TSCM EQ SOLUTION

8/7/2019 TSCM EQ SOLUTION

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TSCM EQ SOLUTION

TOPIC 1 INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

APR 04,05,06

NIL

APR 07

Q1(D)

ANS -- Logistics is the management of the flow of the goods ,information and other resources in a repair cycle between thepoint of origin and the point of consumption in order to meet therequirements of customers. Logistics involves the integration of information, transportation , inventory , warehousing , materialhandling, and packaging , and occasionally security . Logistics is achannel of the supply chain which adds the value of time andplace utility.

Q2(B)

ANS A supply chain is a network of facilities and distribution options that

performs the functions of procurement of materials, transformation of thesematerials into intermediate and finished products, and the distribution of thesefinished products to customers. Supply chains exist in both service andmanufacturing organizations, although the complexity of the chain may varygreatly from industry to industry and firm to firm.The following are five basic components of SCM.

1. Plan This is the strategic portion of SCM. Companies need a strategy for managing all the resources that go toward meeting customer demand for their

product or service. A big piece of SCM planning is developing a set of metrics tomonitor the supply chain so that it is efficient, costs less and delivers high qualityand value to customers.

2. Source Next, companies must choose suppliers to deliver the goods andservices they need to create their product. Therefore, supply chain managers mustdevelop a set of pricing, delivery and payment processes with suppliers and createmetrics for monitoring and improving the relationships. And then, SCM managers
http://en.wikipedia.org/wiki/Good_(economics)http://en.wikipedia.org/wiki/Informationhttp://en.wikipedia.org/wiki/Spare_part#repair_cyclehttp://en.wikipedia.org/wiki/Transportationhttp://en.wikipedia.org/wiki/Inventoryhttp://en.wikipedia.org/wiki/Warehousinghttp://en.wikipedia.org/wiki/Packaginghttp://en.wikipedia.org/wiki/Securityhttp://en.wikipedia.org/wiki/Supply_chainhttp://en.wikipedia.org/wiki/Good_(economics)http://en.wikipedia.org/wiki/Informationhttp://en.wikipedia.org/wiki/Spare_part#repair_cyclehttp://en.wikipedia.org/wiki/Transportationhttp://en.wikipedia.org/wiki/Inventoryhttp://en.wikipedia.org/wiki/Warehousinghttp://en.wikipedia.org/wiki/Packaginghttp://en.wikipedia.org/wiki/Securityhttp://en.wikipedia.org/wiki/Supply_chain


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can put together processes for managing their goods and services inventory,including receiving and verifying shipments, transferring them to themanufacturing facilities and authorizing supplier payments.

3. Make This is the manufacturing step. Supply chain managers schedule theactivities necessary for production, testing, packaging and preparation for delivery.This is the most metric-intensive portion of the supply chainone wherecompanies are able to measure quality levels, production output and worker

productivity.

4. Deliver This is the part that many SCM insiders refer to as logistics, wherecompanies coordinate the receipt of orders from customers, develop a network of warehouses, pick carriers to get products to customers and set up an invoicingsystem to receive payments.

5. Return This can be a problematic part of the supply chain for manycompanies. Supply chain planners have to create a responsive and flexible network for receiving defective and excess products back from their customers andsupporting customers who have problems with delivered products..

Benefits Of Supply Chain Management

1. Make informed decisions2. Increase effectiveness of sales, marketing and customer management3. Retain customers4. Integrate demand planning with sales, manufacturing and logistics planners

by working together with marketing5. Improve security and compliance with safe cargo requirements and other

regulations6. Drive cost and performance gains in nearly every part of your organization7. Position your company with a low cost structure and high speed to drive

profitable growth on a global level.

APR 08

Q1(A)

ANS SAME AS --APR 07 Q1(D)


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APR 09

Q2(A)

1)Primary logistics activities-- goods physically move through the

distribution channel using logistic activitiesTransportation Transportation plays the key role in the economicsuccess by allowing for the safe and the efficient distribution of goodsand services through the supply chain. Transportation links the variouslogistics activities without transportation the integrated logistics systembreaks down. Without the transportation raw materials ca not flow intothe warehouse and plants and the finish product cannot flow out of theplant to the warehouses and finally to the customer. An effective

transportation system forms the backbone of sound economy. Withouttransportation system domestic and international economic growthwould impossible.

Facility structure- facility structure refers to the management of warehouses and the distribution centers. Warehouses can play a keyrole in integrated logistics strategy and in building and maintaininggood relationship between supply chain partners. Warehousing affectscustomer service, stock out rates and forms a sale and marketingsuccess. A warehouses smoothes out markets supply and demandfluctuation. When supply exceeds demand, a warehouse stores productaccording to the customers requirement. When demand exceeds supplythe warehouse can speed product movement to the customer byperforming additional services like marking price, packaging productor final sub assembly. Warehousing can link the production facility andthe consumer or suppliers.

Inventory- Inventory management is the reduction of inventory whilemaintaining customer service and production levels. The idea is to keepthe production line running at a minimum inventory class. The key togood inventory management is to know when to accept the stock outs.

Material handling- it is the movement of raw material, work in processinventory, and finished products within a facility. The art and science of


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moving, packaging and storing of substances in any form is known asmaterial handling a properly installed material handling system canreduce cost and labor increase safety, increase productivity, reducewaste, increase capacity and improve service

Communications and information- As goods move so must information.To move the right goods to the right place at the right time in the rightcondition with the right document, the answers to all the rightquestions must be known. The information could be simple as thecontent of the package or complex as the propose design for a newsupply chain. The importance of information system in logistics is theconversion of accurate data in to useful information. Inaccurate date inan inventory system disrupt customer service, transportation,warehouse operation, production and inventory management

APR 10

Q7(B)

ANS SAME AS APR 07--Q2(B)

TOPIC 2-CREATING OUTCOME- DRIVEN TASKS AND PROCESSES

NIL

TOPIC 3-MATERIALS MANAGEMENT

APRIL 04

Q1(A)

ANS RIGHT PRICE

Price refered to the time ,effort and money a customer expends to get aproduct or services.

From point of selling firm price is the amount of money a firm receivesfor its products and services .The price should cover fixed costs,variables cost and some margin of profit.


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EG. Transportation charge may be embedded in the price of product.when that is the case the seller lowers transportation costs per unit bymoving more in each shipment.

RIGHT PRODUCT

Product is the sum of the attributes that the customer buys. Packaging protects product attributes meaning that the product is

delivered as it was manufactured. Packaging can also be one of the attributes in a purchase decision. Receiving the damage or incorrect order may annoy both industrial

buyer and consumer. Therefore protective packaging is vital in transporting the products to

the customer.RIGHT PLACE

Place or outbound logistics is final marketing interface. This involves choosing a channel of distribution, choosing the type and

number of middleman , and deciding where to locate warehouses toensure availability of product.RIGHT CUSTOMER Right customer means that selecting the correct kind of customer

Q1(B)ANS- ORGANIZATION BASED ON COMMODITIES

1. In such organizations, the items are classifiedaccording to there nature. For eg. Raw materials,

bought out components, spares, imported items,finished goods.

2. These commodities are assigned to the individuals.Taking into consideration the importance of each

product with respect to operations of the company,the workload will vary between the groups.

3. On the basis of this, the determination of staff ineach commodity group is determined.

4. For Example: An automobile manufacturing firmmay have commodity groups such as castings,


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pressed parts, raw materials and civil engineeringmaterials.

5. The advantages of such classification are asfollows:

i. There is no wastage of efforts as eachcommodity is handled separately.

ii. The group to which each commodity isassigned will be in touch with that commodity market and it becomesspecialized.

iii. Bulk buying and specialization is there ineach commodity group.

II. ORGANIZATION BASED ON LOCATION

1. When an organization has several plants, location in different parts of the country there are two alternatives.

2. We can have a centralized organization which is located at theheadquarters.

3. We can have a decentralized materials management which is set up ateach location.


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4. There are many advantages of having a decentralized materialmanagement set up at each location.

5. When the distance between the organization is large in that case it is better to have controlled headquarters both in terms of cost and time.

6. Some plants require unique material and in such cases a materialmanagement department which is located at the plant will be in better coordination with the production plant, finance and marketing department.

III. ADVANTAGES OF CENTRALIZED MATERIALS MANAGEMENT

i. When we combine the requirements of nearby plants and buy in bulk quantities it results in reduction of cost.

ii. The transfer of materials in an emergency is possible.

iii. The surplus material in one plant can be utilized in meeting therequirements of another plant.

Q2(A)

ANS- There are total five steps to be followed


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1. Recognizing need

2. Identifying a supplier.

3. Qualifying and placing an order.

4. Monitoring and managing delivery process.

5. Evaluating the purchase and supplier.

Recognizing the need

1. All departments need to buy something or the other.

2. A form called as purchase requisition is filled by the requisitiondepartment head and forward to the purchasing department.

3. The purchasing requisition contains the following:


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- Name of requestor

- The planned use of the item.

- The specification of the item.

- Number of units.

- Tentative price per unit.

- Expected of purchase.

4. The purchasing department places the order to authorized supplier.

5. Purchasing managers issues a Purchase order to the supplier

authorizing to supply the goods.

Identify the supplier:-

1. Important to purchase row material.

2. Can be purchase through news papers, advertizing, word-of-mouth.

3. Suppliers are asked to send proposal and bidders are invited.

4. Suppliers are requested to provide samples, demonstration andcustomer references for further investigation.

5. For critical item of purchase, more than one supplier is evaluated andshortlisted.

6. Further orders are supplier to selected supplier only.

Qualifying and placing an order

1. Once supplier is identified orders must be identified orders must beidentified.

2. Detailed order is being prepared with expected date of purchase.

3. Contracts are signed.


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4. Purchasing department are then responsible to ensure that the orders arefilled completely and correctly, contracts terms are made.

5. Goods meet the standards.

6. Supply performs satisfactorily.

Monitoring and managing the delivery process

1. Purchasing department ensures the correct goods delivery.

2. It is of correct quantity and at right place.

3. They keep track of monitoring the supplier performance and the overallquantity & service provided by the supplier.

Evaluating the purchase and the supplier:-

1. Supplier performance is evaluated in 2 stages.

2. The purchasing department may contact supplier to avoid future problems.

3. In the second stage the origin summarize the accumulated experiencewith the supplier through many transactions and many purchases.

4. The end of the evaluation period such as belonging the supplier such as bringing the suppliers together online to share more timely and accurateinformation.

5. Applying the barcode technology in receiving the inbound shipments andgenerating order.

Q2(B)

ANS- USE OF COMPUTERS IN PURCHASING1. Today, the purchasing managers rely heavily on computers.2. The computer does not alter the decision making steps as described in the

purchasing process, but it speeds up the process.3. The important use of computers in purchasing is electronic data

interchange(EDI).


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4. The areas of primary interest are as follows:-i. Bringing suppliers online to share more timely and accurate information.

ii. Applying a barcode technology in receiving inbound shipment andgenerating orders.

5. The EDI provides following benefits in purchasing as follows:-i. Electronic Funds Transfer

ii. Paperless purchasingiii. Purchasing professionalismiv. Increasing productivityv. Inventory and lead time reduction

vi. Building enhanced communication with supplier vii. Internet system impact

viii. Support for bar-coding.


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Q3(A)

ANSTwo types of cost

1) Carrying cost- physically storing goods

a) Capital or opportunity cost compares inventory investment to other capitalinvestments.


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Storage space cost- cost of moving goods into and out of inventory (includesvariable cost like rent, utilities and space)

c) Inventory service cost- contains insurance and taxes.

d) Inventory risk cost- cost of obsolescence, damage, relocation or theft.

2) Ordering cost- consist of

a) order cost- include preparing and processing the order request, selecting asupplier, checking stock, preparing the payment and reviewing inventorylevels.

b) setup costs- cost involved in modifying the manufacturing process to makedifferent goods

Q4(B)

ANS-The art and science of moving, packaging , and storing of substances in anyform.

1. A properly installed material handling system can reduce costs and labor,increase safety, increase productivity, reduce waste, increase capacity,and improve service.

2. Depending on the industry material handling can account for 30 to 70 percent of the cost of manufacturing, so inefficiencies should beeliminated.

Objectives of material handling

1. The first is movement of product into ,through, and out of warehouses,efficient movement inside a facility helps control costs and improvecustomer service.

2. Time is the second element parts and raw materials must be availablewhen needed at production stations, loading docks, and terminals.

3. The third element is quantity ,goods must be moved in the right quantity between the production stations as well as to the customer.4. The last element is space, the material handeling system should

effectively use the available space in the warehouse, terminal ,or plant.


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Q6(A)

ANS Material handling is the movement of raw material,work-in-process (WIP) inventory, and finished products

within a facility.The art and science of moving, packaging, and storing of substances in anyform.

A properly installed Material handling system can reduce the costs andlabor, increase safety, increase productivity, reduce waste, increasecapacity and improve service.

Depending on the industry, material handling can account for 30 to 70percent of the cost of manufacturing, so inefficiencies should beeliminated.

Q7(A)

ANS It is the management of this end-to-end supply-chain.

the process of anticipating customer needs and wants, acquiring thecapital , materials , people, technologies and information necessary tomeet those needs and wants , optimizing the goods or service producingnetwork to fulfill customer request , and utilizing the network to fulfillcustomer request in a timely way.

Consist of inbound logistics, conversion operations and outboundlogistics

It contain two activities1) logistics activities (goods physically move through the distributionchannel using logistic activities)

2) service response logistics activities (non-material services move tocustomers at all levels of distribution channel )


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APRIL 05

Q1(A)

ANSSuppliers are evaluated as follows :

1. The suppliers are normally evaluated on price, quality, customer service anddelivery.

2. The below figure shows the supplier evaluation variables .3. The area where all the four circles intercepts indicates that a specific supplier

meets the purchasing managers expectation.4. Therefore, this is called as the area of supplier acceptance.

5. The supplier evaluation variables are as follows broken down in order to get adetailed evaluation of the supplier. The simple breakdown of supply evaluationvariable is follows:

i. Price variablesa. Price of material

b. Financing terms.


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ii. Delivery Variable

a. Reliability of delivery.

b. Total transit time

iii.Quality Variable

a. Overall supplier reputation

b. Product reliability

c. Technical specification

iv. Service Variable

a. Ease of operation or use.

b. Ease of maintenance.

c. Reliability of service.

d. Sales service.

e. Supplier flexibility.

f. Training offered.g. Training time required.

h. Technical services required.

i. Ordering convenience.

6. After choosing the parameters to evaluate the purchasing manager chooses

rating of these parameters, based on their importance.

Example : A 1 to 5 rating scale assumes 1 as worst and 5 as best.

7. This Method not only ranks each variable but also weights it.


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8. The analyst multiplies the rating rank by the importance rank to get anoverall score on that variable.

Example : The purchasing manager may rate price for supplier as 5 (best

price) and reliability.Q2(A)

ANS

SAME AS APRIL-04, Q2(A)

Q2(B)

ANS

ABC analysis is a system in inventory management to minimize the cost of inventories incorporated and which are stored for long time ,these are classifiedinto ABC groups whereas

A stand for the most expensive inventories which are purchased on customersdemands so that it can be processed and then given to them on priority basis , theseitems are carefully selectedB is classified for those goods which are less expensive than A items and which

can be stored for some time before it is processedC goes for those items which are cheap and also can be abundantly used . Theseare items where its loss wont cost much to the company.

Q5(C)

ANS

Same as APRIL 04, Q4(B)Q7(C)

ANS-

: TYPES OF INVENTORY


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1) Cycle stock- it is the product consumed through sales or use andreplenished through ordering.

2)Raw material.--The purchased items or extracted materials that are transformed

into components or products.3) Work in process.--Any item that is in some stage of completion in themanufacturing process.

4) Finished products.--Completed products that will be delivered to customers.

5) In transit inventory-inventory which is in route via a carrier.

6) Safety stock- to prevent from stockouts.

7) Seasonal stock 8) Promotional stock

9) Speculative stock- considering the future demand

10) Dead stock

APRIL-06

Q1(A)

ANS- SAME AS APRIL-04,Q1(B)

Q1(B)

ANS- SAME AS APRIL-04,Q2(A)

Q2(A)


Q2(B)

ANS-


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BUYING PURCHASING

1 To get something by paying

money for it is called buying.

OR

Buying is getting goods without anyevaluation and without any analysisof requirements.

The act of buying something iscalled purchasing.

OR

Purchasing refers to a businessor organization attempting toacquire good or services toaccomplish the goal of theenterprise.

2 Buying is done unconditionally. Purchasing is done very

conditionally.

3 During buying, no contracts aredone.

During purchasing contractsare made.

4 Buying is the short period of time. Purchasing is the long period of time.

5 Buying is not a very much

organized process.

Purchasing consists of athorough and a very organized

process.

Q2(C)

ANS- lead time- time elapsed in placing an order and receiving the order bythe customer is called lead time.

Chain management managing the supply chain management in such a waythat lead time is the minimum.

Q3(A)


Q3(B)


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Q4(A)

ANS-The art and science of moving, packaging, and storing of substances in anyform.

A properly installed material handling system can reduce costs and labor,increase safety, increase productivity, reduce waste, increase capacity, andimprove service.

Depending on the industry, material handling can account for 30 to 70 percent of

the cost of manufacturing, so inefficiencies should be eliminated.Objectives Of Material Handling

The first is movement of product into, through, and out of warehouses,efficient movement inside a facility helps control costs and improvecustomer service.

Time is the second element parts and raw materials must be available whenneeded at production stations, loading docks, and terminals.

The third element is quantity, goods must be moved in the right quantity between the production stations as well as to the customer.

The last element is space, the material handeling system should effectivelyuse the available space in the warehouse, terminal, or plant.

Q4(B)

ANS-The EOQ model is a technique for determining the best answers to the howmuch and when questions. It is based on the premise that there is an optimal order size that will yield the lowest possible value of the total inventory cost. There areseveral assumptions regarding the behavior of the inventory item that are central tothe development of the model


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EOQ assumptions:

1. Demand for the item is known and constant.2. Lead time is known and constant. (Lead time is the amount of time that

elapses between when the order is placed and when it is received.)3. The cost of all units ordered is the same, regardless of the quantity ordered

(no quantity discounts).4. Ordering costs are known and constant (the cost to place an order is always

the same, regardless of the quantity ordered).5. When an order is received, all the items ordered arrive at once

(instantaneous replenishment).6. Since there is certainty with respect to the demand rate and the lead time,

orders can be timed to arrive just when we would have run out.Consequently the model assumes that there will be no shortages.

Based on the above assumptions, there are only two costs that will vary withchanges in the order quantity, (1) the total annual ordering cost and (2) the totalannual holding cost. Shortage cost can be ignored because of assumption 6.Furthermore, since the cost per unit of all items ordered is the same, the totalannual item cost will be a constant and will not be affected by the order quantity.

EOQ symbols:

D = annual demand (units per year)

S = cost per order (dollars per order)

H = holding cost per unit per year (dollars to carry one unit in inventory for oneyear)

Q = order quantity

We saw on the previous page that the only costs that need to be considered for theEOQ model are the total annual ordering costs and the total annual holding costs.These can be quantified as follows:

Annual Ordering Cost

The annual cost of ordering is simply the number of orders placed per year timesthe cost of placing an order. The number of orders placed per year is a function of the order size. Bigger orders means fewer orders per year, while smaller orders


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means more orders per year. In general, the number of orders placed per year will be the total annual demand divided by the size of the orders. In short,

Total Annual Ordering Cost = (D/Q)S

Annual Holding CostThe annual cost of holding inventory is a bit trickier. If there was a constant levelof inventory in the warehouse throughout the year, we could simply multiply thatconstant inventory level by the cost to carry a unit in inventory for a year.Unfortunately the inventory level is not constant throughout the year, but is insteadconstantly changing. It is at its maximum value (which is the order quantity, Q)when a new batch arrives, then steadily declines to zero. Just when that inventoryis depleted, a new order is received, thereby immediately sending the inventorylevel back to its maximum value (Q). This pattern continues throughout, with theinventory level fluctuating between Q and zero. To get a handle on the holding costwe are incurring, we can use the average inventory level throughout the year (which is Q/2). The cost of carrying those fluctuating inventory levels is equivalentto the cost that would be incurred if we had maintained that average inventorylevel continuously and steadily throughout the year. That cost would have beenequal to the average inventory level times the cost to carry a unit in inventory for ayear. In short,

Total Annual Holding Cost = (Q/2)H

Total Annual Cost

The total annual relevant inventory cost would be the sum of the annual orderingcost and annual holding cost, or

TC = (D/Q)S + (Q/2)H

This is the annual inventory cost associated with any order size, Q.At this point we are not interested in any old Q value. We want to find the optimalQ (the EOQ, which is the order size that results in the lowest annual cost). This can

be found using a little calculus (take a derivative of the total cost equation withrespect to Q, set this equal to zero, then solve for Q). For those whose calculus is alittle rusty, there is another option. The unique characteristics of the ordering cost


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line and the holding cost line on a graph are such that the optimal order size willoccur where the annual ordering cost is equal to the annual holding cost.

EOQ occurs when:

(D/Q)S = (Q/2)Ha little algebra clean-up on this equation yields the following:

Q2 = (2DS)/H

and finally

Q = 2DS/H

(this optimal value for Q is what we call the EOQ)

Q5(B)

ANS-

VED Analysis means....

Vital, Essential and Desirable Analysis...

It is the Analysis for monitoring and control of stores and spares inventory byclassifying them into 3 categories viz., Vital, Essential and Desirable. Themechanics of VED analysis are similar to those of ABC Analysis.VED Classification

While in ABC, classification inventories are classified on the basis of their consumption value and in HML analysis the unit value is the basis, criticality of inventories is the basis for vital, essential and desirable categorization.

The VED analysis is done to determine the criticality of an item and its effect on production and other services. It is specially used for classification of spare parts.If a part is vital it is given V classification, if it is essential, then it is given Eclassification and if it is not so essential, the part is given D classification. For


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V items, a large stock of inventory is generally maintained, while for D items,minimum stock is enough.

Q5(C)ANS-Safety stock is a term used to describe a level of stock that is maintained

below the cycle stock to buffer against stock outs. Safety Stock or Buffer Stock exists to counter uncertainties in supply and demand. Safety stock is defined asextra units of inventory carried as protection against possible stock outs. By havingan adequate amount of safety stock on hand, a company can meet a sales demand which exceeds their sales forecast without altering their production plan. It is heldwhen an organization cannot accurately predict demand and/or lead time for the

product. For example, if a manufacturing company were to continually run out of inventory, they would need to keep some extra inventory on hand so they couldattempt to meet demand while they were producing more inventories.

Safety stock can be utilized as a tool for a new company to judge how accuratetheir forecast is in the first few years, especially when used strategically with amaterials requirements planning worksheet. With a material requirements planning (MRP) worksheet a company can judge how much they will need to produce tomeet their forecasted sales demand without relying on safety stock. However, acommon strategy is to try and reduce the level of safety stock to help keepinventory costs low. This can be extremely important for companies with a smaller financial cushion or those trying to run on lean manufacturing , which is aimedtowards eliminating wastes throughout the production process.

The amount of safety stock an organization chooses to keep on hand candramatically affect their business. Too much safety stock can result in high holdingcosts of inventory. In addition, products which are stored for too long a time canspoil, expire, or break during the warehousing process. Too little safety stock can

result in lost sales and, thus, a higher rate of customer turnover. As a result, findingthe right balance between too much and too little safety stock is essential.

Reasons to have Safety Stock

Safety Stocks enable organizations to satisfy customer demand in the event of these possibilities:
http://en.wikipedia.org/wiki/Demandhttp://en.wikipedia.org/wiki/Lead_timehttp://en.wikipedia.org/w/index.php?title=Materials_requirements_planning&action=edit&redlink=1http://en.wikipedia.org/wiki/Material_requirements_planninghttp://en.wikipedia.org/wiki/Lean_manufacturinghttp://en.wikipedia.org/wiki/Demandhttp://en.wikipedia.org/wiki/Lead_timehttp://en.wikipedia.org/w/index.php?title=Materials_requirements_planning&action=edit&redlink=1http://en.wikipedia.org/wiki/Material_requirements_planninghttp://en.wikipedia.org/wiki/Lean_manufacturing


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Assess the packaging using the waste hierarchy (reduce, reuse,recycle), bearing in mind the need for the packaging to do an effective job in protecting and containing its content.

1) Avoid/Reduce: Favor zero packaging material where appropriate.2) Reuse :For packaging that cannot be avoided or reduced, favour packagingthat is or can be reused. Eg: containers that are picked up by the supplier forreuse.

3) Recycle : Where reuse is impracticable favor packaging that is made fromrecycled material and/or material that can be easily recycled (for example,give preference to packaging made from a single recyclable material ratherthan multiple materials).

APRIL-07

Q1(c)

ANS-SAME AS APRIL-06,Q3(A)

Q2(A)

ANS-- SAME AS APRIL-04,Q1(A)

Q2(C)

ANS-- SAME AS APRIL-06,Q7(B)i

Q3(A)

ANS Material handling is the movement of raw material,work-in-process (WIP) inventory, and finished productswithin a facility.


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The art and science of moving, packaging, and storing of substances in anyform.

There are different types of materials in any organization.

Different strategies are used to manage them (likeaccording to their value of usage).

ABC analysis

Critical value analysis

VED Analysis

Q3(C)

ANS-- A properly installed Material handling system can reduce the costsand labor, increase safety, increase productivity, reduce waste, increasecapacity and improve service.

Q4(A)

ANS-- SAME AS APRIL-04,Q1(B)

Q4(B)

ANS-- SAME AS APRIL-06,Q2(B)Q4(C)

ANS-- SAME AS APRIL-06,Q5(C)

Q6(a)

Ans same as April-05,Q2(a)

Q7(B)


Q7(c)

ANSSAME AS APRIL-06, Q2(C)


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APRIL-08

Q1(B)

ANS---SAME AS APRIL-05,Q1(A)

Q1(c)

ANS-SAME AS APRIL-05,Q5(B)

Q2(A)

ANS-- 1) TO PROVIDE UNINTERRUPTED FLOW OF

MATERIALS , SUPPLIES, AND SERVICES REQUIRED TOOPERATE THE FIRM

2) MINIMIZE INVENTORY INVESTMENT AND LOSS

3) MAINTAIN ADEQUATE QUALITY STANDARDS

4) FIND OR DEVELOP COMPETENT SUPPLIERS.

5) STANDARDIZE WHEREVER AND WHENEVER POSSIBLE THE

ITEMS BOUGHT WHENEVER POSSIBLE6) PURCHASE REQUIRED ITEMS AND SERVICES AT THELOWEST ULTIMATE PRICE.

7) IMPROVE THE ORGANIZATIONS COMPETITVE POSITION

8) WORK HARMONIOUSLY WITH OTHER DEPARTMENTS INTHE ORGANIZATION

9) ACCOMPLISH THE PURCHASING OBJECTIVES AT THELOWEST POSSIBLE LEVEL OF ADMINISTRATIVE COSTS.

Q2(B)


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ANS--

Inventory is defined as usable but idle resources

Objectives of inventory

To keep the inventory to minimum possible level which can be achievedby JIT and controlling production in high or low demand times.

Balancing supply and demand (managing seasonal demand and levelproduction eg crackers also level demand and seasonal production egcanned fruits)

Uncertainty of demand and supply- safety stock is kept for uncertain

high demand or uncertain low supply to prevent stockouts.Specialization inventory allows firms with subsidiaries to specialize.Each plant can produce a particular product or part instead of producing variety of products or parts.

Pipeline inventory (buffer interface)- stock is build up as pipelineinventory from purchasing goods from supplier till they are sold tocustomers. It includes materials actually being worked on or moving

between work centers or being in transit to distribution centers andcustomers. Key interfaces are supplier and purchasing, purchasing andproduction, production and marketing, etc.

Ease of production system- feeling of safe and secured.

Future increase in cost

Economies of scale- a firm can get economies of scale in manufacturing(longer production runs) , purchasing (quantity discounts), andtransportation (better equipment utilization) by holding inventory.

Q3(B)

ANS-- Push model order goods in advance of customer demand.


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Pull model once demand is known then production is done

The EOQ model is a technique for determining the best answers to thehow much and when questions. It is based on the premise that there is

an optimal order size that will yield the lowest possible value of the totalinventory cost. There are several assumptions regarding the behavior of the inventory item that are central to the development of the model

EOQ assumptions

Demand for the item is known and constant.

Lead time is known and constant. (Lead time is the amount of time thatelapses between when the order is placed and when it is received.)

The cost of all units ordered is the same, regardless of the quantityordered (no quantity discounts).

Ordering costs are known and constant (the cost to place an order isalways the same, regardless of the quantity ordered).

When an order is received, all the items ordered arrive at once(instantaneous replenishment).

Since there is certainty with respect to the demand rate and the leadtime, orders can be timed to arrive just when we would have run out.Consequently the model assumes that there will be no shortages.

Based on the above assumptions, there are only two costs that will varywith changes in the order quantity

(1) the total annual ordering cost and

(2) the total annual holding cost.Shortage cost can be ignored because of assumption 6. Furthermore, since thecost per unit of all items ordered is the same, the total annual item cost will bea constant and will not be affected by the order quantity.

EOQ symbols:


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D = annual demand (units per year)

P= cost per order (dollars per order)

C= annual inventory carrying cost expressed as a percentage of productcost

V = average cost or value of one unit of inventory

EOQ=sqrt(2PD/CV)

Q4(B)

ANS-- There are 3 types of material handling systemsmanual

mechanized and

automated.

Manual material handling systems -Tend to be labor-intensive. Typicalequipment would be hand dollies, drawers, low racks, pallet jacks, bins,and gravity flow conveyors.

Manual systems yield low throughput because of a lack of handlingspeed. Also, they, use cubic space poorly. Most firms have modifiedmanual systems to mechanized systems to increase efficiency.

Mechanized material handling System Is most efficient. It replacessome manual handling systems with mechanical movement. The forklifttruck is the backbone of a mechanism material handling system. Otherequipment found in this system include pallets, towlines, cranes, storagerack systems, and wheel conveyors.

Automated Material Handling System Most Sophisticated. It usescarousels, automatic storage and retrieval systems, item-picking


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equipment, optical scanners, high-rise rack systems, and robots. It canfully utilize the available cubic space in the facility.

Automated systems seem superior in most situations, but are extremely

costly, may require special types or sizes of facilities, and create seriousproblems when the system crashes.

Q5(A)

ANS Material handling is the movement of raw material,work-in-process (WIP) inventory, and finished productswithin a facility.

The art and science of moving, packaging, and storing of substances in anyform

Objectives of Material Handling

Movement - Movement of product into, through, and out of warehouses.Efficient movement inside a facility helps control costs and improvecustomer service.

Time Parts and raw materials must be available when needed atproduction stations, loading docks, and terminals.

Quantity Goods must move in the right quantity between theproduction stations as well as to the customer

Space The material handling system should effectively use theavailable cubic space in the warehouse, terminal or plant.

Q6(B)

ANS-- PURCHASING AND OTHER FUNCTIONSINTERNAL INFORMATION FLOWING TO PURCHASING


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EXTERNAL INFORMATION FLOWING TO PURCHASING

INFORMATION FLOWING FROM PURCHASING


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USE OF COMPUTERS IN PURCHASING

EDI

It helps to bring suppliers online to share more timely and accurateinformation

Applying bar code technology in receiving inbound shipments andgenerating orders.


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EDI benefits in purchasing


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Q7(B)

Ans--ROUTINE ORDERS

PROCEDURAL PROBLEMS (NON ROUTINE PURCHASESREQUIRED FOR EMPLOYEES TO LEARN ABOUT THEPRODUCT)

PERFORMANCE PROBLEMS(NON ROUTINE PURCHASES OFPRODUCTS DESIGNED TO BE SUBSTITUTES FOR CURRENTPRODUCT AND HAVE TO BE TESTED(MAY BE WHEN THECURRENT RAW MATERIAL IS NOT PROFITABLE OF HAVINGANY KIND OF PROBLEM))


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POLITICAL PROBLEMS(NON ROUTINE PURCHASES(LIKECHANGE IN RAW MATERIAL , SUPPLIER ETC WHOSE USEMAY AFFECT MANY DEPTS OF THE FIRM)

APRIL-09

Q1(C)

ANS MEASUREMENTPRICE EFFICTIVENESS( actual price performance against plan)

COST SAVINGS( reducing per unit cost)

WORKLOAD( measuring new work, the backlog of work and work accomplished)

ADMINISTRATION AND CONTROL( compares actual cost to thepurchasing budget)

EFFICIENCY( purchasing outputs relative to purchasing inputs likepurchase orders per buyer or money committed per buyer or contractsper buyer)

VENDOR QUALITY AND DELIVERY( percentage of items acceptedor rejected)

MATERIAL FLOW CONTROL MEASURES( flow of material fromsupplier to buyer)

REGULATORY, SOCIETAL AND ENVIRONMENTAL MEASURES(govt rule like pollution control)

PROCUREMENT PLANNING AND RESEARCH( price forecastaccuracy, lead time forecasting , plans proposed annually)


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COMPETITION( evaluates items like number of purchase made from asingle source)

INVENTORY( inventory turnover ratio, inventory levels and

consignments)TRANSPORTATION( kind of transportation)

Q1(D)


Q2(B)

ANS---- SAME AS APRIL-08,Q2(A)

Q3(B)

ANSMANAGERS should have good negotiating skill. They should have

strong relationships with suppliers. Good purchasing practices avoidoperational problems. Purchasing should be done to generate profits not justto reduce costs.

Q4(C)

ANS---- SAME AS APRIL-04,Q4(B)

Q5(C)

ANS---- SAME AS APRIL-08,Q6(B)Q7(A)

ANS--characteristics of JIT purchase

1) quality (less product specification, supplier assisted by purchaser, nosampling)


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2) transportation (purchasing manager schedules and controlstransportation activities)

3)suppliers (few supplier located close are selected, repeat business is

preferred, continuous evaluation of suppliers is done, bidding of materials is minimized , encouraged to do JIT purchasing)

4) quantities (frequent , steady delivery of small lots in exact quantities ,long term purchasing contracts, shortages and overages arediscouraged)

BENEFITS OF JUST IN TIME PURCHASE

JIT purchaser benefits

1. JIT purchasing work best when buyers have consistent, reasonable ,production schedule

2. They give large orders to few suppliers

3. Use long term contracts

4. Select responsive suppliers

5. reduced material cost6. Less rework

7. Few delays

8. Less supervision

9. Administrative efficiency is achieved

10.Better and accurate communication

11.Low inventory cost

12. Low transportation cost

13. Less scrap

14. Few defects


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15. Less inspection and better quality finished goods

16. Faster response to design innovation

JIT supplier benefits

1. Better training

2. more predictable schedules

3. Reduce labor turnover

4. Administrative efficiency

Q7(B)

ANS-- SAME AS APRIL-06,Q5(B)Q7(D)


APRIL -10

Q1(A)

ANS SAME AS APRIL-04,Q1(A)Q1(B)

ANS SAME AS APRIL-04,Q2(A)

Q2(A)

ANS--

SAME AS APRIL-04,Q2(B)

Q3(B)



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Q4(A)


Q4(C)

ANSSAME AS APRIL-06,Q2(C)

Q5(B)

ANS SAME AS APRIL-06,Q5(C)

Q6(C)


Q7(C)


TOPIC 4-LOGISTICS AND COMPETITIVE STRATEGYAPRIL-04Q4(A)ANS


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SAME AS APRIL-05,Q4(A)Q5(B)ANS SAME AS APRIL-05,Q3(B)

APRIL-05Q1(B)

ANS- The globalization and customer service is changing the logistics or globalization is a challenge to logistics because of the benefits as follows:

I.BENEFITS OF GLOBALIZATION

A. Benefits to Participating Countries:

1.Integration of Countriesi. Globalization leads to integration of countries of the world for business purposes.

ii. Trade will be made free and there will be free movement of goods andservices among all countries.

iii. The isolation of countries from world trade will be removed and thiswill be beneficial to all participating countries.

1.Integration of Countries

iv. Globalization leads to integration of countries of the world for business purposes.

v. Trade will be made free and there will be free movement of goods andservices among all countries.

vi. The isolation of countries from world trade will be removed and thiswill be beneficial to all participating countries.

3.Transfer of Capital and Technology


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i. Globalization facilities easy transfer of capital from one country to theother due to free convertibility.

ii. This will lead to flow of funds to poor and developing countries, andalso along with capital, technology will also be moved from developed todeveloping countries.

iii. Such transfer of technology leads to modernization of industries.

4.New Global Economic Order

i. The process of globalization leads to a new economic order whichwill facilitate global cooperation for economic development of poor countries.

ii. Such countries will also get wider exposure and will get the benefitsof free trade at the global level.

5.Opportunities to expand Business & Promote Exports

i. Globalization leads to expansion of world trade and the benefits of such expansion will be available to all participating countries.

ii. Business enterprises will have wider exposure and they can sell their products in suitable markets all over the world.

iii. Even expansion in the employment opportunities within the countrywill be possible due to global exposure to domestic industries.

6.Optimum Utilization of Resources

i. Globalization ensures utilization of natural and other resources in the best possible manner.

ii. It will enable countries to use untapped resources fully with thesupport and cooperation of other countries.

iii. Production and marketing activities will get new dimensions as aresult of globalization.


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7.Higher Status

i. A global player gets higher status and reputation at the internationallevel.

ii. Such countries get different benefits of global participation and slowly become a big economic power.

B. Benefits to Participating Companies/Enterprises:

1. High Profit

i. A company participating in global business, manufacturing quality

goods at lower cost due to the use of high technology.

ii. It can export goods in large quantities and earn high profits out of export transactions.

2. Benefits of Liberal Government Facilities

i. Governments in developing countries offer special tax benefits,financial facilities etc. to companies interested in global business.

ii. The benefits of such facilities are available to the company for expanding its business activities.

3. Expansion in Business Activities

i. Companies operating in global market expand their business activitiesdue to export orders, government facilities and so on.

ii. Even latest technology is used in the production activities whichensure quality production at lower cost.

4. Spreading Business Risksi. Global enterprises can spread their business risks between domestics

and global markets.

ii. The loss in the domestic market can be covered from the high profitsavailable from global business.


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iii. As a result, the total business risk is brought down considerably.

5. Better Utilization of Resources

i. Global marketing facilitates mass production. Global enterprises get

the benefit of big orders from abroad.

ii. They utilize available resources fully for production purposes, expand business activities and earn huge profits.

6. Raises Competitive Capacity

i. A global company gets benefits of participation in global business. It produces superior quality goods at lower production cost.

ii. This raises competitive capacity in the domestic and internationalmarket.

7. Contribution to National Economy

i. A business enterprise participating in global marketing conducts largescale production, exports on large scale and earns foreign exchange for the

benefit of the national economy.

ii. It strengthens the national economy and promotes its growth.

Q3(A)ANS-- COMPETITIVE ADVANTAGEA central theme of this book is that effective logistics management can provide amajor source of competitive advantage; in other words, a position of enduringsuperiority over competitors in terms of customer preference may be achievedthrough logistics.

Competitive Advantage and the Three CsCustomers

Needs seekingbenefits at


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The bases for success in the marketplace are numerous, but a simple model is

based around the triangular linkage of the company, formed by its customers andits competitors-the "Three Cs." The Three Cs in question are the customer, thecompetition, and the company.

Figure illustrates the three-way relationship.

The source of competitive advantage is initially found in the ability of theorganization to differentiate itself, in the eyes of the customer, from its competitionand also by operating at a lower cost and, hence, at greater profit.

Seeking a sustainable and defensible competitive advantage has become theconcern of every manager who is alert to the realities of the marketplace.[ns nolonger acceptable to assume that good products will sell themselves; neither is itadvisable to imagine that success today will carry forward into tomorrow.

Let us consider the basis of success in any competitive context. At its mostelemental, commercial success derives either from a cost advantage or a valueadvantage or, ideally, both. It is as simple as that-the most profitable competitor inany industry sector tends to be the lowest cost producer or the supplier providing a

product with the greatest perceived differentiated values. To be successful in theautomobile industry, for example, you either have to be a Nissan (i.e., a costadvantage) or a BMW (i.e., a value advantage).

Company Competitor

Assets and Assets and

Valu Valu

Cost


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Put very simply, successful companies either have a productivity advantage or theyhave a "value" advantage or a combination of the two: The productivity advantagegives a lower cost profile, and the value advantage gives the product or offering adifferential "plus" over competitive offerings.

Let us briefly examine these two vectors of strategic direction

Productivity AdvantageIn many industries there will typically be one competitor who will be the low cost

producer, and, more often than not, that competitor will have the greatest salesvolume in the sector. There is substantial evidence to suggest that "big is beautiful"when it comes to cost advantage. This is partly due to economies of scale thatenable fixed costs to be spread over a greater volume but more particularly to the

impact of the" experience curve.The experience curve is a phenomenon that has its roots in the earlier notion of thelearning curve. Researchers discovered during the last war that it was possible toidentify and predict improvements in the rate of output of workers as they becamemore skilled in the processes and tasks on which they were working. Subsequentwork by Bruce Henderson, founder of the Boston Consulting Group, extended thisconcept by demonstrating that all costs, not just production costs, would decline ata given rate as volume increased. In fact to be precise, the relationship that the

experience curve describes IS between real unit costs and cumulative volume.Further, it is generally recognized that this cost decline applies only to "valueadded," that is, costs other than those used for supplies.

Traditionally, it has been suggested that the main route to cost reduction was bygaining greater sales volume, and there can be no doubt about the close linkage

between relative market share and relative costs. However, it must also berecognized that logistics management can provide a multitude of ways to increaseefficiency and productivity and, hence, contribute significantly to reduced unitcost. How this can be achieved will be one of the key themes of this note.

Value AdvantageIt has long been an axiom in marketing that "customers don't buy products, they

buy benefits." Put another way, the product is purchased not for itself but for the


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promise of what it will deliver. These benefits may be intangible; that is, theyrelate not to specific product features but rather to such things as image or reputation. Alternatively, the delivered offering may be seen to outperform itsrivals in some functional aspect.

Unless the product or service we offer can be distinguished in some way from itscompetitors, there is a strong likelihood that the marketplace will view it as a"commodity," and so the sale will tend to go to the cheapest supplier. Hence, theimportance of seeking to add additional values to our offering to mark it out fromthe competition.

What are the means by which such value differentiation may be gained?Essentially, the development of a strategy based on added values will normallyrequire a more segmented approach to the market. When a company scrutinizesmarkets closely it frequently finds that there are distinct value segments. In other words, different groups of customers within the total market attach differentimportance to different benefits. The importance of such benefit segmentation liesin the fact that often there are substantial opportunities for creating differentiated

appeals for specific segments.For example, look at the automobile. A model such as the Ford Escort is not only

positioned in the middle range of American cars, but within that broad categoryspecific versions are aimed at defined segments. Thus, we find a basic, two-door model, and also four-door and station wagon models. Each of these models

presents a whole variety of options, all of which seek to satisfy the needs of quitedifferent benefit segments. Adding value through differentiation is a pO"Ye1rfulmeans of achieving a defensible advantage in the market.

Equally powerful as a means of adding value is service. Increasingly we arefinding that markets are becoming more service sensitive, and this, of course, poses

particular challenges for logistics management. There is a trend in many marketstoward a decline in the strength of the "brand" and a consequent move toward"


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commodity" market status. Quite simply, this means it is becoming progressivelymore difficult to compete purely on the basis of brand or corporate image.

Additionally, there is an increasing convergence of technology within productcategories, which means that it is no longer possible to compete effectively on the

basis of product differences. Thus, the need arises to seek differentiation throughmeans other than technology (A number of companies have responded to this byfocusing on service as a means of gaining a competitive edge. Service in thiscontext relates to the process of developing relationships with customers throughthe provision of an augmented offer.

This augmentation can take many forms including delivery service, after-salesservices, financial packages, technical support, and so forth.

In practice what we find is that the successful companies will often seek to achievea position based on both a productivity advantage and a value advantage. A usefulway of examining the available options is to present them as a simple matrix (seeFigure).

Let us consider these options in turn.For companies who find themselves in the bottom left-hand comer of our matrix(Figure 1-2), the world is an uncomfortable place. Their products areindistinguishable from their competitors' offerings, and they have no costadvantage. These are typical commodity market situations, and ultimately the onlystrategy is either to move to the right on the matrix, that is, to cost leadership, or upward into a "niche." Many times the cost leadership route is simply notavailable. This is often the case in a mature market where substantial market share

gains are difficult to achieve. New technology may sometimes provide a windowof opportunity for cost reduction, but in such situations, the same technology isoften available to competitors.

Cost leadership, if it is to form the basis of a viable long-term marketing strategy,should essentially be gained early in the market life cycle. This is why market


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share is considered to be so important in many industries. The experience curveconcept, briefly described earlier, demonstrates the value of early market sharegains-the higher your share relative to your competitors, the lower your costsshould be. This cost advantage can be used strategically to assume a position of

price leader and, if appropriate, to make it impossible for higher cost competitorsto survive. Alternatively, price may be maintained, enabling above-average profitto be earned that is potentially available to further develop the position of the

product in the market.

The other way out of the commodity quadrant of our matrix is to seek a niche or segment where it is possible to meet the needs of the customers through offeringadditional values. Sometimes it may not be through tangible product features thatthis value added is generated, but, as we have noted, opportunities may often existfor adding value through service. For example, a steel stockholder who findshimself in the commodity quadrant may seek to move up to the niche quadrant byoffering daily deliveries from stock, by providing additional finishing services for his basic products, or by focusing on the provision of a range of special steels for specific segments. What does seem to be an established rule is that there is nomiddle ground between cost leadership and niche marketing. Being caught in themiddle, as neither a cost leader nor a niche-based provider of added values, isgenerally undesirable.

Finally, perhaps the most defensible position in the matrix is the top right-handcorner, Companies who occupy that position have products that are distinctive inthe values they offer and are also cost competitive. Many Japanese products,

particularly in consumer markets, arguably have achieved this position. Clearly itis a position of some strength, occupying high ground That is extremely difficultfor competitors to attack. There is a clear strategic challenge to logistics: to seek out strategies that will take the business away from the commodity end of themarket toward a securer position of strength based on differentiation and costadvantage.

Ques : How logistic information system can help achieve competitive advantage?(8 marks)

Answer :


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GAINING COMPETITIVE ADVANTAGE THROUGH LOGISTICSOf the many changes that have taken place in management thinking over the last10 years or so, perhaps the most significant has been the emphasis placed on thesearch for strategies that will provide superior value in the eyes of the customer. To

a large extent the credit for this must go to Michael Porter, the Harvard BusinessSchool professor, who, through his research and writing,34 has alerted managersand strategists to the central importance of competitive relativities in achievingsuccess in the marketplace.

One concept in particular that Michael Porter has brought to a wider audience isthe "value chain

Competitive advantage cannot be understood by looking at a firm as a whole. It

stems from the many discrete activities a firm performs in designing, producing,marketing, delivering, and supporting its product. Each of these activities cancontribute to a firm's relative cost position and create a basis for differentiation.The value chain disaggregates a firm into its strategically relevant activities inorder to understand the behavior of costs and the existing and potential sources of differentiation. A firm gains competitive advantage by performing thesestrategically important activities more cheaply or better than its competitors.

Value chain activities can be categorized into two types: primary -activities

(inbound logistics, operations, outbound logistics, marketing and sales, andservice) and support activities (infrastructure, human resource management,technology development and procurement). These support activities are integratingfunctions that cut across the various primary activities within the firm. Competitiveadvantage grows out of the way in which firms organize and perform these discreteactivities within the value chain. To gain competitive advantage over its rivals, afirm must promote value to its customers by performing activities more efficientlythan its competitors or by performing activities in a unique way that creates greater

buyer value.Logistics management, it can be argued, has the potential to assist the organizationin the achievement of both a cost/productivity advantage and a value advantage/Inthe first instance there are a number of important ways in which productivity can

be enhanced through logistics. While these possibilities for leverage will bediscussed in detail later in the book, suffice it to say that the opportunities for


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better capacity utilization, inventory reduction, and closer integration withsuppliers at a planning level are considerable. Equally, the prospects for gaining avalue advantage in the marketplace through superior customer service should not

be underestimated. It will be argued later that the way we service the customer has

become a vital means of differentiation.

To summarize, those organizations that will be the leaders in the markets of thefuture will be those that have sought and achieved the twin peaks of excellence:They have gained both cost leadership and service leadership.

Q3(B)ANS--3Cs-CUSTOMER, COMPETITION, CHANGE:

3 Cs are the new matters, which is driving the organization. These are theCustomer, Competition and Change. The organizations keeping these on their cards are going to decide their future.

In 21st century, the companies having flexibility to attain these factors will comeup and sustain. We loot at these factors one by one.

Customer

Before the period from 1960 to 1970, the manufacturers were in position to sellany thing, which they produced. After 1980 in all the fields the picture haschanged. The customer, consumer or the industries decide the demand.

What they want? When they want? At what place they want the delivery? And alsowhen he will pay? He has become wiser and decides the configuration of thematter that he will purchase.

The organizations are picking need~ of the customers. If an organization looses a

customer for any reason, they have to get ready to loose yet another.

The customers have their choice. They do not behave alike. Customer, consumers,companies demand products and services designed for their unique and particular needs.


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There is no such notion as the customer to whom the seller is dealing at amovement and who has the capacity to instruct their personal taste. The massmarket has broken down into small and single customer. Customers expect thatthey be treated individually. They expect products that are made to their needs,

delivery schedules and the place, at their payment terms, which are convenient tothem.

Such expectations have increased to a great extent after the effect of globalizationand entry of Japanese companies, who entered the markets with lower prices aswell as products with higher quality standards. Further they came with higher levels of service standards.

Customer is aware that he can demand and get more. Technology of higher

sophistication, easily available database allows service providers to display their basic information easily available on the net services to increase competitiveness.

When in a company consumer call for service the call is automatically routed tothe same service representative with whom consumer spoke last time. This createssense of personal relationship and intimacy.

Incredible consolidation of customers in the same market like automobile businesshas greatly changed the terms of seller-customer relationships in the similar way of

restaurants. What holds true for industrial customers is also true for normalconsumer. When the industrial customer gets services in better way, the normalconsumer expects and gets in the similar style.

This is happening because customers now have easy access to enormously bigdata. The information rich world made possible by new communicationstechnologies does not even required the consumer to have computer at home. Dailynewspapers around the country spread the data electronically and pass it on to thereaders with greater amount of analysis. Often the buyer has more information than

the supplier's marketing person. This makes the negotiations tougher. A customer lost today can lead to lose yet another tomorrow this is not a picture of success for the supplier.

Competition:


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The second 'C' stands for competition. In the - sellers market before 1980 it waseasy for manufacturer to get an order on his table and provide the product at hiswill and wish.

Now the scene has changed.Few buyers have many suppliers of good quality products. This competitive basehas not only reduced the prices of the product but improve the quality, and servicelevels. When the Japanese, Germans, French, Taiwanese have entered in theglobalized market, they are free to compete with each other. Only the best willsurvive with a highest quality, lowest price and the best service. There after thesefactors become the standard for all competitors. Adequate is not good enough.

If a company cannot stand shoulder to shoulder with the world's best it has to beout of scene soon.

Newly started company coming up with better products with higher-level servicecan beat the regular companies. The brand may not be considered by the newgeneration of consumer. The competition can put the regular companies awaywhen a new comer's products give good results.

Technology changes the nature of competition in ways companies don't expect.The logistics management gives upper hand to the sellers to get better edge over the competitors by providing products as per the needs of consumer.

COMPANY

The rapidity of technological change promotes innovation products have got nowthe short life.

For example Premier Automobile started the company in 1945 with a model (FiatCar), which lived for about 50 years and died down with the same model. It was ok that time. In today's atmosphere in India itself we see number of automobilecompanies come up with new models of car every two to three years of better quality standards.

Today companies must move fast, or they won't be moving at all. Moreover theyhave to be looking in many directions at a time. They must not only provide


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products to the market but constantly collect data regarding future needs of customers, their likings, the entry of new competitors etc. the changes that will puta company out of business are, those that happen outside the light of its currentexpectations, and that is the source of most change in today's business

environment. These three C's have created a new world for business and it is becoming increasingly clear that organizations designed to operate in oneenvironment can not be fixed to work well in another.

Q4(A)

I. ANS WAREHOUSE

1. Warehouse is a place, use to store products until customer require them.

2. Warehouse is an unavoidable acitivity.It increases the cost of the material by simply carrying it.

3. No transformation of any type is to be done. Stores have a vital role to play.

II. TYPES OF WAREHOUSE

There are three basic types of warehouse as follows: PRIVATE

PUBLIC

CONTRACT

III. A. PRIVATE WAREHOUSING

Also known as proprietary warehousingOperated as a division within a companyOn-site* and off-site** warehousing


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Substantial corporate fixed investment in land, building, andequipment

The firm producing or owning the goods own private warehouses2. The focus of this type is to store, the firms own goods until they are

delivered to a retail outlet or sold.3. High volumes and high utilization favor owning the warehouse

because of economies of sale.4. The firm can maintain lower delivered prices or higher profit margin

based on such economies.5. Private facilities also offer a great deal of control regarding hiring and

firing employees, benefits packages and operation within thewarehouse.

6. Another potential advantage of using a private warehouse is the ability

to maintain physical control over the facility, which allows managersto address loss, damage and theft.

7. A firm can earn extra income from renting or leasing excess space in a private warehouse.

8. To make a private warehouse cost-effective, the facility needs high product throughput to achieve economies of scale and spread the fixedcosts of the facility over many items.

B. PUBLIC WAREHOUSING

Warehouse is owned and operated by a third partyCharges in particular for type of services usedMainly for short-term usage

1. A public warehouse rents space to individuals or firms needingstorage. The services these warehouse offers may vary.

2. Some provide a wide array of services including packaging,labeling, testing, inventory maintenance, local delivery, data processingand pricing3. There are many reasons to lease space instead of owning awarehouse.a. First, Leasing lowers the capital investment needed to establish a

warehouse.


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b. Second, leasing offers flexibility.Public warehousing also allows for flexibility in the amount space leased.

5. The firm avoids responsibility for hiring and firing warehousingemployees as well as the paperwork associated with running a privatewarehouse.6. There are many types of public warehouses:

i. Merchandise warehouse

Provides standardized services for a wide variety of goods & potentialcustomers

ii. Refrigerated warehouse

Provides a temperature controlled environment for products like frozen

food.iii. Bounded warehouse

Allows goods to stored without paying trade, tariff & duties until theyleave the warehouse

iv. Household good warehouse

Stores personal property such as furniture, clothes etc.

v. Speciality goods warehouseUsed to store agricultural products like grains

vi. Bulk storage warehouse

It holds liquids and dry goods like stone, sand & coal.

i. General Merchandise Warehouse

ii. Refrigerated warehouseiii. Bonded warehouseiv. Household goods warehousesv. Specialty goods warehouse

vi. Bulk storage warehouse


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C. CONTRACT WAREHOUSING

A variation of public warehousingA long-term contract and/or servicesWarehouse is owned and operated by a third party

Customizedservices/space over a longtermA trade-off between location flexibility for assured space over the

contract period and a lower price that is usually lower than warehousingrates

Contact for either an entire building or for a defined, fixed portion of square-foot or cubic-foot space

Contract warehousing is a specialized form of public warehousing.2. In addition to warehousing activities, a contract warehouse

provides a combination of integrated logistics services, thus allowing theliaising firm to concentrate on its speciality3. Contract warehousing often provides customized services.4. Contract warehousing is a third party integrated logisticsorganization that provides higher quality services than are available from

public warehouse.5. There are many reasons for the growth of contract warehouses asfollows:-

i. Product seasonalityii. Geographic coverage requirements

iii. Flexibility in testing new marketingiv. Management expertise and dedicated resourcesv. Off - balance sheet financing

vi. Reduction in transportation cost


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Figure : Warehouse

Q4(B)

Ans-- Packaging is enclosing of a physical object, typically a product thatrequires protection from tampering, protection against dust & dirt, Marketing,Reducing theft.

1. Packaging can not only help prevent theft and damage but also help promote goods.

2. Packaging may also interest production, since production employees often package the goods.

3. Packaging is not as costly as transportation, 10 percent of integrated

logistics cost can be attributed to packaging.

4. The size. Shape and type of packaging material influence the type andamount of material handling equipment as well as how goods are stored inwarehouse.


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5. The interface of Packaging with integrated logistics is no more evidentthan with transportation packaging varies by mode of transportation.

Oceangoing package protection requires moisture proof containers that add to

the overall cost of the product.

Functions of Packaging

1. Packaging should contain the goods to prevent shifting.

2. It should protect the good from damage during handling, storingand transporting.

3. Packaging should apportion goods. This refers to reducing production output to a size and shape desired by the consumer.

4. Utilization, this allows packages to be consolidated into larger packages & finally unitized into a single unit for shipping.

5. Packaging should be convenient, allowing customers to use the product with ease.


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Packaging should also communicate. Communication allows information to beconveyed to the consumer.

Q5(B)

Ans-- Two types of cost

4) Carrying cost- physically storing goods

b) Capital or opportunity cost compares inventory investment to other capitalinvestments.

Storage space cost- cost of moving goods into and out of inventory (includesvariable cost like rent, utilities and space)

c) Inventory service cost- contains insurance and taxes.

d) Inventory risk cost- cost of obsolescence, damage, relocation or theft.

2) Ordering cost- consist of

c) order cost- include preparing and processing the order request, selecting asupplier, checking stock, preparing the payment and reviewing inventorylevels.

d) setup costs- cost involved in modifying the manufacturing process to makedifferent goods

APRIL 06

Q3(C)

ANS--

SAME AS APRIL 05, Q4(A)

Q5(A)

ANS-- GAINING COMPETITIVE ADVANTAGE THROUGH LOGISTICSOf the many changes that have taken place in management thinking over the last10 years or so, perhaps the most significant has been the emphasis placed on thesearch for strategies that will provide superior value in the eyes of the customer. To


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a large extent the credit for this must go to Michael Porter, the Harvard BusinessSchool professor, who, through his research and writing,34 has alerted managersand strategists to the central importance of competitive relativities in achievingsuccess in the marketplace.

One concept in particular that Michael Porter has brought to a wider audience isthe "value chain

Competitive advantage cannot be understood by looking at a firm as a whole. Itstems from the many discrete activities a firm performs in designing, producing,marketing, delivering, and supporting its product. Each of these activities cancontribute to a firm's relative cost position and create a basis for differentiation.The value chain disaggregates a firm into its strategically relevant activities in

order to understand the behavior of costs and the existing and potential sources of differentiation. A firm gains competitive advantage by performing thesestrategically important activities more cheaply or better than its competitors.

Value chain activities can be categorized into two types: primary -activities(inbound logistics, operations, outbound logistics, marketing and sales, andservice) and support activities (infrastructure, human resource management,technology development and procurement). These support activities are integratingfunctions that cut across the various primary activities within the firm. Competitiveadvantage grows out of the way in which firms organize and perform these discreteactivities within the value chain. To gain competitive advantage over its rivals, afirm must promote value to its customers by performing activities more efficientlythan its competitors or by performing activities in a unique way that creates greater

buyer value.

Logistics management, it can be argued, has the potential to assist the organizationin the achievement of both a cost/productivity advantage and a value advantage/Inthe first instance there are a number of important ways in which productivity can

be enhanced through logistics. While these possibilities for leverage will bediscussed in detail later in the book, suffice it to say that the opportunities for

better capacity utilization, inventory reduction, and closer integration withsuppliers at a planning level are considerable. Equally, the prospects for gaining avalue advantage in the marketplace through superior customer service should not


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be underestimated. It will be argued later that the way we service the customer has become a vital means of differentiation.

To summarize, those organizations that will be the leaders in the markets of the

future will be those that have sought and achieved the twin peaks of excellence:They have gained both cost leadership and service leadership.

Q7(B)ii

ANS-- SAME AS APRIL 05, Q3(B)

APRIL 07

Q1(A)

ANS-- SAME AS APRIL 05, Q3(B)

Q6(B)

ANS-- SAME AS APRIL 05, Q4(A)

APRIL-08

Q1(D)

ANS

Reverse logistics refers to logistics activities and management skills used toreduce, manage and dispose waste from packaging and products.

SOME COMMON TYPES OF REVERSE LOGISTICS:

Recycling.

Customer returns of new products.

Customer returns of used products.


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Re-usable items.

1. Recycling

The logistics system must take the empty package from the customer andreturn it to the party responsible for the actual recycling process.

Recycling refers to carrying a used material or product backward through thedistribution network.

Several supply chain members usually participate in a recycling system.

Example:- recycling a used aluminum can or a soft drink bottle, etc.

Collectors, sorters, processors and remanufacturers are a part of this.

2.CUSTOMER RETURNS OF NEW PRODUCTS:

Allows customers to return unwanted products.

Customers can also return defective or damaged products and can obtain anexchange or credit.

If the party responsible for the damage cannot be reliably determined, the

retail outlet is likely to bear the loss.3.CUSTOMER RETURNS OF USED PRODUCTS:

Occasionally, customers are encouraged to return used products to their retail outlet and obtain a financial credit. {for eg; in an automotive industry}

Automotive alternators, starters and water pumps can all be remanufacturedfrom used parts.

The used product is packaged for shipment and returned to the distributor.

The distributor credits the retailer and ships the used parts to aremanufacturer.

The remanufactured parts are marketed as an inexpensive alternative to newreplacement parts.


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This logistics system starts with the incentive to return the used product tothe retail outletMAINLY TO OBTAIN DISCOUNTS.

To receive the discount, the customer must return the used part at the time of

purchase.Failure to provide it would result in a extra charge that will increase the costof a remanufactured part.

4.CUSTOMER RETURNS OF REUSED PRODUCTS :

Many returned products must undergo some sort of remanufacturing or alteration process.

Some may be reused with minimal effort. {for eg: a glass bottle }

When these are returned to the retail store, the store credits the customer.

The store takes possession of these products and uses the reverse logisticssystem to return them to a bottling plant.

The bottling plant cleans and sterilizes the used bottles, refills them, capseach bottle and returns it to the market.

Q3(C)

ANS

Primary service response logistics activities

Waiting time

Service capacity

Service delivery


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Q5(B)

ANSSAME AS APRIL-05 Q3(B)

Q5(C)

ANSSAME AS APRIL-05 Q4(A)

APRIL-09

Q1(B)

ANS SAME AS APRIL-08 Q1(D)

Q2(C)

ANS

COMPETITIVE ADVANTAGEA central theme of this book is that effective logistics management can provide amajor source of competitive advantage; in other words, a position of enduringsuperiority over competitors in terms of customer preference may be achievedthrough logistics.

Competitive Advantage and the Three CsCustomers

Needs seekingbenefits at

Valu Valu


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The bases for success in the marketplace are numerous, but a simple model is based around the triangular linkage of the company, formed by its customers andits competitors-the "Three Cs." The Three Cs in question are the customer, thecompetition, and the company.

Figure illustrates the three-way relationship.

The source of competitive advantage is initially found in the ability of theorganization to differentiate itself, in the eyes of the customer, from its competitionand also by operating at a lower cost and, hence, at greater profit.

Seeking a sustainable and defensible competitive advantage has become theconcern of every manager who is alert to the realities of the marketplace.[ns nolonger acceptable to assume that good products will sell themselves; neither is itadvisable to imagine that success today will carry forward into tomorrow.

Let us consider the basis of success in any competitive context. At its mostelemental, commercial success derives either from a cost advantage or a valueadvantage or, ideally, both. It is as simple as that-the most profitable competitor inany industry sector tends to be the lowest cost producer or the supplier providing a

product with the greatest perceived differentiated values. To be successful in theautomobile industry, for example, you either have to be a Nissan (i.e., a costadvantage) or a BMW (i.e., a value advantage).

Put very simply, successful companies either have a productivity advantage or theyhave a "value" advantage or a combination of the two: The productivity advantagegives a lower cost profile, and the value advantage gives the product or offering adifferential "plus" over competitive offerings.

Let us briefly examine these two vectors of strategic direction

Company Competitor

Assets and Assets and

Cost


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Productivity AdvantageIn many industries there will typically be one competitor who will be the low cost

producer, and, more often than not, that competitor will have the greatest salesvolume in the sector. There is substantial evidence to suggest that "big is beautiful"

when it comes to cost advantage. This is partly due to economies of scale thatenable fixed costs to be spread over a greater volume but more particularly to theimpact of the" experience curve.

The experience curve is a phenomenon that has its roots in the earlier notion of thelearning curve. Researchers discovered during the last war that it was possible toidentify and predict improvements in the rate of output of workers as they becamemore skilled in the processes and tasks on which they were working. Subsequentwork by Bruce Henderson, founder of the Boston Consulting Group, extended thisconcept by demonstrating that all costs, not just production costs, would decline ata given rate as volume increased. In fact to be precise, the relationship that theexperience curve describes IS between real unit costs and cumulative volume.Further, it is generally recognized that this cost decline applies only to "valueadded," that is, costs other than those used for supplies.

Traditionally, it has been suggested that the main route to cost reduction was bygaining greater sales volume, and there can be no doubt about the close linkage

between relative market share and relative costs. However, it must also berecognized that logistics management can provide a multitude of ways to increaseefficiency and productivity and, hence, contribute significantly to reduced unitcost. How this can be achieved will be one of the key themes of this note.

Value AdvantageIt has long been an axiom in marketing that "customers don't buy products, they

buy benefits." Put another way, the product is purchased not for itself but for the promise of what it will deliver. These benefits may be intangible; that is, theyrelate not to specific product features but rather to such things as image or reputation. Alternatively, the delivered offering may be seen to outperform itsrivals in some functional aspect.


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Unless the product or service we offer can be distinguished in some way from itscompetitors, there is a strong likelihood that the marketplace will view it as a"com

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