NEDA releases new cost tool
Purchasing staff -- Purchasing, 2/15/2005 12:20:00 PM
The National Electronic Distributors Association (NEDA), in collaboration with Texas A&M University, has developed a tool that buyers can use to calculate the savings that come from using distribution.
NEDA’s Supply Chain Savings Calculator is based on research conducted by Texas A&M, which determined that a broad line semiconductor supplier could save between 25% and 64% of a product’s total cost by using an authorized distributor. The Supply Chain Savings Calculator provides buyers and suppliers with the ability to measure their individual supply chain and distribution costs to determine the most efficient go-to-market strategy for their products. "The Supply Chain Savings Calculator created by Texas A&M uses a supplier or a customer’s own data to determine supply chain costs and compare them to distribution costs," says Robin Gray, executive vice president of NEDA. "The tool is a valuable resource for any organization looking to quantify its existing logistics, inventory and sales expenses versus the cost of using a distributor. It helps identify when it would be more cost effective to use distributors [and when it would be more effective] to buy and sell products direct from the manufacturer," says Gray. The calculator quantifies cost savings to the manufacturer based on a number of variables associated with dealing with a large number of customers as opposed to a limited number of distributors. The calculator also provides equally valid information for other industries that use distribution. "Our research debunks the myth that using a distributor always adds costs to the supply chain," says Barry Lawrence, director of the supply chain systems laboratory, and associate professor of industrial distribution at Texas A&M. "In our research findings, the typical manufacturer saved between 25% and 64% of their overall product costs by using a distributor to sell its products.” The calculator factors into the equation multiple variables that technology companies must consider to determine the true cost of buying or selling products. Among the variables are the sales effort, lead times, fill rates, inventory turns, cost of capital, credit, accounts receivable, expedited orders, warehousing, obsolescence, shrinkage, insurance, tax, total number of items ordered, purchasing, and line shutdown time. The NEDA Supply Chain Savings Calculator is available on a three-month or 12-month subscription via the web at: http://www.nedassoc.org. Pricing ranges between $500 to $6,000 depending on subscription and company size. NEDA member companies receive a substantial discount.
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