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A manufacturing firm redesigns its premier product to benefit from material standardization. This will entail re-tooling its manufacturing facility. The firm conducts a cost analysis using net present value (NPV) and considers four options. Option 1 is to make no change at all. Options 2, 3, and 4 represent different re-tooling configurations. The discount rate for NPV calculation is 10% per annum, and material costs are fixed for the next 3 years. The firm follows a three-year planning cycle and wishes to apply NPV over that time period to the calculations:
Option 1 Option 2 Option 3 Option 4
Re-tooling Costs $0 $500,000 $800,000 $950,000
Annual Material Costs $1,100,000 $900,000 $800,000 $750,000
NPV = r.i (l*r/
What is the 3-year NPV of the best option'
The NPV calculation takes into account the initial re-tooling costs and the discounted future material costs over three years. Option 3 presents the best NPV, making it the optimal choice for maximizing value from material standardization and investment in re-tooling.
A supply manager for JKL, Inc. is negotiating a contract with a supplier of a component. The component will be used in a new product JKL Is manufacturing and plans to bring to market early next year. Which of the following will be the MOST important provision for the supply manager to negotiate for?
In negotiating contracts for new products, flexibility is crucial, especially when dealing with un-certainties in demand and production schedules. A low minimum order quantity (MOQ) provides JKL, Inc. with the ability to order smaller amounts of materials as needed, reducing inventory holding costs and the risk of overstocking. This flexibility can be particularly important during the initial stages of product introduction when demand forecasts may be less certain. Ensuring a low MOQ can also facilitate better cash flow management and reduce the potential for waste. Refer-ences:
* Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2015). Purchasing and Supply Chain Management. Cengage Learning.
* Burt, D. N., Petcavage, S. D., & Pinkerton, R. L. (2010). Supply Management. McGraw-Hill Education.
A firm hires a new staff member in its warehousing department. As a FIRST step in the training of this employee, the warehouse manager should
The first step in training a new warehouse employee should be to explain the company's safety policy and verify understanding of all safety-related requirements (Option C). Safety is paramount in warehouse environments to prevent accidents and ensure compliance with regulations. Providing comprehensive safety training first helps instill a culture of safety and protects both the employee and the organization. Reference: Occupational Safety and Health Administration (OSHA) standards.
A retailer of high-value consumer electronics experiences a significant increase in theft within its forward and reverse logistics operations, both of which are subcontracted to third parties. Which of the following is the FIRST course of action the retailer should undertake in order to mitigate loss within the subcontractors' chain of custody?
The first course of action should be to assess internal process flow diagrams and those of the subcontractors to identify areas where the risk of loss can occur. Understanding the processes helps pinpoint vulnerabilities and implement targeted security measures. This approach ensures that the root causes of theft are addressed before investing in technology solutions. Reference: Risk management and loss prevention strategies in logistics.
Which of the following refers to an agreement between a buyer and supplier in which vendor-owned inventory is stored on the buyer's floor until it is used in production?
Consignment refers to an agreement where vendor-owned inventory is stored on the buyer's premises until it is used. The supplier retains ownership until the items are consumed, reducing the buyer's upfront inventory costs and risks associated with holding stock.
