Supply Chain Management - networked thinking: even under-stock costs



Previous Part Next part



We are moved by the idea to make the world of work more human - without constant pressure for efficiency, stress and fear. As Publisher Best of HR - Berufebilder.de® with podcast, eLearning-on-demand offers and news service we share 15 years of experience with our customers (Samsung, Otto, state institutions). By the Top20 female blogger and consultant Simone Janson, referenced in ARD, ZEIT, Wikipedia .
Copyright: Artwork created as part of a free collaboration with Shutterstock. ,

A textile retailer has to order fashionable blouses of a certain size and color for the summer season. Repeat orders during the season are not provided due to the long procurement periods from overseas and the short season.

Supply Chain Management - Networked Thinking: Understock costs supply chain management

Tip: Text as PDF or podcast (please read the instructions!) or to this text complete eCourse Download. Regular promotions or news per Newsletter!


More knowledge - Podcast, PDF download, eCourse or personal advice

Here writes for you: Erwin Langmann is a consultant for risk management with a focus on transport, logistics and supply chain management. Profile

From the author:

Best of HR Berufebilder

Read



Our books

Read


To estimate the demand correctly

Overview

All unsold blouses must be sold in the retail sale at a special price. The textile retailer estimates the demand for its experiences in past seasons on 100 pieces with a possible uncertainty (variation) of +/- 30 pieces.

Tip: Text as PDF or podcast (please read the instructions!) or to this text complete eCourse Download. Regular promotions or news per Newsletter!

The net sales price is planned with 70 Euro, the purchase price with 25 Euro and the selling price at the end of the season with 20 Euro. On the basis of these few data alone, the so-called news vendor model can be used to calculate how high the maximum profit order quantity should be. In this specific case, it is about 138 pieces.

Oppurtunitätskosten

Overview

It can already be seen from this simple example that for the relevant cost minimization both cost components are necessary, namely the excess inventory costs and the substandard costs. These two cost components are the risk costs of the stock.

In the cost accounting or accounting you will search in vain for both. The most important costs are not available for a management decision! The reason: In classic cost accounting only so-called money costs are recorded, but not the alternative costs relevant for management decisions, also called opportunity costs.

Overstock costs are cheaper

Overview

The excess inventory costs per piece are the difference between the procurement costs per unit minus the selling price per unit. In our example, this is the difference between 25 Euro and 20 Euro = 5 Euro. The understock costs per piece are calculated as the difference between the selling price per piece minus the purchase cost per piece. Here is the difference between 70 Euro and 25 Euro, thus 45 Euro.

Tip: Text as PDF or podcast (please read the instructions!) or to this text complete eCourse Download. Regular promotions or news per Newsletter!

It can be seen that the sub-stock costs per piece are significantly higher than the excess stock costs per piece. An insufficient supply quantity is therefore significantly more expensive than a too large supply quantity. Therefore, you will order a quantity that will be above the mean.

Calculate the risk

Overview

The key measure in the example is the ratio of the inventory cost per item to the total out-of-stock cost per item (the so-called risk inventory cost per item) as the sum of under-inventory and excess inventory costs per item. This is called the Critical Ratio (CR). In the example, 45 is Euro divided by 50 Euro (the sum of under- and overstock costs per item).

This critical ratio is now to be classified in a normal distribution, with the available data of the expected average demand quantity of 100 pieces and the mean demand deviation of 30 pieces. This results in a critical ratio of 0,90.

Risk calculation with Excel

Overview

This means that in addition to the average amount of 100 pieces, there is still a safety buffer to add from 0,90. The security buffer of 0,90 corresponds to a so-called z-value of 1,27. If you multiply the mean deviation of 30 pieces with the z-value (the z-value is the safety factor of the normal distribution), then you get a lot of 38 pieces.

Tip: Text as PDF or podcast (please read the instructions!) or to this text complete eCourse Download. Regular promotions or news per Newsletter!

This can be calculated without problems in Excel using the function wizard with NORMINV. In a specific case, 100 + 38 = 138 blouses must be ordered. Then the costs are the lowest and the expected profit is the highest. Try it yourself with other numbers and you will be able to quickly grasp the relationships.


More knowledge - Podcast, PDF download, eCourse or personal advice

Overview


Offline download: Download this text as PDF - Read usage rights, Because we do not automatically submit the title of this text for privacy reasons: When buying in "interests" the title register if support is needed. After buying text exclusively Download at this URL (please save).

3,35 Book now


Listen to Podcast & Download MP3: You can listen to this text for free, as member even without annoying popup, or download the MP3 for a fee - Read usage rights, After the purchase page refresh, then you will find the download link here. Because we do not automatically submit the title of this podcast for privacy reasons: When buying in "interests" the title register if support is needed.

3,35 Book now


Your eCourse on Demand: Choose your personal eCourse on this or another desired topic, As a PDF download. Up to 30 lessons with each 4 learning task + final lesson. Please enter the title under "interests". Alternatively, we are happy to put together your course for you or offer you a personal regular eMailCourse including supervision and certificate - all further information!

16,20 Book now


Consultant packages: You want to increase your reach or address applicants as an employer? For these and other topics we offer special Consultant packages (overview) - For example, a personal phone call (price is per hour).

149,99 Book now


occupations pictures

You want to comment here? Please the Debate Rules comply, contributions must be unlocked. Your eMailAddress remains secret. More information on the use of your data and how you can counter this can be found in our Privacy Policy.

  1. To follow debate on this post
  2. All debates follow
  3. Debates per eMail subscribe (add link here!)
  1. Aigul Zhalgassova

    In short, what networking means in logistics: - Exciting contributionDcQEQZuKof

  2. firm-job

    Supply Chain Management - Networked Thinking Part 2: Even Understock Costs BERUFEBIL ... - Exciting contributionMpQUrwy32j

  3. firm-job

    Supply Chain Management - Networked Thinking Part 2: Even understock costs: A textile retailer must mo ... - Exciting contributionQcznqCugDt

  4. Competencepartner

    Supply Chain Management - Networked Thinking Part 2: Also understock costs: A textile unit ... - Exciting contributionfzf5cfQHU8 #Creation #Education

Post a Comment

Your email address will not be published. Required fields are marked with * .

JaI would like to be regularly informed about the latest promotions & offers Newsletter be informed.

I hereby accept the Debate Rules and the Privacy policy with the possibility to contradict the use of my data at any time.