Building Lean Supply Chains with the Theory of Constraints by Mandyam Srinivasan

Author:Mandyam Srinivasan
Language: eng
Format: epub
Publisher: McGraw-Hill Education
Published: 2012-01-23T05:00:00+00:00

where

Once the ROA is determined, the ROE is calculated simply as the product of the ROA and the financial leverage. That is:

Figure 5.8 depicts the DuPont model in its basic form.

Figure 5.8 The DuPont Model for financial performance.

The DuPont Model provides a ready way to link operational performance to financial performance because it captures the essence of operations effectiveness in terms that most laypeople can understand. How efficiently are the assets being used? This information is provided by the asset turnover (the ratio of sales to assets). How effectively is the organization leveraging profits from its income? This information is provided by the profit margin (the ratio of net income to sales).

The DuPont Model can be adapted to present the value of effective supply chain and operations strategies by showing how these strategies translate to a competitive advantage, thus leading to an improved ROA. Figure 5.9 shows how the basic DuPont Model can be adapted to link ROA with supply chain and operations strategies, strategies supported by superior process execution.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.