1.A company is into manufacturing an antibiotic product.

This is for veterinarian

purposes. During floods when animals such as cows, buffalos, or other bovine
species have digestive disorders, this medicine is very effective. If you were to give a
thought to have a supply chain designed for this company, what will be your choice-
responsiveness or efficiency. Ideally, how will you balance these both?

Ans-: First of all we need to understand the context of Responsiveness and Efficiency in
supply chain system in any organization.

Responsiveness stands for immediate delivery of products once order received from a
customer and for that all supporting elements of supply chain has to be are in place like
product ready, packaging shipping and human resources. While such approach involves a
huge cost to satisfy customer’s demand but it helps to capture market share.

In the other hand , Efficient supply chain gets their product delivered to customer in a very
cost effective way. In this approach, the inventories are ideally be zero along with
supplementary elements like packaging and transportation lines. The process starts from the
scratch only after receiving the order from customer. It saves money and increase profits
throughout business and it beneficial to the bottom line.

If we have to design the supply chain for this organization then we have to take the product
and its usage into consideration. While the usage are more during floods but such natural
calamities can be predicted to some extent.. Floods normally occurs during rainy season
because of excessive rain so during this period the organization’s supply chain need to be
optimized for efficiency and whenever order comes that time the efficient supply chain can
be helpful to fulfil the demand.

In certain cases the untimely rain, and occurrence of floods due to glacier burst or cloud
burst are highly unpredictable and to handle such situation, a portion of supply chain system
has to be optimized for responsiveness by keeping inventory, packaging and transportation
ready.

1(b). Consider the situation of a pharmaceutical manufacturer. The basic raw

material is abundantly available and comprises almost 75% of the total cost of
the finished product. However, they also require some other ingredients that
are not very expensive and also are required in small quantities but are
available only seasonally.
From the ABC, SDE, and SOS inventory model strategies, what type of
inventory strategy you would suggest to this company and why?

Ans-: As the basic raw materials comprises almost 75% of the cost, then it should
be categorized as A and rest of the materials which contributed 25%of the would be
categorized as B & C as per their individual contribution against cost and overall
inventory. Above classification as per Pereto principle. ( 80/20 rule where 80% of the
output is decided by 20% 0f the input.)
Also we need to bring the seasonal model ( SOS) as a small portion of inventory
which are available and can be procured during specific seasons only.

2. Following data is sourced from the regulatory authorities. Using this data,
build the below-given forecasting models:
 Naive Forecast
 2 Months Moving Average
 Exponential Smoothing (Alpha = 0.3)

Out of the above three, which model will give the most accurate results?
(Using MAD - Mean Absolute Deviation to compare the models).

Naive Forecast-:

Production
Naive Absolute
Category Year in Error
Forecast Deviation
thousand
Light Commercial 31-03-
68,922
Vehicles 2006
Light Commercial 31-03-
65,756 68,922
Vehicles 2007 -3,166 3166
Light Commercial 31-03-
83,195 65,756
Vehicles 2008 17,439 17439
Light Commercial 31-03-
1,08,917 83,195
Vehicles 2009 25,722 25722
Light Commercial 31-03-
1,38,890 1,08,917
Vehicles 2010 29,973 29973
Light Commercial 31-03-
1,71,788 1,38,890
Vehicles 2011 32,898 32898
Light Commercial 31-03-
2,25,724 1,71,788
Vehicles 2012 53,936 53936
Light Commercial 31-03-
2,54,049 2,25,724
Vehicles 2013 28,325 28325
Light Commercial 31-03-
2,24,587 2,54,049
Vehicles 2014 -29,462 29462
Light Commercial 31-03-
3,17,423 2,24,587
Vehicles 2015 92,836 92836
Light Commercial 31-03-
4,08,193 3,17,423
Vehicles 2016 90,770 90770
Light Commercial 31-03-
5,44,335 4,08,193
Vehicles 2017 1,36,142 136142
Light Commercial 31-03-
5,53,184 5,44,335
Vehicles 2018 8,849 8849
5,53,184

Mean Absolute
45793.16667 Deviation
2 months moving average forecast-:

2
Months Absolute
Error
moving Deviation
average

67,339 15,856 15856

74,476 34,442 34441.5
96,056 42,834 42834
1,23,904 47,885 47884.5
1,55,339 70,385 70385
1,98,756 55,293 55293
2,39,887 -15,300 15299.5
2,39,318 78,105 78105
2,71,005 1,37,188 137188
3,62,808 1,81,527 181527
4,76,264 76,920 76920
5,48,760

Mean Absolute
68703.05 Deviation

Exponential Smoothing Forecast-:

Absolute
Exponential Forecast Error
Deviation
68,922 0 0
68,922 -3,166 3166
67,339 15,856 15856
75,267 33,650 33650
92,092 46,798 46798
1,15,491 56,297 56297
1,43,640 82,085 82084.5
1,84,682 69,367 69367.25
2,19,365 5,222 5221.625
2,21,976 95,447 95446.8125
2,69,700 1,38,493 138493.4063
3,38,946 2,05,389 205388.7031
4,41,641 1,11,543 111543.3516
4,97,412
Alpha @ 0.5
66408.66526 Mean Absolute Deviation
Model Summary
Model MAD
Naïve Forecasting 45793
2 Months moving average
Forecast 68703
Exponential Forecast 66408

The Naïve forecast model has resulted the least Mean Absolute Deviation which
means it is more accurate.

3.

Unit Annual Annual

Annual Annual
no. Item Cost consumption consumption Category
Usage Usage %
(Rs) Value value %
1 Oil Filter 2200 150 6.6 330000 8.3 B
2 Head Lamp 395 140 6.1 55300 1.4 C
3 Fuеl Filter 270 95 4.2 25650 0.6 C
4 Rod Bearing 1430 45 2.0 64350 1.6 C
5 Air Filter 860 120 5.3 103200 2.6 C
6 Wind Screen 12000 90 3.9 1080000 27.0 A
7 Piston Rink 4500 250 11.0 1125000 28.2 A
8 Bumper 8000 110 4.8 880000 22.0 A
9 Main Bearing 1130 120 5.3 135600 3.4 C
10 Bush 169 1160 50.9 196040 4.9 C
Total 30954 2280 3995140

Above categorization is based on Pareto principle.

4.

Tata Motors
Year 2015 2014 2013 2012 2011
Inventories (in Cr.) 4802 3862 4455 4588 3891
Revenue (in Cr.) 43485 68764 58234 48078 46883
COGS (in Cr.) 26171 43748 37080 27651 24997
5.45 11.33 8.32 6.03 6.42

Ashok Leyland
Year 2015 2014 2013 2012 2011
Inventories (in Cr.) 1398 1188 1896 2230 2208
 Revenue (in Cr.) 14234 10353 13020 13458 12034
COGS (in Cr.) 8626 5909 7539 9121 8064
6.17 4.97 3.98 4.09 3.65

Inventory Turnover Ratio

Year Tata Motors Ashok Leyland
2011 6.42 3.65
2012 6.03 4.09
2013 8.32 3.98
2014 11.33 4.97
2015 5.45 6.17

From the above analysis it clearly indicates Tata Motors is maintaining a higher
turnover ratio.

5. unable to attempt because of currently using Excel 2010 and forecast tab is not
available.

6. Demand for the Carrom Board at a sports shop is 500 units per month. This
shop incurs a fixed order placement, transportation, and receiving cost of Rs.
4,000 each time an order is placed. Each carrom board costs Rs. 500 and has a
holding cost of 20 percent. Evaluate the number of carrom boards that the
store manager should order in each replenishment lot. Secondly, also
calculate the total cost for EOQ.

Ans-:

Data Value
Total annula quantity
(D) 6000
Cost per order(S) 4000
Per unit cost© 500
Holding Cost (I) 20%

Inventory cost = (Q/2) *I*C

Ordering cost= S*(D/Q)
Inventory Ordering Total
Ordering Quantity(Q) Cost Cost Cost
500 25000 48000 73000
1000 50000 24000 74000
1500 75000 16000 91000
2000 100000 12000 112000
2500 125000 9600 134600
3000 150000 8000 158000
3500 175000 6857 181857
4000 200000 6000 206000
4500 225000 5333 230333
5000 250000 4800 254800
5500 275000 4364 279364
6000 300000 4000 304000

350000

300000

250000

200000 Ordering Quantity (Q)

Inventory Cost
150000
Ordering Cost
100000 Total Cost

50000

0
500

3500
1000
1500
2000
2500
3000

4000
4500
5000
5500
6000

Minimum total cost is the point where Inventory cost and Ordering cost curve
intersect with each other and in above case its intersecting with each other between
the order quantity of 500-1000.
EOQ= Square root of : (2*D*S/I*C)

EOQ= SQRT ((2*6000*4000)/(500*20%))

Ans= 693

Economic order quantity is 693

Total Cost of EOQ= Inventory cost+ Ordering cost
Inventory cost 34641.01615
Ordering cost 34632.03463
Total Cost 69273