Abc Apparel Case

ABC Apparel Case Questions 1 What are the respective amounts and percentages of Materials, excavate, hit and Other in total COGS for ABC? * Illustrate on an jump pie chart showing amounts and percentages for each(prenominal) slice. pic 2 What percentage of total COGS is satisfactory by what Mr. Price c completelyed full package (purchased finished goods)? Finished Garments oppose $647 Million. This assumes the purchased finished goods are supplied charge and duty paid otherwise, applicable freight and duty monetary values would have to be added.Note that not all freight and duty can be added to this category, since freight and duty must as well as support the owned supply image 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 equipment casualty 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 damage reductions (30% of COGS) through supply chain procural practices. Other Costs. Freight and Duty represent almost 10% of COGS, which is in all likelihood ripe for improvement. Evaluate reducing carriers from 4-5 to fewer. labor At 20%, Labor is a substantial percentage of cost but has probably already given up the low hanging cost fruit in the relo cation to offshore geography, and would probably be difficult to further reduce. 4 Which functional areas would you prioritize in your cost reduction efforts? Why? succeeding(a) 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, design 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 relocat ion to offshore 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 pick out materials could be sourced in-region, this would eliminate the cost, risk and antedate time of shipping these products from the US to Central America / Caribbean, reducing the high freight costs. Evaluate supplier Relationship Management programs with Asia fit suppliers. Objective would be to fully determine 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 constitute logistics wait times and unplanned delays.Consid er use of a 3PL to become accountable 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&A rate of 24% and a thoroughgoing(a) margin of 35%, what annual revenue would you estimate for ABC? supply 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 spot 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 relent an equivalent increase through sales, sales must increase by ($70/ . 35) = $200 Million (6%).