Quiz 2

Supply Chain Management

Umar Farooq 17U00609

Q1) Explain with examples how distributors add value to a supply chain and improve its
performance.
Ans. Distributors are very important for adding value to a supply chain process. These are the
middle men for a company, and therefore they have to manage things accordingly between the
company and the customers. They are very important for improving supply chain network of
the company. Some of those examples are following:

 A distributor has a unique return logistic policy and transportation system which makes
reverse logistic a hassle-free approach for the customer
 Distributor adds value to the supply chain by providing customize timings for the
customer to get their goods delivered.
 The distributor also makes an arrangement of differential timings for the delivery
 Distributor maintains a high-end customer support service and posts-sales services

Q2) Explain with examples the two situations in which managers use network design models.
Ans. Role of supply chain network design decision: -
a. The supply chain network design is used to help the company to reach its long-term goals
and objectives by developing its policies.
b. Due to the network design, the supply chain can be able to track and locate the
transportation process and can communicate effectively.

Managers use network design models in two different situations. First, these models are used
to decide on locations where facilities will be established and the capacity to be assigned to
each facility. Managers must make this decision considering a time horizon over which locations
and capacities will not be altered typically in years.
Second, these models are used to assign current demand to the available facilities and identify
lanes along which product will be transported. Managers must consider this decision at least on
an annual basis as demand, prices, and tariffs change. In both cases, the goal is to maximize the
profit while satisfying customer needs. The following information must be available before the
design decision can be made:
  Location of supply sources and markets
 Location of potential facility sites
 Demand forecast by market
 Facility, labor, and material costs by site
 Transportation costs between each pair of sites
 Inventory costs by site as well as a function of quantity
 Sale price of product in different regions
 Taxes and tariffs as product is moved between locations
 Desired response time and other service factors.
Examples: Consider SunOil which is a manufacturer of petrochemical products with worldwide
sales. The Vice President of Supply Chain can consider several different alternatives to meet
demand. One alternative would be to set up a facility in each region. The advantage of such an
approach will be that it lowers transportation cost and also helps avoids duties that may be
imposer. if product is imported from other regions. The disadvantage of this approach is that
plants will be sized only to meet local demand and may not fully exploit economies 0: scale.
Another alternative would be to consolidate plants in few regions. This would improve
economies of scale but would increase transportation cost and the duties to be paid. During
Phase II, the manager must consider these quantifiable tradeoffs along with nonquantifiable
factors such as the competitive environment and political risk
Q3) With the help of examples, discuss the relationship between transportation strategy and
competitive strategy. (10)
Ans. Transportation and competitive strategy both are complementary to each other. This is
because, if the competitive strategy is of early responsiveness, fast transportation strategy is
the best suited for this. If competitive strategy is reduced price, slower transportation modes
can also be used. After knowing the competitive strategy, transportation strategy can help to
provide the right balance between both of them.