To:

From:
Date:

Instructor Name
Student Name
28/10/2015

Subject:

SCM Performance Improvement

This memo is indented to analyze the companys performance with regard to its supply
chain management and recommend procedures and procedures which could be
implemented to increase or enhance companys performance. The financial indicator used
for this procedure is the return over assets.
After analyzing companys situation it was observed that the companys inventory system is
not up to the mark that is the company is taking significant time to sell of its inventory, which
in turn increases companys inventory expenses such material costs, warehouse expenses
and stock costs.
In order to implement JIT system, it was important to improve its existing distributions and
marketing procedures and practices. Thus it recommended increasing the companys
distribution costs by 3% to 8.2% to ensure proper delivery channels are utilized.
Moreover to increase the sale as per JIT system, it is recommended that company carries
out extensive marketing campaign which would increase companys selling costs by 30% to
6.5%. Improved marketing would also ensure that the companys inventory is sold out more
quickly.
As a result companys material costs would be decreased by 14% to 30% due to decline in
warehouse costs or holding costs since the company will hold very less or no inventory.
Accordingly there will also be a decline in the overhead costs of 25% to 15% due the fact
that company will hold fewer inventories which would require lesser overhead expenses.
Moreover since JIT system would be implemented and improved marketing campaign
would be carried out, it could also be said that companys Days inventory outstanding would
decrease by 17% to 100.
Additional to the above changes and recommendations, it was also observed that company
spends a lot on less productive activities such as administration expenses. Thus it
recommended to the management that company should focus on its main goals and it
should outsource its support departments in administration such as finance or accounting
department which improve companys efficiency along with reduction in administration costs
to 8%.