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Which measure of supply chain performance focuses on reducing inventory costs relative to the cost of goods sold?
- a)Efficiency
- b)Responsiveness
- c)Effectiveness
- d)Collaboration
Correct answer is option 'A'. Can you explain this answer?
Verified Answer
Which measure of supply chain performance focuses on reducing inventor...
Efficiency in supply chain performance refers to minimizing costs by reducing inventory investment or value relative to the cost of goods sold. This is often measured through inventory turnover and weeks of inventory on hand.
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Which measure of supply chain performance focuses on reducing inventor...
Understanding Supply Chain Performance Measures
In supply chain management, various performance measures are critical for evaluating effectiveness. One key measure is efficiency, which emphasizes minimizing costs and optimizing resources.
Efficiency and Inventory Costs
- Definition: Efficiency in supply chain performance refers to the ability to maximize output while minimizing input costs.
- Focus on Inventory: This measure specifically targets inventory costs relative to the cost of goods sold (COGS). A lower inventory cost means a company can allocate more resources to other areas, enhancing overall profitability.
Importance of Reducing Inventory Costs
- Cost Savings: Reducing inventory costs can lead to significant savings. High inventory levels often incur storage costs, insurance, and potential obsolescence.
- Cash Flow Improvement: By minimizing inventory, companies can improve cash flow, allowing for reinvestment into operations or other strategic initiatives.
Efficiency vs. Other Measures
- Responsiveness: This measure focuses on how quickly a supply chain can react to changes in demand, which may not prioritize cost reduction.
- Effectiveness: Effectiveness assesses how well a supply chain meets customer needs, which might involve higher costs to ensure quality service.
- Collaboration: This focuses on partnerships and information sharing across the supply chain, often enhancing efficiency but not directly targeting cost reduction.
Conclusion
In summary, option 'A' (Efficiency) is the correct answer as it directly relates to reducing inventory costs relative to COGS, making it a pivotal measure for enhancing supply chain performance. Understanding this relationship helps organizations streamline operations and improve financial outcomes.
In supply chain management, various performance measures are critical for evaluating effectiveness. One key measure is efficiency, which emphasizes minimizing costs and optimizing resources.
Efficiency and Inventory Costs
- Definition: Efficiency in supply chain performance refers to the ability to maximize output while minimizing input costs.
- Focus on Inventory: This measure specifically targets inventory costs relative to the cost of goods sold (COGS). A lower inventory cost means a company can allocate more resources to other areas, enhancing overall profitability.
Importance of Reducing Inventory Costs
- Cost Savings: Reducing inventory costs can lead to significant savings. High inventory levels often incur storage costs, insurance, and potential obsolescence.
- Cash Flow Improvement: By minimizing inventory, companies can improve cash flow, allowing for reinvestment into operations or other strategic initiatives.
Efficiency vs. Other Measures
- Responsiveness: This measure focuses on how quickly a supply chain can react to changes in demand, which may not prioritize cost reduction.
- Effectiveness: Effectiveness assesses how well a supply chain meets customer needs, which might involve higher costs to ensure quality service.
- Collaboration: This focuses on partnerships and information sharing across the supply chain, often enhancing efficiency but not directly targeting cost reduction.
Conclusion
In summary, option 'A' (Efficiency) is the correct answer as it directly relates to reducing inventory costs relative to COGS, making it a pivotal measure for enhancing supply chain performance. Understanding this relationship helps organizations streamline operations and improve financial outcomes.
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Which measure of supply chain performance focuses on reducing inventory costs relative to the cost of goods sold?a)Efficiencyb)Responsivenessc)Effectivenessd)CollaborationCorrect answer is option 'A'. Can you explain this answer? for B Com 2025 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about Which measure of supply chain performance focuses on reducing inventory costs relative to the cost of goods sold?a)Efficiencyb)Responsivenessc)Effectivenessd)CollaborationCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for B Com 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which measure of supply chain performance focuses on reducing inventory costs relative to the cost of goods sold?a)Efficiencyb)Responsivenessc)Effectivenessd)CollaborationCorrect answer is option 'A'. Can you explain this answer?.
Which measure of supply chain performance focuses on reducing inventory costs relative to the cost of goods sold?a)Efficiencyb)Responsivenessc)Effectivenessd)CollaborationCorrect answer is option 'A'. Can you explain this answer? for B Com 2025 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about Which measure of supply chain performance focuses on reducing inventory costs relative to the cost of goods sold?a)Efficiencyb)Responsivenessc)Effectivenessd)CollaborationCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for B Com 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which measure of supply chain performance focuses on reducing inventory costs relative to the cost of goods sold?a)Efficiencyb)Responsivenessc)Effectivenessd)CollaborationCorrect answer is option 'A'. Can you explain this answer?.
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