1.

Write a short note on BAR CODE SYSTEM

Answer: A barcode is an optical machine-readable representation of data, which shows data about
the object to which it attaches. Originally, barcodes represented data by varying the widths and
spacings of parallel lines, and may be referred to as linear or 1 dimensional (1D). Later they evolved
into rectangles, dots, hexagons and other geometric patterns in 2 dimensions (2D). Although 2D
systems use a variety of symbols, they are generally referred to as barcodes as well. Barcodes
originally were scanned by special optical scanners called barcode readers, scanners and
interpretive software are available on devices including desktop printers and smartphones.
In logistics and supply chain management, the accurate and rapid identification of product along
with the use of their information in monitoring the entire the entire process comprise the key
factors. The bar code system is an identification technology that facilitates speedier flow of
logistical information such as quick tracking receipts ,movement details, product identification, etc.,
with a lesser probability of error. It refers to the placement of computer-readable codes on items,
cartons containers which is grouping of parallel bars (usually blocks) of different widths separated
by light spaces (usually white) , again, of different widths. These bars (black and white), again of
different widths are used to define a particular character which can be identified by a electronic
scanning machine system.
In bar code system, wide black bars are all used to define a character as shown in the fig below.
Depending on the symbology, there can be anywhere from 3 to 9 elements used in single code for
single character. At present, there are more than 100 symbologies used. For example, 2 or 5 is one
of the standard symbologies where the code has a total of five bars, two wide and three narrow. All
narrow bars are called the X dimension and have to be of the same width. The width bars are a
width factor of the narrow bars (between two or four times as thick).


Quality control and verification
Barcode verification examines scanability and the quality of the barcode in comparison to industry
standards and specifications. Barcode verifiers are primarily used by businesses that print and use
barcodes. Any trading partner in the supply chain can test barcode quality. It is important to verify
a barcode to ensure that any reader in the supply chain can successfully interpret a bar code with a
low error rate. Retailers levy large penalties for non-compliant barcodes. These chargebacks can
reduce a manufacturer's revenue by 2% to 10%.
Barcode verifiers work like a readers, but instead of simply decoding a barcode, a verifier performs
a series of tests. For linear barcodes these tests are:
Edge Determination
Minimum Reflectance
Symbol Contrast
Minimum Edge Contrast
Modulation
Defects
Decode
Decodability
2D matrix symbols look at the parameters:
Symbol Contrast
Modulation
Decode
Unused Error Correction
Fixed (finder) Pattern Damage
Grid Non-uniformity

Benefits of Barcode
In point-of-sale management, barcode systems can provide detailed up-to-date information on the
business, accelerating decisions and with more confidence. For example:
Fast-selling items can be identified quickly and automatically reordered.
Slow-selling items can be identified, preventing inventory build-up.
The effects of merchandising changes can be monitored, allowing fast-moving, more profitable
items to occupy the best space,
Historical data can be used to predict seasonal fluctuations very accurately.
Items may be repriced on the shelf to reflect both sale prices and price increases.
This technology also enables the profiling of individual consumers, typically through a
voluntary registration of discount cards. While pitched as a benefit to the consumer, this
practice is considered to be potentially dangerous by privacy advocates.
Besides sales and inventory tracking, barcodes are very useful in logistics.
When a manufacturer packs a box for shipment, a Unique Identifying Number (UID) can be
assigned to the box.
A database can link the UID to relevant information about the box; such as order number, items
packed, qty packed, destination, etc.
The information can be transmitted through a communication system such as Electronic Data
Interchange (EDI) so the retailer has the information about a shipment before it arrives.
Shipments that are sent to a Distribution Center (DC) are tracked before forwarding. When the
shipment reaches its final destination, the UID gets scanned, so the store knows the shipment's
source, contents, and cost.
2. Write in detail about cost reduction and logistics.
Answer: Logistics is the process of planning , implementing and controlling of efficient , effective
flow and storage of good , services and related information from the point of origin to the point of
consumption for the purpose of conforming to consumer expectation
The major objective behind the devolpment of an integrated logistic management system was cost
reduction, which reflects maximization of profitable sales volumn by means of a high degree
coordination between various managerial function. The output of the era contributed a lot in the
overall performance of corporate enterprises in terms of increased productivity , profitability and
market share.
With the beginning of 1990s the overall businesss scenario become more critical, mainly due to the
following sea changes in the environmental factor which result in reduction of cost.
a- Rapid innovation in the field of scince and technology has completely changed the corporate
mindset from safety stock mechanism to real time response mechanism by means of rapid
communication and exchange of data
b- New inventory management techniques like MRD, DRP,and JIT become popular instrument
to efficiently plan and deploy inventory item through out the complex and multi-level
network, preventing stock outg situation without enough safety stock, resulting into further
curtailment of logistics cost in general and inventory cost in particular.
c- Liberalization of almost all of the economics of the world for movement of goods from one
country to another resulted into world-class competition in the market
d- Emergence of 3pls provider changed the entire concept of the transport industry from mere
transporter to logistics service solution provider, contributing significantly in the success of
logistics system.

3. Write a short note on Art and science of packaging.
Answer: Packaging may be define as a means of ensuring the safe delivery of a product to the
ultimate consumer in a sound condition at the minimum overall cost. Packaging, although is a
subject of recent technological origin, the art of packaging is as old as the primitive humans.
Use of leaves for wrapping of meat, animal skins for storage and carriage of water was practices and
old as the human race. With the passage of time and continual technological growth, systems have
undergone changes and along with it grew the packaging scene, though at a much slower pace.
But today, packaging is no more does considered in isolation. It has been considered as an integral
part of production, marketing and distribution.
In other words, if packaging is perform its function properly, its requirements should be considered
at as early stage as possible i.e. at the design/formulation stage of the product itself.
The other related area is marketing. These interlinked responsibilities of a package lead to the fact
that packaging function is closely associated with many other function in an organization.
Effective communication is, therefore, important , because of the diverse disciplines represented by
packaging that include chemistry, physics, engineering, marketing, design, law, accounting etc.
Similarly, in an organizational set-up also the packaging function is inter-related and could be
illustrated as in following diagram.


Marketing
Legal
Finance
Purchase
R & D
Marketing
PACKAGING
4. What are the goals of logistics system? Discuss major logistics functions.
Answer: The logistical system of a firm refers to an integrated effort towards generating the high
value of customer satisfaction at the least cost while delivering the highest value to its
shareholders. Hence; the major goals of logistic system are as follows:
1)To make availability the right quantity of right quality products at the right time and place in the
right physical condition, i.e the goal of logistics is making available goods and services to customers
as per their requirements and specifications.
2)To offer the best possible services for core competency. In the present days scenario of intense
global competition, for further growth and more service from trade, corporate enterprises have to
largely depend on their customers because they are having final interface with final end-
users.Hence,firms need to keep their best services to their customers of three broad categories:
(a) Strategic Components: These components reflect the vision of the top management of the
company towards relationship with their customers in terms of their customers, in terms of their
capability to ensure the best return against the investment made, space provided and push efforts
required for generating sales, their commitment for long run association along with continuous
effort improvement.
(b)Logistical Components:these components deals with basic services required for delivery of
goods, including availability of goods as per normal and unforeseen requirements, fixed
replenishment cycle-time, zero-defect delievery,point-to-point information with consistency and
reliability in their services.
(c)Non logistical Components: These services components basically refer to value-added
services offered to customers in terms of financial and technical support for infrastructure
development, credit facility on special occasions, discretionary power for warranty settlement and
proper follow-up of the exclusive territory operation norm.
3)To minimize logistical system. Normally, logistical costs range from 15 to 45 per cent of the price
of the product next to the cost of raw-material for most of the goods. Many long-standing practices
of accounting continue to serve a barrier to fully implementing total cost logistical solutions.
FUCTIONS OF LOGISTICS:
The generic function of logistical management is making available the required quantity of required
quality products at the point of use as and when required at the least count. As such, there are three
sets of logistics functions of the firm. They are:
1) Procurement Function;
2) Production Function;
3) Physical Distribution Function;
Procurement function:
Procurement Function of logistics management ensure a smooth flow of raw materials,parts and
components of special quality from quality certified supplier to the production centres.thefuction
includes of the inputs needed in terms of quality specification and quality requirement study of
sources for procurement,negogiation with them and final supply contracts, order placement and
shipment of input consignments. These are attributed as in-bound logistics functions. For instance,
marutiudyog ltd. procures around 3000 components from its vendors.










Production Function:
The production function of logistics deal with efficient and effective way of work-in-progress
inventory and its flow between the different stages of manufacturing.hence, this function ensures
timely availability of semi-processed materials and components inventory to support the
production schedule. That is why, a set of logistics components crucial at this stage compromise
inputs inventory, production schedule, material handling, storage, protective packaging. It is
significantly different from procurement and physical distribution function.hence, production
function of logistics is largely control label in nature, while the performance of the other functions
is largely conditioned. This function is important in all industrial sectors and generally more crucial
in those industrial units where the product cycle time is high and needs a lot of processing.





Quality
Shipment
Source
study
Negotiati
on and
supply
contracts
Input
needs
Order
placemen
t
Procurement Function

Inputs
Production
schedule
Packaging
Storage
Material
handling
Inventory
management
Physical Distribution Function:
Physical Distribution Function refers to the movement of finished goods from the last point of
production to customers and end users. This function of logistics facilitates marketing and sale
performance of the enterprise by the means of timely and economic product available.hence major
functions of these functions are inventory management of input goods, transportation and
distributing warehousing, order processing. Apart from these, the supportive components are
trade-off, supply, etc.this function ensures zero-defect service and prohibits stock-out by making
the product available at right time, at right place, at right quantity, at right quality. It is also called as
out-bound logistic functions. As for ex: FMCG and electronic goods.










Transport
Distribution
warehousing
Protective
packaging
Output
inventor
y
customer
Order
processing
Physical Distribution Function
5. Write a short note on LOGISTICS MISSION & STRATEGIC ISSUES.
Answer: Major missions of logistics are as follow:
1) To make available the right quantity of right quality products at the right time and place in
the right physical condition i.e the mission of logistics is making available goods and
services to customers as per their requirements and specification.
2) To offer the best possible customer service for core competency. In the present day scenario
of intense global competition , for further growth &more service from trade, corporate
enterprises have to largely depend on customers because they are having final interface
with end users and the final sales deal is swung by their push efforts. For this purpose firms
have to offer their best services to their customers in terms of 3 board categories of service
components, namely:-
a) Strategic components:- These components reflect the vision of the top management of
the company towards relationships with customers I terms of their ability to ensure the
best return against the investment made, space provided and push efforts required for
generating sales , their commitment for long run association along with continuous effort
for improvement in the service standard and transparency and uniformity in operations.

b) Logistical components:- These components deal with basic services required for delivery
of goods , including availability of goods as per normal and unforeseen requirement , fixed
replenishment cycle time , zero defect delivery, prompt reverse logistics system for early
recovery from defective delivery , point to point information along with consistency and
reliability in their services.

c) Non-logistical components:- These service components basically refer to value added
services offered to customers in terms of financial and technical for infrastructural
development , credit facility on special occasions, training for sharpening their marketing
and managerial skills, discretionary power for warranty settlement and proper follow up of
the exclusive territory operation norm

3) To minimize total logistical costs. Normally, logistical costs range from 15 to 45 % of the
price of the product next to the costs of r/m for most of the goods. In certain cases, it may
be about 5% , whereas for others, around 200%. Hence there enough scope for
curtailment of these costs by means of having better coordination and integration of various
logistical and non-logistical functions of an enterprise along with higher level of
productivity. New approaches towards total logistical cost offer ample opportunity for more
comprehensive analysis and understanding of logistical cost component and identified ways
and means to slash it further. However, the implementation of effective logistical process
costing solutions.

6. What are the goals of logistics system? Discuss major logistics functions.
Answer: The logistical system of a firm refers to an integrated effort towards generating the high
value of customer satisfaction at the least cost while delivering the highest value to its
shareholders. Hence; the major goals of logistic system are as follows:
1) To make availability the right quantity of right quality products at the right time and place in the
right physical condition, i. e the goal of logistics is making available goods and services to customers
as per their requirements and specifications.
2) To offer the best possible services for core competency. In the present days scenario of intense
global competition, for further growth and more service from trade, corporate enterprises have to
largely depend on their customers because they are having final interface with final end-
users.Hence,firms need to keep their best services to their customers of three broad categories:
(a) Strategic Components: These components reflect the vision of the top management of the
company towards relationship with their customers in terms of their customers, in terms of their
capability to ensure the best return against the investment made, space provided and push efforts
required for generating sales, their commitment for long run association along with continuous
effort improvement.
(b)Logistical Components: these components deals with basic services required for delivery of
goods, including availability of goods as per normal and unforeseen requirements, fixed
replenishment cycle-time, zero-defect delievery,point-to-point information with consistency and
reliability in their services.
(c)Non logistical Components: These services components basically refer to value-added services
offered to customers in terms of financial and technical support for infrastructure development,
credit facility on special occasions, discretionary power for warranty settlement and proper follow-
up of the exclusive territory operation norm.
3) To minimize logistical system. Normally, logistical costs range from 15 to 45 per cent of the price
of the product next to the cost of raw-material for most of the goods. Many long-standing practices
of accounting continue to serve a barrier to fully implementing total cost logistical solutions.

7. Write a short note on Emerging technologies in lscm system
Introduction: Emerging technologies consist of voice system, memory buttons and RF tag which
promise to expedite the flow of goods. This system is totally different than bar code and satellite
communications and each of these have different functions to promise of speedier products flow
and lower distribution costs.
The system of emerging technology is described bellow
1) Voice system :-
Voice recognition systems generally consist of a voice synthesizer and headset. System is
voice dependent i.e. each unit has to be trained to recognize an individual users speech
patterns. An operator would create a voice template for every word. User might utter
during a dialogue with the computer. The system then would store these templates in its
memory.
This system free up the warehouse workers hands, the technology can expedite
picking, receiving and quality inspection of goods. For instance a worker can read the part
number of an incoming shipment while placing the box on a conveyor or operate a forklift
truck while being directed by the computer tp a particular pallet location.
This technology would allow anyone to engage in an oral discussion with a computer and
enables a low skill workforce to interact with computers and maintain high picking and
receiving levels.

2) MEMORY IN BUTTON
Memory in a button contains an encapsulated microprocessor. Several pages of information
can be stored on a button, which the reader must physically touch to extract the same.
Buttons are suitable for use in product identification and as portable databases in a
harsh environment.
The technology could also be used by motor carriers and private fleets to maintenance
records on individual vehicles.

3) RADIO FREQUENCY (RF)TAG
An alternative to bar codes are radio frequency tags, which communicate data via
radio waves to a reader typically connected to a host computer system. The rf tags or
transponders ad they are sometimes called, have been around for number of years.
Basically, an rf tag consist of an antenna and a piece of silicon, a microcircuit for data
storage. They have intelligence that allows the data to be coded into the tag and the data is
communicated through radio waves.
Rf tags comes in a variety of forms, for instance, there are active and passive tags. The
active variety contains a transmitter that has the power to send the signals. The passive
variety, in contrast, relies on energy from the reader to initiate communication.
Tags can be a read only or read write.
In the United States, fleet operators have began booking at transponders as a low cost
alternative to satellite for shipment tracking. Strategic location like customer sites would be
equipped with readers. Readers, in turn, would scan trucks bearing transponders each time
the vehicles entered a distribution centre or terminal.


APPLICATION
It is used in trucks to collect operational data like revolutions per minute, shifting patters,
and other pertinent trip data.

8. Write a short note on Barcode
Answer: A barcode is an optical machine-readable representation of data, which shows data about
the object to which it attaches. Originally, barcodes represented data by varying the widths and
spacings of parallel lines, and may be referred to as linear or 1 dimensional (1D). Later they
evolved into rectangles, dots, hexagons and other geometric patterns in 2 dimensions (2D).
Although 2D systems use a variety of symbols, they are generally referred to as barcodes as well.
Barcodes originally were scanned by special optical scanners called barcode readers, scanners and
interpretive software are available on devices including desktop printers and smartphones.
Benefits
In point-of-sale management, barcode systems can provide detailed up-to-date information on the
business, accelerating decisions and with more confidence. For example:
Fast-selling items can be identified quickly and automatically reordered.
Slow-selling items can be identified, preventing inventory build-up.
The effects of merchandising changes can be monitored, allowing fast-moving, more
profitable items to occupy the best space,
Historical data can be used to predict seasonal fluctuations very accurately.
Items may be repriced on the shelf to reflect both sale prices and price increases.
This technology also enables the profiling of individual consumers, typically through a
voluntary registration of discount cards. While pitched as a benefit to the consumer, this
practice is considered to be potentially dangerous by privacy advocates.
Besides sales and inventory tracking, barcodes are very useful in logistics.
When a manufacturer packs a box for shipment, a Unique Identifying Number (UID) can be
assigned to the box.
A database can link the UID to relevant information about the box; such as order number,
items packed, qty packed, destination, etc.
The information can be transmitted through a communication system such as Electronic
Data Interchange (EDI) so the retailer has the information about a shipment before it
arrives.
Shipments that are sent to a Distribution Center (DC) are tracked before forwarding. When
the shipment reaches its final destination, the UID gets scanned, so the store knows the
shipment's source, contents, and cost.


Barcode Example Images-



9. Write a detail note on Integrated IT Solution - EDI for logistics and supply chain
management?
Answer: In the present days global competitive environment, the success of logistics and supply
chain management is largely conditioned by the use of extent and development of information
technology. Logistics and supply chain management is characterized by as a transaction oriented
and information intense business function where color must be entered, processed and tracked;
inventory must be achieved, put away, picked, and shipped; transportation must be arranged and
scheduled, followed by generation of required documents and measurement of performance of the
whole process. For efficient and smooth flow and management of these activists, real-time
communication of information is essential.
It is mainly due to quick information processing and speedy communication service capability of a
computer compiled with a sharp decline in a price of computer due to continued reduction in
import duties. The relevant capture of data, its transmission to facilitate decision-making and
ability to communicate the decision to many people in time for effective implementation is a need
the hour. The requirement of on-time delivery, time to market and effective use of resources
highlight the importance of availability of resources of accurate, specific and real-time information
need IT solution to L&SCM.
ELECTRONIC DATA INTERCHANGE (EDI)
EDI is an inter-organization computer-to-computer exchange of standard business document in a
structured and machine-process able format with the objective to eliminate duplicate data entry
and to improve the speed and of the information flow. In an EDI-based system, communication of
business information such as request for quotation, purchase orders, invoices, shipping devices, etc.
between two organization is made available electronically instead of mail, courier, fax or even e-
mail and does not need the intervention of human beings for interception of data. For instance, in a
computerized purchasing system, a purchase orders in a standard electronic information format
(called transaction sheet) electronically-entered into a suppliers order, entry system directly. And,
after receipt of purchase order, information automatically flows into processing without any human
interpretation or even coding, resulting into more data accuracy and less delay information
transmission and processing.
Hence, EDI-based system has a significant advantage of over manual paper-based system in terms
of built-in delay due to several processing points during transit, data in accuracy or errors due to
repeated data entry at several steps, labor-intensive uncertainty about delivery of information
along with high costs of transmission. A comparison of paper-based and EDI-based information
flows portrayed as shown in fig.


COMPONENTS OF EDI.
EDI is a very simple technical system with these basic components into the framework of
information flow, namely; EDI software and a communication medium.
1. EDI standards: As we have already defined, EDI is an inter-organizations computer-to-
computer exchange of standard business information in a structural and machine-process able
format. These machine process able formats are nothing but EDI standards. EDI standards are
rules and guidelines that establish a basic syntax for formatting information electronically.
Standards are critical to a smooth operation of EDI, because of a computer to present exact meaning
of the information, the exact format is essential to read and understand it. Furthermore, basically,
there are two types of EDI, standards, namely; proprietary and generic. Proprietary standards are
guidelines for electronic communication that are unique to one company and its partners, whereas
generic standards are used by companies on an industry wide, nationwide, or even international
basis.
2. EDI software: EDI standards provide the language and structure of EDI software, which
translates data into the proper standard language for electronic communication. AS shown in
fig. the major function of EDI software are data extraction, formatting and transmission of the
outgoing EDI and data receiving, formatting and integration of the incoming EDI.

3. Communication medium: The final element of EDI is a communication medium for electronic
transmission of information through a computer-to-computer dial-up arrangement. It may be
though ones own network (intranet) or third-party network, commonly called as value-added
network (VAN). VAN mostly preferred of the EDI users, which also function like a mail box. The
buyer sends an electronic document to the VAN, which stores messages and stores them in all
mailbox of the designated receiver. The receiver can either have all messages delivered by the
VAN at a set time or may cell to the VAN to receive mail.

BENEFITS OF EDI.

1. Improving customer responsiveness;
2. Reducing transaction costs and timers;
3. Increasing accuracy and productivity;
4. Enhancing supply chain relationship;
5. Increasing ability to compete globally;
6. Improving quality of decision to exploit business opportunities.

10. What do you mean by channels of distribution? What channels of distribution would
you like to institute for the following :-
a. A soft drink company
b. An industrial chemical.
State results in support of your answer.

Answer: A channel of distribution or trade channel is the path or route along which goods move
from producers to ultimate consumers or industrial users. In otherwords , it is the distribution
network through which a producer puts his product in the hands of actual users. The channel of
distribution includes the original producer, the final buyer and any
middlemen either wholesaler or retailer.
The term middleman refers to any institution or individual in the channel which either acquires
title to the goods or negotiates or sells in the capacity of an agent or broker. But facilitating agencies
who perform or assist in marketing function are not included as middlemen in the channel of
distribution. This is because they neither acquire title to the goods nor negotiate purchase or sale.
Such facilitating agencies include banks, railways,roadways, warehouses, insurance companies,
advertising agencies, etc.

The producer may sell goods to wholesalers who may in-turn sell to retailers and the retailer may
sell to consumers. The fourth alternative channel of distribution is when any agent/dealer
intervenes between the producer and retailers and acts as a middlemen. The agent is appointed by
the producer for the sale of goods to the retailers. Another alternative channel is there when
producers agent sells goods to wholesalers who sell to retailers. Agent/dealer is an independent
person/firm buying goods and selling them to retailers. Agent/dealer may also sell to wholesalers
who may then sell to retailers and goods are thus made available to consumers. In the channel of
distribution there may be more than one agent/dealer and wholesaler.

For softdrink company , channel of distribution is :-
Manufacture dealer/distributor sub dealer/ agent retailer consumer.
As the sale of softdrink is very high the production is very high. Therefore manufacture must
appoint a dealer who would distribute it all over. But due to its high demand distributor should
appoint a sub dealer in every city o place who would distribute in there area to retailer and hence
consumer .
For an industrial chemical, channel of distribution must be :-
Manufacturer distributor-retailer-consumer.
Demand of industrial chemical is not very high. So no need of appointing any agent.distributor can
directly distribute to retailer all over.
11. Write a short note on Order Picking: Methods for Piece Pick, Case Pick, and Pallet
Pick Operations.
Answer: Deciding on the amount of space you will need is not just about how much product you
wish to store. The type of picking you intend carrying out is a fundamental part of the decision
process.
The methods for order picking vary greatly and the level of difficulty in choosing the best method
for your operation will depend on the type of operation you have. The characteristics of the
product being handled, total number of transactions, total number of orders, picks per order,
quantity per pick, picks per SKU, total number of SKUs, value-added processing such as private
labelling, and whether you are handling piece pick, case pick, or full-pallet loads are all factors that
will affect the decision on how much space will be required.
Therefore when you have:-
Full pallet picking you will need more racking space than open floor space.
Lots of case picking you will need more ground floor pick faces, than you will need for full
pallet picking and you may also need a case to pallet consolidation floor area.
Lots of small quantity piece picking you will need packing & pallet consolidation areas on
the floor.
When working with clients on warehouse sizing projects we conduct an analysis of the type
of picking operations that will be performed, and then build this into the design concept,
from which we can determine the warehouse sizing details.
Holding requirements include defining the physical size of the inventory on hand. Unless the on-
hand total is fairly stable across the year, it is usually preferable to plan for a high but not peak
inventory level. To fully utilize the space, it is important to determine how product needs to be
stored (e.g., floor stacked, pallet rack, shelving, case flow) and how much of each fixture type will be
required. Cube data (length width height) for each product is a very useful kind of information
for many aspects of capacity planning.
Workflow requirements encompass everything from how product arrives to how it leaves the
facility and everything in between. The objectives of this aspect of planning are to minimize product
handling, to reduce travel as much as possible, and to minimize the resource requirements (labor,
packaging, transportation) to move the product to the customer.
Among the factors to consider are the following:
1. Link the way product arrives with where it is to be stored (location capacity). If possible,
store all of a product in one location and pick from that location as well. This does not work
if stock rotation matters (expiration dates, serial number, or lot control issues).
2. Locate the highest-volume products (greatest number of orders, not physical size) closest to
the outbound shipping area to minimize the travel required to pick and ship orders for
them.
3. Because vertical travel is always slower, locate as many products as possible on or close to
the floor.
4. Allow for staging space to handle product that is in transit, such as items waiting to be put
away.
Future requirements include accommodating growth in the form of higher volume of existing
SKUs, an increase in the number of SKUs, more customers, and more orders. If expansion is
already a thought, consider how that will be accomplished from the outset. If possible, expand
the space without disrupting ongoing operations. Factor in the impact of additional space on
flow, not just holding capacity.
Supply Chain Logistics Consulting Ltd: Use a design simulation tool to enable us to show you how
the design may look, and then from the design overview the sizing is automatically established. We
can design the warehouse and then model changes with you on line, there and then, which
generates your peoples thoughts and ideas, thus ensuring that the final design concept & size meets
the individual needs of your business, both operationally and financially.
1. Our Design Simulation Tool: Gives lots of detail, and because of the 3D effects, the reality
of the picture created, enables us with your people to model exactly how you want the
facility to look and operate. This visual approach to sizing is an enabler for people
involvement, interest, commitment and thought generation from your management team at
all levels in your organization.

12. Discuss the role of information in overall performance of logistics and supply chain
management.
Answer: Information is the key to the success of a logistic operation since without real time
communication of information pertaining to customer requirements; it is not possible to generate
customer satisfaction. The role of information has become further amazing in terms of:
Increased focus on reducing response time;
High valued supply chain relationship;
Attainment of a global standard access to world market

Timely and accurate information is vital for sound logistic decision making. Logistical information
must flow internally among the various department, such as purchasing, manufacturing, marketing,
etc. as well as between the company and its suppliers, transporters, forwarders, finance and sales
forecasting.
The flow of information in the value chain of logistics and supply chain management are always in
forward and backward direction. The forward flow of information deals with operational
performance, whereas backward information flow facilitates coordination functions for smooth
achievement of logistics operations.
COORDINATION FLOW OF INFORMATION
Coordination flow of information is the core logistics strategy of the enterprise, providing
guidelines for resource allocation and operational performance from procurement to finished
product delivery.
Strategic plan
The role of information in strategic planning involves achievement of marketing and
financial objectives of manufacturing distribution enterprise. It defines target markets,
products, marketing mix plans, and the role of logistics and value-added activites.
Capacity plan
It refers to determining of production, transportation and warehousing capacity. A capacity
plan decides where, when and how much a particular product can be produced, stored and
moved.
Logistics plan
It always determines the course of action for the attainment of logistics mission of offering
the best possible customer service at least costs by making available products intact and in
time at the place of use. It focuses primarily on inventory management. It coordinates the
facility, equipment, human resource and inventory resource required for specific customer
service policy.
Manufacturing plan
It is always supported by the logistics plan. It includes master production schedule(MPS)
and manufacturing requirement plan(MRP). Mps defines production machine time
schedules for manufacturing products, whereas MRP depicts material and component
requirements.
Procurement plan
It determines the schedules for release of raw material, shipment and arrival of goods. It
also reflects supplier-vendor management and relationship,degree of material speculation,
availibility of goods.
OPERATIONAL FLOW OF INFORMATION
It involves the logistics operational system required to receive, process, and ship customer
and purchase orders. Inventory management is a fundamental aspect which facilitates a
primary interface between the coordinating and operational flow of information.
Order management
It is the entry point for customer orders by various communication mechanism such as mail,
telephone, fax etc. Its primary purpose is to facilitate the entry and maintenance of
customer orders. It also acts as companys representative for having an interface with
customer.
Order processing
This section deals with allocation of inventory to a customer as per his order. Functions-
back order processing system ; raise voice; reassign order source; verifying shipment.
Distribution operation
It involves transaction and warehousing activities like material movement and storage,
order picking etc. functions- inventory and lot control; laboure scheduling; performance
measurement.
Transportation and shipping
This section consolidates orders for shipment to meet capacity reqirements and produce
shipment documents only with communication of shipment schedules. This section of
information has become more significant in present days rea of information technology.
functions- document preparation; freight payament; vehicle loading; fleet management.
Procurement
The procurement section of logistics and supply chain operational information flow refers
to purchase order preparation and placement negotiation with vendors, vendors
management, etc. functions- match and-pay; input need identification; source study;
quality specification; measurement of vendors performance.


13. Write short note on sensitivity analysis?
Answer: Sensitivity analysis (SA) is the study of how the variation (uncertainty) in the output of a
stastical model can be attributed to different variation in the inputs of the model.Put another way, it
is a technique for systematically changing variables in a model to determine the effects of such
changes.
In any budgeting process there are always variables that are uncertain. Future tax rates, interest
rates, inflation rates, headcount, operating expenses and other variables may not be known with
great precision. Sensitivity analysis answers the question, "if these variables deviate from
expectations, what will the effect be (on the business, model, system, or whatever is being
analyzed)?"
In more general terms uncertainty and sensitivity analysis investigate the robustness of a study
when education includes some of the stastical modelling then sensitivity analysiscan be useful to
computer modelers for a range of purposes,including.
support decision making or the development of recommendations for decision makers (e.g.
testing the robustness of a result);
enhancing communication from modellers to decision makers (e.g. by making
recommendations more credible, understandable, compelling or persuasive);
increased understanding or quantification of the system (e.g. understanding relationships
between input and output variables); and
model development (e.g. searching for errors in the model).
The Purpose of Sensitivity Analysis
5. Sensitivity analysis is a technique for investigating the impact of changes
in project variables on the base-case (most probable outcome scenario). Typically, only
adverse changes are considered in sensitivity analysis. The purpose of sensitivity analysis
is:
(i) to help identify the key variables which influence the project cost and benefit
streams. In WSPs, key variables to be normally included in sensitivity analysis
include water demand, investment cost, O&M cost, financial revenues,
economic benefits, financial benefits, water tariffs, availability of raw water
and discount rates.
(ii) to investigate the consequences of likely adverse changes in these key
variables;
(iii) to assess whether project decisions are likely to be affected by such changes;


Sensitivity analysis can be used to
validate a model,
warn of unrealistic model behavior,
point out important assumptions,
help formulate model structure,
simplify a model,
suggest new experiments,
guide future data collection efforts,
suggest accuracy for calculating parameters,
adjust numerical values of parameters,
choose an operating point,
allocate resources,
detect critical criteria,
suggest manufacturing tolerances,
identify cost drivers.
Examples
Absolute sensitivity function can be used
To calculate changes in the output due to changes in the inputs or system parameters.
To see when a parameter has its greatest effect in adaptive control system.

14. Write a short note on Warehousing Strategy
Answer: The formulation of any warehousing strategy depends on the overall corporate and
logistical objectives in particular especially with regard to:
Availability of goods to the consumer
Degree of customer service to be offered
Minimum total distribution costs
1. Considering the environmental scenario
Demand pattern;
Buying behaviour of customers
Reaction during stock out situation
Warehousing strategies of competitors.
2. Analysis of the firms resources in terms of:
Financial and other resource condition;
Brand equity
Warehousing facilities

This analysis helps them to develop two solutions, whether to have private or public warehouses.
Further discussions are required for:
Centralized or decentralized warehouses
Location of the warehouses
The cost of warehousing.
Centralized warehouses:
Need not carry large inventory.
No stock out situation
Demand can be met at a short notice
Cheaper transportation
Less warehousing cost
Loss of customer service advantage
Distant market demands cant be met in short notice
Poor market coverage and control
Decentralized warehouses:
Market coverage maximum
Maximization of services create loyalty and goodwill
Moderate transportation cost
Better control over market intermediate
Huge warehousing cost
Huge inventory investment
Stock out situation
Storage at one warehouse replenished from another warehouse increases transportation
cost

Factors for Selection of Number and Location of Warehouse
a) Geographical locations
b) Location and facilities of the production centres
c) Transportation infrastructure facilities
d) Nature and quality of goods to be stored
e) Financial factor
f) Possibility of change in the use of warehouse facility at a later stage, if desired.
g) Lastly the ours is on the management philosophy with regard to use of customer service.


15. Write a short note on Elements of Warehousing Costs.
Answer: Three types-
i. Warehousing Infrastructural Development Costs
Costs of procurement of storage space;
Handling and transfer cost;
Administrative cost; and
Costs incurred in direct and indirect physical facilities.
ii. Working Capital Costs:
the cost of working capital involved in goods stored in warehouse as inventory.
ii. Miscellaneous Costs:
Tax to be paid;
Insurance paid for covering risks; and
The risk of product obsolescence or deterioration

16. What are the factors taken into considerations for Warehouse Design?
Answer: Following are the factors to be considered:
Products to be distributed through the proposed warehouse in terms of quantity and
character of goods.
Estimation of the future expansion requirements of warehouse operation.
Identification and selection of the material-handling system.
Designing the layout of a warehouse
Following three steps are followed:
i. Purpose of the facility;
ii. Layout of the facility; and
iii. Warehouse space requirement and aisle layout.
Purpose of the Facility
Achievement of all logistics objectives of the firm pertaining to warehouse facility.
Includes- size of the building, the number of storage levels, the ceiling height, length and
width ratio, floor load capacities.
Smooth flow through operation of warehouse for receiving storing, and shipping of goods.
Layout of the Facility
On the basis of two major aspects:
Required material-handling system and physical facilities.
Physical facilities- windows material receiving and shipping doors, fire doors,
supporting pillars, lighting facilities etc
Material-handling equipments-elevators, cranes, fort lifts, trucks, etc.
Required floor plan to facilitate smooth material flow.
Material flow requirements include receiving, storage, order selection,
packaging/repackaging, and shipping areas within the warehouse.


Space Requirement and Aisle Layout
Consists of the space required for the storage as well as the other housing activities
Storage space layout considerations generally include pallet placement and aisle width.
Pallet placement
Standardized sizes- 40 by 48 and 32 by 48 inches
Positioning- ninety-degree/square placement
Aisle Width
Generally vary with the-
Size of material handling equipment
Quantity of material moored
Incase of the standardized size of material-
Dimensions of pallet or container
Size of the forklift equipment
They can allow two-way traffic.
The exact width is determined by:
the length of the motive equipment with pallet;
the turning of the loaded motive equipment; and
the width of the loaded equipment.
Space needed for other Warehousing Activities
1. Areas for vehicles waiting to be loaded or unloaded and employee parking.
2. Receiving and loading facilities for each mode of transport serving the facility.
3. Staging, or temporary storage areas, for both incoming and outgoing merchandize.
4. Office space, including area for computer facilities.
5. Employee washrooms, lunchrooms, and the like.
6. Pallet storage and repair facilities.
7. An area to store damaged merchandize that is awaiting inspection by the carriers claim
representative.
8. An area to salvage or repair damaged merchandize.
9. An area for repacking, labeling, price marketing, and so on.
10. A room for accumulating and baling waste scrap.
11. An area for equipment storage and maintenance.
12. Specialized storage area for hazardous items, high value items, warehouse supplies, or
items needing other specialized handling.
13. A returned or recycle goods processing area.

OPERATIONAL MECHANISM OF WAREHOUSE
i. Receiving and Stocking System;
ii. Hiring and Training Personnel;
iii. Developing a Working Procedure System;
iv. Developing Security System;
v. Billing and Inventory management System;
vi. Local Delivery System; and
vii. Safety and Maintenance System.
Receiving and Stocking System
Total product-mix to be handled by the warehouse and their quantity of inventory.
Anticipation of the demand pattern and safety stock policy.
Scheduling of arrival of in-bound products.
Time required for the unloading products and their placement in the storage area.
Slot assignment for different products.
Two common slot assignments methods:
fixed slot- refers to a rigid and permanent assignment of storage area for the
positioning of each single product. Advantage is easy to locate the product.
Variable slot- a slot for product positioning in the storage areas is always variable
and changes at the arrival of each shipment.
Objective is to utilize the space of warehouse more efficiently.
Hiring and Training Personnel
This process includes:
Identification and definition of the job requirement describing the role in the total system
and their hiring.
Acquainting hired personnel with job profile;
Locating the training need;
Regrouping of personnel for various operations as per training needs; and
Providing hands-on-training to different groups under near typical working conditions.
Developing a Working Procedure System
Movement of material handling system within the storage area, and
Order picking and selection system.
Normally two methods are used:-
individual selection- one selector will be responsible for the complete sorting and
picking of the order of one customer, irrespective of area.
area selection- deals with the allocation of a certain portion of the total storage space to
each selector, irrespective of the customer.
Other procedural aspects include:
o maintaining proper inventory recording system;
o order processing system;
o Invoicing and documentation system;
o Follow-up of the loading procedures such as right assortments, item checking, adequate
protective packaging, etc.;
o full pallet load stability; and
o system for sharing information regarding the status of the order and shipment schedules.
Developing Security System
Protecting goods from theft,
Security provisions for proper maintenance of the warehouse and special provision for any
unwanted situation.
Development of a standard procedure for checking at the time of entry and exit of the
employers.
Procedure for the entry of the guests, customers, etc.;
Facilities for preserving the physical attributes of the goods;
Prevention of careless handling of goods at the warehouse; and
Proper utilization of material handling equipments, ensuring no damage to the packages of
the goods during loading and unloading.
Billing and Inventory Management System
Preparation of invoices and dispatch challans;
Preparation of shipping documents;
Procedure for proper and up-to-date inventory management system;
Prevention of stock-out situation; and
Prevention of under/over stocking.

Local Delivery System
This procedure includes:
Schedule for the movement of trucks for the delivery of goods to the customer as per their
order specification;
Routing of trucks in case of multi-customer delivery schedule to fill the load capacity of the
trucks; and
Trade-off between total distribution cost and distance covered by vehicles.
Safety and Maintenance System
Development and deployment of a well-balanced safety programme in order to prevent
accidents;
Proper and continuous examination and maintenance of all material handling equipments
safety instruments;
Floor cleaning system on a regular basis and instantly in the case of breakage of product
package/product drainage on the floor; and
Installation of fire-fighting systems and proper lighting.

17. IDENTIFY THE ROLE OF PRODUCTIVE PACKAGING IN LOGISTICS AND MANAGEMENT?
ANSWER: Packaging though an integral part of logistics, also affect marketing and production
function. Packaging helps in promotion of products and size, shape, material of the package affects
production labor efficiency.
Logistical Functions of Packaging
1. Containment: Packaging provides containment for products.
2. Protection: Protection from environment, pilferage, shocks of handling and moving.
3. Cube Minimization: Reducing the space occupied by the product to cut the freight charge.
E.g. Round containers, oval shaped containers and square shaped bottles, etc.
4. Weight minimization: Reducing the weight of the consignment to fully utilize the capacity
of the truck. E.g. Liquids are packed in plastic bottles rather than glass bottles.
5. Apportionment: Grouping goods into convenient unit for distribution. E.g. mangos in
boxes, milk bags in crates.
6. Facilitating handling & using: fruit juices in tetra packs, handling and consumption by users
7. Convenience: Facilitating handling, storage & reuse. E.g. ink cartridges for printers,
reusable corrugated boxes, bottles and refill packs.
8. Communication:
a. Content Identification Product, manufacturer, universal code etc.
b. Tracking: Bar codes and scanners.
c. Handling Instructions: Fragile, This side up, temperature restrictions,
environment concerns, potential dangers etc
Consumer Oriented Packaging V/S Logistics Oriented Packaging
1. Consumer Oriented Packaging: Focuses on consumer convenience and appeal, marketing
consideration and display.
2. Logistics Oriented Packaging: Focuses on handling convenience and protection during
transpiration, material handling and storage.
STAGES IN LOGISTICS PACKAGING
1. Products Packaging: Packaging the products itself, e.g. soft drinks are packed in cans.
1. Master Cartons: Packaged products are packed in larger cartons to facilitate quantity
handling.
2. Unit Load: Master cartons are consolidated into a single large unit to facilitate
transportation, protection and storage. It involves Unitization or Palletisation.
3. Containerization: Unit load is placed in a rigid container for transportation.
Unitization / Palletisation
Unitization is a concept where size shape, weight, volume of the items is considered and master
cartons are placed to form a single larger unit. E.g. bottles in crates, steel sheets in coils, etc.
1. Leads to standardization of handling equipments and methods.
2. Facilitates use of standardized handling equipment like a forklift or a crane.
3. Reduces the time for handling and cost of handling.
4. Simplifies the checking of inbound shipments.
5. Improve product protection.
Types of Pallets
1. Wooden pallets used commonly but break and disintegrate.
2. Pressed wood fiber pallet
3. Plastic pallets light and recyclable
4. Solid molded plastic pallets
5. Corrugated fiberboard slip sheet provide cushion effect to the unit load
6. Refrigerated pallets- for refrigerated materials
Containerization
Containerization is a technique of distributing goods in unitized form and making convenient to
establish an intermodal transport system. Containers are of standard size i.e. 20 ft or 40 ft.
Benefits of Containerization:
1. It eliminates need for intermediate handling at terminals.
2. Standardized containers helps in saving on packaging materials and labour for packaging.
3. Less risk of damage and pilferage.
4. Facilitates intermodal transportation without intermediate reloading.
Types of Containers:
1. General Cargo Containers for general cargo like garments metals etc.
2. Refrigerated Containers for food items that require cold storage like fish, meat.
3. Insulated Containers for items that require airtight space like fruits and vegetables.
4. Ventilated Containers for items that require fresh air like coffee seeds, tea leaves.
5. Flat Containers They have only flat base with no walls, used when cargo the cargo is of
odd size or very heavy like trucks.
6. Liquid Containers They have main holes for loading and unloading of liquid cargo like
milk, oil.
7. Gas Containers They have fixtures to fill or empty liquefied gas. E.g. Liquid oxygen.

CONCLUSION: PRODUCTIVE PACKAGING PLAYS AN IMPORTANT ROLE IN LOGISTICS
MANAGEMENT HELPING IN REDUCING COST SAVING SPACE THUS MONEY.

18. What are the objectives of Inventory control?
Answer: Inventory means a list compiled for some formal purpose, such as the details of an estate
going to probate, or the contents of a house let furnished. Inventory control is primarily about
specifying the shape and percentage of stocked goods. It is required at different locations within a
facility or within many locations of a supply network to precede the regular and planned course of
production and stock of materials.
Inventory control involves a retailer seeking to acquire and maintain a proper merchandise
assortment while ordering, shipping, handling, and related costs are kept in check. It also involves
systems and processes that identify inventory requirements, set targets, provide replenishment
techniques, report actual and projected inventory status and handle all functions related to the
tracking and control of material. This would include the monitoring of material moved into and out
of stockroom locations and the reconciling of the inventory balances. Also may include, lot tracking,
cycle counting support etc. Control of the inventories, with the primary objective of
determining/controlling stock levels within the physical distribution function to balance the need
for product availability against the need for minimizing stock holding and handling costs.
OBJECTIVES OF INVENTORY CONTROL
Through the end of the 1980's, most software packages for distributors placed an emphasis on sales
and accounting related modules. In the early 1990's, many distributors recognized that they needed
help controlling and managing their largest asset, inventory. In response to this need, several
computer software companies developed comprehensive inventory control modules and systems.
These new packages include many new features, designed to help distributors effectively manage
warehouse stock. But after implementing new software, many distributors don't feel that they have
gained control of their inventory. These wholesalers continue to face many of the same challenges
they experienced with their old systems:
Stock outs and lost sales are common while warehouses are bulging with inventory
On-hand and available-for-sale quantities in their computer systems aren't accurate
The return on investment from inventory is not satisfactory
In some cases, the problem lies in the computer software. Some packages still do not have the
necessary capabilities for effective inventory control. In other situations, a distributor is using a
software package that is too complicated. His buyers don't have the knowledge, time, and/or skills
to take advantage of the system's capabilities. But the most common reason distributors do not
achieve their inventory control a goal has nothing to do with the computer system they utilize.
Despite what many data processing salespeople will tell you, computers do not provide solutions to
inventory control problems. Computers are tools. They must be used in the proper business
environment in order to work effectively. This environment is comprised of several elements. All of
them must be present in order for your new inventory control system to live up to its potential. If
your system is not performing up to this potential, be sure you have implemented each of the
following characteristics of good inventory control:
1. Protect your company against theft - Make sure that the only people in your warehouse
belong in your warehouse. Pilferage is a larger problem than most distributors realize.
2. Establish an approved stock list for each warehouse - Most dead inventory is "D.O.A" (dead
on arrival). Order only the amount of non-stock or special order items that your customer
has committed to buy. Before adding an item to inventory, try to get a purchase
commitment from your customer. If this is not possible, inform the salesperson who
requests the item that he or she is personally responsible for half the carrying cost of any
part of the initial shipment that isn't sold within nine months.
3. Assign and use bin locations - Assign primary and surplus bin locations for every stocked
item. All picking and receiving documents should list the primary bin location (in either
characters or a bar code). With correct bin locations on documents, order picking is
probably the least complicated job in your warehouse. Assign inexperienced people to this
task and your most experienced warehouse workers to receiving inventory and stock
control.
4. Record all material leaving your warehouse - There should be appropriate paperwork for
every type of stock withdrawal. Under no circumstances should material leave the
warehouse without being entered in the computer. Eliminate "no charge/no paperwork"
material swaps. Product samples should be charged to a salesperson's account until they
are either returned to stock or charged to the customer.
5. Process paperwork in a timely manner - All printed picking documents should be filled by
the end of the day. Stock receipts should be put away and entered in the computer system
within 24 hours of arrival.
6. Set appropriate objectives for your buyers - Buyers should be judged and rewarded based
on the customer service level, inventory turns, and return on investment for the product
lines for which they are responsible.
7. Make sure every employee is aware of the cost of bad inventory control - Inventory loss
through theft, breakage, or loss must be paid for with net profit dollars. If your net profit
before taxes is 4%, it takes $2,500 in new sales to make up for a $100 merchandise loss!
8. Ensure that stock balances are accurate and will remain accurate - Implement a
comprehensive cycle counting program. A good cycle counting program can replace your
traditional year-end physical inventory.
9. Determine the most advantageous replenishment path for each item in each warehouse -
Assign one of these "paths" to each item in each warehouse:
1. Distributive purchasing - The warehouse replenishes stock with a purchase order
issued directly to the vendor
2. Central Warehousing - The stock of one warehouse is replenished with a stock
transfer from a central warehouse
3. Cooperative Purchasing - Several branches "pool" their needs and issue one vendor
purchase order in order to meet the vendor minimum order within a reasonable
amount of time
10. Specify guidelines for setting the reorder method another purchasing parameters to
maximize inventory turns and minimize stock outs:
1. Minimum/Maximum quantities
2. Economic order quantities
3. Order up to a specific stock level
4. Safety stock quantities
5. Preseason buys
11. Document replenishment procedures:
1. Line buys
2. Non-stock items
3. Price-break purchasing
4. Preseason buys
5. Importing material
12. Establish customer service, inventory turnover, and return on investment goals for the
following 24 months for each branch and major product line - After each month end close,
compare the goals to the actual results.
13. Initiate an on-going dead stock and excess inventory control program - Excess inventory is
usually considered to be any quantity of a product greater than a 12 month supply.
1. Transfer excess stock to a branch that needs the material
2. Return the stock to the vendor
3. Lower the price of items with excess inventory
4. Substitute surplus inventory for lower cost items that are still popular
5. Offer special commissions for the sale of surplus merchandise
6. Sell the excess inventory to a competitor
7. Donate excess stock to a non-profit agency
8. Throw it out, take the "write-off" for your financial statement, and free up room in
your warehouse
14. Make inventory control considerations part of corporate strategic planning.

19. Explain the concept of ERP & its benefits in logistics & supply chain systems.
ANSWER:
MEANING
ERP refers to Enterprise Resource Planning. ERP is a computerized integrated business process of
the organization used by firms to derive competitive advantages in the production, distribution and
financial areas. In other words, it is an integrated set of application software modules providing
operational, managerial and strategic information to improve the productivity, quality and
competitive advantage. Furthermore, ERP integrates the entire enterprise, starting from
supplier/vendor to the customer, including all resources such as financial, human, production,
logistics, etc, by means of an integrated workflow with a flexible assignment of tasks and
responsibilities to different locations, positions, jobs, groups or individual. The information system
of ERP stores information in a summarized format in a large data warehouse and can either be
updated. Furthermore, a manager can retrieve the required data across function in a format in
which he would like to view.
Although there have been differences amongst the ERP and L&SCM (logistics & supply chain
systems), of late, ERP & L&SCM systems are fast converging. The ERP software suppliers have
started adding L&SCM functionality, whereas L&SCM solution providers too are expanding their
preview by adding ERP functionality to their products.
BENEFITS OF ERP
1. Improving productivity and enhancing a competitive edge by optimizing the use of all
resources
2. Bringing about a trade off between demand & supply
3. Bringing together people who work on shared tasks within same firm or in their dealings
with suppliers, customers and third-party logistics service providers
4. Ensuring a smoother flow of inventory and information at all levels and between all parties,
coupled with ready access of up-to-date information
5. Reducing the replenishment cycle time & hence capital lock up
6. Ensuring a high level of customer service with flexibility
7. Overall organizational look-ahead capability and control

20. Write a detailed note on 4PLS
Answer: In todays industrial scenario, there has been an unprecedented increase in customers
demand-for better service and on- time deliveries at reduced cost. This has put extra pressure on
the area of logistics and supply chain management. The expectations of customers from the
suppliers are continually increasing.
To meet these demands, the general trend has been to outsource the service providers-better
known as third-party service providers. However, these service providers, many a times, lack broad
set skills, integral technologies, strategies and global reach.
To build this strength, many third-party service providers are going for collaborations, mainly with
consultancies and technology providers. Now corporations are outsourcing their entire set of
supply chain process from a single organization which will assess, design, make and run integrated
comprehensive supply chain solutions. The evolution in supply chain outsourcing is called Fourth-
Party Logistics-the aim being to provide maximum overall benefit.
The 4PL is a supply chain integrator that assembles and manages the resources, capital, technology
and capabilities of its own organizations that provide complementary services to design, build, run
integrated comprehensive supply chain solution.
Two key distinctions that make the concept of 4PL unique are firstly a 4PL delivers a
comprehensive supply chain solution and secondly, a 4PL delivers value through the ability to have
an impact on the entire supply chain. As the 4PL caters to multiple clients, the investment is spread
across clients, thus, taking the advantage of economies of scale.
Stages of Fourth-Party Logistics Solutions
Reinvention
At the highest level of fourth-party logistics is reinvention. Reinvention takes advantage of the
traditional supply chain management consulting skills, aligns business strategy with supply chain
strategy and is facilitated by technology that integrates and optimizes operations both within and
across participating supply chains.
Transformation
The second level of fourth-party logistics solutions is transformation. It focuses on improving the
supply chain functions. This includes sales and operation planning, distribution management,
procurement strategy and customer support. Technological leadership and excellence is leveraged
with strategic thought, process redesign and organization change management in order to improve
and integrate these supply chain activities by bringing about the best breed solution.
Implementation
The fourth-party logistics solution provider implements recommendations for an efficient use of
supply chain management. This includes business process realignment, technology and system
integration across the client organization and service providers, and transition of the operators to
the delivery team.
Execution
The fourth-party logistics providers take the operational responsibility for multiple supply chain
functions and processes. It covers transportation management, warehouse operations,
manufacturing, procurement, supply chain, information technology; demand forecasting, network
management, customer service management, inventory management and administration.
In summary, the fourth-party logistics 4PL responds effectively to the broad complicated needs of
todays organizations by delivering a comprehensive supply chain solution.
With the advent of ITs role, the effectiveness of fourth-party logistics can be greatly enhanced by
implementing systems at all levels-ERP, DSS-transactional and functional. It provides current
information, allowing an organization to redirect the product flow, if desired, and forecasting the
volumes. It also allows the user to track the performance accountability at all levels within the
supply chain line while monitoring continuous performance opportunities.
Cost Effectiveness of Fourth-Party Logistics
1. Revenue growth by enhanced product quality, product availability, and improved customer
service-all facilitated by the application of leading technology.
2. Operating cost reduction can be achieved through operational efficiencies and procurements.
Savings will be achieved by complete outsourcing of supply chain functions and not just selected
complements.
3. Fixed capital reductions will result from capital asset transfer and enhanced asset utilization. The
fourth-party logistics organization will own its physical asset utilization. The fourth-party logistics
organization will own its physical asset through freezing up the client organization to invest in core
competencies.

21. Describe the role of transportation in the success of logistics system, and coordinated
and efficient supply chain performance?
Answer: The transportation industry is not mere movement of goods and people from one place
to another but it incorporates the overall growth and development of civilization in general and
economy in particular. Now we know logistics is basically a response to customers expectation
which leads to making available the required quantity of required quality as and when required
by the customer which essentially requires transportation . Supply chain management is
consisting of management of moving goods which is the most essential part of it.
Transportation is hence the artery of logistics and supply chain management. Transportation plays
a significant role because goods are rarely manufactured and consumed in the same location . The
very mission of logistics and SCM is to make available the right quantity and right quality goods at
the right time and right place with minimum costs. This can be achieved by proper planning of
movement of goods and appropriate use of transportation resources. The share of
transportation costs in logistics is about 40% of the total costs. Hence, any effort to cut down the
logistics cost needs efficient and effective utilization of transportation facilities and its trade off
with other logistics components. The prevailing global competitive environment scenario,
corporate enterprises are constantly under pressure to cut down logistical costs and improve
customer service capabilities. Hence they need:
Reduction in transit time for minimization of inventory cost;
Less damage, en-route handling and pilferages for minimum insurance charges;
Curtailment of protective packaging costs; and
Point-to-point information regarding the status of shipment.
Liberalization, privatization and globalization have further increased the market
Scope: Where the world market is shrinking into global village. In this situation, movement of goods
and products has become more imperative and also wider. Raw materials of one country are
processed in the other country and sold in third world countries at an economy of scale and
competitive advantage in the logistics and supply chain perspective. The success of any
logistical system and coordinated and efficient supply chain performance, transportation plays a
very strategic role because:
It ensures speedier and timely physical movement of goods from point of inception
to point of consumption;
It creates core competency by preventing stock-out and customer annoyance;
It provides protective storage during transit;
It ensures cost effective better customer service; and
It fulfils specific service requirements of the corporate enterprises for improvement
of logistical capabilities and harmonious supply chain relationships.

22. What do you mean by LIS? What are various component of LIS architecture?
Answer: LOGISTICAL INFORMATION SYSTEM (LIS)
The central purpose of a management in general and logistics and supply chain in particular is to
provide value to the customer. The information delivered from an LIS can be as valuable as the
product. In simple terms, a logistical information system is an integrated approach for providing
interpreted and relevant data that can help manager make decision foe the smooth flow of logistical
function. LIS refers to a set of interrelated and interdependent functions for collection, storage,
analysis and retrieval of information in required format so as to facilitate a smooth flow of input
goods from their source, to the processing facilitates and outputs to their final destination of use.
The major purpose of LIS is to collect, process, store and manipulate data within a firm, facilitating
the decision to overcome any logistical problem.
LIS is a set of computer hardware and software that gathers, organizes, summaries and report any
information for use by manager, customer and other. A generic LIS design consists of four distinct
elements:
1) The inputs;
2) The database and its associated manipulation;
3) The outputs; and
4) The resources.
The Inputs:
Customers provides a lot of useful data while placing an order, which helps in forecasting and
operating decisions, such as sale volume, timing and location of sale and order size. Furthermore
freight bills, purchase order and invoices are additional sources of this type of data. The qualitative
logistics decisions always require a lot of data pertaining to a companys past demand pattern and
other accounting and status reports which are made available from the company record. These
selected items of data are captured by the information system, to be manipulated at a later stage.
The management and personnel of the company can also be a valuable source of data. Their
prediction of future sales, close monitoring and scanning of environmental scenario, competitors
strategies etc., are very relevant sources of data for any information system.
Database Management:
Database management is the heart of any information system which converts data into information
and its interface with decision-assisting methods. It refers to selection and identification of data to
be stored and retrieved, choice of methods of analysis to include, and choice of the basic data
processing procedures for implementation (Ballau, 1992).
The design of the database determines the nature of the data to be retained or stored in a computer
memory for quick access. The selections of data to be stored in the computer are judged on the
following four points of facts:
1) How critical the information is to the decision the logistician must make in a particular firm;
2) How rapidly the information needs to be retrieved;
3) How fragrantly it is to be accessed; and
4) How much efforts may be required to manipulate the information into the form needed
(Ballau,1992)
Normally, operational information is required for more frequent and ready access whereas
strategic logistical information are required infrequently.
The Outputs:
The third element of LIS is the outputs which has a final interface with the logistical decision
makers. The output of any LIS is the processed and manipulated form o input data. These output
data (information) facilitates decision-makers to optimize the logistical resources and ensure a
smooth flow of total logistics system. The outputs are the summary presentation of data in a
required format, generally called summary reports, status reports, exception reports, etc.
Furthermore, the output may be in the form of documents such as invoices, purchase orders,
transportation bills, etc.
The Resources:
In any LIS, there are four types of resources required (Brien, 1994)
1) Human Resources: It includes:
Specialists- System analysists, programmers and computer operators
End Users- Anyone who uses an information system.

2) Hardware Resources: It includes:
Machines- Computers, video monitors, magnetic disk drivers, printers, optical scanners.
Media- Floppy disks, magnetic tape, optical disks, etc.

3) Software Resources: It includes:
Programmers- Operating system programmers, spread sheet programmers, word
processing programmers, SCM & ERP solutions.
Procedures- Data entry procedure, data processing procedure, error correction procedures,
procedure for interface of LIS with MIS

4) Data Resources: It includes product descriptions, customer records, inventory databases.





















A Generic Logistics Information System

Logistics Manager
(Decision Maker)

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Input of Data
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Data Base
Management
Output of
Information
23. How does LIS facilitate in the improvement of logistical decision-making?
Answer: From logistics function point of view, a more operational structure of LIS has been
suggested by Bowersox and Closs (1996). This system consists of sub systems, namely:-
1) modules
2) data files
3) management and data entry activities
4) reports
5) communication links
Modules are routine data processing systems, containing order entry; order processing,
transportation and shipping, distribution operations, and inventory management. Data files refer to
those information structure systems that store specific data supporting communication activities.
Order file, inventory file, warehouse file, account receivable file, distribution requirement file
comprise logistics data file structures.
Management and data entry activities facilitate an interface of LIS with the external environment
such as the decision maker and supply chain business partners. It obtains input data which must be
entered into the total system. The categories of such data inputs are order entry, order status,
forecast development and reconciliation, freight rating, warehouse receipt and adjustment. Reports
provide information in a manipulated format regarding logistics activities and performance links,
which consists of a hardcopy of numerous summary, detail, and exception reports. These reports
are usually used for decision making and measurement of actual performance by the logistics
managers as well as top executives of the firm. These reports are also in the form of invoice, freight
and shipping documents, etc. for the operational performance of the logistical system.
Communication links integrate the total LIS and bring an interface of it with other information
systems of the firm as well as external environment such as LIS of other supply chain members.





24. Write a short note on LOGISTICS MISSION & STRATEGIC ISSUES.
Answer: Major missions of logistics are as follow:
1) To make available the right quantity of right quality products at the right time and place in
the right physical condition i.e the mission of logistics is making available goods and
services to customers as per their requirements and specification.
2) To offer the best possible customer service for core competency. In the present day scenario
of intense global competition , for further growth &more service from trade, corporate
enterprises have to largely depend on customers because they are having final interface
with end users and the final sales deal is swung by their push efforts. For this purpose firms
have to offer their best services to their customers in terms of 3 board categories of service
components, namely:-
a) Strategic components:- These components reflect the vision of the top management of
the company towards relationships with customers I terms of their ability to ensure the
best return against the investment made, space provided and push efforts required for
generating sales , their commitment for long run association along with continuous effort
for improvement in the service standard and transparency and uniformity in operations.

b) Logistical components:- These components deal with basic services required for delivery
of goods , including availability of goods as per normal and unforeseen requirement , fixed
replenishment cycle time , zero defect delivery, prompt reverse logistics system for early
recovery from defective delivery , point to point information along with consistency and
reliability in their services.

c) Non-logistical components:- These service components basically refer to value added
services offered to customers in terms of financial and technical for infrastructural
development , credit facility on special occasions, training for sharpening their marketing
and managerial skills, discretionary power for warranty settlement and proper follow up of
the exclusive territory operation norm

3) To minimize total logistical costs. Normally, logistical costs range from 15 to 45 % of the
price of the product next to the costs of r/m for most of the goods. In certain cases, it may
be about 5% , whereas for others, around 200%. Hence there enough scope for
curtailment of these costs by means of having better coordination and integration of various
logistical and non-logistical functions of an enterprise along with higher level of
productivity. New approaches towards total logistical cost offer ample opportunity for more
comprehensive analysis and understanding of logistical cost component and identified ways
and means to slash it further. However, the implementation of effective logistical process
costing solutions.
25. A well known logistics company operating in twenty cities planned to establish a
neural network for its information support. Advise a strategy for setting the
network.

Answer: The central purpose of a management in general and logistics and supply chain in
particular is to provide value to the customer. The information delivered from a Logistical
Information System (LIS) can be as valuable as the base product or service which the firm provides
to its customers. In simple terms, an LIS is an integrated approach for providing interpreted and
relevant data that can help managers make decisions for the smooth flow of logistical functions.
LIS is a set of computer hardware and software that gathers, organizes summaries and reports
any information for use by managers, customers and others. A generic LIS design strategy consists
of four different elements:
1. Inputs,
2. The database and its associated manipulation,
3. The outputs,
4. The resources.

The inputs: Sources of data after processing in the information system assists the decision making
process. The major sources of data needed for planning and operating the logistics system are
customers, company records, published data and management. Managements prediction of future
sales, close monitoring and scanning environmental scenario, competitors strategies, etc. are very
relevant sources of data for any information system.

Database management: The design of the database determines the nature of the data to be
retained or stored in a computer memory for quick access. The selection of data to be stored in the
computer is judged on the following four points of fact:
1. How critical the information is to the decisions the logistician must make in a particular
firm;
2. How rapidly the information needs to be retrieved;
3. How fragrantly it is to be accessed ;
4. How much efforts must be required to manipulate the information into the form needed.

The outputs: The output of any LIS is the processed and manipulated form of input data
(information) facilitates decision makers to optimize the logistical resources and ensure a smooth
flow of total logistics system. The outputs are the summary presentation of data in a required
format (summary reports, status reports, exception reports, etc.).

The resources: Four types of resources are required in LIS.
1. Human resources: Specialists (System analysts, programmers, computer operators), end
users (Anyone who uses an information system).
2. Hardware resources: Machines (Computers, video monitors, magnetic disk drivers etc.),
media (Floppy disks, magnetic tape, optical disks, etc.).
3. Software resources: Programs (operating system programs, spread sheet programs, word
processing programs, SCM & ERP solutions), procedures (Data entry procedures, data
processing procedures, error correction procedures, procedure for interface of LIS with
MIS).
4. Data resources: It includes product descriptions, customer records, inventory databases.



26. S.C.M IS A NEW BUZZ BIRD FOR CORE COMPETENCY IN PRODUCTIVITY AND PROFITABILITY?
ANSWER: SINCE THE BEGINNING OF THE 1990S, THERE HAS BEEN A PARADIGM CHANGE IN THE BUSINESS
SCENARIO MAINLY DUE THE LIBERALIZATION POLICY OF VARIOUS ECONOMIES ALL OVER THE WORLD AND
REVOLUTION INNOVATION IN THE FIELD OF SCIENCE AND TECHNOLOGY.
TO SUSTAIN THEMSELVES IN SUCH AN ERRATIC ENVIRONMENT FIRMS NEED TO HAVE CORE COMPETENCY
AND PRODUCTIVITY. THAT IS WHY FIRMS ARE PERCEIVED TO HAVE MORE SYSTEMATIZED ACTIVITIES
RELATED TO MOVEMENT AND STORAGE OF GOODS.
FOR EG : GODREG LOCKS HAS REDUCED ITS ORDER TO DELIVER CYCLE FROM THREE WEEKS TO ONLY
THREE DAYS.
OWING TO THIS, THE PHASE FROM 1990, ONWARDS IS RECOGNIZED AS THE ERA OF SUPPLY CHAIN
MANAGEMENT , WHICH HAS BEEN DEFINED BY THE GLOBAL SUPPLY CHAIN FORUM OF 1994 AS:-
THE INTEGRATION OF KEY BUSINESS PROCESSES FROM THE END USER THROUGH ORIGINAL SUPPLIERS THAT
PROVIDES PRODUCTS , SERVICES AND INFORMATION THAT ADD VALUE FOR CUSTOMERS (ACHARYA,1999)
APICS DEFINES SCM AS
ORGANIZATION THAT SUCCESSIVELY TRANSFORM RAW MATERIALS INTO INTERMEDIATE GOODS, THEN A
FINAL GOODS AND DELIVERY THEM TO CUSTOMERS (DESHMUKH AND MOHANTRY, 1999)

THE VARIOUS FEATURES OF SCM ARE AS FOLLOWS:-
SINGLE ENTITY: FOR A VARIETY OF PLANNING AND CONTROL FUNCTIONS ACROSS THE SUPPLY
CHAIN, THE RESPONSIBILITY IS MADE TO REST WITH A SINGLE ENTITY. FOR EXAMPLE :A GROUP
CONSISTING OF REPRESENTATIVES FROM PURCHASE, MANUFACTURING , DISTRIBUTION AND SALES
COULD BE THE ENTITY FOR FINALIZING THE MARKETING PLAN, THE DISPATCH PLAN, THE
PRODUCTION PLAN AND THE PROCUREMENT PLAN. THIS HAS REDUCED ADMINISTRATIVE DELAYS.
INVENTORY PERSPECTIVE: TRADITIONALLY INVENTORY HAVE BEEN VIEWED AS A BUFFER TO
REDUCE COORDINATION REQUIREMENT ACROSS ACTIVITIES , THE CURRENT CONCEPT IS THAT
INVENTORY IS A BUFFER TO BE USED AS LAST RESORT AFTER ENSURING PROPER INFORMATION
SHARING AND COORDINATION. SOME KEY MEASURES OF INVENTORIES IN SCM ARE AS:-
IMPROVING FLEXIBILITY
REDUCING LEAD TIMES
REDUCING UNCERTAINTIES
IMPROVING QUALITY.
STRATEGIC DECISION MAKING: THE DECISION IN THE SUPPLY CHAIN ARE VIEWED AS HAVING
STRATEGIC IMPLICATIONS RATHER THAN JUST OPERATIONAL ONES .FOR EXAMPLE:-RATHER THAN
BEING CONCERNED WITH JUST SOURCING TRUCKS FROM THE MARKETS , ONE COULD CONSIDER
LONG-TERM CONTRACT WITH TRANSPORTERS, OR INVESTING IN THEIR INFRASTRUCTURE TO SUITS
ONES PURPOSE.
SYSTEMS APPROACH:-THE SUPPLY CHAIN FROM VENDOR TO CUSTOMER IS VIEWED AS A SINGLE
INTEGRATION SYSTEM RATHER THAN MANY SUBSYSTEMS INTERFACING WITH EACH OTHERS. FOR
EXAMPLES TRADITIONALLY THE EFFORTS HAVE BEEN AIMED AT DEVELOPING BETTER INTERFACES
BETWEEN, SAY, MARKETING AND PRODUCTION, OR SOURCING AND CONVERSIONS.
DOING THE BEST ONE CAN:-IN THE VARIOUS ACTIVITIES OF THE SUPPLY CHAIN, IT IS
IMPORTANT TO FOCUS ON DOING WHAT ONE CAN DO BEST. THIS HAS IMPLEMENTATIONS ON
OUTSOURCING OR EVEN INSOURCING , AND BUILDING EFFECTIVE PARTNERSHIP.
SUPPLY CHAIN RELATIONSHIPS:-THE SUPPLY CHAIN CONCEPT EMPHASIS MORE OF
HARMONIOUS RELATIONSHIP AMONG ALL THE MEMBERS SUCH AS VENDORS, CHANNELS
PARTICIPANTS, AND ALL 3PLS PROVIDERS. THE CONTRIBUTIONS OF SUPPLY CHAIN MEMBERS ARE
FOR THE PERFORMANCE OF THE ORGANIZATIONS.
FLEXIBLE APPROACH:-TODAYS SUPPLY CHAIN ARE DESIGNED FOR FLEXIBILITY IN ALL THE
PROCESSES OF COMPANYS SUPPLY CHAIN SYSTEM, STARTING FROM MANUFACTURING TO
WAREHOUSING ,WHICH PLAYS A VERY IMPORTANT PART IN IMPROVING THE CUSTOMER SERVICE. A
FLEXIBLE APPROACH TOWARDS DEMAND FOCUSED MANUFACTURING CAN HELP FIRMS IN
MINIMIZING THE INVENTORY LEVELS IN THE SUPPLY OR DEMAND FLOW CHANNELS.
BECAUSE OF THE ABOVE FEATURES OF SCM, COMPUTER GIANT HEWETT PACKARD HAS CUT THE
DURATION OF ITS CYCLE TO DELIVER TO CUSTOMER IN INDIA FROM US BY ONE THIRD ,FROM37DAYS TO
10DAYS.
ALL THIS HAPPENED BECAUSE OF HIGHER AND SYSTEMATIC SCM HENCE IT IS A NEW BUZZ BIRD IN
CORPORATE WORLD.


27. Write a short note on BAR CODING SYSTEM and NEURAL NETWORK SYSTEM in
Logistic Management
Answer: In Logistic and supply chain management, the accurate and rapid identification of
products along with the use of their information in monitoring the entire process comprise the key
factor. The Bar Code System is an identification technology that facilitates speedier flow of logistic
info such as quick tracking receipts, movement details, product identification, etc., with a lesser
probability of error. It refers to placement of readable computer-readable codes on items, cartoons
and containers which are grouping of parallel blocks of different width separated by light spaces
again of different widths. These bars again of different widths are used to define a particular
character which can be identified by an electronic scanning machine system.
In the bar code system, wide black bars, narrow black bars, wide white bars and narrow white
bars are all used to define a character. Depending on symbology, there can be anywhere from 3 to
9 elements used in code for single character. At present, there are more than 100 symbologies
used. For example, 2 or 5 is one of the standard symbologies used where the code has a total of 5
bars, 2 wide and 3 narrow.
BENEFITS OF BAR CODE SYSTEM
Speeds data entry
Enhances data accuracy
Minimizes on hand inventory
Monitors labour efficiency
Improves customer service
Reduces product recall
Verifies order at receiving and shipping
Reduces work-in-process idle time
Monitors and controls shop floor activity
Improves shop floor scheduling
Optimizes floor space
Improves product yield
Reduces scrap

Neural Network
A Neural network (NN) is an alternative computational paradigm, which has some attractive
features owing to its structure and function. NNs have, for example, learning abilities, parallel
processing, fault tolerance, and distributed memory. Therefore, they can provide support in
organizing, classifying, and summarizing data.
Originally, the idea of neural networks was to develop a computer analogue of the human brain.
Many of the terms related to this subject are borrowed from neuroscience but so far the neural
networks only mimic the human brain to a certain degree. However, a neural network consists of
many single and simple processing elements, which interact through a dense web of
interconnections. Through this network structure, an NN can learn and remember complex
patterns.

Neural Networks in Logistics

Logistics together with transportation form a wide area with many tasks. Some of them are also
suitable for neural network applications and several research projects of NNs in these areas have
been carried out.
Applications
Optimization
o Routing Problems
o Travelling Salesman Problem
o Location-Allocation Problem
Modeling
o Dispatching problems
o The mode choice
o Modeling the effect of noise
Prediction
o Bankruptcy prediction
o Predicting performance of transportation industry
Analysis
o Analyzing products and customer profiles
o Logistics chain and process modeling and analysis
o Distribution control and analysis


28. Write Short note on Bullwhip Effect on Supply chain.
Answer: The Bullwhip Effect (or Whiplash Effect) is an observed phenomenon in forecast-
driven distribution channels. The concept has its roots in J Forrester'sIndustrial Dynamics (1961)
and thus it is also known as the Forrester Effect. Since the oscillating demand magnification
upstream a supply chain reminds someone of a cracking whip it became famous as the Bullwhip
Effect. Causes


Bullwhip Efect
Because customer demand is rarely perfectly stable, businesses must forecast demand to properly
position inventory and other resources. Forecasts are based on statistics, and they are rarely
perfectly accurate. Because forecast errors are a given, companies often carry an inventory buffer
called "safety stock".
Moving up the supply chain from end-consumer to raw materials supplier, each supply chain
participant has greater observed variation in demand and thus greater need for safety stock. In
periods of rising demand, down-stream participants increase orders. In periods of falling demand,
orders fall or stop, thereby not reducing inventory. The effect is that variations are amplified as
one moves upstream in the supply chain (further from the customer). This sequence of events is
well simulated by the Beer Distribution Game which was developed by Prasad Ligade MIT Sloan
School of Management in the 1960s.
The causes can further be divided into behavioral and operational causes:
Behavioral causes
misuse of base-stock policies
misapplication of trinomial theorem
misperceptions of feedback and time delays
panic ordering reactions after unmet demand
perceived risk of other players' bounded rationality
Operational causes
dependent demand processing
Forecast Errors
adjustment of inventory control parameters with each demand observation
Lead time Variability (forecast error during replenishment lead time)
lot-sizing/order synchronization
consolidation of demands
transaction motive
quantity discount
trade promotion and forward buying
anticipation of shortages
allocation rule of suppliers
shortage gaming (including dereliction under Benford's Law)
Lean and JIT style management of inventories and a chase production strategy

Consequences
In addition to greater safety stocks, the described effect can lead to either inefficient production or
excessive inventory as the producer needs to fulfill the demand of its predecessor in the supply
chain. This also leads to a low utilization of the distribution channel. In spite of having safety
stocks there is still the hazard of stock-outs which result in poor customer service. Furthermore,
the Bullwhip effect leads to a row of financial costs. Next to the (financially) hard measurable
consequences of poor customer services and the damage of public image and loyalty an
organization has to cope with the ramifications of failed fulfillment which can lead to contract
penalties. Moreover the hiring and dismissals of employees to manage the demand variability
induce further costs due to training and possible pay-offs.
Counter Measures
Theoretically the Bullwhip effect does not occur if all orders exactly meet the demand of each
period. This is consistent with findings of supply chain experts who have recognized that the
Bullwhip Effect is a problem in forecast-driven supply chains, and careful management of the
effect is an important goal for Supply Chain Managers. Therefore it is necessary to extend the
visibility of customer demand as far as possible. One way to achieve this is to establish a demand-
driven supply chain which reacts to actual customer orders. In manufacturing, this concept is
called Kanban. This model has been most successfully implemented in Wal-Mart's distribution
system. Individual Wal-Mart stores transmit point-of-sale (POS) data from the cash register back
to corporate headquarters several times a day. This demand information is used to queue
shipments from the Wal-Mart distribution center to the store and from the supplier to the Wal-
Mart distribution center. The result is near-perfect visibility of customer demand and inventory
movement throughout the supply chain. Better information leads to better inventory positioning
and lower costs throughout the supply chain. Barriers to the implementation of a demand-driven
supply chain include the necessary investment in information technology and the creation of a
corporate culture of flexibility and focus on customer demand. Another prerequisite is that all
members of a supply chain recognize that they can gain more if they act as a whole which requires
trustful collaboration and information sharing.

Methods intended to reduce uncertainty, variability, and lead time:
Vendor Managed Inventory (VMI)
Just In Time replenishment (JIT)
Strategic partnership
Information sharing
smooth the flow of products
coordinate with retailers to spread deliveries evenly
reduce minimum batch sizes
smaller and more frequent replenishments
eliminate pathological incentives
every day low price policy
restrict returns and order cancellations
order allocation based on past sales instead of current size in case of shortage

29. Discuss the emerging role of 3PLs and 4PLs in the achievement of supply chain
objectives.
Answer: Third-party logistics (3PL) involves using external organizations to execute logistics
activities that have traditionally been performed within an organization itself.
According to this definition, third-party logistics includes any form of outsourcing of logistics
activities. For example, a company with its own warehousing facilities decides to employ
external transportation, this would be an example of third-party logistics.

Types of 3PL:
Standard 3PL provider: this is the most basic form of a 3PL provider. They would perform
activities such as, pick & pack, warehousing,. For a majority of these firms, the 3PL function is
not their main activity.
Service developer: this type of 3PL provider will offer their customers advanced value-added
services such as: tracking and tracing, cross docking, specific packaging, or providing a unique
security system. A solid IT foundation and a focus on economies of sales and scope will enable
this type of 3PL provider to perform these types of tasks.
The customer adapter: this type of 3PL provider comes in at the request of the customer and
essentially takes over complete control of the company's logistics activities. The 3PL provider
improves the logistics dramatically, but do not develop a new service. The customer base for
this type of 3PL provider is typically quite small.
The customer developer: this is the highest level that a 3PL provider can attain with respect to
its processes and activities. This occurs when the 3PL provider integrates itself with the
customer and takes over their entire logistics function. These providers will have few
customers, but will perform extensive and detailed tasks for them

The concept of Fourth-Party Logistics (4PL) provider was first defined by Andersen
Consulting (Now Accenture) as an integrator that assembles the resources, capabilities and
technology of its own organization and other organizations to design, build, and run
comprehensive supply chain solutions. Whereas a third party logistics (3PL) service provider
targets a function, a 4PL targets management of the entire process. Some have described a 4PL
as a general contractor who manages other 3PLs, truckers, forwarders, custom house agents,
and others, essentially taking responsibility of a complete process for the customer

4PL only work with intellectual capital and computers
Birds eye view of supply chain
To seek integration
To minimize inventory costs
To improve efficiency and to reduce lead times


Outsourcing logistics functions requires intensified communication and information exchange
between the parties involved. This virtual business environment enables companies to optimize
Forecasting, order processing, production and distribution collaboratively with suppliers and
service providers in the sense of integrated supply chain management.

The key distinction between 4PL and current approaches to supply chain outsourcing is a unique
ability to deliver value to client organizations across the entire supply chain.


30. Write short note on: Coordination and operational flow of information?
Answer: Coordination flow of information
Coordination flow of information is the core of logistic strategy of an enterprise, providing
guidelines for resources allocation and operational performance from procurement to finish
product delivery.
Strategic plan
The generic role of information in strategic planning involves achievement of
marketing and financial objectives of manufacturing and distribution enterprises. The
strategic objective of marketing define target market, product, marketing mix plan, and
the role of logistics and value added activities such as services level and capability the
measurement of actual performance of logistic system with in the fact of consumer
service include replenishment cycle time and its consistency,
Operational flow of information
It involves the logistics operational system required to receive, process, and ship customer and
purchase order. Inventory management is a fundamental aspect which facilitates a primary
interface between coordinating and operating flow of information. It control throughout supply
chain network.
Order management
The order management of operational information flow is the entry point for customer orders
by various communication mechanisms such as mail, telecom, fax, email, verbal or EDI. Its
primary purpose is to facilitate the entry and maintenance of customer order, providing
information regarding the inventory availability and delivery schedule.
The major functions are:
1. Order entry
2. Credit checking
3. Inventory availability check
4. Order acknowledgement
5. Order editing and modification
6. Order pricing
7. Order status enquire
8. Price and discount
9. Promotion
10. Reassignment of order source
11. Return processing
Order processing
This section deals with allocation of inventory to a customer as per his order. While assigning
an inventory to a customer, three aspects are taken into consideration name as, processing
system of pending, response on real time basis in a lot, and finally a balance between customer
requirement and firm resources constraints. The various functions of order processing are:
1. Back order processing system
2. Raise invoice
3. Prepare transportation
4. Reverse inventory
5. Reassign order source
6. Verify shipment

Distribution operation
This involves transection and warehousing activity like material movement and storage,
product receipt and dispatch, order picking etc
The major functions are:
1. Location of storage and warehouse
2. Inventory and lot control
3. Labour scheduling
4. Marshalling of good
5. Receiving, stock storage and retrieval
6. Tracking of storage locations
7. Performance measurement

Transportation and shipping
This involves order for shipment to meet capacity requirements and produce shipment document
only with communication of shipment schedule. This section of information has become more
significant in present days.
The major functions are:
1. Carrier selection and capacity requirement
2. Dispatch scheduling and dispatching
3. Document preparation
4. Freight payments
5. Routing and consolidation of shipment
6. Tracking of shipment
7. Vehicle loading
8. Fleet management
9. Performance measurement

Procurement
This involves purchase order preparation and placement negotiation with vendors, vendor
management etc. procurement functions are
1. Match and pay
2. Input need identification
3. Source study
4. Quality specification
5. Negotiation and contract with vendor
6. Purchase order entry, processing and placement
7. Purchase order status
8. Receipt schedule
9. Measurement of vendor performance

Capacity Plan
The capacity plan refers to determining of production, transportation and warehousing capacity.
In other words, it identifies the barriers within the materials management system. Hence a
capacity plan decides where, when and how much a particular product can be produced, stored
and moved. While overcoming these barriers, resources are managed by anticipating production
and capacity needs and scheduling the limited resources prior to the actual product need.
Logistic Plan
A logistic plan always determines the course of actions for the attainment of logistic mission of
offering the best possible customer service at least costs by making available products intact and
in time at the place of use. It coordinates the facility, equipment, human resource and inventory
resource required for specific customer service policy. Hence information pertaining to logistics
plan involves demand forecasting, customer ordering pattern, promotional plan requirements,
period of demand, and safety stock policy so that the distribution requirement planning may
facilitates efficient management to bring about a trade-off between demand and supply.
Manufacturing Plan
The manufacturing plan is always supported by the logistics plan. It includes master production
schedule (MPS) and manufacturing requirement plan(MRP). MPS defines production and machine
time schedules for manufacturing products, whereas MRP depicts material and component
requirements to facilitate the designated manufacturing plan and also coordinate the purchase and
arrival of materials.
Procurement Plan
The procurement plan determines the schedules for release of raw materials, shipment and arrival
of goods. It also reflects the supplier/vendor management and relationships, degree of material
speculation, long-run and short-run purchasing requirements, availability of goods, etc.

31. What are the OPERATIONAL OBJECTIVES in logistic management?
Answer: While achieving logistics mission of the enterprise, logistics managers are required to
define operational objectives in more specific terms. Proper definition and communication of
logistics operational are prerequisite for the development, implementation, administration, and
control of logistics system design. Efficient performance of any logistics system needs careful
consideration of following six Rs about operational objectives manger, Operational Objectives of
Logistics are as follows
1. Right Response
The first and foremost operational objective of logistics management refers to a firms ability to
meet the service requirements of its customers by means of quick response with positive attitude.
In this regard, real-time communication of information regarding requirements and availability of
logistics service is the core of the right response. To meet the logistical mission of the best possible
customer service, logistical operations ensure intact and in time delivery of goods as per the
customers requirement and specification.
2. Right Quality
The second logistics operational objective is to ensure delivery of only right quality products; it
includes consistency in the quality of the product and their zero-defect delivery. Consistency in the
quality of the product refers to homogeneity in the product feature. For instance, a Mahindra Jeep
which was ready couldnt be dispatched because ERP-based logistics system hadnt registered the
use of a gasket. However, zero-defect delivery deals with the quality of delivery in terms of damage
less delivery, delivery, right assortments and correct documentation Furthermore, in the era of
Quest for Quality, Total Quality Management (TQM) has further strengthened the logistics
objectives of right quality as a continuous quality improvement system.
3. Right Quantity
The objective of right quality deals with the maintenance of a minimum possible level of inventory
required for a desired level of customer service. This operational objective reflects the total
commitment of logistics system in terms of financial value for every items inventory, namely; raw
materials, work-in-process and finished products. Any decrease in the inventory level for the same
level of service results in a decrease in the inventory cost, which consequently achieves the
logistics mission of minimum total logistics cost. That is why, the growing importance of logistics
management has witnessed the innovation of modern inventory management techniques such as
zero inventory, just-in-time (JIT), MRP-I, MRP-II, systems and extensive use of information
technology for speedier transmission of information regarding the inventory stats at a particular
point of time and place to present the stock-out situation. Hence, it is the gift of logistics system
that the same level of customer service can be maintained with a lower level of inventory.
4. Right Value
Another significant operational objective of the logistics management system is right value
addition due to its major contribution in creating time and place utilities. If a logistics system fails
to meet its delivery commitment, the company will lose its customer immediately die availability
of large number of alternative products in the market the then the company will have to make
further investment in finding anew customer. In other words, if a product remains in the stock, its
value will decrease and cost increase. Logistics prevent this occurrence. Hence, logistics add value
by creating time and place utilities. A part from above, the real value addition made by logistics is
in terms of quality, quick response, better service and consistency and reliability of the total
logistics system, which generate superior customer value.
5. Right Costs Trade-offs
The fifth operational objective of logistics is to bring a right costs trade-off between the costs
involved in a logistics system and the contribution of that system in the achievement of overall
business performance in general and logistics mission in particular. In other words, this logistics
objective ensures a proper balance between total logistics cost and a desired level of customer
service performance.
6. Right information
Information regarding the requirement of goods is the primary aspect. Point-to-point information
is one of the important elements of customer service portfolio of recent times, enabling customers
to meet their further delivery commitments or formulate their future sales and distribution
strategies. The logistics management system approaches flexible scheduling. That is why,
nowadays, monthly of quarterly planning is replaced by daily or weekly planning due to real-time
capturing of data, quick processing followed by speedy transmission in order to facilitate decision-
making and the ability to communicate the decision to many people in time for effective
implement.

32. COMPARE VARIOUS MODES OF TRANSPORTATION
Answer:
Airways
When goods are transported by air, the mode of transport is called airways.
One of the significant advantages of the air transportation lies in the speed.
It is most preferred mode of transport for the perishable goods like flowers or for
emergency services like supply of a spare part during the breakdown of a machine
The growth of this mode is gradually increasing, however the freight of this mode is
highest in comparison with other modes.
Seaways
Seaway is the oldest mode of transport. When goods are transported through the water
medium by a ship, it is called a seaway transportation.
Throughout the world, this mode has acquired a very high position due to its advantage
like being the cheapest, having the largest capacity and flexibility. However, the greatest
disadvantage lies in its slow speed.
Roadways
Most of the logistical operations of corporate enterprises largely depend on this mode of
transportation.
It is mainly due to its moderate contribution in between two extreme of airways and
seaways as far as speed and cost are concern.
The reliability and economy of this mode is gradually increasing due to continuous
improvement in the vehicle and condition of road.
These factors facilitate in the achievement of logistical objectives like lower transit unit,
lower total logistical costs and improved customer services.
That is why, over the years, it has attracted the corporate world significantly and eaten the
business of railways.
Railways
The major advantage of railways is to efficiently transport large quantities of goods over
long distances.
The bulk shipment of products like fertilizers, cement, food grains, petroleum products, etc
are normally through railways from the production plant to the bulk warehouses.
Pipelines

This mode of transport is a very significant one but with a very restricted scope.
Pipeline is used primarily for the shipment of liquid and gas like crude petroleum and
refined and natural gas.
The basic nature of this mode of transport is unique in comparison to all other modes.
It includes a significant initial fixed cost in setting up the pipeline and related
infrastructure, lowest variable cost, 80 to 90 per cent optimization of pipeline capacity
utilization, 24 hour operation, and not being labour intensive.

33. Distinguish between Public and Private warehousing
Answer: Warehouse Definition
Warehouse is performance of administrative and physical functions associated with
storage of goods and materials.
It is also a commercial building for storage of goods.
It is used for:
Switching facility
Long term storage house
Important steps in logistic network selection are decided on centralized or decentralized.
Objective of Warehouse
Maximum utilization of storage space.
Higher labor productivity
Maximum asset utilization
Reduction in material handling
Reduction in operating cost.
Increased inventory turnover
Reduced order filling time
Types of Warehouse
Public-A public warehouse which is owned by government, rents space to individuals or
firm for storage of goods
Private- A firm producing or owning the goods owns private warehouses
Contract- Contract warehousing is a specialized form of public warehousing


Difference

1. Private Warehouses:
Private warehouse comprises of warehousing facilities operated by and owned or leased by a firm
handling its own goods. They are used by firms whose warehousing needs are stable enough, such
as retail chain stores firms or multi-brand, multi-product FMGC firms, to make long terms
commitments about fixed facilities. Generally, private warehouse assure greater design flexibility
with respect to storage and material handling needs, greater and efficient control of warehouses,
operational functionality, rapid information flow and lower costs private warehousing operation
comes under the logistical functions of an enterprise.
The major benefits of private warehousing include control, flexibility, cost, and other intangible
benefits. Since the firm has full decision-making authority over all the functions of the warehouse,
it results into a high degree of control and integration of it with firms total logistics and supply
chain system. Finally, Private warehouses contribute significantly in the firm-customer
relationships, market responsiveness, corporate image, etc.
2. Public Warehouses:

Private Public Contract
Investment High No Very little
Flexibility Material handling,
storage & thought
planning.
Location Location
Cost per unit
stored
Inversely related to
volume
Low Inversely related to
volume.
Level of
control
High Low High
Adequacy of
goods stored
High Low High
Risk Due to change in market
demand or consumption
center.
Minimal Minimal
Public warehouses are those warehouses which are owned and operated by organizations like
government, cooperatives, or a 3PL firm in private sector. The space of public warehouses can be
used by any firm, organization or individual public on certain terms and conditions of payment.
Despite having higher operating costs, the major benefit of public warehouses to firms using space,
are flexibility in terms of ease in changing the location, size and number of facilities, no fixed costs,
economies of scale, and value-added service. Firms using the services of public warehouses come
under the purview of supply chain process strategy.

Public VS Private Warehouses

Operating cost factor Public warehouses Private warehouses
Operating cost factor Higher due to inclusion of
profit, selling, and advertising
costs
10 to 25 percent lower, if in
sufficient volume
Initial investment None Large facility, startup,
equipment, rained personnel
Control Good due to incentive to
perform on short-term
contract
Direct responsibility over
personnel and procedures
Risk Minimal Risk of obsolescence due to
change in technology or
demand
Tax advantages Free-port states, tax-less real
estate, no property advantage
Deprecation allowance
Economies of scale Possible due to serving many
customers.
Dependent on companys
volume.
Consolidation of shipments Can consolidate to a
warehouse and form the
warehouse to the customer
None
Storage and handling cost Know exact charges for
decision-making.
Generally only estimated


34. What is the relationship between logistics and marketing?
Answer: Logistics is the management of the flow of materials and services between the point of
origin and the point of use in order to meet the requirements of customers or corporations.
Logistics involves the integration of information, transportation, inventory, warehousing, material
handling, and packaging, and often security. Logistics is a channel of the supply chain which adds
the value of time and place utility. Today the complexity of production logistics can be modeled,
analyzed, visualized and optimized by plant simulation software, but is constantly changing. This
can involve anything from consumer goods such as food, to IT materials, to aerospace and defense
equipement.
Marketing is the process used to determine what products or services may be of interest to
customers, and the strategy to use in sales, communications and business development. It
generates the strategy that underlies sales techniques, business communication, and business
developments. It is an integrated process through which companies build strong Customer
relations and create value for their customers and for themselves.
Marketing is used to identify the customer, satisfy the customer, and keep the customer. With the
customer as the focus of its activities, marketing management is one of the major components of
business management. Marketing evolved to meet the stasis in developing new markets caused by
mature markets and overcapacities in the last 2-3 centuries. The adoption of marketing strategies
requires businesses to shift their focus from production to the perceived needs and wants of their
customers as the means of staying profitable.
The term marketing concept holds that achieving organizational goals depends on knowing the
needs and wants of target markets and delivering the desired satisfactions.It proposes that in
order to satisfy its organizational objectives, an organization should anticipate the needs and
wants of consumers and satisfy these more effectively than competitors.
It is seen as a key performance indicator within business and is often part of a Balanced Scorecard.
In a competitive marketplace where businesses compete for customers, customer satisfaction is
seen as a key differentiator and increasingly has become a key element of business strategy.
Logistics is one of the main functions within a company. The main targets of logistics can be
divided into performance related and cost related. They are high due date reliability, short
delivery times, low inventory level and high capacity utilization. But when decisions need to be
made, there is always a trade off between these targets. This is what makes challenging and
interesting being a logistician. Distribution logistics has, as main tasks, the delivery of the
finished products to the customer. It consists of order processing, warehousing, and
transportation. Distribution logistics is necessary because the time, place, and quantity of
production differs with the time, place, and quantity of consumption.
A firm in the market economy survives by producing goods that persons are willing and able to
buy. Consequently, ascertaining consumer demand is vital for a firm's future viability and even
existence as a going concern. Many companies today have a customer focus (or market
orientation). This implies that the company focuses its activities and products on consumer
demands. Generally, there are three ways of doing this: the customer-driven approach, the market
change identification approach and the product innovation approach. In the consumer-driven
approach, consumer wants are the drivers of all strategic marketing decisions. No strategy is
pursued until it passes the test of consumer research. Every aspect of a market offering, including
the nature of the product itself, is driven by the needs of potential consumers. The starting point is
always the consumer. The rationale for this approach is that there is no reason to spend R&D funds
developing products that people will not buy. History attests to many products that were
commercial failures in spite of being technological breakthroughs.
Product Solution
Promotion Information
Price Value
Place Access
If any of the 4Ps were problematic or were not in the marketing factor of the business, the
business could be in trouble and so other companies may appear in the surroundings of the
company, so the consumer demand on its products will decrease. Accessing the place and
providing the product in proper condition comes under logistics. Thus these both functions are
related to each other.

35. Write a short note on RELEVANCE OF PACKAGING IN LOGISTICS` PERSPECTIVE.
Answer: THE MAIN PURPOSE OF PACKAGING MATERIALS AND THEIR OPERATIONS IS
CONCERNED WITH THE RELATED COSTS. PACKAGING AFFECTS COST OF EVERY LOGISTICS
ACTIVITY. THE MAJOR FUNCTIONS OF PACKAGING IN CONTEXT WITH THE LOGISTICS AND
SUPPLY CHAIN ARE TO PROVIDE CONTAINMENT,PROTECTION , UTILIZATION AND
COMMUNICATION.
CONTAINMENT-
REFERS TO THE MINIMIZATION OF WEIGHT AND SPACE REQ. ON PACKAGESO THAT OVERALL
LOGISTICS COST CAN BE REDUCED BY MINIMIZING TRANSPORTATION N STORAGE COSTS. EG.
COCA-COLA BEVERAGES ARE DELIVERED IN POWDERED FORM TO BOTTLERS N DEN DEY R
HYDRATED OR RECONSTITUTED.
PROTECTION-
THE AMOUNT OF PROTECTION THAT A PACKAGE MUST PROVIDE DEPENDS UPON THE
CHARACTERISTICS OF THE PRODUCT N THE CONDITIONS IN THE LOGICAL SYSTEM
PRODUCT CHARACTERISTICS + LOGISTICS HAZARD = PACKAGE PROTECTION.
UTILIZATION-
IT REFERS TO HOW THE PACKAGING AFFECTS PRODUCTIVITY AND EFFICIENCY OF LOGISTICAL
SYSTEM. MOST OF THE LOGISTICS OUTPUTS ARE IN TERMS OF PACKAGES SUCH AS NO. OF
CARTONS LOADED PER HR, OR PACKAGES PICKED PER HR, ETC.
COMMUNICATION-
PACKAGE SYMBOLIZES THE PRODUCT THROUGH THE LOGISTICAL CHANNELS. THE SYMBOLS
AND THE OTHER DATA INFORM BUYERS ABOUT CONTENTS, AND VARIOUS ATTRIBUTES LIKE
HANDLING INSTRUCTIONS OF THE PRODUCT. AND VARIOS INFORMATION PROVIDE INVENTORY
MANAGEMENT. USE OF BAR-CODING SYSTEM SHOWS THE COMMUNICATION FUNCTION WHICH
HAS A DIRECT INTERFACE WITH LOGISTICS INFORMATION SYSTEM.
THUS IN THE LOGISTICS N SUPPLY CHAIN MANAGEMENT PERSPECTIVE, PACKAGING IS
REQUIRED FOR PROTECTION AND IDENTIFICATION OF GOODS IN THEIR JOURNEY IN A SUPPLY
CHAIN NETWORK. AND HAS A GR8 IMPACT ON COST N PRODUCTIVITY OF A LOGISTICAL
SYSTEM.

36. Write a short note on Inventory Management.
Answer: Inventory means a list compiled for some formal purpose, such as the details of an estate
going to probate, or the contents of a house let furnished. This remains the prime meaning in
British English. In the USA and Canada the term has developed from a list of goods and materials to
the goods and materials themselves, especially those held available in stock by abusiness; and this
has become the primary meaning of the term in North American English, equivalent to the term
"stock" in British English. In accounting, inventory or stock is considered an asset.
Inventory Management
Inventory management is primarily about specifying the shape and percentage of stocked goods. It
is required at different locations within a facility or within many locations of a supply network to
proceed the regular and planned course of production and stock of materials.
The scope of inventory management concerns the fine lines between replenishment lead time,
carrying costs of inventory, asset management, inventory forecasting, inventory valuation,
inventory visibility, future inventory price forecasting, physical inventory, available physical space
for inventory, quality management, replenishment, returns and defective goods and demand
forecasting.Balancing these competing requirements leads to optimal inventory levels, which is an
on-going process as the business needs shift and react to the wider environment.
Inventory management involves a retailer seeking to acquire and maintain a proper merchandise
assortment while ordering, shipping, handling, and related costs are kept in check. It also involves
systems and processes that identify inventory requirements, set targets, provide replenishment
techniques, report actual and projected inventory status and handles all functions related to the
tracking and management of material. This would include the monitoring of material moved into
and out of stockroom locations and the reconciling of the inventory balances. Also may
include ABC analysis, lot tracking, cycle counting support etc. Management of the inventories, with
the primary objective of determining/controlling stock levels within the physical distribution
function to balance the need for product availability against the need for minimizing stock holding
and handling credit.
Business inventory
The reasons for keeping stock
There are three basic reasons for keeping an inventory:
1. Time - The time lags present in the supply chain, from supplier to user at every stage,
requires that you maintain certain amounts of inventory to use in this "lead time."
2. Uncertainty - Inventories are maintained as buffers to meet uncertainties in demand,
supply and movements of goods.
3. Economies of scale - Ideal condition of "one unit at a time at a place where a user needs it,
when he needs it" principle tends to incur lots of costs in terms of logistics. So bulk buying,
movement and storing brings in economies of scale, thus inventory.
All these stock reasons can apply to any owner or product stage.
Buffer stock is held in individual workstations against the possibility that the upstream
workstation may be a little delayed in long setup or change over time. This stock is then used while
that changeover is happening. This stock can be eliminated by tools like SMED.
These classifications apply along the whole Supply chain, not just within a facility or plant.
Where these stocks contain the same or similar items, it is often the work practice to hold all these
stocks mixed together before or after the sub-process to which they relate. This 'reduces' costs.
Because they are mixed up together there is no visual reminder to operators of the adjacent sub-
processes or line management of the stock, which is due to a particular cause and should be a
particular individual's responsibility with inevitable consequences. Some plants have centralized
stock holding across sub-processes, which makes the situation even more acute.
Special terms used in dealing with inventory
Stock Keeping Unit (SKU) is a unique combination of all the components that are
assembled into the purchasable item. Therefore, any change in the packaging or product is
a new SKU. This level of detailed specification assists in managing inventory.
Stock-out means running out of the inventory of an SKU.
[2]

"New old stock" (sometimes abbreviated NOS) is a term used in business to refer to
merchandise being offered for sale that was manufactured long ago but that has never
been used. Such merchandise may not be produced anymore, and the new old stock may
represent the only market source of a particular item at the present time.

Typology
1. Buffer/safety stock
2. Cycle stock (Used in batch processes, it is the available inventory, excluding buffer stock)
3. De-coupling (Buffer stock held between the machines in a single process which serves as a
buffer for the next one allowing smooth flow of work instead of waiting the previous or
next machine in the same process)
4. Anticipation stock (Building up extra stock for periods of increased demand - e.g. ice cream
for summer)
5. Pipeline stock (Goods still in transit or in the process of distribution - have left the factory
but not arrived at the customer yet)

Inventory examples
While accountants often discuss inventory in terms of goods for sale, organizations -
manufacturers, service-providers and not-for-profits - also have inventories (fixtures, furniture,
supplies, ...) that they do not intend to sell. Manufacturers', distributors', and wholesalers'
inventory tends to cluster in warehouses. Retailers' inventory may exist in a warehouse or in
ashop or store accessible to customers. Inventories not intended for sale to customers or
to clients may be held in any premises an organization uses. Stock ties up cash and, if uncontrolled,
it will be impossible to know the actual level of stocks and therefore impossible to control them.
While the reasons for holding stock were covered earlier, most manufacturing organizations
usually divide their "goods for sale" inventory into:
Raw materials - materials and components scheduled for use in making a product.
Work in process, WIP - materials and components that have begun their transformation to
finished goods.
Finished goods - goods ready for sale to customers.
Goods for resale - returned goods that are salable.
For example:
Manufacturing
A canned food manufacturer's materials inventory includes the ingredients to form the foods to be
canned, empty cans and their lids (or coils of steel or aluminum for constructing those
components), labels, and anything else (solder, glue, ...) that will form part of a finished can. The
firm's work in process includes those materials from the time of release to the work floor until
they become complete and ready for sale to wholesale or retail customers. This may be vats of
prepared food, filled cans not yet labeled or sub-assemblies of food components. It may also
include finished cans that are not yet packaged into cartons or pallets. Its finished good inventory
consists of all the filled and labeled cans of food in its warehouse that it has manufactured and
wishes to sell to food distributors (wholesalers), to grocery stores (retailers), and even perhaps to
consumers through arrangements like factory stores and outlet centers.
Examples of case studies are very revealing, and consistently show that the improvement of
inventory management has two parts: the capability of the organisation to manage inventory, and
the way in which it chooses to do so. For example, a company may wish to install a complex
inventory system, but unless there is a good understanding of the role of inventory and its
parameters, and an effective business process to support that, the system cannot bring the
necessary benefits to the organisation in isolation.
Typical Inventory Management techniques include Pareto Curve ABC Classification
[3]
and
Economic Order Quantity Management. A more sophisticated method takes these two techniques
further, combining certain aspects of each to create The K Curve Methodology.
[4]
A case study of k-
curve
[5]
benefits to one company shows a successful implementation.
Unnecessary inventory adds enormously to the working capital tied up in the business, as well as
the complexity of the supply chain. Reduction and elimination of these inventory 'wait' states is a
key concept in Lean.
[6]
Too big an inventory reduction too quickly can cause a business to be
anorexic. There are well-proven processes and techniques to assist in inventory planning and
strategy, both at the business overview and part number level. Many of the big MRP/and ERP
systems do not offer the necessary inventory planning tools within their integrated planning
applications.


Principle of inventory proportionality
Purpose
Inventory proportionality is the goal of demand-driven inventory management. The primary
optimal outcome is to have the same number of days' (or hours', etc.) worth of inventory on hand
across all products so that the time of runout of all products would be simultaneous. In such a case,
there is no "excess inventory," that is, inventory that would be left over of another product when
the first product runs out. Excess inventory is sub-optimal because the money spent to obtain it
could have been utilized better elsewhere, i.e. to the product that just ran out.
The secondary goal of inventory proportionality is inventory minimization. By integrating
accurate demand forecasting with inventory management, replenishment inventories can be
scheduled to arrive just in time to replenish the product destined to run out first, while at the same
time balancing out the inventory supply of all products to make their inventories more
proportional, and thereby closer to achieving the primary goal. Accurate demand forecasting also
allows the desired inventory proportions to be dynamic by determining expected sales out into the
future; this allows for inventory to be in proportion to expected short-term sales or consumption
rather than to past averages, a much more accurate and optimal outcome.
Integrating demand forecasting into inventory management in this way also allows for the
prediction of the "can fit" point when inventory storage is limited on a per-product basis.
Applications
The technique of inventory proportionality is most appropriate for inventories that remain unseen
by the consumer. As opposed to "keep full" systems where a retail consumer would like to see full
shelves of the product they are buying so as not to think they are buying something old, unwanted
or stale; and differentiated from the "trigger point" systems where product is reordered when it
hits a certain level; inventory proportionality is used effectively by just-in-time manufacturing
processes and retail applications where the product is hidden from view.
One early example of inventory proportionality used in a retail application in the United States is
for motor fuel. Motor fuel (e.g. gasoline) is generally stored in underground storage tanks. The
motorists do not know whether they are buying gasoline off the top or bottom of the tank, nor
need they care. Additionally, these storage tanks have a maximum capacity and cannot be
overfilled. Finally, the product is expensive. Inventory proportionality is used to balance the
inventories of the different grades of motor fuel, each stored in dedicated tanks, in proportion to
the sales of each grade. Excess inventory is not seen or valued by the consumer, so it is simply cash
sunk (literally) into the ground. Inventory proportionality minimizes the amount of excess
inventory carried in underground storage tanks. This application for motor fuel was first
developed and implemented by Petrolsoft Corporation in 1990 for Chevron Products Company.
Most major oil companies use such systems today.
[7]

Roots
The use of inventory proportionality in the United States is thought to have been inspired by
Japanese just-in-time parts inventory management made famous by Toyota Motors in the
1980s.[3]
High-level inventory management
It seems that around 1880
[8]
there was a change in manufacturing practice from companies with
relatively homogeneous lines of products to vertically integrated companies with unprecedented
diversity in processes and products. Those companies (especially in metalworking) attempted to
achieve success through economies of scope - the gains of jointly producing two or more products
in one facility. The managers now needed information on the effect of product-mix decisions on
overall profits and therefore needed accurate product-cost information. A variety of attempts to
achieve this were unsuccessful due to the huge overhead of the information processing of the time.
However, the burgeoning need for financial reporting after 1900 created unavoidable pressure
for financial accounting of stock and the management need to cost manage products became
overshadowed. In particular, it was the need for audited accounts that sealed the fate of
managerial cost accounting. The dominance of financial reporting accounting over management
accounting remains to this day with few exceptions, and the financial reporting definitions of 'cost'
have distorted effective management 'cost' accounting since that time. This is particularly true of
inventory.
Hence, high-level financial inventory has these two basic formulas, which relate to the accounting
period:
1. Cost of Beginning Inventory at the start of the period + inventory purchases within the
period + cost of production within the period = cost of goods available
2. Cost of goods available cost of ending inventory at the end of the period = cost of goods
sold
The benefit of these formulae is that the first absorbs all overheads of production and raw material
costs into a value of inventory for reporting. The second formula then creates the new start point
for the next period and gives a figure to be subtracted from the sales price to determine some form
of sales-margin figure.
Manufacturing management is more interested in inventory turnover ratio or average days to sell
inventory since it tells them something about relative inventory levels.
Inventory turnover ratio (also known as inventory turns) = cost of goods sold / Average Inventory
= Cost of Goods Sold / ((Beginning Inventory + Ending Inventory) / 2)
and its inverse
Average Days to Sell Inventory = Number of Days a Year / Inventory Turnover Ratio = 365 days a
year / Inventory Turnover Ratio
This ratio estimates how many times the inventory turns over a year. This number tells how much
cash/goods are tied up waiting for the process and is a critical measure of process reliability and
effectiveness. So a factory with two inventory turns has six months stock on hand, which is
generally not a good figure (depending upon the industry), whereas a factory that moves from six
turns to twelve turns has probably improved effectiveness by 100%. This improvement will have
some negative results in the financial reporting, since the 'value' now stored in the factory as
inventory is reduced.
While these accounting measures of inventory are very useful because of their simplicity, they are
also fraught with the danger of their own assumptions. There are, in fact, so many things that can
vary hidden under this appearance of simplicity that a variety of 'adjusting' assumptions may be
used. These include:
Specific Identification
Weighted Average Cost
Moving-Average Cost
FIFO and LIFO.

Inventory Turn is a financial accounting tool for evaluating inventory and it is not necessarily a
management tool. Inventory management should be forward looking. The methodology applied is
based on historical cost of goods sold. The ratio may not be able to reflect the usability of future
production demand, as well as customer demand.
Business models, including Just in Time (JIT) Inventory, Vendor Managed Inventory (VMI) and
Customer Managed Inventory (CMI), attempt to minimize on-hand inventory and increase
inventory turns. VMI and CMI have gained considerable attention due to the success of third-party
vendors who offer added expertise and knowledge that organizations may not possess.


37. Warehousing mgt has two distinct parts and equally important parts:
1. The physical job of creating and the network of storage points.
2. The managerial task of controlling the inventory levels.
Explain
Answer: Warehouse are godowns for keeping and storing goods(raw materials, semi
Finished goods) and providing other related services in order to help traders and manufacturers,
preserve the goods in a scientific and systematic manner for the maintainance of their original
value, quality and
Usefulness:
The operational mechanism of a warehouse mgt incorporates a variety of functions ranging from
receiving of goods, their storage, marshaling, shipping etc. the various elements of warehouse
operation are:
1) Receiving and stocking system
2) Hiring and training personnel
3) Developing a working procedure system
4) Developing security system
5) Billing and inventory mgt system
6) Local delivery system
7) Safety and maintenance system
From these elements of warehouse operation, we can see that receiving of goods and their storage,
up to date recording , order receiving, processing
And filling, dispatching of goods are the important functions of the warehousing mgt. They form
distinct but equally imp part of warehousing mgt. but the other side i.e. managerial side of
controlling the inventory levels i.e. inventory mgt is also given a due importance. For that we have
to concentrate upon developing security system, billing and inventory mgt system.

38. What is a warehouse . Explain its significance and types in detail
Answer: Definition of warehousing
The building or place where goods are stored is known as warehousing. There is a need to store
for the product, until it is shipped to the customer. A producer produces the product but all the
product is not shifted quickly to the hands of the customers. It takes some time, there are also
some other factors which are responsible for warehousing like utility and demand

Meaning of Warehousing
Example:
We need different types of goods in our day-to-day life. We may buy some of these items in bulk
and store them in our house. Similarly, businessmen also need a variety of goods for their use.
Some of them may not be available all the time. But, they need those items throughout the year
without any break. Take the example of a sugar factory. It needs sugarcane as raw material for
production of sugar. You know that sugarcane is produced during a particular period of the year.
Since sugar production takes place throughout the year, there is a need to supply sugarcane
continuously. But how is it possible? Here storage of sugarcane in sufficient quantity is required.
Again, after production of sugar it requires some time for sale or distribution. Thus, the need for
storage arises both for raw material as well as finished products. Storage involves proper
arrangement for preserving goods from the time of their production or purchase till the actual use.
When this storage is done on a large scale and in a specified manner it is called warehousing. The
place where goods are kept is called warehouse. The person in-charge of warehouse is called
warehouse-keeper.
Warehousing refers to the activities involving storage of goods on a large-scale in a systematic and
orderly manner and making them available conveniently when needed. In other words,
warehousing means holding or preserving goods in huge quantities from the time of their
purchase or production till their actual use or sale. Warehousing is one of the important auxiliaries
to trade. It creates time utility by bridging the time gap between production and consumption of
goods.
Need for Warehousing
Warehousing is necessary due the following reasons.
(i) Seasonal Production- You know that agricultural commodities are harvested during certain
seasons, but their consumption or use takes place throughout the year. Therefore, there is a need
for proper storage or warehousing for these commodities, from where they can be supplied as and
when required.
(ii) Seasonal Demand- There are certain goods, which are demanded seasonally, like woollen
garments in winters or umbrellas in the rainy season. The production of these goods takes place
throughout the year to meet the seasonal demand. So there is a need to store these goods in a
warehouse to make them available at the time of need.
(iii) Large-scale Production - In case of manufactured goods, now-a-days production takes place
to meet the existing as well as future demand of the products. Manufacturers also produce goods
in huge quantity to enjoy the benefits of large-scale production, which is more economical. So the
finished products, which are produced on a large scale, need to be stored properly till they are
cleared by sales.
(iv) Quick Supply - Both industrial as well as agricultural goods are produced at some specific
places but consumed throughout the country. Therefore, it is essential to stock these goods near
the place of consumption, so that without making any delay these goods are made available to the
consumers at the time of their need.
(v) Continuous Production- Continuous production of goods in factories requires adequate
supply of raw materials. So there is a need to keep sufficient quantity of stock of raw material in
the warehouse to ensure continuous production.
(vi) Price Stabilization- To maintain a reasonable level of the price of the goods in the market
there is a need to keep sufficient stock in the warehouses. Scarcity in supply of goods may increase
their price in the market. Again, excess production and supply may also lead to fall in prices of the
product. By maintaining a balance of supply of goods, warehousing leads to price stabilization

Types of Warehouses
After getting an idea about the need for warehousing, let us identify the different types of
warehouses. You have learnt that warehousing caters to the storage needs of different types of
commodities. In order to meet their requirement various types of warehouses came into existence,
which may be classified as follows.
i. Private Warehouses
ii. Public Warehouses
iii. Government Warehouses
iv. Bonded Warehouses
v. Co-operative Warehouses

We shall now discuss each of these.
1. Private Warehouses - The warehouses which are owned and managed by the manufacturers
or traders to store, exclusively, their own stock of goods are known as private warehouses.
Generally these warehouses are constructed by the farmers near their fields, by wholesalers
and retailers near their business centres and by manufacturers near their factories. The design
and the facilities provided therein are according to the nature of products to be stored.
2. Public Warehouses - The warehouses which are run to store goods of the general public are
known as public warehouses. Any one can store his goods in these warehouses on payment of
rent. An individual, a partnership firm or a company may own these warehouses. To start such
warehouses a licence from the government is required. The government also regulates the
functions and operations of these warehouses. Mostly these warehouses are used by
manufacturers, wholesalers, exporters, importers, government agencies, etc.
3. Government Warehouses -These warehouses are owned, managed and controlled by central
or state governments or public corporations or local authorities. Both government and private
enterprises may use these warehouses to store their goods. Central Warehousing Corporation
of India, State Warehousing Corporation and Food Corporation of India are examples of
agencies maintaining government warehouses.
4. Bonded Warehouses - These warehouses are owned, managed and controlled by government
as well as private agencies. Private bonded warehouses have to obtain licence from the
government. Bonded warehouses are used to store imported goods for which import duty is
yet to be paid. Incase of imported goods the importers are not allowed to take away the goods
from the ports till such duty is paid. These warehouses are generally owned by dock
authorities and found near the ports.
5. Co-operative Warehouses - These warehouses are owned, managed and controlled by co-
operative societies. They provide warehousing facilities at the most economical rates to the
members of their society abilisation.

Significance of Warehousing
Warehousing offers many advantages to the business community whether it is industry or trade. it
provides a number of benefits which are listed below.
i. Protection and Preservation of goods - Warehouse provides necessary facilities to the
businessmen for storing their goods when they are not required for sale. It provides protection to
the stocks, ensures their safety and prevents wastage. It minimises loses from breakage,
deterioration in quality, spoilage etc. Warehouses usually adopt latest technologies to avoid losses,
as far as possible.
ii. Regular flow of goods- Many commodities like rice, wheat etc. are produced during a
particular season but are consumed throughout the year. Warehousing ensures regular supply of
such seasonal commodities throughout the year.
iii. Continuity in production- Warehouse enables the manufacturers to carry on production
continuously without bothering about the storage of raw materials. It helps to provide seasonal
raw material without any break, for production of finished goods.
iv. Convenient location- Warehouses are generally located at convenient places near road, rail or
waterways to facilitate movement of goods. Convenient location reduces the cost of
transportation.
v. Easy handling- Modern warehouses are generally fitted with mechanical appliances to handle
the goods. Heavy and bulky goods can be loaded and unloaded by using modern machines, which
reduces cost of handling such goods. Mechanical handling also minimizes wastage during loading
and unloading.
vi. Useful for small businessmen- Construction of own warehouse requires heavy capital
investment, which small businessmen cannot afford. In this situation, by paying a nominal amount
as rent, they can preserve their raw materials as well as finished products in public warehouses.
vii. Creation of employment - Warehouses create employment opportunities both for skilled and
unskilled workers in every part of the country. It is a source of income for the people, to improve
their standards of living.
viii. Facilitates sale of goods- Various steps necessary for sale of goods such as inspection of
goods by the prospective buyers, grading, branding, packaging and labelling can be carried on by
the warehouses. Ownership of goods can be easily transferred to the buyer by transferring the
warehouse keepers warrant.
ix. Availability of finance- Loans can be easily raised from banks and other financial institutions
against the security of the warehouse-keepers warrant. In some cases warehouses also provide
advance to the depositors of goods on keeping the goods as security.
x. Reduces risk of loss - Goods in warehouses are well guarded and preserved. The warehouses
can economically employ security staff to avoid theft, use insecticides for preservation and provide
cold storage facility for perishable items. They can install fire-fighting equipment to avoid fire. The
goods stored can also be insured for compensation in case of loss.


39. Discuss the nature and scope of storage, warehouses and distribution centers.
Answer: Storage: Storages are the godowns for keeping and storing of raw material, components,
semi-finished goods, tools, maintenance, repairing and operating equipments and supplies related
to the production function. The primary use of storages occurs in relation to- and usually in
advance of- various production processes. It is unusual for finished goods in condition to be
delivered to customer of a firm to be stored for any length of time. This may occur, however, in
situations where the firm has, for one reason or other, produced or purchased an extremely large
amount of a particular product at one time and must store some portion of this amount for later
sale of use.
Storage warehouses may be located at any point in a logistics system, but usually have some type
of strong locational relationship to production facilities. Storages are most frequently used by
companies for various reasons such as seasonal demand and supply pattern to level out
production activities, maturing, ripening, or aging products such as tobacco, cheese and wine
industries, stockpiling of strategic materials, supplies resulting from speculative purchasing
decision, etc.
Warehouse: Warehouses are the godowns for keeping and storing finished goods facilitating to
the marketing and distribution functions of the enterprise. In other words, warehouse are used to
store goods, for varying amounts of time, during their journeys between points of production and
to wholesale or retail outlets.
In logistics and supply chain perspective, warehouse performs the storing function where goods
are stored in bulk quantities and from there, a new and different small assortment of goods is
selected and moved forward to be dispersed to the next level. Hence, warehouses are generally
located near to the market for smooth and quick flow of finished goods to the customers. However,
in plant warehouse store finished goods for the time being till they are transported to warehouse.
Distribution Centre: The distribution center is a new idea at the advent of logistics and supply
chain management referring to dynamic full-service warehouse primarily related to the market. It
emphasizes the movement of goods rather than their storage and other customer-oriented
logistical services such as sales, market intelligence, traffic, credit and other merchandizing
services of manufacturer. In other words, the emphasis of distribution centers is fast movement of
goods and logistical services such as making available goods as per the requirement of retailers,
documentation, assortments, information sharing, intact delivery of goods, credits facility, etc.