College of Finance, Management and Development

Department of Public Procurement and Asset

Management (MSc.)

INDIVIDUAL ASSIGNMENT ON ADVANCED SUPPLY CHAIN

AND LOGISTICS MANAGEMENT

BY: Mihret Asefa ID: 2201656

SUBMITED TO: Rijalu N. (PhD)

Submission date: Dec. 7, 2023.

Addis Ababa , Ethiopia.
 1. There are organizational theories developed and transformed in to supply chain
theories. Discuss these theories relating to practical cases with industry scenario by
example.
Certainly! There are several organizational theories that have been developed and transformed
into supply chain theories. I will discuss a few of them and provide practical examples from
industry scenarios.

1. Systems Theory:
Systems theory emphasizes the interdependence and interconnectedness of various parts of an
organization or a supply chain. It focuses on understanding how changes in one part of the
system can affect the overall performance. An example of this theory in practice is the concept
of Just-in-Time (JIT) inventory management. JIT aims to minimize inventory levels by
synchronizing production with customer demand. By adopting JIT, companies like Toyota have
been able to streamline their supply chain, reduce costs, and improve overall efficiency.

2. Contingency Theory:
Contingency theory suggests that there is no one-size-fits-all approach to organizing and
managing supply chains. It argues that the most effective organizational structure and practices
depend on the specific circumstances or contingencies faced by the organization. For example,
in the e-commerce industry, companies such as Amazon have successfully implemented a
decentralized organizational structure to handle their complex supply chain operations. This
allows them to quickly respond to changing customer demands and adapt their supply chain
processes accordingly.

3. Transaction Cost Economics:

Transaction cost economics (TCE) theory focuses on minimizing transaction costs in supply
chain relationships. It suggests that organizations should choose the most economically
efficient governance structure for each transaction, whether it is through market-based
exchanges or internal coordination. For instance, companies like Apple have adopted a
vertically integrated supply chain strategy, where they own and control various stages of the
production process. This allows them to reduce transaction costs, ensure quality control, and
maintain a competitive advantage.

4. Resource-Based View:
The resource-based view (RBV) theory emphasizes the strategic management of resources
within an organization or a supply chain. It suggests that competitive advantage is derived from
valuable, rare, and difficult-to-imitate resources. An example of this theory in practice is the
partnership between Nike and its suppliers. Nike's supply chain management focuses on
collaborating with suppliers who possess unique capabilities and resources, such as innovative
manufacturing technologies or sustainable materials. This enables Nike to differentiate its
products and maintain a competitive edge in the market.

These are just a few examples of how organizational theories have been applied in practical
industry scenarios. Each theory provides valuable insights and frameworks for understanding
and improving supply chain management practices.

2. There are schools of thought with regard to supply chain management on its
historical development. Some argued that it is developed in the 1950s and sixties
with the systems concept where organization is viewed as a sub-system in the supply
chain, whereas, other paradigm showed it emerged from logistics management of the
1980s and got popularity in the 1990s. What is your position? Discuss.

, I don't have personal opinions or positions. However, I can provide you with information on
the historical development of supply chain management and the different schools of thought
regarding its origins.

The development of supply chain management can be traced back to multiple influences and
perspectives. There are two main schools of thought regarding its historical development:

1. Systems Concept in the 1950s and 1960s:

According to this school of thought, supply chain management evolved from the systems
concept, which emerged in the 1950s and 1960s. The systems concept emphasized the
interconnectedness and interdependence of various components within an organization. It
viewed organizations as subsystems within a broader supply chain system. This perspective
recognized the importance of managing the flow of materials, information, and resources across
different organizational functions and boundaries to achieve overall efficiency.

2. Logistics Management in the 1980s and 1990s:

Another school of thought argues that supply chain management emerged from the field of
logistics management in the 1980s and gained popularity in the 1990s. During this period, there
was a growing recognition of the strategic role of logistics in managing the flow of goods and
materials across organizations. Logistics management focused on activities such as
transportation, warehousing, and inventory management. Over time, the scope of logistics
expanded to encompass a broader perspective, incorporating activities beyond the boundaries of
an individual organization, leading to the development of supply chain management.

It is important to note that both perspectives have contributed to the evolution of supply chain
management. The systems concept provided a foundation for understanding the interconnected
nature of supply chains, while logistics management emphasized the operational aspects and the
need for coordination across organizational boundaries. As supply chain management
developed further, it incorporated elements from both perspectives, recognizing the strategic
importance of managing the end-to-end flow of products, services, information, and finances
across the entire supply chain.

In conclusion, the historical development of supply chain management is influenced by

multiple factors and perspectives. While some argue it emerged from the systems concept of the
1950s and 1960s, others highlight its origins in logistics management of the 1980s. Both
perspectives have contributed to shaping the field of supply chain management as we know it
today.

3. World class organizations in the global and ever increased competition considered
supply chain management as a philosophy to be adopted for sustainable competitive
advantage. This is practiced by maintaining core competencies and outsourcing other
subsidiary activities of the firm. Discuss how this philosophy works on a
manufacturing industry by taking a hypothetical company.

Let's consider a hypothetical manufacturing company called XYZ Inc. that produces
electronic goods such as smartphones and laptops. In order to stay competitive in the
global market, XYZ Inc. has adopted supply chain management as a philosophy to
achieve sustainable competitive advantage.

Firstly, XYZ Inc. focuses on maintaining its core competencies, which include product
design, research and development, and marketing. These are the areas where the
company excels and can differentiate itself from its competitors. By investing in these
core competencies, XYZ Inc. can continuously innovate and produce high-quality
products that meet the needs of its customers.

On the other hand, XYZ Inc. outsources subsidiary activities such as manufacturing,
logistics, and distribution to third-party suppliers and partners. By doing so, the company
can benefit from cost efficiencies, access to specialized expertise, and flexibility in
 scaling production up or down based on market demand.

Supply chain management allows XYZ Inc. to effectively coordinate with its suppliers
and partners to ensure smooth operations throughout the entire production process. This
includes managing inventory levels, optimizing transportation routes, and implementing
quality control measures to minimize defects.

Furthermore, by collaborating closely with its suppliers and partners, XYZ Inc. can also
drive innovation in its supply chain by adopting new technologies or processes that
improve efficiency and sustainability.

Overall, by adopting supply chain management as a philosophy, XYZ Inc. can achieve
sustainable competitive advantage in the manufacturing industry by focusing on its core
competencies while leveraging external expertise for subsidiary activities. This approach
allows the company to be agile in responding to market changes while maintaining high
standards of quality and efficiency in its operations.
4. Customer-based inventory management strategies allow the use of different
availability levels for specific customers. Discuss the rationale for such a strategy. Are
such strategies discriminatory? Justify your position.
Customer-based inventory management strategies allow for different availability levels for
specific customers based on their purchasing history, order frequency, and overall value to the
business. The rationale for such a strategy is to prioritize inventory allocation to high-value
customers who contribute significantly to the company's revenue and profitability. By ensuring that
these key customers have access to the products they need when they need them, businesses can
strengthen their relationships and loyalty, ultimately leading to increased sales and long-term
success.

While it may seem discriminatory on the surface, customer-based inventory management strategies
are not inherently unfair or unjust. Instead, they are a practical and strategic approach to optimizing
inventory allocation and maximizing customer satisfaction. Businesses have limited resources and
capacity, so it makes sense to prioritize those customers who provide the most value in return.

Furthermore, these strategies are often based on objective criteria such as order volume, frequency,
and consistency rather than subjective factors like personal preferences or biases. As long as these
criteria are applied consistently and transparently across all customers, there is no inherent
discrimination involved.

In conclusion, customer-based inventory management strategies are a rational approach to meeting

the needs of high-value customers while also managing limited resources effectively. As long as
these strategies are implemented fairly and transparently, they are not discriminatory but rather a
sound business practice aimed at driving growth and profitability.
5. Illustrate the difference between inventory hedging, buffering and speculation.
Inventory hedging involves using financial instruments such as futures contracts to protect against the
risk of price fluctuations in inventory. This is done by locking in a price for future delivery, ensuring that
the cost of inventory remains stable.

Buffering, on the other hand, involves holding excess inventory to cushion against unexpected changes
in demand or supply. This allows a company to have a reserve of inventory to meet sudden changes in
market conditions without having to rely on external sources.

Speculation involves taking a position in the market based on an expectation of future price movements.
This can involve buying or selling inventory with the hope of profiting from price changes. Unlike
hedging and buffering, speculation is not aimed at managing risk but rather at taking advantage of
potential market opportunities.

Case: A Major Purchase without Purchasing Function

A construction company engaged in the construction of road sector in Addis Ababa, Ethiopia faced
the following purchasing puzzle during its operation.
The company was established recently with initial capital of over ten million dollar as a general
contractor privately registered as per the requirements of commercial code of Ethiopia and ministry
of Works and Urban Development for General Contractor Grade one. There are General Contractor
Grade one qualification requirement in terms of machinery, professional, technical, material and
financial requirements set by the government body. As the company was established and suddenly
grew from Rental Company to a big general construction company of grade one level, it faced
structural problem especially procurement or supply function. First of all , the company doesn’t
have purchasing function in its organizational structure. Buying activities are carried out on daily
need basis by non professional purchasers where they face frequent returns, delays, and engaged in
tiresome and highly costly transactions as they do not have time to compare prices in the market.
The blunder made at the top level management is when capital purchase is made for construction
machineries like dozer, excavator, roller; loader, etc are purely based on least price bases from
second market (salvage products0 where there maintenance cost became a regular workshop
activity.
As a newly established company, the firm faced this challenge and yet has to run and complete four
projects that worth over $50,000,000.
Question: Suppose you are assigned as a supply chain management consultant to advice the firm,
how do you solve it?
As a supply chain management consultant, I would first assess the current situation and identify the
key issues that are causing problems in the procurement and purchasing process. Based on the
information provided, it is clear that the company lacks a professional purchasing function, leading
to frequent returns, delays, and costly transactions. Additionally, the decision to purchase
construction machineries based solely on least price from the second market has resulted in high
maintenance costs.

To address these issues, I would recommend the following steps:

1. Establish a dedicated purchasing function: The company should create a dedicated purchasing
department with trained professionals who can handle procurement activities efficiently. This will
involve hiring or training staff with expertise in sourcing, negotiating contracts, and managing
supplier relationships.

2. Implement a strategic sourcing process: The company should develop a strategic sourcing process
to ensure that all purchases are made based on quality and long-term value rather than just price.
This may involve conducting market research, identifying reliable suppliers, and negotiating
favorable terms and conditions.

3. Centralize procurement activities: Centralizing procurement activities will help streamline the
purchasing process and enable better control over spending. This can be achieved by implementing
an integrated procurement system or software that allows for better visibility and tracking of
purchases.

4. Develop supplier partnerships: Building strong relationships with suppliers is crucial for ensuring
timely delivery of materials and equipment. The company should work towards developing long-
term partnerships with reliable suppliers who can provide quality products at competitive prices.

5. Invest in quality construction machineries: Instead of solely focusing on least price options from
the second market, the company should invest in quality construction machineries from reputable
manufacturers. While this may involve higher initial costs, it will ultimately reduce maintenance
expenses and improve operational efficiency.

6. Conduct regular performance evaluations: The company should regularly evaluate the
performance of its suppliers to ensure they are meeting quality and delivery standards. This will help
identify any issues early on and allow for corrective actions to be taken.
By implementing these recommendations, the construction company can improve its procurement
processes, reduce costs, and ensure timely completion of its projects worth over $50 million.

Cases: B
Cisco's sales were growing by 100 percent per year in the mid-90s. Employment was
swelling to keep pace and supply chain costs were unacceptably high. Product life cycles
continued to shorten. Demands for reliability, flexibility, and speed escalated at an alarming
rate. To keep pace, Cisco undertook a wholesale revamping of its business processes, from
design and forecasting to raw materials acquisition, production, distribution, and customer
follow-up.
The creation of Cisco's global networked business model arose in multiple departments at
the same time, out of a shared realization of the need for change. Within this model,
Cisco views its supply chain as a fabric of relationships, rather than in a linear fashion. The
goal was to transcend the internal focus of Enterprise Resource Planning (ERP) systems to
embrace a networked supply chain of all trading partners. Primary goals were servicing the
customer better, coping with huge growth, and driving down costs. Utilizing the Internet, it
is pursuing a single enterprise strategy.

Today Cisco relies on five contract manufacturers for nearly 60 percent of final assembling
and testing and 100 percent of basic production. Through strict oversight and a clear set of
standards, Cisco ensures that every partner achieves the same high level of quality. All 14 of
its global manufacturing sites, along with two distributors, are linked via a single enterprise
extranet.
The quest for a single enterprise has tied Cisco to its suppliers in unprecedented ways.
Product now flows from first- and second-tier suppliers without the documentation and
notifications on which most supply chains rely. Instead of responding to specific work
orders, contract manufacturers turn out components according to a daily build plan derived
from a single forecast shared throughout the supply chain. Items move either to Cisco or
directly to its customers.

Payment occurs automatically upon receipt; there are no purchase orders, invoices, or
traditional acknowledgments.
In exchange for getting paid sooner, suppliers are required to aggressively attack their cost
structures but not to the point where they can't make a profit. "It's not a partnership if you're
putting the other guy out of business," says Barbara Siverts, manager of supply chain
solutions within Cisco's Internet Business Solutions unit.
Cisco cites at least $128 million in annual savings from its single enterprise strategy. It has
reduced time to market by 25 percent, while hitting 97 percent of delivery targets.
Inventories have been cut nearly in half. Order cycle time has declined from 6 to 8 weeks 4
years ago to between 1 and 3 weeks now. Under a program known as dynamic
replenishment, demand signals flow instantly to contract manufacturers. Inventories can be
monitored by all supply chain partners on a real time basis.
Some 55 percent of product now moves directly from supplier to customer, bypassing Cisco
altogether. This has removed several days from the order cycle. Direct fulfillment
means
 reduced inventories, labor costs, and shipping expenses. Cisco pegs savings at $10 per
unit or around $12 million a year. Working with UPS, Cisco took control of the
outbound supply chain, allowing for time definite delivery throughout Europe within 5 to
8 days, via a single point of contact. With Oracle's inventory control system hooked
directly into UPS'S logistics management system. Cisco now tracks product to
destination on a real time basis. The extra measure of control allows it to intercept,
reroute, or reconfigure orders on short notice. Through deferred delivery, Cisco
ensures that a component won't arrive at the customer's dock until it's ready to be
installed.

Cisco's outsourcing strategy took another step forward recently, with the decision to turn
over shipping and warehousing functions to FedEx Corp. The air, ground, and logistics
services provider will manage a merge-in-transit operation for direct shipment to end
customers, resulting in the near elimination of Cisco-operated warehouses within 5
years.

Question: How logistics management played in the success of CISCO’s Supply Chain
Management?

Cisco's global networked business model and single enterprise strategy have revolutionized its
supply chain management. By viewing its supply chain as a fabric of relationships and utilizing
the Internet, Cisco has been able to achieve significant cost savings, reduce time to market, and
improve delivery targets. The company's reliance on contract manufacturers for final assembling
and testing has allowed for increased flexibility and efficiency in its production processes.

The implementation of dynamic replenishment and direct fulfillment has further streamlined
Cisco's supply chain, resulting in reduced inventories, labor costs, and shipping expenses. This
has led to significant annual savings and improved customer service through faster order cycle
times.

Additionally, Cisco's partnership with UPS for outbound supply chain management and Oracle's
inventory control system has allowed for real-time tracking of products to their destination. This
level of control enables Cisco to intercept, reroute, or reconfigure orders on short notice,
ensuring that components arrive at the customer's dock only when ready to be installed.

Furthermore, Cisco's decision to outsource shipping and warehousing functions to FedEx Corp
demonstrates its commitment to optimizing its supply chain operations. This merge-in-transit
operation will result in the near elimination of Cisco-operated warehouses within 5 years.
Overall, Cisco's innovative approach to supply chain management has not only resulted in
significant cost savings but also improved efficiency, flexibility, and customer service.
QS; Logistics management played a crucial role in the success of CISCO's Supply Chain
Management by ensuring the efficient and effective movement of goods and materials
throughout the supply chain. This involved coordinating transportation, warehousing, inventory
management, and distribution to ensure that products were delivered to customers in a timely
manner.

By effectively managing logistics, CISCO was able to reduce lead times, minimize inventory
holding costs, and improve overall customer satisfaction. Additionally, logistics management
allowed CISCO to optimize its supply chain network, identify cost-saving opportunities, and
enhance visibility and control over its operations.

Overall, logistics management played a key role in enabling CISCO to achieve operational
excellence and deliver value to its customers through an efficient and responsive supply chain.
Key Points:
1. Cisco experienced rapid sales growth in the mid-90s, leading to challenges in employment,
supply chain costs, and product life cycles.
2. To address these challenges, Cisco undertook a comprehensive revamping of its business
processes, creating a global networked business model that focused on relationships rather than
linear supply chain management.
3. The company relies on five contract manufacturers for nearly 60% of final assembling and
testing, with strict oversight to ensure quality standards are met.
4. Cisco's single enterprise strategy has led to significant cost savings, reduced time to market,
and improved delivery targets.
5. The company has implemented dynamic replenishment and direct fulfillment strategies to
reduce inventories and improve order cycle times.
6. Working with UPS and Oracle, Cisco tracks product shipments in real-time and has the ability
to intercept, reroute, or reconfigure orders as needed.
7. Cisco has outsourced shipping and warehousing functions to FedEx Corp., aiming to eliminate
Cisco-operated warehouses within 5 years.
Overall, Cisco's supply chain management strategy has evolved to embrace a networked
approach that prioritizes customer service, cost reduction, and flexibility in response to rapid
growth and changing market demands.
QS; Logistics management played a crucial role in the success of CISCO's Supply Chain
Management by ensuring the efficient and effective movement of goods and materials
throughout the supply chain. This involved activities such as transportation, warehousing,
inventory management, and order fulfillment.

By effectively managing logistics, CISCO was able to minimize lead times, reduce transportation
costs, optimize inventory levels, and improve overall supply chain visibility. This allowed the
company to meet customer demand more effectively while also reducing operational costs.

Additionally, logistics management played a key role in enabling CISCO to implement just-in-
time inventory practices and lean manufacturing principles, which further improved efficiency
and responsiveness within the supply chain.

Overall, effective logistics management was essential in supporting CISCO's Supply Chain
Management strategy and contributed significantly to the company's success in delivering high-
quality products to customers in a timely and cost-effective manner.