Supply Chain Management Case Analayis Essay Example | Topics and Well Written Essays - 750 words

Supply Chain Management Case Analayis - Essay Example Effective supply chain management (based on collaboration between a manufacturer and retailer) allows companies to reduce costs and anticipate the demand. Another important factor is improved technology (the internet connection and computer databases) which improves coordination and control mechanisms (Simchi-Levi et al 2008). 2. In order to improve the situation, the companies should cooperate and plan their activities together. Also, they should pay a special attention to scheduling stage. Scheduling of production/operations covers detailed planning of quantities and times, facilitating the efficient and continuous operation of the process. Where smoothing is difficult to achieve, scheduling could play the role of a cushioning device. For example, it is difficult to make customers change their buying behavior, to buy diapers size two instead of size one. Instead of smoothing demand (externally) companies try to deal with the problem internally by producing at a constant rate throughout the year and building up inventories or by stepping up the production rate as the seasonal peak in demand occurs. Even if Kimberly-Clark opens its own stores, it will not benefit the company and can damage sales in Costco stores. The main problem is that Kimberly-Clark has limited product range and most buyers prefer to s ave time and visit supermarkets where they can buy goods and products for the whole family. Kimberly-Clark and Costco should cooperate and implement a new advertising campaign aimed to attract potential customers and popularize Kimberly-Clark products (Simchi-Levi et al 2008). 3. For Costco, the main advantages of supply chain management are low inventory cost and no need for ordering itself, 'full shelves' and low warehousing cost, low price which attracts consumers and saves on staff. For Kimberly-Clark, the main advantages are effective data analysis and forecasting of demand, stable sales and control over sales. This process helps Kimberly-Clark to plan its production and avoid overproduction of certain products. In general, the advantage of supply chain management is flexibility of all operations. In contrast, by encouraging the use of large batches, it deters a firm from becoming flexible in responding to changing customer needs. "A proposed supply chain is one in which all the operations that go toward manufacturing a particular product and its variations are grouped together" (Christopher 2005, p. 54). 4. The main advantage if in-house operation is a quick response, reduced time and control over the supply. Also, it allows the company to deliver better service and improve overall service level. The main disadvantage is limited number of products and dependency upon a single manufacturer. The advantages of external sources are market analysis and opportunities to switch from one supplier to another, buy low cost and high quality products from different suppliers. Many customers are brand loyal seeking a particular brand or a product. Cooperation (strategic alliance) with one company limits market opportunities of the retailer. In order to achieve greater value through reductions in both batch volumes and in barriers between operations, it would also be worthwhile and cost effective to use external sources of supply.

GDP growth Essay Example | Topics and Well Written Essays - 1500 words

GDP growth - Essay Example This paper seeks to enquire how far the title of this essay "In today's economic climate, any company that hasn't borrowed as much as it can is crazy" is relevant within the context of corporate finance principles. That is, when business opportunities abound, is it wise on the part of the firms to watch as silent spectators without grabbing them and execute them by means of borrowed capital. The title raises two hypotheses, debt is preferred to equity and in spite of sufficient equity available, a company should borrow maximum possible in the pretext of the resultant economic climate of liberal consumption. Firms should invest money only if the project earns more than the hurdle rate which is generally higher in projects with high risks and investment pattern will be reflected in the ratio of financing mix of equity and debt. Cash flows and their timing determine rate of return on projects. If there are no profitable investments available, the stock holders' funds must be returned to them. Objective behind these principles is maximising the value of the firm as per the traditional theory of corporate finance. ... Borrowing facilitates availing of tax benefit and it is higher in case of higher tax rate. It creates a disciplining environment by which greater separation between management and stock holder is achieved which is a greater benefit as per the principles of corporate governance. Disadvantages are firms are exposed to bankruptcy cost due to higher business risk, agency cost due to greater separation stock holders and lenders and financing flexibility for the future is lost because of greater uncertainty regarding future financing requirements. A debt carries with it a commitment to make future payments which are tax deductible and future defaults in payments can result in loss of control to the lenders. In a hypothetical situation of no taxes (tax free), no separation between managers and stockholders, no default probability, and presence of certainty in future funds requirements, default risk, agency cost and capital structure become irrelevant and firm value is divested of its debt r atio as posited by the Miller-Modigliani theorem. According to this theorem, firm value will be decided by cash flows and there will be no question of leverage. (Damodaran) Real options In the present economic scenario of mergers and acquisitions for bailing out weak firms or as an exercise of creating a competitive advantage, companies require large volume of funds and committed bank facilities are useful in financing their real options to carry out M & A transactions. In 2000, Bank of America advanced bridge loan to Club Corp for debt acquisition as part of M & A exercise. Similarly Bank of America provided Ferrellgas a bridge loan of $ 175 million to carry out acquisition of Thermogas. (Patrick C 2000) Debt-to-Equity Ratio This is the ratio of