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Supply Chain Management Issues

We are developing a program for a group experience Supply Chain Managers and have drafted the questions below which we will include as a part of the program. Please assist by providing detailed responses to the following questions along with citations, if any.

I. Sally Smith's supplier has quoted $1,100.00 per 1,000 pieces for a plastic molded part. Marshall wants to determine if this price is reasonable. The annual usage is 1,000,000 per year and the supplier is sole source.

Smith decides it will be necessary to develop a "should cost" for the part. Working with his engineering and production departments, they estimate that the direct material cost should be $98.90 and the direct labor cost should be $241.00 for the 1,000 pieces requested in this quote.
From a review of annual report studies Smith found that similar extrusion companies of the same size doing similar work have the following average ratios:
The Material Overhead rate =10% of Material Cost
The Indirect Factory Overhead rate =118% of Direct Labor Cost
The Sales, General & Admin. (SG&A) Expense rate =13%
Profit =10%
Calculate "should cost" for this extrusion?

2. Paul is a manufacturing commodity manager an had worked on a large request for quotation (RFQ) for printed circuit boards for the past seven months. His company was in the process of developing a new tool for semiconductor processing that could revolutionize the semiconductor manufacturing process and bring the company significant market share. All work surrounding this cross-functional product development team effort had been highly confidential. However, in a meeting with the potential winning supplier, Paul saw that the supplier had revised prints that had not been formally released. When asked, the supplier said that they had received the prints, as well as proprietary operating data, from the company's engineering team.
(i) What should Paul do? Select from the responses below:
(A) Terminate the RFQ because one potential supplier seemed to have an unfair advantage
(B) Have the supplier with the confidential documentation sign a non-disclosure agreement
(C) Ask for the offending engineerâ??s resignation
(D) Immediately notify senior management of the breach in confidentiality
(ii) What should Paul say and do to defend the response he selected from list above?

3. A supply manager is tasked with developing an in-house freight auditing process. In developing the process and testing it, there appears to be a significant problem with matching descriptions of items ordered with descriptions of items received. This could potentially cause problems in determining if the freight bills are correct. To combat this, the supply manager institutes a new policy to have:

(A) Supplier purchase orders forwarded to the responsible carrier.
(B) All order, receipt and invoice documentation matched before shipping.
(C) Restrictions on the choice of carriers to those who provide the best information.
(D) Shipments with incomplete bills of lading refused.
(i) Which of the above option should the manager select and how should he/she defend the response he/she selected?

4. As the Supply Chain Manager of a large construction road and construction equipment company your mandate for the next 12 months is to reduce costs yet assure supply in this uncertain environment. You donâ??t want to be without supply if the economy picks up and yet you want your firm to be profitable if the recovery weakens. Uncertainty abounds with the US and European budget crises, the increases in raw material prices, and your companyâ??s uncertainty in getting new orders.

Your Task:
Develop, explain and defend 5 sourcing strategies you would implement to meet the mandate from management to continue lowering costs yet maintaining supply assurance. Keep in mind the recessionary environment and low confidence level of businesses in general.

Solution Preview

1) Cost=98.90+241.00+9.89+284.38 + 13% of revenue = 634.17+13%of revenue = total cost = 90% of revenue
Revenue - 634.17+13%of revenue = 10% of revenue
Revenue = x
X - 634.17 +0.13x = 0.1x
1.03 x = 634.17
X = 615.7
Hence, price for 1000 pieces = $615.7

2) The RFP was built on company's confidential information. This information could get leaked leading to breach in confidentiality. Hence Paul should immediately notify senior management of the breach in confidentiality. Since Paul was involved in the RFP process since its inception, he was well aware of the confidential information related to cross-functional product development. Paul knew what information was provided by the company as the RFP was floated. The potential winning supplier had information related to product which was not disclosed by the company in the RFP. Hence, it becomes moral duty of Paul to let the senior management know of the situation.
Paul can work with the senior management to identify the employee who was responsible for dissemination of product-specific vital information including new product designs. If there was a non-disclosure agreement signed by employees involved in the new product development, it can be a case of breach of contract resulting in award of damages under the Contract Act.
The ...

Solution Summary

This solution provides assistance with the questions and calculations related to supply chain management issues.

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