Page 93 - DMGT525_MATERIALS_MANAGEMENT

Materials Management

Notes First, they measure service in terms of the perfect order—the order that arrives when promised,
complete, priced and billed correctly, and undamaged. The perfect order not only spans the
supply chain, as a progressive performance measure should, but also views performance from
the proper perspective, that of the customer.
Second, excellent supply chain managers determine their true profitability of service by
identifying the actual costs and revenues of the activities required to serve an account, especially
a key account. For many, this amounts to a revelation, since traditional cost measures rely on
corporate accounting systems that allocate overhead evenly across accounts. Such measures do
not differentiate, for example, an account that requires a multifunctional account team, small
daily shipments, or special packaging. Traditional accounting tends to mask the real costs of the
supply chain—focusing on cost type rather than the cost of activities and ignoring the degree of
control anyone has (or lacks) over the cost drivers.
Deriving maximum benefit from activity-based costing requires sophisticated information
technology, specifically a data warehouse. Because the general ledger organizes data according
to a chart of accounts, it obscures the information needed for activity-based costing. By maintaining
data in discrete units, the warehouse provides ready access to this information.

Task Develop a method for evaluating the performance of the supply chain in an
organization. Mention the factors which you will take into consideration.

Self Assessment

Fill in the blanks:
11. Surveys, interviews, and industry research have been the traditional tools for defining
key ………………… criteria.
12. The goal of research is to find the degree of ……………….. and variation needed to
maximize profitability.

13. Companies have traditionally taken a ………………. approach to logistics network design
in organizing their inventory, warehouse, and transportation activities to meet a single
standard.
14. Sales volume ……………….. sharply, as excess inventory had to be consumed by the
marketplace.

15. The 4th principle in implementation of supply chain management in an organization is to
……………………….. product closer to the customer and speed conversion across the
supply chain.

88 LOVELY PROFESSIONAL UNIVERSITY