ASSIGNMENT OM 0012 Supply Chain Management

MBA: Semester III Name : 571112074 Learning Centre : 1665

-----------------------------------------------------------------------------------------------------------------------------------------------Q1. a. What are the characteristics of a Supply Chain? Answer: Supply Chain is an overall system which covers the flow of material and information from a business to its customer. Generally, in a manufacturing organisation, raw material enters its premises through a supply system and is transformed into finished goods with the help of its operations system. The finished goods are provided to the final customers or users through a distribution system. A similar situation exists in case of companies involved in manufacturing and marketing of service products, i.e., where the products are not merely tangible items, but are in the nature of services. Most Supply Chains exhibit the following characteristics: Includes all activities and processes that are involved in generating and supplying products to the customer. Comprises mutually linked companies and Supplier-Customer relationships as a Customer in a Supply Chain can become a Supplier to another entity or vice-versa. Gathers products from supplier to customer along the Supply Chain and the design requirements and demand information from the final customer to supplier, i.e. while the first-mentioned flow is downstream, the latter flow is upstream Therefore, a Supply Chain is a network of facilities and distribution options that executes the functions of procurement of materials, transformation of these materials into intermediate and finished products and the distribution of these finished products to customers. All organisations have Supply Chains of varying degrees, depending on the size of the organisation and the type of products manufactured. Q1. b. Explain the Logistics process with an example. Answer: Logistics is the process of anticipating customer needs and wants, acquiring the capital, material, people and technologies, and information necessary to meet those needs. It also includes optimizing the goods or service to fulfill customer requests and utilizing the network to fulfill customer requirements in a timely way. Following diagram depicts the Process of Logistics: Inventory Flow

: Alok Kumar Singh : AIM Computer Education Learning

Registration Centre

No. Code

Customers

Physical Distribution

Manufacturi ng support

Procurement

Suppliers

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Information Flow Logistics is viewed as the competency that links an enterprise with its customers and suppliers. Information from and about the customers will flow through the enterprise in the form of sales activity, forecasts and orders. The information is refined into specified manufacturing and purchasing plans. As products and materials are procured, a value added inventory flow is initiated which ultimately results in transfer of ownership of finished products to customers. The Logistics process is viewed in terms of two interrelated efforts namely: Inventory Flow and Information Flow. This basic process is not restricted to manufacturing firms and for profit business alone. There is a need to integrate requirements and operations in all businesses including public sector organisations. Q2. a. Explain the Concept of Integration with examples Answer: Concept of Integration An integrated supply chain can be defined as an association of customers and suppliers who use the management techniques to optimise their collective performance in the creation, distribution, and support of a product. It may be helpful to think of the participants as the divisions of a large, vertically integrated corporation. Although the independent companies in the chain are bound together only by trust, shared objectives, and contracts entered into on a voluntary basis. Unlike captive suppliers (divisions of a large corporation that typically serve primarily the parent corporation), independent suppliers are often faced with the conflicting demands of multiple customers. Goals typically include higher profits and reduced risks for all participants. Traditional unmanaged (or minimally managed) supply chain is characterised by the following: Adversarial relationships between customers and suppliers, including win-lose negotiations. Slight regard for sharing benefits and risks. Short-term focus, with little concern for mutual long-term success;. Primary emphasis on cost and delivery, with little concern for benefit. Limited communications. Less interaction between the OEM and suppliers more than one or two tiers away.

Integrated supply chains tend to recognise that all parties should benefit from the relationship on a sustainable, long-term basis and are characterised by partnerships with extensive and open communications. For example, a well-integrated system of independent participants can be visualised as a flock of redwing black birds flying over a marsh. Without any apparent signal, every bird in the flock climbs, dives, or turns at virtually the same instant. That is an integrated system. In an example of multi-tier integration, Wal-Mart thoroughly integrated P&G's Pampers product line into its supply chain. P&G, in turn worked with 3M to integrate its production of adhesive strips with Pampers manufacturing facilities.

Q2. b. How do Strategic Sources help long-term business process?

Answer:
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Strategic sourcing is related to purchasing activities, but has a somewhat broader scope. Strategic sourcing is a cross-functional process that involves members of the firm other than those who work in the formal purchasing department. The strategic sourcing team may include members from engineering, quality, design, manufacturing, marketing, accounting, strategic planning and so on. Strategic sourcing management focuses on managing, developing and integrating with supplier capabilities to achieve a competitive advantage. The competitive advantages gained may be through cost reduction, technology development, quality improvement, cycle time reduction and improved delivery capabilities to meet customer requirements. Earlier, buyers used to play suppliers off against each other, switch suppliers frequently and offer only short-term contracts. This adversarial model, a non ideal one worked when all buyers in the industry practiced the same form of supply management. Nowadays, globalisation of markets and supply sources has forced global competitors to collaborate with suppliers to achieve competitive market advantages. Many changes are occurring in how firms approach and manage their supply base. One of the main changes is Longer-term contracting will continue to grow. Most firms no longer pursue short-term contracts characterised by frequent competitive bidding by suppliers. Instead, purchases are directing their efforts toward a value adding activities. Longer-term purchase agreements are prerequisites to activities requiring closer co-operation between a purchaser and supplier. As purchasers encourage suppliers to be involved in the early stages of design of the products, the use of longer-term agreements will continue to increase. Many longer-term agreements promise partnerships or alliances between buyers and sellers.

Q3. Discuss origin of Collaborative Planning, Forecasting, and Replenishment (CPFR) .

Answer: CPFR began as a 1995 initiative co-led by Wal-Mart's 1 Vice President of Supply Chain, Chief Information Officer, Vice President of Application Development, and the Cambridge, Massachusetts software and strategy firm Benchmarking Partners. The Open Source initiative was initially called CFAR (pronounced See-Far, for Collaborative Forecasting and Replenishment). According to an October 21, 1996 Business Week article entitled Clearing the Cobwebs from the Stockroom, New Internet software may make forecasting a snap. Benchmarking developed CFAR with financial support from Wal-Mart, IBM, SAP, i2, and Manugistics. The latter two are makers of accounting and Supply Chain Management software respectively. To promote CFAR as a pattern, Benchmarking has posted specifications on the web and briefed more than 250 companies including Sears, J.C. Penney, and Gillette. About 20 companies are implementing CFAR. Warner Lambert (now part of Pfizer) served as the first pilot for CFAR. The pilot's results were publicly announced at a CFAR industry session at Harvard University on July 30, 1996. This session was for executives from Wal-Mart's suppliers as well as other retailers and the Uniform Code Council. Benchmarking Partners then gave CFAR to the Board of Directors of the Voluntary Inter-industry Commerce Standards Committee (VICS). VICS established an industry committee to organise for rolling CFAR out as an international standard. The original committee was co-chaired by the Vice President of Customer Marketing from Nabisco and the Vice President of Supply Chain from WalMart. Based on the suggestion of Procter and Gamble's Vice President of Supply Chain, the standard was renamed CPFR to emphasise the role of planning in the collaborative process. The first publication of the VICS and CPFR Voluntary Guidelines came out in 1998. Currently there are committees to improve business guidelines and roadmaps for various collaborative scenarios. This includes upstream suppliers, suppliers of finished goods and retailers. They integrate demand and supply planning and execution. The committee is continuing to improve the existing guidelines, tools and critical first steps that enable the implementation of CPFR. These committees gained experience from pilot studies that have occurred over the past six years. VICS continues to lead much of the research and implementation of CPFR through its procedure and project investigations. Q4. Explain the factors influencing customer behavior.
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Answer: A key objective of Supply Chain Management is the upside lift of revenue growth that can be achieved through customer responsiveness and progressed towards market share improvement in order to increase the shareholder value. This can be obtained if the value delivered can lead to satisfied customers who can in turn behave in ways that are profitable to the firms in the supply chain. Repeated purchases, customer loyalty and positive word of mouth communication to other consumers regarding the product or service offering have to be connected to customer satisfaction and value. It is important to note that intermediate firms along the supply chain are also customers in the process and also ask how the creations of value for intermediate firms along the supply chain influence the customers behaviour in the channel. It is believed that satisfied customers will be loyal customers who will continue to purchase a firm s or supply chains goods and services and also influence others to purchase those same goods and services. For this the firms have to identify main customer segments, understand the value required by the customers and also develop and deliver products and services that are necessary to meet customer needs. The challenges faced by the firms are to understand the role of each member of the chain in the entire delivery system and also to focus beyond the immediate customer at each link in the chain to the ultimate customer. Only by delivering superior value to the final customer can the chain achieve the overall objective of differential advantage which can improve the performance of the chain as a whole as well as that of the individual members of the chain. Some of the key factors in the comparison are as follows: Expectations: This represents what the customer believes about how a product will perform. These expectations can be based on the specific product experience which could be with a competitor s brand or with a substitute product. Ideals: This shows how the customer would like the product to perform. The value dimensions are very important to customers and are reflected in the ideal standard. Promises: These are made through market communications like advertisements, communications, or corporate communications which can be used as a standard. sales

Industry norms: These are the standards accepted within an industry or product category that may influence the comparison standard. Q5. Give a brief introduction on all steps involved in Procurement process? Answer: Though Procurement process has a significant applicability to the Industrial product/intermediate buying, most of this process also applies to household or consumer goods purchase. It must be emphasised once again that industrial procurement is supposed to be more rational and logical as well analysed and deliberated upon. The consumer goods purchase on the other hand is supposed emotional and impulsive. Broadly, the procurement process has the following steps: 1. Purchase Requisition (PR)/Purchase Indent (PI): This is the initiating document for all purchase activities in an organisation. No purchase should take place without the purchase requisition. The purchase requisition comes from the indenting department to the procurement department. The indenting department is the one having the need for the requisitioned product.

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2. Floating the purchase enquiry/tender: This is the next step in the process. It must be clarified here that the accuracy and correctness of the PR/PI is the responsibility of the indenting department. However, the procurer/procurement department has to check the PR as it is expected to get all necessary clarifications before proceeding further with the process. Once the PR/PI is found acceptable, the procurement department sends its enquiries to potential suppliers. The procurement department has the responsibility to source the product/service. Therefore, the onus is on them to locate the suppliers/vendors. The procurement department equipped with the information of the sources of supply then floats its enquiry to a list of vendors who are rated. Generally, the enquiry floated is of two kinds. They are: Limited Enquiry or Limited Tender Open Enquiry or Open Tender.

3. Receiving quotations: The normal procedure is to receive the sealed tenders in a box kept exclusively for this purpose. The box will carry a legend on it giving title of tender, closing date, and tender opening date. The box is kept under lock and key until the last date for receipt of tender. At the end of the scheduled time, the box will be taken to the specified place of opening the tender. 4. Opening the quotation/tender, tabulating and analysing: The quotations are to be opened on the tender opening day at the appointed place in the presence of the agents/representative. The tenders are superficially scrutinised for required enclosures including earnest deposit. 5. Short listing promising vendors/suppliers: We have the list made above. This contains the details of all the vendors who quoted against the tender. The list is tabulated and is rearranged in the descending order of price. 6. Technical Evaluation: The technical committee evaluates the quotations on the technical capabilities and lists them. Both the technical evaluation list and the price evaluation list are now combined to make a final shortlist of all the agents. Based on this, generally the lowest priced agent is chosen. Generally, this shortlist will have the lowest three tenders. 7. Commercial negotiations: There are times when procurer calls the short listed potential suppliers for negotiations. The negotiations could cover topics of price, extended warranty, and offer of additional quantities of spares and consumables. When the negotiations are completed, one of the short listed agents emerges the winner. This supplier/vendor gets the order for supply of goods/services. 8. Purchase Order (PO) release: The negotiations with each of the short listed agents would finally lead to one of them who will best match the requirements of the purchase committee both technically and commercially. This person will be the chosen supplier. The purchase committee will place all the deliberations on record and will be signed by both the vendor and the procurer. This is the final stage of the purchase process. 9. Pre-delivery inspection: This is generally done for all products and more specifically for technical products. This is invariably a part of the PO or contract. The clause provides opportunity to the procurer to select at a few items randomly from the lot received for testing. This sample is tested at the supplier end for adherence to specifications. Only when the samples meet the specifications, the vendor is allowed to deliver the complete lot of material. 10. Check deliveries, installation testing and commissioning: Once the pre delivery inspection is successfully complete and the samples tested are found OK then the supplier/vendor gets the clearance from the procurer. It is now the responsibility of the vendor to complete the supplies as per the terms of the PO.
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11. Certification of supplies: Once the supplier successfully completes the pre-inspection, it is the responsibility of the supplier to complete the delivery of goods as per the contract. The quality, quantity and other requirements are to be met and other terms like the peripherals, accessories, spares requirements are to be provided. 12. Payment to the vendor: Once all this is done, the vendor has to wait for the payment to be received. The payment is made as per the agreed terms. It would be in the long-term interest of the procurer to see that the vendor is paid on time. Although it is the right of the vendor to take action against supplier for any delay in payment, this is not resorted to in the Indian business context. Q6. Write a note on assessment tool. Answer: The supply chain management framework is a comprehensive model designed to assist executives in the management of relationships with customers and suppliers, and to achieve the necessary integration across corporate functions. The supply chain management processes are designed to guide the cross-functional efforts. It is likely that some parts of the processes are implemented to some degree in any organisation. The assessment steps, one for each of the cross-functional processes described in this unit and the methodology to conduct an assessment were developed to assist management to: Benchmark management practices in the firm with those prescribed in the processes. Identify where to start with the implementation of a process. Measure the output as and when the supply chain management is implemented.

The assessment tools are designed to be applicable in any business environment. Because the tools and the methodology to assess practices in the firm are standardised, management may conduct assessments across locations, divisions, or geographies to identify the best-in-class for each process and transfer improvements to the rest of the organisations. Finally, this benchmarking experience can be used between non-competing firms with similar business challenges. We observe multiple benefits that result from conducting an assessment of cross-functional processes, they are: An assessment of a process provides an environment where representatives from all corporate functions are encouraged to provide their perspective on the management practices of the firm as a whole. It is not just focusing on what is happening inside a single corporate function. The consensus building meeting provides a constructive environment for exchanging ideas because the cross-functional team is not trying to solve a problem or contingency. There are situations, where representatives from functional areas are invited for the first time to become involved in the evaluation for the activities of a process. In these situations, it is clear to everyone that the functional perspective provided by these representatives is necessary and valuable. The discussion developed during the consensus building meeting enables participants to view others perspective as well as explain their own, which results in a broader understanding of how their decisions and actions affects others in the organisation. Finally, the output of an assessment provides an objective basis for prioritising action items across the organisation and can be used to gain the support from upper-management that is necessary to realise the improvement opportunities.
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