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SUPPLY CHAIN MANAGEMENT 2009 SUPPLY

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					                    2009
SUPPLY CHAIN MANAGEMENT
       Assignment-2




                    Submitted to: Prof. Prakash Rao
                    Submitted by: Vijay Singh
                    Marketing
                    Sec. B
                    08PG067
                    9/3/2009
Q.1 Explain the different drivers of supply chain? [1]

Ans. There are five major drivers of supply chain: -

   I.   Production
  II.   Inventory
 III.   Location
 IV.    Transportation
  V.    Information




                                                 Production




                         Transportation        Information           Inventory




                                                  Location




          I.   Production: Production is typically related to issues on what to produce, how
               to produce (which manufacturing process) and when to produce.

         II.   Inventory:      Here the decisions and issues may be concerned with how much
               to make and how much to store as inventory and where to store these items (at
               the plant itself, warehouse, or the retailer etc.).
  III.       Location: A number of issues regarding location such where to locate a plant,
             where to locate a warehouse etc. may have significant bearing on the dynamics
             of supply chain and in turn may affect the overall costs.

  IV.        Transportation: The issues may be related to how to move a product from
             one location to another and by what mode of transportation. One needs to
             evaluate economies of scale on one hand and the desired level of customer
             satisfaction on the other hand. Moves the product between stages in the supply
             chain. Faster transportation allows greater responsiveness but lower efficiency.
             It also affects inventory and facilities.
             Components of Transportation Decisions:
            Mode of transportation:
                  – air, truck, rail, ship, pipeline, electronic transportation
                  – vary in cost, speed, size of shipment, flexibility
            Route and network selection
                  – route: path along which a product is shipped
                  – network: collection of locations and routes
            In-house or outsource
            Overall trade-off: Responsiveness versus efficiency

   V.        Information: Information is a binding force having critical implications for the
             supply chain. Information acts as basis for making various supply chain decisions.
             It also acts as an integrator. Unless information flows are handled properly, one
             may not be able to draw benefits from the supply chain integration.

Q.4 Explain the role of inventory in supply chain? [2]
Ans. Managing inventory has become very important. This is due to the following
reasons:
    Resource availability (such as that of finance and space) has forced management
       to consider how best to lower the levels of inventory within the supply chain
       management systems in order to maintain margins
    The changes in manufacturing philosophy, concept like just in time and lean
       manufacturing have reduced the need for inventory as an insurance buffer within
       the logistics activity.

    The role of inventory in supply chain is:
    Inventory exists in the supply chain because of a mismatch between supply and
    demand. This mismatch is intentional at a steel manufacturer where it is economical
to manufacture in large lots that are then stored for future sales. The mismatch is
also intentional at a retail store where inventory is held in anticipation of future
demand. An important role that inventory plays in the supply chain is to increase the
amount of demand that can be satisfied by having product ready and available when
the customer wants it. Another significant role inventory plays is to reduce cost by
exploiting any economics of scale that may exist during both production and
distribution.
Inventory is spread throughout the supply chain from raw materials to work in
process to finished goods those suppliers, manufacturers, distributors, and retailers
hold. Inventory is a major source of cost in a supply chain and it has a huge impact on
responsiveness. If we think of the responsiveness spectrum, the location and quantity
of inventory can move the supply chain from one end of the spectrum to the other.
For example, an apparel supply chain with high inventory levels at the retail stage has
a high level of responsiveness because a customer can walk into a store and walk out
with the shirt they were looking for. In contrast, an apparel supply chain with little
inventory would be very unresponsive. A customer wanting a shirt would have to
order it and wait several weeks or even months for it to be manufactured, depending
on how little inventory existed in the supply chain.
Inventory also has a significant impact on the material flow time in a supply chain.
Material flow time is the time that elapses between the points at which material
enters the supply chain to the point at which it exist. Another important area where
inventory has a significant impact is throughput. For a supply chain, throughput is the
rate at which sales occur. If inventory is represented by I, flow time by T, and
throughput by D, the thee can be related using Little's law as follows:

I = DT
For example, if the flow time of an auto assembly process is ten hours and the
throughput is 60 units an hour, Little's Law tells us that the inventory is 60 x 10 = 600
units. If we were able to reduce inventory to 300 units while holding throughput
constant, we would reduce our flow time to five hours (300/60). We note that in this
relationship, inventory and throughput must have consistent units.
The logical conclusion here is that inventory and flow time are synonymous in a
supply chain. managers should use actions that lower the amount of inventory
needed without increasing cost or reducing responsiveness, because reduces flow
time can be a significant advantage in a supply chain.
Q. 6.What is Bullwhip effect? What is done to mitigate the undesirable effects of it? [3]
Ans. The objective of supply chain management is to provide a high velocity flow of high
quality, relevant information that will enable suppliers to provide an uninterrupted and
precisely timed flow of materials to customers. However, unplanned demand oscillations,
including those caused by stock outs, in the supply chain execution process create
distortions which can wreck havoc up and down the supply chain. There are numerous
causes, often in combination that will cause these supply chain distortions to start what
has become known as the “Bullwhip Effect”.

Cracking the “Bullwhip Effect” (how to mitigate the undesirable effects of it)
Essential to minimizing the “Bullwhip Effect” is to first, specifically understand what drives
customer demand planning and inventory consumption as they are the triggers for
replenishment order quantities at various points in the supply chain. The most effective
process for smoothing out the oscillations of the “Bullwhip Effect” will be customers and
suppliers understanding what drives demand and supply patterns and then,
collaboratively working to improve information quality and compressing cycle times
throughout the entire process. More than likely, you will find opportunities for
improvement by adopting some or all of the following actions, among others, to minimize
the “Bullwhip Effect” and increase business performance.
• Minimize the cycle time in receiving projected and actual demand information.
• Establish the monitoring of actual demand for product to as near a real time basis as
Possible.
• Understand product demand patterns at each stage of the supply chain.
• Increase the frequency and quality of collaboration through shared demand
information.
• Minimize or eliminate information queues that create information flow delays.
• Eliminate inventory replenishment methods that launch demand lumps into the supply
chain.
• Eliminate incentives for customers that directly cause demand accumulation and
order staging prior to a replenishment request, such as volume transportation
discounts.
• Minimize incentivized promotions that will cause customers to delay orders and
thereby interrupt smoother ordering patterns.
• Offer your products at consistently good prices to minimize buying surges brought on
by temporary promotional discounts.
• Identify, and preferably, eliminate the cause of customer order reductions or
cancellations.
• Provide vendor-managed inventory (VMI) services by collaboratively planning
inventory needs with the customer to projected end-user demand then, monitor actual
demand to fine tune the actual VMI levels. (Note: VMI can increase sales and
profits especially in industries where buyers can go to alternative sources if you or
your distributor stock-out.)

Q. 9.What is the process view of the supply chain? [4]
Ans. Process View of Supply Chain:
A supply chain is a sequence of processes and flows that take place within and between
different stages and combine to fill a customer need for a product. Two ways to view the
processes performed in a supply chain are:
Cycles view and
Push/pull view
Cycle view:




Cycle Process in a supply chain is divided into a series of cycles. Cycles are performed at
the interface between two successive stages of a supply chain. Supply chain process can
be broken down into four process cycles such as
– Customer order cycle
– Replenishment cycle
– Manufacturing cycle
– Procurement cycle
Each cycle occurs at the interface between two successive stages of the supply chain. A
cycle view of the supply chain is very useful when considering operational decisions. It
clearly specifies the roles and responsibilities of each member of the supply chain. It helps
the designer to consider the infrastructure required to support the processes

Push/Pull View:




Pull/Push view categorizes processes in a supply chain based on whether they are
initiated in response to a customer order (pull) or in anticipation of a customer order
(push). Categorization is based on the timing of process execution relative to end
customer demand. At the time of execution of a pull process customer demand is known
with certainty. In case of push process at the time of execution of a process demand is not
known and must be forecasted
Pull process – reactive process
Push process – speculative process
Push/pull boundary in a supply chain separates push process from pull process. Very
useful when considering strategic decisions relating to supply chain. Forces more global
consideration of supply chain processes as they relate to a customer order. More the pull
process betters the supply chain.

 Q. 20.What is reverse logistics? what are its benefits? [5]
Ans. It is "the process of planning, implementing, and controlling the efficient, cost
effective flow of raw materials, For all operations related to the reuse of products and
materials, in-process inventory, finished goods and related information from the point of
consumption to the point of origin for the purpose of recapturing value or proper
disposal. Reverse logistics provides an environmentally-friendly method of recovering and
reusing parts and materials after a product's life cycle has ended.

Benefits of reverse logistics:
1. Capitalize
A number of organizations are capitalizing on reverse logistics opportunities. Companies
such as Eastman Kodak (reusable cameras) & Hewlett-Packard (printer toner cartridges
returned for refilling) have implemented successful reuse and recycling programs. These
initiatives not only have reduced the amount of waste fed into the supply chain and the
landfills, but also have lowered operating costs for these companies. many companies
have been able to recover their cost investments from one or more of the following areas:
raw material and packaging procurement, manufacturing, waste disposal, and current and
future regulatory compliance.

2. Satisfaction
It allows manufacturers to increase customer satisfaction by providing a complete view of
their supply chains, including goods in the return loop. Integrating the reverse logistics
services into the complete logistics job provides feedback for the design, engineering,
assembly and distribution. Reverse logistics involves is all about products that are
returned by the customers, either for repair or after-sales service.

3. Distribution
High-technology firms characterized by rapid product obsolescence, high costs of goods
sold, and medium to high logistics costs. With their emphasis on minimizing costs to
increase margins, these firms tend to leave disposal to consumers and salvager's. They
typically concentrate on distributing to channel members and consumers, who then must
deal with product disposal themselves...
Regardless of how relations with external suppliers develop, just as with other
organizations, waste elimination and product recalls are of growing concern to hospital
pharmacies. In the private sector, product recalls appear to be becoming an increasingly
frequent occurrence. In recent years these have involved Heinz baby foods, Findus
pancakes, Marks & Spencer’s underwear, and cars produced by those epitomes of quality,
Mercedes and Rolls Royce. As Bowersox and Closs (1996) noted, product recalls require
organizations to be able to reverse the normal logistics flow from suppliers to customers
so that inventory deemed unsuitable can be located by customers and returned to
suppliers in a timely and cost-effective manner. This is particularly important in the case
of pharmaceutical products where the health of patients may be put at risk if drugs are
not withdrawn expeditiously. For example, in 1997, the world’s best-selling weight loss
drugs, Redux and Pondimin, had to be withdrawn when evidence emerged that their use
might lead to heart disease. Another example was the UK government’s withdrawal of the
license for Tasmar (tolcapone). As the press release from the makers stated:
Evolving safety information about the anti-Parkinson drug Tasmar (tolcapone) has led
Roche to revise the recommendations to physicians on the appropriate use of the drug.
These changes reflect additional information obtained through post-marketing experience
in approximately 100,000 patients worldwide (Roche Media Release, 1998).
Regardless of who is at fault, it is the responsibility of the pharmaceutical service to affect
product recalls within hospitals. Given the large number of locations where drugs are kept
– wards, operating theatres, day clinics, etc., as well as the pharmacy stores – this can be
a complicated and time-consuming process unless tried and tested procedures are already
in place.
As mentioned earlier, as well as product recall, waste elimination through the recycling of
unused or unwanted supplies also provides a powerful reason for developing an effective
reverse logistics process. Indeed, BMW wishes to take the rationale for reverse logistics
even further, by building cars which are capable of being entirely recycled once they have
passed their useful life (Giuntini and Andel, 1995). BMW’s intention is to buy back their
old cars, disassemble them, recondition the parts and put them into new cars. Reverse
logistics, therefore, can represent a new beginning for many products. It allows products
to be recycled and repackaged. To achieve this, however, organizations need to treat the
reverse portion of the logistics process with the same seriousness and deliberation as the
forward portion of the logistics process and to integrate the two.

				
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