Professional Documents
Culture Documents
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Financial
Data for
Amazon and
Nordstrom
TABLE 3-1
3
Return on Equity (ROE) Is Shareholders
Measure of Firm Performance
Net Income
ROE =
Average Shareholder Equity
4
Return on Assets (ROA) Captures
Operations Impact on ROE
Sales Revenue
PPET =
PP & E
Asset Turnover ART INVT PPET
Amazon 1.85 (better) 15.62 (better) 7.31 (better) 6.80 (better)
Nordstrom 1.50 5.16 5.46 4.71
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Return on Financial Leverage (ROFL)
Captures Finances Impact on ROE
Includes impacts of financial decisions:
accounts payable, accounts receivable, debt,
9
Cash-to-Cash (C2C) Cycle Measures
Time from Cost to Revenue
10
financial performance. In 2010, one of the biggest improvements in financial performance for
GM was its ability to sell its cars with much smaller discounts because the supply chain had
far less excess inventory. Lost sales represent customer sales that did not materialize because
of the absence of products the customer wanted to buy. Every lost sale corresponds to product
margin that is lost. Both markdowns and lost sales reduce net income and arguably represent
TABLE 3-2
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Two Critical Supply Chain Measures
Not in Financial Statements
Markdowns: discounts required to convince
customers to buy excess inventory
Lost sales: represent customer sales that did
not materialize because of the absence of
products the customer wanted to buy
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Drivers of Supply Chain Performance
to Be Covered in Future Lectures
1. Facilities 4. Information
The physical locations in the Data and analysis concerning
supply chain network where facilities, inventory,
product is stored, assembled, transportation, costs, prices,
or fabricated and customers throughout
2. Inventory the supply chain
All raw materials, work in 5. Sourcing
process, and finished goods Who will perform a particular
within a supply chain supply chain activity
3. Transportation 6. Pricing
Moving inventory from point How much a firm will charge
to point in the supply chain for the goods and services
that it makes available in the
supply chain
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Summary of Learning Objectives
1. Describe key financial measures of firm
performance
2. Identify the major drivers of supply chain
performance
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