SCM Answers New

Q 2 )Identify the major drivers of supply chain performance.
Discuss the role and impact of each driver in creating a strategic fit between the supply chain strategy and the competitive strategy. Ans: The strategic fit requires that a companys supply chain achieve the balance between responsiveness and efficiency that best meets the needs of the companys competitive strategy. The logistic and cross-functional drivers of supply chain performance interact with each other to determine the supply chains performance in terms of responsiveness and efficiency. The drivers of supply chain performance and the role and impact of each driver is as follows: 1. Facilities: Facilities are the actual physical locations in the supply chain network where product is stored, assembled or fabricated. The two major types of facilities are production sites and storage sites. Impact: Decisions regarding the role, location, capacity and flexibility of facilities have a significant impact on the supply chains performance. Role in the supply chain: If we think of inventory as whatis being passed along the supply chain and the transportation as howit is passed along, then facilities are the where of the supply chain. They are the locations to or from which the inventory is transported. Within the facility, inventory is either transfor med into another state (manufacturing) or it is stored (warehousing). Role in the competitive strategy: Facilities are a key driver of supply chain performance in terms of responsiveness and efficiency. For example, companies can gain economies of scale when a product is manufactured or stored in only one location; this centralization increases efficiency. The cost reduction comes at the expense of responsiveness, as many of a companys customers may be located far from the production facility. The opposite is also true. Locating facilities close to customers increases the number of facilities needed and consequently reduce efficiency. If the customer demands and willing to pay for responsiveness that having numerous facilities adds, however, then this facilities decision helps meet the companys competitive strategy goals. 2. Inventory: Inventory encompasses all raw materials, work in process and finished goods within a supply chain.
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Impact: Changing inventory policies can dramatically alter supply chains responsiveness and efficiency. For example, a clothing retailer can make itself more responsive by stocking large amount of inventory and satisfying customer demand from stock. A large inventory increases the retailers cost, thereby making it less efficient. Reducing inventory makes the retailer more efficient but hurts its responsiveness. Inventory also has a significant impact on the material flow time in supply chain. Material flow time is the time that elapses between the point at which material enters the supply chain to the point at which it exits. Role in the supply chain: Inventory exists in supply chain because of a mismatch between supply and demand. This mismatch is intentional at a steel manufacturer, where it is economical to manufacture in large lots that are then stored for future sales. This mismatch is also intentional at a retail store where inventory is held in anticipation of future demand. An important role that inventory plays in the supply chain is to increase the amount of demand that can be satisfied by having the product ready and available when customer wants it. Another significant role that inventory plays is to reduce cost by exploiting economies of sale that may exist during production and distribution. Role in the competitive strategy: Inventory plays a significant role in supply chains ability to support a firms competitive strategy. If firms competitive strategy requires a very high level of responsiveness, a company can achieve this responsiveness by locating large amount of inventory close to the customer. Conversely, a company can also use inventory to become more efficient by reducing inventory through centralized stocking. The latter strategy would support a competitive strategy of being a low-cost customer. The trade-off impact in the inventory driver is between the responsiveness that results from more inventory and the efficiency that results from less inventory. 3. Transportation: Transportation entails moving inventory from point to point in supply chain. Transportation can take the form of many combinations of modes and routes, each with its own performance characteristics. Impact: Transportation Choices have large impact on supply chain responsiveness and efficiency. For example, a mail-order catalog company can use a faster mode of transportation such as FedEx to ship products, thus making its supply chain more responsive, but also less efficient given the high costs associated with using FedEx. Or company can use slower
but cheaper ground transportation to ship products, making its supply chain efficient but limiting its responsiveness. Role in the supply chain: Transportation moves products between different stages in a supply chain. Faster transportation allows a supply chain to be more responsive but reduces its efficiency. The type of transportation a company uses also affects the inventory and facility locations in a supply chain. Role in the competitive strategy: The role of transportation in a companys competitive strategy figures prominently in the companys consideration of the target customers needs. If a firms competitive strategy targets a customer who demands a very high level of responsiveness, and that customer is willing to pay for this responsiveness, then a firm can use transportation as one driver for making a supply chain more responsive. 4. Information: Information consists of data and analysis concerning facilities, inventory, transportation, cost, prices and customers throughout the supply chain. Impact: Information is potentially the biggest driver of performance in the supply chain because it directly affects each of the other drivers. Information presents management with the opportunity to make supply chain more responsive and more efficiency. Role in the supply chain: i. Information serves as the connection between various stages of supply chain, allowing them to coordinate and maximize total supply chain profitability. ii. Information is also crucial to the daily operations of each stages of supply chain. Role in the competitive strategy: Information is an important driver that companies have used to become both more responsive and more efficient. The tremendous growth of the importance of information technology is a testimony to the impact that information can have on improving the company. Like all other drivers, however, even with information, companies reach a point when they must make the trade-off between responsiveness and efficiency. Another key decision involves what information is most valuable in reducing cost and improving responsiveness within supply chain. This decision will vary depending on the supply chain structure and the market segment served.
5. Sourcing: Sourcing is the choice of who will perform a particular supply chain activity such as production, storage, transportation, or the management of information. Impact: At the strategic level, sourcing decisions determine what function a firm performs and what function a firm outsources. Sourcing decisions affect both the responsiveness and efficiency of supply chain. Role in the supply chain: Sourcing is the set of business processes required to purchase goods and services. Managers must first decide which task will be outsourced and those that will be performed within the firm. For each outsourced task, the managers must decide whether to source from a single supplier or a portfolio of suppliers. If a portfolio of multiple suppliers is to be carried, then the role of each supplier in the portfolio must be clarified. The next step is to identify the set of criteria that will be used to select suppliers and measure their performance. Managers then select suppliers and negotiate contracts with them. Contracts define the role of each supply source and should be structured to improve supply chain performance and minimize information distortion from one stage to the next. Role in the competitive strategy: Sourcing decisions are crucial because they affect the level of responsiveness and efficiency the supply chain can achieve. In some instance, firms outsource to responsive third parties if it is too expensive for them to develop this responsiveness on their own. I n other instances firms have kept the responsive process in-house, to maintain control. Firm also outsource for efficiency if the third party can achieve significant economics of scale or has a lower underlying cost structure for other reason. Outsourcing decisions should be driven by the desire for growth in total supply chain profitability. 6. Pricing: Pricing determines how much a firm will charge for goods and services that it makes available in supply chain. Impact: Pricing affects the behavior of the buyer of the goods and services, thus affecting supply chain performance. Role in the supply chain: Pricing is the process by which a firm decides how much to charge customer for goods and services. Pricing affects the customer segments that choose to buy the product, as
well as the customers expectations. This directly affects the supply chain in term of the level of responsiveness required as well as the demand profit that the supply chain attempts to serve. Pricing is also a lever that can be used to match supply and demand. Short-term discount can be used to eliminate supply surpluses or decrease seasonal demand spikes by moving some of the demand forward. Role in the competitive strategy: Pricing is a significant attribute through which a firm executes its competitive strategy. For example, Costco, a membership-based wholesaler in the US, has a policy that prices are kept steady but low. Customers expect low prices but are comfortable with a low level of product availability. The steady prices also ensure that demand stays relatively stable. In contrast, some manufacturing and transportation firms use pricing that varies with the response time desired by the customer.
Q 3)Which are the various demand forecasting methods? Explain the static time series method n detail and a brief of each forecasting method Ans Forecasts are developed for a companys finished goods, components and service parts. The forecast is used by the production team to develop production or purchase order triggers, quantities and safety stock levels. The forecast is not static and should be reviewed by management on a regular basis. This is to ensure that information on future trends, the internal or external environment is incorporated into the forecast to give a more accurate calculation. Statistical Forecasting In supply chain management software, the forecast is a calculation that is fed data from real time transactions and is based on a set of variables that are configured for a number of statistical forecast situations. Planning professionals are required to use the software to provide the best forecast situation possible and often this is left unchecked without any review for long periods. To best use the forecasting techniques in the supply chain software, planners should review their decisions with respect to the internal and external environment. They should adjust the calculation to provide a more accurate forecast based on the current information they have. Statistical forecasts are best estimates of what will occur in the future based on the demand that has occurred in the past. Historical demand data can be used to produce a forecast using simple linear regression. This gives equal weighting to the demand of the historical periods and projects the demand into the future. However, forecasts today give greater emphasis on the more recent demand data than the older data. This is called smoothing and is produced by giving more weight to the recent data. Exponential smoothing refers to ever-greater weighting given to the more recent historical periods. Therefore a period two months ago has a greater weighting than a period six months ago. The weighting is called the Alpha Factor and the higher the weighting, or Alpha factor the fewer historical periods are used to create the forecast. For example, a high Alpha factor gives high weighting to recent periods and demand from periods for a year or two years ago are weighted so lightly that they have no bearing on the overall forecast. A low Alpha factor means historical data is more relevant to the forecast. Historical periods generally contain demand data from a fixed month, i.e. June or July. However, this introduces error into the calculation as some months have more days than other months and the number of workdays can vary. Some companies use daily demand to alleviate this error, although if the forecaster understands the error, monthly historical periods can be used along with a tracking indicator to identify when the forecast deviates significantly from the actual demand. The level at which the tracking signal flags the deviation is determined by the forecaster or software and vary between industries, companies and products. A small deviation may require intervention when the product being forecasted is high-value, whereas a low-value item may not require the forecast be scrutinized to such a high level. Non-Statistical Forecasting
Non-statistical forecasting is found in supply chain management software where demand is forecasted based on quantities determined by the production planners. This occurs when the planner enters in a subjective quantity that they believe the demand will be without any reference to historical demand. The other non-statistical forecasting that occurs is when demand for an item is based on the results of materials requirements planning (MRP) runs. This takes the demand for the finished good and explodes the bill of materials so that a demand is calculated for the component parts. The component demand can then be amended by the planner based on their assessment and knowledge of the current environment. The resulting forecast is based on current demand and will not incorporate any demand from previous periods. Many companies will use a combination of non-statistical and statistical forecasting across their product line. Statistical forecasting is based on complex calculations and the future demand can be determined based on the demand from historical periods. The forecast gives the planner a guide to future demand, but no forecast is totally accurate and the planners experience and knowledge of the current and future environment is important in determining the future demand for a companys products. Time series method Forecasting is a method or a technique for estimating future aspects of a business or the operation. It is a method for translating past data or experience into estimates of the future. It is a tool, which helps management in its attempts to cope with the uncertainty of the future. Forecasts are important for short-term and long-term decisions. Businesses may use forecast in several areas: technological forecast, economic forecast, demand forecast. There two broad categories of forecasting techniques: quantitative methods (objective approach) and qualitative methods (subjective approach). Quantitative forecasting methods are based on analysis of historical data and assume that past patterns in data can be used to forecast future data points. Qualitative forecasting techniques employ the judgment of experts in specified field to generate forecasts. They are based on educated guesses or opinions of experts in that area. There are two types of quantitative methods: Times-series method and explanatory methods. Time-series methods make forecasts based solely on historical patterns in the data. Timeseries methods use time as independent variable to produce demand. In a time series, measurements are taken at successive points or over successive periods. The measurements may be taken every hour, day, week, month, or year, or at any other regular (or irregular) interval. A first step in using time-series approach is to gather historical data. The historical data is representative of the conditions expected in the future. Time-series models are adequate forecasting tools if demand has shown a consistent pattern in the past that is expected to recur in the future. For example, new homebuilders in US may see variation in sales from month to month. But analysis of past years of data may reveal that sales of new homes are increased gradually over period of time. In this case trend is increase in new home sales. Time series models are characterized of four components: trend component, cyclical component, seasonal component, and irregular component. Trend is important characteristics of time series models. Although times series may display trend, there might be data points lying above or below trend line. Any recurring sequence of points above and below the trend line that last for more than a year is considered to constitute the cyclical component of the time seriesthat is, these
observations in the time series deviate from the trend due to fluctuations. The real Gross Domestics Product (GDP) provides good examples of a time series tat displays cyclical behavior. The component of the time series that captures the variability in the data due to seasonal fluctuations is called the seasonal component. The seasonal component is similar to the cyclical component in that they both refer to some regular fluctuations in a time series. Seasonal components capture the regular pattern of variability in the time series within one-year periods. Seasonal commodities are best examples for seasonal components. Random variations in times series is represented by the irregular component. The irregular component of the time series cannot be predicted in advance. The random variations in the time series are caused by shortterm, unanticipated and nonrecurring factors that affect the time series. Smoothing methods (stable series) are appropriate when a time series displays no significant effects of trend, cyclical, or seasonal components. In such a case, the goal is to smooth out the irregular component of the time series by using an averaging process. The moving averages method is the most widely used smoothing technique. In this method, the forecast is the average of the last x number of observations, where x is some suitable number. Suppose a forecaster wants to generate three-period moving averages. In the threeperiod example, the moving averages method would use the average of the most recent three observations of data in the time series as the forecast for the next period. This forecasted value for the next period, in conjunction with the last two observations of the historical time series, would yield an average that can be used as the forecast for the second period in the future. The calculation of a three-period moving average is illustrated in following table. Based on the threeperiod moving averages, the forecast may predict that 2.55 million new homes are most likely to be sold in the US in year 2008. Year Actual sale(in million) 2003 4 2004 3 2005 2 2006 1.5 3 (4+3+2)/3 2007 1 2.67 (3+2+3)/3 2008 2.55 (2+3+2.67)/3 Example: Three-period moving averages In calculating moving averages to generate forecasts, the forecaster may experiment with different-length moving averages. The forecaster will choose the length that yields the highest accuracy for the forecasts generated. Weighted moving averages method is a variant of moving average approach. In the moving averages method, each observation of data receives the same weight. In the weighted moving averages method, different weights are assigned to the observations on data that are used in calculating the moving averages. Suppose, once again, that a forecaster wants to generate three-period moving averages. Under the weighted moving averages method, the three data points would receive different weights before the average is calculated. Generally, the most recent observation receives the maximum weight, with the weight assigned decreasing for older data values.
Forecast(in million) Calculation
Year Actual sale(in million) 2005 2 (.2) 2006 1.5 (.3) 2007 1 (.4) 2008 .42 (2*.2+1.5*.3+1*.4)/3
Forecast(in million) Calculation
Example: Weighted three-period moving averages method A more complex form of weighted moving average is exponential smoothing. I this method the weight fall off exponentially as the data ages. Exponential smoothing takes the previous periods forecast and adjusts it by a predetermined smoothing constant, (called alpha; the value for alpha is less than one) multiplied by the difference in the previous forecast and the demand that actually occurred during the previously forecasted period (called forecast error). Exponential smoothing is mathematically represented as follows: New forecast = previous forecast + alpha (actual demand - previous forecast) Or can be formulated as F = F + (D - F) Other time-series forecasting methods are, forecasting using trend projection, forecasting using trend and seasonal components and causal method of forecasting. Trend projection method used the underlying long-term trend of time series of data to forecast its future values. Trend and seasonal components method uses seasonal component of a time series in addition to the trend component. Causal methods use the cause-and-effect relationship between the variable whose future values are being forecasted and other related variables or factors. The widely known causal method is called regression analysis, a statistical technique used to develop a mathematical model showing how a set of variables is related. This mathematical relationship can be used to generate forecasts. There are more complex time-series techniques as well, such as ARIMA and Box-Jenkins models. These are heavier duty statistical routines that can cope with data with trends and the seasonality in them. Time series models are used in Finance to forecast stocks performance or interest rate forecast, used in forecasting weather. Time-series methods are probably the simplest methods to deploy and can be quite accurate, particularly over the short term. Various computer software programs are available to find solution using time-series methods.
Q 4) Explain VMI AnsVendor Managed Inventory (VMI) VMI can be defined as: VMI is a streamlined approach to inventory and order fulfillment. With it, the supplier and not the retailer are responsible for managing and replenishing the inventory using an integral part of VMI, i.e. EDI, by electronic transfer of data over a network. It can be seen as a mechanism where the supplier creates the purchase orders based on the demand information exchanged by the retailer/customer. VMI is basically evolved to facilitate the operations at retail stores. It involves a continuous replenishment program in which the retailer supplies the vendor with the information necessary to maintain just enough merchandise stock to meet customer demand. This enable the supplier to better project and anticipate the amount of products it needs to produce or supply. If applied properly, VMI can provide the benefits of smoother demand, increased sales, lower inventories and still reduced costs of lost sales to the other industries. VMI Business Model The activities of forecasting and creating the purchase orders are performed generally by the retailers in Conventional Business Model. But when using VMI in fulfillment process, these are done by the supplier/vendor and not the retailer. 1. The retailer sends the sales and inventory data to supplier via EDI or other B2B collaboration facilities. 2. The supplier creates the purchase orders based on the established inventory levels and fill rates. 3. The vendor sends the shipment notices before shipping the product to the retailers store/warehouse. 4. Then the vendor sends the invoice to the retailer. 5. Upon receiving the product, the retailer does the invoice matching and handles payment through their account payable system. In VMI process the retailer is free of forecasting and creating the orders as the vendor generates the orders. The vendor is responsible for creating and maintaining the stock plan for the retailer.
Store Inventory Levels Sales History
Rank SKU (Stock Keeping Unit) based on sales Excess product Products Retailer Warehouse Product Activ ity Excess product Retail Stores
Vendors PO ackn Invoice Retailer received Payment advise
Marketing Buyers at corporate offices
VMI Business Model The VMI concept provides improved visibility across the supply chain pipeline that helps manufacturers, suppliers, and retailers reduce inventory and improve production planning, inventory turnover and stock availability. With more detailed level of information, it allows the manufacturer to be more customer-specific in its planning. Benefits of VMI: 1. Dual Benefits a. Data entry errors are reduced due to computer-to-computer communications. b. Speed of the communication is also increased. c. Both parties are interested in giving better service to the end customer. Having the correct item in stock when the end customer needs it, benefits all parties involved. d. A true partnership is formed between the manufacturer and the distributor/supplier.
2. Supplier Benefits a. Reduced Inventory. Using VMI process, the supplier is able to control the lead time component of order point better than a customer with thousands of supplier they have to deal with. Also, the supplier takes the responsibility to have the product available when needed, thereby lowering the need for safety stock. The following factors contribute to reduce the inventory significantly: 1. Reduced stock outs: Supplier maintains the availability of stocks and hence reducing the need for safety stock. 2. Reduced forecasting and purchasing activities: as they are done by the supplier, the retailer can reduce the costs on forecasting and purchasing activities. 3. Increase in sales: due to less stock out situation, the customers will find the right product at right time. Hence they will come again and again to the store, thereby reflecting an increase in sales. 4. Planning and ordering costs reduced. 5. The overall service level is improved by having the right product at the right time. 6. The Manufacturer is more focused in providing great service. VMI managed inventory reduces transaction costs as: a. Purchasing a. Speeds transactions. b. Streamlines communication between customer and supplier. c. Eliminates paper-to-computer data entry. d. Improves data accuracy. e. Frees staff to work on more productive activities. b. Inventory Management a. Delivery as needed cuts storage. b. Helps reduce inventory levels. c. Improves fill rates. d. Decrease lost sales. c. Receiving a. Advance Ship Notice (ASN) speeds up receiving. b. Barcoding cuts warehousing costs. d. Error Reduction a. Data entry mistakes are avoided. b. Information flow is continuous.
3. Manufacturers Benefits 1. Improved visibility results in better forecasting : The retailer sends the Point Of Sales data directly to the vendor, which improves the visibility and results in better forecasting. 2. Reduces potential returns : As the vendor forecasts and creates order, mistakes which may lead to a return, will come down. 3. Encourages Supply Chain cooperation : Partnerships and collaborations are formed the smooth the supply chain pipeline. 4. Promotions can be more easily incorporated in the inventory plan. 5. A reduction in the distributor ordering errors. 6. Visibility to stock levels helps to identify priorities. The manufacturer can see the potential need for an item before the item is ordered.
Q 5) List the various inventory models and EOQ model. Ans: Inventory models is the Mathematical equation or formula that helps a firm in determining the economic order quantity, and the frequency of ordering, to keep goods or services flowing to the customer without interruption or delay. Types of inventory models: Deterministic models these are simple models in which it is assumed that the demand or consumption rate is known with certainty. Constant lead time is involved in procurement Probabilistic models here the demand follows a known probability distribution, while the lead time may either be constant or variable with a known probabilistic distribution. Static models static models relate to a single decision process in which only a single purchase order can be placed to meet the demands.Eg. Bread and eggs at a grocer Dynamic the decision on one procurement process will affect the subsequent procurement decisions. Eg. A printer and its consumables Economic order quantity is the level of inventory that minimizes total inventory holding costs and ordering costs. It is one of the oldest classical production scheduling models. The framework used to determine this order quantity is also known as Wilson EOQ Model or Wilson Formula. The model was developed by Ford W. Harris in 1913, but R. H. Wilson, a consultant who applied it extensively, is given credit for his in-depth analysis.EOQ, or Economic Order Quantity, is defined as the optimal quantity of orders that minimizes total variable costs required to order and hold inventory. The EOQ tool can be used to model the amount of inventory that we should order each month. The EOQ helps us to determine the appropriate amount and frequency when ordering and holding inventory The quantity to order at a given time must be determined by balancing two factors: (1)the cost of possessing or carrying materials and (2)the cost of acquiring or ordering materials. Purchasing larger quantities may decrease the unit cost of acquisition, but this saving may not be more than offset by the cost of carrying materials in stock for a longer period of time Underlying assumptions The ordering cost is constant. The rate of demand is constant The lead time is fixed The purchase price of the item is constant i.e. no discount is available The replenishment is made instantaneously, the whole batch is delivered at once. EOQ is the quantity to order, so that ordering cost + carrying cost finds its minimum. Variables Q = order quantity Q* = optimal order quantity D = annual demand quantity of the product P= purchase cost per unit S= fixed cost per order ( notper unit, typically cost of ordering and shipping and handling. This is not the cost of goods) H = annual holding cost per unit (also known as carrying cost or storage cost) (warehouse space, refrigeration, insurance, etc. usually not related to the unit cost) The Total Cost function The single-item EOQ formula finds the minimum point of the following cost function: The different formulas have been developed for the calculation of economic order quantity (EOQ). The following formula is usually used for the calculation of EOQ.
A = Demand for the year Cp = Cost to place a single order Ch = Cost to hold one unit inventory for a year *= Example: Pam runs a mail-order business for gym equipment. Annual demand for the TricoFlexers is 16,000. The annual holding cost per unit is $2.50 and the cost to place an order is $50. Calculate economic order quantity (EOQ) Calculation:
Q 7) Why is warehousing becoming an essential service for industries? Ans: Every company stores its goods while they wait to be sold. A Warehouse as a location with adequate facilities where volune shipments are received from a production center, broken dowm , reassembled into combinations representing a particular order/s, and shipped to the customers location /s. Common warehousing decisions that a company must should be regarding: 1. Number of warehouses 2. Types of warehouses 3. Location of the warehouses Before making a site selection decision, companies need to closely examine the current distribution network and the impact of adding, subtracting or consolidating facilities on the entire organization. Frequently, warehouse location analyses projects are understaffed, underfunded and fail to take the entire distribution networks current capabilities and future requirements into account. Before a site selection decision can be made, all management levels and business functions- including sales, marketing, distribution, pur chasing and operations management- must participate in the analysis. A typical warehouse or distribution center will receive stock of a variety of products from suppliers ad store these until the receipt of orders from customers, whether individual buyers, retail branches, or other companies. A logistics automation system may provide the following: 1. Automated Goods In Processes : Incoming goods can be marked with barcodes and automation systems notified of the expected stock. On arrival, the goods can be scanned and thereby identified, and then taken via conveyors, sortation systems, and automate cranes into an automatically assigned storage location. 2. Automated Goods Retrieval for Orders : n receipt of orders, the automation system is able to immediately locate goods and retrieve them to a pickface location. 3. Automated Despatch Processing : Combining knowledge of all orders placed at the warehouse the automation system can assign picked goods into dispatch nits and then into outbound loads. Sortation systems and conveyors can then move these onto the outgoing trailers. A complete warehouse automation system can drastically reduce the workforce required to run a facility, with human input required only for a few tasks, such as picking units of product from a bulk packed case. Globally, the USD100 billion warehousing industry has undergone significant changes in the last decade owing to the growth in world trade and expansion of international markets as well as increasing application of new technology. Internationally, warehousing industry is classified into three different types viz. public warehousing, private warehousing and contract warehousing. Of these, contract warehousing, which has dedicated customers with long-term agreement is the
fastest growing segment of the industry internationally and s expected to grow at a rate of 12-15 per cent over the next couple of years. In addition to the traditional economic and service benefits, warehouse operators must offer other value-added services to remain competitive today.The value-added service center is a DC thats evolved to meet the needs of todays customers. It uses information technology to become the nerve centre of the supply chain and bridge the gap of tomorrows demand-based requirements. Warehousing and distribution today are about providing order management from the cradle to the grave, including: inventory and order visibility; flexible order fulfillment solutions that can responded to customer demand; customer service and product knowledge; transportation management; and reverse logistics. Finally, they are about performing all of those activities as close to the end consumer as possible.Warehouse can also complete production activities to postpone specialization are refine product characteristics. At times, reassembly at a warehouse maybe done to correct a production problem.
Q 8) Discuss cross-docking, milk run and pool distribution. Ans: Cross Docking: Traditional warehouses move materials into storage, keep them till they are needed and then move them out to meet the customer demand. Cross docking co-ordinates the supply and delivery so that the goods arrive at the receiving area and are transferred straight away to the loading area, where they are put into delivery vehicles. In other words, cross docking is the movement of materials from the receiving docks directly to the shipping docks. Goods do not need to be placed in storage, creating a significant cost savings in inventory and material handling. Cross docking helps reduce direct cost associated with excess inventory by eliminating unnecessary handling and storage of product. Fewer inventories means less space and equipment required for handling and storing the products. This also means reduced product damages and product obsolescence. Thus, the step of filling a warehouse with inventory before shipping it out is virtually eliminated. Cross docking shift the focus from supply chain to demand chain. For example, stock coming into cross docking centre has already been preallocated against a replenishment order generated by a retailer in the supply chain. Cross docking helps retailers streamline the supply chain from point of origin to point of sale. It also encourages electronic communications between retailers and suppliers. Two basic forms of Cross Docking: 1. Basic Cross Dock: In this form the packages are moved directly from the arriving vehicles to the departing ones. This form of cross docking does not need a warehouse and a simple transfer point is enough. 2. Flow Through Cross Dock: In case of the flow through concept, when the materials arrive and they are in large packages, these packages are opened and broken into smaller quantities, sorted, consolidated to deliver them to different customers and transferred to vehicles. Benefits of Cross Docking: Helps to improve the speed of flow of the products from the supplier to the stores. Helps to reduce the costs. Helps to reduce the amount of finished goods inventory that is required to be maintained as safety stock. Helps to save money. Working:
On receiving goods workers put them in lanes corresponding to the receiving doors. A second team of workers sort the goods into shipping lanes from which a final team loads them into outbound trailers.
Milk Runs: A milk run is a route in which a truck either delivers product from a single supplier to multiple retailers or goes from multiple suppliers to single retailer as shown in the figures below. In other words, in a milk run, a supplier delivers directly to multiple retail stores on a truck or a truck picks up deliveries for many suppliers of the same retail store. The main job of the supply chain manager is to decide on the routing of each milk run.
Benefits of Milk Runs: 1. Reduces cost: Milk runs help to reduce the transportation costs by consolidating shipments to multiple stores on a single truck. The use of milk runs allows deliveries to multiple stores to be consolidated on a single truck, resulting in a better utilisation of the truck and somewhat lower costs. 2. Proximity of suppliers: The use of milk runs is helpful if very frequent, small deliveries are needed on a regular basis and either a set of suppliers or a set of retailers is in geographical proximity. 3. Reduces inventory: Milk runs also help to reduce the amount of inventory need to be kept as safety stock in the warehouses.
Pool Distribution: Pool distribution is the distribution of product to numerous destination points (customers, stores or stop points) within a particular geographic region. Characteristics include high frequency regular shipments in LTL quantities, typically in the 150 to 2000 pound per shipment range. Pool distribution represents an excellent cost effective alternative to the higher cost of individual LTL shipments. Instead of LTL direct, product is shipped to regional terminals in truckload quantities. There it is off loaded, then segregated and sorted by delivery point then reloaded on local delivery trucks for delivery to the individual destinations. Pool reduces transit times, maintains shipment integrity, and allows a significant discount over LTL rates.
Benefits: When you have multiple shipments bound for a specific region, pool distribution is a simple, cost effective alternative to LTL. Speed merchandise to retail outlets. Truckload transit time is shorter than LTL, and once at our distribution centres, your multiple shipments are delivered the next day. Reduce claims (Less handling than normal LTL service). Meet customer delivery requirements. Reduce delivery costs to your customer. Handle peaks in business effectively.
Q 9) What is the role of IT in SCM system? How is data mining is used in SCM? Ans: 1. In the IT perspective we can say that SCM is all about improving logistics, relationship management with the supplier and delivering value by doing business. 2. Over the period of time various new concept and models evolved. IT has played a key role at each step of evolution of SCM systems. Following describes the various phases of evolution discussing the role of IT at each phase. 3. Manufacturing Requirement planning (MRP): it is a process used to calculate the amount of raw materials necessary to manufacture a specified number of products. Role of IT here is that IT was used for processing data with the main purpose of reducing the processing time. The priorities or major requirement at that point of time were consistency, speed and accuracy. 4. Manufacturing Resource Planning (MRP II): It is the method for effective planning of all resources of a manufacturing company, it addresses operational planning in units, financial planning in dollars and has a simulation capability to answer what-if questions. Role of IT at this phase in addition to the basic requirement of consistency, speed and accuracy the focus changed to MIS. The priorities or major requirements at that point of time were on the scope and the modular structure. At this point DBMS and partially the Relational DBMS was used for data management. 5. Enterprise Resource Planning (ERP): It is an information technology industry term for integrated, multi-module application software packages designed to serve and support several business functions across an organisation. The role of IT at this phase in addition to all the requirements above focus changed to planning capabilities and the high level integration with external entities. Integration platform provides a base for all IT applications by maintaining master tables. For example, item master, supplier master, company master etc. 6. Supply Chain Management (SCM): IT played a key role in SCM for optimisation , simulation and analysis capabilities, and also integrated data mining tools for the industrial application. Functional role of IT in SCM can be summarised as: a. Transaction execution b. Collaboration and co-ordination c. Decision support Product Data Management System (PDMS) is a class of enterprise software that manages the product data and relationships facilitating innovations and increasing engineering productivity.
Role of Data Mining in SCM: 1. The 1990s was a decade of great change and also a period during which the of logistic and supply chain management reached the board rooms of major corporations worldwide. 2. The accelerated rate of change in our economy was driven by a number of macro level forces, namely: an empowered consumer; a shift in economic power toward the end of supply chain; deregulation of key industries; globalization and technology. 3. All of these forces of change elevated the importance of supply chain management as a strategic weapon for competitive advantage. The conceptual basis of supply chain is not new. In actually, we have gone through several evolutionary stages starting with physical distribution management in the 1970s, which evolved into logistic management in the 1980s and the supply chain management in the 1990s. 4. There are number of terms being used that may be considered synonymous with how SCM is defined in this text, namely, demand chain, demand flow, value networks and so on. 5. SCM is involved with integrating three key flow across the boundaries of the companies in a supply chain-product/materials, information, and financials/cash. Successful integration of these three key flows has produced improved efficiency and effectiveness for companies. 6. The key factors for successful SCM include inventory, cost, information, customer service, and collaboration relationships. Focusing on the management of these factors is critical to the implementation of a supply chain strategy.
Q 12) Explain various modes, participants, formats of transposition and factors influencing transportation. On what one should decide what is the best mode of transport? Ans. Transportation refers to the movement of product from one location to another as it makes its way from the beginning of a supply chain to the customer. Transportation is an important supply chain driver because products are rarely produced and consumed in the same location. Transportation is a significant component of the costs incurred by most supply chains. Modes of transportation The effectiveness of any mode of transport is affected by equipment investments and operating decisions by the carrier as well as the available infrastructure and transportation policies. The carrier's primary objective is to ensure good utilization of its assets while providing customers with an acceptable level of service. Carrier decisions are affected by equipment cost fixed operating cost, variable operating costs, the responsiveness the carrier seeks to provide its target segment, and the prices that the market will bear. The modes of transportation are:Air Major airlines in the United States that carry both passenger and cargo include American, United, and Delta. Airlines have a high fixed cost in infrastructure and equipment. Labor and fuel costs are largely trip related and independent of the number of passengers or amount of cargo carried on a flight. An airline's goal is to maximize the daily flying time of a plane and the revenue generated per trip. Air carriers offer a very fast and fairly expensive mode of transportation. Small, high-value items or time-sensitive emergency shipments that have to travel a long distance are best suited for air transport. Air carriers normally move shipments under 500 pounds, including high-value but lightweight high-tech products.
Package carriers Package carriers are transportation companies such as FedEx, UPS, and the U.S. Postal Service, which carry small packages ranging from letters to shipments weighing about 150 pounds. Package carriers use air, truck, and rail to transport time-critical smaller packages. Package carriers are expensive and cannot compete with LTL carriers on price for large shipments. The major service they offer shippers is rapid and reliable delivery. Thus, shippers use package carriers for small and time-sensitive shipments.
Package carriers also provide other value-added services that allow shippers to speed inventory flow and track order status. By tracking order status, shippers can proactively inform customers about their packages. Package carriers also pick up the package from the source and deliver it to the destination site. With an increase in just-in-time (JIT) deliveries and focus on inventory reduction, demand for package carriers has grown. Truck The trucking industry consists of two major segments- TL or LTL. Trucking is more expensive than rail but offers the advantage of door-to-door shipment and a shorter delivery time. It also has the advantage of requiring no transfer between pickup and-delivery. TL operations have relatively low fixed costs, and owning a few trucks is often sufficient to enter the business. TL pricing displays economies of scale with respect to the distance traveled. Given trailers of different size, pricing also displays economies of scale with respect to the size of the trailer used. TL shipping is suited for transportation between manufacturing facilities and warehouses or between suppliers and manufacturers LTL operations are priced to encourage shipments in small lots, usually less than half a TL, as TL tends to be cheaper for larger shipments. Prices display some economies of scale with the quantity shipped as well as the distance traveled. LTL shipments take longer than TL shipments because of other loads that need to be picked up and dropped off. LTL shipping is suited for shipments that are too large to be mailed as small packages but that constitute less than half a TL. Railways Rail carriers incur a high fixed cost in terms of rails, locomotives, cars, and yards. There is also a significant trip-related labor and fuel cost that is independent of the number of cars (fuel costs do vary somewhat with the number of cars) but does vary with the distance traveled and the time taken. Any idle time, once a train is powered, is very expensive because labor and fuel costs are incurred even though trains are not moving. Idle time occurs when trains exchange cars for different destinations. It also occurs because of track congestion. Labor and fuel together account for over 60 percent of railroad expense. From an The price structure and the heavy load capability makes rail an ideal mode for carrying large, heavy, or high-density products over long distances. Transportation time by rail, however, can be long. Rail is thus ideal for very heavy, lowvalue shipments that are not very time sensitive. Coal, for example, is a major part of each railroad's shipments. Small, time-sensitive, short-distance or short-lead-time shipments rarely go by rail A major goal for railroad firms is to keep locomotives and crews well utilized.
Major operational issues at railroads include vehicle and staff scheduling, track and terminal delays, and poor on-time performance. Railroad performance is hurt by the large amount of time taken at each transition. The travel time is usually a small fraction of the total time for a rail shipment. Delays get exaggerated because trains today are typically not scheduled but "built. Water Major ocean carriers include Maersk Sealand, Evergreen Group, American President Lines, and Hanjin Shipping Co. Water transport, by its nature, is limited to certain areas. Within the United States, water transport takes place via the inland waterway system (the Great Lakes and rivers) or coastal waters. Water transport is ideally suited for carrying very large loads at low cost. Within the United States, water transport is used primarily for the movement of large bulk commodity shipments and is the cheapest mode for carrying such loads. It is, however, the slowest of all the modes, and significant delays occur at ports and terminals. This makes water transport difficult to operate for short-haul trips, though it is used effectively in Japan and parts of Europe for daily short-haul trips of a few miles.
Pipeline Pipeline is used primarily for the transport of crude petroleum, refined petroleum products, and natural gas. In the United States, pipeline accounted for about 17 percent of total ton-miles in 2002. A significant initial fixed cost is incurred in setting up the pipeline and related infrastructure that does not vary significantly with the diameter of the pipeline. Pipeline operations are typically optimized at about 80 to 90 percent of pipeline capacity. Given the nature of the costs, pipelines are best suited when relatively stable and large flows are required. Pipeline may be an effective way of getting crude oil to a port or a refinery. Sending gasoline to a gas station does not justify investment in a pipeline and is done better with a truck. Intermodal Intermodal transportation is the use of more than one mode of transport to move ashipment to its destination. A variety of intermodal combinations are possible, with the most common being truck/rail. Major intermodal providers with rail include CSX Intermodal, Pacer Stacktrain, and Triple Crown. Intermodal traffic has grown considerably with the increased use of containers for shipping and the rise of global trade.
Containers are easy to transfer from one mode to another, and their use facilitatesintermodal transportation. Containerized freight often uses truck/water/rail combinations, particularly for global freight. Participants in the transportation: Like any other transaction transportation involves the buyer and seller. However, there are other participants involved more often in transportation. Transportation is influenced by mainly 5 parties they are:-
Shipper and consignee The shipper and the consignee have the common objective of moving goods from the origin to destination within a prescribed time at the lowest cost. the service should include a specified pickup and delivery time, predictable transit time , zero loss and damage as well as accurate and timely transaction of information. Carrier The carrier is an intermediary between consignee and the shipper. The main objective of the carrier is to maximize the revenue associated with the transaction while maximizing the cost associated to complete the transaction. His objective is to charge the highest price acceptable to the above parties keeping the cost namely labor, fuel and vehicle cost required moving the goods at the minimum. Government Transportation is an important factor as it affects the economy to a large extent and hence it maintains a high level interest in it. It is desirable to have a stable and efficient transportation environment to sustain economical growth. Many governments are more involved with the carrier activities and practices. Involvement may take the form of regulation, promotion or ownership.
Public The public is concerned with the transportation accessibility, expense effectiveness and environmental and safety standards. The public ultimately determines the need for transportation by demanding goods around the world at reasonable price. The relationship between the parties is complex because of the interaction between the parties. There occur conflicts between parties with micro interest, government and public. Formats of transportation: We have seen the participants involved in transportation process, there could be an overlap in the functions of the parties involved Hence the transportation requirement can be accomplished in 3 basic ways. In each of these the legal status of the operating authority is different and hence there are different regulations for each of them. The following are the three formats of carrier: i. Private fleet ii. Contract carriers iii. Common carriage Private fleet: A private fleet consists of the firm providing its own transportation. They are not for hire and are not subject to economic regulations although they must comply with the regulation concerning hazardous goods movement, vehicle pollution norms, vehicle safety etc as specified by the government authorities. The firm must own or lease the transport equipment and provide managerial directions regarding the operations. The primary distinction between the for-hire and the private fleet is that to qualify as the private fleet the transportation activity should be incidental to the main business of the firm. E.g. Scooters owned by the dominos pizza chain are a part of private fleet. Private fleet could be costlier when the distance is large; hence it is better to go for a forhire carrier. Contract carrier: Contract carriers provide transportation services for select customer. The basis of contract is an agreement between a carrier and a shipper for a specified transportation service at a previously agreed cost and service terms. The business agreement becomes a basis for the contract carrier to receive a permit to transport the specified commodities. The contract carrier provides transportation services to a number of shippers.
They charge different rates as per the service levels agreed upon to different shippers. Contract carriers have a fleet of trucks or other vehicles based on the type of commodity to be transported. The contract carrier is more cost effective than private due to following reason: Privately owned fleet implies the need for basic fixed cost of the vehicles. Privately owned vehicles need maintenance which also adds to the costs. The firms should not involve itself in the activities that is not its core competencies. Common carriage: The basic foundation of public transportation is the common carrier. The most obvious common carrier is the Indian railways. Common carrier offers service in non-discriminatory prices to public. Heavy consignments are the best transported through a common carrier. Also it is a better to use a common carrier in places where roads are not developed and where there are few contract transporters available.
Factors affecting transportation The three fundamental factors to transportation performance are: Cost It includes the direct cost i.e. the payment for the movements between the geographical locations and expenses related to the administration and indirect cost of maintaining in transit inventory. Hence for deciding the transportation, the least expensive transportation is not always resulting in the lowest cost of movement. Speed It is the time required to complete a specific movement of goods from one place to another. On the other hand grater the speed of transportation higher is the charges. Hence the tradeoff is required to be made and balance has to be struck. Consistency Cost Speed Consistency
It refers to the variation in time required to perform a specific movement. It is the reflection of dependability of the transport. Some other factors are Distance
It is the major influence on transportation cost since it directly contributes to the variable cost such as labor, fuel, and maintenance. The greater the distance more efficient is the utilization of fuel and labor and hence there is lower cost per unit distance even if the total cost increases. Volume
It also plays a important role in deciding the transport. The greater the load lesser will be the cost per unit weight. This happens because the fixed cost of delivery as well as administrative cost can be spread over additional volume. Density
It incorporates the weight and space considerations. These are important because the transportation cost it usually quoted in terms of rupees per unit of weight. An increased density product allows more units of the product to be loaded into a fixed cube of vehicles. Storability
It refers to the product dimensions and how they affect vehicle space utilization. Odd sizes and shapes or excessive lengths or weight consume more space i.e they do not show well and typically lots of space is wasted .items with normal shape are much easier to stow than package with unusual shape. Handling
Some materials are fragile which requires minimum handling. The transportation needs to be selected as per the material. Some transportation like railways may require a lot of intermediary handling to get the good to the the destination.
Choice of modes Selecting a transportation mode is both a planning and an operational decision in a supply chain. The decision regarding carriers with which a company contracts is a planning decision, whereas the choice of transportation mode for a particular shipment is an operational decision. For both decisions, a shipper must balance transportation and inventory costs. The mode of transportation that results in the lowest transportation cost does not necessarily lower total costs for a supply chain. Cheaper modes of transport typically have longer lead times and larger minimum shipment quantities, both of which result in higher levels of inventory in the supply chain. Modes that allow for shipping in small quantities lower inventory levels but tend to be more expensive. Dell, for example, airfreights several of its components from Asia. This choice cannot be justified on the basis of transportation cost alone. It can only be justified because the use of a faster mode of transportation for shipping valuable components allows Dell to carry low levels of inventory. Faster modes of transportation are preferred for products with a high value-to weight ratio, for which reducing inventories is important, whereas cheaper modes are preferred for products with a small value-to-weight ratio, for which reducing transportation cost is important. The choice of transportation mode should take into account cycle, safety, and in-transit inventory costs besides the cost of transportation. Ignoring inventory costs when making transportation decisions can result in choices that worsen the performance of a supply chain
Q 13) . What are the differences between Traditional and Modern Approaches of Supply Chain Management? Traditional SCM Approach : The traditional approach of SCM was the fragmented sub-optimization within departments, or within the company. The typicality in this approach is the local dominance and absence of global sense.
Fig. 13(a) SCM approach in MRP Age
As shown in fig. 13(a), customers and suppliers were treated as external entities and most of the time ignored for any strategic decisions. In fact, the organization was looking at the various departments including sales, production, and others like, finance, HR, maintenance, R&D, administration etc. as separate functionalities and no cohesiveness was observed amongst them. On the contrary purchase and the production planning department was seen as one functionality and primal application of integration philosophy was seen through MRP applied there. As shown in fig. 13(b), in the MRP-II age, purchase, planning and the production departments were seen as one functionality and MRP-II was primarily focused on materials and capacity integration. Again the various departments like sales, finance, HR, maintenance, R&D, administration etc. were not tightly integrated in MRP-II. The customers and suppliers were treated as external entities and not considered for any longterm decisions.
Fig. 13(b) SCM approach in MRP-II Age
As shown in fig. 13 (c), in the ERP age, all the departments were seen as one entity. There existed a common language and one approach in all the decision making across organization. In fact, the other entities like subcontractor and even few integrated suppliers were seen as a part of the organization.
Fig. 13(c) SCM approach in ERP Age
But again all the external entities like distributors, retailers or suppliers were not tightly integrated in ERP. We can say that ERP helped organization to integrate all of its internal supply chain operations but failed to extend the integrations across external supply chains
Modern SCM Approach:
The modern SCM approach embraces the challenges across organizations, across different lines of businesses, across consumers and across geographies. Hence we can say that the traditional functions are now getting reshaped with new SCM approach. The strategies now formed are such that they govern the overall supply chain rather than the individual players or organizations. Hence we can say that today supply chains rather than organizations compete with each other.
Fig. 13(d) SCM approach in E-ERP Age
As shown in fig. 13(d), in the E-ERP Age, which is also referred as CPFR (Collaborative Planning Forecasting Replenishment), all the organized players are seen as one entity . It means the manufacturing organization closely operates with all the trading partners including customers at one side and suppliers at other side.
In fact, the well defined customer demands are known and the main focus of the organization becomes fulfilling this demand with the supply management thus integrating suppliers side. Typically, it integrates all of its internal supply chain operations as well as the external supply chain operations to deliver value to the final consumers.
Fig. 13(e) SCM Approach in Global E-Biz Age
As shown in fig. 13(e), in the Global E-Biz Age, consumers can directly talk with the manufacturing company that is also a patent holder of the commodities required by consumers. Perhaps no material physically flows to or from this patent holder as shown in the fig. th level and a logistics It means that the manufacturing operations will be outsourced to the 4 services suppliers job is to lift the required material from the point of supply to the point of demand, and ultimately deliver the goods to the consumer. It organizes the complete solution for the overall global system dynamics and closely operates with all the trading partners including customers at one side and suppliers at the other side.
14. Explain role of IT in Business. What are various IT tools that are used in industry today? Information technology (IT): 1. Information is the driver that serves as the glue to create a coordinated supply chain 2. Information must have the following characteristics to be useful: Accurate Accessible in a timely manner Information must be of the right kind 3. Information provides the basis for supply chain management decisions Inventory Transportation Facility 4. Effective use of IT in the supply chain can have a significant impact on supply chain performance. Relevant information available throughout the supply chain allows managers to make decisions that take into account all stages of the supply chain 5. Allows performance to be optimized for the entire supply chain, not just for one stage leads to higher performance for each individual firm in the supply chain
IT tools for business: 1. Project Management: The systems here offer features for scheduling, tracking, monitoring and reporting activities within multiproject environment. These can be used for: Working more effectively. Co-ordinating and managing projects more effectively. Saving time and money. Completing projects on time and within budget. 2. Computer Aided Design/Computer Aided manufacturing(CAD/CAM) Computer-aided design ( CAD ), also known as computer-aided design and drafting ( CADD ) ,is the use of computer technology for the process of design and
design-documentation. Computer Aided Drafting describes the process of drafting with a computer. CADD software, or environments, provides the user with input-tools for the purpose of streamlining design processes; drafting, documentation, and manufacturing processes. CADD output is often in the form of electronic files for print or machining operations. The development of CADD-based software is in direct correlation with the processes it seeks to economize; industry-based software (construction, manufacturing, etc.) typically uses vector-based (linear) environments whereas graphic-based software utilizes raster-based (pixelated) environments. 3. Computer Integrated Manufacturing(CIM) Computer-integrated manufacturing ( CIM ) is the manufacturing approach of using computers to control the entire production process. This integration allows individual processes to exchange information with each other and initiate actions. Through the integration of computers, manufacturing can be faster and less errorprone, although the main advantage is the ability to create automated manufacturing processes. Typically CIM relies on closed-loop control processes, based on real-time input from sensors. It is also known as flexible design and manufacturing. 4. Manufacturing Execution System(MES) A manufacturing execution system (MES) is a control system for managing and monitoring work-in-process on a factory floor. An MES keeps track of all manufacturing information in real time, receiving up-to-the-minute data from robots, machine monitors and employees. Although manufacturing execution systems used to operate as self-contained systems, they are increasingly being integrated with enterprise resource planning (ERP) software suites. The goal of a manufacturing execution system is to improve productivity and reduce cycle-time, the total time to produce an order. By integrating an MES with ERP software, factory managers can be proactive about ensuring the delivery of quality products in a timely, cost-effective manner. 5. Management Information System(MIS) MIS refers broadly to a computer-based system that provides managers with the tools for organizing, evaluating and efficiently running their departments. In order to provide past, present and prediction information, an MIS can include software that helps in decision making, data resources such as databases, the hardware resources of a system, decision support systems, people management and project management applications, and any computerized processes that enable the department to run efficiently. 6. Decision Support System(DSS)
Decision Support Systems (DSS) are a specific class of computerized information system that supports business and organizational decision-making activities. A properly designed DSS is an interactive software-based system intended to help decision makers compile useful information from raw data, documents, personal knowledge, and/or business models to identify and solve problems and make decisions. 7. Expert System(ES) Expert system is a computer system that emulates the decision-making ability of a human expert. Expert systems are designed to solve complex problems by reasoning about knowledge, like an expert, and not by following the procedure of a developer as is the case in conventional programming. The first expert systems were created in the 1970s and then proliferated in the 1980s. Expert systems were among the first truly successful forms of AI software.
8. Knowledge Management(KM) Knowledge Management ( KM) comprises a range of strategies and practices used in an organization to identify, create, represent, distribute, and enable adoption of insights and experiences. Such insights and experiences comprise knowledge, either embodied in individuals or embedded in organizations as processes or practices.Knowledge Management efforts typically focus on organizational objectives such as improved performance, competitive advantage, innovation, the sharing of lessons learned, integration and continuous improvement of the organization. KM efforts overlap with organizational learning, and may be distinguished from that by a greater focus on the management of knowledge as a strategic asset and a focus on encouraging the sharing of knowledge. 9. Enterprise Resource Planning(ERP) Enterprise resource planning ( ERP ) integrates internal and external management information across an entire organization, embracing finance/accounting, manufacturing, sales and service, customer relationship management, etc. ERP systems automate this activity with an integrated software application. Its purpose is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders. ERP systems can run on a variety
of hardware and network configurations, typically employing a database as a repository for information. 10. Customer Relationship Management(CRM) CRM (customer relationship management) is an information industry term for methodologies, software, and usually Internet capabilities that help an enterprise manage customer relationships in an organized way. For example, an enterprise might build a database about its customers that described relationships in sufficient detail so that management, salespeople, people providing service, and perhaps the customer directly could access information, match customer needs with product plans and offerings, remind customers of service requirements, know what other products a customer had purchased. 11. Supply Chain Management(SCM) Supply chain management (SCM) is the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer. Supply chain management involves coordinating and integrating these flows both within and among companies. It is said that the ultimate goal of any effective supply chain management system is to reduce inventory (with the assumption that products are available when needed). As a solution for successful supply chain management, sophisticated software systems with Web interfaces are competing with Web-based application service providers (ASP) who promise to provide part or all of the SCM service for companies who rent their service.
Q 15) Explain Distribution Management warehousing in detail with respect to concepts, requirement, important aspects of logistics etc. According to the Council of Supply Chain Management Professionals (CSCMP), logistics management can be defined as, "that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers' requirements." . According to Coyle, Bardi and Langley there are four subdivisions of logistics: Business logisticsthis is the same as the definition from the CSCMP and approach we are adopting in our discussion. Military logisticsall that is necessary to support the operational capability of military forces and their equipment in order to ensure readiness, reliability, and efficiency. Event logisticsmanagement of all involved (activities, facilities, and personnel) in organizing, scheduling, and deploying the resources necessary to ensure the occurrence of an event and efficient withdrawal afterwards. Service logisticsacquisition, scheduling, and management of facilities, personnel, and materials need to support and sustain a service operation. Within the context of this essay we will be addressing the concept of business logistics. Business logistics systems can be classified into four categories: Balanced System. Firms with a balanced system have reasonably balanced inbound and outbound flows. Heavy inbound. These firms have a very heavy inbound flow but a very simple outbound flow. Firms with heavy inbound flow typically do not warehouse their finished goods, for example, aircraft manufacturers. Heavy outbound. These firms have a complex outbound flow and a very simple inbound flow. Their inbound flow is usually raw material from a relatively short distance. Typically their outbound shipments are a wide variety of packaged finished goods requiring storage and transportation to the final consumer. Reverse system. Reverse supply chain logistics systems have reverse flows on the outbound side of their system. Durable products are returned for credit, trade-in, repair, salvage or disposal or the firm utilized returnable or reusable containers. Coyle, Bardi and Langley list a number of activities that lie within the realm of logistics: Order fulfillmentactivities involved with completing customer orders. Obviously, transportation and logistics would be an integral part of completing the orders since they directly impact delivery. Traffic and transportationthe physical movement of goods.
Warehousing and storagea number of ware-housing decisions directly impact logistics and transportation. For example, how many warehouses are needed, where should they be located, how large should they be, how much inventory should be held in each? Plant and warehouse site locationlocation can alter time and place relationships between the warehouse and the customer. Frequently transportation cost is a major factor in plant and warehouse location. Materials handlingthe placement of goods and the movement of goods within a warehouse, factory or other facility. This includes incoming movement of goods and the movement of goods from storage to order-picking areas to dock areas for shipment. Industrial packagingtransportation directly impacts the type packaging needed. Fast methods of transport, such as air, generally require little in the way of packaging while the slower modes, such as water or rail, require substantial packaging expenditures to ensure safe shipment. Purchasingquantities purchased directly affect transportation costs. Also, transportation relates directly to the distance or location of goods purchased by the firm. Purchasing and logistics are increasingly integrated in many major firms. Demand forecastingaccurate and reliable forecasting is essential for effective inventory control purposes, especially within firms utilizing lean manufacturing and JIT. Inventory controlthis is directly related to transportation and warehousing. If transportation is slow higher levels of inventory are needed, ergo, more warehouse capacity is needed. Production planningproduction planning must operate in close coordination with logistics in order to ensure adequate market coverage. Production planning and logistics are increasingly integrated within large corporations. Parts and service supportthe effectiveness of parts and service support depend upon speed of transportation, location of warehouses, and forecasting of support function needs. Obviously, parts and service support have a direct impact on customer service levels. Return goods handlingreverse supply chain logistics is an increasingly important but frequently overlooked dimension in logistics. Salvage and scrap disposaldisposal is an integral part of the reverse supply chain. There is an increasing interest, in the logistics literature, in the impact of the location of evaluation and disposal facilities for returned goods. Customer service levelslogistics plays an extremely important role in ensuring that customers get the right products at the right place at the right time. Transportation, warehousing, forecasting, inventory control, and production planning all have a direct impact on customer satisfaction.
The two most obvious aspects of logistics are warehousing and transportation.
Warehousing and Storage:Warehousing is defined as the storage of goods: raw materials, semifinished goods, or finished goods. This includes a wide spectrum of facilities and locations that provide warehousing. Since this is a point in the logistics system where goods are held for varying amounts of time, the flow is interrupted or stopped, thereby creating additional costs to the product. In a macroeconomic sense, warehousing creates time utility for raw materials, industrial goods and finished products. It also increases the utility of goods by broadening their time availability to prospective customers. Transportation:Transportation involves the physical movement or flow of goods. The transportation system is the physical link that connects customers, raw material suppliers, plants, warehouses and channel members. These are the fixed points in a logistics supply chain. The basic modes of transportation are water, rail, motor carrier, air and pipeline. Water being the slowest mode with rail, motor carrier, and air following in order of speed of delivery. Generally, the order is reversed when looking at costs. Selection of the appropriate carrier has several steps. First the firm selects a transportation mode. The shipper must compare the service desired with the rate or cost of service. Service usually means transit time or the time that elapses from the time the consignor makes the goods available for dispatch until the carrier delivers to the consignee. Pickup and delivery, terminal handling and movement between origin and destination account for the time involved in transporting goods. The firm must balance the "need for speed" with the costs inherent in the mode of transport. This includes the rate charged for the service, minimum weight requirements, loading and unloading facilities, packaging, possible damage in transit, and any special services that may be desired or required. If next day delivery is imperative, the shipper will utilize an air freight carrier but will pay a premium price for such rapid service. If time is not a particularly critical element the shipper may elect to use rail or a motor carrier, or may even utilize a water carrier if time is inconsequential. Water-based modes of transpor tation are the least expensive and are used for commodity type products such as grain, coal, and ore. Some firms even utilize more than one mode of transportation, called intermodal transport, to move their goods. Once a mode is selected, the shipper must decide the legal classification or type of carrier they wish to utilize: common, regulated, contract, exempt or private. Common carriers serve the general public at reasonable prices and without discrimination. They cannot refuse to carry a particular commodity or refuse to serve a particular point with the scope of the carrier's operation. Common carriers are liable for all goods lost, damaged, or delayed unless caused by an act of God, an act of a public enemy, an act of public authority, an act of the shipper, or some defect within the good itself.
Regulated carriers are required to provide safe and adequate service and facilities upon reasonable request and are liable for damage up to limits established by the carrier. Regulated carriers can be motor carriers or water carriers and are subject to minimal federal controls. A contract carrier does not serve the general public, but, rather serves one or a limited number of contracted customers. They have no legal service obligation. They often provide a specialized service and usually have lower rates than common or regulated carriers. Exempt carriers are exempt from regulation regarding rates and services. Exempt status comes from the type commodity hauled or the nature of the carrier's operation. Exempt motor carriers are usually local and typically transport such items as agricultural goods, newspapers, livestock, and fish. Exempt water carriers transport bulk commodities such as coal, ore, grain, and liquid. Exempt rail carriers transport piggy-back shipments and exempt air carriers haul cargo. A firm's own transportation is termed a private carrier. Private carriers are not "for-hire" and not subject to the same federal regulations as other types of transport. However, the carrier's primary business must be something other than transportation. Once the mode and type of carrier is determined a final decision can be made based on other factors. Accessibility is one such factor. Some firms have geographic limits to their routing network. Others may not possess physical access to needed facilities or have the ability to provide the equipment and facilities that movement of a particular commodity may require. Reliability, the consistency of the transit time a carrier provides, is also a key factor. Finally, convenience and communication are other important considerations when selecting a carrier. Measures that a transportation firm would use to judge its performance include: orders shipped on time, orders shipped complete, order preparation time, product availability, and transit time. From the customer perspective performance can be gauged from orders received on time, orders received complete, orders received damage free, orders filled accurately, and orders billed accurately.
Q 16) What are various characteristics of forecasts? Explain in detail. Ans: Forecasting: Demand forecast forms the basis of all Supply chain All push processes in the supply chain are performed in anticipation of customer demand, whereas all pull processes are performed in response to customer demand. For push processes, a manager must plan the level of activity , be it production, transportation, or any other planned activity, for pull processes, A manager must plan the level of available capacity & inventory but not the actual amount to be executed The goal is to increase profitability through better optimization of sales channels, inventory management and product promotions. Characteristics of forecasts: Forecasts are always wrong: It implies that forecasts should include both the expected values and the measure of forecasted error ( demand uncertainty ). Forecasts are predictions about the future, and thus are destined to be wrong To make them as accurate as possible we must have a forecasting process, and knowledgeable people who are in touch with customers and the marketplace, to feed the best, most up-to-date information into that forecasting process. The final ingredient is to have sources of market information that inform the forecasters' conclusions There are only three proven solutions to providing good service (timely delivery for in-stock positions, with controlled inventory levels) in the face of volatile demand, when even the best of forecasts are wrong. Here they are. Use them individually or in combination, and give yourself and your company the best chance of success. i. More lead-time to adjust sourcing and production. ii. More inventory because inventory can buffer a mistake, especially an oversold forecast. iii. More, flexible, productive capacity, with low (or no) changeover/set-up times. This is the best of all; hard to attain, tough to maintain, but the best, most responsive solution of all. This is the capacity to ramp up products/services as demand increases, or to cut it back when demand falls short. Long-term forecasts are usually less accurate than short-term forecasts: It means that long term forecasts have a higher standard deviation of error relative to the mean than short-term forecasts. Aggregate forecasts are usually more accurate than disaggregate forecasts: Aggregate forecasts have a lower standard deviation of error relative to the mean. For example, it is more accurate to forecast the GDP of a country than forecast the earnings of a specific company.
The company must also be knowledgeable about numerous factors that may be related to the demand forecast, including the following: Past demand Planned advertising and marketing efforts Display position in a catalog State of the economy Planned price discounts Actions competitors have taken
Q 17) Explain Fleet Management. Fleet management is an important area requiring consideration. Managing and operating a fleet of cars and vans if not done well could result in about 35 per cent increase in the running cost which can hit the operating margins of a company. Issues that need to be considered include: Running the most suitable types of vehicle Selecting the most appropriate fuel type Ensuring vehicle safety Controlling associated costs Minimising environmental impact
The focus on fleet management should come in from the top level management. There may be initial running cost but generally, running an efficient fleet will produce lower costs to the business than letting things just happen. Process The steps in managing a fleet are as follows: 1. Developing a fleet action plan: The outline action plan has to be set out. 2. Assess current position: The actual performance in terms of numbers of vehicles, annual mileage patterns, overall costs, and fuel consumption needs to be established. These provide the baseline against which progress is measured. 3. Identify outline objects: The objectives need to be established. They should be measurable. The following could be some of the objectives for improvement of the fleet. i. Cost savings ii. Reduction in overall mileage iii. Reduction in fuel used iv. Reduction in emissions v. Time-scale 4. Review the performance Once the objective are set, there needs to be a constant review to see whether the objectives are met or not. Factors The three factors that need to be considered for fleet management are: 1. The transport/ mobility requirement 2. The vehicle driver 3. Vehicle selection
Q 19) How many cycles are involved in cycle view of supply chain? Consider the supply chain involved when a customer purchases a computer system from a distributor. Identify the cycles in this supply chain and location of Pull/Push boundary. Ans: A supply chain is a sequence of processes and flows that take place within and between different stages and combine to fulfil a customer need for a product. A cycle view of the supply chain clearly defines the processes involved and owners of each process. There are five stages of a supply chain which can be broken down into the following four process cycles of supply chain. 1. 2. 3. 4. Customer Order Cycle Replenishment Cycle Manufacturing Cycle Procurement Cycle
Each order occurs at the interface between two successive stages of the supply chain. The five stages thus result in four supply chain process cycles. A cycle view of supply chain is very useful; when considering operational decisions because it clearly specifies roles and responsibilities of each member of the supply chain; and when setting up information systems (for example) to support supply chain operations as process ownership and objectives are clearly defined. Customer Order Cycle: It occurs at the customer/retailer interface and includes all processes directly involved in receiving and filling the customers order. Customer initiates this cycle at retailer site. Cycle primarily involves filling customers demand. Processes involved are as follows: Customer Arrival: - Refers to customers arrival at the location where he/she has access to his/her choices regarding a purchase. - Goal is to facilitate and maximize the contact between customer and appropriate product so that customers arrival turns into a customer order. Customer Order Entry: - Refers to customers informing the retailer what products they want to purchase and retailer allocating products to customers. - Objective is to ensure that order entry is quick, and communicated to all other supply chain processes that are affected by it.
Customer Order Fulfilment: - Customers order is filled and sent to customer. - Objective is to get the correct orders to customers by the promised due dates at lowest possible cost. Customer Order Receiving: - Customer receives the order and takes ownership of product. Replenishment Cycle: It occurs at retailer/distributor interface and includes all processes involved in replenishing retailer inventory. Initiated when a retailer places and order to replenish inventories to meet future demand. Objective is to replenish inventories at retailer at minimum cost while providing high product availability. Processes included are as follows: Retail Oder Trigger: - As retailer fills customer demand, inventory is depleted and must be replenished to meet future demand. - Objective is to maximize profitability by ensuring economies of scale and balancing product availability and cost of holding inventory. Retail Order Entry: - Objective is that an order be entered accurately and conveyed quickly to all supply chain processes affected by the order. Retail Order Fulfilment: - Objective is to get the replenishment order to retailer on time while minimizing costs. Retail Order Receiving: - Objective is to update inventories and displays quickly and accurately at the lowest possible cost. Manufacturing Cycle: It occurs at the distributor/manufacturer or retailer/manufacturer interface. Includes all processes involved in replenishing distributor(or retailer) inventory. This cycle is triggered by customer orders, replenishment orders from a retailer or distributor, or by forecast of customer demand and current product availability in manufacturers finished-goods warehouse. One extreme in this is the Pull Process i.e. orders are collected and then the demand is supplied; and the other extreme is Push Process i.e. the production products is done in anticipation of customer demands.
Processes involved are as follows: Order Arrival: - During this process, a finished-goods warehouse or distributor sets a replenishment order trigger based on the forecast or future demand and current product inventories. - The resulting order is then conveyed to the manufacturer. Production Scheduling: - Orders are allocated to a production plan. - Objective is to maximize the proportion of orders filled on time while keeping costs down. Manufacturing and Shipping: - During the manufacturing phase of the process, the manufacturer produces to the production schedule. - During the shipping phase, the product is shipped to the customer, retailer, distributor or finished-goods warehouse. - Objective is to create and ship the product by the promised due date while meeting quality requirements and keeping costs down. Receiving: - The product is received at the distributor, finishes-goods warehouse, retailer or customer and inventory records are updated. Procurement Cycle: It occurs at the manufacturer/supplier interface. Includes all processes necessary to ensure that materials are available for manufacturing to occur according to schedule. The manufacturer orders components from suppliers that replenish the component inventories. These component orders are determined precisely once the manufacturer has decided what the production schedule will be. Since the component orders depend on production schedule, the suppliers have to be linked to the manufacturers production schedule.
Consider the following example for identifying the cycles when customer purchases computer system from a distributor.
Let us consider a distributor named L.L Bean which receives customer orders through its website or in store. The processes in L.L Bean supply chain break up into pull and push processes as shown in the figure above. The cycles identified when a customer buys a computer system from L. L. Bean are: Customer Order Cycle, Replenishment and Manufacturing Cycle, Procurement Cycle.
L.L Bean executes all processes in the customer order cycle after the customer arrives. All processes that are part of the customer order cycle are thus pull processes. The customer selects a computer system with the desired configuration. Order fulfilment tales place from product in inventory that is built in anticipation of customer orders. The selected computer system is checked for availability in the inventory. The goal of the replenishment cycle is to ensure product availability when a customer order arrives. All processes in the replenishment cycle are performed in anticipation of demand and thus are push processes. The same holds true for the processes in the manufacturing and procurement cycles. All processes in these cycles are push processes. The push/pull boundary appears at the interface between Replenishment and Manufacturing Cycle and Customer Order Cycle.
Q 20)What are benefits and role of Internet in SCM? Explain with one example.
Ans: Supply chain management (SCM) is concerned with the flow of products and information between supply chain members' organizations. Recent development in technologies enables the organization to avail information easily in their premises. These technologies are helpful to coordinates the activities to manage the supply chain. The cost of information is decreased due to the increasing rate of technologies. In the integrated supply chain model (Fig.1) bi-directional arrow reflect the accommodation of reverse materials and information feedback flows. Manager needs to understand that information technology is more than just computers. Except computer data recognition equipment, communication technologies, factory automation and other hardware and services are included.
Integrated supply chain model Bi-directional arrow reflects the accommodation of reverse materials and information feedback flows. Managers need to understand that information technology is more than just computers. Except computer, data recognition equipment, communication technologies, factory automation and other hardware and services are included. The importance of information in an integrated supply chain management environment: Prior to 1980s the information flow between functional areas with in an organization and between supply chain member organizations were paper based. The paper based transaction and communication is slow. During this period, information was often over looked as a critical competitive resource because its value to supply chain members was not clearly understood. IT infrastructure capabilities provides a competitive positioning of business initiatives like cycle
time reduction, implementation, implementing redesigned cross-functional processes. Several well know firms involved in supply chain relationship through information technology. Three factors have strongly impacted this change in the importance of information. First, satisfying in fact pleasing customer has become something of a corporate obsession. Serving the customer in the best, most efficient and effective manner has become critical. Second information is a crucial factor in the managers' abilities to reduce inventory and human resource requirement to a competitive level. Information flows plays a crucial role in strategic planning. All enterprises participating in supply chain management initiatives accept a specific role to perform. They also share the joint belief that they and all other supply chain participants will be better off because of this collaborative effort. Power with in the supply chain is a central issue. There has been a general shift of power from manufacturers to retailers over the last two decade. Retailers sit in a very important position in term of information access for the supply chain. Retailers have risen to the position of prominence through technologies. The Wal-Mart & P&G experiences demonstrate how information sharing can be utilized for mutual advantage. Through sound information technologies Wal-Mart shares point of sale information from its many retail outlet directly with P&G and other major suppliers. Benefits: 1. On-line vendor catalogs from which buyers can find,select, and order items directly from suppliers without any human contact 2. The ability to track shipments using a wide variety of modes including truck, rail, and air transport 3. The ability to contact vendors or buyers regarding customer service problems from late deliveries, stock-outs, alterations in scheduled shipment dates, late arrivals, and a wide variety of other service issues. 4. The ability to reserve space in public warehouses for anticipated deliveries to market locations 5. The ability to schedule outbound shipments from private and public distribution centers on a 24-hour basis 6. The ability to provide 7-day/24-hour worldwide customer service 7. The ability to receive orders from international customers 8. The ability to check the status of orders placed with vendors 9. The ability to place bids on projects issued by government and industry buyers 10. The ability to notify vendors of changes in configurations in products that are produced to order 11. The ability to pay invoices electronically and to check outstanding debit balances 12. The ability to track equipment locations including rail cars, trucks, and material handling equipment 13. The ability to directly communicate with vendors, customers, etc. regarding supply issues on a 7-day/ 24-hour basis via E-mail. 14. The ability to schedule pickups and deliveries 15. The ability to be more responsive to customer service problems 16. The ability to reduce service costs and response time.
Q 21) Write note on application of e-business Ans: E-Business is the digital enablement of transactions and processes within a firm, involving information systems under the control of the firm, which doesnt include the companys revenue. E-Business is a significant new way of conducting business. It raises cost issues regarding existing transactions. It also impacts traditional internal and external supply chain management issues. Application of e-business: 1) Response Time to Customer : In many cases going online may offer a time advantage. E.g. mutual fund prospectus or music can be downloaded from the wed. 2) Product Variety : An e-business finds it easier selection of products than a bricks and mortar store. E.g. Amazon.com offers a much larger selection of books than atypical bookstore. 3) Product availability : An e-business can greatly increase the speed with which information on customer demand is disseminated throughout the supply chain, giving rise to more accurate forecasts. These improved forecasts and the more accurate view of customer demand leads to a better match between supply chain demands. An e-business allows for aggregation of inventory that improves product availability. 4) Customer Experience : An e-business affects customer experience in terms of access, customization and convenience. Unlike most retail stores that are open only during business hours, an e-business allows access to customers who may not be able to place orders during regular business hours. E-business allows a firm to access customers who are geographically distant. 5) Faster Time to Market: A firm can use e-business to introduce new products much more quickly than a firm that uses physical channels. A firm that sells PCs through physical channels must produce enough units to stocks the shelves as its distributors and retailers before it starts to see revenue from the new product. An e-business in contrast introduce a new products by making it available on the web-site A distribution lag to fill physical channels is not present. A new product can be made available as soon as the first unit is ready to be produced. E.g.; Dell often introduce new products earlier than its competitors because of ebusiness. 6) Order Visibility:
The internet makes it possible to provide visibility of order status. 7) Direct Sales to Customers : An e-business allows manufacturers and other members of the supply chain that do not have direct contact with customers in traditional channels to enhance revenues by bypassing intermediaries and selling directly to customers, thereby collecting the intermediarys incremental revenue. E.g.: Dell sells PCs online direct to customer, as a result revenue increased. 8) Flexible Pricing, Product Portfolio, and Promotions: An e-business can easily alter by changing one entry in the database linked to its web site. This ability allows an e-business to maximize revenues by setting prices based on current inventories and demand. E.g.: the airlines provide a last-minute, low-cost prices fares available on the web on routes with unsold seats. An e-business can easily alter the product portfolio that it offers as well as promotions it is running. 9) Efficient Funds Transfer : An e-business can enhance revenues by spending up collection. Impact on Cost: Inventory: An e-business can lower inventory levels and inventory cost by improving a supply chain coordination. E-business enables a firm to aggregate inventories far from customers, if most customers are willing to wait for delivery of online orders. An e-business can significantly lowers its inventories if it can postponed the introduction of variety until after the customer order is received. Facilities: An e-business can reduces net-work facility costs by centralizing operations, thereby decreasing the number of facilities required. E-business lowers its resource cost. Transportation: If a firm can put its product in a form that can be downloaded, the internet will allow it to save on the cost and time for delivery. Information: An e-business can share demand information throughout its supply chain to improve visibility. The internet may also be used to share planning and forecasting information within the supply chain, further improving coordination. This helps reduce overall supply chain costs and better match supply and demand. These are the applications of e-business.
Q 22) What are the different kinds of process view of Supply Chain? Explain push/pull view of DELL Supply Chain . Ans: A supply chain is a sequence of processes and flows that take place within and between different stages and combine to fill customer need for a product. There are two different ways to view the processes performed in a supply chain. 1. Cycle View: The processes in a supply chain are divided into series of cycles, each performed at the interface between two successive stages of a supply chain. 2. Push/Pull View: The processes in a supply chain are divided into two categories depending on whether they are executed in response to a customer order or in anticipation of customer orders. Pull processes are initiated by customer orders, whereas push are initiated and performed in anticipation of customer orders. 1. Cycle View of Supply Processes All supply chain processes can be broken into the following four process cycles, as shown below: Customer order cycle Replenishment cycle Manufacturing cycle Procurement cycle
. Fig. Supply Chain Process Cycles Each cycle occurs at the interface between two successive stages of the supply chain. The five stages thus result in four supply chain process cycles. Not every supply chain will have, all four
cycles clearly separated. For example, a grocery supply chain in which a retailer stocks finishedgoods inventory and places replenishment orders with a distributor is likely to have all four cycles separated. Each cycle consists of six sub processes. Each cycle starts with the supplier marketing the product to customers. A buyer then places an order that is received by the supplier. The supplier supplies the order, which is received by the buyer. The buyer may return some of the product or other recycled material to the supplier or a third party. The cycle of activities then begins all over again.
Fig.Subprocesses in each Supply Chain Process Cycle Depending on the transaction in question, the sub processes can be applied to the appropriate cycle. When customers shop online at Amazon orders books from a distributor to replenish its inventory, it is a part of the replenishment cycle-with Amazon as the buyer and the distributor as the supplier. Within each cycle, the goal of the buyer is to ensure product availability and to achieve economies of sales ordering. The supplier attempts to forecast customer orders and reduce the cost of receiving the order. The supplier then works to fill the order on time and improve efficiency and accuracy of the order fulfillment process. The buyer then works to reduce the cost of the receiving process. Reverse flows are managed to reduce cost and meet environmental objectives. Even though each cycle has the same basic sub processes, there are a few important differences between cycles. In the customer order cycle, demand is external to the supply chain and thus uncertain. In all other cycles, order placement is uncertain but can be projected based on policies followed by the particular supply chain stage. For example, in the procurement cycle, a tire supplier to an automotive manufacturer can predict tire demand precisely once the production schedule at the manufacturer is known. The second difference across cycles relates to the scale of an order. Whereas a customer buys a single car, the dealer orders multiple cars at a time from the manufacturer, and the manufacturer, in turn, orders an even larger quantity of tires from the supplier. As we move from the customer to the supplier, the number of individual orders declines and the size of each order increases. Thus, sharing of information and operating policies across supply chain stages becomes more important as we move farther from the end customer.
A cycle view of the supply chain is very useful when considering operational decisions because it clearly specifies the roles of each member of the supply chain. The detailed process description of a supply chain in the cycle view forces a supply chain designer to consider the infrastructure required to support these processes. The cycle is useful, for example, when setting up information systems to support supply chain operations. 2. Push/Pull View of Supply Chain Processes: All processes in a supply chain fall into one of two categories depending on the timing of their execution to end customer demand. With pull processes, execution is initiated in response to a customer order. With push processes, execution is initiated in anticipation of customer orders. Therefore, at the time of execution of a push process, demand is known with certainty, whereas at the time of execution of a push process, demand is not known and must be forecast. Pull processes may also be referred to as reactive processes because they respond to speculated (or forecasted) rather than actual demand. Push processes operate in an uncertain environment because customer demand is not yet known. Pull processes operate in an environment in which customer demand is known. They are, however , often constrained by inventory and capacity decisions that were made in the push phase.
Fig. Push/Pull View of the Supply Chain Dell does not sell through a reseller or distributor but directly to the consumer. Demand is not filled from finished-product inventory, but from production. The arrival of a customer orders triggers production of the product. The manufacturing cycle is thus part of the customer order fulfillment process in the customer order cycle. There effectively only two cycles in the dell supply chain: (1) a customer order and manufacturing cycle and (2) a procurement cycle. All processes in the customer order and manufacturing cycle at Dell are thus classified as pull processes because are initiated by customer arrival. Dell, however not place component orders in response to a customer order. Inventory is replenished in anticipation of customer demand. All processes in the procurement cycle for Dell are thus classified as push processes, because they are in response to a forecast.
A push/pull view of the supply chain is very useful when considering strategic decisions relating to supply chain design. The goal is to identify an appropriate push/pull boundary such that the supply chain can match supply and demand effectively.
Fig. Push/Pull Processes for Dell Supply Chain
Q23)What are the major drives of Supply Chain performance? How could an auto manufacturer use transportation to increase the efficiency of its Supply Chain? The Drivers of Supply chain Performance are: Facilities, Inventory, Transportation and Information. These Drivers are not only determines the supply chains performance in terms of responsiveness and efficiency, they also determine whether strategic fit is achieved across the supply chain. Drivers of Supply Chain Performance: 1. Facilities: are the places in the supply chain network where product is stored, assembled, or fabricated. The two major types of facilities are production sites and storage sites. Whatever the function of the facility, decision, regarding location, capacity and flexibility of facilities have a significant impact on the supply chain performance. 2. Inventory: is all raw materials, work in process, and finished goods within a supply chain. Inventory is an important supply chain driver because changing inventory policies can dramatically alter the supply chains efficiency and responsiveness. 3. Transportation: entails moving inventory from point to point in supply chain. Transportation can take the form of many combinations of modes and routes each with its own performance characteristics. 4. Information: consists of data and analysis concerning facilities, inventory, transportation, and customers throughout the supply chain. Information is potentially the biggest drivers of supply chain as it directly affects each of the other drivers. Information presents management with the opportunity to make supply chain more responsive and efficient. 5. Sourcing: is a choice of who will perform a particular Supply chain activity such as production, storage, transportation or the management of information. At a strategic level, these decisions determine what functions a firm performs and what functions a firm outsources. 6. Pricing: determines how much a firm will charge for the goods or services that it makes available in the supply chain. Pricing affects the behavior of the buyer of the goods or services thus affecting the supply chain performance. Transportation refers to the movement of products from one location to another as it makes its way from beginning of the supply chain to the customer. Transportation is the important supply chain driver because products are rarely produced and consumed in the same location. Transportation is the significant component of the cost incurred by most of the supply chains. The role of transportation is even more significant is global supply chains. The Auto manufacturer could use transportation to move products across global network. Global transportation would allow the auto manufacturer to sell products all over the world. He will have suppliers worldwide and would sell products to customers all over the world from few plants. .
Q 24)What are the various stages in Supply Chain? Explain decision phases involved in Supply Chain in detail. Ans: Supply chain management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers. Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption. Supply chain management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management. It also includes the crucial components of coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies. More recently, the loosely coupled, self-organizing network of businesses that cooperate to provide product and service offerings has been called the Extended Enterprise. Supply chain management consists of following stages in order to maximize the total supply chain profitability:
Customer service management process Procurement process Product development and Manufacturing flow management process Physical distribution Outsourcing/partnerships Performance measurement Warehousing management Fig. Supply chain management stages
a) Customer service management process: Customer Relationship Management concerns the relationship between the organization and its customers. Customer service is the source of customer information. It also provides the customer with real-time information on scheduling and product availability through interfaces with the company's production and distribution operations. Successful organizations use the following steps to build customer relationships: determine mutually satisfying goals for organization and customers establish and maintain customer rapport produce positive feelings in the organization and the customers b) Procurement process Strategic plans are drawn up with suppliers to support the manufacturing flow management process and the development of new products. In firms where operations extend globally, sourcing should be managed on a global basis. The desired outcome is a win-win relationship where both parties benefit, and a reduction in time required for the design cycle and product development. Also, the purchasing function develops rapid communication systems, such as electronic data interchange (EDI) and Internet linkage to convey possible requirements more rapidly. Activities related to obtaining products and materials from outside suppliers involve resource planning, supply sourcing, negotiation, order placement, inbound transportation, storage, handling and quality assurance, many of which include the responsibility to coordinate with suppliers on matters of scheduling, supply continuity, hedging, and research into new sources or programs. c) Product development and commercialization Here, customers and suppliers must be integrated into the product development process in order to reduce time to market. As product life cycles shorten, the appropriate products must be developed and successfully launched with ever shorter time-schedules to remain competitive. According to Lambert and Cooper (2000), managers of the product development and commercialization process must: 1. coordinate with customer relationship management to identify customer-articulated needs; 2. select materials and suppliers in conjunction with procurement, and 3. develop production technology in manufacturing flow to manufacture and integrate into the best supply chain flow for the product/market combination.
d) Manufacturing flow management process The manufacturing process produces and supplies products to the distribution channels based on past forecasts. Manufacturing processes must be flexible to respond to market changes and must accommodate mass customization. Orders are processes operating on a just-in-time (JIT) basis in minimum lot sizes. Also, changes in the manufacturing flow process lead to shorter cycle times, meaning improved responsiveness and efficiency in meeting customer demand. Activities related to planning, scheduling and supporting manufacturing operations, such as work-in-process storage, handling, transportation, and time phasing of components, inventory at manufacturing sites and maximum flexibility in the coordination of geographic and final assemblies postponement of physical distribution operations. e) Physical distribution This concerns movement of a finished product/service to customers. In physical distribution, the customer is the final destination of a marketing channel, and the availability of the product/service is a vital part of each channel participant's marketing effort. It is also through the physical distribution process that the time and space of customer service become an integral part of marketing, thus it links a marketing channel with its customers (e.g., links manufacturers, wholesalers, retailers).
f) Outsourcing/partnerships This is not just outsourcing the procurement of materials and components, but also outsourcing of services that traditionally have been provided in-house. The logic of this trend is that the company will increasingly focus on those activities in the value chain where it has a distinctive advantage, and outsource everything else. This movement has been particularly evident in logistics where the provision of transport, warehousing and inventory control is increasingly subcontracted to specialists or logistics partners. Also, managing and controlling this network of partners and suppliers requires a blend of both central and local involvement. Hence, strategic decisions need to be taken centrally, with the monitoring and control of supplier performance and day-to-day liaison with logistics partners being best managed at a local level.
g) Performance measurement Experts found a strong relationship from the largest arcs of supplier and customer integration to market share and profitability. Taking advantage of supplier capabilities and emphasizing a longterm supply chain perspective in customer relationships can both be correlated with firm
performance. As logistics competency becomes a more critical factor in creating and maintaining competitive advantage, logistics measurement becomes increasingly important because the difference between profitable and unprofitable operations becomes more narrow.
h) Warehousing management As a case of reducing company cost & expenses, warehousing management is carrying the valuable role against operations. In case of perfect storing & office with all convenient facilities in company level, reducing manpower cost, dispatching authority with on time delivery, loading & unloading facilities with proper area, area for service station, stock management system etc.
Supply chain management is a cross-function approach including managing the movement of raw materials into an organization, certain aspects of the internal processing of materials into finished goods, and the movement of finished goods out of the organization and toward the endconsumer. Decision phases involved in Supply Chain:
Fig. Decision phases in supply chain Strategic level Decisions about the structure of supply chain and what processes each stage will perform over the next several years are taken.
Strategic decisions are: - Strategic network optimization, including the number, location, and size of warehousing, distribution centers, and facilities. - Strategic partnerships with suppliers, distributors, and customers, creating communication channels for critical information and operational improvements such as cross docking, direct shipping, and third-party logistics. - Product life cycle management, so that new and existing products can be optimally integrated into the supply chain and capacity management activities. - Information technology chain operations. - Where-to-make and make-buy decisions. - Aligning overall organizational strategy with supply strategy. It is for long term ,needs resource commitment, are expensive and must take into account market certainty.
Tactical level Definition of set of policies that govern the short term operations are taken. Starts with forecast of demands in coming year. Visually time horizon is quarter of the year. Planning decisions are: - Sourcing contracts and other purchasing decisions. - Production decisions, including contracting, scheduling, and planning process definition. - Inventory decisions, including quantity, location, and quality of inventory. - Transportation strategy, including frequency, routes, and contracting. - Benchmarking of all operations against competitors and implementation of best practices throughout the enterprise. - Milestone payments. - Focus on customer demand and Habits.
Operational level Time horizon is weekly or daily. Decisions regarding individual customer orders are made. Operations include: - Daily production and distribution planning, including all nodes in the supply chain. - Production scheduling for each manufacturing facility in the supply chain (minute by minute). - Demand planning and forecasting, coordinating the demand forecast of all customers and sharing the forecast with all suppliers. - Sourcing planning, including current inventory and forecast demand, in collaboration with all suppliers. - Inbound operations, including transportation from suppliers and receiving inventory. - Production operations, including the consumption of materials and flow of finished goods. - Outbound operations, including all fulfillment activities, warehousing and transportation to customers. - Order promising, accounting for all constraints in the supply chain, including all suppliers, manufacturing facilities, distribution centers, and other customers. - From production level to supply level accounting all transit damage cases & arrange to settlement at customer level by maintaining company loss through insurance company.
Q 25) What do you mean by Demand and Forecasting? What are the types of demand and the characteristics of a forecast? Ans: Demand: Demand Planning is an important process in the segment of the supply chain management. Demand Planning is involve forecasting and also other activates for promotion planning. There Are two type of Demand: 1. Independent Demand 2. Dependent Demand and derived Demand Independent Demand item are generally finished goods while depended demand item are generally component or subassemblies.Independent Demand item are forecast while Dependent demand and derived demand item are requirement can be derived based on demand for finished goods. Forecasting: Forecasts of future demand are essential for supply chain management decisions Demand forecasts are used in supply chain design, planning as well as in operations.Demand forecasts are used in various subcomponents of supply chain. Characteristics of Forecasts 1. Forecasts may always go wrong. Therefore a rigorous presentation of forecast should include both the expected value and a measure of forecast error. 2. Long-term forecasts are usually less accurate in comparison to short-term forecasts. 3. Aggregate forecasts are usually more accurate in comparison to disaggregate forecasts. For example, forecast of the food consumed by a group of students in a college canteen can be forecasted more accurately than the food consumed by each and every student. Forecasting Methods Forecasting methods fall into four categories 1. Qualitative: The forecasts are based on the human judgement and opinion. Market research falls in this category. 2. Time Series: These methods use historical demand data of an item. 3. Causal: Causal forecasting uses data of multiple variable to forecast demand of an item. 4. Simulation: Simulation methods use what if questions and come out with forecasts. The underlying models for whatif analysis are time series or causal models. Even a hybrid model can be used for simulation.
Q 26) What are the different modes of transportation? On what basis one should decide the best mode of transportation? Ans: Modes of Transport A mode identifies the basic transportation method or form. Each mode has its own significance depending upon the geographical location and product to be transported. Each differs in cost and time taken to transport the goods from one place to another. There are 5 basic modes of transportation, as follows: Air: The fastest and most expensive mode. Truck: A relatively quick and inexpensive mode with high levels of flexibility. Rail: An inexpensive mode used for large quantities. Ship: The slowest mode but often the only economical choice for large overseas shipments. Pipeline: Used primarily to transport oil and gas. Electronic transportation: The newest mode that transports goods such as music, previously sent solely by physical modes, electronically via the Internet. Decision Factors The three fundamental factors to transportation performance are: Cost Speed Consistency Cost It includes the direct cost i.e. the payment for movement between two geographical locations and expenses related to the administration and indirect cost of maintaining in-transit inventory. Hence for deciding the transportation, the least expensive transportation is not always resulting in the lowest cost of movement. Speed It is the time required to complete a specific movement of goods from one place to another. Speed and cost are related in two ways. On one hand, greater the speed of transportation higher is the transportation charges, but on the other hand greater speed would result in lesser time of inventory in-transit being unavailable. Consistency Consistency requires to the variations in time required to perform a specific movement. Consistency is the reflection of dependability of the transport. This is a very important factor as inconsistent transportation, i.e. if a given movement takes 2 days once and 6 days the next time, can create serious logistical and operational problems. If there is inconsistency then it would require safety stock which would mean higher costs and also chances of obsolescence in some industries where specifications change frequently. Apart from the factors discussed above, there are other factors to be considered while deciding for the transport of a good. These factors are as follows in the order of their relative importance Distance Volume Density Stow ability
Q 27.)What are the forecasting methods?
Ans: Forecasting methods are classified into four types: Qualitative: Qualitative forecasting methods are primarily subjective; they rely on human judgment and opinion to make a forecast. They are most appropriate when there is little historical data available or when experts have marketing intelligence that is critical in making the forecasts. For example, forecasting the growth and the future of a nascent industry. Time Series: Time series uses historical data to make a forecast. They are based on the assumption that the past demand is a good indicator of future demand. These methods are very suitable when the environmental situation is stable and the basic demand pattern does not very significantly from one year to another. These are simple To implement and provide a very good beginning. Causal: Causal method involves assuming that the demand forecast is highly correlated with certain factors in the environment like the state of the economy or interest rates. Causal forecasting methods find this correlation between demand and the environmental factors and use estimates of these environmental factors to forecast future demand. For example, price and demand for a commodity. Simulation: Simulation forecasting methods imitate the consumer choices that give rise to demand to arrive at a forecast. Using simulation, a firm can combine time series and causal method to answer such questions like what will be the impact of price promotion on sales.
Q 28 Compare conventional business model and VMI model in detail Ans
Conventional business model VMI business model 1. In this model the sales are typically forecasted 1. In VMI , typically activities of forecasting and in their replenishment systems using the creating the purchase orders are performed by the historical sales data. vendor/supplier and not by retailer. 2. Retailers/customers track the sales information 2. Here the vendor is responsible for creating and and inventory and forecast the orders. maintaining the stock plan for the retailer. 3. Whenever purchase orders are created they are 3. EDI is an integral part of VMI process. communicated to the vendor using Retailer sends the inventory data to vendor via EDI(Electronic Data Interchange) document. EDI and vendor sends invoice to retailer by EDI. 4. Whenever inventory stock level decreases the 4. Whenever inventory stock level decreases order is placed . products are automatically replenished by vendor. 5. Less visibility across the supply chain pipeline. 5. VMI concept provides improved visibility across supply chain pipeline that helps supplier and retailer to reduce inventory and improve production planning , inventory turnover and stock availability.
Conventional Business model Store inventory Rank SKU levels based on Sales history Decide if SKU to be present Yes at a store Create PO <MIN QTY Compare available QTY with min QTY. VMI Business model Product To vendors For store PO info Vendors (Excess Prdt) (Excess Prdt) No replenishment No Retailer warehouse Retail stores Prdt
Retail Store inventory Rank SKU levels based on Product activity Sales history Update stock plan Forecasting Review suggested order/agreed upon inventory quantities Store/DC order notification Pick and ship product Retailer receivedEDI 861 P di EDI 821 EDI 825 stores
(Excess Prdt) Retailer warehouse (Excess Prdt)
Vendors
PO ackn-EDI 855 ASN-EDI 856
Marketing buyers at Invoice-EDI 810 Ctffi
Q.29 Explain the Distribution Management of Mumbai Dabbawala in reference with Supply Chain Logistic. Ans: Logistics can be defined as the science pertaining to the movement of materials and the services along with its information. Logistics is the process of moving and positioning inventory to meet customer requirements at the lowest possible total landed cost. Distribution refers to getting the right product to the right place at the right place. It the channel structure used to transfer products from an organisation to its customer. Distribution organisations manage the activities associated with the movement of materials from supplier to customer. Mumbai Dabbawala is the example of great example of proper Distribution Management.Mumbai Dabbawalas name is in Guinness Book of World Record. Also having world record in Best Time Management. The Mumbai Tiffin Box Suppliers Association is a streamlined 120-year-old organization with 4,500 semiliterate members providing a quality doorto-door service to a large and loyal customer base. For the efficiency of their supply chain it has been claimed that this virtually achieves a Six Sigma performance rating i.e. 99.9999% of deliveries are made without error. For distribution management Dabbawalas entire system depends on teamwork and meticulous timing. Half of Mumbai's residents commute everyday from the outlying suburbs to downtown offices, factories, banks, mills and factories in order to earn a living. A large number of these prefer fresh home-cooked meals for their lunch. Teamwork Tiffin boxes are collected from homes in the morning, and taken to the nearest railway station. At various intermediary stations, they are hauled onto platforms and sorted out for areawise distribution, so that a single tiffinbox could change hands three to four times in the course of its daily journey. At Mumbai's city stations, the last link in the chain, a final relay of dabbawalas fan out to the tiffins' destined bellies. Lunch hour over, the whole process moves into reverse and the tiffin boxes return to suburban homes. The range of customers includes students (both college and school), entrepreneurs of small businesses, managers, especially bank staff, and mill workers. The distribution of the tiffins is done without any technological backup. Following example shows the proper working of the distribution management of Mumbai Dabbawala.
At Vile Parle Station, there are four groups of dabbawalas. Each has twenty members and each member services 40 customers. That makes 3,200 tiffin boxes in all. These 3,200 boxes are collected by 9.00 am, reach the station and are sorted according to their destinations by 10.00 am when the 'Dabbawala Special' train arrives. The railway provides sorting areas on platforms as well as special compartments on trains travelling south between 10.00 am and 11.30 am. During the journey, these 80 dabbawalas regroup according to the number of boxes to be delivered in a Particular area, and not according to the groups they actually belong to. If 150 tiffin boxes are to be delivered in the Grant Road Station area, then four people are assigned to that station, keeping in mind one person can carry no more than 35-40 boxes. During the earlier sorting process, each dabbawala would have concentrated on locating only those 40 boxes under his charge, wherever they come from, and this specialization makes the entire system efficient and error-free. Typically it takes about ten to fifteen minutes to search, assemble and arrange 40 tiffin boxes onto a crate, and by 12.30 pm they are delivered to destination place. The return journey is started at 1.30pm to 2.30pm. The Dabbawala collects the tiffins from the offices where they had delivered almost an hour ago. After collecting all tiffinsdabbawalas meet for the segregation as per the destination station. Here they rearrange the tiffins as per the source station and start their return journey. After reaching at source station dabbawalas sort the tiffins as per the area and dispatch the tiffins to the respected home. Features 1. Their distribution service is uninterrupted even on the days of extream weather such as Mansoon. 2. Each one is a shareholder therefore there will be no strike. Each one earn Rs.5000 to Rs. 6000. 3. Error rate is 1 in 16 million transactions. 4. There is no technical back up for distributing the tiffins to the required destination. 5. Six Sigma Performances. 6. Zero % investment, 100 % Customer Satisfaction.
Q 30) Write short notes on A ) Bench Marking In Supply Chain Supply chain operations within an organization should be constantly reviewed to identify where improvements can be made or deficiencies eliminated. One method to help do this is to perform a series of benchmarking tests on their supply chain processes. Benchmarking or goal setting allows a company to assess the opportunities they may have for improving a number of areas in their supply chain including productivity, inventory accuracy, shipping accuracy, storage density and bin-to-bin time. The benchmarking process can provide a company some estimate of the benefits achieved by the implementation of any improvements. Benchmarking is the process whereby an assessment of an act or performance is measured by some means, whether this is by a measurement of time, value or quantity. For example, an assessment of moving items from one storage location to another can be measured by time for a single movement or by quantity if the performance is over a set period. A benchmarking project will gather the assessments and develop a plan of action to improve the process that was assessed. The popularity of benchmarking was spearheaded by the Xerox corporation in the 1980s and is now used in corporations throughout the world. Types of Benchmarking Internal Benchmarking The internal benchmarking process allows a company with a number of facilities that operate the same supply chain processes to compare and contrast the ways in which the process is performed in those facilities External Benchmarking For companies that have performed internal benchmarking and want to investigate new ways in which to improve performance of their internal processes, external benchmarking can produce significant improvements. Competitive Benchmarking For companies that are not performing as well as their competitors they may want to identify the reasons why their processes are not as efficient Components of Benchmarking There are a number of components to a benchmarking study. Not every benchmarking project will incorporate these components, but a combination of these can be used.
Financial benchmarking This involves a financial analysis of the operations that are assessed. For example, a company can compare the cost of storing a component in each of its warehouses. Performance benchmarking This can compare the efficiency of performing a task in one company location to another, or to a competitors. Product benchmarking This method compares the product of one company against another, or comparing between facilities in the same company. Strategic benchmarking This method observes how other companies compete. This can be within the same industry or outside of the companies industry. Functional benchmarking This is considered to be traditional benchmarking where a company will benchmark a single process at a location or a number of locations to identify where efficiencies can be made.
c) Fleet management It is the management of a company's vehicle fleet. Fleet management includes commercial motor vehicles such as cars,vans and trucks. Fleet (vehicle) management can include a range of functions, such as vehicle financing, vehicle maintenance, vehicle telematics (tracking and diagnostics), driver management, speed management, fuel management and health and safety management. Fleet Management is a function which allows companies which rely on transportation in their business to remove or minimize the risks associated with vehicle investment, improving efficiency, productivity and reducing their overall transportation and staff costs, providing 100% compliance with government legislation (duty of care) and many more. These functions can be dealt with by either an in-house fleet-management department or an outsourced fleet-management provider. According to market research from the independent analyst firm Berg Insight, the number of fleet management units deployed in commercial fleets [1] Even though the in Europe will grow from 1.5 million units in 2009 to 4 million in 2014. overall penetration level is just a few percent, some segments such as road transport will attain adoption rates above 30 percent. Fleet Management comprises the target-oriented, optimalplanning, supervision and control of the fleet operationsbased on the available resources, considering internal and external influencing factors. A special focus is on the integration of organizational processes with modern informationsystems Fields of application Object tracking (vehicle tracking) Health and safety tracking Fuel and speed management
Sales order transmission Route planning Driver Management Vehicle diagnostics
d) Impact of e-business on distribution network In order to analyze the impact of e-business technologies on supply chain operations, we break down the supply chain into three distinct components: the business channel, the transportation/distribution channel, and the payments channel. All three channels have been transformed and have become more tightly interconnected by ebusiness technologies that bring more accurate information to decision-makers in real time. Information can be stripped from products/services and analyzed separately to make better decisions regarding production, distribution, marketing, sales, etc. Each of these channels is explored in greater detail below. The business channel of supply chain operations concerns what goods or services a business should focus on producing and at what levels. This involves knowing your customer and satisfying their needs and desires. Information needed to make these decisions comes from the market as it sends out its many signals. Producing this information entails consumer and market research, and is often very data intensive to most accurately understand changing preferences, tastes, styles, etc. The transportation/distribution channel of supply chain operations addresses what is the best way to move products to customers, essentially answering the question, How should goods (and services) be moved and stored? This involves understanding the entire supply chain, from the raw materials to the end consumer, and then taking advantage of the most efficient and effective logistics and inventory systems. Again, information at all points along the supply chain can be integrated using new e-business technologies, enabling better decisions regarding necessary inventory levels and efficient movement of products. The payments channel of supply chains pertain to the best way to move money in exchange for delivered goods and services. The essential question addressed here is, How (and when) should suppliers be paid? Knowing and understanding the supply chain operations of all the firms involved is crucial to making the payments system flow smoothly and accurately. ERP systems that communicate and share information in real time can lead to competitive advantages. All three of these channels have been transformed by new e-business technologies. The effective implementation of new information technologies allows firms to quickly collect and analyze important information throughout the supply chain, including monitoring demand in real-time.
In short, information flows within and between businesses can be reorganized through e-business technologies, resulting in better and more timely decisions across all channels of the supply chain.
f) Benchmarking A Benchmark is a standard of performance. Benchmarking helps organisations identify standards of performance in other organizations and to import them successfully to their own. In determining what qualifies as world class, benchmarking asks the questions: who are we now, and who do we want to be? The best benchmarking efforts not only match the performance of others but also motivate to exceed it. In benchmarking with comparison to others, an organization: Determines how leading organizations perform specific processes Compares their methods to its own Uses the information to improve upon or completely change its processes Forms of benchmarking Internals benchmarking: studies the practices and performance within the organization itself. External benchmarking: determines the performance of others, preferably world-class companies. Quantitative benchmarking: allows organizations to measure progress toward goals and to set improvement objectives in terms of specific performance measures or metrics. Process benchmarking: examines how top performing companies accomplish a specific process. Benefits of benchmarking Helps organizations to make better informed decisions; Exposes organizations to innovations and breakthroughs; Allows organizations to see beyond the barriers, to embrace change, to think outside the box; and Provides organizations with a methodology and a game plan for accelerating, implementing, and managing change. Key Actions in Benchmarking for best Practices 1. Understand the Government Process to Improve. 2. Research to Plan the Review. 3. Select Appropriate Organizations.
4. Collect Data from Selected Organizations. 5. Identify Barriers to change. 6. Make Recommendations for Change-Constructive and Convincing.
g) Types of Demand Demand can be two type : Independent demand Dependent or derived demand Independent demand items are generally finished goods while dependent demand items are generally components or subassemblies. Independent demand items are forecasted (since you dont know the future requirements for them) while dependent demand item requirements can be derived based on demand for finished goods. For example, you would forecast demand for refrigerators but you would calculate how many crisper drawers are needed (2 drawers per fridge, 100 fridges next week therefore need 200 crisper drawers). Any business can benefit from accurate forecasts to: Optimize the business for reducing the costs of operations Increase sales opportunities for maximizing profits Provide accurate information for making better decisions.
h) Stages of Supply Chain A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer request. The supply chain includes not only the manufacturer and suppliers, but also transporters, warehouses, retailers, and even customers themselves. Within each organization, such as a manufacturer, the supply chain includes all functions involved in receiving and filling a customer request. These functions include, but are not limited to, new product development, marketing, operations, distribution, finance, and customer service.
Fig: Stages of Supply Chain A typical supply chain may involve a variety of stages. These supply chain stages include: Customers Retailers Wholesalers/distributors Manufacturers Component/raw material suppliers Each stage in a supply chain is connected through the flow of products, information, and funds. These flows often occur in both directions and may be managed by one of the stages or an intermediary. Each stage in Figure need not be present in a supply chain. The appropriate design of the supply chain depends on both the customer's needs and the roles played by the stages involved. In some cases, such as Dell, a manufacturer may fill customer orders directly. Dell builds-to-order; that is, a customer order initiates manufacturing at Dell. Dell does not have a retailer, wholesaler, or distributor in its supply chain. In other cases, such as the mail-order company L.L.Bean, manufacturers do not respond to customer orders directly. In this case, L.L.Bean maintains an inventory of product from which it fills customer orders. Compared to the Dell supply chain, the L.L.Bean supply chain contains an extra stage (the retailer, L.L.Bean itself) between the customer and the manufacturer. In the case of other retail stores, the supply chain may also contain a wholesaler or distributor between the store and the manufacturer.
i) Economic order quantity EOQ applies only when demand for a product is constant over the year and each new order is delivered in full when inventory reaches zero. There is a fixed cost for each order placed, regardless of the number of units ordered. There is also a cost for each unit held in storage, sometimes expressed as a percentage of the purchase cost of the item. We want to determine the optimal number of units to order so that we minimize the total cost associated with the purchase, delivery and storage of the product. The required parameters to the solution are the total demand for the year, the purchase cost for each item, the fixed cost to place the order and the storage cost for each item per year. Note that
the number of times an order is placed will also affect the total cost, though this number can be determined from the other parameters. Underlying assumptions 1. 2. 3. 4. 5. The ordering cost is constant. The rate of demand is constant The lead time is fixed The purchase price of the item is constant i.e. no discount is available The replenishment is made instantaneously; the whole batch is delivered at once.
EOQ is the quantity to order, so that ordering cost + carrying cost finds its minimum. (A common misunderstanding is that the formula tries to find when these are equal.)
EOQ Formula
A = Demand for the year Cp = Cost to place a single order Ch = Cost to hold one unit inventory for a year
j) Role Of It In Network Design The question to ask yourself is does your supply chain network optimally support the business model and objectives? If you hesitate to answer, you might want to consider supply chain network re-design and optimization as a way to tackle the most challenging supply chain dilemmas your organization may face. Supply chain network design problems are concerned with determining logistics infrastructure over a multi-year strategic planning horizon. The strategic decisions may include location and capacity of facilities and warehouses along with the sourcing allocations between them and
customers. The objective is to provide the most effective solution so as to minimize total costs while providing your customers with the highest possible level of service. By applying advanced mathematical technology, network design and optimization can also help companies to determine optimal answers to various types of questions from the most strategic in nature to the most tactical:

How will the cost of fuel impact the network structure? Should there be single or multiple sourcing? How would the number of DCs impact total costs? Where should each DC be located? What lead times should be offered? Where the incremental capacity should be added? Should I pre-build inventory or increase capacity? What is the impact of adding a new product?
Optimization opportunities occur at every stage along the supply chain and the extent of a particular supply chain re-design effort depends on business considerations and the need to balance effort versus value returned. Could Network Design &Optimization Help Your Business? Companies can save millions of dollars and significantly improve their supply chain performance by applying network design modeling and expert consultant services. Supply chain efficiency has a fundamental impact on the bottom line of both income statements and balance sheets of organizations. The nature of supply chain network optimization allows for an initial assessment of potential benefits before a large-scale project is started. The objective for companies would be to embed the optimization results into the day-to-day operations, creating a sustainable competitive advantage. Supply chain network design projects are usually accomplished in a matter of weeks and the payback is often realized within the first few months of implementation. Companies that focus on their supply chain network are often rewarded with a cost efficient and customerresponsive supply chain. Typical Supply Chain Network Modeling Approach Network modeling is a powerful tool to improve overall supply chain performance. A network optimization process usually involves modeling a subset of a companys products across the supply chain to determine the inventory and customer service improvements that network design and optimization will provide. Whether your company is looking to reduce costs, improve customer service, or be positioned for future growth, network optimization and modeling helps develop the implementation plans required to translate strategic decisions into reality. A typical approach for modeling the supply chain network generally involves the following phases:
Phase 1 Gather data and establish current cost and service baseline
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Phase 2 Determine logistics scenarios Phase 3 Develop an implementation plan
InPhase 1of network modeling it is essential to gain a thorough understanding of your companys overall business requirements. Durring this phase, the project team commences with gathering, cleaning and validating operational and costs data on the current network. These baseline service levels and costs will be used as the benchmark against which all other options will be compared. Phase 2focuses on identifying the potential scenarios to model and conducting first level scenario analysis. In this phase it is also critical to clearly articulate the key constraints and key factors to be modeled in each scenario. High-level models are built to test the potential what ifs and calculate the appropriate cost and service levels. Each scenario is tested for 'robustness' and in so doing, serves to verify and validate the network model. Models are often estimated at the SKU level, with multiple time periods, and the entire end-to-end supply chains are evaluated. It is important to note that the more precise a model must be, the greater the amount of data that must be collected, the greater the accuracy required of that data and the more challenging it may be to solve the model. Every effort should be made to create reusable models that may be reapplied for future studies. Phase 3in supply chain network modeling is the final selection and justification of the selected network. The results must now be compared with the baseline in order to build the business case for change. This includes defining specific operating procedures, material flow policies, inventory policies and load plans. We work together with each client to help develop a road map of how to change from the existing network to the desired future state and properly determine the one-time costs.
. k. Classical inventory management:

Inventory management is the key to any successful distribution business. Inventory management provides everything you need to know about the receipt and movement of goods, the sale, removal or other disposition of goods, and the precise valuation and status of goods remaining in inventory at any time. Effective inventory management allows a distributor to meet or exceed his customers expectations of product availability with the amount of each item that will maximize the distributors net profits. Reactive Inventory System: This system responds to the channel members inventory needs by drawing the product through the inventory channel. Planning Approach:
It is an approach that schedules the product movement through the channel according to the forecasted demand and the availability of the product.
L)Trends in Packaging: One of the worst pollution meanaces of modern times is packaging, plastic because of its poor degradability. Paper is being pushed as an alternative, but it lacks the strength and convenience of plastic. Hence, there has been a constant effort to make plastics a biodegradable packaging material by following kinds of innovative modification. Recycling: In recycling, the waste is prepared for reuse or is recovered to be used for some other purpose. This recovery can be in the form of direct reuse and material recycling. Repair: The Product/component is brought into the working state after this recovery operation. Refurbishing: The Product is upgraded such that it meets higher quality and operational standards than the original product. Remanufacturing: In this type of recovery operation, the products are completely disassembled and all modules and parts are examined in detail. Damaged Grocery Products: Auctions Expert liquidation partners work with manufacturers of canned goods to recover valuable revenue that is typically lost when grocery products get damaged at various points in the supply chain.

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Q 2 )Identify the major drivers of supply chain performance.

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Forecast(in million) Calculation

Forecast(in million) Calculation

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Store Inventory Levels Sales History

Vendors PO ackn Invoice Retailer received Payment advise

Marketing Buyers at corporate offices

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Fig. 13(a) SCM approach in MRP Age

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Fig. 13(b) SCM approach in MRP-II Age

Fig. 13(c) SCM approach in ERP Age

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Modern SCM Approach:

Fig. 13(d) SCM approach in E-ERP Age

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Fig. 13(e) SCM Approach in Global E-Biz Age

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Fig. Push/Pull Processes for Dell Supply Chain

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Q 27.)What are the forecasting methods?

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Q 28 Compare conventional business model and VMI model in detail Ans

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(Excess Prdt) Retailer warehouse (Excess Prdt)

PO ackn-EDI 855 ASN-EDI 856

Marketing buyers at Invoice-EDI 810 Ctffi