Reference no: EM131192169
Supplier selection and order allocation:
Case study - Introduction:
One of the most strategic decisions facing a company in supply chain management is the purchasing strategy. In most industries, cost of raw materials and procured components consume a significant portion of the company's budget. For example, in technology firms, purchased materials and services account for up to 80% of the total product cost.
TABLE
Data for Mighty Manufacturing
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Scenario A
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Scenario B
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Total sales ($000)
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$76,537
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$75,092
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Return on assets
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62.03%
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57.93%
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Average time through supply chain (days)
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42.68
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40.03
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Order cycle time to customer (days)
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4.38
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3.42
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Achieved fill rate
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98.95%
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97.08%
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Average production capacity utilization
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89.22%
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82.47%
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The average quality levels that each buyer requires from all the suppliers are given as follows:
Buyer 1: 6%
Buyer 2: 4%
TABLE:
Fixed Cost of Suppliers
Supplier Fixed Coal
1 53500
2 $3600
TABLE
Lead Time of Products in Days
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Product
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Buyer
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Supplier
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Lead Time
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1
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1
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1
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8 |
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1
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1
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2
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17 |
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1
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2
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1
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14 |
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1
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2
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2
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24 |
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2
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1
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1
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28 |
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2
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1
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2
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8 |
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2
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2
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1
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16 |
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2
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2
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2
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12 |
TABLE
Quality of Product (Measured by Percentage of Rejects)
Product Supplier Quality (%)
The average quality levels that each buyer requires from all the suppli¬ers are given as follows:
Buyer 1: 6%
Buyer 2: 4%
The price break points of the suppliers are given in Tables 5.25 and 5.27. Level 1 break points represent the quantity at which price discounts apply. Level 2 break points represent the maximum quantity of a par¬ticular product a supplier can provide to that buyer. For example, for product 1, Buyer 1 and Supplierl, the first 85 units will cost $180/unit and the next 65 units (i.e., 150-85) will cost $165/unit; no more than 150 units of product 1 can be purchased from Supplier 1 by Buyer 1.
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