gear Thonn. err yout The avergye poe should be ealoal eet oF the aver pret fori, 3) Range of 8 the basis of quanten * °Y%N8 goods and services in a The Saeco Te refers to meaner Rs . Y relntea with a Deloe Fluctuation in a given a 8 time period, 9 Supply Quality: It is mensarement ofthe quay f goods spl 7) Supply Lead Time: . ° * refern to measurement ofthe average tie between placing an order andthe z Product SAGA. Overall Trade-Off. i Sourcing decisions should be pe og intra ugh tape Surplus affects sales ratio, production and in ing the sharo of the total surplus in the supply chin, Th tan influence the total surpos in a supply chal, The hee eet formation a ee outsourcing on responsiveness and efficiency. igure 5.13 depicts the positive and negative pr 5 On contrary, a company should keep all the activit ina supply chain in-house in case outsoureing proves Sourcing Driver Tncreases EMiclency 1) Pocusing on in-house. to raise supply chain surplus. y Merete ie se Efficiency 54.7. ° Pricing : Increases Effectiveness. Pricing refers to finding the: prices at which 1) Outsourcing the processes TC aaive nin att | — purchasing behaviour is greatly affected by pricing, |” {eltist ventory shreeeh pope For example, in case a transportation company is SE OR taney nbd onder early and those who believe in responsiveness will wait and place the order when they actually require the product. Placing of early order is unlikely when the pricing is not affected by the lead time. The logistic function can be separated from supply chain managemeat based on the definitions of these drivers. Inthe past few years, cross-functional drivers have started playing significant role in the supply chain surphus, Although logistics is a crucial aspect, yet there are three more cross-functional drivers of supply chain management. of Pricing Decisions en er scales is shown in many supp % y 2 ‘big firms, The cost of loading and toa fc place is cheaper than seoding itv 4-5 differs el a inva way that supply chain reflects economy of quentity that any rv. However, ce si fe ws f ‘Pototes with te economy of cal leit might rove 19D8 S598 companies like Costco follow eve) a Low Pricing versus High-Low Pring! ow, wil ot ft ty ic consistent low pricing, On carr, fee 2 8 er ety However, high-low pricing ae tO all in demand wes on ‘amfiles in 2 sunotv chai.3) Fixed Price versus Menu Pricing: It is essential for the company to take decision regarding keeping fixed Price or offering a price menu where prices vary due to some factors such as lead time or location. Pricing menu is desirable when there are severn) factors which can affect the pricing like value to customers and marginal supply chain cost, For example, Amizon {s offering 1 menu where prices vary consistently based on certain attributes. 5.4.7.2. Role Play of Pricing The pricing play the following role; 1) Role im the Supply Chain: Pricing refers to the procedure which helps a firm to ascertain the price at which goods and services should be offered to the customers. Pricing affects both the prospective ‘buyers and the desires of the customers, It has a direct influence on the responsiveness and demand profile of the supply chain. Price can also serve as a tool for manipulating demand and supply. For example, discount can be offered for managing surplus supply. Similarly, off-season discount can help in moving the stocked items, Summing up, pricing is one of the crucial factors which afféct the degree and kind of demand in the supply chain, 2) Role im the Competitive Strategy: Pricing is a crucial factor which belps the company in its competitive strategy implementation. For example, Costco which is a membership-based wholesaler company of US designed a pricing strategy where pricing is kept steadily low. Customers want the Prices to be low and quite okay if the product is available in the limited quantity. The consistent Pricing also leads to stable demand. As Costco is catering to well-off sector, it formulated a suitable supply chain. The objective of supply chain of Costco is efficiency though it can be at cost of responsiveness. On contrary, some companies formulate pricing policy where prices vary with the lead time desired by the customers. The pricing policy of these companies is catering to a wider petceptive which include segments, the customers who desire efficiency and the customers who. desire tesponsiveness. In such a situation the structure of the supply chain should be sich that caters to'two 5.4.7.3. ° Pricing-Related Metrics ‘The various pricing related metrics are described below: D Profit Margin: The metric which measures profit as a percentage of revenue is known as profit margin. optimising the prices (including aspects like customer types, scope, type of margin, ete.), a firm has to ‘inspect a wide range of profit margin metrics. 2» Days Sales Outstanding: This metric measures the average time between the closing of sales and collection of cash. 3) Incremental Fixed Cost per Order: The cost which is not dependent on the size of order is measured by incremental fixed cost per order. This comprises changeover costs at a production plant or order Processing or costs of transportation which are incurred independent of the shipment size at a mail order firm, 4) Incremental Variable Cost per Unit: The costs (like picking order costs at a mail-order firm or variable costs at a manufacturing firm) are the incremental costs that change with the order size, 5) Average Sale Price: It calculates the mean price at which an operation in the supply chain was carried out in a certain period. Through measuring the price by the amounts sold at that level the average must be obtained. Average Order Size: The average amount per order is estimated. The incremental variable cost per unit, 2 incremental fixed cost per order, order size and average sales price helps in determining the coatribution from carrying out the operations of supply chain. ; D Range of Sale Price: The maximum and minimum selling price per unit is estimated over a specified Range of Periodic Sales: calculates both the minimum and the maximum amount sold in a period: . f fa ansiven period of time. The aim of tis metic is o determine the inerrlation eee th ene errant is shift elon hr males chominar in the acingS474, a ee Overall Trade-Off — Increase Firm Profi . its Increasing the profits of the firm should be objective of all the Pricing decisions. This . This necessitates a Pricing Driver 1) EDLP Pricing that foster stab si demand 2 2) Cost base and standard pricing format Increases Effectiveness 1) Differential Pricing that attracts customers 2) Demand base and variable pricing format ‘Figure 5.14; Price Driver’s Effect on Efficiency and Etfectiveness Several other pricing tactics may take away the market share, preserve the market share or reduce the costs of upply chain. Customers with different needs can be attracted through differential pricing provided that such technique reduces costs or increases income or both. Ey EXERCISE 5.5.1. Multiple Choice Questions 1) Enablers of SCM are 1) Facility b) Transportation 6) Inventor 6) All of the above Coaversion Cycle (CCC) is equal to : Sibiosps0~ pro ‘ DIG DSo+ DPO )DIO+DSO+DPO —_ 4) None of these 3) _eam be defined as the “ability to react purposefully and within an appropciate time-scale to Zostomer demand or changes in the marketplace, to bring about or maintain competitive advantage”, a) Efficiency b) Effectiveness ¢) Responsiveness 4) Competitive advantage ° Sse ee 9 Reet ae oan i Hig cd Commer Sein ct ¢) Cost ) All of the above p re ee ¢) Both a and b 1d) None of these Components of facility dei oval Design et ton tt ‘Which. show discrepancy between the firm's actus! serie tae 8) Gap 2 ma © 4d) Gap 5 4 2G ctciogy ofits own ors Wit eo