Disha School of Management Assignment of

DISHA SCHOOL OF MANAGEMENT
ASSIGNMENT OF
SUPPLY CHAIN MANAGEMENT
Submitted to:- Submitted By:-

Prof. GAZALA ASHRAF Rajeesh Nair
Faculty of Management U.ID. 0908030
DSM, Raipur PGDM VIth Trimester
Q.1) what types of distribution networks are typically best suited for
commodity items?
Answer: Commodities and differentiated Products:
Commodities and differentiated products are
the two ends of the product spectrum. A product is a commodity when all units of
production are identical, regardless of who produces them. However, to be a
differentiated product, a company’s product is different than those of its
competitors. On the continuum between commodities and differentiated products
are many degrees and combinations of the two.
DISTIBUTION NETWORK TYPICALLY BEST SUITED FOR COMMODITY

ITEMS:
PRICE TAKERS
People that produce commodities are referred to as “price takers.” This means that
an individual producer has no control over his/her price. On any day, they must
take what the market offers them. For example, a Midwestern corn farmer has no
influence over price because each farmer’s corn is the same. So buyers don’t care
which farmer’s corn they buy.
RETAIL STORAGE WITH CUSTOMER PICKUP
In this option, inventory is stored locally at retail stores. Customers either walk into
the retail store or place an order online or on the phone, and pick it up at the retail
store. Local storage increases inventory costs because of lack of aggregation. For
very fast moving items, however, there is marginal increase in inventory even with
local storage. Transportation cost is much lower than other solutions because
inexpensive modes of transport can be used to replenish product at the retail store.
Facility costs are high because many local facilities are required. A minimal
information infrastructure is needed if customers walk into the store and place their
order. For online orders, however, a significant information infrastructure is
needed to provide visibility of the order until the customer picks it up. Very good
response times can be achieved in this case because of local storage. Product
variety stored locally will be lower than other options. It is more expensive than all
other options to provide a high level of product availability. Order visibility is
extremely important for customer pickups where orders are placed online or on the
phone. Returns can be handled at the pickup site. Overall, return ability is fairly
good using this option. The main advantage of a network with local storage is that
it can lower the delivery cost and provide a faster response than other networks.
The major disadvantage is the increased inventory and facility costs. Such a
network is best suited for fast moving items or items where customers value the
rapid response.
Q.2) How do import duties an exchange rate affect the location
decision in a sc?
Answer: Import duties and exchange rates have significant influence on supply
chains. Firms would like to manufacture in places with undervalued currencies and
low import tariffs for their raw materials. If local currency is overvalued and tariffs
are high, firms would not like to set up plants locally, and instead they might opt
for off-shoring to cut costs.
Import duties are also a protectionist tool used by local governments in their effort
to support their local industry. High duties inflate the price of imported products
and make them less competitive on the local market. In their effort to avoid this
effect, foreign companies that want to compete in a market protected by high
import duties, might opt to set up for local production (e.g., Japanese car makers
setting assembly plants in US in the 80’s and 90’s).
Q.3) 1 Explain strategy fit?

2. How has globalization made strategic fit even more
important to a company's success?
Answer: 1. Strategic fit express the degree to which an organization is matching

its resources and capabilities with the opportunities in the external environment.
The matching takes place through strategy and it is therefore vital that the company
have the actual resources and capabilities to execute and support the strategy.
Strategic fit can be used actively to evaluate the current strategic situation of a
company as well as opportunities as M&A and divestitures of organizational
divisions. Strategic fit is related to the Resource-based view of the firm which
suggests that the key to profitability is not only through positioning and industry
selection but rather through an internal focus which seeks to utilize the unique
characteristics of the company’s portfolio of resources and capabilities. A unique
combination of resources and capabilities can eventually be developed into a
competitive advantage which the company can profit from. However, it is
important to differentiate between resources and capabilities. Resources relate to
the inputs to production owned by the company, whereas capabilities describe the
accumulation of learning the company possesses. Resources can be classified both
as tangible and intangible:
Tangible:
 Financial (Cash, securities)

 Physical (Location, plant, machinery)
Intangible:
 Technology (Patents, copyrights)

 Human resources
 Reputation (Brands)
 Culture
2. Globalization
One of the most far-reaching developments in the world economy has been the
process known as globalization. Globalization has been set in motion by the
following factors:
 The liberalization of international trade and capital markets
 Technical developments in ICT and transportation
 Rapid economic development in emerging markets.
 Businesses operate in a real-time global marketplace and their focus is
upon maximizing comparative
advantage through sourcing and supplying products.
 Maximizing the competitive position of a business requires two
seemingly conflicting strategies:
Minimizing cost. Economies of scale can be created by centralizing business

activities. Furthermore, standardization in production components, low
transportation cost and the revolution of information and communication make
it possible for global companies to source raw materials and product
components from all over the world and to bring together and assemble raw
materials, parts, and semi-finished products at a single or few locations, to
reduce the overall cost without any interference in product quality.
Maximizing flexibility. Creating flexibility to respond to customers’ demand is

achieved by decentralizing business activities. Changes in the cost/quality
trade-off from a customer’s perspective, reduced lead times and shorter product
life cycles require customization and postponement of final assembly in or
close to the market. Economies of scale and the cost of investing in site, plant
and equipment favour centralization. Pushing factors to decentralize are
transport costs, flexibility and proximity to the customer. Depending on the
balance of these two forces, the company will serve markets at regional,
national, continental or even at a worldwide level. In the recent past, corporate
decision makers did not face such conflicting choices. Location decisions were
a simple trade-off between cost and quality. High quality, high value added
goods were manufactured in proximity to the customer. Products produced in
larger volumes with a lower added value moved to low cost locations. The
relocation of business activities to an offshore location was mainly driven by
minimizing investment and operating cost. The ‘raison d’être’ for the
establishment a FTZ has been, and very often still is, to offer business a lower
cost manufacturing base.
Q.4) how can an auto manufacturer use transportation to increase

efficiency of supply chain?
Answer: yes , auto manufactures can use transportation to increase the efficiency
of its supply chain
Ie is in general motors creating a collaborators across the transportation network.
It contains 8 sites .and three phases
Phase 1 : bench marking
Phase 2 :process design and engineering
Phase 3 : implementation
Makes 15% of change
phase 1: Benchmarking is the process of comparing one's business processes and

performance metrics to industry bests and/or best practices from other industries.
Dimensions typically measured are quality, time and cost. Improvements from
learning mean doing things better, faster, and cheaper.
Benchmarking involves management identifying the best firms in their industry, or

any other industry where similar processes exist, and comparing the results and
processes of those studied (the "targets") to one's own results and processes to
learn how well the targets perform and, more importantly, how they do it.
Phase 2: Process design is the design of processes for desired physical and/or
chemical transformation of materials. Process design is central to chemical
engineering and it can be considered to be the summit of chemical engineering,
bringing together all of the components of that field.
Q.5) how can a firm use pricing to change demand pattern?

Ans. Cross Price Elasticity of Demand
Very often, a change in the price of one product leads to a change in the demand.
Cross price elasticity (CPed) measures the responsiveness of demand for good X
following a change in the price of good Y (a related good). We are mainly
concerned here with the effect that changes in relative prices within a market have
on the pattern of demand. With cross price elasticity we make an important
distinction between substitute products and complementary goods and services.
Substitutes: With substitute goods such as brands of cereal or washing powder, an

increase in the price of one good will lead to an increase in demand for the rival
product. Cross price elasticity for two substitutes will be positive. For example, in
recent years, the prices of new cars have been either falling or relatively flat. s the
price of new cars relative to people’s incomes has declined, this should increase
the market demand for new cars and (ceteris paribus) reduce the demand for
second hand cars. We can see that there has been a very marked fall in the prices of
second hand cars.
Pricing strategies for substitutes: If a competitor cuts the price of a rival product,
firms use estimates of cross-price elasticity to predict the effect on the quantity
demanded and total revenue of their own product. For example, two or more
airlines competing with each other on a given route will have to consider how one
airline might react to its competitor’s price change. Will many consumers switch?
Will they have the capacity to meet an expected rise in demand? Will the other
firm match a price rise? Will it follow a price fall?
Consider for example the cross-price effect that has occurred with the rapid
expansion of low-cost airlines in the European airline industry. This has been a
major challenge to the existing and well-established national air carriers, many of
whom have made adjustments to their business model and pricing strategies to
cope with the increased competition.
Pricing strategies for complementary goods: For example, popcorn, soft drinks
and cinema tickets have a high negative value for cross elasticity– they are strong
complements. Popcorn has a high mark up i.e. pop corn costs pennies to make but
sells for more than a pound. If firms have a reliable estimate for Cped they can
estimate the effect, say, of a two-for-one cinema ticket offer on the demand for
popcorn. The additional profit from extra popcorn sales may more than
compensate for the lower cost of entry into the cinema.

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DISHA SCHOOL OF MANAGEMENT

SUPPLY CHAIN MANAGEMENT

Submitted to:- Submitted By:-

DISTIBUTION NETWORK TYPICALLY BEST SUITED FOR COMMODITY

RETAIL STORAGE WITH CUSTOMER PICKUP

Q.3) 1 Explain strategy fit?

Answer: 1. Strategic fit express the degree to which an organization is matching

 Financial (Cash, securities)

 Technology (Patents, copyrights)

Minimizing cost. Economies of scale can be created by centralizing business

Maximizing flexibility. Creating flexibility to respond to customers’ demand is

Q.4) how can an auto manufacturer use transportation to increase

phase 1: Benchmarking is the process of comparing one's business processes and

Benchmarking involves management identifying the best firms in their industry, or

Q.5) how can a firm use pricing to change demand pattern?

Substitutes: With substitute goods such as brands of cereal or washing powder, an

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