Introduction of Supply Chain Management

Short Questions
LWhat do you mean by physical Now an information low in
SCM

Ans. The organizations that make up the supply chain arc k

information flows.
together through physical flows and
Physical Flows

Physical lows involve thetransformation,

movenent. and storae
visible piece of the supp.
of goods and materials. They are the most
chain. But just as important are information flows.
Information Flowss
information flows allow the various supply chain partners
t

coordinate their long-term plans, and to control the day-to-day flow of

goods and materials up and down the supply chain

Q2. What do you mean by SCOR model?
Ans. One common Supply Chain
and very effective model is the
the Supply Chain
Operations Reference (SCOR) model. developed by
Council to improve and communicate
enable managers to address,
The SCOR model runs
supply chain management practices effectively.
Deliver. Return.
through five supply chain stages: Plan. Source. Make.
Q3. What is a manufacturing cycle?
manutacturer
Ans. The Manufacturing Cycle is found between a
or

the customer) member

repair activity and the next downstream (toward
member may be a wholesaler.
of the
supply chain. 1his next downstream
a customer. retail
a retailer, or the customer. The cycle begins when
order. or when a
activity, or wholesaler places a replenishment
manutacturer forecasts customer demand. Processes in this eycle
nclude production and maintenance scheduling. and product repair.

shipping. and receiving.

 Material
10 Noble Study
04. What is a replenishment eycle?
bctween thc retailer and the
Ans. The Replenishment Cyce occurs

distributor or wholesaler and incudes all processes for replenishing

retail inventory retail order entry, fulfillment, and reccipt This cycle
which is a policy thal starts the
beguns wth the retail order trigger,
replenishment order placement
Strategies?
Q5. What do you mean by Outsourcing and Offshoring
Ans. Rethinking your supply chain strategy not only in volves
different activities in the supply chain, but also
coordinating the
outside
deciding what to make internally and what to buy from
sources

How can a firm identify what manufacturing activities lie in

its set

of core competencies, and thus should be completed internally. and

what product and components should be purchased from outside

suppliers. because these manufacturing activities are not core

competencies?
Q6. Define the term Inbound logistics and Outbound logisties.
Ans.
OInbound Logistics: The activities which are concerned with
procurement of material, handling. storage and transportation
Outbound Logistics: The activities which are concerned with the
collection, maintenance, and distribution or delivery to the final
consumer.

Apart from these, other activities are warehousing, protective

packing, order fulfilIment, stock control. maintaining equilibrium
between demand and supply, stock management.

Long Questions
Q.1 Discuss the meaning of supply chain management.
Ans. A supply chain is a global network used to deliver products and
services fronm raw materials to end customers through an engineered
flow ofinformation, physical distribution, and cash. A supply chain. in
view of the above supply chain management definition. comprises a
network of both entities and processes (the engineered flow).
Supply Chain is the network of organizations that are involved.
through upstrcam and downstream linkages, in the different processes
 12 Noble Study Material
hain but also any data that goes along with the product (such as order
status nformation, payment schedules, and ownership titles) and the
actual entities that handle the product from stage to stage of the
supply
chain.
There are essentially three goals of SCM: to reduce imventory. to
Increase the speed of transactions with real-time data exchange. and to
increase revenue by satisfying customer demands more efficiently.
Q.2 Discuss the various stages of supply chain.
Ans. Stage of Supply Chain:
It encompasses such a wide range of functions that it can seem

daunting, even to the most experienced international businessperson.

liowever. ihe process can be
effectively modelled by breaking it down
into several main
strategic areas.
One common and
very effective model is the Supply Chain
Operations Reference (SCOR) model, developed by the Supply Chain
Council to enable managers to address.
improve and communicate
supply chain management practices effectively. The SCOR model runs
through five supply chain stages: Plan. Source. Make. Deliver. Return
Stage 1:
Plan Planning invoives a wide range of activities.
first decide on their operations
Companies must
strategy. Whether to manufacture a
product or component or buy it from a supplier is a major decision.
Companies must weigh the benefits and disadvantages of different
options presented by international supply chains.
Options include: Manufacturing product component
a

domestically Manufacturing component in a foreign market by setting

a

up international production facilities Buying a component from a

foreign supplier Buying a component from a domestic supplier
Stage 2:
Source This aspect of supply chain managemeni nvolves
organizing the procurement of raw materials and components
Procurement is the acquisition of goods and services at the best
possible
price. in the right quantity and at the right time. When sources have
been selected and vetted.
companies mustnegotiate contracts and
schedule deliveries. Supplier performance must be assessed and
payments to the suppliers made when appropriate In some cases.
 Nohle Stuly Material |13
mpanies will be working with a network of suppliers. This will

inohe
e working with this network, managing inventory and company

ssets and ensuring that export and mport requirements

ass0
are mct

Stage 3:
Mahe This stage is concerned with selheduling of productrm
and release. Companies must
actnities. testing of products. packing
rules tor pertornance, data that must be stored. facilties
also manage
and regulatory conmpliance.
Stage 4:
Deliver The delivery stage encompasses all the sls

distribution strategies and

processing customer inquiries to selecting
and
transportation options. Companies must also manage warehousing
to these tasks for them.
inventory or pay for a service provider manage
The delivery stage includes any trial period or warranty period.
and
customers or retail sites must be invoiced and payments received,

companies must manage import and export requirements for the finished
product.
Stage 5:
Return is associated with managing all returns of defective products
authorizing returns.
including identifying the product condition,
replacing defective products and
scheduling product shipments,
include "end-of-life" products (those
providing refunds. Returns also
lifetime and a vendor will no longer
that are in the end oftheir product
be marketing, selling, or promoting particular
a product and may also
must establish
be limitingor ending support for the product). Companies
rules for the following: Product returns Monitoring
performance and
costs Managing inventory of
returned product

related to supply chain

Q.3 What are the important decision phases
management?
Ans. 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.
Successful SCM requires decisions relating to the flow of
information. Product and Fund.
 14 Nohle Study Material
There are three such Decision plhases which are explaned below
Supply Chain Strategy-
This ty pe of decision is taken by the management
mostly. As the
decision includes long term prediction and contains cost of
say very
capensive ifit goes wrong. The market conditions should be taken into
consideration at this stage.
The prediction and condition of market for next years are
important
in these decisions. The decision
may include the structure of supply
chain after making structure the tasks and
responsibilities ofeach stage
like as we know there is
transportation storage of material produced.
Production of material, plant location which should be
easy for
transporters to load material and to dispatch at their said location.
Location of warehouses for
storage of finished product or good and so
on. All these
decisions are strategicdecision s taken by higher
authority.(Management).
Supply Chain Planning -
By keeping in mind the supply chain design
phase the next i.e.
Planning should be done
according to the demand and supply view.
The most important to know about
demand and
Research and the Component of Mkt. Research. supply
is Market

The another thing which i would like to

put in front of is the
you
competitors and strategies they are following to meet their customer
requirement. Demand may be different in different
market. By
forecasting it which market will be provided the finished goods from
which plant is planned in this stage.
Everyone in this field or firms try
to make the overall
process as flexible as they can make it. The supply
chain design phase jf
performs good in shorter term the planning is
said to be successful.
Supply Chain Operations-
Operations decisions are those that should be made within minutes,
hours or days. The aim of this phase is reducing uncertainty and
performance optimization.
All that is involved in this
phase is from customer order handling
to
providing the customer with that product.
Suppose a customer requires a
product which your company
manufactures, It is first of all the
to take order. convey it
responsibility of marketing department
to production dept. and inventory dept.
prod.
luction dept
Noble Study Materiul 15
tion dep produces acc.to the customer
need sends it to
P se through a proper chanel and distributor tocustomer within
framc. All the department in this process involved should try to
ove the pertormance and mnimze
inp uncertanty.
(ive a detailed note on cycle view of supply chain
Q4. proces.
The supply chain process occurs in two ways. Cycle View and
hPull view. The processes in a supply chain are divided into a
er
a f cvcle, cach performed at the interface between two successive
stages of
a supply chain.
Supply Chain is a sequence of processes and flows that take place
Nvithin and between different stages and combine to fill a customer
wit
need for a product. The processes in a Supply Chain are divided into
serics of cycles, each perfomed at the interface between two successive
stages of a Supply Chain. Cycle view of Supply Chain is useful in
making operational decisions as role of cach member of Supply Chain
isclearly defined."

The five-stage supply chain is comprised of four cycles:

Customer
Customer
order cycle

Retailer

Replenishment
cycle
Distributor
Manufacturing
cycle

Manufacture
Procurement
cycle
Supplier
"Procurement Cycle
ne Procurement Cycle occurs between the manufacturerand supplier.
and
ncludes all processes to ensure the availability of materials
and
mponents at the time and place required in the production
 Material
16 Noble Study include supplier production
sehedule. These processes
maintenance
manutacturmg. shipping. and receivinp
scheduling and component
requirements of the manufacturer's
The cycle is triggered by
maintenance actiVity s repair schedule. or the
Droduction schedule, the
restocking policy.This repeat several times between several
cycle may
tiers of suppliers.
Manufacturing Cycle
The Manufacturing Cycle is found between a manufacturer or repair

the customer) member of

activity and the next downstream (toward
the supply chain. This next downstream member may
be a wholesaler.
a retailer. or the customer. The cycle begins
when a customer, retail
or when a
activity, or wholesaler places a replenishment order,
manufacturer forecasts customer demand. Processes in this cycle
include production and maintenance scheduling, and product repair.
shipping, and receiving.
Replenishment Cycle
The Replenishment Cycle occurs between the retailer and the
distributor or wholesaler and includes all processes for replenishing
retail inventory: retail order entry, fulfillment, and receipt. This cycle

begins with the retail order trigger, which is a policy that starts the
replenishment order placement.
Customer Order Cycle
The Customer Order Cycle sits at the interface between the
custorner and retailer and includes all processes for receiving and filling
of customer orders: customer arrival. order entry, fulfillment. and

receipt.
Q.5 Enlist and describe the key issues in supply chain management.
Ans. key issues:
Distribution Network Configuration
Consider several plants producing products to serve a set of
geographically dispersed retailers. The curreni set of warehouses is
deemed inappropriate, and management wants to reorganize or redesign
the distribution network. This may be due, for example. to changing
demand patterns or the termination of a leasing contract for a number
of existing warehouses. In addition. changing demand patterns may
require a change in plant production levels, a selection of new suppliers
and a new flow pattern of goods throughout the distribution network
 Noble Study Materiul
| 17
Prdu
ction Sourcing
anany industries. there is a need to carefully balance
ralion and
ransor,
manutacturing costs. In particular,
T tion costs typically implies that cach reducing
produ
manufacturing facility is
sible for a small set of products so that large batches are
reducingproduction costs. Untortunately. this may leadproduced,
hence to higher
transortaion costs

Similarly. reducing transportation costs typically implies that cach

tacility is flexible and has the ability to produce most or all products.
haf this
but this leads to small batches and hence increases production costs.
Linding the right balance between the two cost components is difficult
hut needs to be done monthly or quarterly.
Supply Contracts

In traditional supply chain strategies, each party in the chain focuses

on its own profit and hence makes decisions with little regard to their
impact on other supply chain partners. Relationships between suppliers
and buyers are established by means of supply contracts that specify
and
pricing and volume discounts, delivery lead times, quality, returns,
so forth.
is whether supply contracts also can be
The question, of course,
the traditional supply chain strategy with one that
used to replace
optimizes the entire supply chain performance.
Distribution Strategies
is how much
An important challenge faced by many organizations
distribution system. What
should they centralize (or decentralize) their
and transportation
is the of each strategy on inventory levels
impact when
costs? What about the impact on service levels? And. finally,
centralized locations to the
should products be transported by air from
various demand points?
firm determining
important for a single
These questions are not only
that need to decide
1s distribution strategy, but also for competing
should
can collaborate
with each other. For example,
OW much they
Competing dealers
Partnering
upply Chain Integration and
Strategie
designing and implementing a globally optimal
AS observed earlier,
the conflicting
difficult because of its dynan1ics and
Supply chain is quite

RMBOP 01(2)
 Material
18 Noble Studr
obiectives employed by dillercnt lacilities and partners. Neverthelec.

Dell, Wal-Mart, and Procter N Gamble success stories demonstrato

not only that an integrated. globally optimal supply chain is noseihi

but that it can have a huge impact on the company s performance and

market share
Of course, one can argue that these three examples are associated
with companies that are among the biIggest ccmpanies in their respective
industries: these companies can implement technologies and strategies
that very few others can afford.
Outsourcing and Off shoring Strategies
Rethinking your supply chain strategy not only involves
coordinating the different activities in the supply chain, but also
deciding what to make internally and what to buy from outside sources.
How can a firm identify what manufacturing activities lie in its set of
core competencies, and thus should be completed internally, and what
product and components should be purchased from outside suppliers.
because these manufacturing activities are not ccre competencies?
Product Design
Effective design plays several critical roles in the supply chain.
Most obviously. certain product designs may increase inventory holding
or transportation costs relative to other designs, while other designs
may facilitate a shorter manufacturing lead time. Unfortunately, product
redesign is often expensive. When is it worthwhile to redesign products
so as to reduce logistics costs or supply chain lead times?
Information Technology and Decision-Support Systems
Information technology is a critical enabler ofeffective supply chain
management. Indeed, much of the current interest in supply chain
management is motivated by the opportunities that appeared due to the
abundance of data and the savings that can be achieved by sophisticated
analysis of these data.
Customer Value
Customer value is the measure of a company's contribution to its
customer, based on the entire range of products, services. and intangibles
that constitute the company's offerings. In recent years. this measure

RMBOP 01 (2)
 Noble Study Material |19
superseded
ed measures such as quality and custoner satisfaction
hos JMIsy. effective supply chain management is critical if a lirm wishes
O bo u s l y

customer needs and provide value.

u fiulfill
Smart Pricing

Revenue managemecnt strategIes

have been applicd successfully in

dustries suc. such as airlines, hotels, and rental cars. In recent years, a
lustries
herof manufactures, retailers, and carriers have applied a variation
hu
techniques to improve supply chain performance. In this case
ofthese
and inventory (or available capacity) to
he tirm integrates pricing
market demand and improve the bottom line.
iatluence
differentiate
o.6 What do you
mean by logistics management? Also
chain
logistics management and supply
between market
management.

Ans. Logistics Management:

chain
management is part of supply
the
Logistics
and controls the efficient,
management that plans, implements,
flow and storage of goo services, and
effective forward, and reverse
the point of origin and the point of
related information between
customer's requirements.
consumption in order to meet
the movement of goods.
The management process which integrates
from she sourcing of raw
services. information, and capital, right
consumer is known as Logistics
material, till it reaches its end
behind this process is to proviue the right
Management. The objective
product with the right quality right time in the right place at the
at the
The logistic activities are divided
right price to the ultimate customer.
into two broad categories they are:
with
Inbound Logistics: The activities which are concerned
procurement ofmaterial, handling, storage and transportation
O Outbound Logistics: The activities which are concerned with
the collection, maintenance, and distribution or delivery to the
final consumer.
Apart from these, other activities are warehousing. protective
packing, order fulfillment, stock control, maintaining equilibrium
between demand and supply, stock management. This will result in

savings in cost and time, high-quality products, etc.

20 Noble Study Material
Difference between Market Logistics Management and
Supply Chain Management

Market Logistics Management Supply Chain Management

Logistics management is|e SCM deals withintegration
prmarily concerned with| all partners in the value chan
optimizing flows within and|
out of the organization.
Logistics is essentially a SCM builds upon thi
framework that creates a framework and secks
single plan for flow of| achieve linkage and
products and information coordination between
through a business. processes of other entities

the pipeline i.e. suppliers an

customers, and organizatior

itself.

Logisties tends to focus on SCM focuses on purchasing

transportation & distribution. and procurement. production

planning. demand
management. from point of
to point of
origin
consumption.

supply chain. Also state the

the various drivers of
Q7. Explain
obstacles of achieving strategie fit.
Framework for Structuring Supply Chain Drivers
Ans. A and developmen
chain managers
have to take research
Supply of their supph
both responsiveness and efficiency
efforts to improve were technological
and
continuous basis. In the past there
chains on a without an
one of them
which improve
managerial breakthroughs both dimensions
other and also improvement in
deterioration in the

simultaneously.
tells. new technologies (capi
Actual economic theory
Capitalproductivi
investments) are adopted
for capital productivity.
improvement
chains c o m e s through
context of supply
in the
resnonsiyeness and efficiency.
 NobleStudly Material |21
Bul at a
ertain point in time, there can be tradeoffs bctween
e s
nd efticiency. Tlence supply chain designers come
C H C ' S sn d .

e Vaous combinatons of responsIVeness

ana c1iciCHCV (res

nsiveness elliciency Irontier) and the optimal
based on thhe competilive strategy considerations
naton
i schosen ba
is
chosen

of Drivers
Definition.
f i n i t i o n p l a n a t i o n

pe consists of all raw material, work in process.

entory: It
within a supply chain.
and finishcd goods
Transportation:
t involves moving inventory from one point
to another point.
n the supply chan
place where inventory is stored,
is a
n Facilities: A facility facilities can be categorised
or assembled. Hence
manufactured
and storage facilities.
into production facilities
consists of data and results of analysis
Information: It
facilities, customer orders.
inventory, transportation,
regarding
customers, and funds.

Inventory
maintained in the supply chain
because of mismatches
Inventory is
demand.
between supply and
based on reasons for keeping them
Types of inver.tory due to producing or buying larger
O Cycle inventory: This results
costs related to processing
each
lots to minimize acquisition
order.
purchase order or production
uncertainty or
Safety Inventory: It is held to counter against
variability of demand.
satisfy to
Seasonal "nventory: It is inventory maintained
to production capacity.
higher demands in a period compared
variability in
It arises due to the decision to service predicted
slack period or low
demand through extra production during
demand periods
but results in
Increasing inventory gives higher responsiveness
higher inventory carrying cost.
Transportation
Number of decisions have to he taken in designing
a supply
-chain regarding transportation.
 22 Noble Study Material
Decisions
O Mode of Transportation
Six basic modes exist
OAir
O Truck (Road)
Rail
Ship
O Pipeline
Electronic transportation (the newest mode for
music
documents etc)
Route and Network Selectioon
Network is offacilities or destinations which can be use
a set
for transportation of
goods. Route is a specific selection o
facilities or destinations through which
goods move.
Own Transport or Outsourced
Facilities
Transport
Within a facility, inventory is either transformed into another state
or stored.
Facilities Related Decisions
O Location
Capacity
Manufacturing Methodology or Technology
Warehousing methodology
Information
Information does not have a physical presence. It is likely to be
overlooked. But it deeply affects every part ofsupply chain. Information
is the connection between various stages in a supply chain and allows
them to coordinate actions and increase the maximum supply chain
profitability. It is also essential in daily operations. The stocks availabk
in warehouses must have visib:lity so that when a customer wants at
item, it can be delivered to him.
O Decisions related to Information
OPush Process Information and Pull Process Information
Coordination and information sharing across various facilities
in the supply chain.
Forecasting
Aggregate Planning
OEnabling technologies.
 Noble Study Material | 23
Soureing
S e t of business processes required to purchase goods and
services in a supply chain.
Supplier selection, single vs, multiple suppliers, contract

negotiation.

Sourcing decisions are crucial because they affect the level of

efliciency and responsivenesS in

a supply chain
In-house vs. outsource
decisions- improving efficiency and
responsiveness.

crucial they affect the level of

because
Sourcing decisions are
in a supply chain.
efficiency and responsiveness efficiency and
outsource decisions- improving
O In-house vs.

responsiveness.
Pricing customers in a supply
determines the amount to charge
Pricing
chain. and supply
be used to match demand
Pricing strategies can t0 improve
strategies
Firms can utilize optimal pricing
efficiency and responsiveness.
prices by response
Low price and low product availability: vary
times.
Obstacles to Achieving Strategic Fit
balance between responsiveness and
A company's ability to find a
needs of the targeted customer is the
efficiency that best meet the
achieving strategic fit .Companies face many obstacles in
key to
be located on the responsiveness
deciding where this balance is to
spectrum Obstacles
Increased variety (mass
Increasing variety of products -
customization) tend to raise uncertainty, and uncertainty frequently
results in increased cost and decreased responsiveness
Decreasing product life cycles-This makes the job of achieving
strategic fit more difficult supply chain must constantly adapt
as

to manufacture and deliver new product

in addition to coping with
these product's demand uncertainty.
Increasingly demanding customers
faster fulfillment, better
Today's customers are demanding
same price they paid
quality and better performing products for the to
years ago means that the supply chain must provide more just
maintain its business.
 24 | Noble
Study Material
Fragmentation of supply chain ownership
Now-a-days most firms have become less
More members in vertically intevratod
supply chain for providing goods
Many owners with its own policies and interests. the chain
(network) more complicated to coordinate
Globalization
Supply chains are more global
Global supply chains creates
many benefts such as ability to
source from a
global base of suppliers who may offer better or
cheaper goods than were available in a company's hone nation
Suppliers are apart making coordination much more diflicult
Removal of trade barrier results in increased
competition from
global companies
Companies that once protected has to find time for responding
to needs of customer that arise due to competition
Now more strain on supply chain better trade-off
Difficulty executing new strategies
Creating successful strategy is not easy
Skillful execution of strategy is as important as creating
successful strategies
For instance others could figure out Toyota's brilliant strategies:
the difficulty was in executing that strategy.

Applied Questions (Case Study)

it has influenced
If we see the trend of supply chain management,
from
autonomous bodies along
the supply chain to move away
many two key
words cooperative management. In this system
adversarial to and
the demand side that can be said globalization
driving forces on
globalization is very advantageouw
customisation. The concept of and
mass
too much opportunities
firms because it provides
for multinational sector. product development and
economies and
research
help in their
they havelot
in manufacturing sector.
customers,
the
are open for
In modern days options
according
can buy goods
available. They
and lot of options Company
is
know
ofchoices from any company.
liking in anywhere
to their
 Nohle Study Material |25
thev can complete the need of customer. This is why the complete
ow
hov

frequently
introducing the new product. Fashion goods. toys personal
by
comptes, electronic goods. domestic appliances ete are example o
novative prodicts: they have shorter life because
of
new
and prOduct varicties.
CompetitiOn
guarantee of product stability." In
lhere is no
In the age of fashion
mass product varieties has a high degree
the ce of competition wili be
In this phase only those companies can
of demand. uncertainly. demands
of quick response supply because
survive which has capacity drive chain
side there are three trends that
On the supply
of uncertain.
each other.
members to cooperate
technology sector companies have
.With increment ofinformation and their
to make link to their customers, suppliers
lots of option
world. In fact information technology
around the
partners in all
and buying of goods like OLX.
has changed the picture selling
of
has provided opportunities
Flipkat.Myntra. Zovi etc. This trend
to manage complex to logistics process.
more
chain management. Now-
2. Retailing is prevalent
a
driver ofsupply
market, suffering from
retailers who are facing competitive
a-days inventories require
and
to carry fewer
narrowing margins need innovations for
from their suppliers. Logistics
quicker response
efficient consumer
example vendor- managed inventory (VMI),
and
response (ECR)
and collaborative planning, forecasting
replenishment (CPFR) are frequently accepted
by suppliers and
retailers to improve their performance.
such as just in time (JIT)
3. New changes in manufacturing process
chain dependent on time
oriented logistics make complete supply
sensitive delivery of product and services. It
is a key driver to a
chain performance. AAs
chain member to improve over all supply
in industrial and
business increasingly relies on other companies
consumer goods the need ofeffectively managed relationship is of
considerable importance.
achieve
of globalisation and information. the ability to
In the era
the effective management has become easy and competitive.

Management with downstream and upstream

member gives an

growth and reduced cost. In a

opportunity to company to make sure
26| Noble Study Material
survey on e-business by the institute of supply management and forreste.
ester
research told that more than half the responding companies (52
reported collaborating with suppliers online. Example:. Amazon
Jabong. Yepmee ete.
Reasonly transparency has increased and the chain members has
to reduce transition cost. eliminate rework and error, cut order cycle
time. This is why academic need to provide an alternative source for
supply chain knowledge that is presented and examined to ensure
validity, generalizability and reliability of supply chain management.
So it is the basic interest of academics to become
actively involved in
research of supply chain management model to reduce cost and increase
production.
Questions:
1. Discuss in brief the problems associated with an effective
supply chain.
2. Identify the various problems and issues in supply chain

management.
3. Give a note on future aspect of supply chain management.
Answers.
Ans. 1. The problem ofsupply chain management is full of many sub
problems such as network design, logistic management, customer
services and other. These problems can be both general and specific.
Specific problems happens at the vertical direction of problem with
particular issue for example inventory management, but general
problems occurs horizontally.
In the age of competition with mass product varieties has a high
degree of demand, uncertainly. In this phase only those companies can
be survive which has capacity of quick response supply because
demands of uncertain.
In modern days options are open for the customers, they have lot
of choices and lot of options available. They can buy goods accord1ng
to their liking in anywhere from any company. Company is known
how they can complete the need of customer. This is why the complete
by frequently introducing the new product.
 Noble Study Material |27
Ans. 2. Identification of Problems and Issues:
Supply chain management consist of dealing with managerial and
technical problems. These problems are related with many common
issues that must be addressed for supply chain to function effectively
and etticiently. In the following we will discuss some of these issues
A. Configuration of distribution network This issue is related with a
selection of warehouses, locations and capacities, finalising
transportation between warehouses and plants so as to maximise
production and educed transportation expenditure and other costs.
B. Management of inventory This is related with the stocking of goods
in the supply chain. This is a decision problem solution in which
involves using of forecasting, optimization algorithms, inventory
management and supplier and manufacturer deals with issue in a
supply chain by sharing information
C. Contracts of supply It is related with sitting up relationship of
suppliers and buyers in a reference of prize, discount, rebate. quality
standards and return policies. It is a contract of terms and conditions.
This approach is completely new; it is different from traditional
approach because its main focus is minimizing the impact of
decision made at not just on in supply chain but on its entire place
D. Strategies of distribution This is related with decision making to
the movement of goods in supply chain. Objectives of its to
minimize cost of storage and transportation. In this system
manufacturer can make decision about storage or direct shipment
to the point of uses of plenty of products. Information are shared
to manufacturer. suppliers, distributors and retailers.
E Strategies for outsourcing and procurement It is an important issue
because buying or selling or manufacturing should be considered
thoroughly. It must be considered what to manufacture and what
to buy from internal and external sources but the main problem
with it that is making decision in identifying risks with these
decisions and sorting them.
Another issue to consider is the impact of internal or procurement
strategies and what channels to utilise that can be public and private
both. When dealing with the trading partners, in taking
decisions
manufacturers try to minimize risk or they make balance between
risk and payoff.
 Material
28 Noble Study
Ans. 3. Future Aspects:
The incrcasing role ofthe Internet in supply chains has the ental
o fereaing unique capabilites tor improving supply chain nent
Therefore. it is benefical lo recognize that it will have a imDortsant
role in defining the agenda for future research in supply chain
management. As described in previously, sharing of information and
integration ot information are two of the main problems in supply chain

112nagement.
As the size of the supply chain network grows. there is an
Cxponential increase in the amount of data and therefore. information
and eventually knowledge that needs to be collected, stored. managed.
and serviced for various decision-making needs while
processed.
managing the supply chain.
This problem needs active solution both
from anoperational
well as
(forecasting and inventory management) as
respect, and
of efficient information processing methodologies
development destination for supply chain
infrastructure offers that
techniques. Cyber
configuration research.
2 Description of Inventory Management

Short Questions
of inventory
Q.I Enlist the various tools and techniques
management.
Ans. Inventory management mean methods that are used for organi/ing

holding and replenishment of stock. attention

t

lt is necessary for every management 1o give proper

inventory management
management will determiiue
(a)
An efficient system of inventory
what to purchase (b) how much to purchase (c) from where io purchase
(d) where to store, etc.
The following are the important tools and techniques of inventor
management and control:
. Determination of Stock Levels.
2. Determination of Safety Stocks.

3 Determination of Economic Order Quantity

4 A.B.C. Analysis
. VEDAnalysis
6. Inventory Turnover Ratios
7. Aging Schedule of Inventories
8. Just in Time Inventory
Q.2 What do you mean by EOQ model?
Ans. In inventory management, economic order quantity( EOQ) 1s
the order quantity that minimizes the total holding costs and ordering
costs. It is one ofthe oldest classical production scheduling models

2DS
H
Qis the economic order quantity (units). D is demand (units, often
annual). S is ordering cost (per purchase order), and H is carrying cost
per unit
30 Noble Study Material
Q.3 Discuss in brief the inmportance of transportation in logisties

management.
Ans. Transportation involves the physical movement of goods between

origin and destination points. The transportation system links

chain
geographically .separated facilities in a company's supply
Transportation facilitates the creation of timne and place utility.
is a
Transportation key supplychain process that must be included
in chain strategy development, network design, and total cost
supply
management.
supply
between chain
Transportation provides the critical links
between their facilities.
partners, permitting goods to flow
of a supply
Transportation efliciency promotes the competitiveness
chain
Modes of Transportation
Truck
Rail

Air
Water
Pipeline
Multimodal transportation
Q.4 What do you mean by containerization?
Ans. Containerization is a system of intermodal freight transport using
containers and ISO
intermodal containers (also called shipping
standardized dimensions.
containers). The containers have
use of
Containerization. Refers to the increasing and generalized
the container as a support for freight transportation. The development

intermodal transportation and containerization are mutually inclusive.

of
forces linked with
self strengthening and rely of a set of driving
technology, infrastructures and management.
There arefive main ypes of containers:
Standard container.
are
Container designed to carry a wide variety general cargo. They
either in
often labeled as dry containers because they carry dry goods
loadeu
break bulk (most common) or bulk
(less common) form. Cargo is
and unloaded through a double door which marks the"back side"o
the container.
 Noble Study Material 31
Tank container.
Container designed to carry liquids (chemicals or foodstuf). t is

composed of a tank surrounded by a structure making it the samc size

than a standard 20 foot containers, including its tour latching ponts
Open top container.
A contaner with an open roof and designcd to carry cargo that is

too large to be loaded standard container doors. such as

through
machinery. The container is loaded from the top with a tarpaulin used
to cover its contents.
Flat container.
Container having an open roof and sides designed to carry heavy
and oversized cargo. The cargo transported is left exposed to outdoor
conditions.
Refrigerated container.
Also known as a reefer. Container designed to carry temperature
controlled cargo, often around or below freezing point. It is insulated
and equipped with refrigeration plant maintaining the temperature
constant.

Q.5 What do you mean by cross docking?

Ans. Cross docking is a logistics procedure where products from
supplier or manufacturing plant are distributed directly to a customer
or retail chain with marginal to no handling or storage time. Cross
docking takes place in a distribution docking terminal: usually
consisting of trucks and dock doors on two (inbound and outbound)
sides with minimal storage space.
The name 'cross docking' explains the process of receiving products
through an inbound dock and then transferring them across the dock to
the outbound transportation dock.

Long Questions
Q1 Discuss the meaning ofinventory. Enlist the types of inventory.
Ans. In the supply chain one of the key variables which have to be
managed is inventory. The inventory includes a vast spectrum of
materials that is being transferred, stored, consumed. produced.
packaged, or sold in one way or anotherduring a firm's normal course
ofbusiness.The planning, storing. moving and accounting for inventory
is the basis for all logistics.
 Material
32| Noble Study
Inventory has a financial value. which accounting pur Oses is
for

it be very difficult toco

considered a floating asset. However, may conven 3)3)
asscts, hence the inventory is ver "
into iquid
phy sical inventory risky
investment
There are three main purposes or motives of holding inventorias.
ies:
i) The Transaction Motive which facilitates continua
sales orders
production and timely execution of
i) The Precautionary Motive which necessitates the holdingat
inventories for meeting the unpredictable changes in demand
and supplies of materials.
ii) The Speculative Motive which induces to keep inventories
for taking advantage of price fluctuations, saving in re-ordering
costs and quantity discounts. etc.
Types of inventories
Inaccounting language it may mean stock of finished goods only
In a manufacturing concern, it may include raw materials,
work in
process and stores. etc. Inventory includes the following things:
a) Raw Material: Raw material form a major input into the
organisation. They are required to carry out production activities
uninterruptedly. The quantity of raw materials required will be
determined by the rate of consumption and the time required for
replenishing the supplies. The factors like the availability of raw
materials and government regulations etc. too affect the stoch of
raw materials
b) Work in Progress: The work-in-progress is that stage of stocks
which are in between raw materials and finished goods. The raw
materials enter the process of manufacture but they are yet to attain
a final shape of finished goods. The quantum of work in progress
depends upon the time taken in the manufacturing process. The
greater the time taken in manufacturing, the more will be the amount
of work in progress.
Consumables: These are the materials which are needed to
smoothen the process of production. These materials do not directly
enter production but they act as catalysts, etc. Consumables may
be classified accord1ng to their consumption and criticality.
 Nohle Study Material | 33
Finished goods: These are the goods which are ready for the
consumers. The stock of finished goods provides a butfer hetween

production and market. The purpose of maintaining inventory 1s to

ensure proper supply of goods to customers.
Spares: Spares also form a part of inventory. The consumption
pattern of raw materials, consumables, finished goods are different
from that of spares. The stocking policies of spares are different
from industry to industry. Some industries like transport will require
more spares than the other concerns. The costly spare parts like
rather
engines, maintenance spares etc. are not discarded after use,
they are kept in ready position for further use.
Q.2 Discuss the objectives and techniques of inventory

management.
Ans. Effective inventory management
Inventory management mean methods that are used for organizing,
holding and replenishment of stock. The main goal keep the
inventories on optimal level, without stockouts and excesses. For this,
two controversial but simultaneously mutually dependent tasks should
be solved:
T o have enough inventories to fulfill orders of outer and inner
clients in a manner satisfying them. Or with other words assure
high level of customer service. Usually thiscustomer service level
is measured as availability (fill rate).
T o minimize inventory carrying costs, first ofall capital tied into
inventories for maximizing the company's profitability. Trade-off
should be found for achieving these two goals simultaneousBy.
It is necessary for every management to give proper attention to
inventory management. A proper planning of purchasing, handling
storing and accounting should form a part of inventory management.
An efficient system of inventory management will determine (a) what
to purchase (b) how much to purchase (c) from where to purchase (d)
where to store, etc.
There are contlicting interests of diflerent departmental heads over
the issue of inventory The finance manager will try to invest less in
inventory because for him it is an idle investment, whereas production
manager will emphasise to acquire more and more inventory as he

RMB OP 01 (3)
34 | Noble Study Material
want interruption in production
due shortage o
to
does not any
the stock
inventory. The purpose of inventory management is to keep
nor under-stocking
in such way that neither there is over-stocking
a
of liquidity and starving o
The over-stocking will mean reduction
on the other
hand. wil
other production processes; under-stocking.
should be
investments in inventory
result in stoppage of work. The

kept in reasonable limits.

Objects of Inventory Management are operational and
management
The main objectives of inventory
mean that the
materials and spares
financial. The operational objectives
so that work is
not disrupted
should be available in sufficient quantity
means that investments
for of inventory. The financial objective
want

inventories should not remain idle and minimum working capital

in
are the objectives
of inventory
should be locked in it. The following
management:
finished goods
(1) Toensure continuous supply of materials spares and
time and the customers
so that production should not suffer at any
demand should also be met.
and under-stocking of inventory.
(2) To avoid both over-stocking
under control so that they contribute in
(3) To keep material cost
and overall costs.
reducing cost of production
and
(4) Tominimise through deterioration, pilferage. wastages
losses
damages
control so that materials shown in
(5) To ensure perpetual inventory
stock ledgers should be actually Iying in the stores.
(6) To ensure right quality goods at reasonable prices.
level
(7) To maintain investments in inventories at the optimum
s

required by the operational and sales activities.

(8) To eliminate duplication in ordering or replenishing stocks. The
is possible with help of centralising purchases.
T o facilitate furnishing of data for short term and long tem
planning and control of inventory.
(10) To design proper organisation of inventory. A clear l e a r cu
cut

accountability should be fixed at various

levels of manageme nent.

RMBOP01(3)