CHANDRAGUPT INSTITUTE OF MANAGEMENT PATNA

PGP 2019-2021 END-TERM EXAMINATION [TERM-V: CORE COURSE]

SUPPLY CHAIN MANAGEMENT

Max. Marks: 50 Duration: 2 hours 30 minutes

NOTE:
1. Write your name, roll number and section, name of examination and date on top of first page. Write
your roll number on top of every page.
2. Answer all questions and all parts of a given question together
3. Write the answers neatly in your own legible handwriting.
4. Show all steps and calculations clearly (including rough work which is to be done on right margin of
the page, next to the question answered) – no marks to be awarded if only answer is mentioned for any
question.
5. Credit will be given to precise, to the point answers in clear legible handwriting. Give proper
explanations and reasons for all your answers.
6. Scan and send the answer sheets as one document with the name of the document in the
format: RollNumber_Name_SCMEndTerm to Email ID : scmendterm@cimp.ac.in
7. The submission has to be done within the assigned time. Submissions made after the scheduled time
will not be considered for evaluation. 
8. Send only from your CIMP provided Email ID to the Email ID : scmendterm@cimp.ac.in

QUESTION NO. 1 [ 2× 5=10 marks ]

A. “Viewed from the classical perspective, need based segmentation can produce some odd couples”.
Explain.

B. “Accurate Response enables companies to do a better job of matching supply and demand and produces
savings that drop straight to the bottom-line”. Explain how this may be achieved (you may refer to the
case of Sport Obermeyer).

C. It has been observed by many companies that distorted information from one end of a supply chain to
another causes exaggerated order swings at upstream stages of the chain. How do these swings occur
and what can companies do to mitigate them?

D. McMaster Carr and W.W. Grainger sells MRO products. While McMaster Carr sells its products from five
warehouses, Grainger sells from more than 350 retail locations, supported by several warehouses. List
two advantages and two disadvantages of Grainger compared to McMaster Carr.

E. Consider the Indian retail store chain Big Bazar.

a. How would you characterize the competitive strategy of the store chain?
b. Where would you place Big-Bazar on the zone of strategic fit? What should its supply chain be
able to do particularly well?

QUESTION NO. 2 [ 2+1+5=8 marks ]

A. What are the steps in network planning in supply chains? Write one sentence on each step.

B. Why is data aggregation recommended during planning for supply networks?

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 C. Consider a distribution system for a single product which is manufactured at three plants (P1, P2 and
P3) and needs to be shipped to two markets (M1 and M2) through any of the two available warehouses
(W1 and W2). Plant 1 has a capacity limitation of 100,000 units, while the other two plants have
capacities of 500,000 units each. The demands at the two markets are 200,000 units at M1 and 400,000
units at M2. The per unit costs of distribution are given in the table below.

FACILITY P1 P2 P3 M1 M2
W1 2 4 3 5 3
W2 1 5 4 7 2

If the production costs at all the plants are the same, suggest a distribution strategy specifying the
quantities to be shipped from the plants through warehouses to the markets to achieve the minimum
total cost of distribution. Use the heuristic: “the routing will be done through that route for which the
total cost of transporting is least and multiple sourcing for each market is allowed”.

QUESTION NO. 3 [ 2× 4=8 marks ]

A. Weekly demand for loaves of Blunder Bread at a Kroger store is normally distributed with a mean of
500 and a standard deviation of 200. Blunder Bread takes two weeks to supply a Kroger order. Kroger
is targeting a CSL of 90 percent and monitors its inventory continuously.
a. How much safety inventory of bread loaves should Kroger carry?
b. What should their ROP be?

B. Weekly demand for 12” frames at the Frame Shop is normally distributed with a mean of 250 and a
standard deviation of 150. The store manager has decided to follow a periodic review policy to manage
inventory of cell phones. They plan to order every three weeks. The manufacturer currently takes two
weeks to fill an order. Given a desired CSL of 95 percent,
a. how much safety inventory should the store carry?
b. What should their OUL be?

QUESTION NO. 4 [ 2× 4=8 marks ]

Food Mart sells Frostee Flakes. Demand for Frostee Flakes is 500 boxes per week. Food Mart has a holding cost
of 30 percent and incurs a fixed cost of $100 for each replenishment order it places for Frostee Flakes. Given
that cost is $2 per box of Frostee Flakes,
a) How much should Food Mart order in each replenishment lot?
b) If a trade promotion lowers the price of Frostee Flakes to $1.80 for a month, how much should Food
Mart order given the short-term price reduction?
c) Analyze the effect of short-term price reduction on the cycle inventory in the system.
d) Analyze the effect of short-term price reduction on the average flow time in the system.

QUESTION NO. 5 [ 1× 8=8 marks ]

The Orange Company has introduced a new music device called the J-Pod that is highly valued in the market.
There are no competitors having similar product. J-Pod is sold through Good Buy, an electronics retailer. The
annual demand for the product (in units) from the end customers is directly dependent on the price p
according to the demand curve:

D=20,00,000−2,000 p

The production cost per unit for Orange is $100.

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 a. If Orange sells directly to the end customers, what is the optimal price it should charge?
b. If Orange charges the retailer the same price as found in part (a), what is the optimal price the retailer
should charge the end customers?
c. What is the annual demand faced by the retailer at that price?
d. What is the total annual profit for the retailer?
e. What is the total annual profit for Orange?
f. What is the total amount the supply chain loses due to double marginalization?
g. What can Orange do to make up for the loss due to double marginalization?
h. Suppose Orange offers a discount of $40 per unit to the retailer. Should the retailer pass on this benefit
to the customer? If yes, how much?

QUESTION NO. 6 [ 1× 8=8 marks ]

Consider the following demand scenario:

Quantity 2000 2100 2200 2300 2400 2500 2600 2700

Probabilit 3% 8% 15% 30% 17% 12% 10% 5%
y

Suppose the manufacturer produces at a cost of Rs.20 per unit. The manufacturer sells to the retailer at
Rs.40 per unit. The retailer sells to the end customers for Rs.50 per unit during season. Unsold units can
be sold for Rs.10 per unit after season.

A. Suppose the manufacturer is making to order.

i. How many units will the retailer order?
ii. What is the expected profit for the manufacturer?
iii. What is the expected profit for the retailer?
iv. What is the system optimal production quantity under global optimization?
v. What is the expected profit under global optimization?
vi. Suppose there is a buy back contract where the manufacturer promises to pay the retailer Rs.20 per
unit of all unsold units. How many units will the retailer order now?

B. Suppose the manufacturer is making to stock.

vii. How much will the manufacturer make?
viii. What can be a possible contract where both the manufacturer and retailer enjoy a higher expected
profit than in part (vii) above?

Best of luck!!!

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