Business Economics

1. Business Economics WEEK W/C 11th March 2013 INTRODUCTION Course 17832 Advanced Diploma Management

3. Assessment • For the company you are to complete the following: • A brief back ground on the company. • The method you would use for the procurement of goods i.e. make or buy. • The purchase strategy you would implement i.e. cooperation or differentiated or a hybrid. • The risks associated with the points # 2 and 3. • Contingencies to mitigate the identified risks. • Recommended stock management method. • An analysis of which one the company focuses on Profit/People/Planet. • The research must be thorough and contain a good analysis to support developed answers. In other words you need to argue or present your case and support it with evidence. • Anticipated written report length 4-6 A4 pages (est. 500 words per page).

4. Presentations

5. Assessment • Any problems or questions

6. Cigarette smokers • At 28 percent, China has 301,000,000 smokers, equivalent to nearly the entire population of the United States (307 million). • With each smoker inhaling an average of about 12.4 coffin nails a day, that adds up to 3,732,400,000 (3.73 billion) cigarettes consumed every 24 hours in the world’s most populous country. • According to the Tobacco Atlas, people around the world consume an astonishing 12 million cigarettes per minute. 6

7. Pork consumption • Denmark surpasses China in relative terms. • When it comes to pig production per capita, Denmark ranks world’s NO. 1.   • The interesting fact is in Denmark, the number of pigs is 2.3 times of Danish population.

9. Stock Management Optimum Purchasing Volume with a buffer stock

10. OPV with a Buffer Stock • In the following examples the figures used are the same that were used in the slides for Optimum purchasing volume without a buffer stock. • Note: the company has now decided to establish a buffer stock of 1,000 units which equals 30 days of sales or consumption

11. OPV with Buffer Stock

12. OPV with Buffer 12000 units +1000 units 2 = 7000 units

13. OPV with Buffer Stock • 6000 units +1000 units 2 = 4,000 units

14. OPV with Buffer Stock 3000 units + 1000 units 2 = 2,500 units

15. OPV with Buffer Stock The optimum purchasing volume each time is still 2,400 units. The annual costs for all the purchasing alternatives have increased by the same amount (DKK 7,500). This amount corresponds to 15% of the value of the buffer stock, which is DKK 50,000 (1,000 units at DKK 50 each).

16. OPV with Buffer Stock The annual stock and order costs are still lowest when five annual purchases are made (2,400 units each time).

17. Wilsons Formula with Buffer Stock There are no changes in Wilson’s formula even though the company now has a buffer stock. The optimum purchasing volume each time is still calculated as above.

18. OPV with Buffer Stock

19. OPV with Buffer Stock • The annual costs have increased by DKK 7,500 (DKK 25,500-DKK 18,000), • corresponding to the stock interest on the buffer stock. • The presence of a buffer stock has no influence on the optimum purchasing volume each time. • When calculating the optimum purchasing volume each time the presence of a buffer stock can be ignored completely.

20. Story of bottled water • http://www.youtube.com/watch?v=Se12y9hSOM0 • Annie Leonard

21. Homework tasks • Please complete 17.7 and 17.8 from the textbook chapter. 21