1.a.

Name the decision stages in a supply chain Decision stages in a supply chain: There are three phases: 1. Supply chain strategy or design 2. Supply chain planning and 3. Supply chain operation Supply chain strategy or design: the company decides how to structure the supply chain. b. Explain the process overview of supply chain Procurement cycle: occurs at the manufacturer / supplier interface and includes all processes necessary to ensure that materials are available for carrying out manufacturing as per schedule The manufacturer orders components from suppliers to replenish inventories. Component orders are based on the production schedule Push/pull view of supply chain process: All processes in supply chain fall into one of two categories: 1. push process and 2. pull process In pull process, execution is initiated in response to a customer order. In push process, execution is in anticipation of customer order At the time of execution of a pull process, demand is known with certainty whereas at the time execution of a push process demand is not known but forecasted A push/pull view of the supply chain is useful when considering strategic decisions relating to supply chain design This view facilitates a more global consideration of supply chain processes as they relate to a customer order. Pull process may be regarded as reactive process as they react to customer demand Push process may be regarded as speculative process as they respond to forecast (speculative) demand rather than actual demand The push/pull boundary in a supply chain helps to separate, push process from pull process. Ex. In computer manufacturing firm, the beginning of assembly process represents the push/pull boundary All processes carried out prior to assembly are push processes and All processes carried out after and including assembly are pull processes, because they are initiated in response to a customer order. c. Explain the importance of Supply Chain Management Importance of SCM: of late SCM is gaining importance. Reasons: 1. the total time for material to travel through the entire supply chain can be quite long (say 6months to an year). SCM can reduce waiting time in various stages leading to reduction in inventory, increased flexibility, reduced costs, reduced cycle time and better deliveries 2. Many companies have improved their internal operations and now find it necessary to consider relations with external customers and suppliers in supply chain to gain further improvements in operations

3. Supply chain thinking is an application of systems thinking and provides a basis for understanding processes that cut across a companys internal departments and processes that extend outside company as well. 4. the goals of SCM is to reduce uncertainty and risks in the supply chain, positively affecting inventory levels, cycle time, processes and ultimately end-customer service levels. Focus is on system optimization 5. the design, planning and operation of a supply chain have a strong impact on overall profitability and success 6. SCM has become a hot competitive advantage as companies struggle to get the right stuff to the right place at right time 7. All the TQM, JIT, reengineering, team work and delighting customers depends on the relationships with suppliers and distributors who are part of the supply chain 8. SCM includes transportation vendors, suppliers, distributors, banks, credit and cash transfers, bills payable and receivable, warehousing and inventory levels, order fulfillment and sharing customer, forecasting and production information 9. As firms strive to increase their competitiveness via product customization, high quality, cost reductions and speed-to-market, they place added emphasis on SCM 10. SCM build chain of suppliers that focus on both waste and maximizing value to the ultimate customer The key to SCM is to make suppliers partners in the firms strategy to satisfy the ever-changing market place 2.a. State the process overview of supply chain Process overview of a supply chain: Two different ways to view process 1. cycle view 2. the push-pull view Cycle view: supply chain process can be broken down to four processes cycles: 1. customer order cycle, 2. replenishment cycle, 3. manufacturing cycle and 4. procurement cycle Each cycle occurs at the interface between two successive stages of supply chain as shown:

b. Briefly state objectives of Supply Chain Management Objectives:

To maximize the overall value generated. The value a supply chain generates is the difference between what the final product is worth to the customer and the costs the supply chain incurs in filling the customers request Value is correlated with supply chain profitability the difference between revenue generated from customer and the overall cost across the supply chain. This surplus is to be shared by all the intermediaries, higher the profitability, the more successful is supply chain. Success is to be measured in terms of supply chain profitability and not in terms profit at individual stages Effective supply chain management involves, the management of supply chain assets and product, information, and fund flows to maximize total supply chain profitability c. Discuss role of inventory in supply chain Ex. Efficiency increases when a firm manufactures a product in large quantities in one location because of economies of scale But the responsiveness decreases because of distance involved in transporting the product to the customers located far from facility Locating the facility close to customers increases number of facilities needed and consequently costs increase and decrease efficiency Decisions regarding the number of facilities and their location play a crucial role in design of supply chain Components of facilities decisions are: 1. location, 2. capacity, 3 manufacturing process, 4. warehousing methodology (stock keeping unit storage, job lot storage and cross docking) The overall trade off between responsiveness and efficiency involves facilities decision Role of inventory in the supply chain: Inventory occurs in supply chain because of mismatch in supply and demand Inventory in supply chain helps to increase the amount of demand satisfied by having the product ready when customer wants it. Inventory plays significant role in reducing the cost of the product by exploiting economies of scale that may exist during production and distribution Inventory exists in supply chain in the form of RM, WIP, and FG that suppliers, manufacturers, distributors and retailers hold. It is a major source of cost in supply chain and its impact on responsiveness is significant The location and quantity of inventory can vary responsiveness to great extent Inventory also has a significant impact on the material flow in a supply chain The time that elapses between the point at which material enters the supply chain to the point of exit is referred to as material flow time Inventory also affects through-put which is the rate at which sales to the end customer occur. According to Littles law, inventory is the product of flow time T and through put R(I=RT) Reduced flow time can reduce inventory cost and increase responsiveness

inventory plays a significant role in competitive strategy: firm can use inventory to achieve high level of responsiveness (a competitive advantage) by locating large inventory near market (customers) On the other hand it can reduce cost by centralized stocking which supports competitive strategy as low cost producer Inventory drives the trade off between responsiveness and efficiency The decisions to create more responsive and efficient supply chain: 1. cycle inventory decision: cycle inventory is the average amount of inventory used to satisfy demand between receipt of supplier shipment The size of cycle inventory is the result of the production or purchase lot size When firms produce or purchase in large lots to exploit economies of scale, cycle inventory increases, hence the inventory carrying cost A retailer must take cycle inventory decisions regarding how much to order for replenishment and how often to place orders. Supply chain managers face the basic trade-offs between the cost of holding larger lots of inventory and the cost of ordering the product frequently Another related decision is determining how much safety inventory to hold Safety inventory is the inventory which is held to meet the excess demand when demand exceeds expectation (or estimation) Safety inventory is needed to counter uncertainty in demand and in delivery lead time. Determining an appropriate amount of safety inventory involves making a trade-off between costs of having too much inventory and the cost of losing sales due to stock out When the demand for a product is seasonal, seasonal inventory may have to be built up to counter predictable variability in demand affected by seasonality. the decision to build seasonal inventory or not depends on the ability of a firm to change the rate of its production system to adjust to a period of high demand without incurring large costs The basic trade off supply chain managers face in determining how much seasonal inventory to build is between the cost of carrying additional seasonal inventory and the cost of having a more flexible production rate c. Briefly explain how strategic fit achieved A firms success or failure is closely linked to following keys: 1. competitive strategy and all functional strategies must fit together to form a coordinated overall strategy Each functional strategy must support other functional strategies and help a firm reach its competitive strategy goal 2. the different functions in a company must appropriately structure their processes and resources to be able to execute these strategies 3. the design of the overall supply chain and the role of each stage must be aligned to support the supply chain strategy A company may fail, because of a lack of strategic fit or because its overall supply design, processes and resources do not provide the capabilities to support desired strategic fit How is strategic fit achieved: three basic steps:

1. understanding the customer and supply chain uncertainty: first the company must understand the customer needs for each targeted segment and uncertainty the supply chain faces in satisfying these needs These needs help company define the desired cost and service requirements The supply chain uncertainty helps the company identify the extent of unpredictability of demand, disruption and delay the supply chain must be prepared for. 2. understanding the supply chain capabilities: There are many types of supply chains, each of which is designed to perform different tasks well. A company must understand what its supply chain is designed to do well 3. achieving strategic fit: if a mismatch exist between what supply chain does particularly well and desired customer needs, the company will either need to restructure the supply chain to support the competitive strategy or alter its competitive strategy Understanding the customer and supply chain uncertainty: to understand the customer the company must identify the needs of the customer segment being served. The quantity of the product needed in each lot: an emergency order for material needed to repair a production line is likely to be small. An order for material to construct new production line is likely to be large

The response time that customers are willing to tolerate: the tolerable response time for the emergency order is likely to be short, whereas the allowable response time for the construction order is apt to be long The variety of products needed : a customer may place a high premium on the availability of all parts of an emergency repair order from a single supplier. This may not be the case for construction order The service level required: A customer placing an emergency order expects high level of product availability. This customer may go elsewhere if all parts of the order are not immediately available. This may not happen in case of a construction order for which long lead time is likely The price of the product: customer placing emergency order is less sensitive to price than customer placing construction order The desired rate of innovation in the product: customers at high end department store expect a lot of innovation and new designs in the stores apparel. Customers at wal-mart may be less sensitive to new product innovation Each customer in a particular segment tend to have similar needs, where as customers in a different segment can have very different needs The goal is to identify one key measure for all the attributes of consumer needs to define supply chain design 4.a. Pictorially represent supply chain decision frame work I-71 (3 marks)

b. Discus obstacles to achieving strategic fit I-106 to112 (7 marks) Obstacles to achieving strategic fit: the key to achieving strategic fit is a companys ability to find a balance between responsiveness and efficiency that best matches the needs to its target customer In deciding where this balance should be located on responsiveness spectrum, companies face following obstacles. 1. increasing variety of products: product proliferation is rampant today. With customers demanding ever more customized products, manufacturers have responded with mass customization and companies even view each customer as an independent market segment Products that were generic are now custom-made for a specific consumer Increased variety tends to raise uncertainty, and increased uncertainty hurts both efficiency and responsiveness within the supply chain 2. decreasing product life cycles: in addition to increasing variety of product types, the life cycle of products has been shrinking. Today there are products whose life cycles can be measured in months, compared to earlier standard of years. These are not niche products either PCs and automobile manufacturers have lowered their product life cycle from 5 years to 3 years. Decrease in product life cycle makes the job of achieving strategic fit more difficult as supply chain has to constantly adopt to manufacture and deliver of new products in addition to coping up with demand products uncertainty Increased uncertainty combined with smaller window of opportunity has put additional pressure on supply chain to coordinate and create a good match between supply and demand Increasingly demanding customers: customers are constantly demanding improvements in delivery lead times, cost, and product performance. If they do not receive improvements they move on to new suppliers

Many companies had periodic, standard price increases - not due to a rise in demand or any other factor, but simply their way of doing business Now companies cannot force any price rise without loosing market share This tremendous growth in customer demands (not necessarily demand) means that the supply chain must provide more just to maintain its business Fragmentation of supply chain ownership: Over decades most firms have become less vertically integrated. Companies have shed non-core functions and have taken advantage of supplier and customer competencies This new ownership structure have made supply chain management more difficult With chain broken into many owners with its own policies and interests, working in their own interest rather than the whole chains interest, resulting in reduction of overall supply chain profitability Globalisation: today supply chains are operating globally Establishing a global supply chain creates many benefits, such as global base suppliers may offer cheaper goods. Globalisation also stress to the chain, because facilities within the chain are farther apart, making coordination much more difficult Globalisation has increased competition as once protected national players must compete with companies around the world This situation has made supply chain performance a key to maintaining and growing sales and putting more strain on the supply chain, thus forcing them to choose trade offs c. Discus drivers of supply chain performance I-64 to 71 (10 marks) Drivers of supply chain performance: to understand how a company can improve supply chain performance in terms of responsiveness and efficiency, we must examine the logistical and cross functional drivers of supply chain performance viz., facilities, inventory, transportation, information, sourcing, and pricing Facilities: the performance of supply chain is very much dependent on production, i.e., what is produced, how it is produced (the manufacturing process used) and when it has to be produced Inventory: all RM, WIP and FG within supply chain are referred to as inventory Any change in inventory policies can greatly affect the efficiency and responsiveness of the supply chain Ex. A clothing retailer can make itself more responsive by stocking large amounts of inventory and satisfying customer demand from stock A large inventory however increases retailers cost, making it less efficient. Reducing inventory makes retailer more efficient but hurts its responsiveness Transportation: entails moving inventory from point to point in the supply chain

Transportation can take the form of many combinations of modes and routes, each with its own performance characteristics Transportation choices have a large impact on supply chain responsiveness and efficiency Ex. A mail order catalogue firm can use a faster mode of transportation such as FedEx to ship products to make supply chain more responsive but also less efficient given the high costs associated with FedEx. Vice versa Information: consists of data analysis concerning facilities, inventory, transportation costs, prices and customers throughout the supply chain. Information is potentially the biggest driver of performance in the supply chain because it directly affects each of the other drivers Information is helpful in making the supply chain more efficient and responsive at the same time Ex. With information on customer demand patterns, a pharmaceutical company can produce and stock drugs in anticipation of customer demand, which makes supply chain very responsive because customers will find required drugs when they need them This information can make supply chain more efficient because the pharmaceutical firm is better able to forecast demand and produce only the required amount This information can also make managers efficient with shipping options, that allow them to choose the lowest-cost alternative while meeting the necessary service requirement Sourcing: is the choice of who will perform a particular supply chain activity such as production, storage, transportation, or the management information At strategic level these decisions determine what functions a firm performs and what functions the firm out sources Pricing: determines how a firm will charge for goods and services that it makes available in the supply chain. Pricing affects the behavior of the buyer of the goods or services thus affecting supply chain performance Supply chain management includes the use of logistical and cross-functional drivers to increase the supply chain surplus Cross-functional drivers have become important in raising the supply chain surplus in recent years. While Logistics remains a major part, supply chain management is increasingly becoming focused on the three cross-functional drivers
5. a. Name the six distribution network design II-13 (3marks)

1. manufacturer storage with direct shipping 2. manufacturer storage with direct shipping and in-transit merge 3. distributor storage with package carrier delivery 4. distributor storage with last-mile delivery 5. manufacturer/distributor storage with customer pick up

6. retail storage with customer pickup

b. Write a note on factors influencing distribution network design II- 6 to 10 (7 marks)

Factors influencing distribution network design: at the highest level performance of distribution network should be evaluated along two dimensions; 1. Customer needs that are met 2. Cost of meeting customer needs Thus a firm must evaluate the impact on customer service and cost as it compares different distribution network options The customer needs that are met influence the companys revenues, which along with cost decide the profitability of the delivery network Issues that are influenced by structure of distribution network: 1. response time 2. product variety 3. product availability 4. customer experience, 5. time to market , 6. order visibility 7. returnability Response time is the amount of time it takes for a customer to receive an order Product variety is number of different products/ configuration that are offered by distribution network Product availability is the probability of having a product in stock when a customer order arrives Customer experience includes ease with which customers can place and receive orders and to the extent to which this is customized. It includes purely experiential aspects, such as possibility of getting a cup of coffee and the value that the sales staff provides Time to market is the time it takes to bring a new product to the market Order visibility is the ability of customer to track their orders from placement to delivery Returnability is the ease with which a customer can return unsatisfactory merchandise and the ability of the network to handle such returns It may seem that a customer always wants the highest level of performance along all these dimensions In practice this is not the case. Customers ordering book at amazon.com are willing to wait longer than those who drive to a nearby Borders store to get the same book In contrast customers find a much large variety of books at amazon compared to Borders store Thus amazon customers trade off fast response time for high levels of variety
c. Write a note on Distributor storage with last-mile delivery II-28 to31 (10 marks)

Distributor storage with last-mile delivery: last mile delivery refers to the distributor/ retailer delivering the product to the customers home instead of using a package carrier Last mile delivery is suitable for relatively fast-moving items for which disaggregation does not lead to a significant increase in inventory (grocery in thickly populated cities)

Last mile delivery is hard to justify if labour costs are high

Cost factor Inventory Transportation

Performance Higher than distributor storage with package carrier delivery Very high cost given minimal scale economies. Higher than any other distribution option Facilities cost higher than manufacturer storage or distributor storage with package carrier delivery but larger than retail stores Similar to distributor storage with package carrier delivery

Facilities and handling

Information

Cost factor Inventory Transportation

Performance Higher than distributor storage with package carrier delivery Very high cost given minimal scale economies. Higher than any other distribution option Facilities cost higher than manufacturer storage or distributor storage with package carrier delivery but larger than retail stores Similar to distributor storage with package carrier delivery

Facilities and handling

Information

6. a. Mention the Factors influencing network design decisions II-78 (3 marks)

Factors influencing network design decisions: 1.Strategic factors 2.Technological factors, 3.Macroeconomic factors, 4.Political factors, 5.Infrastructure factors, 6.Competitive factors, 7.Customer response time and local presence, 8. Logistics and facility costs
b. Write a note on role of distribution network in supply chain II- 2 to 5 (7 marks)

Role of distribution in supply chain: Distribution refer to steps taken to move and store a product from the supplier stage to a customer stage in the supply chain Distribution occurs between every pair of stages in the supply chain RM and components are moved from suppliers to manufacturers, and finished products are moved from the manufacturer to the end consumer Distribution is a key driver of overall profitability of a firm because it affects both the supply chain cost and the customer experience directly Distribution related costs make up about 10.5 % in US economy and about 20% of cost of manufacturing For commodity products, distribution forms an even higher fraction of product cost In India the outbound distribution cost of cement is about 30% of the cost of producing and selling cement Appropriate network can be used to achieve a variety of supply chain objectives ranging from low cost to high responsiveness As a result, companies in the same industry often select very different distribution networks A poor distribution network can hurt the level of service that customer receive while increasing the cost. An inappropriate network can have significant ve effect on the profitability of the firm as evident in failure of many B2C companies Appropriate choice of distribution network results in customer needs being satisfied at the lowest possible cost
c. Write a not distribution networks in practice II-61 to 69 (10 marks)

Distribution networks in practice:

1. the ownership structure of distribution network can have as big an impact as the type of distribution network Distribution networks that have exactly same physical flow but different ownership structures can have vastly different performance For ex. A manufacturer that owns its distribution network can control the network actions An independent distributor wants to optimize its own enterprise not necessarily entire supply chain Attempting to optimize over a distribution network with multiple enterprises requires great skill in coordinating the incentives of each of the players and in creating the right relationships Be sure to consider the impact of both the physical flows and the ownership structure when designing a distribution network 2. the choice of a distribution network has very long-term consequences: The structure of the distribution network is one of the most difficult decisions to change The impact often lasts for decades, amplifying the importance of the choice US car manufacturers sell cars through dealers. Even they cannot change this set up. Some times dealers have relationship with more than one manufacturer and legislation support them. Although manufacturers have tried to implement alternative channels dealers have kept them captive, making manufacturers to sell through dealers PC were sold through independent distributors and retailers. Dell break this and sold directly HP tried to follow, but HP dealers reacted negatively, and company ended up with a minimal direct business Manufacturers are shackled by their legacy (inheritance) distribution network The only way to go direct is to have direct relationship with the customers (that the distributors have with the customers at present) which is to too costly The above examples show the long-term implication of choosing right distribution network consider whether an exclusive distribution strategy is advantageous: Another important choice is whether to distribute exclusively or not Manufacturer of consumer electronics Sony has chosen many departmental stores only to make available its products in many outlets, not keen on competition distributors get in to sell the product An alternative approach for a high end stereo equipment manufacturer is to form an exclusive relationship with a distributor and allow higher margins to the distributor The advantage is Sony can increase its sales significantly because distributor is interested in marketing Sony goods as he gets higher margin with less competition

4. product price, commoditisation, and criticality affect the type of distribution system preferred by customers: Interactions between buyer and seller take time and resources Many buyers would like to establish a relationship with a single enterprise that can deliver a full line of products This can be accomplished by a manufacturer with a broad line of products This often accomplished more effectively by a distributor carrying products from many manufacturers A customers desire for a one stop shop depends not just on the convenience of relationship, but also on the type of product he is buying The more differentiated an item is, the more likely that a customer will be willing to have relationship solely around that particular product A consumer of PC may be content to buy from manufacturer, but not a consumer for pen or paper ( would buy from next door shop) 5. integrate the internet with the existing physical network: To extract maximum from e-business, firms should integrate it with the existing supply chain networks Separating them often results in inefficiencies within the supply chain. Coupling e-business with physical network is referred to clicks-and-mortar