OM0012 – Supply Chain Management Master of Business Administration - MBA Semester III

Q1. How has the concept of Supply Chain Management evolved over the years? Depict in chronological order. Evolution of Supply Chain Management
The concept of Supply Chain is as old as that of trade and can be traced back to 5000 years BC in India. All across the world, there are several indications of the concept of Supply Chain having existed for thousands of years. However, the chronicled record of the practice of certain basic concepts of Supply Chain Management can be traced back to the industrial revolution in eighteenth century. On the other hand, the above period is characterised by individual company‟s attempts to maximise the efficiency of their own businesses, at which many companies excelled. Therefore, the relationships between different organisations that were interfacing with each other as suppliercustomer were very hostile, and genuine to what every organisation sought for turned out to be a WIN-LOSE situation, i.e. a customer would benefit at the cost of his supplier, or the supplier would gain at the cost of the customer. The Toyota Production System, which is hailed as the second industrial revolution, started changing the situation, as the new attempts and practices in manufacturing were based on co-operation and collaboration between companies. With the advent of Manufacturing Resource Planning (MRP) and Enterprise Resource Planning (ERP) systems organisations began evolving as an integrated and cohesive unit and the concept of Internal Supply Chain gained ground. Consequently, thereafter the interface in the markets was those of tightly integrated units dealing with other tightly integrated companies. The concept of Supply Chain Management was born and this evolved further. Thus, while the concept of Supply Chain is very old, the concept of Supply Chain Management is quite recent.


Customer service is vital for Logistics operations. Discuss.
Customers are now at ease while dealing with Logistics companies. Realtime availability of information is helping courier companies attract new customers. Technology adoption has helped to meet service levels with customers and it is one of the key strategies to acquire and retain customers.

The impact of Logistics in the ability of a company to satisfy its customers cannot be overstated. All other efforts at modernisation, within a company would not bear fruit until the Logistics system is carefully designed to facilitate the smooth and efficient flow of goods in the system. India has to improve its roads and transport network as per the international standards in order to solve the Logistics problems. The goal of any Logistics system is to maintain or improve customer service. In the Push mode of operation, the penalties of higher safety stock, larger warehouse, and inter-warehouse transfer are not the only penalties. Stock rotation becomes more difficult to maintain. Handling of all the products at each warehouse involves unloading, staging, storing, picking, staging and loading for shipment. All these activities involve an element of cost. In addition, there is a potential for product damage each time a product is handled. For example, Blue Dart has a quick response team which studies the business requirements of its customers and develops appropriate solutions. It also has technical people spread across the country who work alongside customers to solve any problems.

Q3. “The utility of forecasts can be enhanced through collaborative forecasting among supply chain partners.” Explain?
The forecast of demand forms the basis for all strategic and planning decisions in a supply chain. Throughout the supply chain, all push process is performed in anticipation of customer demand whereas all pull process is performed in response to customer demand. For push process, a manager must plan the level of available capacity and inventory. In both instances the first step a manager must take is to forecast what customer demand will be? The utility of forecasts can be enhanced through collaborative forecasting among supply chain partners by: • Production: Scheduling, inventory control, aggregate planning, purchasing • Marketing: Sales-force allocation, promotions, new product introduction • Finance: Plant/equipment investment, budgetary planning • Personnel: Workforce planning, hiring, layoffs It is essential that these decisions not to be segregated by functional area or even by enterprise, as they influence each other and are best made jointly. For example, Coca-Cola considers the demand forecast over the coming quarter and decides on the various promotions. The promotion information

is then used to update the demand forecast. The updated forecast is essential for the bottlers, who are often independent of Coca-Cola, to plan their production as it may require additional investment and hiring decisions. A bottler operating without the updated forecast based on the promotions unlikely to have sufficient supply available for Coca-Cola. This example illustrates the importance of collaboration (both within the functions of a company as well as among companies in a supply chain). Mature products with stable demand are usually easiest to forecast. Staple products at a supermarket, such as milk or paper towels fit this description. Forecasting and the accompanying managerial decisions are extremely difficult when either the supply of raw materials or the demand for the finished product is highly variable. Some examples of items that are difficult to forecast include fashion goods and many high-tech products.

Q4. Lack of co-ordination in a Supply Chain leads to deterioration of service and an increase in cost within the Supply Chain.” Explain

Lack of co-ordination in a Supply Chain leads to deterioration of service and an increase in cost within the Supply Chain. Supply Chain co-ordination improves if all stages of the Supply Chain put effort together to increase total Supply Chain profits. For this, it is necessary that each stage of the Supply Chain take into account the impact of its action on other stages of the Supply Chain.

A lack of co-ordination results either because of different stages of Supply Chain with conflicting objectives or because information flows between different stages is distorted. When a different owner owns each stage of the Supply Chain then each stage tries to maximise its own profits resulting in actions that often diminish total Supply Chain profits. Supply Chain often consists of stages with a large number of different owners. For example, a large automobile manufacturing firm may have thousands of suppliers and each of these suppliers may have several other suppliers in turn. Many firms have experienced an effect which is called “Bullwhip effect” or “Whiplash effect” in which fluctuations in orders increase as they move up the Supply Chain from retailers to wholesalers and to manufacturers to their suppliers. The Bullwhip effect distorts the demand information within the Supply Chain by means of different stages which have a very different estimation of what demand looks like. The Bullwhip effect results in a loss of Supply Chain co-ordination. It is difficult to achieve co-ordination within a Supply Chain if each stage of the Supply Chain optimises its local objective without considering the impact on the entire Supply Chain. Proper co-ordination would increase the total Supply Chain profits. Information distortion is another reason for lack of coordination. For example, availability in the estimation of demand at various stages in the Supply Chain due to Bullwhip effect has an impact on various measures of performance in a Supply Chain. These measures of performance are: • Manufacture cost • Inventory cost • Replenishment lead time • Transport cost • Labour cost for shipping and receiving • Level of product availability and • Relationships across the Supply Chain

Q5. Elaborate the concept of „Supply Chain Management and its integration with the 'quality consciousness movement'.

The whole concept of ' Supply Chain Management ' has undergone a recent met amorphosis. Over t he years, it has become highly int egrat ed wit h t he ' qualit y consciousness movement ' st art ing wit h qualit y cont rol in 1 9 6 0 s, qualit y assurance in 1 9 7 0 s, qualit y syst ems in 1 9 8 0 s, and t ot al qualit y management during t he 1 9 9 0 s. The impact of Supply Chain Management is f ound in such processes as Just In Time ( JIT) , Product Chain Part nership, and benchmarking. The Int ernet and subsequent

growt h of e-commerce over t he last couple of years have revolut ionised our daily lif e personally and business wise. The Int ernet has ref urbished t he exist ing business pract ises and it cont inues t o evolve t he new ones. CPFR is t he most comprehensive and ext ensive model of Supply Chain Management . It int egrat es t he ent ire process rat her t han t arget ing specif ic areas. It also ensures a higher achievement of cust omer sat isf act ion by bridging t he gap bet ween t he supply and demand processes t hroughout t he organisat ion. This reduces t he cycle t ime and increases cust omer sat isf act ion. St eps in implement ing CPFR There are nine st eps in CPRF implement at ion. They are: 1 . Develop f ront -end agreement : The part ies involved est ablish t he procedures and rules f or t he collaborat ive relat ionship. 2 . Creat e joint business plan: The part ies involved creat e a business plan t hat t akes int o account t heir individual corporat e st rat egies and def ined cat egory roles, object ives, and t act ics. 3 . Creat e sales f orecast : One part y t o creat e an init ial sales f orecast uses ret ailer Point of Sales dat a, causal inf ormat ion, and inf ormat ion on planned event s. This f orecast is t hen communicat ed t o t he ot her part y and it is used as a baseline f or t he creat ion of an order f orecast . 4 . Ident if y except ions f or sales f orecast : Product s t hat f all out side t he sales f orecast const raint s, set t he f ront -end agreement are ident if ied. 5 . Resolve/ Collaborat e on except ion it ems: The part ies discuss and produce an adjust ed f orecast . 6 . Creat e order f orecast : Causal inf ormat ion and invent ory st rat egies are combined t o generat e a specif ic order f orecast t hat support s t he shared sales f orecast s and joint business plan. 7 . Ident if y except ions f or order f orecast : Product s t hat f all out side t he order f orecast const raint s, set joint ly by t he part ies involved are ident if ied. 8 . Resolve/ Collaborat e on except ion it ems: The part ies negot iat e again ( if necessary) t o produce an adjust ed order f orecast . 9 . Order generat ion: One of t he part ies involved will get a f irm order f rom t he order f orecast .

Q6.Give a brief introduction on all steps involved in Procurement process?

Study of Procurement Process steps 1. Purchase Requisition (PR)/Purchase Indent (PI): This is the initiating document for all purchase activities in an organisation. No purchase should take place without the purchase requisition. The purchase requisition comes from the indenting department to the procurement department. The indenting department is the one having the need for the requisitioned product. 2. Floating the purchase enquiry/tender: This is the next step in the process. It must be clarified here that the accuracy and correctness of the PR/PI is the responsibility of the indenting department. 3. Receiving quotations: The normal procedure is to receive the sealed tenders in a box kept exclusively for this purpose. The box will carry a legend on it giving title of tender, closing date, and tender opening date. The box is kept under lock and key until the last date for receipt of tender. 4. Opening the quotation/tender, tabulating and analysing: The quotations are to be opened on the tender opening day at the appointed place in the presence of the agents/representative. 5. Short listing promising vendors/suppliers: We have the list made above. This contains the details of all the vendors who quoted against the tender. The list is tabulated and is rearranged in the descending order of price. 6. Technical Evaluation: The technical committee evaluates the quotations on the technical capabilities and lists them. 7. Commercial negotiations: The negotiation generally takes place between the procurement committee and the management team of the vendor. The agreement arrived at, is recorded and is signed for reference for both the parties. 8. Purchase Order (PO) release: The negotiations with each of the short listed agents would finally lead to one of them who will best match the requirements of the purchase committee both technically and commercially. 9. Pre-delivery inspection: This is generally done for all products and more specifically for technical products. This is invariably a part of the PO or contract. 10. Check deliveries, installation testing and commissioning: Once the pre delivery inspection is successfully complete and the samples tested are

found OK then the supplier/vendor gets the clearance from the procurer. It is now the responsibility of the vendor to complete the supplies as per the terms of the PO. 11. Certification of supplies: Once the supplier successfully completes the pre-inspection, it is the responsibility of the supplier to complete the delivery of goods as per the contract. 12. Payment to the vendor: Once all this is done, the vendor has to wait for the payment to be received. The payment is made as per the agreed terms.

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