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MMPO 05
LOGISTICS AND SUPPLY CHAIN MANAGEMENT
 TABLE OF
CONTENTS

01 LONG IMP QUESTIONS

02 EXTRA LONG QUESTIONS

03 VERY IMP SHORT NOTES

04 EXTRA SHORT NOTES

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MMPO 05- Logistics and Supply Chain Management

FIRST PRIORITY MOST IMPORTANT QUESTIONS
YOU HAVE TO DO 05 QUESTIONS OUT OF 07
Q1- What activities can be performed by e-Agents ? How can e-Agents help to enhance
collaboration among channel partners ? (v v v v v imp)
ANS- Activities can be performed by e-Agents and collaboration enhance -Software agents are
deployed by companies on the World Wide Web to gather necessary information and initiate action
by themselves. Intelligent agents are software entities that can carry out operations on behalf of a
user or another program, with some degree of independence or autonomy while using some
knowledge or representation of the user‘s behavior, goals or desires. COOL (COOrdination
Language), Java, KQML (Knowledge Query & Manipulation Language), Telescript and Tcl (Tool
Control Language) are some of the computer languages being used to create agents, define their
jobs and establish coordination protocols for communication and collaboration among multiple
agents.
Some of the supply chain activities that e-Agents can take up include:

In a nutshell, e-agents can act as smart assistants performing complex and collaborative tasks. They
reduce the amount of human-computer interaction. This can lead to considerable saving in time and
cost for every partner in the supply chain. e-Agents can help channel partners collaborate and
manage the supply chain to enhance customer satisfaction and reduce operational costs.

COLLABORATIVE STRATEGIES
In the future, supply chains must embark upon a collaborative strategy to manage demand flow and
customer satisfaction through technology integration. Collaboration enables channel partners to
jointly gain a better understanding of product demand flow and implement effective programs to
satisfy customers through collaborative product development, synchronized production scheduling,
collaborative demand planning and logistic solutions.
Effective collaboration among channel partners can help in aligning them to enhance the value of
the integrated activities in the supply chain. This can contribute to faster product development
through shared design development and modification documents. It can also contribute to
synchronization of production and delivery schedules and smoothen the material flow process
obviating inventory management problems. This can result in better capacity utilization, order
fulfillment and customer satisfaction.
Down-stream collaboration with distributors, wholesalers and retailers can result in real-time flow of
point-of-sales (POS) data across the supply chain. This can help in jointly formulating effective
forecasting and replenishment schemes and smoothen demand variations along the supply chain.
Collaborative forecasting strategy involving all channel partners can contribute to effective demand
planning, which is one of the crucial objectives that manufacturers aim to meet in order to reduce
losses on account of inventory excesses or shortages. Each partner in the supply chain should be
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able to plan demand based on a single, reliable source of demand data. However, this can be
possible through seamless data interchange among channel partners.
Management of the supply chain has evolved over the last two decades with aim to achieve efficient
logistics with cost minimization that provides better product and services to the valuable customers.
The major challenge that currently supply chain is facing in the global market is to manage
uncertainty in terms of understanding the customers. Efforts are being made to manage demand
flow, supplier collaboration and customer services using cuttingedge information technology.
Traditionally, the focus of companies has been on the intra-organizational flows over which the
organization had some control. However, companies are increasingly recognizing that supply chain
management involves the management of the complete chain starting from inbound logistics,
processing, outbound logistics, marketing and sales, customer service and recycling and reuse of
unused or waste materials This involves a large and complex network of suppliers, transporters,
manufacturers, distributors and customers. Successful supply chain flow requires synchronization of
operations through effective collaboration among the various channel players.

Q2- "Bench marking raises organizational consciousness". Discuss with reference to supply chain
management.? (v v v v v imp)
ANS- "Bench marking raises organizational consciousness"- Clearly the process of benchmarking
focuses on customers and performance improvement with the potential for significant advances in
efficiency and effectiveness. Benchmarking is used extensively by many organizations to help
understand their relative positioning and efficiency of operations. Benchmarking networks; full time
benchmarking manager and consulting assignments are evidence of the continuing interest in this
area.
Benchmarking raises an organizations consciousness. It provides an external focus on the internal
activities and derives an organization to the conclusion that there are Benchmarking raises an
organizations consciousness. It provides an external focus on the internal activities and derives an
organization to the conclusion that there are
As described earlier Benchmarking has four distinct phases:
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Good benchmarking is about managing continuous improvement strategically; identifying

stakeholders and ensuring their interests are being met by any benchmark based initiative and
managing change. Benchmarking is a tool for enacting change. The critical success factor for any
change is the creation of additional value in the eyes of the stakeholders of the business.
Benchmarking is all about finding new ways of enacting business processes and using companies
precious resources to serve its stakeholders needs in a better way. To achieve this change
benchmarking studies have to be very specific, comparable and have a predefined set of
performance drivers and KPI’s. Without any one of these a benchmarking study cannot hope to be
effective.
In putting benchmarking to work in the supply chain it is worth keeping in mind that change will
occur once the process has started. By its very nature it will cause participants to look at their new
world with a new set of eyes. Problems will be uncovered and new and creative solutions will be
developed. Benchmarking removes some of the politics and guesswork out of the development of
continuous improvement targets within organizations. This is due to the external, politically neutral,
nature of the analysis. Some people like to know exactly where they stand and what is expected of
them. If measures are used to guide or assess.
performance these must not be vague or non-descript. Metrics without clarity can lead to individuals
incorporating these into a workable framework of their own. The problem is that this framework
might not be what management had in mind! Effective continuous improvement starts with a
rigorous analysis of process flows – what work is done where and why is it done in way it is done.
Report outputs are analyzed and the ‘why’ question is repeated many times. Continuous
improvement must be managed strategically with all those involved clearly understanding why a
particular course of action is being followed, where improvement targets have come from and how
and by whom it is expected that the improvements will be implemented.
Benchmarking solves this problem. It develops a set of objective measures within an organizational
framework, stabilizes the improvement program and provides all parties with a clear understanding
of why a particular course of action is being followed, customer surveys, completed as a part of a
benchmarking exercise, will point specifically to the areas that need improvement. Benchmarking if
managed effectively holds the key to unlocking an individual’s defenses. It creates a logical,
prioritized and importantly achievable path to good practice and operational excellence. Unlocking
the power vested in individuals and teams in this fashion is the catalyst for organizational creativity
and innovation.
Organization that introduces benchmarking correctly can use it to make a quantum leap in their
performance, and develop a culture in which managers and staff constantly searches for
improvements. Within logistics and supply management, benchmarking can be used for a number of
different purposes, from assessing the performance of the entire operation, through prioritizing
improvements, to searching for the off-the-shelf improvement strategies in a specific area of a
logistics or supply chain activity. In some senses, benchmarking is imitation and stealing – “creative
swiping”! At its best it is skillful appropriation and adaptation requiring imagination and innovation;
at its worst it can be an expensive and time – consuming piece of corporate tourism. It is a long-term
process, requiring senior management’s commitment, with the emphasis upon continuous
improvement and organizational learning. The focus is primarily upon the role, strategic issues,
processes and practices, rather than on the bottom line and numeric measure of performance. The
mere comparison of operations and costs is not sufficient; considerable attention must be paid to
how the activities are organized and performed. This will provide good understanding of how
superior performance has been achieved, rather than just the magnitude of the performance gap

Q3- What is Physical Distribution Management ? Describe its components.? (v v v v v imp)or

Discuss the 'Total Approach' to Physical Distribution Management with the help of suitable
examples ?
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ANS- Physical Distribution Management and its components - They are the decisions that must be
taken, when a company organizes a channel or network of intermediaries, who take responsibility
for the management of goods as they move from the producer to the consumer. Each channel
member must be carefully selected and the company must decide what type of relationship it seeks
with each of its intermediate partners. Having established such a network, the organisation must
next consider how these goods can be efficiently transferred, in the physical sense, from the place of
manufacture to the place of consumption. Physical distribution management (PDM) is concerned
with ensuring the product is in the right place at the right time.
It is now recognised that PDM is a critical area of overall supply chain management. Business
logistical techniques can be applied to PDM so that costs and customer satisfaction are optimised.
There is little point in making large savings in the cost of distribution if, in the long run, sales are lost
because of customer dissatisfaction. Similarly, it does not make economic sense to provide a level of
service that is not really required by the customerand leads to an erosion of profits. This cost/service
balance is a basic dilemma that a physical distribution manager face. The reason for the growing
importance of PDM is the increasingly demanding nature of the business environment. In the past it
was not uncommon for companies to hold large inventories of raw materials and components.
Although industries and individual firms differ widely in their stockholding policies, nowadays, stock
levels are kept to a minimum wherever possible. Holding stock is wasting working capital for it is not
earning money for the company. To think of the logistical process merely in terms of transportation
is much too narrow a view. Physical distribution management (PDM) is concerned with the flow of
goods from the receipt of an order until the goods are delivered to the customer. In addition to
transportation, PDM involves close liaison with production planning, purchasing, order processing,
material control and warehousing. All these areas must be managed so that they interact efficiently
with each other to provide the level of service that the customer demands and at a cost that the
company can afford.
Components of PDM
There are four principal components of PDM namely Order processing, Stock levels or inventory,
Warehousing and Transportation.
Order processing
Order processing is the first of the four stages in the logistical process. The efficiency of order
processing has a direct effect on lead times. Orders are received from the sales team through the
sales department. Many companies establish regular supply routes that remain relatively stable over
a period of time providing that the supplier performs satisfactorily. Very often contracts are drawn
up and repeat orders (forming part of the initial contract) are made at regular intervals during the
contract period. Taken to its logical conclusion this effectively does away with ordering and leads to
what is called ‗partnership sourcing‘. This is an agreement between the buyer and seller to supply a
particular product or commodity as and when required without the necessity of negotiating a new
contract every time an order is placed. Orderprocessing systems should function quickly and
accurately. Other departments in the company need to know as quickly as possible that an order has
been placed and the customer must have rapid confirmation of the order‘s receipt and the precise
delivery time. Even before products are manufactured and sold the level of office efficiency is a
major contributor to a company‘s image. Incorrect ‗paperwork‘ and slow reactions by the sales
office are often an unrecognised source of ill will between buyers and sellers. When buyers review
their suppliers, efficiency of order processing is an important factor in their evaluation. A good
computer system for order processing allows stock levels and delivery schedules to be automatically
updated so management can rapidly obtain an accurate view of the sales position. Accuracy is an
important objective of order processing, as are procedures that are designed to shorten the order
processing cycle.
Inventory
Inventory, or stock management, is a critical area of PDM because stock levels have a direct effect
on levels of service and customer satisfaction. The optimum stock level is a function of the type of
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market in which the company operates. Few companies can say that they never run out of stock, but
if stock-outs happen regularly then market share will be lost to more efficient competitors. The key
lies in ascertaining the re-order point. Carrying stock at levels below the re-order point might
ultimately mean a stock-out, whereas too high stock levels are unnecessary and expensive to
maintain. Stocks represent opportunity costs that occur because of constant competition for the
company‘s limited resources. If the company‘s marketing strategy requires that high stock levels be
maintained, this should be justified by a profit contribution that will exceed the extra stock carrying
costs.
Warehousing
Many companies function adequately with their own on-site warehouses from where goods are
dispatched direct to customers. When a firm markets goods that are ordered regularly, but in small
quantities, it becomes more logical to locate warehouses strategically around the country.
Transportation can be carried out in bulk from the place of manufacture to respective warehouses
where stocks wait ready for further distribution to the customers. This system is used by large retail
chains, except that the warehouses and transportation are owned and operated for them by logistics
experts. Levels of service will of course increase when numbers of warehouse locations increase, but
cost will increase accordingly. Again, an optimum strategy must be established that reflects the
desired level of service
Transportation
Transportation usually represents the greatest distribution cost. It is usually easy to calculate
because it can be related directly to weight or numbers of units. Costs must be carefully controlled
through the mode of transport selected amongst alternatives, and these must be constantly
reviewed. The patterns of retailing that have developed, and the pressure caused by low stock
holding and short lead times, have made road transport indispensable. When the volume of goods
being transported reaches a certain level some companies purchases their own vehicles, rather than
use the services of haulage contractors. However, some large retail chains have now entrusted all
their warehousing and transport to specialist logistics companies.
For some types of goods, transport by rail still has advantages. When leadtime is a less critical
element of marketing effort, or when lowering transport costs is a major objective, this mode of
transport becomes viable. Similarly, when goods are hazardous or bulky in relation to value, and
produced in large volumes then rail transport is advantageous. Rail transport is also suitable for light
goods that require speedy delivery (e.g. letter and parcel post). Except where goods are highly
perishable or valuable in relation to their weight, air transport is not usually an attractive transport
alternative. For long-distance overseas routes it is popular. Here, it has the advantage of quick
delivery compared to sea transport, and without the cost of bulky and expensive packaging needed
for sea transportation, as well as higher insurance costs. The chosen transportation mode should
adequately protect goods from damage in transit (a factor just mentioned makes air freight popular
over longer routes as less packaging is needed than for long sea voyages). Not only do damaged
goods erode profits, but frequent claims increase insurance premiums and inconvenience
customers, endangering future business.
The Systems or „Total‟ approach to PDM
PDM has been neglected in the past; this function has been late in adopting an integrated approach
towards it activities. Managers have now become more conscious of the potential of PDM, and
recognize that logistical systems should be designed with the total function in mind. A fragmented or
disjointed approach to PDM is a principal cause of failure to provide satisfactory service, and causes
excessive costs.
PDM is concerned with ensuring that the individual efforts that go to make up the distributive
function are optimised so that a common objective is realised. This is called the ‗systems approach‘
to distribution management and a major feature of PDM is that these functions be integrated. To
plan an efficient logistics structure it is necessary to be aware of the interaction between the
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different distribution costs and how they are vary with respect to the different depot alternatives
(number, size, type and location).
Figure demonstrates how the individual distribution and logistics cost elements can built up the
total logistics cost.

Fig-- Total Logistics Cost

The top line on the graph shows the overall distribution cost in relation to the number of depots in
the network. The minimum point on this curve represents the lowest cost solution. The result will
depend in the number of factors –product type, geographical area of demand, service level
requirements etc.

Q4- When Christopher says that "supply chains compete, not companies", what exactly does he
mean ? Evaluate this statement from the cost point of view..? (v v v v v imp)
ANS- Logistics run throughout the process of supply chain and therefore in order to access the
performance of supply chain, total logistics cost is of utmost importance. It is required to follow a
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practice of costing that is more activity based rather than being confined to traditional functional
boundaries to incorporate changes in cost as and when a process changes.
The outputs of a logistics system and the cost corresponding to those outputs are evaluated to
determine the logistics cost. ―Mission costing‖ is a method of costing whereby the total logistics
cost is based on the total system cost of accomplishing desired logistic objectives (the system's
'output') as well as the costs of the various inputs used to meet these outputs. The term "mission"
was coined in 1998 by Christopher, it is a set of customer service goals that a system must meet
within a certain product/market environment in the context of logistics. The type of market served
determines the mission. The attainment of established mission goals necessitates contributions from
a wide range of functional areas and activities. Often decisions made in one area has unexpected
impact on other areas. The purpose of total cost analysis in this context is to identify the change in
costs brought about by these decisions. Cost must therefore be viewed in incremental terms – the
change in total costs caused by the change to the system. Thus, the addition of an extra warehouse
to the distribution network will bring about cost changes in transport, inventory investment and
communications. It is the incremental cost difference between the two options that is the relevant
accounting information for decision making in this case.
The cost of logistics varies from industry to industry e.g. building material say bricks will have very
high logistics costs as compared to Pharmaceuticals. Logistics becomes more and more expensive as
the cost of fuel, land, safety, environmental conservation, and human resources increase. However,
there is also a general belief that new productive models and good practices are effective in
reducing the cost of logistics. Logistics has an impact on the overall financial performance of a
company. It has an effect on Return on Assets (ROA)
Traditional cost accounting suffered shortcomings especially in terms of logistics. Christopher (1998)
discussed these issues as follows:

The above mentioned issues circles around the problem of analyzing cost in terms of the various
stages of the overall value chain of the firm. To address this problem, it was necessary to change the
basis of cost accounting from unit or product based to activity based. Activity- based costing is a
system of cost accounting based on activities, which are considered as any event, unit of work, or
task with a specific goal. Christopher (2016) has summarized the rationale behind ABC as serving
customers generates activity, activity consumes resources and resources cost money. The key to ABC
is to seek out the ‗cost drivers‘ along the logistics pipeline that cause costs because they consume
resources. Gattorna and Wallters (1996) defined cost driver as factor that creates of influences cost.
Cost-driver analysis identifies the cause of cost, e.g. the number of customer orders received in a
specific period. A positive cost driver results in a revenue, production or support related activities
that generate profit. A negative cost driver causes unnecessary work and reduces profitability. A cost
pool is a grouping of costs caused by related cost drivers and activities. Gattorna and Wallters (1996)
illustrated the concept of cost drivers with an example (Figure ), which comprised of identifying
activities and the cost drivers & cost pool associated with them.
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Q5- How can the chain relationship contribute to the success of Supply Chain Management ? Is it
necessary to extend this relationship beyond the chain, to further achieve the objectives of supply
chain management? (v v v v v imp)
ANS- Organizations that work without functional barriers are likely to achieve coordination within
the various components of the supply chain. This also necessitates the integration of data across the
enterprise so that all planners in the SC share common information. It is important for organizations
to have horizontal and vertical visibility into their SCs.
Advanced Manufacturing Research, a Boston-based consulting firm, developed a supply chain
model, which emphasizes material and information flow between manufacturers and their trading
partners.

 Competitive pressure to introduce new products more quickly

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Most product supply systems are out of balance with customer requirements. Each link in the
product supply system should be individually capable of producing and delivering what customers
order each day. The entire supply chain is only as capable as the weakest link in the system. Having
pursued cost cutting measures aggressively, many companies have reached the point of diminishing
returns within their organization‘s own boundaries and believe that better coordination across
corporate boundarieswith suppliers and distributors – presents the greatest opportunities. This has
coincided with the emergence of electronic networks that facilitate closer coordination. Uncertainty
is inherent in innovative products and requires efforts to find how to cope with it by creating a
responsive SC. A company can employ three coordinated strategies to manage uncertainty:
 Striving to reduce uncertainty by finding sources of new data that can serve as leading indicators or
by having different products share common components to the extent possible so that demand for
components becomes more predictable.
 Avoid uncertainty by cutting lead times and increasing the SC‘s flexibility to produce to order or at
least make it at a time closer to when demand materializes and can be accurately forecast.
 Hedge against the remaining residual uncertainty with buffers of the inventory or excess capacity.
Dispersed Manufacturing – Dissected Value Chain- Management of Chain Relationship
As companies focus on their core activities and outsource the rest, their success increasingly
depends on their ability to control what happens in the value chain outside their own boundaries. In
1980s, the focus was on supplier partnership to improve cost and quality. In today‘s faster-paced
markets, the focus has shifted to innovation, flexibility and speed.
Li & Fung is Hong Kong‘s largest export trading company and innovator in the development of SCM.
On behalf of it‘s customers, mostly retailers of US and EU, they work with an ever expanding
network of thousands of suppliers around the globe, sourcing clothing, toys, fashion accessories,
luggage. It draws on Hon Kong‘s expertise in distribution-process technology – a host of information
intensive service functions including product development, sourcing, financing, shipping, handling
and logistics.
This group‘s one breakthrough was dispersed production and dissecting the value chain- Labour
intensive middle portion is done in southern China and the front and back ends of the value chain in
Hong Kong. Instead of considering which country do the best job overall, they adopted an idea of
doing it globally by way of pulling apart the value chain and optimizing each step.For an example
when it received an order from a US buyer to produce 10000 pcs of garments, they might decide to
buy the yarn from a Korean producer but get it woven and dyed in Taiwan. The buttons and zippers
might come from Chinese plants. Then, because of quota & labour conditions, make the garments in
Thailand. If buyer needs quick delivery, divide the orders to five factories in Thailand. Effectively it
was customizing the value chain to best meet the customer‘s needs. Five weeks after the receipt of
the order 10000 garments arrived on the shelves in US, all looked like coming from one factory, with
colours and everything perfectly matched. This is a new type of value added, a truly global product.
Though the level would show ― Made in Thailand‖, but it‘s not a Thai product. The manufacturing
process was dissected and looked for the best solution at each step. The benefits outweigh the costs
of logistics and transportation. Similarly, it may be observed that the main pillars of success for ECR
are the Integration, Collaboration, Co-ordination, Trust, Openness, and Sharing of information as
well as benefits among all the channel partners, supported by advanced Information &
Communication Technologies.
Forming close, ongoing relationships even with the carriers or logistic service providers can help to
have distinctive competitive advantage in speed to customer, reliability, availability or other
customer service factors. The efficiency and effectiveness of customer service is possible through
dedicated and motivated channel partners, which partly comes through a well-maintained
relationship at each level. Suppliers, Distributors and Retailers need to trust each other to establish
long-term relationships and provide optimum value to the customer. Efficient new product
introduction and sales promotion can be explored by way of collaborative relationships among
trading partners.
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Relationship Marketing is the practice of building long term satisfying relations with suppliers,
distributors, retailers and customers – with an objective to have their long-term preference and
business. This is achieved by delivering high quality on time, good service and fair prices to other
parties over a period of time. It also results in strong economic, technical, and social ties among
them and reduce transaction cost and time. The ultimate outcome could be building a unique
company asset called a Marketing Network, consisting of all stakeholders: customers, employees,
suppliers, distributors, retailers, advertising Agencies, university scientists, transporters and any
other service providers. The competition, in future, will be between whole networks- rather than
between the companies.
The company‘s challenge is to reactivate the dissatisfied customer through customer win- back
strategies. It is easier to retract lost customers than to find new ones. The cost of attracting a new
customer is estimated to be five times the cost of keeping a current customer happy. The emphasis
is now shifting from making sales to building relationship. Apart from use of computers, information
and communication technologies, fundamental changes in operational relationship are required.
High tech without high touch may not provide a long-term differentiator.
Strategic Issues
The strategy of differentiation to satisfy specific customer requirements based on logistics
performance/competency is becoming increasingly popular. In the present century, there is a
pressing need of clear strategies to be distinctly different and unique, offering something different
from their rivals. Organizations have been rushing to implement the latest ideas on management
and struggling to fit all the pieces together: TQM, TPM, Reengineering, Time-based Competition,
Benchmarking, Restructuring, Downsizing, Cost Reduction, ERP Implementation and Supply Chain
Management.
All these improvements are necessary just to stay in the game. But, that is not sufficient because, if
everybody is competing on the same set of variables, then the standard gets higher but no company
gets ahead. Therefore, organizations need to create distinctive competitive advantages
continuously.
Manufacturers will have to increasingly think in terms of delivering value to customers/end-users,
and this will require a complete rethinking in the way a company would need to operate it‘s supply
chain in the future

Q6- ‘‘The most common method for evaluating non-economic factors in a facility location study is
to use a scoring model.’’ Why ? Justify your answer.? (v v v v v imp)
ANS- Facilities and their locations are major issues in an organization‘s logistics system efficiency and
its ability to successfully implement its competitive advantage. Facility location decisions are of
major importance to a company‘s ability to compete. Determining appropriate locations for facilities
such as plants, warehouses, retail stores, hospitals etc represents an important strategic decision.
The choice of location for the place of business is one of the earliest problems facing management.
Location decisions come under the category of long-term decisions. They involve long-term
commitments. A plant location decision cannot be reviewed until after quite sometime as they
involve huge investments. Location decisions also have effect on the operating costs/revenues. For
example, a bad location decision may call for excessive transportation costs, shortage of skilled
workforce, loss of competitive advantage, inadequate supply of raw materials etc.

The location decision is very much dependent on the type of business. For industrial location
decisions, the strategy is usually minimizing costs. For retail and service organizations, like hospitals
and hotels, the location decision focuses on maximizing revenue. Location strategy of Warehouse is
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driven by a combination of cost and speed of delivery. The objective of location strategy is to
maximize the benefit of location to the firm
Single Facility Location Problem
In this section you would learn about Single Facility Rectilinear Distance Location Problem, Squared
Euclidean Distance Problem (known as the Gravity problem) and the Straight-Line Distance Problem
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Similarly ranking the y values 3, 8, 9, 10 gives the median value as nay value between 8 and 9 and
the minimum value of g2 ( y) = 8. See Figure
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Multi-facility Location Problem

Retail Facility Location

The major criterion used for retail facility location is the volume of demand and hence estimates of
demand must be known for potential locations. Statistical techniques such as regression analysis can
be used to predict demand. For locating facilities that are oriented toward sales, the principal factors
are market related and the important data are demographic in nature. Other intangible factors,
which affect retail location, are competition, zoning laws, traffic patterns and accessibility etc. Like in
plant location, scoring models may be used to rank potential sites
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Q7- What is the skill set required by 4PL companies to be able to effectively integrate the supply
chain for their client company? (v v v v v imp) OR FOURTH PARTY LOGISTICS
ANS- Skill set required by 4PL companies to be able to effectively integrate the supply chain for
their client company- The term “fourth-party logistics provider” is a trademarked term owned by
Andersen Consulting. It refers to the evolution in logistics from suppliers focused on warehousing
and transportation (third-party logistics providers) to suppliers offering a more integrated and value
added solution. Among other services, fourth-party logistics providers include supply chain
management and solutions, change management capabilities, and value added services as part of
their offering. A 4PL company delivers a comprehensive supply chain solution and adds value by
influencing the entire supply chain.
A 4PL leverages a full range of service providers (3PLs, IT providers, contract logistics providers, call
centers, etc.) along with the capabilities of the client and its supply chain partners. The 4PL acts as a
single point of interface with the client organization and provides the management of multiple
service providers through a teaming partnership or an alliance. A 4PL adds value to the entire supply
chain, through reinvention, transformation, and execution.

Execution of the supply chain integration strategy leads to increased revenue, operating cost
reduction, working capital reduction, and fixed capital reduction while traditional approaches tend
to focus only on operating cost reduction and asset transfer
Revenue growth and customer satisfaction are driven by enhanced product quality and product
availability due to the elimination of stock-outs and ‘ship-complete’. Dramatic customer service
improvements can be attained as the 4PL focuses on the entire supply chain and is not limited to
increasing efficiencies associated with warehousing and lowest-cost transportation. Operating-cost
reductions are driven through operational efficiencies, process enhancements and procurement
savings. Savings are achieved through the complete outsourcing of the supply chain function instead
of only a few components as in the case of a 3PL solution. Savings are also achieved due to the
economies of scale that accrue due to the large size of the operations involved in the entire service
chain.
Synchronization of supply chain activities by channel partners leads to operating-cost reductions and
a lower cost of goods sold, due to integration of processes, and improved planning and execution of
supply chain activities. Technology is proactively used to manage order and inventory movement
throughout the pipeline, thereby minimizing the amount of inventory required, and increases item.
availability to reduce cycle times. Thus, working-capital reductions can be realized through inventory
reductions and reduced “order to cash” cycle times. Fixed-capital reductions result from capital asset
transfer and enhanced asset utilization. 4PL’s can undertake the ownership of physical assets, thus
freeing up assets held by various companies that form part of the supply chain. This allows the client
organization to invest in its core competencies like research and design, product development,
marketing and sales, etc.
A 4PL can use any of the three operating models to deliver supply chain solutions
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SECOND PRIORITY MOST IMPORTANT QUESTIONS

Q8- What are the advantages of using Bar-Code and scanning systems in Retail Industry ? Explain.?
(v v v v v imp)
ANS- With scanning technology becoming so widespread in businesses, many people take the ways
that barcode scanners impact retail for granted. As a business owner, you'll find yourself thinking
about the effects of barcode scanners for retail when shopping for them. Whether you plan to get
your first system or need an upgrade, a good scanner optimizes the technology's effectiveness.
Discover how barcode scanners improve the retail industry and how to get the most out of them.
The Benefits of Barcode Scanners for Retail
The ways that barcode scanners improve retail include:
 Inventory management: Many businesses track an item's progress and location by
scanning its barcode at different points in shipment.
 Accuracy: Scanning a barcode has better accuracy than manual data entry when handling an
item from shipment to sale.
 Efficiency: Since it takes a simple scan to read an item, barcode scanning has faster results
than entering a number.
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 Cost: Thanks to barcode fonts and reasonable scanner costs, many businesses can afford
barcode technology.
Flexibility: Barcode scanners can read 1D or 2D codes and evolve over time through technological
developments. You can also combine scanner types to speed up inventory management or checkout.
After the invention of the barcode, the retail industry changed forever. Barcodes can also transform
your business through the above benefits and more.
Electronic Records Management (ERM):
―Paperless business transactions are made possible by ERP software, Auto ID technology, and EDI
networks, all of which fall under the umbrella term ERM. The purpose of ERM in SCM is to promote
process flow accountability, which helps to lessen the danger of cybercrime (e-risks) caused by
electronic communication.
Barcoding and Scanner
Bar codes are a machine-readable representation of numerical data. Supply chain operations heavily
rely on bar codes to identify and follow products along the entire chain. Bar codes are made up of a
series of parallel lines of variable lengths, and they can be shown in either a horizontal (ladder) or
vertical (picket fence) layout. A warehouse's inventory, for instance, could be automatically updated
whenever new goods were received, thanks to the help of a warehouse management system. The
stock record is updated when the item is shipped, and the bar code is used to track where it was
stored. Bar codes are a timesaving tool that can improve efficiency immensely. However, issues can
arise if bar codes are altered or lablabeltached during transport. A proper approach to maintenance
management is essential if you want this machinery to last as long as possible.
It's common to see bar code scanners at the checkout lines of large grocery stores and shopping
malls. This number identifies the brand and item. Other uses include monitoring the movement of
things like PC parts during production or automobile assembly lines. By 1983, most products had
barcodes, and Wal-Mart had already begun using scanners at the registers. Point-of-sale stock
counts were automatically updated, and sales and stock data could be consolidated in one place
thanks to the work of the IT department at corporate IT department. Later that year, a satellite
communications network was set up, giving all stores and headquarters access to real-time stock
information.

Q9- Discuss major constraints of routing. Why are routing problems considered most difficult ?
Elaborate? (v v v v v imp)
ANS- India is one of the best examples of routing and re-scheduling, wherein such activities are
optioned in the shortest possible time. Roadblocks, damages to bridges and roads owing to natural
calamities are the major reasons for such re-routing. We can plan our travel plans well in advance
but then criticalities are criticalities and one has to accept such contingencies. Everything doesn‘t
happen as planned and therefore every company should gear for alternative arrangements involving
alternate routes, modes and schedules in case the movement of the shipment is emergent.
Delay in delivery due to routing problems increase costs of goods manifold. Therefore, to tide over
this the company has to plan these activities well in advance with detailed coordination and
judicious and realistic planning. India is a versatile country with equally versatile terrain and climatic
condition. Companies have to gear itself to such changing scenarios and terrain since the very
inception. Efficient versus inefficient routing can save tremendous amount of money in fuel, labor,
and capital expenditures and significantly enhance customer satisfaction. The objective should be to
minimize:
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Transportation happens to be the most fundamental part of strategic logistic management.

Transport costs include all costs associated with movement of products from one location to
another. The average transport costs ranges from 5 to 6% of the recommended retail price of the
product. Transportation is the movement of products, materials and services from one area to
another, both inbound and outbound. It can also be said as movement from one node of the supply
chain to the other ‗The ideal organization following the MTO is the Indian Army; with the principle,
wherever you are we reach you, in time, and in the best and cheapest mode available‘. Indian Army
is a typical example of ideal transportation mixes in our country. It uses the aerial, land, sea and rail
routes to maintain its forces strewn all over the country and abroad. The logistics is enormous and
the various modes of transport are, aircraft, train, trucks, animals, and human beings. It transports
supplies, ration, fuel, oil lubricants, arms, ammunition, clothing and personal loads over vast
distances and over varied terrain and climatic conditions.

Q10- Why does a company Pursue a new Enterprise Resource Planning (ERP) solution ? Explain
with suitable example? (v v v v v imp)
ANS- Information technology (IT) has provided an integrated supply chain management solutions
incorporating supply chain configuration, demand planning, logistics and warehouse management.
The contribution of IT has become imperative for capturing point-of-sales (POS) data and calculating
near-accurate demand forecasts. For instance, Modi Xerox uses IT to reduce their cash-to-cash cycle
time through fast flow of order/demand data and their execution through shipment and
delivery/installation confirmation. Various solutions are available ranging from enterprise resource
planning (ERP) tools to Internet based e-commerce opportunities. Some of these tools are discussed
in the following sections.
Enterprise resource planning (ERP) tools are capable of capturing data and automating financial,
inventory and customer order tracking tasks. ERP systems utilize a single data model and have an
established set of rules for accessing data. Although this is possible within an organization, more
complex systems like electronic data interchange (EDI) are required for accessing data from various
databases crowded along the entire supply chain.
EDI consists of a communications standard that supports inter-organizational electronic exchange of
common business documents and information. It represents a cooperative effort between buyer and
seller. They can become more competitive by streamlining the communication process through the
elimination of many steps involved in traditional information flows. The basic components of an EDI
system include:
1. A standard set of rules for formatting and syntax agreed upon by the user in the network like the
American National Standards Institute (ANSI) standards.
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2. Software that can translate company specific database information into EDI standard format for
transmission.
3. A mail service responsible for the transmission of the document usually through its own network
or a third party value-added network (VAN).
Hence, the EDI involves three basic processes:

Software designed for ERP generally focuses on a company's core operations, includes all the
necessary logical connections to enable a continuous flow of data throughout the company in a
supply chain context, and is commonly connected with other systems. ―Enterprise resource
planning (ERP) is "not a system but a framework that includes administrative (financial, accounting),
human resources (payroll, benefits), and Manufacturing Resources Planning (MRP)" (procurement,
production planning) software to manage and coordinate many of a company's assets, processes,
and operations (Boyle, 2004). Enterprise resource planning (ERP) systems simplify the automation
and integration of SCM and other business
processes. Everything from the acquisition of raw materials to the delivery of finished goods to
customers may be tracked centrally through the use of such systems‖. Internal operations, the
complete supply chain, customer support, and business partnerships can all benefit from
implementing an ERP system. Incorporating continuous auditing tools into commonly used
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enterprise resource planning (ERP) designs enables the assurance role to expand experimentally
from a one-time occurrence to a continual operation. New approaches to integrating and planning
helped ERP rise to the top as the dominating technology in business

Q11- Explain Push-Pull Supply Chain System. Why is it called an Ideal Mix? (v v v v v imp) OR
Supply Chain Strategies
ANS- The various strategies that has to be followed for an effective integration are:
1--- Push & pull
2-- Push-pull
1-- Push Based Supply Chain
Long-term forecasts are the backbone of a push-based supply chain model, as regards the
production and the distribution decisions are concerned. Typically though, the manufacturer bases
demand forecasts in orders received from the retailer‘s warehouses. Therefore, it takes much longer
for the push based supply chain to react to the changing marketplace, which may lead to
 Inability to meet changing demand patterns.
 The obsolescence of supply chain inventory as demand for certain products disappears.
Actually, the bullwhip effect leads to under utilization of resources, because planning and managing
is that much more difficult. For example, a production manager is in quandary as to how to discern
production capacity. Should it be based on peak demand or average demand? Similarly, it is not
clear as to how to determine the transportation aspects, based on average or peak demand?
Therefore, a push based chain we find extra transportation costs, higher inventory levels and higher
manufacturing costs, due to need for emergency production changeovers.
2-- Pull Based Supply Chain
In this type of chain, the production and distribution is based on demands so that it can be
effectively coordinated with true customer requirements rather than forecasts. Inventory in such
firms following the pull system is negligible and responds only to orders per se. This is further
coupled with fast information flow mechanisms on customer demands to the various components of
the supply chain. This system is more attractive in nature because, it leads to:

In a pull based supply chain there is considerable reduction in inventory, enhanced resource
management and a comparable reduction in system costs to push based system. At the same time,
pull based systems are difficult to implement when lead-time are long and it is not practical to react
to the demand information. Moreover, since the systems are not planned well in time it‘s difficult to
take advantage of economics of scale in manufacturing and transportation. Taking these advantages
and disadvantages into consideration the companies have formulated a new system ‗the push-pull‘
system, i.e. an integration of push and pull system.
Push-pull strategy
This is an ideal mix of both push and pull strategy in which the first half of the system is based on
push method and the remaining as pull based. The interface between the two models is push-pull
boundary. In order to comprehend the strategy better you have to consider the supply chain time
line, that is, the time that elapses between procurement of raw materials and the delivery to the
customer, the end of the time line. The push-pull boundary, exists somewhere in between this time
line and denotes the time when the company switches from one strategy to the other as illustrated
in Figure
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Fig. The Push-Pull Supply Chain System

Q12- "Successful supply chain design requires several decisions relating to the flow of information,
product and funds." Explain the statement. Also explain the four types of supply chain strategies?
(v v v v v imp)
ANS- Successful supply chain design requires several decisions related to the flow of information,
product and funds. These decisions fall into three phases depending on the frequency of each
decision and time frame over which a decision phase has an impact.
1--- Supply chain strategy or design A company‘s competitive strategy defines the set of customer
needs that it seeks to satisfy through its products and services. The supply chain strategy includes
supplier‘s strategy, operations strategy, and logistics strategy. Decisions regarding inventory,
transportation, operating facilities and information flows in supply chain are all parts of supply chain
strategy. Various functional strategies cannot be formulated in isolation. They must fit and support
each other if a company is to succeed. The key consideration is to achieve a strategic fit between a
company‘s competitive strategy and supply chain strategy is a key consideration. To achieve this,
there are three basic steps
 Understanding the customer,
 Understanding the supply chain, and
 Achieving the strategic fit.
During the design phase, a company decides on how to structure the supply chain. It decides what
the chains configuration will be and what processes each stage will perform. These decisions include
the location and capacities of production and ware housing facilities, products to be manufactured
or stored at various locations, modes of transportation and types of information systems to be
utilized. Supply chain design decisions are typically made for long term and are very expensive to
alter on short notice.
2-- Supply chain planning This starts with a forecast for the coming year of demand in different
markets – with all the details of markets, supply locations, inventories, sub-contracting with
manufacturers etc.
3- Supply chain operations The goal is to implement the operating policies in the best possible
manner

SUPPLY CHAIN STRATEGIES

Let us see some supply chain characteristics and strategies
Demand and supply uncertainty characteristics
Hau Lee points out that in addition to important demand characteristics, there are uncertainties
revolving around the supply side that are equally important drivers for the right supply chain
strategy. Lee defines a stable supply process as one where the manufacturing process and the
underline technology are mature and the supply base is well established. In contrast, an evolving
supply process is where the manufacturing process and the underline technology are still under
early development and are rapidly changing. As a result the supply base may be limited in both size
and experience. In a stable supply process, manufacturing complexity tends to be low or
manageable. Stable manufacturing processes tend to be highly automated, and long-term supply
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contracts are prevalent. In an evolving supply process, the manufacturing process requires a lot of
fine-tuning and is often subject to breakdowns and uncertain yields. The supply base may not be
reliable, as the suppliers themselves are going through process innovations. Following exhibit
summarizes some of the differences between stable and evolving supply processes.
Lee argues that while functional products tend to have a more mature and stable supply process,
but that is not always the case. For example, the annual demand for electricity and other utility
products in a locality tend to be stable and predictable, but the supply of hydroelectric power, which
relies on rainfall in a region, can be erratic year by year. Some food products also have a very stable
demand, but the supply (both quality and quantity) of the products depends on yearly weather
conditions. Similarly, there are also innovative products with a stable supply process. Fashion
apparel products have a short selling season and their demand is highly unpredictable. However, the
supply process is very stable, with a reliable supply base and a mature manufacturing process
technology
Types of Supply Chain Strategies
Lee characterizes four types of supply chain strategies as shown in the exhibit below. Information
technologies play an important role in shaping such strategies
1-- Efficient Supply Chains: These are supply chains that utilize strategies aimed at creating the
highest cost efficiency. For such efficiencies to be achieved, non value added activities should be
eliminated, scale economies should be pursued, optimization techniques should be deployed to get
the best capacity utilization in production and distribution, and information linkages should be
established to ensure the most efficient, accurate, and cost effective transmission of information
across the supply chain
2-- Risk Hedging Supply Chains: These are supply chains that utilize the strategies aimed at pooling
and sharing resources in a supply chain so that the risks in supply disruption can be shared. A single
entity in a supply chain can be vulnerable to supply disruptions, but if there is more than one supply
source or if alternative supply resources are available, then the risk of disruption is reduced.
3-- Responsive Supply Chains: These are supply chains that utilize strategies aimed at being
responsive and flexible to the changing and diverse needs of the customers. To be responsive,
companies’ use build to order and mass customization processes as a means to meet the specific
requirements of customers
4-- Agile Supply Chains: These are supply chains that utilize strategies aimed at being responsive and
flexible to customer needs, while the risk of supply shortages or disruptions are hedged by pooling
inventory and other capacity resources. These supply chains have strategies in place that combine
the strengths of “hedged” and “responsive” supply chains. They are Agile because they have the
ability to be responsive to the changing, diverse, and unpredictable demands of customers on the
front end, while minimizing the back end risks of supply disruptions.

Q13- ‘‘A connection and interrelationship between the components of supply chain has to be
established for utmost customer satisfaction.’’ Explain the statement with reference to integration
of supply chain at various stages? (v v v v v imp) Explain Integrated Supple Chain/ Value Chain
ANS- The main objective of the supply chain concept is to integrate and synchronize the service
requirements of the consumer/customer with the flow of materials from suppliers in such a way that
any conflicting or contradictory situation rising can be balanced out. These conflicts could be like,
high customer service, low inventory investment and low operating cost. These have to be balanced
or optimized, and therefore, various models have been proposed over the years in order to integrate
the SCM systems, for example Stevens Model 1989, which proposes a balance in the supply chain
involving functional trade-off. Supply chain management revolves around efficient integration of
suppliers, manufacturers, warehouses and stores. The main challenge being coordination of the
activities within the chain and across it for improved performance, reduce costs, increase service
level, reduce the bullwhip effect, resource utilization, and effective response to market changes.
Companies have realized over a period of time that integrating the front-end of supply chain,
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customer requirements/demands, to the back-end of the supply chain, the production and
manufacturing portions of the supply chain.
Development of an integrated supply chain requires management of material and information flows
to be viewed from three perspectives:
 Strategic.
 Tactical.
 Operational.
At each of these levels, there has to be utmost coordination and harmonization between the
finance, information, material, facilities, people and the system as a whole. Let us see these
perspectives one by one.
Integrated Supply Chain/value chain
Integration of Supply Chain & Demand Chain can be seen from three angles as follows:

Tactical level: This focuses on the means by which the strategic objectives could be achieved. The
various objectives for each element in the supply chain provide the directions for achieving the
balance within the supply chain. It involves identifying the necessary resources with which the
balance could be achieved.
Operational level: the implementation level in the model, and aims at converting the objectives and
policies so formulated into workable solutions. This is also the supply chain development phase and
the strategy and plans for implementation are evolved. Implementation plans require a time-phased
program for allocation of resources all through the supply chain. Fig

Steven‘s comment concerning supply chain development is equally interesting, which says while the
impetus for the development of the strategy may be a top-down approach; its success is likely to be
achieved by a bottomup approach. The same is highlighted in the Fig-
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Fig- Steven‟s model of Supply Chain Integration

The concept of value chain/supply chain management approach enables a company to react
effectively to market swings and changes. However, in order to get the optimum potential, a
connection and inter-relationship between the components of the supply chain has to be
established and identified and an integrated chain formed for utmost customer satisfaction, i.e.
cost-effective product.
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Q14- How the chain relationship can contribute to the success of SCM ? Is it necessary to extend
this relationship beyond the chain to further achieve the objectives of SCM ? Explain.? (v v v v v
imp) or Chain Relationship – Within and Beyond the Organization
ANS- Organizations that work without functional barriers are likely to achieve coordination within
the various components of the supply chain. This also necessitates the integration of data across the
enterprise so that all planners in the SC share common information. It is important for organizations
to have horizontal and vertical visibility into their SCs.
Advanced Manufacturing Research, a Boston-based consulting firm, developed a supply chain
model, which emphasizes material and information flow between manufacturers and their trading
partners.

Most product supply systems are out of balance with customer requirements. Each link in the
product supply system should be individually capable of producing and delivering what customers
order each day. The entire supply chain is only as capable as the weakest link in the system. Having
pursued cost cutting measures aggressively, many companies have reached the point of diminishing
returns within their organization‘s own boundaries and believe that better coordination across
corporate boundarieswith suppliers and distributors – presents the greatest opportunities. This has
coincided with the emergence of electronic networks that facilitate closer coordination.
Uncertainty is inherent in innovative products and requires efforts to find how to cope with it by
creating a responsive SC. A company can employ three coordinated strategies to manage
uncertainty:

Dispersed Manufacturing – Dissected Value Chain- Management of Chain Relationship

As companies focus on their core activities and outsource the rest, their success increasingly
depends on their ability to control what happens in the value chain outside their own boundaries. In
1980s, the focus was on supplier partnership to improve cost and quality. In today‘s faster-paced
markets, the focus has shifted to innovation, flexibility and speed. Li & Fung is Hong Kong‘s largest
export trading company and innovator in the development of SCM. On behalf of it‘s customers,
mostly retailers of US and EU, they work with an ever expanding network of thousands of suppliers
around the globe, sourcing clothing, toys, fashion accessories, luggage. It draws on Hon Kong‘s
expertise in distribution-process technology – a host of information intensive service functions
including product development, sourcing, financing, shipping, handling and logistics.
This group‘s one breakthrough was dispersed production and dissecting the value chain- Labour
intensive middle portion is done in southern China and the front and back ends of the value chain in
Hong Kong. Instead of considering which country do the best job overall, they adopted an idea of
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doing it globally by way of pulling apart the value chain and optimizing each step.For an example
when it received an order from a US buyer to produce 10000 pcs of garments, they might decide to
buy the yarn from a Korean producer but get it woven and dyed in Taiwan. The buttons and zippers
might come from Chinese plants. Then, because of quota & labour conditions, make the garments in
Thailand. If buyer needs quick delivery, divide the orders to five factories in Thailand. Effectively it
was customizing the value chain to best meet the customer‘s needs. Five weeks after the receipt of
the order 10000 garments arrived on the shelves in US, all looked like coming from one factory, with
colours and everything perfectly matched. This is a new type of value added, a truly global product.
Though the level would show ― Made in Thailand‖, but it‘s not a Thai product. The manufacturing
process was dissected and looked for the best solution at each step. The benefits outweigh the costs
of logistics and transportation.
Similarly, it may be observed that the main pillars of success for ECR are the Integration,
Collaboration, Co-ordination, Trust, Openness, and Sharing of information as well as benefits among
all the channel partners, supported by advanced Information & Communication Technologies.
Forming close, ongoing relationships even with the carriers or logistic service providers can help to
have distinctive competitive advantage in speed to customer, reliability, availability or other
customer service factors. The efficiency and effectiveness of customer service is possible through
dedicated and motivated channel partners, which partly comes through a well-maintained
relationship at each level. Suppliers, Distributors and Retailers need to trust each other to establish
long-term relationships and provide optimum value to the customer. Efficient new product
introduction and sales promotion can be explored by way of collaborative relationships among
trading partners.
Relationship Marketing is the practice of building long term satisfying relations with suppliers,
distributors, retailers and customers – with an objective to have their long-term preference and
business. This is achieved by delivering high quality on time, good service and fair prices to other
parties over a period of time. It also results in strong economic, technical, and social ties among
them and reduce transaction cost and time. The ultimate outcome could be building a unique
company asset called a Marketing Network, consisting of all stakeholders: customers, employees,
suppliers, distributors, retailers, advertising Agencies, university scientists, transporters and any
other service providers. The competition, in future, will be between whole networks- rather than
between the companies.
The company‘s challenge is to reactivate the dissatisfied customer through customer win- back
strategies. It is easier to retract lost customers than to find new ones. The cost of attracting a new
customer is estimated to be five times the cost of keeping a current customer happy. The emphasis
is now shifting from making sales to building relationship. Apart from use of computers, information
and communication technologies, fundamental changes in operational relationship are required.
High tech without high touch may not provide a long-term differentiator.
Strategic Issues
The strategy of differentiation to satisfy specific customer requirements based on logistics
performance/competency is becoming increasingly popular. In the present century, there is a
pressing need of clear strategies to be distinctly different and unique, offering something different
from their rivals.
Organizations have been rushing to implement the latest ideas on management and struggling to fit
all the pieces together: TQM, TPM, Reengineering, Time-based Competition, Benchmarking,
Restructuring, Downsizing, Cost Reduction, ERP Implementation and Supply Chain Management.
All these improvements are necessary just to stay in the game. But, that is not sufficient because, if
everybody is competing on the same set of variables, then the standard gets higher but no company
gets ahead. Therefore, organizations need to create distinctive competitive advantages
continuously.
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Manufacturers will have to increasingly think in terms of delivering value to customers/end-users,

and this will require a complete rethinking in the way a company would need to operate it‘s supply
chain in the future.
Q15- “Supplier alliances play a key role in strategic supply chain management activities across the
board.” Explain the statement? (v v v v v imp)
ANS- Supplier alliances plays a key role in strategic supply chain management activities across the
board, therefore in order to develop and manage these relationship and alliances firm‘s has to
continuously endeavor to identify methods to facilitate these relations. Supplier is as important as
the customer and that has to be realised in the true sense.
Riggs & Robbins spelt out these relations in their book ‗The executive guide to Supply Management
Strategies‟, they are:
Annual supplier meetings: annual supplier meeting is a common phenomenon in maintaining direct
relationship with the suppliers by the buyer firm. It is used both as a teaching and learning platform
as well as the opportunity to distinguish one‘s organisation as a supply management leader. It dwells
on the buyer‘s management performance, learning and future goals. The main objective being
learning of key strategies to support the buyer‘s business. It requires extensive planning and is
expensive, but it lays the foundation of a buyer supplier relationship in the long run.
Supplier discussions: it‘s an informal forum for gaining and sharing learning, between the
representatives, like the chief executive, chief operating officer, and representatives from
marketing, supply management and research divisions. It reviews the buyer‘s progress and goals in
the backdrop of shift in strategies and policies. It‘s a forum that builds trust and respect, towards a
successful supplier relationship.
Workshops and seminars: these are aimed at creating opportunities for supply-stream innovations,
which will benefit all the participants. It composes of members of supplier participants who provide
material and services that are critical to the products made available at the marketplace. Such
discussions open the door for newer set of goals and collaborations. It provides the base for
continual improvement, concepts and innovations required to guide and organize discussion and
work sessions.
Collaborations/partnership: this is supposed to be the most successful supplier buyer relationship in
recent times. These are based on mutual interdependence and respect. These alliances begin with
careful selection of source during product design process. This is the time when the buyer requires a
dependable supplier who can provide the required process, design and technological support for a
successful product. The supplier at the same time requires a responsible customer for its product
and services. They both require each other and have to work hand in glove. Unexpected criticalities
that may arise can be sorted out with a ‗we shall overcome‘ attitude. The most important in these
relationships is the integration of the buyer and supplier as long as the relationship is beneficial to
each other.
Developing and managing the relationship
Supply managers at all levels should ensure and tailor appropriate actions during the planning and
management of such alliances mentioned above. Like:
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Management of supply contract is a challenging responsibility and a critical too. Companies have to
continuously generate and develop newer ideas and innovations to maintain these relations and
work in unison to a common goal without jeopardizing each other‘s interest in the overall gambit of
supplier buyer alliances and relationship.
Q16- Explain how Structure of IT's Effect on Supply Chain Management and The goals and
advantages of implementing IT in SC? (v v v v v imp)
ANS- ―Technology advancements in electronic data interchange (EDI), the Internet, and the World
Wide Web (WWW) have led to the rise of SC design and management as prominent operational
paradigms‖. Businesses now use online communication systems due to the complexity of SCM. An
example of a medium that improves communication is the Internet, which allows for more two-way
interaction between businesses and their clients. ―Armstrong and Hagel (1996) claim that there has
been a shift in the supply chain toward the development of online business communities. The goal of
SCM is to maximise the long-term success of all participants in the chain by encouraging open
communication and cooperation. This illustrates the value of open lines of communication and the
application of modern technological tools in SCM‖. This occurs mainly because of inconsistent
ordering. More and more research is being done to determine how IT affects SC and relationships
between businesses. According to the article, information technology fosters productive working
partnerships. There is a common belief that advances in IT can improve a relationship's information
processing capabilities, paving the way for or bolstering increased inter-firm cooperation and
lowering levels of uncertainty. Since trust is built on interactions between people, eliminating human
interaction in the buying and selling process and adopting a more relational/cooperative governance
structure brought about by IT have contributed to strengthening the bonds between buyers and
sellers. As mentioned in the previous section, the leading framework will be illustrated in the
following section to show how IT affects SCM.
Structure of IT's Effect on Supply Chain Management
 Information Technology in Sourcing
Over the past decade, the procurement management function of IT has proliferated. The research
shows that IT is used in several procurement processes, including talking to suppliers, comparing
quotes, and shopping online. Vendor negotiations have also been sped up by technology. There has
been a decline in the frequency with which negotiations occur face to face due to technological
advancements. This encompasses settlements reached through bargaining, renegotiation, and
agreements concerning cost and duration. Information Technology was in charge of fielding
questions from suppliers, providing answers, and handling claims for damaged or defective goods.
Order processing applications are another everyday use of IT in supply chains. It is often used for
order placement and status checking in this context. It is used for this by more than half of all
businesses. Substantial savings in the order-handling process have resulted from this. It has reduced
the number of mistakes made while processing orders. The time it takes to find and fix errors has
decreased.
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 IT on operation:
Managing inventories is an expensive part of the supply chain process. According to the study's
findings, the most common application of IT in this domain is reporting stock-out situations, either
by customers to suppliers or by businesses to their clients. The rapid implementation of EDI
information programmers with customers has been made possible by advances in IT. It has had the
most significant impact on enabling businesses to take preventative measures with their inventory
systems. Shorter delivery lead times and lower inventory levels are evidence of this, as are the
companies' abilities to keep customers apprised of order shipping delays and inventory emergencies.
Scheduling production has always been the most challenging part of supply chain management.
With the help of IT, businesses have been able to streamline the production scheduling process by
better connecting with their suppliers and clients. The research found that some interactions
coordinate the efforts of their JIT programmers with their suppliers with the help of information
technology. Some companies are also using it to coordinate production schedules with suppliers.
 IT on logistics:
―The most widespread use of IT in SC is in transportation management. A survey of relevant studies
reveals that shipping costs make up the bulk of a supply chain's overhead. The study found that
carrier monitoring of pickups at regional distribution centres was the most frequent use of IT in this
sector‖. This is crucial for a company because it allows them to monitor the reliability of the carriers
they work with by keeping tabs on deliveries as they make their way to regional depots. As a result,
logistics directors can rely on punctual arrivals from their contracted motor carriers. Also, managers
can immediately alert pages of shipment delays instead of waiting days for the data to become
available. Claims tracking and settlement are simplified by using IT. Manufacturing, sourcing,
logistics, transportation, customer service, quality control, and other departments must work
together to fulfil a customer order. ―The objectives are to shorten the time it takes to complete a
customer order, to decrease the number of raw materials, intermediate products, and finished
goods sitting in storage, to increase the precision and thoroughness of the order fulfilment and
billing processes‖, and to speed up the time it takes to get paid for the goods that have already been
shipped. It is used by manufacturers, retailers, and their trading partners to achieve this level of
Order Cycle Integration.
 IT on customer relationships:
Many professionals in the business world believe that a firm can enhance its operations and supply
better service at lower costs by concentrating on customer satisfaction overall. Total customer
satisfaction is the end goal of customer-satisfaction-driven management, often seen as the natural
progression from TQM (comprehensive quality management) because quality is only one component
of customer satisfaction. And yet, previously, firmcondition setting processes could not make
optimal use of customer information. As the speed of information technology continues to improve,
businesses can now provide customers with additional channels for addressing service-related
concerns and reap the many benefits of integrating customer and company data.
 IT on vendor relationship:
More frequent and intimate communication between retailers and their suppliers is one of the many
benefits of implementing IT in supply chains. An IT-based supply chain has been linked favourably in
a report to numerous business advantages. According to Grover et al., a dyad's choice to use IT
within the dyad may strengthen the partners' resolve to establish norms of social behaviour. ―The
study shows that a more relational and cooperative governance structure is set, and transaction
costs between buyers and suppliers are reduced‖. Any interaction facilitated by IT in an organization
relies heavily on mutual trust. Trust is established when one party believes another will always act in
their best interests. The management literature has recently begun to emphasize the significance of
faith in various interorganizational relationships. Trust between the two parties involved is crucial
for any business relationship to succeed. Commitment to the long term is an indicator of productive
partnerships between businesses. Long-term orientation is the willingness to work toward
maintaining and strengthening relationships over time. The willingness to invest in a relationship is
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often displayed through allocating resources, such as time, money, space, etc. Firms' willingness to
invest in the transaction- or relation-specific IT infrastructure is a crucial indicator of commitment,
and IT has helped facilitate productivity gains in supply chains. Numerous studies have linked open
communication between buyers and sellers to positive business outcomes. Quantity and quality of
information shared refer to how much sensitive and confidential data is divulged to a business
partner in a supply chain. The transparency and cooperation brought about by IT in terms of sharing
information benefited the bonds between businesses.
 IT on the firm:
To keep expenses low, a business needs a highly disciplined workforce that is well-informed about its
goals and objectives, has a clear understanding of its methods, and works quickly and effectively.
This highlights the need for the organization to have highly standardized procedures and for all
employees to be well versed in and able to apply these procedures faithfully. However, in a dynamic
marketplace, it is also crucial to be creative, to present novel service bundles and fresh
organizational links with the client. For this, a discipline of change is needed, one that promotes
innovation while keeping the status quo stable until the time is suitable for the widespread adoption
of the inventions. A solution to this issue exists in the realm of IT. The relationship between a
company's IT use, employee count, and revenue was also investigated. ―Larger businesses, as
indicated by the total number of workers, are more likely to use IT to update customers on the
status of their orders and to oversee outsourcing customer service tasks. As well to individual
customers, regional conditions also vary. A company with a significant multinational customer will
need to provide or coordinate service provision in various geographic locations‖. Every community
has quirks, traditions, business norms, and methods for getting things done. In some instances, the
global procedures may not be applied locally. IT achieved a middle ground between the ideal
worldwide standardization and the inevitable regional adaptations. To succeed in today's highly
competitive market, lifelong education has never been more critical. When a new group is put
together, its members must be able to pick up the skills they'll need to tackle the challenges they'll
face quickly and effectively. It has the most significant impact on enhancing the dissemination of
newly acquired knowledge to other team members and individuals within the larger organization.
Tightness and elasticity are required in any successful organization. By "light," we refer to the
importance of running a streamlined business that pays close and consistent attention to minimizing
expenses and maintaining high customer service standards. ―To be "loose" means to be open to
new ideas, to listen to and meet the demands of your customers, and to be able to shift with the
times. In addition to this, IT also has a significant effect on businesses in the supply chain
management sector.

Figure Framework for the impact of IT on SCM

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The goals and advantages of implementing IT in SCM

The goals are:
We are providing access to and insight into data, establishing a central hub from which all
information can be accessed, making it possible to make business choices on a comprehensive
picture of the supply chain, and Facilitating Partner Cooperation. The integration of IT into SCM
paves the way for new opportunities, from gaining a tactical edge to developing a competitive
advantage. Competition regulations and industry structures are both impacted. Technology in the
information age is essential because it allows for centralised strategic planning and day-to-day
centralised operations, which are critical in helping businesses gain a competitive edge. The infection
supply chain has become more consumer-focused due to the widespread adoption of IT.

Q17- Explain how a Organizations that have adopted E-SCM practices, Benefits of adopting e-SCM
and Challenges while adopting e-SCM? (v v v v v imp)
ANS- Organizations that have adopted E-SCM practices ― Some of the most successful companies
in the world were early adopters of electronic supply chain management. Their successes and
failures in adopting e-SCM can serve as examples for other businesses. Dell's success can be
attributed mainly to the company's management tenets and vision for a Zerotime organisation
based on the benefits of the Internet, an integrated, virtual organisation, and online sales, all of
which were put into place by the company by the fall of 1996. Since then, Dell has undergone
phenomenal expansion, with sales increasing by 58% in 1997, profits rising by 82%, and the
company's stock splitting for the sixth time in 1998.
Key to Dell's success was the strategy's facilitation of the company's ability to trade stock for data.
Information is more mobile, disposable, storable, and trackable than physical goods, so Dell kept
records of customer orders, needs, and forecasts. Therefore, Dell uses the virtual integration model
shown in Figure , in which the conventional roles and boundaries of the value chain are disregarded

Figure . Virtual integration model

―Today, Dell's success still places it among the best businesses in the world. And among CIOs, Dell is
still the preferred option for enterprise flash deployments‖
Lanier Worldwide Inc.: One of the largest in the industry, it offers clients in over 100 countries,
allowing them to produce and disseminate professionalquality documents more quickly, cheaply,
and efficiently than ever. ―They can do this by emphasising the customer experience heavily and
adhering to a rigid workflow methodology. Lanier uses a WMS, TMS module, and DSS to create a
centralised database that can be accessed by employees and clients alike. In addition, Lanier allows
customers to view the status of their orders, view all their order information, and view the real-time
status of their orders via the Internet, making them very happy. Study topics such as knowledge
sharing are addressed by the DSS, which collects and manages data from Lanier's distribution
centres in a unified database for purposes such as trend analysis, performance tracking, and quality
control reports.
Wal-Mart is a worldwide firm that owns and operates multiple warehouse clubs and outlet malls.
The corporation is the largest in the world in retail sales and employs more people in the private
sector than any other company, with over two million. It also performs better than all other bargain
stores in terms of operating profit, inventory turnover, and sales per square foot.
The company's transformation from a regional to a global powerhouse has mainly been attributed to
practical supply chain management improvements, such as the successful integration of suppliers,
manufacturing, warehousing, and distribution to stores. Modern technology and network design
enable precise demand forecasting, inventory tracking and forecasting, the planning of highly
efficient transportation routes, the administration of client relationships, and the logistical
organisation of service response. Thanks to this strategy, Wal-Mart has become a dominant force in
a worldwide cutthroat market thanks to several long-term competitive advantages, including lower
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product costs, lower inventory carrying costs, increased instore variety and selection, and
competitive customer pricing.
Cisco: A pioneer in the networking industry, Cisco has revolutionised online interaction. One of
Cisco's greatest strengths is its supply chain management capabilities, given the company's extensive
network of business associates.
Challenges while adopting e-SCM
e-SCM streamlines demand and SC through seamless data and physical assets integration. Partner
integration is a difficult task in and of itself. While the Internet and other IT infrastructure make this
kind of integration possible, gaining a sustainable competitive advantage requires more than just
installing shiny new software. While there may be financial and productivity gains from
implementing Internet-based technologies, doing so raises cultural and technical issues.
Collaborating is based on trust, dedication, and cooperative standards, but it also necessitates that
companies overcome their innate reluctance to share confidential information with other partners.
Consequently, businesses can't reap the benefits of integration until they get past cultural worries.
When it comes to technical issues, however, things like the Internet's inherent unreliability and the
difficulty of integrating applications among trading partners come to mind.
―Successful adoption and enhanced performance can be guided by analysing SCM opportunities
and developing a clear roadmap and strategy for the e-SC. Despite the challenges, e-SCM has proven
its worth for a variety of reasons, including improving operations, outsourcing more effectively,
increasing profits, boosting customer satisfaction, producing high-quality results, responding to
competitive pressures, adapting to a more global market, leveraging the power of e-commerce, and
managing supply chains as they become increasingly complex
Benefits of adopting e-SCM
IT and growing e-business applications, together with related new business models, are playing an
increasingly essential role in supply chain management as organisations demonstrate lower costs
and increased responsiveness of their SC due to e-business investments
Figure 6.5, therefore, illustrates the customer centricity of the customercentric/e-SCM, which, in
contrast to traditional SCM, places the customer's needs ahead of the company's resources and
expertise.

Figure . Customer-centric e-SCM

―As businesses increasingly rely on Internet technology to link their channels' worth of data,
transactions, and decisions, the entire channel system can continuously generate radical new
sources of competitive advantage through cyber-collaboration‖. This paves the way for collaborative
product development, electronic marketplaces for purchasing goods, and networked strategies for
managing operations and satisfying customers. This kind of paradigm shift, which was made possible
by Information and Communication Technology, has had a significant impact on the way people
work. It has made it possible to do more with less and gives people the chance to gain competitive
advantages using e-SCM.

Q18- Q17- Explain how a Organizations that have adopted E-SCM practices, Benefits of adopting e-
SCM and Challenges while adopting e-SCM? (v v v v v imp)
ANS- Cost Drivers ― traditional cost accounting suffered shortcomings especially in terms of
logistics. Christopher (1998) discussed these issues as follows:
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The above mentioned issues circles around the problem of analyzing cost in terms of the various
stages of the overall value chain of the firm. To address this problem, it was necessary to change the
basis of cost accounting from unit or product based to activity based. Activity- based costing is a
system of cost accounting based on activities, which are considered as any event, unit of work, or
task with a specific goal. Christopher (2016) has summarized the rationale behind ABC as serving
customers generates activity, activity consumes resources and resources cost money. The key to ABC
is to seek out the ‗cost drivers‘ along the logistics pipeline that cause costs because they consume
resources. Gattorna and Wallters (1996) defined cost driver as factor that creates of influences cost.
Cost-driver analysis identifies the cause of cost, e.g. the number of customer
orders received in a specific period. A positive cost driver results in a revenue, production or support
related activities that generate profit. A negative cost driver causes unnecessary work and reduces
profitability. A cost pool is a grouping of costs caused by related cost drivers and activities. Gattorna
and Wallters (1996) illustrated the concept of cost drivers with an example (Figure), which
comprised of identifying activities and the cost drivers & cost pool associated with them

Activity Based Costing (ABC)

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Activity-Based Costing (ABC) recognizes the relationship between costs, overhead activities and
manufacturing products and assigns overhead and indirect costs to related products and services.
Litt in one of his articles commented, ―Activity Based Costing (ABC) is an accounting technique that
utilizes cost attachment rather than cost allocation to determine the actual cost of products and
services‖. ABC can be used when there are varying products, cost of overhead is high, error cost is
substantial, and competition is hard. ABC also makes it easier to understand variable cost behavior
and costof-quality for activities and processes.
The ABC can be performed by

The distinctive characteristics of customers in terms of ordering behavior and distribution

requirements are separately accounted for in ABC. ABC employs a more logical cost allocation as the
cost attached to each level of activity is identified which in turn gives a better picture of the true
cost-to-serve. Cost of serving customers and channels once known aids in making decisions
regarding customer service policies, or the sales terms to streamline the customer base or to
encourage customers to change the product mix they order and so on. This exhaustive knowledge of
individual customer profitability and channel costs helps in achieving the long-term profits for a
company. The following example manufacturing company, which sells its products through a
network of dealers to the industrial users illustrates the difference between traditional cost
accounting and ABC.

Fig- Traditional Cost Accounting Method

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SECOND PRIORITY MOST IMPORTANT QUESTIONS

Q1- Enterprise Resource Planning (ERP)? (v v v v v imp)
ANS- ENTERPRISE RESOURCE PLANNING - Information technology (IT) has provided an integrated
supply chain management solutions incorporating supply chain configuration, demand planning,
logistics and warehouse management. The contribution of IT has become imperative for capturing
point-of-sales (POS) data and calculating near-accurate demand forecasts. For instance, Modi Xerox
uses IT to reduce their cash-to-cash cycle time through fast flow of order/demand data and their
execution through shipment and delivery/installation confirmation. Various solutions are available
ranging from enterprise resource planning (ERP) tools to Internet based e-commerce opportunities.
Some of these tools are discussed in the following sections.
Enterprise resource planning (ERP) tools are capable of capturing data and automating financial,
inventory and customer order tracking tasks. ERP systems utilize a single data model and have an
established set of rules for accessing data. Although this is possible within an organization, more
complex systems like electronic data interchange (EDI) are required for accessing data from various
databases crowded along the entire supply chain.
EDI consists of a communications standard that supports inter-organizational electronic exchange of
common business documents and information. It represents a cooperative effort between buyer and
seller. They can become more competitive by streamlining the communication process through the
elimination of many steps involved in traditional information flows. The basic components of an EDI
system include:
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Q2- Electronic Data Interchange? (v v v v v imp)

ANS- Electronic Data Interchange - Several SC companies have used EDI technology to facilitate
better communication and streamline operations. The term "Electronic Data Interchange" refers to
sharing data formats between computers that can be processed automatically. EDI is used by all
parties in the supply chain to communicate and share data that is essential to running a successful
company. Establishing such formal ties is most common among businesses with long-term trading
relationships.
For instance, some chains of stores will relay EPOS data to their suppliers to automatically restock
sold items. Those vendors can create a sales trend analysis to aid demand forecasting with a solid
connection. EDI's many benefits stem from the fact that it eliminates the need for employees to
manually compile the data, making it more accurate and efficient than alternative methods. In
addition, it is used to transmit any other information the associated businesses see fit to share, such
as invoices, bills of lading, confirmations of shipments, and shipping particulars. ―The main
advantages of using EDI are that it speeds up transactions, reduces costs, and eliminates errors by
only requiring data to be entered into the system once‖. In addition to these benefits, electronic
data interchange (EDI) can speed up information processing, enhance customer service, decrease
paperwork, boost productivity, streamline tracing and expediting, reduce expenses, and improve
billing. Supply chain partners can benefit from improved technologies that allow generous sharing of
actual data to combat exaggerations and inaccuracies in supply and demand data. Despite EDI's
many advantages, there is often a disconnect between the EDI-prescribed actions and the actual
ones that companies take. In addition, EDI is widely used by large corporations but is rarely
implemented by SMEs.
Q3- REVERSE LOGISTICS? (v v v v v imp)
ANS- Reverse Logistics is the process of moving goods from the ultimate customer to another point,
for extracting value that is otherwise unavailable, or disposing them properly. Goods returned to the
supplier may be in the form of:
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Reverse logistics is a part of the closed-loop supply chain as depicted in Figure . The reverse logistics
part of the supply chain starts with collection of returned goods or refuse which then passes through
sorters for reprocessing (reuse, recycle, recondition, remanufacture, refurbishing and asset
recovery) or for disposal.
One of the main objectives of reverse logistics is to keep the cost of reprocessing returned/refused
materials lower than that of new products in order to keep the venture profitable. Accordingly,
transportation and handling costs have to be kept to a minimum. Often the extra cost incurred in
reverse logistics is added to the products when they are first sold new. Moreover, recycling and
disposal procedures must incorporate applicable government and environment protection laws. At
most companies, returns are primarily managed through a series of disconnected and paper-
intensive processes. As a result, it takes the average company between 30 and 70 days to get a
returned product back into the market, including return transportation, repair or refurbishing, and
redistribution to the customer or market. Moreover, both companies and customers have limited
visibility into the returns process. In fact, a manufacturer frequently finds out about a return only
after it lands on the receiving dock.
Long reverse logistics cycles are harmful for products that have short lifecycles such as high-tech
products that can lose up to half their value in a single business quarter. Moreover, Internet-based
sales have increased the incidence of returns to around 60%. Delays and lack of visibility into the
reverse logistics process can result in lost sales, customer dissatisfaction and inventory carrying
costs.

Web-based applications are being developed that focus on automating and streamlining the process
and information flows associated with returns management. These applications connect customers,
collectors, manufacturers, and carriers while providing much needed visibility and control over, the
returns process. This can help suppliers maintain customer satisfaction levels.

Q3- The Logistics-Marketing Interface? (v v v v v imp)

ANS- Traditionally logistics group assumed primary responsibility for warehousing, inventory and
transportation within many organizations while marketing group is responsible for negotiation,
promotion and selling. As neither group had responsibility for over all channel management,
conflicts arose at the expense of overall organization goal. The organizations had realized that
functional interdependence, not internecine conflicts, is the key to satisfy customer needs. Despite
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the realization by logistics and marketing manager that cooperation is essential marketers often
criticize logistics department for being cost minimizers having no concern for customer needs while
logistics department accuse marketers of chasing sale at any cost. Therefore it is essential that
organizations identify area of agreement and potential conflict. Senior management must be keen to
actively support cooperation between the two groups. This can be assisted by performance
measurement that reward cooperation and a spirit of interdependence and actively discourage
parochial behavior.
Logistics and Product Life Cycle-
Product life cycle (PLC) is a key marketing concept that affects the relationship between logistics and
marketing. For different stages of PLC i.e. introduction, growth, maturity and decline, different level
of logistics support is required by marketing. In the introduction and growth stage timely cost
effective fulfillment of order is a major requirement in ensuring initial acceptance of the product.
Later as sales slow-down and the product move into the maturity and decline stages, the company
changes to trimming cost as the product faces stiff price competition and consequent pressure on
margins. Hence there is need for a logistics manager to understand what marketing is trying to
achieve with each product and what appropriate level of logistics support is required accordingly.
Areas of Logistics and Marketing Interaction
In today‘s competitive environment organizations are utilizing the benefits of their established
logistics/marketing interface to be competitive not in terms of product and price but also logistics
services tailored to meet individual customer needs. These organizations are able to differentiate
themselves from their competitors by offering a total service with logistics forming an essential part
of the total value chain.

Q4- GREEN SUPPLY CHAIN? (v v v v v imp)

ANS-Green Supply chain involves the management of materials and resources from suppliers to
manufacturers, service providers to customers and back while protecting and conserving the natural
environment.
A green supply chain involves the implementation of appropriate strategies to reconcile the supply
chain to environmental protection and conservation on a sustainable basis. Waste minimization and
elimination of inessential nonvalue added activities is one of the most important strategies towards
a green supply chain. Process wastage decreases efficiency and lowers productivity. Reduced output
and blocked inventory decreases profitability and growth thereby making the business process
unsustainable in the end. Such business processes ultimately end up firing fuel and energy without
delivering value to the society.
Another important green strategy is to automate processes by using the electronic media as far as
possible. This reduces paper work, and eliminates non-value added activities involved in filing,
storing, maintaining and retrieving documents.
Usage of materials must be limited to the extent required. Excessive trimming and disposal of
partially filled containers of materials is both wasteful and environmentally harmful. Wastage can
take place when materials or goods are unnecessarily stored before they can be used. Just-intime
delivery and usage of materials can reduce the wastage that can occur during multiple storage and
handling. While preventing and eliminating waste would be the best policy, some waste is inevitable
at the customer‘s end in the form of used containers, packaging etc. Recycling these materials helps
to use them once again thereby reducing their role in environmental pollution. The process of
recycling, renovating and reusing materials can be undertaken through a separate supply-chain
channel, collectively termed as reverse logistics.

Q5- Customer Service? (v v v v v imp)

ANS- A customer-focused strategy needs to understand and develop the combination of products
and services that satisfies customers. One of the key factors for successful marketing is the
availability of products and services to the customers, when and where desired by them.
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They defined: ―Customer service is a process for providing significant valueadded benefits to the
supply chain in a cost effective way.‖ Excellent customer service performance is likely to add value
for members of the supply chain. A customer service programme needs to be evaluated of its
performance through measures like goal attainment and relevancy. A primary reason for SCM
becoming an important managerial issue in the nineties stems from increased national and
international competition. Customers have multiple sources from which to choose to satisfy
demand; locating product throughout the distribution channel for maximum customer accessibility
at a minimum cost becomes crucial. The dynamic nature of the market place makes holding
inventory a risky and potentially unprofitable business. Customer‘s buying habits are constantly
changing and competitors are continually adding and deleting products. Demand changes only make
it almost sure that the company will have the wrong inventory
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Q6- Benchmarking? (v v v v v imp)

ANS- Organization that introduces benchmarking correctly can use it to make a quantum leap in
their performance, and develop a culture in which managers and staff constantly searches for
improvements. Within logistics and supply management, benchmarking can be used for a number of
different purposes, from assessing the performance of the entire operation, through prioritizing
improvements, to searching for the off-the-shelf improvement strategies in a specific area of a
logistics or supply chain activity. In some senses, benchmarking is imitation and stealing – ―creative
swiping‖! At its best it is skillful appropriation and adaptation requiring imagination and innovation;
at its worst it can be an expensive and time – consuming piece of corporate tourism. It is a long-term
process, requiring senior management‘s commitment, with the emphasis upon continuous
improvement and organizational learning. The focus is primarily upon the role, strategic issues,
processes and practices, rather than on the bottom line and numeric measure of performance. The
mere comparison of operations and costs is not sufficient; considerable attention must be paid to
how the activities are organized and performed. This will provide good understanding of how
superior performance has been achieved, rather than just the magnitude of the performance gap.
Benchmarking targets the critical success factors (CSF‘s) of a specific organization. What needs to be
done to ensure long-term success? Where does management see the potential for competitive
advantage? Benchmarking helps to identify those features critical to ongoing success, as well as
those parts of the organization that are less important and from which resources may be diverted. In
Benchmarking, a ―role‖ describes in essence what a person or function does for an organization.
What responsibilities, services and tasks are offered to a customer or client by the organization?
How do these compare with other organizations in terms of process architecture, structure or
capability? Roles, in this instance are bundles of services provided either to external customer or to
an internal customer. Questioning the roles within an organization leads to the question, ― Are we
doing the right things‖ – in other words, the question of effectiveness – while assessing processes
raises concerns about whether things are being done right – in other words, the question of
efficiency. Every process within any organization consumes resources. To leverage the most value
from processes, an organization must eliminate Non-Value-Adding Activities (NVA) in the process
itself. Benchmarking supports the targeting of processes or process elements that are of high
importance to the business, but are perceived to be operating sub-optimally. While every process
can be improved, an oftenoverlooked issue is getting the most value out of every rupee spent on
process improvement. Only through the process of Continuous Benchmarking a process against
itself, and with other external sources, can this be truly assessed.
Benchmarking provides the basis for meeting and exceeding stakeholder expectations.
Understanding its potential benefits requires understanding the type of benchmarking to be
deployed and the purpose of conducting such an exercise. While benchmarking can be performed at
any time, it is often undertaken as a response to an information need associated with a project or
issue within the organization. The situations that may trigger the benchmarking process are:

Q7- Fleet Sizing & Configuration? (v v v v v imp)

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ANS- Fleet sizing objective is to employ through ownership, hire, lease and or rental the fewest
possible trucks to manage the company‘s load profile/shipping requirements. This decision is akin to
the decision of how much inventory is to be made available to the consumers/customers. In fleet
sizing, increased availability yields fewer lost sales, shorter customer cycle times, improved customer
services but higher fleet costs. Fleet sizing projections should be developed a few times during the
year and at any time when a major shift in demand pattern occurs. In certain cases, the cost of
vehicle shortages can be estimated and a cost of shortages versus cost of ownership analysis can be
made to determine the optimal fleet size. Fleet size can be regulated and minimized by:

SECOND PRIORITY MOST IMPORTANT SHORT QUESTIONS

Q8- Challenges Faced in Implementation of Benchmarking? (v v v v v imp)
ANS Irrespective of the type and scope of benchmarking, the critical factors that are needed to be
ensured are as follows:
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Benchmarking applications may be limited by the management culture. Benchmarking takes a

normative approach to the management – there are industry best practices that can be generalized
between sectors and organizations. As with most programs that require major organizational
change, considerable inertia may be experienced from individuals and departments, especially those
with the most to loose. These are inevitable issues around the identification of best practices and
the adoption of processes that are not valued by that particular organization‘s customers.
There is however difficult judgment calls to make around the introduction of new practices where
quantum jump is required. Incorrect benchmarking can often lead to wrong conclusions.
Benchmarking may lead to a culture of imitation rather than innovation; to adopt rather than adapt
and to achieve parity rather than superiority. This type of approach will never result in competitive
advantage. When the process is approached for the first time, it is worthwhile learning from others
who have built up experience of applying benchmarking within their own operations. This is where
membership of benchmarking clubs and network proves invaluable.

Q9- Functional Vs. Innovative Products: SCM Issues? (v v v v v imp)

ANS-- Marshall L. Fisher observed that in some cases, costs have risen to unprecedented levels
because of adversarial relations between SC partners as well as dysfunctional industry practices such
as an over reliance on price promotions. A framework was devised for deciding which SC is the best
for a particular company‘s situation. Products can be classified into two categories, either primarily
functional or primarily innovative based on their demand patterns. It helps a manager to understand
the nature of demand for their products and devise the SC that can best satisfy that demand. The
root cause of the problems faced by many SCs is a mismatch between the type of product and the
type of SC.
Functional products are the staples, which satisfy basic needs, don‘t change much over time, have
stable, predictable demand, long life cycles and available at a wide range of retail outlets/grocery
stores. Their stability invites competition and leads to lower profit margins. Fashion apparel and
personal computer manufacturers introduce innovations to avoid low margins and to give customers
reason to buy their products. But, the demands for these products are unpredictable, life cycle is
short and profit margin is high. They also require a fundamentally different SC than functional
products

SC performs two distinct types of functions: a physical function and a market mediation function.
Physical function includes converting raw materials into parts, components and finished goods, and
transporting all of them from one point to the next in the SC. Market mediation function is less
visible but equally important and ensures matching of offerings with customer‘s preferences. Each of
these two functions incurs physical costs (costs of production, transportation, inventory storage) and
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market mediation costs arising out of marked down or lost sales opportunities & dissatisfied
customers.

A global brand can be greatly benefited by having gathered knowledge of customers and their
choices, through channel partners; and can create global products, which may need to be adapted as
per local preferences.

Q10- Bullwhip effect? (v v v v v imp)

ANS-- ―Failure to accurately estimate demand and share information among supply chain entities
can result in bloated inventory levels due to cumulative effect of poor information cascading up
through a supply chain12, says Burt in his book WCSM. This is in fact quite natural in a way. If a firm
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doesn‘t have information of the demand it will unnecessary carry a load of additional inventory or
even increase the lead-time to cater for the uncertainty. Either way the inventory gets bloated, if the
lead-time increases so will the buyer increase order quantities (based on conventional recorder
point calculations). This will result in the supplier interpreting this to be growing customer demand,
with a cascading effect on the supplier who feels the necessity to increase capacity to meet the
trend. To add fuel to the fire, just as supplier has added additional capacity to meet the increase in
demand, demand falls off because the buying firm has excessive stock available. The resultant is
firing of employees, selling of assets in order to reduce the capacity. Since increased capacity is
increase in costs, when the demand was misinterpreted. This phantom‘ demand in SCM is called as
bullwhip effect. In other words, the increase in variability as we travel upwards in the supply chain is
referred to as the bullwhip effect Therefore, in order to identify and control the bullwhip effect its
pertinent to understand the main factors that contribute towards increase in variability in the supply
chain.

Q11- Demand Management? (v v v v v imp)

ANS-- ― Why do we require demand management? It‘s primarily required since accumulation of
inventories amounting to millions in the supply chain shows absence of demand management in the
total system. ―Demand management‘s imperative of forecast error reconciliation with the actual
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order rate of an enterprise is one of the most overlooked potentials in the successful management
of inventory levels, customer satisfaction, staffing strategies and facilities expansion or contraction.
An example to elucidate forecast accuracy
You are part of a counseling class on SCM at IGNOU that meets every day between 1800 hours to
2000 hours. Let the topic of discussion be forecast accuracy. The counselor asks you approximately
as to where will you be one week from now at 2130 hours. You respond by saying 90% you will be
here for the class, with a 10% possibility of getting tied down to family commitments. The next
question of the counselor will be, with that in mind where will you be 4 years from now, at the same
time?

What is demand management?

Let us now see what is demand management per se? ―It seeks to estimate, control, smooth,
coordinate, balance and influence the demand and supply for a firm‘s products and services in an
effort to reduce total costs for the firm and its supply chain.‖5 It recognizes that forecasts are
developed at several points through out an organization, but doesn‘t develop forecast. It accepts
forecast from other functions and updates these based on real time demand. It is also directly
related to supply in order to adjust the flow of raw materials and services. So, how can we establish
control in demand management?

It is also responsible for smoothing and streamlining production after the master production
schedule is in place and been released to internal production and external suppliers. Demand keeps
on changing on a day-today basis. Therefore the demand managers should have contingencies in
place in coordination with the supply chain members so that necessary modifications could be
affected well in time. ―Demand management also balances the total costs of not meeting the
demand against the total costs of adding additional resources required to meet the growing
demand,‖ says Burt in his book WCSM. Actually, without a forecast of demand, supply channels
tends to get cluttered and all this can effectively be overcome through a comprehensive demand
management.
Demand driven strategies
Demands forecast and demand shaping are the two different processes, which helps in generating
information for integrating demand information into the supply chain planning process, as
enumerated below:
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Q12- Communication in a supply chain? (v v v v v imp)

ANS-- ― we will discuss about Internet, Voice Calls, Fax, Broadcasting and Publishing.
Internet, Voice Calls, Fax
New technologies to deliver communication services - easier, faster, cheaper
The convergence of digital technologies, networks and telephones is delivering highend capabilities
with simplicity and prices that are affordable to even small business and home users After the
emergence of super-simple networking kits and servers, it’s time for highspeed Internet access. A
new technology DSL or Digital Subscriber Line service provides an inexpensive easy way for small
businesses and home users to get fast access to the Internet at speeds, approaching those previously
affordable only 10 large corporations using costly dedicated leased lines. It is more than 50 times
faster than an ordinary 56 KBPS modem and there is no waiting – the connection is always on. Using
the net to make phone calls is another way to reduce costs. It is estimated that by 2002, 18.5% of all
domestic phone traffic in the US will be carried over data lines up from just 0.2% in 1999.
A new piece of hardware called a gateway server is the technology, bringing about the transition of
moving long distance phone calls from traditional circuit switched networks to packet-switched
networks like the Internet. How it works is simple – First you dial the local or toll free number of the
closest gateway server. You get an automated voice prompt and punch in the long distance number
you want to reach. The server converts your voice signal into packet data and routes your call over
the Internet. A server at the destination reconverts the data back to voice and directs the call over
local lines. You pay only for the local connections on either end of the servers.
Internet fax services too are mushrooming. They save long distance charges needed to fax lengthy
documents and are also a boon to the business traveler. He can dial up any of several on-line fax
services from his laptop to send his document. Faxes can also be received this way through your e-
mail inbox. These services are very handy for so-called broadcast faxing – sending one document to
multiple fax machines all over the world. Some of these services are free, while charges for others
are nominal. Some software’s even combine voicemail, multiple voice mailboxes, call tracking, faxing
and paging.
Broadcasting to “Narrow casting”
The news you want, on your PC A new piece of software brings personalized, updated news to the
PC on your desktop - and as advertisers pay – it’s free. PointCast is personalized news – retrieval
service that takes advantage of the fact that many offices PCs are always turned on and connected
to the network. Whenever the machine is idle for a few minutes, PointCast commandeers the screen
and starts flashing headlines, weather reports and small-animated advertisements. A green ticker
scrolls across the bottom, reeling off sports scores and the current prices of stocks – customized for
individual interest. Click on a headline and up pops the full story. Click on the weather summary and
you get a variety of weather maps and forecasts of specific cities of interest. Click on a stock price to
get the current share price, a chart of the stocks rise and fall over the past month and a dozen or so
stories about the company. Click on an ad and you will be connected to the company’s website. The
ads are always visible in one corner of the PointCast screen. They are animated, colorful and
impossible to ignore completely – advertising at its best. Like all great software, PointCast hides its
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technological complexity. First you download the software from the company’s website. Then you
set your preferences by selecting categories of news you like, sports you want to follow and
companies you want to track. You can even set PointCast to supply lottery numbers and your
horoscope. Every hour or so, the software connects via. the Internet to a PointCast server. It gathers
up the kinds of stories requested from various news services. The stories are automatically stored on
the PC hard-drive, so that the news you want will be instantly available on your screen when you
want it.
Thus, a startup, by innovating the news supply chain today delivers the kind of personalized news
broadcast that big media companies have been trying to for years.
Publishing
How a fashion magazine launches its premier issue with 30,000 subscribers and expects to cross the
circulation mark of 1,50,000 by its first anniversary using innovative distribution While other big
publishers spend $30 for every new subscriber, Ralph Clermont’s “wink” averages just $2. Instead of
relying on inefficient direct mail campaigns, he uses the Internet. Mass e-mails are sent and staffers
make strategic postings in chatrooms operated by women oriented sites. These messages direct
users to wink’s website where they can sign up for a year’s free subscription. On some days, daily
subscriptions top 1,700. Thus an innovative supply chain used to reach potential subscribers helped
make success of an idea that had failed six years ago when its launch was attempted the traditional
way.
Q13- Need For Supply Chain Performance Measures? (v v v v v imp)
ANS-- ― To excel and win in today‘s competitive environment, the supply chain needs continuous
improvements. To achieve this goal, performance measures that support global supply chain
performance measurement and improvement are needed, rather than narrow company-specific or
function-specific measures, which inhibit chain-wide improvement. Several factors that contribute to
management‘s need for new types of measures for managing the supply chain include:

Recent studies indicate that supply chain performance affects more than 85 percent of a
manufacturer‘s costs and a large percent of its revenues (Supply chain council 1998). Monitoring SC
performance through proper measurements is, therefore, necessary and can help the organizations
to identify opportunities for optimization. The successful companies are reengineering their supply
chains to decrease costs and improve customer satisfaction. Effective reengineering requires an in-
depth understanding of the supply chain processes and their linkages. An in-depth understanding
can only permit the development of a performance system and the setting of improvement goals
against benchmarks.
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Q14- Hau Lee‘s uncertainty framewor? (v v v v v imp)

ANS-- ― Let us consider some examples and types of supply chain needed. According to Lee, it is
more challenging to operate a supply chain that is in the right column of the table than in the left
column., In a similar way, it is more challenging to operate a supply chain that is in the lower row of
the exhibit than in the upper row. Before setting up a supply chain strategy, it is necessary to
understand the sources of the underlying uncertainties and explore ways to reduce these
uncertainties. If it is possible to move the uncertainty characteristics of the product from the right
column to the left or from the lower row to the upper, then the supply chain performance will
improve.