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T ROLL NUMBER: 510916226 OM0003 SET-1
Q1. Supply chain management is a better sounding name for the earlier “distribution and logistics” term used in Marketing. Do you agree? Express your views in detail. Ans:Since the beginning of last decade of the twentieth century, there has been a metamorphic environmental change in the business world, which resulted into tremendous growth opportunities ion one hand ad more complicated business problems threatening to even survival on the other. Numerous brands of cars, two wheelers, and consumer goods are available against an at least six years back where consumers were left with very few brands for their choice. With the growth in the industrialization, companies nowadays, are increasing their product portfolio with a focus on quick information, prominent display, ready and intact delivery etc in order to satisfy their consumers with a difference. To attain all of the above goals, companies have to present best quality product at a reasonably least price as and when required, avoiding a stock out situation which has given impetus to the concept of Supply Chain and Logistics Management. Supply chain management (SCM) is the combination of art and science that goes into improving the way your company finds the raw components it needs to make a product or service and deliver it to customers. American Production and Inventory Control Society define it as the organistions that successively transform raw materials into intermediate goods, then to final goods and deliver them to customers. Supply Chain Management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-oforigin to point-of-consumption (supply chain). Harland defines Supply chain management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers. Cooper defines it as “an integrative philosophy to manage the total flow of distribution channel from supplier to ultimate user.” In simple words, SCM is an integrated management of various functions in the areas of materials, operations, distributions, marketing and services after sales with a customer focus in perspective so as to synergize various processes in the organisation with a view of optimising the total cost. Above definitions of explain us about some of the important features of Supply Chain Management such as
• Customer focus • Retaining existing customers • Streamlining of operations • Minimum Fixed Cost • Elimination of paper work • Just in time inventory • Transparency at all levels of management decisions • Developing multiple supply sources for a multiple components • Customer value enhancement and cost reduction 2. Elaborate on the various activities/disciplines covered by logistics. Ans:- The following is a general description of ten activities/disciplines covered by logistics: 1. Maintenance Planning Maintenance planning begins early in the acquisition process with development of the maintenance concept. It is conducted to evolve and establish requirements and tasks to be accomplished for achieving, restoring, and maintaining the operational capability for the life of the system. 2. Supply Support Supply support encompasses all management actions, procedures, and techniques used to determine requirements to: 1. Acquire support items and spare parts. 2. Catalog the items. 3. Receive the items. 4. Store and warehouse the items. 5. Transfer the items to where they are needed. 6. Issue the items. Etc., 3. Support and Test Equipment Support and test equipment includes all equipment, mobile and fixed, that is required to perform the support functions, except that equipment which is an integral part of the system. Support equipment categories include: 1. Handling and Maintenance Equipment. 2. Tools (hand tools as well as power tools). 3. Metrology and measurement devices. 4. Calibration equipment.
5. Test equipment etc., 4. Manpower and Personnel Manpower and personnel involves identification and acquisition of personnel with skills and grades required to operate and maintain a system over its lifetime. Manpower requirements are developed and personnel assignments are made to meet support demands throughout the life cycle of the system. Manpower requirements are predicated on accomplishing the logistics support mission in the most efficient and economical way. 5. Training and Training Devices Training and training devices support encompasses the processes, procedures, techniques, training devices, and equipment used to train personnel to operate and support a system. This element defines qualitative and quantitative requirements for the training of operating and support personnel throughout the life cycle of the system. It includes requirements for: 1. Competencies management. 2. Factory training. 3. Instructor and key personnel training. 4. New equipment training team. 5. Resident training. 6. Sustainment training. 7. User training. 6. Technical Data Technical Data and Technical Publications consist of scientific or technical information necessary to translate system requirements into discrete engineering and logistic support documentation. Technical data is used in the development of repair manuals, maintenance manuals, user manuals, and other documents that are used to operate or support the system. 7. Computer Resources Support Computer Resources Support includes the facilities, hardware, software, documentation, manpower, and personnel needed to operate and support computer systems and the software within those systems. Computer resources include both stand-alone and embedded systems. 8. Packaging, Handling, Storage, and Transportation (PHS&T) This element includes resources and procedures to ensure that all equipment and support items are preserved, packaged, packed, marked, handled,
transported, and stored properly for short- and long-term requirements. It includes material-handling equipment and packaging, handling and storage requirements, and pre-positioning of material and parts. It also includes preservation and packaging level requirements and storage requirements. 9. Facilities The Facilities logistics element is composed of a variety of planning activities, all of which are directed toward ensuring that all required permanent or semi-permanent operating and support facilities are available concurrently with system fielding. Planning must be comprehensive and include the need for new construction as well as modifications to existing facilities. 10. Design Interface Design interface is the relationship of logistics-related design parameters of the system to its projected or actual support resource requirements. These design parameters are expressed in operational terms rather than as inherent values and specifically relate to system requirements and support costs of the system. 3. “Collaborative Planning, Forecasting and Replenishment” is a waste of time, energy and productive resources which can be put to other effective use by organizations. Discuss. Ans:Collaborative Planning, Forecasting, and Replenishment (CPFR) can be defined as a menu-driven business process by which we integrate the company goals throughout the supply and demand process by collaboratively forecasting and continuously replenishing inventory with the customers by offering: the process, collaboration, and technology solutions. According to Katz and Hannah, "CPFR tools work as metal detectors to identify business issues that need immediate attention". Traditionally, suppliers and retailers did their individual forecasts, and eventually ended up blaming one another for any shortcomings from their respective forecasts. CPFR entails that the supplier and retailer collaborate by sharing information such as the point-of-sale data, inventory stocks, outof-stock data, proposed promotion & pricing strategies, planned production schedule, and subsequently evolve a shared and agreed-upon forecast. This calls for a very strong commitment and a high level of trust from both the supplier and the retailer. CPFR aims to enhance supply chain integration by supporting and assisting joint practices. CPFR seeks cooperative management of inventory through
joint visibility and replenishment of products throughout the supply chain. Information shared between suppliers and retailers aids in planning and satisfying customer demands through a supportive system of shared information. This allows for continuous updating of inventory and upcoming requirements, making the end-to-end supply chain process more efficient. Efficiency is created through the decrease expenditures for merchandising, inventory, logistics, and transportation across all trading partners. The emergence of business as a global activity, unfettered by the constraints of geographical and political boundaries, have necessitated a re-adjustment of attitudes with regard to the manner of doing business. CPFR is a menudriven business process by which the trading partners integrate the company goals throughout the supply chain by collaboratively forecasting and continuously replenishing inventory through process improvement, collaboration, and technology solutions. Origin of CPFR CPFR began as a 1995 initiative co-led by Wal-Mart's Vice President of Supply Chain, Chief Information Officer, Vice President of Application Development, and the Cambridge, Massachusetts software and strategy firm, Benchmarking Partners. The Open Source initiative, was originally called CFAR (pronounced See-Far, for Collaborative Forecasting and Replenishment). According to an October 21, 1996 Business Week article entitled Clearing the Cobwebs from the Stockroom, New Internet software may make forecasting a snap, "Benchmarking developed CFAR with funding from Wal-Mart, IBM, SAP, i2, and Manugistics. The latter two are makers of accounting and supply chain management software, respectively. To promote CFAR as a standard, Benchmarking has posted specifications on the Web and briefed more than 250 companies, including Sears, J.C. Penney, and Gillette. About 20 companies are implementing CFAR." Warner Lambert (now part of Pfizer) served as the first pilot for CFAR. The pilot's results were publicly announced at a CFAR industry session at Harvard University, July 30, 1996 of executives from Wal-Mart's suppliers as well as other retailers and the Uniform Code Council. Benchmarking Partners then presented CFAR to the Board of Directors of the Voluntary Inter-industry Commerce Standards Committee (VICS). VICS established an industry committee to prepare for rolling CFAR out as an international standard. The original committee was co-chaired by the Vice President of Customer Marketing from Nabisco and the Vice President of Supply chain from Wal-Mart. Based on the suggestion of Procter & Gamble's Vice President of Supply Chain, the standard was renamed CPFR to emphasize the role of planning in the collaborative process.
The first publication of the VICS CPFR Voluntary Guidelines came out in 1998. Currently there are committees "to develop business guidelines and roadmaps for various collaborative scenarios, which include upstream suppliers, suppliers of finished goods and retailers, which integrate demand and supply planning and execution. The committee is continuing to improve the existing guidelines, tools and critical first steps that enable the implementation of CPFR."  These committees gained experience from pilot studies which have occurred over the past six years. VICS continues to lead much of the research and implementation of CPFR through its guidelines and project investigations. CPFR Model The CPFR process model represents voluntary guidelines aimed at structuring and guiding supply chain partners in setting up their relationship and processes. Collaborative Planning Forecasting and Replenishment (CPFR) represents a paradigm-breaking business model that extents Vendor Managed Inventory principles by taking a holistic approach to supply chain management among a network of trading partners. CPFR has the potential to deliver increased sales, organizational streamlining and alignment, administrative and operational efficiency, improved cash flow, and improved return-on-assets (ROA) performance. The CPFR process model has been developed by the VICS Association in cooperation with leading retailers, consumer packaged goods manufacturers as well as consulting and software providers. The CPFR model presents the aspects in which industries focus. The model provides a basic framework for the flow of information, goods, and services. In the retail industry the “retailer typically fills the buyer role, a manufacturer fills the seller role, and the consumer is the end customer.” The center of the model is represented as the consumer, followed by the middle ring of the retailer, and finally the outside ring being the manufacturer. Each ring of the model represents different functions within the CPFR model. The consumer drives demand for goods and services while the retailer is the provider of goods and services. The manufacturer supplies the retailer stores with product as demand for product is pulled through the supply chain by the end user, being the consumer. Some of the main processes shown in the model can be found in the second ring that has arrows in a circular pattern. This is displayed with collaboration arrangement, joint business plan, sales forecasting, order fulfillment etc. Strategy & Planning, Collaboration Arrangement is the process of setting the business goals for the relationship, defining the scope of collaboration and assigning roles, responsibilities, checkpoints and escalation procedures. The
Joint Business Plan then identifies the significant events that affect supply and demand in the planning period, such as promotions, inventory policy changes, store openings/closings, and product introductions. Demand & Supply Management is broken into Sales Forecasting, which projects consumer demand at the point of sale, and Order Planning/Forecasting, which determines future product ordering and delivery requirements based upon the sales forecast, inventory positions, transit lead times, and other factors. Execution consists of Order Generation, which transitions forecasts to firm demand, and Order Fulfillment, the process of producing, shipping, delivering, and stocking products for consumer purchase. Analysis tasks include Exception Management, the active monitoring of planning and operations for out-of-bounds conditions, and Performance Assessment, the calculation of key metrics to evaluate the achievement of business goals, uncover trends or develop alternative strategies. Most companies forecast future demand based on historical customer orders or shipment levels and patterns. However, actual consumer demand may be very different from the order stream. Each member of the supply chain observes the demand patterns of its customers and in turn produces as set of demands on its suppliers. But the decisions made in forecasting, setting inventory targets. Lot sizing and purchasing act to transform and distort the demand picture. The further a company is "upstream" in the supply chain, the more distorted is the order stream relative to consumer demand as described by the so-called bullwhip effect. This distortion of the demand picture imposes high supply chain costs in the form of suboptimal customer service levels, high inventories and low returns on asset. Collaborative Planning, Forecasting and Replenishment (CPFR) is a visionary framework for aligning supply and demand across a network of trading partners. However, many companies have found it difficult to implement the full scope of the CPFR model. Most successful projects have focused on just one part of CPFR at a time – the one that offers the highest ROI for the particular trading relationship. Some of the key characters of any CPFR model are: The consumer is at the center of the model. The goal of collaboration has always been to satisfy consumers with better product availability at lower cost. The new model makes the consumer focus visually apparent. Collaboration is a continuous cycle of activities. The old model showed CPFR as a linear, numbered sequence of steps. However, everyone in a customer/supplier relationship recognizes that companies are always simultaneously selling products, shipping the next order, and planning the
next promotion. The new CPFR eliminates the presumption that there‟s a start and finish (or any predetermined order) to this process. Execution and analysis are fundamental to success. The original CPFR model supported demand planning and forecasting in great detail, but gave little-to-no guidance on execution and analysis activities. The 9-step process ended with order commitment – order fulfillment and dexecution were a footnote. The new model rebalances the CPFR tasks to encompass execution and place more emphasis on collecting and sharing the performance metrics that measure the success of the initiative. Manufacturers and retailers in highly promoted channels concentrate their efforts on coordinating events to synchronize supply and demand where the volatility (and opportunity for out-of-stocks or overstocks) is greatest. Manufacturers and retailers in everyday low price (EDLP) channels who have access to high quality Point Of Sale (POS) forecasts have adapted their demand planning processes to support Collaborative Forecasting. Manufacturers, retailers and suppliers who have relied on continuous replenishment program (CRP) processes in the past are evolving to Collaborative Replenishment (CR) initiatives. CPFR scenarios convert the high-level boxes and pictures of the generic CPFR model into step-by-step instructions for each of these CPFR variants. By providing business partner visibility into inventory and by collaborating on a single shared forecast of customer demand, supply chain partners can positively impact a set of key business drivers to create value across supply chain partners. Need for CPFR The whole concept of 'Supply Chain Management' has undergone a recent metamorphosis. Over the years, it has become highly integrated with the 'quality consciousness movement' starting with quality control in 1960s, quality assurance in 1970s, quality systems in 1980s and total quality management during the 1990s. The impact of supply chain management is found in such processes as just-in-time (JIT), product-chain-partnership, and benchmarking. The Internet and subsequent growth of e-commerce over the last couple of years have revolutionized our daily life, both personal and business, in this information superhighway age. The Internet has overhauled existing business practices and continues to evolve new ones. CPFR is the most comprehensive and extensive model of supply chain management that integrates the entire process rather than targeting specific areas. It also ensures a higher achievement of customer satisfaction by
bridging the gap between the supply and demand processes throughout the organization, thereby reducing the cycle time, and increasing customer satisfaction. Steps in implementing CPFR The CPFR process model contains nine steps: 1. Develop front-end agreement: the parties involved establish the guidelines and rules for the collaborative relationship. 2. Create joint business plan: the parties involved create a business plan that takes into account their individual corporate strategies and defined category roles, objectives and tactics. 3. Create sales forecast: retailer point-of-sales data, causal information and information on planned events are used by one party to create an initial sales forecast, this forecast is then communicated to the other party and used as a baseline for the creation of an order forecast. 4. Identify exceptions for sales forecast: items that fall outside the sales forecast constraints set inc the front-end agreement are identified. 5. Resolve / collaborate on exception items: the parties negotiate and produce an adjusted forecast. 6. Create order forecast: point-of-sales data, causal information and inventory strategies are combined to generate a specific order forecast that supports the shared sales forecasts and joint business plan. 7. Identify exceptions for order forecast: items that fall outside the order forecast constraints set jointly by the parties involved are identified. 8. Resolve / collaborate on exception items: the parties negotiate (if necessary) to produce an adjusted order forecast. 9. Order generation: the order forecast is translated into a firm order by one of the parties involved. Following table shows the roles and responsibilities of various management levels in implementing CPFR model. TABLE Benefits of CPFR Model Some of the benefits implementation are: • Increased level of trust due to sharing of critical information among trading partners • Distinct increase in service levels to customers • More accurate demand and sales forecasting, enabling better production management
• Increased visibility to planned and unplanned changes • Near elimination of out-of-stock situations • Enhanced category management benefits • Reductions in inventory on hand • Reduction in returns and allowances • Shift from make-to-stock manufacturing • Double-digit increase in sales • Improved return-on-assets (ROA) performance • Enhancement of the organization's Economic Value Added (EVA) Successful CPFR pilots have been carried out by Wal-Mart, Sara Lee Corp., Warner- Lambert Co., Procter & Gamble Co., Wegmans Food Markets, Nabisco Inc., Schnuck Markets, Food Lion, Salisbury, Meijer, Loblaw Cos., Kmart Corp., Kimberly-Clark Corp., Hewlett-Packard, Lucent Technologies Inc., Circuit City Stores Inc. to name a few. According to Katz, Klaris, and Scorpio "The success of a CPFR initiative depends on strong, sustained, highly visible sponsorship. In order to create and implement a successful CPFR process, the management team must be ready to commit both personnel and resources". Scope of future work on CPFR The emergence of business as a global activity and the shrinkage of the world into a Global Village, unfettered by the constraints of geographical and political boundaries, have necessitated a re-adjustment of attitudes with regard to the manner of doing business. At present, over sixty leading manufacturers, retailers, system integrators and software solution providers actively participate in the VICS CPFR Committee. This represents a very small percentage of the entire business community, and of the scope of CPFR. Every industry, every business has at least one supplier and one retailer, and therefore the scope of CPFR opportunities is unlimited. With the emergence of 'trading exchanges' across industries, buyers and sellers are coming together more than ever before and the trading partner relationship is shifting from a 'win/lose' adversarial interaction to a 'win/win' collaborative interaction. The corporate and value-chain focus is shifting from market-area specific planning to customer specific planning. According to Harrington, True collaboration requires a strategic change in the nature of both the relationships and transactions between trading partners. By discipline to make-to-demand
collaborating collectively, and in real time, on such things as sales forecasts, production plans, inventory management, and procurement, companies can begin to eliminate uncertainty from the supply chain".
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