Logistics Control - Part 1 PDF

recorded class course I've I invite all in lab first level students they make sure all parts of this course is understandable however you can always email me whenever you have any question so as a apart sequence in logistics control module supply chain management discipline integrates flows a...

recorded class course I've I invite all in lab first level students they make sure all parts of this course is understandable however you can always email me whenever you have any question so as a apart sequence in logistics control module supply chain management discipline integrates flows and movements from suppliers to customers so it includes of course manufacturing operations per se purchasing transportation inventory and distribution the principle is so I underline these words the coordinate and link all those activities into a seamless process the best companies around the world are reaching powerful positions and competitive advantages because they integrates simply in supply chain management programs so as we see manufacturing is in the heart of the process it turns to perform first of all the quality of the products and services related as other advantages reducing inventory levels of falling wastes and lowering transaction costs in this posture also deadlines appears as an important part of supply chain management to remain competitive companies must seek new solutions to important supply chain management issues such as modern analysis load planning route planning distribution air work and W see our working capital requirements the following slides shows the main activities as part of their company's supply chain management functions so we have positioned the production management system in art of a supply chain management process so let's see together the important parts of a supply chain management scheme a so we find financial flows informational flows and physical flaws it starts whether the relationship with suppliers and ends with customers in this chapter we will speak mainly about the financial WC are the financial working capital requirement that concerned suppliers manufacturing venturi retailers and customers so this part shows the main goal of a supply chain management which is a controlling and performing all kinds of flows so to get that part of management we have to use planning and decision support tools so a manga those decision support tools are we find that WC are the WCR is the abbreviation of working capital requirements so remember this definition that I will say it is very important the WCR is the amount of cash liquidity of money may be liability that a company will need any time during an exercise or during a production process so why do we need this amount of money to honor the obligations so a company we need this amount of money and any time to honor its obligation let me repeat the word to honor its obligation the subject late let's take these examples if we consider a business buying gifts at 100 with no stock immediately says the goods for 250 the point is no deadlines are involved you pay immediately your supplier and at the same time you are paid by your customer the question is how much money do you need to start another business the answer is simple zero now let's consider the same business the difference here is the existence of 30 days stock so the question is after the 30 days expired how much cash do need to fund the inventory the answer is 500 always with the same case but now after 30 days holding the goods in our warehouses we sell 104 or from the 500 that we have already in our stock the 100 are sold at 250 which is the amount we will receive from our customer after a long 60 days we follow the same strategy by giving an important question how much money will we need at any time to honor our obligations the same amount of money we have in our inventory plus what we owe to our customers so the formula is a 400 plus 250 the WC r is equal to inventory plus once we alter our customers which is account receivable on the other side if we consider our supplier giving us for example forty five critic term so 45 days of course what we have to do we have to try to raise to increase this amount due to the supplier that will help us to reduce our working capital requirements so we have a general formula now that we absolutely need to learn net working capital requirement is equal to inventory plus accounts receivable minus accounts payable so whenever the inventory plus accounts receivable is higher than accounts payable the net working capital requirements is a higher and it is bad for the financial situation of a company as the business grows rapidly each sales increase which is interns increases that accounts receivables due from customers and the amounts of inventory it needs to hold these rapid increases working capital requirements can cause a business to run out of cash unless it has adequate finance in place to deal with this year so let's take an example we suppose an annual revenue of one hundred eighty two thousand five hundred and the business over 45 days the customers took pay to customers to pay so we want to convert those 45 days into an amount of money we need just to calculate the average daily revenue one hundred eighty two thousand five hundred divided by 365 five and multiplied by the number of days given to our customers the results will be twenty two thousand five hundred on average at any time the working capital requirements resulting from offering credits or customers will be twenty two thousand five hundred itzá representing twelve point three percent income of the club revenue so what we have seen in the previous slide show its concern accounts receivable reminders now what about inventory as we know stock involve costs so in calculating WCR for inventory we need absolutely to add posts we know already this course is equal to revenue minus margin or we can use this formula to calculate the percentage of course cost of sales is equal to revenue by 1 minus the cross margin percentage to clarify more we have an example always the same example 180 2500 annual revenue and 30 days inventory period here we have 40 percent of gross margin which means 60 percent of course so let's calculate the inventory WCR so we have inventory is equal to days of inventory by daily cost of sales so the daily cost of sales is the daily revenue by the cost of sales so why here we include costs simply because inventory involve costs so the results will be nine thousands in percentage in comparison with the global revenues sir represents in four point nine percent we do agree that the objective of every management is to reduce the WCR which means to reduce accounts receivable and inventory on the other hand accounts payable must increase last parts of WCR calculation is accounts payable the method of calculation is the same as inventory which mean we include course percentage to determine the amount of money that could reduce our needs and cash we have 20 days given by our suppliers to us which results to an amount of six thousands so it's the same calculation as we do it for inventory from here we can clearly observe the importance of negotiating better terms with all partners customers and suppliers if we take the general formula to calculate the WCR look at here the accounts receivable plus inventory - accounts payable it will give us a net capital requirements of twenty twenty-five thousand five hundred which representing thirteen point nine percent of the global revenue so at any time during the whole accounting exercise the company will need decent amounts of one in twenty five thousand five hundred to honor its obligations may be to pay its employees to pay fixed costs or to finance other assets - all in lap first other students please do this exercise and send it to me by email good luck