With reference to the case study, outline the reasons Ellie had for favouring single sourcing as opposed to multiple sourcing Read the following case and answer the question that followMiddleton Fine Furniture-Supply Chain Savings Opportunities*The furniture industry is a tough industry to complete in. It is a very price-driven business and every expense must beconstantly reviewed and reduced as much as possible. Middleton Fine Furniture was feeling the pressure of the economicdownturn and needed to cut expenses. If they could not accomplish this, the only alternative was to lay off employees.Sally Sherman was the chief executive officer of Middleton Fine Furniture. In its 100 years of operations, Middleton FineFurniture was extremely proud of the fact that its employees were like family and Sally didn't feel layoffs were an option.Sally knew that until the economy turned around, her company would need to tighten its belt. However, Sally wanted morethan immediate financial relief, she want sustainable cost reductions.Sally met with Kenisha Yost, chief financial officer, and Ellie Gomez, vice president of supply chain management to discussMiddleton's financial predicament. Sally emphasized that she wanted a solution that enabled Middleton Fine Furniture tomanage expenses in a manner that potentially could result in recurring savings. She didn't just want to survive this currentfinancial crisis, she wanted to avoid it happening again.Kenisha and Ellie began brainstorming on what they could do to provide a long-term solution. Kenisha mentioned thatinventory, while essential to their business, was money on the shelf. It did no good sitting there. How could they reduceinventory without endangering the business?Ellie pointed out that the initial step to reducing inventory was to calculate their current inventory turnover ratio. Once theyhad that as a baseline, they could work on specific actions to reduce inventory. Furthermore, by analysing their currentinventory turnover ratio they could identify actions in other departments, other than just the supply department, that may becontributing to having too much money sitting on the shelf. Ellie explained that low inventory turnover can also be anindicator of poor sales, overstocking, and obsolete inventory. Issues that would need marketing's support to correct.Ellie looked deeper into Middleton Fine Furniture's supply chain management processes. She discovered that Middletonhad preferred to use multiple sourcing as its procurement method. Although multiple sourcing has many advantages, singlesourcing can be advantageous as well. Although not all the parts they procured for the furniture could be single sourced,there were several that could. These were large-volume parts where quality was critical. Consequently, switching to singlesourcing for these particular parts would ensure less quality variability and potentially less waste, a true cost reduction.Another advantage would be the opportunity to lower the cost of the parts because of the volume they would purchase froma single vendor. The increased volume for a single vendor would result in a lower purchase cost per unit for Middleton FineFumiture.As Ellie continued to ponder the problem, she reflected on the changes in Middleton's processes over the years. In its earlyyears Middleton made all the parts for its furniture. As it grew, it sourced more and more pieces from suppliers. Ellie decidedthe time was right for a make-or-buy break-even analysis on the parts they still made in-house and the parts they bought.This would be a challenging task and it would take time; however, the potential benefit of reducing costs outweighed theeffort required.Kenisha and Ellie met with Sally. They outlined the three major initiatives they were pursuing, inventory management, singleversus multiple sourcing for specific parts, and an evaluation of whether to change from make or buy where applicable.Sally believed their solutions would generate the savings they needed and the processes put in place as a result wouldfacilitate sustainable cost reductions.Source: Wisner. J. D, Tan. K and Leong. G. K.(2019) Principles of supply chain management a balanced approach (5thedition) Boston: Cengage leaming

Sourcing is a critical business decision which helps company to not only save money but also to get…

Answered: With reference to the case study,…

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...