Bahria University (Karachi Campus) : Midterm Assessment Assignment Spring 2020

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BAHRIA UNIVERSITY (KARACHI CAMPUS)

Midterm Assessment Assignment Spring 2020


Course Title: Sourcing and Logistics Course Code: MGT 615
Class: MBA Weekend Course Instructor: Col. Shoaib Ishtiaq (R)
Submission: Latest by 31 May 2020 Max Marks: 15
Student’s Name: ____________________ Reg. No: _________

Assignment Guidelines by the Teacher

Instructions to the students:

 Assignment Submission: Computer Typed


 Date of Commencement: Mid Term Assessment Assignment will be available at LMS on
Friday, May 15, 2020 at 10:00 AM.
 Date of Submission: Latest by Sunday, May 31, 2020.
 Questions must be answered in the given sequence.
 Solution to the questions must be self-explanatory without overwriting. Each step and calculation
must be shown in the solution.
 Use of calculators is allowed.
 Don’t share your work with your classmates or any other person till result will be announced, this
will be treated as cheating with zero tolerance.
 Any assistance from seniors/teachers/any other person is not allowed.
 Title/Front page should include: Name of student, Registration/Enrollment Number, Class with
Section, Semester, instructor name etc.
 Early submission is appreciable.
 Viva voice regarding the assignment, would be conducted before the finalization of marks.
 Save the assignment with your complete Name as mentioned in CMS
Question 1: Total Marks: 06
Discuss all the factors relevant to the case. Your recommendations should be supported by logical
reasoning & realistic assumptions.

Over the past ten years, Walmart has become the world’s largest and arguably most powerful
retailer with the highest sales per square foot, inventory turnover, and operating profit of any
discount retailer. Walmart owes its transition from regional retailer to global powerhouse largely to
changes in and effective management of its supply chain. Walmart began with the goal to provide
customers with the goods they wanted when and where they wanted them. Walmart then focused
on developing cost structures that allowed it to offer low everyday pricing.

The key to achieving this goal was to make the way the company replenishes inventory the
centrepiece of its strategy, which relied on a logistics technique known as cross docking. Using cross
docking, products are routed from suppliers to Walmart’s warehouses, where they are then shipped
to stores without sitting for long periods of time in inventory. This strategy reduced Walmart’s costs
significantly and they passed those savings on to their customers with highly competitive pricing.
Walmart then concentrated on developing a more highly structured and advanced supply chain
management strategy to exploit and enhance this competitive advantage.

Walmart has been able to assume market leadership position primarily due to its efficient
integration of suppliers, manufacturing, warehousing, and distribution to stores. Its supply chain
strategy has four key components: vendor partnerships, cross docking and distribution
management, technology, and integration. Walmart’s supply chain begins with strategic sourcing to
find products at the best price from suppliers who are in a position to ensure they can meet
demand. Walmart establishes strategic partnerships with most of their vendors, offering them the
potential for long-term and high volume purchases in exchange for the lowest possible prices.

Suppliers then ship product to Walmart’s distribution centers where the product is cross docked
and then delivered to Walmart stores. Cross docking, distribution management, and transportation
management keep inventory and transportation costs down, reducing transportation time and
eliminating inefficiencies. Technology plays a key role in Walmart’s supply chain, serving as the
foundation of their supply chain. Walmart has the largest information technology infrastructure of
any private company in the world. Its state-of-the-art technology and network design allow
Walmart to accurately forecast demand, track and predict inventory levels, create highly efficient
transportation routes, and manage customer relationships and service response logistics.

Wal-Mart’s supply chain management strategy has provided the company with several sustainable
competitive advantages, including lower product costs, reduced inventory carrying costs, improved
in-store variety and selection, and highly competitive pricing for the consumer. This strategy has
helped Walmart become a dominant force in a competitive global market. As technology evolves,
Walmart continues to focus on innovative processes and systems to improve its supply chain and
achieve greater efficiency.

The benefits of an efficient supply chain management system included reduction in lead time, faster
inventory turnover, accurate forecasting of inventory levels, increased warehouse space, reduction
in safety stock and better working capital utilization. It also helped reduce the dependency on the
distribution centre management personnel resulting in minimization of training costs and errors.
The stock-out of goods and the subsequent loss arising out of it was completely eliminated. Wal-
Mart’s supply chain management practices resulted in increased efficiency in operations and better
customer service. It eliminated old stocks and maintained quality of goods. Bar coding and radio
frequency technologies enabled accurate distribution of goods. Cross-docking also helped Wal-Mart
to reduce inventory storage costs. It also helped to cut down the labor and other handling costs
involved in the loading and unloading of goods.

Question:
a. What were the supply chain management processes adopted by Wal-Mart and how far were
they effective? Discuss. (Marks 3)

b. What was the nature of benefits derived by Wal-Mart from the efficient supply chain
(sourcing benefits) management practices and how far it has contributed to its sustainable
competitive advantage? Explain briefly.
(Marks 3)

Question 2: Total Marks: 03

Nissan Company is currently in the process of establishing automobile manufacturing plant. As


there are around 10,000 different parts required for manufacturing a single parts from tiny bolts to
engine, body and suspension to name a few. Governing body is facing a critical decision making
issue. They have to decide on which parts and processes to outsource and which to be included in
In-House manufacturing. As a procurement manager critically evaluate the most common reasons
engaged in outsourcing and also recommend the steps involved in the tendering process of out
sourcing.

Question 3: Total Marks: 06

Discuss all the factors relevant to the case. Your answer should be supported by logical reasoning.

Cornhill Aggregates (CA) quarries, supplies and manufacturers building materials for the
construction sector. Quarries are where stone is extracted from the ground. The company has 59
quarries, 63 asphalt plants, 25 rail terminals and 29 pre-cast concrete plants. CA has an annual
procurement spend of 800 million, sourcing a highly complex range of goods and services. These
include explosives used in quarrying. CA operates a logistics business, a rail division and a marine
transport operation. CA also purchases numerous business support activities such as utilities,
telecom, print and waste management. The company currently deals with 9,600 suppliers.

Saj Cutler recently joined CA as procurement director and set about the task of establishing a
central procurement function. His number one objective is to simplify and standardize the sourcing
processes of the organization, as there is currently no common approach and limited use of
electronic systems. Additionally, centralized sourcing is not always the best approach. Quarries tend
to be, by their nature, in remote locations and this favours local sourcing.

In these situations, Cutler feels that it is better to understand local suppliers and to benchmark
them against national suppliers rather than setting up a national contact. Cutler says, “One solution
does not fit all in the business.” Bitumen is another example of non-standard sourcing. CA annually
buys more than 175,000 tonnes of bitumen, which is widely used in the industry. “While bitumen is
not a commodity, its price is very much influenced by oil,” says Cutler. “If you look at the input costs,
it is the crude oil price which is the main driver.”

Cutler’s second objective is to establish robust supplier selection criteria. Contracts are currently
awarded on the lowest price without taking into account other factors. Personal protective
equipment (PPE) is an example of spend category where Cutler feels that the lowest price may not
represent the best value for the money. Two suppliers have been shortlisted to provide PPE jackets
to CA. After taking reliability and life also want to set up longer term contracts with fewer suppliers
and recognize the need to determine the financial stability of suppliers to achieve this. With many
different sites under his control, Cutler is aware that he needs to communicate his sourcing
strategies clearly.
a. Briefly explain the terms ‘strategic sourcing’ and ‘tactical sourcing ’with examples.
(Marks: 03)

b. Suggest how the procurement director at CA might engage more closely with stakeholders
to gain their support when sourcing and what steps he would take in pre order and post
order purchasing process. (Marks: 03)

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