ISM Updated CORE Exam Questions and Answers by nadia

To determine which supplier is most efficient in the use of its assets, we calculate the return on assets (ROA) for each supplier. ROA is calculated as:

ROA=Net IncomeAssets\text{ROA} = \frac{\text{Net Income}}{\text{Assets}}ROA=AssetsNet Income​

Supplier D: ROA = 50 / 20 = 2.5

Supplier A: ROA = 100 / 10 = 10

Supplier C: ROA = 200 / 400 = 0.5

Supplier B: ROA = 200 / 100 = 2

Supplier A has the highest ROA at 10, indicating the highest efficiency in using its assets to generate income.

References:

Financial analysis methods in supply chain management.

Return on assets (ROA) calculation and interpretation.

Total Cost of Ownership (TCO): TCO analysis considers all costs associated with the lifecycle of an asset.

Fleet Automobiles: For fleet automobiles, TCO includes acquisition, operation, maintenance, and disposal costs.

Disposal Costs: These are the costs related to the disposal of the vehicle at the end of its useful life, including resale value or recycling costs.

Comprehensive Analysis: Including disposal in TCO ensures that all potential costs are considered, providing a complete picture of the financial impact of owning and operating the fleet.

References

ISM. (n.d.). Total Cost of Ownership (TCO) Analysis.

CIPS. (n.d.). Understanding Total Cost of Ownership in Procurement.

The best way for supply management to effectively support stakeholders is to ensure that communications are tailored to each stakeholder. Tailoring communications means providing relevant information in a manner that each stakeholder understands and values. This approach ensures clarity, fosters engagement, and meets the unique needs of each stakeholder, thereby enhancing collaboration and support.

References

"Effective Communication Skills for Scientific and Technical Professionals," Harry E. Chambers.

"Managing Stakeholders as Clients: Sponsorship, Partnership, Leadership, and Citizenship," Mario Henrique Trentim.

Context: Evaluating bids for a delivery van with consideration of cost and potential buyback offers.

Cost Calculation:

Supplier J: $50,000

Supplier K: $52,500 with a $3,000 buyback.

Opportunity Cost: The present value (PV) factor for 5 years at 10% is 0.62.

Supplier K’s Net Cost: $52,500 - ($3,000 * 0.62) = $52,500 - $1,860 = $50,640

Comparison: Supplier J’s cost is $50,000, Supplier K’s effective cost is $50,640.

Lifecycle Savings: Supplier K offers a buyback, which provides future value and offsets initial higher cost.

Conclusion: Over the van's life cycle, Supplier K's offer results in cost savings considering the buyback.

References

Capital Budgeting Techniques by Brigham and Ehrhardt.

Present Value calculations and decision-making in procurement.