cost is 18%. The company averages four inventory turns. The cost savings resulting from increasing inventory turns from four to six would be:
To calculate the cost savings from increasing inventory turns, we first need to determine the current inventory level and the inventory carrying cost.
Calculate the average inventory level:
Current inventory turns = 4
Cost of Goods Sold (COGS) = $350 million
Average inventory = COGS / Inventory turns = $350 million / 4 = $87.5 million
Calculate the inventory carrying cost:
Inventory carrying cost rate = 18%
Current carrying cost = $87.5 million * 18% = $15.75 million
Calculate the new inventory level with increased turns:
New inventory turns = 6
New average inventory = COGS / New inventory turns = $350 million / 6 = $58.33 million
Calculate the new inventory carrying cost:
New carrying cost = $58.33 million * 18% = $10.5 million
Determine the cost savings:
Cost savings = Current carrying cost - New carrying cost = $15.75 million - $10.5 million = $5.25 million per turn
Since inventory turns increase from 4 to 6 (an increase of 2 turns), total savings:
Total cost savings = $5.25 million * 2 = $29 million
Thus, the cost savings from increasing inventory turns from four to six would be $29,000,000.
Coyle, J. J., Langley, C. J., Novack, R. A., & Gibson, B. J. (2016). Supply Chain Management: A Logistics Perspective. Cengage Learning.
Stevenson, W. J. (2018). Operations Management. McGraw-Hill Education.
Which of the following measures would be an appropriate indicator of the marketing and sales organization's support of the sales and operations planning (S&OP) process?
A company considers moving a portion of its production to a distant country to support a major customer. Which of the following actions is most effective in mitigating the risk of financial loss in the event of a global economic downturn?
Which of the following tools would help a team of operators to prioritize causes of equipment failures?
Which of the following forecasting techniques is most appropriate when data is scarce?
Which of the following statements defines the function of the bill of lading (B/L)?
Which of the following activities is an aspect of proper demand management?
Cash-to-cash cycle time is a measure of a firm's:
A company produces and distributes a family of soft drinks in a single country. It has developed and will introduce a new family of soft drinks for weight- and health-conscious individuals. There currently are no competitors with nationwide distribution for this category of soft drinks. Which of the following supply chain strategies would be most appropriate for the two product families?
Given the context of introducing a new product family with no existing competitors and uncertain demand patterns, the most appropriate strategy is to:
Current Product Family (To Forecast): Continue producing the established product family based on demand forecasts. This approach leverages historical sales data and existing market understanding to maintain efficient production and distribution.
New Product Family (To Order): Produce the new product family only after receiving orders from distributors. This minimizes the risk associated with overproduction and inventory holding costs for a new product with uncertain demand.
Producing both product families to forecast (A) or to order (B) does not account for the differing levels of market maturity and demand predictability. Producing the new product family to forecast (D) would be risky due to the lack of historical data and demand uncertainty.
'Supply Chain Management: Strategy, Planning, and Operation' by Sunil Chopra and Peter Meindl.
APICS Dictionary, 16th edition.
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