Abc Apparel Case

ABC Apparel Case Questions 1 What are the respective amounts and percentages of Materials, beat back, operating qualified and Other in total COGS for ABC? * Illustrate on an stick out pie chart showing amounts and percentages for separately slice. pic 2 What percentage of total COGS is delineate by what Mr. Price c wholeed full package (purchased finished goods)? Finished Garments instance $647 Million. This assumes the purchased finished goods ar e supplied onus and duty paid otherwise, applicable freight and duty costs would have to be added.Note that not all freight and duty can be added to this category, since freight and duty must withal support the owned supply kitchen stove operations. $647 / $2528 = 25. 6% 3 Where do you see the largest opportunities for cost reduction? List your Top 3, with strategies to pursue each one. * Explain your selections. Purchase legal injury or cost of supply (TCO) reductions in purchased finished goods. At 38% of COGS, these represent the largest single opportunity for cost management / reduction. Material worth reductions (30% of COGS) through supply chain procural practices. Other Costs. Freight and Duty represent almost 10% of COGS, which is believably ripe for improvement. Evaluate reducing carriers from 4-5 to fewer. repulse At 20%, Labor is a substantial percentage of cost but has probably already given up the low hanging cost fruit in the relocation to offshore geography, and would probably be difficult to further reduce. 4 Which functional areas would you prioritize in your cost reduction efforts? Why? adjacent the same priorities in Question 3 Purchase price or cost of supply (TCO) reductions in purchased finished goods. Apply supply chain procurement practices such as negotiated price reductions, reverse auctions, global sourcing, stooge costing, centralizing procurement, spend analysis or supplier rationalization. Material price reductions. Apply supply chain procurement practices such as negotiated price reductions, reverse auctions, global sourcing, target costing, centralizing procurement, spend analysis or supplier rationalization. Other Costs Reduction.Freight and Duty represent almost 10% of COGS, which is probably ripe for improvement. Labor Cost Reduction. At 20%, Labor is a substantial percentage of cost but has probably already given up the low hanging cost fruit in the relocation to offsho re geography, and would probably be difficult to further reduce. 5 Which internal manufacturing processes would you prioritize for improvement? Why? Evaluate moving the cloth manufacturing processes (yarn through Fabric Finishing) from US to offshore, preferably close to the cutting operations.If the fall upon materials could be sourced in-region, this would eliminate the cost, risk and be given time of shipping these products from the US to Central America / Caribbean, reducing the high freight costs. Evaluate provider Relationship Management programs with Asia cloak suppliers. Objective would be to fully spot and reduce hidden costs of supply from this region through cooperative problem-solving and joint incentives (gainsharing) for improved performance. Pursue lead time reductions and reduced lead time variability through improved logistics practices. Seek use of technologies to get wind logistics wait times and unplanned delays.Consider use of a 3PL to b ecome responsible for coordinating all Western Hemisphere logistics, negotiating with the major carriers to reduce costs, pre-clearing all shipments through customs, etc. 6 What is the ratio of internal manufacturing cost to purchased garment cost? Ratio, internal to external costs 275% Internal $1,881 External $647 7 Assuming a SG&038A rate of 24% and a rough margin of 35%, what annual revenue would you estimate for ABC? specify your calculations. pic 8 What is ABCs net profit margin, in dollars and percent? 11% $428 9 What is ABCs profit leverage effect of reducing purchased decimal point costs? How much additional revenue would be required to equal a 5% reduction in purchased prices paid? pic 5% of 1404 = $70 Million. So, reducing purchased costs by 5% reduces COGS and increases profit by $70M. To chip in an equivalent increase through sales, sales must increase by ($70/. 35) = $200 Mil lion (6%).