DRIVESPRING 2014
PROGRAM-MBADS (SEM 3/SEM 5) MBAFLEX/ MBAN2 (SEM 3) PGDOMN (SEM 1)
SUBJECT CODE & NAME-OM0012 SUPPLY CHAIN MANAGEMENT
BK ID-B1542 CREDITS AND MARKS4 CREDITS AND 60 MARKS
Q1. Write short notes on:

Intermodal transportation

Capacitated plant location model

Bulk shipments

Purchasing strategies
(Intermodal transportation Capacitated plant location model Bulk shipments Purchasing strategies) 10
(2.5 marks each)
Answer.
Intermodal transportation
It is a combination of at least two or more modes of transportation. For example, a manufacturer using
water transport to ship goods from one country to another, and then using the road transport to get the
goods to a customer. It is one of the most important modes of transportation as it becomes essential in
situations where one mode of transportation is not enough. When there are more than two modes of
transportation involved, it is called a multimodal transportation.
This mode of transportation takes a lot of work to set up. This is because there has to be proper
coordination among the different modes of transportation and their coordinators.
Intermodal
transportation is the most timely, efficient, cost effective and environmental friendly mode of
transportation.
Capacitated plant location model
The capacitated plant location model is a variant of facility location model that includes allocation of
capacities for the facilities. The allocation of capacities for a facility that serves as a least cost source for a
demand point helps in serving any demand at that point. The capacity of a facility and demand at each of
the demand point are known as deterministic parameters. These parameters can be easily calculated
using mathematical equations. According to capacitated plant location model, different facility locations
offer different fixed costs for locating a facility. The facilities that are located at the demand points are
controlled to a given capacity level of the demand. This model also helps you to focus on reducing the
cost of meeting the global demands.
Bulk shipments
Bulk shipping has been a part of inventory management for a long time. Since it is cheaper to purchase
and ship goods in bulk, sellers can plan to reload their inventory less frequently than they normally
would. Because there is fewer inflow of frequent shipments, sellers needs to spend extra money on
purchasing and warehousing the inventory. However, if the seller is reasonably sure of product sales,
then bulk shipping can save a good deal of money.
Purchasing strategies
Purchasing requires decisions to be made at strategic level, tactical level and operational level. Earlier,
purchasing decisions were limited to operational and tactical levels. However, purchasing now has more
strategic level impact.
For example, if, unfortunately, a company purchases and places a long term contract with an unreliable
supplier, then there is an adverse effect on customer service, product quality, costs, profit and ultimately
on the company’s survival in the market. There are four levels of strategic decisions and their positions
on a standard model. Figure-1 depicts the four levels of strategy.
Figure-1: Levels of Strategy
Q2. Discuss the steps involved in the measurement of supplier performance.
(Listing of the steps involved in the measurement of supplier performance, Explanation of the steps
involved in the measurement of supplier performance) 1.25, 8.75 (1.25 for each step)
Answer.
List of steps involved in the measurement of supplier performance
Following are the seven steps that comprise a process to develop and deploy supplier assessment:
1. Aligning the goals and objectives of the supplier performance with the organisation’s goals.
2. Identifying an approach for evaluating the supplier performance.
3. Developing a method to collect supplier information.
4. Designing and developing a robust assessment system.
5. Deploying a supplier performance assessment system.
6. Giving performance feedback to the suppliers.
7. Producing results from measuring supplier performance.
Explanation
Alignment of goals
Measuring the performance of a supplier cannot be completed quickly. It is a long term process. Firstly,
there must be a supplier policy that has its foundation on the organisational goals and objectives.
Programs like Six Sigma, lean enterprise, continuous improvement, total quality management and
operational excellence are implemented in organisations to track continuous improvements.
Choose evaluation approach
The evaluation approaches differ from company to company. The various aspects for evaluation can be
listed as follows:

Financial strength

Operational performance metrics

Business processes and practices

Enabling cultural or behavioural factors

Risk factors
Develop information collection method
The various methods implemented for the collection of data can be listed as:

Paper based questionnaires

Web based questionnaires

Retrieval from existing database

Visiting supplier sites

Certification to third party standards such as IS0 9001, ISO/TS 16949
Design a robust assessment system
The approaches that are undertaken to design a robust system for assessment may be listed as follows:

Comparing the organisation’s performance with the industry standards.

Computing the performance with the business models.

Accepting third party standards.

Creating KPIs (Key Performance Indicators) and scoreboards that are based on the system data
or the feedback got from client.

Creating a performance guideline of your own and evaluating against it.
Deploy the system
Deploying a system is a tough task in the assessment systems. Certain systems that require extraction of
data need to deploy different systems that share information. In the case of questionnaire based systems,
participant might feel it tedious to fill the entire questionnaire. When the concern is regarding on-site
audits, personnel mainly from the cross-functional teams need to be trained.
Give actionable feedback
Feedbacks given to suppliers must be such that it makes an impact. The company giving feedback must
have a correct conversation with the supplier company on the performance and work on the issues that
are critical for the business. There must be a two way communication between the companies.
Produce results
Supplier performance measurement is all about understanding, interacting and improvising the supplier
performance. When all these areas are taken care in the right manner, it will indirectly have an impact on
the performance of the supplier. The supplier performance measurement steps up to the supplier
development, and then to the improvement in performance which in turn affects the customer
financially.
Q3. Write short notes on:

Lead time reduction

Cross docking

Distributor integration

e-sourcing
(Lead time reduction, Cross docking, Distributor integration, e-sourcing)10 (2.5 marks each)
Answer.
Lead time reduction
Lead time reduction is one of the powerful methods to reduce cost throughout the supply chain. It also
helps to enhance the customer satisfaction. Increase in uncertainty, increase in inventory costs and
decrease in response time to customer needs are some of the negative impact of longer lead time.
We can obtain the following benefits by reducing the lead time:

Fulfil customer orders quickly

Reduce bullwhip effect

Create accurate forecasts

Reduce finished products inventory levels

The two components involved in lead times are:

Order lead time

Information lead time
Cross docking
Cross docking is the strategy wherein warehouses are used as inventory coordination points rather than
inventory storage points. In this system, the goods from the manufacturer are received by the
warehouses/distribution centres. The goods in warehouses are stored for less than 12 hours. Then the
goods from warehouses are directly transferred to the vehicles which service the retailers, and are finally
delivered to the retailers. The decrease in lead time by the cross docking process decreases storage time
and limits inventory costs.
The schematic representation of the cross docking process is shown in figure-2:
Figure-2: Cross Docking Process
Distributor integration
Distributors provide vital market information and hence they are considered as the important link in any
firm's supply channel. Distributors usually have information about customer requirements and
experience. The manufacturers use this information to develop new products. The distributors not only
sell the manufactured products, but also provide sales services, financing and promote the products. As
customers’ requirements change, the new technology emerges to meet those requirements. In some
cases, a customer may need technical expertise and the distributor may not have skilful personnel. To
overcome this problem, distributors integrate their services so that the inventory or expertise available at
one distributor can be shared with other distributors.
E-sourcing
E-sourcing is used for the recognition of new suppliers for a category of purchasing requirements with
the help of the Internet. It is also known as reverse auctioning as it is a process by which enterprises can
shift their procurement process online to reach a larger number of suppliers than would be possible
through usual channels. The major advantage of e-sourcing is the competitive phase by which suppliers
bid for projects. Suppliers submit bids together with various details of the service they agree to provide,
and purchasers can pick and select from the offers.
Q4. What are the issues faced in global supply chain?
(Explanation of the issues faced in global supply chain)10 (1.25 marks each) 10
Answer.
Issues faced in global supply chain
The following are the different issues in Global Supply Chain Management

International versus regional products

Local autonomy versus central control

Project scale and span of control

Technology solutions

Cost of technology absorption

Availability of technology infrastructure

Internal and external resource capability

Miscellaneous issues
International versus regional products
A company ideally aims to build universal products which can be sold in many markets. But achieving
the same is not simple due to the large categories of products with different international requirements
and specifications.
Local autonomy versus central control
Centralised control seems good for certain strategies but for some cases local autonomy plays a bigger
role in the supply chain. Duplication can arise in decentralised organisations. Many multinational
companies like Unilever have tried to overcome the problems that arise due to a decentralised structure.
Depending on the characteristics of the region involved, organisations need to alter their expectations to
meet the regional business requirements.
Project scale and span of control
Projects on global supply chain involve multiple countries and locations. The location of project
managers and production sites are wide spread, hence it is impossible for managers to physically visit all
locations and be present at the site. But if the project planning, design and control lies with a single team
or person, the rest of the project teams lose focus.
Technology solutions
Many multinational companies are not able to manage their supply chain operations on one application
or a set of applications. According to local logistic activities at each location, legacy systems or standalone systems are implemented.
Cost of technology absorption
The cost of technology absorption is based on the capability of the country and location to absorb cost.
The costs of IT implementation are expensive.
Availability of technology infrastructure
Technology infrastructure facility can be different between countries and also between different locations
within the country. Internet connectivity and bandwidth also can differ across locations. This can hinder
the implementation of an internet based technology application.
Internal and external resource capability
Supply chain management involves many locations, and cross functional departments and teams within
the organisation. Besides these, some companies involve multiple external agencies who are responsible
for managing the logistics.
Q5. What is standardisation? Explain the four approaches to standardisation?
(Explanation of standardization, Description of the approaches to standardization)2, 8 (2 marks for each
approach)
Answer.
Standardization
Standardisation is a process of using a standard product in place of a family of products. Standardisation
helps to achieve economies of scale by doing an activity once and repeating it many times.
Generally, lead time can be shortened by reducing inventory levels and increasing forecast accuracy.
However, after a certain stage it cannot be achieved in the same way (stock out issue), but
standardisation can be used to further reduce the lead time. There are four different approaches
(identified by Jayashankar M. Swaminathan, an expert in the global supply-chain management and mass
customisation) to standardisation. They are:

Part standardisation

Process standardisation

Product standardisation

Procurement standardisation
Approaches to standardization
There are four different approaches (identified by Jayashankar M. Swaminathan, an expert in the global
supply-chain management and mass customisation) to standardisation. They are:

Part standardisation

Process standardisation

Product standardisation

Procurement standardisation
Part standardisation
In part standardisation, common parts are used across many products. Common parts are used to avoid
keeping huge inventories that include all the required parts of the product. When excessive parts are
common it reduces product differentiation, so that less expensive customisation options take over the
sales of more expensive parts.
Process standardisation
In process standardisation, the process is standardised for different products and then the products are
customised. The process is designed in such a way that it can be modified according to manufacturing
decisions made for a specific product. The manufacturing process starts by making a generic product.
This product is then modified into a specific end product.
Product standardisation
In product standardisation, a variety of products will be manufactured but only a few will be placed in
inventory. When a product, which is not in stock, is ordered, the order may be filled by a product in the
stock that has all the features required by a customer. This process is called as downward substitution.
For example, in the semiconductor industry, a higher-speed chip is sold as a lower-speed chip when the
lower-speed chips are out of stock.
Sometimes, it may be possible to redesign the products so that one product can be adjusted to meet
several end-customer requirements. For example, consider simple electrical products in which power
supplies need to be different for different markets. Here, the manufacturer can standardise product by
using a switchable power supply.
Procurement standardisation
Procurement standardisation involves establishing norms for the equipment and procurement
approaches. This process is considered when processing equipment is very expensive. For example, the
production of Application Specific Integrated Circuits (ASICs) needs expensive equipments. Hence, the
same equipment is used to produce all possible end products. Here, the end products are highly
customised and demand is always unpredictable.
Q6. Discuss the impacts of e-commerce on SCM.
(Listing of the impacts of e-commerce on SCM, Explanation of impacts of e-commerce on SCM) 1, 9 (1
mark for each impact)
Answer.
Impacts of e-commerce on SCM
E-commerce impacts SCM in the following ways:
Cost efficiency – E-commerce facilitates transportation companies of all sizes to exchange data over
the Internet regarding the cargo. It allows shippers, firms associated with trucking and freight forwarders
to update their documents related to cash and time investments that are necessary for the traditional
paper work system.
Flexibility in distribution system – E-commerce provides businesses with more flexibility in the
complex process of sharing information and products between clients, suppliers, and businesses. It links
the distribution channels and customers and simplifies the complex movement of products and services
through supply chain.
Customer orientation – E-commerce supports the logistics and transportation services for local and
global customers. It helps companies deliver services to their customers with better quality, speed up the
growth of supply chain initiatives that are significant for the business, and reduce the cost related to their
processing. Internet, when used for e-commerce, allows customers to place orders, monitor shipments,
access rate information and also pay their bills.
Shipment tracking – Through e-commerce, users can get real-time information about cargo
shipments. Users can create and submit bills of lading, order for a cargo, analyse the charges, submit a
claim for cargo and carry out other functions. Encryption technologies help to secure such business
transactions.
Shipping notice – E-commerce automates the process of receiving the delivery. The list of the goods
that will be delivered can be given to the receiver beforehand, to enable cross verification. It also records
the details of parcel and items to be shipped.
Freight auditing – Freight auditing deals with reviewing the. This reduces the risk of over payment,
paperwork, or the auditing done by a third party. In addition to this, it provides instant access to the
databases that contain the data on various discounts, latest prices and allowances for major transporters.
Reduced shipping documentation – E-commerce enables automatic generation of bills of lading,
shipping labels and the public statements of the carrier. It also generates the specialised export
documentation that is used for overseas shipments. The reduced paperwork makes the shipping
department more efficient.
Online shipping inquiry – The online shipping inquiry provides access to the shipping information
to all the employees from the company at any location. It helps in tracking and verifying the shipments
for their delivery. This allows the customers to analyse the transportation costs and performance
efficiency, and negotiate better rates with the suppliers.
Reduced order cycle time – The improved communication features of e-commerce have reduced all
components of the order cycle time to seconds. The buyer can determine if the product is available with a
supplier before placing an order. The seller can instantaneously monitor the demand and adjust the
supply according to the demand. This helps the seller to avoid or reduce the stock-out time.