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Answer the following questions: (18 points total)
1) How would you apply the Theory of Constraints to a quick-service automobile oil change service? Explain. (3 points)
2) What are the implications of a negative cash-to-cash conversion cycle? Give a specific example (3 points)
3) Select two types of supply chain risks and in your own words, explain in-depth how supply chain managers can help mitigate these risks. (5 points)
4) A major automobile manufacturer located in Georgetown, Kentucky, has two certified vendors that produce brake pads with the following information. Audubon Manufacturing is located in Columbus, Ohio, and LaPlaya Manufacturing is located in Monterrey, Mexico. The automobile assembly factory is assumed to operate 340 days per year. Details for the annual part and logistics cost for Audubon and LaPlaya for an annual demand of 1,000,000 is given below:
| Total Annual Logistics Cost (TALC) Analysis | Audubon | LaPlaya |
| C = Wholesale or retail price per unit considering price breaks | $11.80 | $10.85 |
| Tc = country import or export tariff cost per unit, if any | $- | $0.46 |
| Tm = cost per unit to ship by air, ship, truck and/or rail | $0.90 | $1.25 |
| Sub Total (C + Tc + Tm) | $12.70 | $12.56 |
| D = Forecast annual demand in units = | 1,000,000 | 1,000,000 |
| Q = Typical order quantity in units= | 50,000 | 100,000 |
| Average Number orders per year (D/Q) = | 20 | 10 |
| Co = cost to place one order = | $155.00 | $195.00 |
| Ch = cost to store one unit in inventory for one year = | $1.45 | $1.10 |
| L = lead time in days = | 45 | 100 |
| Yd = days per year = | 340 | 340 |
| d = average daily demand in units (D/Yd) = | 2,941.18 | 2,941.18 |
| (C + Tc + Tm)*D | $12,700,000 | $12,560,000 |
| Co(D/Q) | $3,100 | $1,950 |
| [Q/2 + d*L]Ch | $228,162 | $378,529 |
| TALC = | $12,931,262 | $12,940,479 |
4a) Look at the information given. What supplier and order quantity do you recommend based on total costs? Explain your answer (4 points)
4b) List other criteria that you might use to make the final supplier decision. (3 points)
Explanation & Answer
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Surname 1
Student’s Name
Professor’s Name
Course
Date
Supply Chain Management
1) How would you apply the Theory of Constraints to a quick-service automobile oil
change service?
An organization focused on enhancing its business operations uses the constraint theory as a
management philosophy to achieve its goals. In applying the constraint theory, an organization
identifies its goals and the impediments to the implementation of those goals to improve its
business operations by mitigating and eliminating the limiting factors. In such a business the
goals can be to offer outstanding services to customers and expand the capacity of the firm. The
limiting factors are the emergence of electric cars and government regulation on fuel vehicles
due to environmental degradation from pollution. In applying the theory, I would seek to come
up with measures to ensure that my business can cut across the emerging market trends and
guarantee its continuity.
2) What are the implications of a negative cash-to-cash conversion cycle? Give a specific
example
Cash-to-cash conversion involves the amount of time in the form of days taken by a
company to convert resources into cash flows. A negative cash cycle is desirable because the
lower the cash cycle, the better the company’s finance looks. For a negative cash cycle, one does
Surname 2
not pay for inventory or materials up to the time of selling the final product that they produce.
The situation translates to using working capital efficiently and having available cash run other
transactions. A particular example is the Apple Company that has a negative cash conversion
which means that the company gets paid by customers long even before they pay for their
suppliers.
3) Select two types of supply chain risks and in your own words, explain in-depth how
supply chain man...
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