Course Code MGT 561 Supply Chain Management Book
Course Code MGT 561 Supply Chain Management Book: Supply Chain Management Strategy, Planning, and Operation 5 th edition (Pearson Publishing) Author: Sunil Chopra and Peter Meindl Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall. 3 -1
3 Supply Chain Drivers and Metrics Power. Point presentation to accompany Chopra and Meindl Supply Chain Management, 5 e Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall. © 2012 Prentice Hall Inc. 1 -2 3 -2 2
A Framework for Structuring Drivers Figure 3 -1 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall. 3 -3
Pricing • Role in the Supply Chain – Pricing determines the amount to charge customers for goods and services – Affects the supply chain level of responsiveness required and the demand profile the supply chain attempts to serve – Pricing strategies can be used to match demand supply Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall. 3 -4
Pricing • Role in the Competitive Strategy – Firms can utilize optimal pricing strategies to improve efficiency and responsiveness – Pricing strategies vary to meet different customer responsiveness requirements Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall. 3 -5
Components of Pricing Decisions • Pricing and economies of scale – The provider of the activity must decide how to price it appropriately to reflect these economies of scale • Everyday low pricing versus high-low pricing – Different pricing strategies lead to different demand profiles that the supply chain must serve Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall. 3 -6
Components of Pricing Decisions • Fixed price versus menu pricing – If marginal supply chain costs or the value to the customer vary significantly along some attribute, it is often effective to have a pricing menu – Can lead to customer behavior that has a negative impact on profits Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall. 3 -7
Components of Pricing Decisions • Pricing-related metrics – Profit margin – Days sales outstanding – Incremental fixed cost per order – Incremental variable cost per unit – Average sale price – Average order size – Range of sale price – Range of periodic sales Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall. 3 -8
Pricing • Overall trade-off: Increase firm profits – Understand of the cost structure of performing a supply chain activity and the value this activity brings to the supply chain – Strategy may support efficiency in the supply chain, lower supply chain costs, defend market share, or steal market share – Differential pricing may be used to attract customers with varying needs – Strategy should help either increase revenues or shrink costs or preferably both Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall. 3 -9
Financial Measures Of Performance • From a shareholder perspective, return on equity (ROE) is the main summary measure of a firm’s performance Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall. 3 -10
Financial Measures Of Performance • Return on assets (ROA) measures the return earned on each dollar invested by the firm in assets Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall. 3 -11
Financial Data for Amazon Table 3 -1 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall. 3 -12
Financial Measures Of Performance • An important ratio that defines financial leverage is accounts payable turnover (APT) Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall. 3 -13
Financial Measures Of Performance • ROA can be written as the product of two ratios – profit margin and asset turnover Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall. 3 -14
Financial Measures Of Performance • Cash-to-cash (C 2 C) cycle roughly measures the average amount time from when cash enters the process as cost to when it returns as collected revenue C 2 C = – days payable (1/APT) + days in inventory (1/INVT) + days receivable (1/ART) Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall. 3 -15
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall. 3 -16
Summary of Learning Objectives 1. Describe key financial measures of firm performance 2. Identify the major drivers of supply chain performance 3. Discuss the role of each driver in creating strategic fit between the supply chain strategy and the competitive strategy 4. Define the key metrics that track the performance of the supply chain in terms of each driver Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall. 3 -17
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