Question

Which activity area in the supply chain is generally focused on the short term planning horizon and is often measured by reduction in cost of goods sold?

Answer 1

Operational activities in the supply chain are focused on the short-term with goals such as reducing the cost of goods sold (COGS) by optimizing production processes and considering the nature of the product in relation to transportation costs.

Step-by-step explanation:

The activity area in the supply chain typically focused on the short term planning horizon is known as operational or day-to-day activities. These activities are usually concerned with improving efficiency, responsiveness, and reducing costs in the immediate term. In the context of the cost of goods sold (COGS), these short-term activities aim for a reduction in cost associated with producing and delivering products to the market. Companies may seek to optimize their production processes and leverage economies of scale to reduce per-unit costs. Manufactures often consider whether they are involved in bulk reducing or bulk gaining in this context; bulk reducing industries benefit from producing closer to raw material sources as the finished product costs less to transport. On the other hand, bulk gaining industries are oriented towards producing closer to the market since the final products are heavier or bulkier than the raw materials.