Vce CSCP Questions Latest

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.

References

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.

The primary objective of supply chain management is to take a systems approach. This involves viewing the supply chain as a whole, rather than as a collection of separate entities. By taking a systems approach, supply chain management aims to integrate and coordinate the activities of suppliers, manufacturers, and distributors to optimize overall performance and achieve efficiencies across the entire supply chain. This holistic perspective ensures that decisions made in one part of the supply chain consider the impacts on other parts, leading to improved customer satisfaction, reduced costs, and better use of resources.

References

Christopher, M. (2016). Logistics & Supply Chain Management. Pearson UK.

Stadtler, H., & Kilger, C. (Eds.). (2008). Supply Chain Management and Advanced Planning: Concepts, Models, Software, and Case Studies. Springer Science & Business Media.

The Supply-Chain Operations Reference-model (SCOR) is a process reference model that provides a comprehensive framework for evaluating and improving supply chain performance. It includes best practices for various supply chain processes such as plan, source, make, deliver, return, and enable. In this context, the production and engineering departments using SCOR best practices to design a new "make" process flow is a correct application of the model. The "make" process in SCOR focuses on production activities, and leveraging SCOR's best practices helps in designing efficient and effective production processes.

References

Supply Chain Council. (2012). Supply Chain Operations Reference Model (SCOR) Version 11.0. Supply Chain Council, Inc.

Bolstorff, P., & Rosenbaum, R. (2007). Supply Chain Excellence: A Handbook for Dramatic Improvement Using the SCOR Model. AMACOM.

Context: Companies often prioritize service levels based on the profitability of their products.

Options Breakdown:

A. Wider variety: While a wider variety can attract more customers, it does not directly influence the prioritization of service levels.

B. Shorter lead time: Short lead times are desirable but not the primary reason for maintaining higher service levels.

C. Higher profit margins: Products with higher profit margins contribute more significantly to the company’s bottom line, justifying higher service levels to ensure customer satisfaction and repeat business.

D. Lower sales volumes: Lower sales volumes typically do not warrant higher service levels due to their limited impact on overall profitability.

Correct Answer Justification: Companies aim to maintain higher service levels for high-margin products to maximize profitability and customer retention.