O.M-II (Learning Sheet) Submitted by: Devam Sardana

1. 

The tradeoff between ordering costs and inventory holding costs exists because of

high fixed ordering cost and if this can be eliminated then there is no need to make

that trade off.

2. 

As the system cannot produce more than the capacity of the bottleneck, the scheduling

in the system must be such that the bottleneck is not starving.

3.  TPS: When the production is as per the velocity of consumption, several things must

act as enablers like meeting quality specification with each output unit, no labour

absenteeism, no machine failure and availability of quality raw material on time.

Exposing problems and building sustainable solutions is a major characteristic of

TPS. Process perfection is the key and automation should precede process perfection

otherwise it leads to larger magnitude of errors.

4.  The major problem with having a specialised and centralised structure in the supply

chain (RNTCP) is that each agency is meeting its own objectives without any focus

on the customer. Thus the system becomes completely decoupled with demand. This

results in overstocking and the more dangerous problem of medicine stockout.

5.  Instead of having quality control managers/inspectors, the process capability should

 be such that the company produces according to the specification repeatedly and

 process adherence should be high.

6.  Discount selling decouples the purchases and the consumption triggering wrong

signal in the supply chain and the perceived demand and volatility increases across

the supply chain (Bullwhip Effect). This leads to further investment in capacity

 building which necessitates discount selling. This leads to transfer of wealth from the

company to its distributors who align their purchasing with the discount season. P &

G eliminated discounts and the bullwhip effect through information sharing by

channel partners and encouraged competitors to do the same. This shifted the

competition from discounts to quality where P & G had a significant advantage.

7. 

When the retailer faces all the risk associated with inventory and there is a huge

difference between cost of understocking and overstocking, the major focus will be

minimising excess inventory. However, if the distributor is willing to reduce the

upfront investment and share the revenue, then the distributor will stock more

reducing to fewer stockouts and more opportunity for sales leading to higher profits in

the integrated supply chain as compared to the case when both operate individually.