-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.