Question 1. Outline main benefits of Supply chain management.

Main benefit of supply chain management is given below:

1. Supply chain management improve the customer service.

2. It helps to achieve the balance between cost and services
3. Reduce cost through the supply chain
4. Help to make strong long-term relation with the suppliers and dealers and also buyers
5. Easy analysis of demand and supply of the products in the market
6. Help to seek new opportunities in the form cheap labor and material
7. Help to cater large group of customers

Question 2. Companies in any supply chain can make their decisions individually and
collectively in five areas. What are these areas?

Area of supply chain are

1. Production
2. Inventory
3. Location
4. Transportation
5. Information

Production

Production is the core component of supply chain or main driver of supply chain. Production o
products or services began with the customer need and demand. Manufacturing companies detect
this need and produce the product if not exist at the time of asked. For production company
needs raw material and other manufacturing materials which he gets from different suppliers and
manufacture a product.

Production is subdivided into other two categories i.e.

Product focus:

A factory that focuses on a product performs the variety of diverse operations necessary to make
a given product line from production of diverse product parts to assembly of these parts.
Functional Focus:

A functional approach focuses on performing only a few operations like simply making a select
collection of parts or only doing assembly. These functions can be performed for making a lot of
different types of products.

Inventory

When products are manufactured company store these products in large Wearhouse and deliver
to dealers, brokers and retailers on demand. There are three kinds of inventory exist to run
smooth business operation.

Cycle Inventory

This is the quantity of the inventory, which is required to satisfy demand for the product in the
time between purchases of the product. Companies tend to manufacture and to buy in large lots
in order to increase the benefits that economies of scale can carry. However, with big lots also
come improved carrying costs. Carrying costs come from the expenditure to store, handle, and
indemnify the inventory. Managers face the tradeoff between the decreased cost of ordering and
superior prices offered by purchasing product in big lots and the augmented carrying cost of the
cycle stock that comes with purchasing in large lots.

Safety Inventory

This is the inventory that is held as a cushion against ambiguity. If the demand needs are made
with perfect accuracy, then the only inventory that would be required would be cycle inventory.
But as each forecast has some level of uncertainty in it, we wrap that uncertainty to a greater or
lesser quantity by holding further inventory in case demand is unexpectedly greater than
predictable. The trade-off here is to consider the costs of carrying additional inventory against
the costs of losing sales because of having insufficient inventory.

Seasonal Inventory

This is inventory, which is stocked up in expectation of expected increases in demand, which

occurs at certain times of the year. For instance, it is expected that demand for antifreeze will rise
in the winter. If a business that manufactures antifreeze has a permanent production rate that is
costly to change, then it will try to produce product at a stable rate all year long and build up
supply during periods of low demand to cover for periods of high demand that will go beyond its
production rate. The alternative to maintaining a seasonal inventory is to invest in flexible
manufacturing facilities that can quickly change their rate of production for different products in
response of increase in demand. In this case, the trade-off is between the cost of having seasonal
inventory and the cost of having more stretchy production capabilities.

Location

Location is the most important factor of supply chain and it directly impact on the financial
condition of the company. If the manufacturing unit or Wearhouse are far from each other, then
company needs to pay cost for it. similarly, if the company locates in populated area then it faces
the pollution causing cases by the public.

Transportation

There are several ways to transport the finished goods and raw material from source to where it
needs. Company’s supply chain management think about the possible ways to transport the
goods at less cost. Below are mention few transportation modes use by the companies

1. Shipping
2. Rail
3. Pipeline
4. Trucks
5. Airplanes

Company use the mode of transportation on the base of urgency and material handling
mechanics.

Information

To run successful supply chain manager, need accurate real time information to plan and run
supply chain properly. Through two ways company get the information

1. Coordinating daily activities

2. Forecasting and planning

Question 3. What is inventory management?

Inventory Management is a collection of techniques that are applied to supervise the inventory
levels within dissimilar companies in a supply chain. The objective is to decrease the cost of
stock as much as possible while still maintaining the levels of service that customers need.

As discussed previously there are three types of inventory:

Cycle inventory

Seasonal inventory

Safety inventory

Cycle Inventory

This is the type of inventory, which is needed to meet the demand of the product over the time
period between placing orders for the product. Cycle Inventory is essential because economies of
scale craft it attractive to make smaller number orders of big quantities of a product rather than
permanent orders of little product quantity. The end use consumer of a product might actually
utilize a product in constant small amounts all over the year. But the distributor and the producer
of that product might find it cheaper to make and stock the product in huge batches that do not
match the consumption pattern.

Seasonal Inventory

Seasonal Inventory occurs when a corporation or a supply chain with a predetermined amount of
productive capacity chooses to create and stock products in expectation of future demand. If
future demand is going to exceed productive capacity, then the answer is to produce products in
times of low demand that can be put into inventory to meet the high demand in the future.

Safety Inventory

Safety Inventory is essential to balance the ambiguity that is present in a supply chain. Retailers
and distributors do not like to run short of inventory in the face of unanticipated customer
demand or unforeseen delay in getting replenishment orders so they carry safety stock on hand.
As a rule, the higher the level of ambiguity, the higher the level of safety stock that is essential.
 Question 4. Short notes

1.Producers

Producers, produce the goods and get the raw material from natural an other resources. They sell
to the manufacturing companies who produce the goods and sell it to the customers who
consume them. Again, customer raise a demand, company note it and start manufacturing for
manufacturing company get resources raw material, labor and other manufacturing material from
the factor market and the cycle starts again.

2.Distributers

This the group in business who get the bulk goods from the company and also acquire the raw
material from small and large dealers and sell to the companies for manufacturing purposes.
Distributers collect finished goods from the company and supply it to the market to small and
large retailers who further sell to customers and customers of customers.

3.Retailers

Retailers are also sometime called wholesalers. They are street corner shopkeepers who have
almost all types of goods and sell to customers. They sell in large and small quantities to
customers. A small customer always goes the retail shop to buy goods. If a customer wants to
buy in bulks then he’ll go to distributor center or company to buy products in bilks.