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Aggregate Planning Essay

918 words - 4 pages

1

Supply chain: the facilities, functions, and activities that

are involved in producing and delivering a product or
service from suppliers to the end customer.

focusing on integrating and
managing the flow of goods, services, and information
through the supply chain in order to make it responsive
to customer needs while lowering total costs.

Supply chain management:

Supply chain strategy: designing a firm’s supply chain to

meet the competitive priorities of the firm’s operations
strategy.
2

The goal is to reduce costs as well as increase performance which
3
can be accomplished by better forecasting, inventory management,
operations planning and scheduling, and resource ...view middle of the document...

Average
aggregate
inventory
value

Inventory
turnover

Days of
supply
7

Average aggregate inventory value = the total value of
all items held in inventory for a firm.
AGV = (# of A items)(Value of each A)+(# of B items)(Value of each B)+…

Inventory turnover ratio:
showing how many times a company's inventory is sold
and replaced over a period.
Inventory turnover =

Annual sales at (cost)

Average aggregate inventory value

Low inventory turnover means that a company has poor
sales or too much inventory while high inventory
turnover means strong sales performance.
8


Days of supply:
It shows how many days it takes a company to sell its
inventory.
High value of days of supply means that the firm has a
lot of inventory sitting around.
Days of supply =

Average aggregate inventory value *365 days
Cost of goods sold

If the cost of goods sold during the year has been $1
million and the average inventory value for the year has
been $100,000, then the inventory turns is 10. It takes
365/10= 36,5 days on average to cycle the whole
inventory.
9

The Eagle Machine Company averaged $2 million in inventory last
year, and the cost of goods sold was $10 million. The best inventory
turnover in the industry is six turns per year. If the company has 52
business weeks per year, how many weeks of supply were held in
inventory? What was the inventory turnover? What should the
company do?

 Weeks of supply =
$2 mil/($10 mil)(52 wks.)
= 10.4 weeks
 Inventory turns =
$10 mil./$2 mil. =
5 turns/yr

10


Total Revenue:
Increasing the percent of on-time deliveries to customers, for
example, will increase total revenue because satisfied
customers will buy more services and products from the firm.
Cost of Goods Sold:
Being able to buy materials or services at a better price and
transform them more efficiently into services...

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