Business Ethics
Essay by Roberto David • February 17, 2016 • Coursework • 391 Words (2 Pages) • 1,194 Views
2. What is the Value in use of the Integrated Stock Management (ISM) program to pharmacist relative to the incumbent card-based system? -Build a customer value model to persuasively demonstrate this (please use word equations to illustrate your calculations and clarify the assumptions you are making. -Since hiring part-time PA’s is according to the case an ‘’impractical solution’’, please assume that PA’s can only work full time. Please carefully reflect on different options how the time savings can be traformed into value for the pharmacy
The reason why a focal firm chooses for supplier A instead of B is most of the times not only based on the price of the product; during the use of the product, the focal company also makes costs.
Therefore, a supplier can also emphasise on the savings next to the price of the product. By doing so, a company can still convince the focal company to choose for them.
Based on the information in the case, the following value-in-use analysis has been conducted;
[pic 1]
Explaination references:
- Investment cost of consulting the pharmacy= €2500 (according to the case)
- Estimate TSM Pharmaceutische needs 6 pharmacist assistants (PAs) in total, and the salary for each PA is €28.000, so the total salary for PAs per year= €28,000*6=€168,000
Estimated loan per PA per hour= €28,000 for 1584 hours=€17.68 per hour
8 overhours per week and 52 weeks the PAs have to work per year, so the overtime cost per year= €17.68*1.25*8hours*52weeks=€9193.6
- Ordering cost: (Assuming the PA places the order, the total costs per year are estimated)
Card System:
Time old situation: 72 order lines*2 minutes= 144 minutes
Ordering cost: 144minutes/60*52weeks*6days*€17.68=€13,238.78
ISM System:
Time new situation: 62 order lines*12/60 minutes=12.4 minutes
Ordering cost: 12.4minutes/60*52weeks*6days*€17.68 =€1140.36
- Cost for returns/mistakes per year
Card System:
Old situation; 12 mistakes per order, returning took 4 minutes per mistake=48 minutes
Cost for returns/mistakes per year=48minutes/60*52weeks*6days*17.68=€4412.93
ISM System:
New situation= 3 mistakes per order = 12 minutes
Cost for returns/mistakes per year=12minutes/60*52weeks*6days*17.68=€1103.23
- Monetary value of Inventory on Card system is €18,400
Monetary value of Inventor on ISM system is €13,800
- Before using ISM by pharmacy (Card system), The total cost is:
PAs’ salary+ ordering cost+ Cost for returns + Inventory cost
= €168,000+€9193.6+€13,238.78+€4412.93+€18,400
= €213,245.30
After using ISM by pharmacy,The total cost is:
Cost on Consultants + PAs’ salary + ordering cost +Cost for mistake+inventory cost:
=€2500+€168,000+€9193.6+€1140.36+€1103.23+€13,800
=€195,737.19
- Profit after using ISM system:
Total cost of card system-Total cost of ISM
...
...