MBA (OPERATIONS MANAGEMENT) SEMESTER 3 OM0012 SUPPLY CHAIN MANAGEMENT - 4 CREDITS (BOOK ID B1234) ASSIGNMENT- 60 MARKS Note: Answer

r all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme. Q1. Analyse the key issues in Supply Chain Management ((Identification the various of issues(configuration, inventory management, distribution strategy, supply chain integration, product design , customer value)-3 marks, Describe how the issue affects the SCM-3 marks, Connect how the issues affect the competitiveness of the firm-3 marks, How these issues can be avoided-1 marks) 10 marks Answer. Key issues in supply chain management A company that implements SCM does not necessarily increase its competitive edge. Often, companies go wrong in identifying the key business issues that are related to the effective implementation of SCM. Some of the key issues in supply chain management are: 1.Configuration of distribution network This issue is concerned with the design of distribution network for a specific market. The distribution network mainly includes warehouses, retail outlets, manufacturing plant and supply sources. The costs of inventory at various levels and cost of logistics form the total cost of distribution network. SCM is easy to understand, only when it provides quality and cost benefits that offer equal profit to all supply chain members. 2.Inventory management Distributors and retailers always wish to have inventory in stock, however, not in excess especially that which is perishable or expensive to manage. Hence, inventory management requires planning. Distributors and retailers usually depend on the storage warehouses. Companies tend to hold inventory as low as possible, however, businesses are forced to hold inventories as buffer to counter the effects of an uncertain demand. Holding unnecessary inventory also becomes expensive to manage. Managing optimum levels of inventory forms one of the critical issues in supply chain management. 3.Distribution strategy There are several strategies for distribution of companys finished products. These strategies include cross-docking, classical distribution strategy and direct shipping. Here, selecting the best distribution strategy to achieve the corporate goal is the major issue in supply chain management. 4.Supply chain integration and strategic partnering The inter organizational partnership for increasing competitive edge includes many complex issues. Supply chain integration efficiently uses the information, which is possible only by sharing it. This helps the business processes to deliver superior services and products to the customers. Here, the key issue is regarding how to achieve this and what are the challenges involved in this process? 5.Product design The design of the product affects the total cost of the products. This impacts various other cost elements within the supply chain. The design of the product determines the length of the product life cycle. The key issue is to determine how to leverage design in order to attain the supply chain management objectives. 6.Customer value Companies need to design supply chain in order to provide value to the customers' demand. The key issue here is how to design supply chain in order to satisfy the customers demands in the age of increasing consumer power. To avoid these issues, supply chain management requires logistic models such as, Just In Time (JIT) inventory model, Vendor Managed Inventory (VMI) model, Zero Inventory (ZI) model, Total Quality Management (TQM), and so on that are based on quick order to delivery response. These models focus on vendors' activities, check the delivery responses and note the customers' feedbacks to fulfill their needs. Q2. Managers usually do not prefer a single best purchasing strategy. As there are many options and variables, managers try to design the best-fit strategy based on the requirements of the project. Evaluate this

(Describe understanding and analyzing business objectives-5 marks, is this statement logical/valid from the point of view of designing a strategy (understanding and analyzing business objectives) defend or criticize-2.5 marks, What value the analysis adds?-5 marks) 10 marks Answer. To design a purchasing strategy, it is necessary to understand the business objectives of the company, which in turn helps to identify what purchasing should achieve. The business objectives generally include four features. They are:

Measurement Quantitative aims are much easier to manage than the qualitative aims. With quantitative aims, you can measure performance and plot progress whereas with qualitative aims you can only estimate based on your opinion. It is important to note that absolute measures are of limited use. Specificity Sometimes a companys objective is different from its goal. It is difficult to manage an objective which says we will give the best customer satisfaction when compared to a specific goal which says we will reduce complaints by 2% by the third quarter. Time frame An objective must be achieved within the specified time frame. In this case, the goal is achieved within the specified time frame, whereas an objective does not have a timescale. A company can have an objective of becoming the market leader and a goal of increasing market share by 9% this financial year. Focus A focus can be directed to the external business environment or can be directed to the internal business environment, which is generally based on the way resources are used. For example, a company focuses on external business environment when it says, we will be one of the two largest providers of toothpaste and focuses on internal resources when it says, we will invest 5% of revenue in new technology. To design a purchasing strategy, you need to analyze the business objectives from a purchasing perspective. This involves a procedure which is briefly described in the following five steps: 1. Analyze the purpose of the business Analyze the set of objectives, procedures, performance measures and so on. This step defines the broad objective that purchasing should achieve. 2. Analyze the purchasing function Analyze the demand on its services, state of operations and capabilities of operations. This step describes the internal feature of the procurement function. 3. Analyze the environment in which the procurement function works Analyze the details of the organisation including customers, competitors and economic conditions, particularly the opportunity and threats. 4. Design the supply strategy Determine the design policy and analyze the future state of procurement. This helps the company to move from its present state to the desired future state. There are many strategies that help the function to move forward. Managers need to compare and select the best strategy. 5. Implement the result Make appropriate decisions through all levels of function, check the progress and make adjustments. The steps from 1 to 3 are the analysis stage, step 4 is the design stage and step 5 is the implementation stage. This approach can be summarized as 'analysis, choice and implementation'. Managers usually do not prefer a single best purchasing strategy. As there are many options and variables, managers try to design the best-fit strategy Based on the requirements of the project. Similarly, there are no straightforward steps that lead to a good strategy. Managers have to use their skills and subjective judgment to design a strategy.

Q3. How does a company select a 3 Party Logistics company? 1. 2. 3. 4. 5. 6. 7. Sending Request for Quotation (RFQ) and Request for Information (RFI) to the 3PL companies Receive bids Evaluate bids(pre-defined criteria for evaluation) Select top 3 PL companies and conduct meetings performs detailed review of the financial standing of the 3PL companies select the best suitable company to fulfill requirements, Negotiate the contract terms and arrive upon a final agreement.) -7(1 marks each), Advantages of 3PL-3 marks

Answer. Selecting a 3PL Once a company decides to outsource certain functions, then it starts searching the most reasonable 3PL company that can meet all the necessary requirements. The third party logistics can be asset based, management based or integrated providers. The asset based 3PLcompanies operate their business using their own trucks, personnel and warehouses. Management based 3PL companies provide technological and managerial services to their client. The integrated providers give their services in addition to the services required by the client. A company must provide a detailed Request for Quotation (RFQ) and Request for Information (RFI) to the 3PL companies. The RFI should include the following: Scope of contract, which include locations and facilities. Information on warehouse size and number of deliveries required. Kind of logistic tasks to be performed, for example, transportation, and warehousing. Level of performance required. Once a company receives the bids from the prospective 3PL companies, then the evaluation of bids takes place. Here, the bids are reviewed based on some pre-defined criteria. The criteria specify that 3PL must: provide all the required services have the required technology infrastructure have sufficient warehouse space and personnel be financially sound be well networked geographically be compliant with environmental policies provide detailed costs of services to compare that with the other bids A company evaluates each of the bids based on the given criteria and gives score to each bidder. Once the evaluation process is complete, the company selects top three 3PL companies for site visits and conduct meetings with them. Here, the company performs more detailed review of the financial standing of the 3PL companies. Then, they select the best suitable company who can fulfill their requirements, negotiate the contract terms and arrive upon a final agreement. Advantages of 3PL A firm can gain the following competitive advantages by using 3PL: Focus on core strengths 3PL allows a company to focus on its core competencies. It enables a company to use its limited resources for its core functions. Provide technological flexibility The 3PL providers constantly update their IT skills and equipment depending on the changes in requirements and developments in technology. Provide other flexibilities 3PL also provides greater flexibility in the operations of a company. A company can achieve flexibility in geographic locations by using different 3PLs who provide regional warehousing in different areas. A company can also achieve flexibility in service offerings, resources and workforce size through the use of 3PLs. Savings on investments An organisation can save on capital investment required for logistics assets like land, vehicles and warehouses by using 3PL.

Q4. What are the strategies used for the risk mitigation of controllable risk? 1. Speculative strategy 2. Hedge strategy 3. Flexible strategy- 9(3 marks for each point), Conclusion-1 marks Answer. Risk mitigation strategies for controllable risks We can classify the risk mitigation strategies for controllable risks as follows: Speculative strategy

 Hedge strategy Flexible strategy Let us now briefly discuss these strategies. Speculative strategy This strategy is adopted by companies based on speculative or simulated results obtained from different scenarios. The processes adopting this strategy create stable plans with low volatility which does not require highly responsive supply chain design. This strategy reduces cost of logistics by efficient use of resources like warehouses and trucks, but it can increase inventory levels and hence result in high inventory costs. An example of speculative strategy is Dell with their new business model to sell their computers through retail stores worldwide. For this scenario, Dell must plan for a speculation strategy of supply chain in order to fill all retail channels with pre-built machines. Hedge strategy Hedging in this context means protecting the existing or expanding supply chain position. Hedging caters to risk scenarios related to high price fluctuations. Hedging helps the purchasing department in transferring and managing risks. Using hedging strategies, a company can design supply chain in a way that any loss incurred in one part of the supply chain can be offset by the gains obtained in another part. A company which has adopted this strategy is Volkswagen. Volkswagen has its operating plants spread over a wide geographical area. These operating plants located in United States, Brazil, Mexico, and Germany is important market places for Volkswagen products. Based on the macroeconomic conditions, certain plants are more profitable at various times when compared to the others. Flexible strategy This strategy is designed with various suppliers and surplus manufacturing capacities in different countries. The design is in such a way that products can be moved at minimum cost between regions as the economic conditions demand. The proper implementation of this strategy helps companies to take advantage of varying scenarios. We need to assess the following considerations before the implementation of a flexible strategy: The presence of variability in the system which enables the maximum use of flexible strategies. The more the variability in international conditions, the more a company benefits from using flexible strategies. The spreading of production over various facilities needs to justify the cost involved. This cost may include loss of economies of scale in terms of manufacturing and supply. The coordination and management mechanisms employed in the company need to take quick advantage of flexible strategies. A proper design of supply chain and the following approaches facilitate in implementing flexible strategies effectively: Production shifting Organizations can shift their production facilities between geographic locations as and when circumstances change. Information sharing The presence of production and supply chain activities in many regions and markets often increases the availability of information. Global coordination The positioning of facilities worldwide provides firms a particular amount of market leverage which a firm otherwise lacks.

Q5. Discuss the impact of e-commerce on SCM ((E-commerce impacts SCM in the following ways: 1. 2. 3. 4. 5. 6. 7. 8. 9. Cost efficiency Flexibility in distribution system Customer orientation Shipment tracking Shipping notice Freight auditing Reduced shipping documentation Online shipping inquiry Reduced order cycle time)-9(1 marks each), Conclusion-1 marks

Answer. Impacts of e-commerce on SCM E-commerce impacts SCM in the following ways: Cost efficiency E-commerce facilitates transportation companies of all sizes to exchange data over the Internet regarding the cargo. It allows shippers, firms associated with trucking and freight forwarders to update their documents related to cash and time investments that are necessary for the traditional paper work system. Flexibility in distribution system E-commerce provides businesses with more flexibility in the complex process of sharing information and products between clients, suppliers, and businesses. It links the distribution channels and customers and simplifies the complex movement of products and services through supply chain. Customer orientation E-commerce supports the logistics and transportation services for local and global customers. It helps companies deliver services to their customers with better quality, speed up the growth of supply chain initiatives that are significant for the business, and reduce the cost related to their processing. Internet, when used for ecommerce, allows customers to place orders, monitor shipments, access rate information and also pay their bills. Shipment tracking Through e-commerce, users can get real-time information about cargo shipments. Users can create and submit bills of lading, order for a cargo, analyze the charges, submit a claim for cargo and carry out other functions. Encryption technologies help to secure such business transactions. Shipping notice E-commerce automates the process of receiving the delivery. The list of the goods that will be delivered can be given to the receiver beforehand, to enable cross verification. It also records the details of parcel and items to be shipped. Freight auditing Freight auditing deals with reviewing the. This reduces the risk of over payment, paperwork, or the auditing done by a third party. In addition to this, it provides instant access to the databases that contain the data on various discounts, latest prices and allowances for major transporters. Reduced shipping documentation E-commerce enables automatic generation of bills of lading, shipping labels and the public statements of the carrier. It also generates the specialized export documentation that is used for overseas shipments. The reduced paperwork makes the shipping department more efficient. Online shipping inquiry The online shipping inquiry provides access to the shipping information to all the employees from the company at any location. It helps in tracking and verifying the shipments for their delivery. This allows the customers to analyze the transportation costs and performance efficiency, and negotiate better rates with the suppliers. Reduced order cycle time The improved communication features of e-commerce have reduced all components of the order cycle time to seconds. The buyer can determine if the product is available with a supplier before placing an order. The seller can instantaneously monitor the demand and adjust the supply according to the demand. This helps the seller to avoid or reduce the stock-out time.

Q6. What are the reasons for the bullwhip effect and what methods may be employed to reduce it? ((Reasons: Demand forecasting, lead time, Batch ordering, Price fluctuation, Inflated orders)-5 marks, the methods employed to reduce or eliminate the bullwhip effects are: Reducing uncertainty reducing variability Lead-time reduction Strategic partnership-5 marks)) 10 marks Answer. Bullwhip effect is considered as a dynamical phenomenon in supply chains. We can define bullwhip effect as an increase in the demand variation in a supply chain from downstream to upstream. Reasons for bullwhip effect The main reasons for bullwhip effect are: Demand forecasting Lead time Batch ordering Price fluctuation Inflated orders Let us next briefly discuss the reasons for bullwhip effect.

Demand forecasting We define demand forecasting as the process of estimating the future demand of products or services. The decision makers in the supply chain are responsible for creating a demand forecast. The upstream member in the supply chain needs to readjust the demand forecast according to the order placed by the downstream member. The order thus placed by downstream and upstream members finally reaches the manufacturer. However, the orders that reach the manufacturer are an exaggerated demand and not the actual product demand. As a result, variability occurs in product scheduling, capacity planning and inventory management of the manufacturer and hence the bullwhip effect. Lead time Lead time is defined as the time interval from when a customer places an order to the time the customer receives the order. Variability increases with an increase in lead time. A longer lead time results in a small change in the estimate of demand variability. This implies a considerable change in the safety stock and reorder level, leading to a change in the order level. This, in turn, results in an increase in the variability and hence leads to bullwhip effect. Batch ordering Retailers use batch ordering intermittently to place a large order. The wholesalers then do not receive any orders from the retailers for a long time interval. Therefore, the wholesalers find a distorted and highly variable pattern in the orders placed. Hence, batch ordering results in an increase in the variability and this in turn leads to bullwhip effect. Price fluctuation One of the main reasons for the bullwhip effect is price fluctuation. In order to increase the customer demand for a product, distributors often introduce various schemes such as rebates and coupons. This results in a variation in the demand for a product. Moreover, if the price of a product fluctuates frequently, retailers stock the product when the price comes down. This variability in price leads to the bullwhip effect. Inflated orders Most retailers place inflated orders when there is a shortage of a product. This inflated order often magnifies the bullwhip effect. Retailers and distributors place inflated orders mainly when they expect a product to be in short supply in the near future. However, when the product supply regularizes, the retailers and the distributors place their standard order resulting in distortions and variations in the demand. This increases the effect of bullwhip. Methods to cope with the bullwhip effect The methods employed to reduce or eliminate the bullwhip effects are: Reducing uncertainty Reducing variability Lead-time reduction Strategic partnership Let us now discuss these methods. Reducing uncertainty We can effectively reduce the bullwhip effect by reducing uncertainty. We can do this by centralizing the demand information. Centralizing the demand information makes the demand of the customers as well as the retailers visible to all partners of the supply chain. It is better to provide information regarding the demand to the members in the supply chain in order to avoid uncertainty to a great extent. Reducing uncertainty throughout the supply chain helps to decrease the bullwhip effect but does not eliminate it completely. Reducing variability We can diminish the bullwhip effect by reducing variability in the customer demand process. Frequent fluctuations in the product price leads to an increase or decrease in the demand and results in variability in the supply chain. It is possible to reduce the variability of customer demand with the help of an Everyday Low Pricing Strategy (EDLP). EDLP strategy provides a product at a consistent price to the customer rather than offering periodic price promotions. The retailer can avoid frequent changes in the customer demand by eliminating the price promotions. Hence, EDLP can make the customer demand more stable. Lead-time reduction We can reduce the variation in the supply chain by decreasing the lead time. Variability increases with an increase in lead time. The longer the lead time, the larger is the variability. Therefore, by reducing the lead time, we can reduce the effect of bullwhip as well. Strategic partnerships We can eliminate the bullwhip effect by using Many strategic partnerships. Information sharing in strategic partnership reduces the variability in the supply chain. The strategic partnerships can eliminate the bullwhip effect by changing the manner in which the information is shared and inventory is managed in a supply chain. For example, it was found that the bullwhip effect can be reduced or eliminated by reducing the lead time. ABC is a well known domestic products manufacturing company. The company manufactures their products globally. During the course of their business processes, managers of the company found an increasing level of bullwhip effect in the supply chain.