LSCM QB 8-10 MARK

1. Write down Obstacles to Achieving Strategic Fit

There are two main elements that constitute strategic fit: (1) the customer’s expectation, which is the main
building block of the “competitive strategy” of a SC and (2) the SC’s performance, which is associated with the “SC
strategy” in responding to the established competitive strategy.

Achieving strategic fit there are two main steps to achieving strategic fit: 1. Establishing the supply chain strategy
based on the implied uncertainties 2. Specifying the specific role of each SC member in achieving the established SC
strategy. The obstacles in achieving Strategic fit are as follows;
1.SC competitive strategies and uncertainties We consider a generic four-level SC including retailers, distributor,
manufacturers, and suppliers. As the competitive strategy of the SC is defined, each member faces some uncertainty.
Four main types of uncertainties are considered in this study: demand uncertainty, transportation time uncertainty,
capacity uncertainty, and procurement time uncertainty. The four uncertainty types considered are the most
common types of uncertainty in business environments.
2.Customer’s demand rate uncertainty If the SC competitive strategy targets customers with highly uncertain
demand, then to maintain the service level at a reasonable level, the SCS must involve responsiveness. In this
situation, the quantity of orders received by the retailers is the uncertain parameter. In this situation, the size of
orders for the next period can be estimated only up to some errors. Therefore, shortages may occur in the store. A
shortage in the store causes the customers to look to buy the products from the competitors. Therefore, the
competitive nature of the market creates a lost sales inventory system. Losing one customer harms the upstream
members in addition to the retailer.
3.Transportation time uncertainty Transportation time uncertainty means a variance in the shipment time between
an origin and a destination. There are several reasons for varying transportation time, includingweather conditions,
clearance delay, terrorism. If the SC competitive strategy targets market areas that have the above conditions, then
the transportation time will be uncertain. In this state, even given a fixed and known demand, the response to the
customers will be disturbed due to irregular receipt of batches by the retailers. Therefore, transportation time
uncertainty can significantly affect the SC’s responsiveness. In turn, low responsiveness in the competitive market
causes customer loss and degrades the SC’s profitability. According to the strategic fit model, in the presence of
increasing uncertainties, the SCS must maintain responsiveness.
4.Manufacturers’ site-warehouses transportation time uncertainty There are two main strategies to prevent the
decline of SC responsiveness in case of uncertain shipment times between the manufacturers’ sites and the
warehouses: 1. Use of more reliable transportation modes with higher costs and lower uncertainty2. Storage of a
higher volume of product in warehouses 3. Combined solution If expensive modes of transportation are used to deal
with the uncertainty, then the distributor must pay more. Moreover, holding more inventory in the distributor
warehouses causes investment depreciation and increasing inventory holding costs.
5.Warehouses –retailers’ site transportation time uncertainty Another transportation time uncertainty occurs
when the retailer places an order to the distributor, the distributor has enough inventory in its warehouse, but the
time between placing the retailer’s order and receiving the order is uncertain. Reasons such as delay in order
processing time, traffic congestion, and traffic restrictions in city can cause this type of uncertainty. In contrast with
the manufacturer’s site-warehouses transportation, which involves long paths, in this case the paths are mainly
includes the urban and suburban streets
6.Manufacturer’s capacity uncertainty One type of uncertainty that is often studied in the SC literature is the
uncertainty associated with the production process. Most of the previous studies in this field consider the capacity
constraints of the manufacturer. Uncertain constraints on production capacity where the manufacturer faces
unpredictable capacity reduction (UCR), is the main concern of this section. A variety of reasons, such as random
power cuts, machinery breakdowns, can cause the UCR in the manufacturers’ site. Occurrences of UCR in successive
periods disturb the product flow through the SC. This type of uncertainty mainly disturbs the relations between the
manufacturers and distributor
7. Suppliers’ lead time uncertainty Supplier lead time uncertainty can be defined as the unpredictable delays in
delivery of raw material from the suppliers to the manufacturers. When a manufacturer places an order, the
ordered batches will be delivered after an uncertain time period. Delays in procurement in the manufacturers’ sites
can cause the production line to shut down temporarily. In turn, shutting down the production line causes
disturbances in the timely shipments to the distributor warehouses, damages the retailer’s inventory system, and
finally decreases the customer service level

2. Short note on E-Business and the Distribution Network

E-business & the distribution network
The E-Business industry is not just limited to setting up a website and selling products online. It includes
product configuration, suitable infrastructure, logistics, secured payment gateway, and supply chain
management. An efficient supply chain accelerates E-Business processes to meet customers’
expectations.

Supply Chain Management in E-commerce

Vital Components forming the Distribution network of E-Business Industry:
1. Inventory Management: Inventory is a critical component of supply chain management. According to
the traditional inventory model, businesses used their own warehouses to sell the products directly to
customers. But, now as per the risk-pooling strategy, E-Business businesses do not hold their own
inventory and rather outsource their inventory to a larger wholesaler. It enables E-Business businesses to
reduce the risk of keeping their own inventory. Several businesses are adopting the drop-shipping model
for inventory. According to this model, a store does not hold the product it sells on the website, rather it
purchases the product from a third-party and ships it to the customer.
2. Reverse Logistics: E-Business also have an SCM structure which entails reverse logistics. Reverse
logistics is defined as the planning and execution of the movement of goods from the point of
consumption to the point of origin. Almost, all E-Business businesses provide the facility of exchange and
returns. This increases the need for logistics.
3. Optimized Inventory Management, The success of an E-Business website depends on customer
satisfaction. If customers cannot buy the right product at the right time, they will immediately switch to
other E-Business stores. A service level of 95% of products is ideal for E-Business success. The slow delivery
process increases the risk of losing potential customers and can even cause a negative impact on the
reputation of the business. From inventory to logistics and purchase to supplier management, processes
should be well-coordinated and optimized. Even if one link of the supply chain doesn’t function well the
entire supply chain management will fail, resulting in loss of revenue.
4. Excess Inventory Increases Costs: E-Business businesses are expanding rapidly due to which they reach
their limit on inventory management. With the growth in business, product portfolio, supplier base and
surge in returns also grow at a rapid pace. Increasing inventory drastically is common mistake E-Business
businesses make to meet the demands of customers. Inventory represents a significant portion of the
total investment of E-Business businesses. Excess inventory can mutate into obsolete stock (dead capital)
which can lead to increased costs.
5.Determining transport strategy Across the retail spectrum, companies are at opposite ends of extremes
and trying to define their multi-channel strategies—and when it is defined then determining how to
implement that strategy inside or outside of their own distribution networks. The approach retail shippers
usually take starts with the service strategy that they need to meet customer demand from both a delivery
and transportation mode perspective. On the delivery side, retail shippers need to know specifically what
a customer wants as well as where it will be buying product. This basic premise has seen customers get
more comfortable with e-commerce in recent years, and in turn has upped the ante for retailers to have a
reliable delivery service strategy.
6.optimal distribution network; Once the transportation strategy comes into clearer view, then the
shipper needs to implement what JLL describes as the “optimal distribution network”— defined as
achieving the balance between service and cost. However, this ideal network is becoming harder to realize
due to the fact that it’s getting tougher to make long-term projections on how retailers will need to have
their distribution networks perform five to 10 years out. Ideally, these projections will need to be based on
how revenue and demand is expected to grow and the products retailers will carry. There are other factors
to consider, such as making significant capital investments in DCs, including the more sophisticated
materials handling systems that act as the foundation of many e-commerce business plans.
7.Design and technology Where these DCs are located subsequently forces retailers to think about the
design of their facilities. They now need to make sure that they’re quickly picking individual items and
have enough dock doors and trailer space to re-circulate trucks. To successfully do this, retailers need to
be nimble and flexible with their “inside the box” operations and have a fluid transportation network set-
up intact. And with inventory management now more crucial than ever in supply chain management
processes, technology is a linchpin for speed and efficiency from point of sale to the inventory fulfillment
mechanism.

The key benefits of SCM in E-Business include:

Reduced Costs: SCM in E-Business removes various stages of distribution, retailers, and outlets. The
elimination of these stages reduces the overall cost of products. The reduced costs give customers a direct
advantage when compared to the cost of products available in physical stores.
Trade Globally: SCM enables E-Business businesses to trade globally. An efficient SCM enables E-Business
businesses to import raw material from anywhere and export their finished product to any country easily.
Enhanced Customer Satisfaction: Customer satisfaction is an important factor for the success of an E-
Business business. With an efficient supply chain management in e-commerce, enterprises can easily track
demand, the time suppliers will require to fulfill the orders and order goods from suppliers to keep the
inventories replenished.
3. Short note on Transportation in a Supply Chain

Transportation refers to the movement of product from one location to another as it makes its way
from the beginning of a supply chain to the customer. Transportation is an important supply chain driver
because products are rarely produced and consumed in the same l9cation. Transportation is a significant
component of the costs incurred by most supply chains.

The shipper is the party that requires the movement of the product between two points in the supply
chain. The carrier is the party that moves or transports the product. A carrier makes investment decisions
regarding the transportation equipment (locomotives, trucks, airplanes, etc.) and in some cases
infrastructure (rail), and then makes operating decisions to try to maximize the return from these assets. A
shipper, in contrast, uses transportation to minimize the total cost (transportation, inventory, information,
sourcing, and facility) while providing an appropriate level of responsiveness to the customer.

The different kinds of transportation are

1. Road transportation 2. Maritime transportation 3.Air transportation 4.Rail transportation 5.Pipeline

transportation

Importance of Transportation in Supply Chain

The importance of transportation in any supply or distribution chain cannot be over emphasized. It is one of
the most vital economic activities for a business that links a company to its suppliers and customers; an
essential activity in the supply chain that supports the economic utility of time and place therefore ensuring
that customers have products when and where they demand it.

An inefficient transport system may hinder customer satisfaction as late deliveries can lead to many
complaints and even loss of customers; products may also suffer damage if delivery is delayed and this too
can cause a decline in business.

But, when a company delivers promptly with complete and undamaged goods, the confidence of the
customer is built and his loyalty gained. It is the duty of the person in charge of the supply chain to choose
the most convenient, effective and economical means of transportation that befits the company or
organisation.

Challenges of Transportation in Supply Chain

Sharp Fluctuations in fuel pricingThe sharp fluctuation in fuel pricing can be explained by the constant rise and
fall in oil. The OPEC (Organization of the Petroleum Exporting Countries), led by Saudi Arabia, has often refused
to curb production on the overall market which has resulted in an abundance of crude oil. This increase caused a
disparity between the demand and supply of crude (which is later converted into other products such as fuel),
with repercussions on fuel prices. The matter is still to be solved.

Driver shortages Though the future looks bright for the truck industry, the shortage of drivers is a result of
various factors. Demographically, a lack of availability has been noted. Low wages have also contributed to a
decrease in some drivers. One more important factor is the working conditions which apparently are
unsatisfactory, taking into account the dangers and weather conditions while driving in extreme regions.

Expansion in 3PL / 4PL providersCharging higher prices for providing external services to a company’s logistic
operations is a new addition to supply chain. 3PL and 4PL providers are third party and fourth party logistics
company which manage part or the complete supply chain distribution. Obviously, if you need them, charges
may be higher given that corporations have to cope with increased competition on the market, creating a need
to provide better service. Or the service may be out of your demographic area.

Commoditization of carrier pricing Commoditization in transportation has a direct impact on whether a

company dispatches its products or hires a third/fourth party provider to do so. The transportation services
market, being heavily price-driven, results in consumers having less focus in distinguishing between companies’
products and services, but will put more emphasis on buying the cheapest alternative. Pricing is the only
competition which transportation services rely on. In a recent article published in Logistics Management,

Expanding use of technology tools Many companies are still reluctant to adopt new technologies. Digital
technology innovation is sure to transform the trends of supply chain and procurement in the future. However, a
slow conversion to technology may give other companies which are digitally equipped, a competitive advantage.

Increasing regulations Regulations are imposed to create a clear and legal functioning in any field, which also
applies to supply chain. Regulations on the hours of services, compliance, and safety, accountability are vital
requirements. Fulfilling all of them without falling prey to legal complications is a real hassle. Some companies
have a real trouble meeting this end.
4.What Is a Supply Chain? write down the Objective of a Supply Chain.
A supply chain is a network between a company and its suppliers to produce and distribute a specific
product to the final buyer. This network includes different activities, people, entities, information, and
resources. The supply chain also represents the steps it takes to get the product or service from its original
state to the customer. Companies develop supply chains so they can reduce their costs and remain
competitive in the business landscape.
5. Briefly explain Modes of Transportation and Their Performance Characteristics
Modes of Transportation and their Performance Characteristics
1.Air: • Very fast and fairly expensive mode of transportation. • Used for small, high-value items or time-sensitive
emergency shipments that have to travel a long distance

2.Package Carriers: Package carriers are transportation companies such as FedEx, UPS, and the U.S. Postal Service,
which carry small packages ranging from letters to shipments weighing about 150 pounds. • Expensive and cannot
compete with LTL carriers on price for large shipments. T • Rapid and reliable delivery- used for time sensitive
products • Provide other value-added services, allow shippers to speed inventory flow and track order status. •
Package carriers are the preferred mode of transport for e-businesses Key issues in this industry include the location
and capacity of transfer points as well as information capability to facilitate and track package flow.

3.Truck: The trucking industry consists of two major segments- TL or LTL • More expensive than rail but offers the
advantage of door-to-door shipment and a shorter delivery time. • Requires no transfer between pickup and-
delivery and have low relatively low fixed costs • LTL shipments take longer than TL shipments because of other
loads that need to be picked up and dropped off. • A key to reducing LTL costs is the degree of consolidation • Key
issues for the LTL industry include location of consolidation centres, assigning of loads to trucks, and scheduling and
routing of pickup and delivery.

4.Rail: • Incur a high fixed cost in terms of rails, locomotives, cars, and yards. • Significant trip-related labour and
fuel cost, independent of the number of cars but does vary with the distance travelled and the time taken. • The
price structure and the heavy load capability makes rail an ideal mode for carrying large, heavy, or high-density
products over long distances • Transportation time by rail can be long. Ideal for very heavy, low-value shipments
that are not very time sensitive.

5. Water: • Water transport is ideally suited for carrying very large loads at low cost. • Difficult to operate for short-
haul trips. • Delays at ports, customs, security, and the management of containers used are major issues in global
shipping

6.Intermodal: Intermodal transportation is the use of more than one mode of transport to move a shipment to its
destination. On land, the rail/truck intermodal system offers the benefit of lower cost than TL and delivery times that
are better than rail, thereby bringing together different modes of transport to create a price/service offering that
cannot be matched by any single mode.

• Key issues involve the exchange of information to facilitate shipment transfers between different modes because
these transfers often involve considerable delays, hurting delivery time performance.
6. Briefly explain Strategic Fit and Scope
7. Write short note on Importance of Supply Chain Decisions
Decision phases can be defined as the different stages involved in supply chain management for taking
an action or decision related to some product or services. Successful supply chain management requires
decisions on the flow of information, product, and funds that fall into three decision phases.
The three main decision phases involved in the entire process of supply chain are described below –
Supply Chain Strategy
In this phase, decision is taken by the management mostly. The decision to be made considers the sections
like long term prediction and involves price of goods that are very expensive if it goes wrong. It is very
important to study the market conditions at this stage.
Supply Chain Planning
Supply chain planning should be done according to the demand and supply view. In order to understand
customers’ demands, a market research should be done. The second thing to consider is awareness and
updated information about the competitors and strategies used by them to satisfy their customer demands
and requirements.
Supply Chain Operations
The third and last decision phase consists of the various functional decisions that are to be made instantly
within minutes, hours or days. The objective behind this decisional phase is minimizing uncertainty and
performance optimization.
The importance of supply chain decisions can’t describe in a word. There is a close connection between the
design and management of supply chain flows. Besides, the successes of the supply chain also depend on it.In
supply chain management, all parties are directly or indirectly involved with each other to fulfill the demand of
consumers. It does not include only the manufacturers and suppliers but also agents, brokers, retailers,
wholesalers and customers themselves. In organizations, the supply chain involves receiving and fulfilling
customer demand. It may be new product development, marketing .operations, distribution, finance, and
customer service.

See the supply chain of Wal-Mart and Amazon. It will give you a clear scene of the importance of supply chain
decisions. They are the most successful companies in the world. Because they are successful to manage their
supply chain decisions most effectively. They have built their success on superior design, planning, and operation
of the supply chain.In contrast, the failure of many businesses must depend on effective supply chain decisions.
The weak supply chain decisions can’t bring success for the organizations. Sometimes, we can see that, some
companies supply chain can’t adopt them to the changing nature of the supply chain. Moreover, they also fail to
meet customer expectations.

For example, Dell Computer Company has great supply chain decisions.That’s why they become more successful
than any other company. Their suppliers are much more attentive to adapt them to the changing nature of the
supply chain. Because they are technologically advantaged and connected with each other. Besides, they have
the capacity to meet the customers’ expectations.

Wal-Mart is the leader of using supply chain. let’s see how. Wal-Mart has a great supply chain design, planning,
and operations decisions to become a success. It has a direct link up with its suppliers. When a company
established its business, it has to invest a huge amount of money for transportation and information
infrastructure to facilitate the effective flows of goods and services. Whereas, Wal-Mart designed its supply chain
with clusters of stores around the distribution centers. So that it can facilitate the effective flows of goods and
services in a cost-effective manner.

The frequent replenishment allows Wal-Mart to match supply and demand more effectively than the
competitors. That’s why It has been a leader in sharing information. Besides, it also collaborating with suppliers
to bring down costs and improve product availability.
8. Briefly explain Supply chain
A supply chain is a connected system of organizations, activities, information and resources designed to source,
produce and move goods from origination to a final destination—typically from a supplier to an end customer.
Modern supply chains are often very complex, spanning multiple countries and involving many steps.

The Key Steps in a Supply Chain:

1. Original sourcing or extraction of raw materials

2. Refining or manufacturing materials into basic parts
3. Assembling basic parts into finished products
4. Selling finished products to end users
5. Delivering finished products to end users or consumers

Between each of these steps, several activities need to take place, including:

1. Documentation, contracts and other information that define expectations throughout the supply chain
2. Physical movement of goods from one location or organization to another
3. Storage of goods until they are needed
4. Stock and inventory tracking and management
5. Demand and supply management
6. Tracking and authentication of goods
7. Onward logistics and distribution of goods to the end customer

Common Challenges in the Supply Chain

The global, complex and multi-step nature of modern supply chains creates several challenges for supply chain
managers.

1 .Lack of T r ans par en c y in th e Sup pl y Ch ai n : Legacy supply chains are often opaque and difficult to
understand. This makes it hard to track and plan for how goods are moving through the supply chain. Without
transparency, optimization and effective demand management are almost impossible. This issue is heightened by
fragmented, legacy software and systems that do not allow for the consistent capture, reporting and transferal of
information.

2 .Go ods Th at A re Lost or Del ayed : An effective supply chain depends on streamlining the movement and
processing of goods. Without proper tracking, authenticating the sending, receiving and location of goods is a big
challenge. This creates unnecessary delays and holdups, damaging upstream and downstream operations
throughout the supply chain.

3 .Inc r eas ed W ast e and In suff ici en t Pl anni n g : Small reductions in supply chain efficiency can have a
significant overall impact on productivity and profitability. Without proper status updates and reporting, supply
chains will waste effort, resources and time. This makes it difficult to manage expectations and plans.

4 . P o or R el ati o ns hi p s a n d U n h ap py C o ns ume r s : Supply chains need to be as fast as possible to meet the

demands of modern consumers. A complex, legacy supply chain often relies on goodwill and established norms to
work well. When these areas are challenged by increased demand or outside disruption, relationships can suffer,
together with the quality and timeliness of supplying products.
9.Briefly explain LSCM with examples
1.Supply chain management (SCM)
The management of the flow of goods and services,[2] involves the movement and storage of raw
materials, of work-in-process inventory, and of finished goods as well as end to end order fulfillment from
point of origin to point of consumption Supply-chain management has been defined as the "design,
planning, execution, control, and monitoring of supply-chain activities with the objective of creating net
value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with
demand and measuring performance globally."
2.Functions
Supply-chain management is a cross-functional approach that includes managing the movement of raw
materials into an organization, certain aspects of the internal processing of materials into finished goods,
and the movement of finished goods out of the organization and toward the end consumer. As
organizations strive to focus on core competencies and become more flexible, they reduce their ownership
of raw materials sources and distribution channels
3.Importance
Organizations increasingly find that they must rely on effective supply chains, or networks, to compete in
the global market and networked economy. In Peter Drucker's (1998) new management paradigms, this
concept of business relationships extends beyond traditional enterprise boundaries and seeks to organize
entire business processes throughout a value chain of multiple companies.
In recent decades, globalization, outsourcing, and information technology have enabled many
organizations, such as Dell and Hewlett Packard, to successfully operate collaborative supply networks in
which each specialized business partner focuses on only a few key strategic activities.
4.Example
In 2010, Wal-Mart announced a big change in its sourcing strategy. Initially, Wal-Mart relied on
intermediaries in the sourcing process. It bought only 20% of its stock directly, but the rest were bought
through the intermediaries. Therefore, the company came to realize that the presence of many
intermediaries in the product sourcing was actually increasing the costs in the supply chain. To cut these
costs, Wal-Mart decided to do away with intermediaries in the supply chain and started direct sourcing of
its goods from the suppliers. Eduardo Castro-Wright, the then Vice President of Wal-Mart, set an ambitious
goal of buying 80% of all Wal-Mart goods directly from the suppliers. Walmart started purchasing fruits
and vegetables on a global scale, where it interacted directly with the suppliers of these goods. The
company later engaged the suppliers of other goods, such as cloth and home electronics appliances,
directly and eliminated the importing agents. The purchaser, in this case Wal-Mart, can easily direct the
suppliers on how to manufacture certain products so that they can be acceptable to the consumers. Thus,
Wal-Mart, through direct sourcing, manages to get the exact product quality as it expects, since it engages
the suppliers in the producing of these products, hence quality consistency.