Reference no: EM13491926

-Classic Homes manufactures modular kitchens and bathrooms and the managing director, Amy Jones, is concerned that the total number of suppliers has increased from 20 to 60 over the past three years. He is sure that this is insufficient and has asked you as the new management accountant to investigate this. You have decided to undertake an activity-based analysis of supplier costs and supplier performance, and will focus initially on the four suppliers of wall and floor tiles.

 

Activity	Cost per unit of activity driver
Order material	$200 per order
Receive order	$1500 per delivery
Inspect order	$250 per delivery
Return material to supplier	$210 per return
Downtime due to late delivery	$260 per hour
Rework due to low quality tiles	$50 per hour
Pay supplier	$190 per invoice
Dispute invoiced amount	$480 per dispute

 

Over the past year, the four suppliers of tiles consumed the following number of activities:

 

Activity	Ardex	Slatecrete	Bath Depot	Bath & Tiles
Order material	20	50	30	10
Receive order	20	80	10	20
Inspect order	5	25	5	0
Return material to supplier	3	8	0	0
Downtime due to late delivery	20	60	10	10
Rework due to low quality tiles	11	10	0	0
Pay supplier	12	48	12	10
Dispute invoiced amount	2	0	13	2
Supplier manager time	10%	15%	10%	5%
Cost of material purchased	$60000	$120000	$70000	$30000

 

The Supplier Manager employed to manage suppliers is paid a salary of $90,000.

Required:

1.    Calculate the total cost of ownership and the supplier performance index for each of the four suppliers.

2.    Discuss the relative performance of each supplier.

3.    Suggest four non-financial performance measure that could be used to assess the performance of the tile suppliers

4.    Describe the benefits of supply chain management for an organisation and the ultimate customers.