SCM Answers New

8/3/2019 SCM Answers New

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Q 2 )Identify the major drivers of supply chain performance. Discuss the role and impact

of each driver in creating a strategic fit between the supply chain strategy and the

competitive strategy.

Ans:The strategic fit requires that a companys supply chain achieve the balance between

responsiveness and efficiency that best meets the needs of the companys competitive strategy.

The logistic and cross-functional drivers of supply chain performance interact with each other to

determine the supply chains performance in terms of responsiveness and efficiency.

The drivers of supply chain performance and the role and impact of each driver is as follows:

1. Facilities:

Facilities are the actual physical locations in the supply chain network where product is

stored, assembled or fabricated. The two major types of facilities are production sites and

storage sites.

Impact:

Decisions regarding the role, location, capacity and flexibility of facilities have a

significant impact on the supply chains performance.

Role in the supply chain:

If we think of inventory as whatis being passed along the supply chain and the

transportation as howit is passed along, then facilities are the where of the supply chain.

They are the locations to or from which the inventory is transported. Within the facility,

inventory is either transfor med into another state (manufacturing) or it is stored

(warehousing).

Role in the competitive strategy:

Facilities are a key driver of supply chain performance in terms of responsiveness and

efficiency. For example, companies can gain economies of scale when a product is

manufactured or stored in only one location; this centralization increases efficiency. The

cost reduction comes at the expense of responsiveness, as many of a companys

customers may be located far from the production facility. The opposite is also true.

Locating facilities close to customers increases the number of facilities needed and

consequently reduce efficiency. If the customer demands and willing to pay for

responsiveness that having numerous facilities adds, however, then this facilitiesdecision helps meet the companys competitive strategy goals.

2. Inventory:

Inventory encompasses all raw materials, work in process and finished goods within a

supply chain.

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Impact:

Changing inventory policies can dramatically alter supply chains responsiveness and

efficiency. For example, a clothing retailer can make itself more responsive by stocking

large amount of inventory and satisfying customer demand from stock. A large inventory

increases the retailers cost, thereby making it less efficient. Reducing inventory makes

the retailer more efficient but hurts its responsiveness. Inventory also has a significant impact on the material flow time in supply chain. Material flow time is the time that

elapses between the point at which material enters the supply chain to the point at which

it exits.


Inventory exists in 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. This 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 the product ready and available when customer

wants it. Another significant role that inventory plays is to reduce cost by exploiting

economies of sale that may exist during production and distribution.


Inventory plays a significant role in supply chains ability to support a firms competitive

strategy. If firms competitive strategy requires a very high level of responsiveness, a

company can achieve this responsiveness by locating large amount of inventory close to

the customer. Conversely, a company can also use inventory to become more efficient by

reducing inventory through centralized stocking. The latter strategy would support a

competitive strategy of being a low-cost customer. The trade-off impact in the inventory

driver is between the responsiveness that results from more inventory and the efficiency

that results from less inventory.

3. Transportation:

Transportation entails moving inventory from point to point in supply chain.

Transportation can take the form of many combinations of modes and routes, each with

its own performance characteristics.

Impact:

Transportation Choices have large impact on supply chain responsiveness and efficiency.

For example, a mail-order catalog company can use a faster mode of transportation such

as FedEx to ship products, thus making its supply chain more responsive, but also less

efficient given the high costs associated with using FedEx. Or company can use slower

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but cheaper ground transportation to ship products, making its supply chain efficient but

limiting its responsiveness.


Transportation moves products between different stages in a supply chain. Faster

transportation allows a supply chain to be more responsive but reduces its efficiency. The type of transportation a company uses also affects the inventory and facility

locations in a supply chain.


The role of transportation in a companys competitive strategy figures prominently in the

companys consideration of the target customers needs. If a firms competitive strategy

targets a customer who demands a very high level of responsiveness, and that customer

is willing to pay for this responsiveness, then a firm can use transportation as one driver

for making a supply chain more responsive.

4. Information:

Information consists of data and analysis concerning facilities, inventory, transportation,

cost, prices and customers throughout the supply chain.

Impact:

Information is potentially the biggest driver of performance in the supply chain because

it directly affects each of the other drivers. Information presents management with the

opportunity to make supply chain more responsive and more efficiency.


i. Information serves as the connection between various stages of supply chain,

allowing them to coordinate and maximize total supply chain profitability.

ii. Information is also crucial to the daily operations of each stages of supply chain.


Information is an important driver that companies have used to become both more

responsive and more efficient. The tremendous growth of the importance of information

technology is a testimony to the impact that information can have on improving the

company. Like all other drivers, however, even with information, companies reach a

point when they must make the trade-off between responsiveness and efficiency. Another

key decision involves what information is most valuable in reducing cost and improving

responsiveness within supply chain. This decision will vary depending on the supply

chain structure and the market segment served.

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5. Sourcing:

Sourcing is the choice of who will perform a particular supply chain activity such as

production, storage, transportation, or the management of information.

Impact:

At the strategic level, sourcing decisions determine what function a firm performs and

what function a firm outsources. Sourcing decisions affect both the responsiveness and

efficiency of supply chain.


Sourcing is the set of business processes required to purchase goods and services.

Managers must first decide which task will be outsourced and those that will be

performed within the firm. For each outsourced task, the managers must decide whether

to source from a single supplier or a portfolio of suppliers. If a portfolio of multiple

suppliers is to be carried, then the role of each supplier in the portfolio must be clarified. The next step is to identify the set of criteria that will be used to select suppliers and

measure their performance. Managers then select suppliers and negotiate contracts with

them. Contracts define the role of each supply source and should be structured to

improve supply chain performance and minimize information distortion from one stage

to the next.


Sourcing decisions are crucial because they affect the level of responsiveness and

efficiency the supply chain can achieve. In some instance, firms outsource to responsive

third parties if it is too expensive for them to develop this responsiveness on their own. I n

other instances firms have kept the responsive process in-house, to maintain control. Firm

also outsource for efficiency if the third party can achieve significant economics of scale

or has a lower underlying cost structure for other reason. Outsourcing decisions should be

driven by the desire for growth in total supply chain profitability.

6. Pricing:

Pricing determines how much a firm will charge for goods and services that it makes

available in supply chain.

Impact:

Pricing affects the behavior of the buyer of the goods and services, thus affecting supply

chain performance.


Pricing is the process by which a firm decides how much to charge customer for goods

and services. Pricing affects the customer segments that choose to buy the product, as

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well as the customers expectations. This directly affects the supply chain in term of the

level of responsiveness required as well as the demand profit that the supply chain

attempts to serve. Pricing is also a lever that can be used to match supply and demand.

Short-term discount can be used to eliminate supply surpluses or decrease seasonal

demand spikes by moving some of the demand forward.


Pricing is a significant attribute through which a firm executes its competitive strategy.

For example, Costco, a membership-based wholesaler in the US, has a policy that prices

are kept steady but low. Customers expect low prices but are comfortable with a low

level of product availability. The steady prices also ensure that demand stays relatively

stable. In contrast, some manufacturing and transportation firms use pricing that varies

with the response time desired by the customer.

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Q 3)Which are the various demand forecasting methods? Explain the static time series

method n detail and a brief of each forecasting method

AnsForecasts are developed for a companys finished goods, components and service parts. The

forecast is used by the production team to develop production or purchase order triggers,

quantities and safety stock levels. The forecast is not static and should be reviewed by

management on a regular basis. This is to ensure that information on future trends, the internal or

external environment is incorporated into the forecast to give a more accurate calculation.

Statistical Forecasting

In supply chain management software, the forecast is a calculation that is fed data from real time

transactions and is based on a set of variables that are configured for a number of statisticalforecast situations. Planning professionals are required to use the software to provide the best forecast situation possible and often this is left unchecked without any review for long periods.

To best use the forecasting techniques in the supply chain software, planners should review their

decisions with respect to the internal and external environment. They should adjust thecalculation to provide a more accurate forecast based on the current information they have.

Statistical forecasts are best estimates of what will occur in the future based on the demand thathas occurred in the past. Historical demand data can be used to produce a forecast using simple

linear regression. This gives equal weighting to the demand of the historical periods and projects the demand into the future. However, forecasts today give greater emphasis on the more recentdemand data than the older data. This is called smoothing and is produced by giving more weight

to the recent data. Exponential smoothing refers to ever-greater weighting given to the more recent historical periods. Therefore a period two months ago has a greater weighting than a

period six months ago. The weighting is called the Alpha Factor and the higher the weighting, or

Alpha factor the fewer historical periods are used to create the forecast. For example, a high

Alpha factor gives high weighting to recent periods and demand from periods for a year or twoyears ago are weighted so lightly that they have no bearing on the overall forecast. A low Alphafactor means historical data is more relevant to the forecast.

Historical periods generally contain demand data from a fixed month, i.e. June or July. However,

this introduces error into the calculation as some months have more days than other months and

the number of workdays can vary. Some companies use daily demand to alleviate this error,

although if the forecaster understands the error, monthly historical periods can be used along with a tracking indicator to identify when the forecast deviates significantly from the actual

demand. The level at which the tracking signal flags the deviation is determined by the forecaster or software and vary between industries, companies and products. A small deviation may require intervention when the product being forecasted is high-value, whereas a low-value item may not require the forecast be scrutinized to such a high level.

Non-Statistical Forecasting

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Non-statistical forecasting is found in supply chain management software where demand is forecasted based on quantities determined by the production planners. This occurs when the

planner enters in a subjective quantity that they believe the demand will be without any reference to historical demand. The other non-statistical forecasting that occurs is when demand for an item is based on the results of materials requirements planning (MRP) runs. This takes thedemand for the finished good and explodes the bill of materials so that a demand is calculated for

the component parts. The component demand can then be amended by the planner based on theirassessment and knowledge of the current environment. The resulting forecast is based on current demand and will not incorporate any demand from previous periods. Many companies will use a combination of non-statistical and statistical forecasting across their product line.

Statistical forecasting is based on complex calculations and the future demand can be determined

based on the demand from historical periods. The forecast gives the planner a guide to future demand, but no forecast is totally accurate and the planners experience and knowledge of the current and future environment is important in determining the future demand for a companys

products.

Time series method

Forecasting is a method or a technique for estimating future aspects of a business or theoperation. It is a method for translating past data or experience into estimates of the future. It is atool, which helps management in its attempts to cope with the uncertainty of the future. Forecasts

are important for short-term and long-term decisions. Businesses may use forecast in several areas: technological forecast, economic forecast, demand forecast. There two broad categories offorecasting techniques: quantitative methods (objective approach) and qualitative methods(subjective approach). Quantitative forecasting methods are based on analysis of historical dataand assume that past patterns in data can be used to forecast future data points. Qualitative

forecasting techniques employ the judgment of experts in specified field to generate forecasts.

They are based on educated guesses or opinions of experts in that area. There are two types ofquantitative methods: Times-series method and explanatory methods.

Time-series methods make forecasts based solely on historical patterns in the data. Time-series methods use time as independent variable to produce demand. In a time series,measurements are taken at successive points or over successive periods. The measurements maybe taken every hour, day, week, month, or year, or at any other regular (or irregular) interval. Afirst step in using time-series approach is to gather historical data. The historical data is representative of the conditions expected in the future. Time-series models are adequate forecasting tools if demand has shown a consistent pattern in the past that is expected to recur inthe future. For example, new homebuilders in US may see variation in sales from month to

month. But analysis of past years of data may reveal that sales of new homes are increased gradually over period of time. In this case trend is increase in new home sales. Time series models are characterized of four components: trend component, cyclical component, seasonal component, and irregular component. Trend is important characteristics of time series models. Although times series may display trend, there might be data points lying above or below trend line. Any recurring sequence of points above and below the trend line that last for more than ayear is considered to constitute the cyclical component of the time seriesthat is, these

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observations in the time series deviate from the trend due to fluctuations. The real Gross Domestics Product (GDP) provides good examples of a time series tat displays cyclical behavior.

The component of the time series that captures the variability in the data due to seasonalfluctuations is called the seasonal component. The seasonal component is similar to the cyclical component in that they both refer to some regular fluctuations in a time series. Seasonalcomponents capture the regular pattern of variability in the time series within one-year periods.

Seasonal commodities are best examples for seasonal components. Random variations in times series is represented by the irregular component. The irregular component of the time series cannot be predicted in advance. The random variations in the time series are caused by short-term, unanticipated and nonrecurring factors that affect the time series.

Smoothing methods (stable series) are appropriate when a time series displays no

significant effects of trend, cyclical, or seasonal components. In such a case, the goal is to

smooth out the irregular component of the time series by using an averaging process. The moving averages method is the most widely used smoothing technique. In this method, the forecast is the average of the last x number of observations, where x is some suitablenumber. Suppose a forecaster wants to generate three-period moving averages. In the three-

period example, the moving averages method would use the average of the most recent threeobservations of data in the time series as the forecast for the next period. This forecasted valuefor the next period, in conjunction with the last two observations of the historical time series, would yield an average that can be used as the forecast for the second period in the future. The calculation of a three-period moving average is illustrated in following table. Based on the three- period moving averages, the forecast may predict that 2.55 million new homes are most likely to

be sold in the US in year 2008.

Year Actual sale(in Forecast(in million) Calculationmillion)

2003 4

2004 32005 2

2006 1.5 3 (4+3+2)/3

2007 1 2.67 (3+2+3)/3

2008 2.55 (2+3+2.67)/3

Example: Three-period moving averages

In calculating moving averages to generate forecasts, the forecaster may experiment with different-length moving averages. The forecaster will choose the length that yields the highestaccuracy for the forecasts generated. Weighted moving averages method is a variant of moving

average approach. In the moving averages method, each observation of data receives the sameweight. In the weighted moving averages method, different weights are assigned to the observations on data that are used in calculating the moving averages. Suppose, once again, that a forecaster wants to generate three-period moving averages. Under the weighted moving averages method, the three data points would receive different weights before the average is calculated. Generally, the most recent observation receives the maximum weight, with the weight assigned decreasing for older data values.

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Year Actual sale(in Forecast(in million) Calculationmillion)

2005 2 (.2)2006 1.5 (.3)

2007 1 (.4)

2008 .42 (2*.2+1.5*.3+1*.4)/3

Example: Weighted three-period moving averages method

A more complex form of weighted moving average is exponential smoothing. I this method the weight fall off exponentially as the data ages. Exponential smoothing takes the previous periods

forecast and adjusts it by a predetermined smoothing constant, (called alpha; the value for

alpha is less than one) multiplied by the difference in the previous forecast and the demand thatactually occurred during the previously forecasted period (called forecast error). Exponential

smoothing is mathematically represented as follows: New forecast = previous forecast + alpha (actual demand - previous forecast) Or can be formulated as F = F + (D - F)

Other time-series forecasting methods are, forecasting using trend projection, forecastingusing trend and seasonal components and causal method of forecasting. Trend projection method used the underlying long-term trend of time series of data to forecast its future values. Trend and

seasonal components method uses seasonal component of a time series in addition to the trend component. Causal methods use the cause-and-effect relationship between the variable whose

future values are being forecasted and other related variables or factors. The widely known causal method is called regression analysis, a statistical technique used to develop a mathematical model showing how a set of variables is related. This mathematical relationshipcan be used to generate forecasts. There are more complex time-series techniques as well, such as ARIMA and Box-Jenkins models. These are heavier duty statistical routines that can copewith data with trends and the seasonality in them.

Time series models are used in Finance to forecast stocks performance or interest rate

forecast, used in forecasting weather. Time-series methods are probably the simplest methods to deploy and can be quite accurate, particularly over the short term. Various computer software programs are available to find solution using time-series methods.

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Q 4) Explain VMI

AnsVendor Managed Inventory (VMI)

VMI can be defined as:

VMI is a streamlined approach to inventory and order fulfillment. With it, the supplier and notthe retailer are responsible for managing and replenishing the inventory using an integral part

of VMI, i.e. EDI, by electronic transfer of data over a network.

It can be seen as a mechanism where the supplier creates the purchase orders based on the

demand information exchanged by the retailer/customer.

VMI is basically evolved to facilitate the operations at retail stores. It involves a continuous

replenishment program in which the retailer supplies the vendor with the information necessary

to maintain just enough merchandise stock to meet customer demand. This enable the supplier to

better project and anticipate the amount of products it needs to produce or supply.

If applied properly, VMI can provide the benefits of smoother demand, increased sales, lower

inventories and still reduced costs of lost sales to the other industries.

VMI Business Model

The activities of forecasting and creating the purchase orders are performed generally by the

retailers in Conventional Business Model. But when using VMI in fulfillment process, these are

done by the supplier/vendor and not the retailer.

1. The retailer sends the sales and inventory data to supplier via EDI or other B2B

collaboration facilities.

2. The supplier creates the purchase orders based on the established inventory levels and fill

rates.

3. The vendor sends the shipment notices before shipping the product to the retailers

store/warehouse.

4. Then the vendor sends the invoice to the retailer.

5. Upon receiving the product, the retailer does the invoice matching and handles payment

through their account payable system.

In VMI process the retailer is free of forecasting and creating the orders as the vendor generates

the orders. The vendor is responsible for creating and maintaining the stock plan for the retailer.

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Store Inventory Rank SKU (Stock

Retail StoresLevels Keeping Unit)

based on salesSales History

Excess product

Products

Retailer Warehouse

Product Activ ity Excess product

Vendors

PO ackn

InvoiceRetailer received

Payment advise

Marketing Buyers at

corporate offices

VMI Business Model

The VMI concept provides improved visibility across the supply chain pipeline that helps

manufacturers, suppliers, and retailers reduce inventory and improve production planning,

inventory turnover and stock availability. With more detailed level of information, it allows the

manufacturer to be more customer-specific in its planning.

Benefits of VMI:

1. Dual Benefits

a. Data entry errors are reduced due to computer-to-computer communications.

b. Speed of the communication is also increased.

c. Both parties are interested in giving better service to the end customer. Having the

correct item in stock when the end customer needs it, benefits all parties involved.

d. A true partnership is formed between the manufacturer and the

distributor/supplier.

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2. Supplier Benefits

a. Reduced Inventory.

Using VMI process, the supplier is able to control the lead time component of

order point better than a customer with thousands of supplier they have to deal

with. Also, the supplier takes the responsibility to have the product available

when needed, thereby lowering the need for safety stock.

The following factors contribute to reduce the inventory significantly:

1. Reduced stock outs: Supplier maintains the availability of stocks and hence

reducing the need for safety stock.

2. Reduced forecasting and purchasing activities: as they are done by the

supplier, the retailer can reduce the costs on forecasting and purchasing

activities.

3. Increase in sales: due to less stock out situation, the customers will find the

right product at right time. Hence they will come again and again to the store,

thereby reflecting an increase in sales.

4. Planning and ordering costs reduced.

5. The overall service level is improved by having the right product at the right

time.

6. The Manufacturer is more focused in providing great service.

VMI managed inventory reduces transaction costs as:

a. Purchasing

a. Speeds transactions.

b. Streamlines communication between customer and supplier.c. Eliminates paper-to-computer data entry.

d. Improves data accuracy.

e. Frees staff to work on more productive activities.

b. Inventory Management

a. Delivery as needed cuts storage.

b. Helps reduce inventory levels.

c. Improves fill rates.

d. Decrease lost sales.

c. Receiving

a. Advance Ship Notice (ASN) speeds up receiving.

b. Barcoding cuts warehousing costs.

d. Error Reduction

a. Data entry mistakes are avoided.

b. Information flow is continuous.

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3. Manufacturers Benefits

1. Improved visibility results in better forecasting : The retailer sends the Point Of Sales

data directly to the vendor, which improves the visibility and results in better

forecasting.

2. Reduces potential returns : As the vendor forecasts and creates order, mistakes which

may lead to a return, will come down.3. Encourages Supply Chain cooperation : Partnerships and collaborations are formed

the smooth the supply chain pipeline.

4. Promotions can be more easily incorporated in the inventory plan.

5. A reduction in the distributor ordering errors.

6. Visibility to stock levels helps to identify priorities. The manufacturer can see the

potential need for an item before the item is ordered.

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Q 5) List the various inventory models and EOQ model.

Ans:Inventory models is the Mathematical equation or formula that helps a firm in determining

the economic order quantity, and the frequency of ordering, to keep goods or services flowing to the customer without interruption or delay.

Types of inventory models:Deterministic modelsthese are simple models in which it is assumed that the demand or consumption rate is known with certainty. Constant lead time is involved in procurement

Probabilistic modelshere the demand follows a known probability distribution, while the leadtime may either be constant or variable with a known probabilistic distribution.Static modelsstatic models relate to a single decision process in which only a single purchaseorder can be placed to meet the demands.Eg. Bread and eggs at a grocer Dynamic the decision

on one procurement process will affect the subsequent procurement decisions. Eg. A printer and its consumablesEconomic order quantity is the level of inventory that minimizes total inventory holding costsand ordering costs. It is one of the oldest classical production scheduling models. The framework

used to determine this order quantity is also known as Wilson EOQ Model or Wilson Formula.The model was developed by Ford W. Harris in 1913, but R. H. Wilson, a consultant who applied it extensively, is given credit for his in-depth analysis.EOQ, or Economic Order Quantity, is defined as the optimal quantity of orders that minimizes total variable costs required

to order and hold inventory. The EOQ tool can be used to model the amount of inventory that weshould order each month. The EOQ helps us to determine the appropriate amount and frequency

when ordering and holding inventoryThe quantity to order at a given time must be determined by balancing two factors: (1)the cost ofpossessing or carrying materials and (2)the cost of acquiring or ordering materials. Purchasinglarger quantities may decrease the unit cost of acquisition, but this saving may not be more than offset by the cost of carrying materials in stock for a longer period of time

Underlying assumptionsThe ordering cost is constant.The rate of demand is constantThe lead time is fixedThe purchase price of the item is constant i.e. no discount is availableThe replenishment is made instantaneously, the whole batch is delivered at once.

EOQ is the quantity to order, so that ordering cost + carrying cost finds its minimum. VariablesQ= order quantityQ = optimal order quantity*

D= annual demand quantity of the product

P= purchase cost per unit

S= fixed cost per order ( notper unit, typically cost of ordering and shipping and handling. Thisis not the cost of goods)H= annual holding cost per unit (also known as carrying cost or storage cost) (warehouse space, refrigeration, insurance, etc. usually not related to the unit cost) The Total Cost functionThe single-item EOQ formula finds the minimum point of the following cost function: The different formulas have been developed for the calculation of economic order quantity

(EOQ). The following formula is usually used for the calculation of EOQ.

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A = Demand for the year

Cp = Cost to place a single orderCh = Cost to hold one unit inventory for a year* = Example:Pam runs a mail-order business for gym equipment. Annual demand for the TricoFlexers is

16,000. The annual holding cost per unit is $2.50 and the cost to place an order is $50.Calculate economic order quantity (EOQ)Calculation:

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fastest growing segment of the industry internationally and s expected to grow at a rate of 12-15

per cent over the next couple of years.

In addition to the traditional economic and service benefits, warehouse operators must offer

other value-added services to remain competitive today.The value-added service center is a DC

thats evolved to meet the needs of todays customers. It uses information technology to become

the nerve centre of the supply chain and bridge the gap of tomorrows demand-based

requirements.

Warehousing and distribution today are about providing order management from the cradle

to the grave, including: inventory and order visibility; flexible order fulfillment solutions that can

responded to customer demand; customer service and product knowledge; transportation

management; and reverse logistics. Finally, they are about performing all of those activities as

close to the end consumer as possible.Warehouse can also complete production activities to

postpone specialization are refine product characteristics. At times, reassembly at a warehouse

maybe done to correct a production problem.

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Q 8) Discuss cross-docking, milk run and pool distribution.

Ans:

Cross Docking:

Traditional warehouses move materials into storage, keep them till they are needed and then move them out to meet the customer demand. Cross docking co-ordinates the supply anddelivery so that the goods arrive at the receiving area and are transferred straight away to the

loading area, where they are put into delivery vehicles. In other words, cross docking is the movement of materials from the receiving docks directly to the shipping docks.

Goods do not need to be placed in storage, creating a significant cost savings in inventory and

material handling. Cross docking helps reduce direct cost associated with excess inventory by eliminating unnecessary handling and storage of product. Fewer inventories means less spaceand equipment required for handling and storing the products. This also means reduced product damages and product obsolescence. Thus, the step of filling a warehouse with inventory before

shipping it out is virtually eliminated. Cross docking shift the focus from supply chain todemand chain. For example, stock coming into cross docking centre has already been pre-allocated against a replenishment order generated by a retailer in the supply chain. Cross docking helps retailers streamline the supply chain from point of origin to point of sale. It also encourages

electronic communications between retailers and suppliers.

Two basic forms of Cross Docking:

1. Basic Cross Dock: In this form the packages are moved directly from the arrivingvehicles to the departing ones. This form of cross docking does not need a warehouseand a simple transfer point is enough.

2. Flow Through Cross Dock: In case of the flow through concept, when the materialsarrive and they are in large packages, these packages are opened and broken into smallerquantities, sorted, consolidated to deliver them to different customers and transferred tovehicles.

Benefits of Cross Docking:

Helps to improve the speed of flow of the products from the supplier to the stores.

Helps to reduce the costs.

Helps to reduce the amount of finished goods inventory that is required to be maintained

as safety stock. Helps to save money.

Working:

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On receiving goods workers put them in lanes corresponding to the receiving doors. A secondteam of workers sort the goods into shipping lanes from which a final team loads them into

outbound trailers.

Milk Runs:

A milk run is a route in which a truck either delivers product from a single supplier to multipleretailers or goes from multiple suppliers to single retailer as shown in the figures below. In other words, in a milk run, a supplier delivers directly to multiple retail stores on a truck or a truck

picks up deliveries for many suppliers of the same retail store. The main job of the supply chain

manager is to decide on the routing of each milk run.

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Benefits of Milk Runs:

1. Reduces cost: Milk runs help to reduce the transportation costs by consolidatingshipments to multiple stores on a single truck. The use of milk runs allows deliveries tomultiple stores to be consolidated on a single truck, resulting in a better utilisation of the

truck and somewhat lower costs.

2. Proximity of suppliers: The use of milk runs is helpful if very frequent, small deliveriesare needed on a regular basis and either a set of suppliers or a set of retailers is in geographical proximity.

3. Reduces inventory: Milk runs also help to reduce the amount of inventory need to be keptas safety stock in the warehouses.

Pool Distribution:

Pool distribution is the distribution of product to numerous destination points (customers, storesor stop points) within a particular geographic region. Characteristics include high frequency regular shipments in LTL quantities, typically in the 150 to 2000 pound per shipment range.

Pool distribution represents an excellent cost effective alternative to the higher cost of individualLTL shipments. Instead of LTL direct, product is shipped to regional terminals in truckload quantities. There it is off loaded, then segregated and sorted by delivery point then reloaded on local delivery trucks for delivery to the individual destinations. Pool reduces transit times,maintains shipment integrity, and allows a significant discount over LTL rates.

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Benefits:

When you have multiple shipments bound for a specific region, pool distribution is a

simple, cost effective alternative to LTL.

Speed merchandise to retail outlets.

Truckload transit time is shorterthan LTL, and once at our distribution centres, your

multiple shipments are delivered the next day. Reduce claims (Less handling than normal LTL service).

Meet customer delivery requirements.

Reduce delivery costs to your customer.

Handle peaks in business effectively.

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Q 9) What is the role of IT in SCM system? How is data mining is used in SCM?

Ans:

1. In the IT perspective we can say that SCM is all about improving logistics, relationship

management with the supplier and delivering value by doing business.

2. Over the period of time various new concept and models evolved. IT has played a key

role at each step of evolution of SCM systems. Following describes the various phases of

evolution discussing the role of IT at each phase.

3. Manufacturing Requirement planning (MRP): it is a process used to calculate the amount

of raw materials necessary to manufacture a specified number of products. Role of IT

here is that IT was used for processing data with the main purpose of reducing the

processing time. The priorities or major requirement at that point of time were

consistency, speed and accuracy.

4. Manufacturing Resource Planning (MRP II): It is the method for effective planning of all

resources of a manufacturing company, it addresses operational planning in units,

financial planning in dollars and has a simulation capability to answer what-if

questions. Role of IT at this phase in addition to the basic requirement of consistency,

speed and accuracy the focus changed to MIS. The priorities or major requirements at

that point of time were on the scope and the modular structure. At this point DBMS and

partially the Relational DBMS was used for data management.

5. Enterprise Resource Planning (ERP): It is an information technology industry term for

integrated, multi-module application software packages designed to serve and support

several business functions across an organisation. The role of IT at this phase in addition

to all the requirements above focus changed to planning capabilities and the high level

integration with external entities. Integration platform provides a base for all ITapplications by maintaining master tables. For example, item master, supplier master,

company master etc.

6. Supply Chain Management (SCM): IT played a key role in SCM for optimisation ,

simulation and analysis capabilities, and also integrated data mining tools for the

industrial application. Functional role of IT in SCM can be summarised as:

a. Transaction execution

b. Collaboration and co-ordination

c. Decision support

Product Data Management System (PDMS) is a class of enterprise software that managesthe product data and relationships facilitating innovations and increasing engineering

productivity.

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Role of Data Mining in SCM:

1. The 1990s was a decade of great change and also a period during which the of

logistic and supply chain management reached the board rooms of major

corporations worldwide.

2. The accelerated rate of change in our economy was driven by a number of macro

level forces, namely: an empowered consumer; a shift in economic power toward

the end of supply chain; deregulation of key industries; globalization and

technology.

3. All of these forces of change elevated the importance of supply chain

management as a strategic weapon for competitive advantage. The conceptual

basis of supply chain is not new. In actually, we have gone through several

evolutionary stages starting with physical distribution management in the 1970s,

which evolved into logistic management in the 1980s and the supply chain

management in the 1990s.

4. There are number of terms being used that may be considered synonymous withhow SCM is defined in this text, namely, demand chain, demand flow, value

networks and so on.

5. SCM is involved with integrating three key flow across the boundaries of the

companies in a supply chain-product/materials, information, and financials/cash.

Successful integration of these three key flows has produced improved efficiency

and effectiveness for companies.

6. The key factors for successful SCM include inventory, cost, information,

customer service, and collaboration relationships. Focusing on the management of

these factors is critical to the implementation of a supply chain strategy.

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Q 12) Explain various modes, participants, formats of transposition and factors influencing

transportation. On what one should decide what is the best mode of transport?

Ans. Transportation refers to the movement of product from one location to another as it makes

its way from the beginning of a supply chain to the customer. Transportation is an important

supply chain driver because products are rarely produced and consumed in the same location.

Transportation is a significant component of the costs incurred by most supply chains.

Modes of transportation

The effectiveness of any mode of transport is affected by equipment investments and operating

decisions by the carrier as well as the available infrastructure and transportation policies. The

carrier's primary objective is to ensure good utilization of its assets while providing customers

with an acceptable level of service. Carrier decisions are affected by equipment cost fixed

operating cost, variable operating costs, the responsiveness the carrier seeks to provide its target

segment, and the prices that the market will bear.

The modes of transportation are:-

Air

Major airlines in the United States that carry both passenger and cargo include

American, United, and Delta.

Airlines have a high fixed cost in infrastructure and equipment.

Labor and fuel costs are largely trip related and independent of the number of passengers

or amount of cargo carried on a flight. An airline's goal is to maximize the daily flying time of a plane and the revenue generated

per trip. Air carriers offer a very fast and fairly expensive mode of transportation.

Small, high-value items or time-sensitive emergency shipments that have to travel a longdistance are best suited for air transport.

Air carriers normally move shipments under 500 pounds, including high-value but

lightweight high-tech products.

Package carriers

Package carriers are transportation companies such as FedEx, UPS, and the U.S. PostalService, which carry small packages ranging from letters to shipments weighing about 150

pounds. Package carriers use air, truck, and rail to transport time-critical smaller packages.

Package carriers are expensive and cannot compete with LTL carriers on price for largeshipments.

The major service they offer shippers is rapid and reliable delivery. Thus, shippers use

package carriers for small and time-sensitive shipments.

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Package carriers also provide other value-added services that allow shippers to speed

inventory flow and track order status. By tracking order status, shippers can proactively inform customers about their packages.

Package carriers also pick up the package from the source and deliver it to the destinationsite.

With an increase in just-in-time (JIT) deliveries and focus on inventory reduction, demand

for package carriers has grown.Truck

The trucking industry consists of two major segments- TL or LTL.

Trucking is more expensive than rail but offers the advantage of door-to-door shipmentand a shorter delivery time.

It also has the advantage of requiring no transfer between pickup and-delivery. TL operations have relatively low fixed costs, and owning a few trucks is often sufficient

to enter the business. TL pricing displays economies of scale with respect to the distance traveled. Given trailers

of different size, pricing also displays economies of scale with respect to the size of the

trailer used. TL shipping is suited for transportation between manufacturing facilities and warehouses

or between suppliers and manufacturers LTL operations are priced to encourage shipments in small lots, usually less than half a TL, as TL tends to be cheaper for larger shipments.

Prices display some economies of scale with the quantity shipped as well as the distance

traveled. LTL shipments take longer than TL shipments because of other loads that need to be

picked up and dropped off. LTL shipping is suited for shipments that are too large to bemailed as small packages but that constitute less than half a TL.

Railways

Rail carriers incur a high fixed cost in terms of rails, locomotives, cars, and yards.

There is also a significant trip-related labor and fuel cost that is independent of the number

of cars (fuel costs do vary somewhat with the number of cars) but does vary with the distance traveled and the time taken.

Any idle time, once a train is powered, is very expensive because labor and fuel costs are

incurred even though trains are not moving. Idle time occurs when trains exchange cars for different destinations.

It also occurs because of track congestion. Labor and fuel together account for over 60percent of railroad expense.

From an The price structure and the heavy load capability makes rail an ideal mode for

carrying large, heavy, or high-density products over long distances.

Transportation time by rail, however, can be long. Rail is thus ideal for very heavy, low-value shipments that are not very time sensitive. Coal, for example, is a major part of each railroad's shipments.

Small, time-sensitive, short-distance or short-lead-time shipments rarely go by rail

A major goal for railroad firms is to keep locomotives and crews well utilized.

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Major operational issues at railroads include vehicle and staff scheduling, track and

terminal delays, and poor on-time performance. Railroad performance is hurt by the large amount of time taken at each transition. The

travel time is usually a small fraction of the total time for a rail shipment. Delays get exaggerated because trains today are typically not scheduled but "built.

Water

Major ocean carriers include Maersk Sealand, Evergreen Group, American President

Lines, and Hanjin Shipping Co. Water transport, by its nature, is limited to certain areas. Within the United States, water

transport takes place via the inland waterway system (the Great Lakes and rivers) orcoastal waters.

Water transport is ideally suited for carrying very large loads at low cost. Within the

United States, water transport is used primarily for the movement of large bulkcommodity shipments and is the cheapest mode for carrying such loads. It is, however, theslowest of all the modes, and significant delays occur at ports and terminals.

This makes water transport difficult to operate for short-haul trips, though it is usedeffectively in Japan and parts of Europe for daily short-haul trips of a few miles.

Pipeline

Pipeline is used primarily for the transport of crude petroleum, refined petroleum

products, and natural gas. In the United States, pipeline accounted for about 17 percent of total ton-miles in 2002.

A significant initial fixed cost is incurred in setting up the pipeline and related

infrastructure that does not vary significantly with the diameter of the pipeline.

Pipeline operations are typically optimized at about 80 to 90 percent of pipeline capacity.Given the nature of the costs, pipelines are best suited when relatively stable and large flows are required.

Pipeline may be an effective way of getting crude oil to a port or a refinery. Sending

gasoline to a gas station does not justify investment in a pipeline and is done better with a

truck.

Intermodal

Intermodal transportation is the use of more than one mode of transport to move

ashipment to its destination.

A variety of intermodal combinations are possible, with the most common beingtruck/rail.

Major intermodal providers with rail include CSX Intermodal, Pacer Stacktrain, and

Triple Crown. Intermodal traffic has grown considerably with the increased use of containers for

shipping and the rise of global trade.

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Containers are easy to transfer from one mode to another, and their use

facilitatesintermodal transportation. Containerized freight often uses truck/water/rail combinations, particularly for global

freight.

Participants in the transportation:

Like any other transaction transportation involves the buyer and seller. However, there are other

participants involved more often in transportation.

Transportation is influenced by mainly 5 parties they are:-

Shipper and consignee

The shipper and the consignee have the common objective of moving goods from the origin

to destination within a prescribed time at the lowest cost. the service should include a

specified pickup and delivery time, predictable transit time , zero loss and damage as well as

accurate and timely transaction of information.

Carrier

The carrier is an intermediary between consignee and the shipper. The main objective of the

carrier is to maximize the revenue associated with the transaction while maximizing the cost

associated to complete the transaction. His objective is to charge the highest price acceptable

to the above parties keeping the cost namely labor, fuel and vehicle cost required moving the

goods at the minimum.

Government

Transportation is an important factor as it affects the economy to a large extent and hence it

maintains a high level interest in it. It is desirable to have a stable and efficient transportation

environment to sustain economical growth. Many governments are more involved with the

carrier activities and practices. Involvement may take the form of regulation, promotion or

ownership.

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Public

The public is concerned with the transportation accessibility, expense effectiveness and

environmental and safety standards. The public ultimately determines the need for

transportation by demanding goods around the world at reasonable price. The relationship

between the parties is complex because of the interaction between the parties. There occur

conflicts between parties with micro interest, government and public.

Formats of transportation:

We have seen the participants involved in transportation process, there could be an overlap in the

functions of the parties involved Hence the transportation requirement can be accomplished in 3

basic ways. In each of these the legal status of the operating authority is different and hence there

are different regulations for each of them.

The following are the three formats of carrier:

i. Private fleet

ii. Contract carriers

iii. Common carriage

Private fleet:

A private fleet consists of the firm providing its own transportation. They are not for hire

and are not subject to economic regulations although they must comply with the regulation

concerning hazardous goods movement, vehicle pollution norms, vehicle safety etc as specified

by the government authorities.

The firm must own or lease the transport equipment and provide managerial directions

regarding the operations.

The primary distinction between the for-hire and the private fleet is that to qualify as the

private fleet the transportation activity should be incidental to the main business of the

firm. E.g. Scooters owned by the dominos pizza chain are a part of private fleet.

Private fleet could be costlier when the distance is large; hence it is better to go for a for-

hire carrier.

Contract carrier:

Contract carriers provide transportation services for select customer. The basis of contract

is an agreement between a carrier and a shipper for a specified transportation service at a

previously agreed cost and service terms. The business agreement becomes a basis for the

contract carrier to receive a permit to transport the specified commodities.

The contract carrier provides transportation services to a number of shippers.

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They charge different rates as per the service levels agreed upon to different shippers.

Contract carriers have a fleet of trucks or other vehicles based on the type of commodity

to be transported.

The contract carrier is more cost effective than private due to following reason:

Privately owned fleet implies the need for basic fixed costof the vehicles.

Privately owned vehicles need maintenance which also adds to the costs.

The firms should not involve itself in the activities that is not its core

competencies.

Common carriage:

The basic foundation of public transportation is the common carrier. The most obvious

common carrier is the Indian railways. Common carrier offers service in non-discriminatory

prices to public.

Heavy consignments are the best transported through a common carrier.

Also it is a better to use a common carrier in places where roads are not developed and

where there are few contract transporters available.

Factors affecting transportation

The three fundamental factors to transportation performance are:-

Cost

Speed

Consistency

Cost

It includes the direct cost i.e. the payment for the movements between the geographical locations

and expenses related to the administration and indirect cost of maintaining in transit inventory.

Hence for deciding the transportation, the least expensive transportation is not always resulting

in the lowest cost of movement.

Speed

It is the time required to complete a specific movement of goods from one place to another. On the other hand grater the speed of transportation higher is the charges. Hence the tradeoff is

required to be made and balance has to be struck.

Consistency

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It refers to the variation in time required to perform a specific movement. It is the reflection of

dependability of the transport.

Some other factors are

Distance

It is the major influence on transportation cost since it directly contributes to the variable cost

such as labor, fuel, and maintenance. The greater the distance more efficient is the utilization

of fuel and labor and hence there is lower cost per unit distance even if the total cost

increases.

Volume

It also plays a important role in deciding the transport. The greater the load lesser will be the

cost per unit weight. This happens because the fixed cost of delivery as well as administrative

cost can be spread over additional volume.

Density

It incorporates the weight and space considerations. These are important because the

transportation cost it usually quoted in terms of rupees per unit of weight. An increased

density product allows more units of the product to be loaded into a fixed cube of vehicles.

Storability

It refers to the product dimensions and how they affect vehicle space utilization. Odd sizes

and shapes or excessive lengths or weight consume more space i.e they do not show well and

typically lots of space is wasted .items with normal shape are much easier to stow than

package with unusual shape.

Handling

Some materials are fragile which requires minimum handling. The transportation needs to be

selected as per the material. Some transportation like railways may require a lot of

intermediary handling to get the good to the the destination.

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Choice of modes

Selecting a transportation mode is both a planning and an operational decision in a supply

chain. The decision regarding carriers with which a company contracts is a planning decision,

whereas the choice of transportation mode for a particular shipment is an operational

decision. For both decisions, a shipper must balance transportation and inventory costs.

The mode of transportation that results in the lowest transportation costdoes notnecessarily lower total costs for a supply chain.

Cheaper modes of transport typically have longer lead times and larger minimum

shipment quantities, both of which result in higher levels of inventory in the supply chain.

Modes that allow for shipping in small quantities lower inventory levels but tend to be

more expensive. Dell, for example, airfreights several of its components from Asia. This choice cannot be

ustified on the basis of transportation cost alone. It can only be justified because the useof a faster mode of transportation for shipping valuable components allows Dell to carry

low levels of inventory. Faster modes of transportation are preferred for products with a high value-to weight

ratio, for which reducing inventories is important, whereas cheaper modes are preferred

for products with a small value-to-weight ratio, for which reducing transportation cost is

important. The choice of transportation mode should take into account cycle, safety, and in-transit

inventory costs besides the cost of transportation.

Ignoring inventory costs when making transportation decisions can result in choices that

worsen the performance of a supply chain

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Q 13) . What are the differences between Traditional and Modern Approaches of Supply Chain

Management?

Traditional SCM Approach :

The traditional approach of SCM was the fragmented sub-optimization within departments, or

within the company. The typicality in this approach is the local dominance and absence of global sense.

Fig. 13(a) SCM approach in MRP Age

As shown in fig. 13(a), customers and suppliers were treated as external entities and most of the

time ignored for any strategic decisions.

In fact, the organization was looking at the various departments including sales, production, and

others like, finance, HR, maintenance, R&D, administration etc. as separate functionalities and

no cohesiveness was observed amongst them.

On the contrary purchase and the production planning department was seen as one

functionality and primal application of integration philosophy was seen through MRP applied

there.

As shown in fig. 13(b), in the MRP-II age, purchase, planning and the production departments

were seen as one functionality and MRP-II was primarily focused on materials and capacity

integration.

Again the various departments like sales, finance, HR, maintenance, R&D, administration etc.

were not tightly integrated in MRP-II.

The customers and suppliers were treated as external entities and not considered for any long-

term decisions.

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Fig. 13(b) SCM approach in MRP-II Age

As shown in fig. 13 (c), in the ERP age, all the departments were seen as one entity.

There existed a common language and one approach in all the decision making across

organization.

In fact, the other entities like subcontractor and even few integrated suppliers were seen as a

part of the organization.

Fig. 13(c) SCM approach in ERP Age

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But again all the external entities like distributors, retailers or suppliers were not tightly

integrated in ERP.

We can say that ERP helped organization to integrate all of its internal supply chain operations

but failed to extend the integrations across external supply chains

Modern SCM Approach:

The modern SCM approach embraces the challenges across organizations, across different lines

of businesses, across consumers and across geographies.

Hence we can say that the traditional functions are now getting reshaped with new SCM

approach.

The strategies now formed are such that they govern the overall supply chain rather than the

individual players or organizations.

Hence we can say that today supply chains rather than organizations compete with each other.

Fig. 13(d) SCM approach in E-ERP Age

As shown in fig. 13(d), in the E-ERP Age, which is also referred as CPFR (Collaborative Planning

Forecasting Replenishment), all the organized players are seen as one entity .

It means the manufacturing organization closely operates with all the trading partners including

customers at one side and suppliers at other side.

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In fact, the well defined customer demands are known and the main focus of the organization

becomes fulfilling this demand with the supply management thus integrating suppliers side.

Typically, it integrates all of its internal supply chain operations as well as the external supply

chain operations to deliver value to the final consumers.

Fig. 13(e) SCM Approach in Global E-Biz Age

As shown in fig. 13(e), in the Global E-Biz Age, consumers can directly talk with the

manufacturing company that is also a patent holder of the commodities required by consumers.

Perhaps no material physically flows to or from this patent holder as shown in the fig.

level and a logisticsthIt means that the manufacturing operations will be outsourced to the 4

services suppliers job is to lift the required material from the point of supply to the point of

demand, and ultimately deliver the goods to the consumer.

It organizes the complete solution for the overall global system dynamics and closely operates

with all the trading partners including customers at one side and suppliers at the other side.

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14. Explain role of IT in Business. What are various IT tools that are used in industry

today?

Information technology (IT):

1. Information is the driver that serves as the glue to create a coordinated supply chain

2. Information must have the following characteristics to be useful:

Accurate

Accessible in a timely manner

Information must be of the right kind

3. Information provides the basis for supply chain management decisions

Inventory

Transportation

Facility

4. Effective use of IT in the supply chain can have a significant impact on supply chain

performance. Relevant information available throughout the supply chain allows

managers to make decisions that take into account all stages of the supply chain

5. Allows performance to be optimized for the entire supply chain, not just for one stage

leads to higher performance for each individual firm in the supply chain

IT tools for business:

1. Project Management:

The systems here offer features for scheduling, tracking, monitoring and

reporting activities within multiproject environment. These can be used for:

Working more effectively.

Co-ordinating and managing projects more effectively.

Saving time and money. Completing projects on time and within budget.

2. Computer Aided Design/Computer Aided manufacturing(CAD/CAM)

Computer-aided design(CAD), also known as computer-aided design and

drafting(CADD) ,is the use of computer technology for the process of design and

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design-documentation. Computer Aided Drafting describes the process of drafting

with a computer. CADD software, or environments, provides the user with input-tools

for the purpose of streamlining design processes; drafting, documentation, and

manufacturing processes. CADD output is often in the form of electronic files for

print or machining operations. The development of CADD-based software is in direct

correlation with the processes it seeks to economize; industry-based software(construction, manufacturing, etc.) typically uses vector-based (linear) environments

whereas graphic-based software utilizes raster-based (pixelated) environments.

3. Computer Integrated Manufacturing(CIM)

Computer-integrated manufacturing (CIM) is the manufacturing approach of

using computers to control the entire production process. This integration allows

individual processes to exchange information with each other and initiate actions.

Through the integration of computers, manufacturing can be faster and less error-

prone, although the main advantage is the ability to create automated manufacturing

processes. Typically CIM relies on closed-loop control processes, based on real-time

input from sensors. It is also known as flexible design and manufacturing.

4. Manufacturing Execution System(MES)

A manufacturing execution system (MES) is a control system for managing and

monitoring work-in-process on a factory floor. An MES keeps track of all

manufacturing information in real time, receiving up-to-the-minute data from robots,

machine monitors and employees. Although manufacturing execution systems used to

operate as self-contained systems, they are increasingly being integrated with

enterprise resource planning (ERP) software suites. The goal of a manufacturing

execution system is to improve productivity and reduce cycle-time, the total time to

produce an order. By integrating an MES with ERP software, factory managers can

be proactive about ensuring the delivery of quality products in a timely, cost-effective

manner.

5. Management Information System(MIS)

MIS refers broadly to a computer-based system that provides managers with the tools

for organizing, evaluating and efficiently running their departments. In order to

provide past, present and prediction information, an MIS can include software that

helps in decision making, data resources such as databases, the hardware resources ofa system, decision support systems, people management and project

management applications, and any computerized processes that enable the department

to run efficiently.

6. Decision Support System(DSS)

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Decision Support Systems (DSS) are a specific class of computerized information

system that supports business and organizational decision-making activities. A

properly designed DSS is an interactive software-based system intended to help

decision makers compile useful information from raw data, documents, personal

knowledge, and/or business models to identify and solve problems and make

decisions.

7. Expert System(ES)

Expert systemis a computer system that emulates the decision-making ability of a

human expert. Expert systems are designed to solve complex problems by reasoning

about knowledge, like an expert, and not by following the procedure of a developer as is

the case in conventional programming. The first expert systems were created in the 1970s

and then proliferated in the 1980s. Expert systems were among the first truly successful

forms of AI software.

8. Knowledge Management(KM)

Knowledge Management (KM) comprises a range of strategies and practices used in

an organization to identify, create, represent, distribute, and enable adoption

of insights and experiences. Such insights and experiences comprise knowledge,

either embodied in individuals or embedded in organizations as processes or

practices.Knowledge Management efforts typically focus on

organizational objectives such as improved performance, competitive

advantage, innovation, the sharing of lessons learned, integration and continuousimprovement of the organization. KM efforts overlap with organizational learning,

and may be distinguished from that by a greater focus on the management of

knowledge as a strategic asset and a focus on encouraging the sharing of knowledge.

9. Enterprise Resource Planning(ERP)

Enterprise resource planning (ERP) integrates internal and external management

information across an entire organization,

embracing finance/accounting, manufacturing, sales and service, customer

relationship management, etc. ERP systems automate this activity with an

integrated software application. Its purpose is to facilitate the flow of information

between all business functions inside the boundaries of the organization and manage

the connections to outside stakeholders. ERP systems can run on a variety

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of hardware and network configurations, typically employing a database as a

repository for information.

10. Customer Relationship Management(CRM)

CRM (customer relationship management) is an information industry term for

methodologies, software, and usually Internet capabilities that help

an enterprise manage customer relationships in an organized way. For example, an

enterprise might build a database about its customers that described relationships in

sufficient detail so that management, salespeople, people providing service, and

perhaps the customer directly could access information, match customer needs with

product plans and offerings, remind customers of service requirements, know what

other products a customer had purchased.

11. Supply Chain Management(SCM)

Supply chain management (SCM) is the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to

retailer to consumer. Supply chain management involves coordinating and integrating

these flows both within and among companies. It is said that the ultimate goal of any

effective supply chain management system is to reduce inventory (with the

assumption that products are available when needed). As a solution for successful

supply chain management, sophisticated software systems with Web interfaces are

competing with Web-based application service providers (ASP) who promise to

provide part or all of the SCM service for companies who rent their service.

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Q 15) Explain Distribution Management warehousing in detail with respect to concepts,

requirement, important aspects of logistics etc.

According to the Council of Supply Chain Management Professionals (CSCMP), logistics

management can be defined as, "that part of supply chain management that plans, implements,

and controls the efficient, effective forward and reverse flow and storage of goods, services and

related information between the point of origin and the point of consumption in order to meet

customers' requirements." .

According to Coyle, Bardi and Langley there are four subdivisions of logistics:

Business logisticsthis is the same as the definition from the CSCMP and approach we

are adopting in our discussion.

Military logisticsall that is necessary to support the operational capability of military

forces and their equipment in order to ensure readiness, reliability, and efficiency.

Event logisticsmanagement of all involved (activities, facilities, and personnel) in

organizing, scheduling, and deploying the resources necessary to ensure the occurrence

of an event and efficient withdrawal afterwards.

Service logisticsacquisition, scheduling, and management of facilities, personnel, and

materials need to support and sustain a service operation.

Within the context of this essay we will be addressing the concept of business logistics.

Business logistics systems can be classified into four categories:

Balanced System. Firms with a balanced system have reasonably balanced inbound and

outbound flows.

Heavy inbound. These firms have a very heavy inbound flow but a very simpleoutbound flow. Firms with heavy inbound flow typically do not warehouse their finished

goods, for example, aircraft manufacturers.

Heavy outbound. These firms have a complex outbound flow and a very simple inbound

flow. Their inbound flow is usually raw material from a relatively short distance.

Typically their outbound shipments are a wide variety of packaged finished goods

requiring storage and transportation to the final consumer.

Reverse system. Reverse supply chain logistics systems have reverse flows on the

outbound side of their system. Durable products are returned for credit, trade-in, repair,

salvage or disposal or the firm utilized returnable or reusable containers.

Coyle, Bardi and Langley list a number of activities that lie within the realm of logistics:

Order fulfillmentactivities involved with completing customer orders. Obviously,

transportation and logistics would be an integral part of completing the orders since they

directly impact delivery.

Traffic and transportationthe physical movement of goods.

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Warehousing and storagea number of ware-housing decisions directly impact logistics

and transportation. For example, how many warehouses are needed, where should they be

located, how large should they be, how much inventory should be held in each?

Plant and warehouse site locationlocation can alter time and place relationships

between the warehouse and the customer. Frequently transportation cost is a major factor

in plant and warehouse location. Materials handlingthe placement of goods and the movement of goods within a ware-

house, factory or other facility. This includes incoming movement of goods and the

movement of goods from storage to order-picking areas to dock areas for shipment.

Industrial packagingtransportation directly impacts the type packaging needed. Fast

methods of transport, such as air, generally require little in the way of packaging while

the slower modes, such as water or rail, require substantial packaging expenditures to

ensure safe shipment.

Purchasingquantities purchased directly affect transportation costs. Also,

transportation relates directly to the distance or location of goods purchased by the firm.

Purchasing and logistics are increasingly integrated in many major firms.

Demand forecastingaccurate and reliable forecasting is essential for effective

inventory control purposes, especially within firms utilizing lean manufacturing and JIT.

Inventory controlthis is directly related to transportation and warehousing. If

transportation is slow higher levels of inventory are needed, ergo, more warehouse

capacity is needed.

Production planningproduction planning must operate in close coordination with

logistics in order to ensure adequate market coverage. Production planning and logistics

are increasingly integrated within large corporations.

Parts and service supportthe effectiveness of parts and service support depend upon speed of transportation, location of warehouses, and forecasting of support function

needs. Obviously, parts and service support have a direct impact on customer service

levels.

Return goods handlingreverse supply chain logistics is an increasingly important but

frequently overlooked dimension in logistics.

Salvage and scrap disposaldisposal is an integral part of the reverse supply chain.

There is an increasing interest, in the logistics literature, in the impact of the location of

evaluation and disposal facilities for returned goods.

Customer service levelslogistics plays an extremely important role in ensuring that

customers get the right products at the right place at the right time. Transportation,

warehousing, forecasting, inventory control, and production planning all have a direct

impact on customer satisfaction.

The two most obvious aspects of logistics are warehousing and transportation.

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Warehousing and Storage:Warehousing is defined as the storage of goods: raw materials, semi-

finished goods, or finished goods. This includes a wide spectrum of facilities and locations that

provide warehousing. Since this is a point in the logistics system where goods are held for

varying amounts of time, the flow is interrupted or stopped, thereby creating additional costs to

the product.

In a macroeconomic sense, warehousing creates time utility for raw materials, industrial goods

and finished products. It also increases the utility of goods by broadening their time availability

to prospective customers.

Transportation:Transportation involves the physical movement or flow of goods. The

transportation system is the physical link that connects customers, raw material suppliers, plants,

warehouses and channel members. These are the fixed points in a logistics supply chain.

The basic modes of transportation are water, rail, motor carrier, air and pipeline. Water being the

slowest mode with rail, motor carrier, and air following in order of speed of delivery. Generally,

the order is reversed when looking at costs.

Selection of the appropriate carrier has several steps. First the firm selects a transportation mode.

The shipper must compare the service desired with the rate or cost of service. Service usually

means transit time or the time that elapses from the time the consignor makes the goods available

for dispatch until the carrier delivers to the consignee. Pickup and delivery, terminal handling

and movement between origin and destination account for the time involved in transporting

goods.

The firm must balance the "need for speed" with the costs inherent in the mode of transport. This

includes the rate charged for the service, minimum weight requirements, loading and unloading facilities, packaging, possible damage in transit, and any special services that may be desired or

required. If next day delivery is imperative, the shipper will utilize an air freight carrier but will

pay a premium price for such rapid service. If time is not a particularly critical element the

shipper may elect to use rail or a motor carrier, or may even utilize a water carrier if time is

inconsequential. Water-based modes of transpor tation are the least expensive and are used for

commodity type products such as grain, coal, and ore. Some firms even utilize more than one

mode of transportation, called intermodal transport, to move their goods.

Once a mode is selected, the shipper must decide the legal classification or type of carrier they

wish to utilize: common, regulated, contract, exempt or private.

Common carriers serve the general public at reasonable prices and without discrimination. They

cannot refuse to carry a particular commodity or refuse to serve a particular point with the scope

of the carrier's operation. Common carriers are liable for all goods lost, damaged, or delayed

unless caused by an act of God, an act of a public enemy, an act of public authority, an act of the

shipper, or some defect within the good itself.

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Regulated carriers are required to provide safe and adequate service and facilities upon

reasonable request and are liable for damage up to limits established by the carrier. Regulated

carriers can be motor carriers or water carriers and are subject to minimal federal controls.

A contract carrier does not serve the general public, but, rather serves one or a limited number of

contracted customers. They have no legal service obligation. They often provide a specialized

service and usually have lower rates than common or regulated carriers.

Exempt carriers are exempt from regulation regarding rates and services. Exempt status comes

from the type commodity hauled or the nature of the carrier's operation. Exempt motor carriers

are usually local and typically transport such items as agricultural goods, newspapers, livestock,

and fish. Exempt water carriers transport bulk commodities such as coal, ore, grain, and liquid.

Exempt rail carriers transport piggy-back shipments and exempt air carriers haul cargo.

A firm's own transportation is termed a private carrier. Private carriers are not "for-hire" and not

subject to the same federal regulations as other types of transport. However, the carrier's primary

business must be something other than transportation.

Once the mode and type of carrier is determined a final decision can be made based on other

factors. Accessibility is one such factor. Some firms have geographic limits to their routing

network. Others may not possess physical access to needed facilities or have the ability to

provide the equipment and facilities that movement of a particular commodity may require.

Reliability, the consistency of the transit time a carrier provides, is also a key factor. Finally,

convenience and communication are other important considerations when selecting a carrier.

Measures that a transportation firm would use to judge its perfo

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