Supply Chain Management in Business

Summary Question in E- Business and Supply Chain Management

Questions1: In order to prepare the products for market, what are the business models that manufactures can use to determine the inventory. Give the examples to each model.

Answers: There are two kinds of models, these are:

a) Anticipatory Business Model (Push).

Forecast, buy materials, make, warehouse, sell, and deliver are the usual stages of an anticipatory business model implementation. Retail and wholesale businesses anticipate sales by purchasing inventory assortments. Almost all necessary labor is generally done in advance. The anticipatory business approach was dangerous since it could miss client needs. Each distributor duplicated an anticipatory procedure.

Source: Buurman, J. (2002). Supply chain logistics management. McGraw-Hill2020.

 

b) Responsive Business Model (Pull)

The main difference between responsive models is the order of events that drive business practice. In comparison to Figure Above, the responsive process also has fewer steps. Fewer steps usually mean less cost and less time between placing an order and getting it delivered. The responsive sequence starts with a sale, then moves on to material purchase, custom manufacturing, and direct customer delivery.

Source: Buurman, J. (2002). Supply chain logistics management. McGraw-Hill2020.

Question2: Elaborate the principle of logistic

Logistics is that part of supply chain management that plans, implements and controls the efficient, effective flow and storage of goods, services and related information from the point of origin to the point of consumption in order to meet customers’ requirements. It is about getting the right product, to the right customer, in the right quantity, in the right condition, at the right place, at the right time, and at the right cost. 

a) Right Product 

While designing selecting a product, the organization should look into potential issues that can arise during transportation such as Special packaging requirements, for example, can arise from the product’s weight or bulk, its shape or its fragility and distance of transportation.  Designed properly will greatly facilitate logistics with certain level of standardization in the product. Having right knowledge and using the right product will facilitate in efficaciously managing the time and resources.  

b)  Right Costumer 

Customers are the core component of supply chain processes. The right customer is about finding the customer and creating an awareness about our product and services. The greatest challenge involved in this would be to identify the customer to be targeted.

Market research would give an insight into whom we are supposed to target. Then as per the budget one would choose which marketing strategies to employ so that the right people know about our product and how to access the product.

c) Right Quantity 

Sending right number of products is also important in logistics. It is the task of the supply chain managers to find the right quantity of deliverables and to coordinate with the manufacturing and delivery team to get the right quantity of products delivered to the customers. If we do not meet the demand of product, we will ultimately loose some chance of making money. Also, if we have excess quantity our warehousing expenses and other associated expenses will increase. So, the production must be in a balance to cater the demand and must not make huge inventory cost. 

d) Right Condition 

The right condition in logistics is about the safe delivery of the proposed product. The quality of the products should be maintained till the time it reaches the end user or the customer. The distribution strategy should be such that it is preserving the quality of the product without increasing the overhead costs. It is the duty of the supply team to ensure that the goods are stored properly and delivered to the customers in the right condition.

e) Right Place 

The managers can develop a robust delivery system with location tracking so that both the customers and the providers can track the exact location of the product and get it delivered to the right place. The supply chain managers should ensure that they have efficient and experienced delivery staff so that the product is delivered to the right place. After choosing the place it is important to choose a distribution strategy that would satisfy the demand without oversupplying or under-supplying the product at any given point.

f) Right Time 

 Time is a crucial factor in logistics. Even if everything else in the process is done accurately the entire process can fail if the timing is not right. You must have the products on the shelves or in stock at the right time to cater to the demand if the product demand is not met at the right time it might be lost to competition. Customer’s satisfaction and long-term relationship are only possible if the products are delivered to the customers at the right time. It is the task of managers to develop a tracking system and coordinate with the delivery team to get the items delivered before the deadline.

g) Right Cost

Pricing is imperative for the businesses as it is the factor that decides whether it has incurred profit or loss. The supply chain manager should research market trends and set competitive prices for the goods and services. They must have an appropriate price value in order to track the company income and expenses. A good system for storing and updating the right prices ensures success in logistics management services.

Question3 : How the inventory level is related to the order frequency, ordering cost, market demand (price, and quantity)? And elaborate how inventory can be affected in the global supply chain.

a) Ordering Frequency 

The performance cycle, cost, and economic order formulas govern inventory planning. First, the EOQ is determined so that order placing and inventory carrying costs are equivalent. The average inventory base is half the order quantity. Third, if all else is equal, the inventory unit value will influence the frequency of replenishment orders. Frequently, more expensive items are purchased

b) Ordering Cost 

The average stock equals fifty percent of the order quantity. As order quantity increases, average inventory and annual carrying cost increase proportionally. Larger orders necessitate fewer replenishment orders per planning period, which reduces overall ordering expenses. The replenishment cycle stock, safety stock, and in-transit stock are inventory factors that can be controlled. To find the ideal replenishment cycle stock, EOQ formulae consider the trade-off between storage and ordering expenses. Safety stock is determined by demand, variance, and replenishment period. Transport modality influences goods in transit.

c) Market Demand 

 Price, inventory, and demand all influence one another. Inventory levels and demand determine price pressure. In recent years, there has been a dearth of inventory and an explosion in sales. Normal inflation exists, and prices are growing. We believe low inventory levels impede sales. Sales would increase with more.

d) Global Supply Chain 

Maintaining a balance between demand and supply is one of the most crucial and hardest functions of inventory in supply chains. For businesses to effectively manage supply chain flows, they must address supplier interactions upstream, and customer demands downstream. This means that a business must strike a delicate balance between meeting client demands, which are frequently difficult to foresee with precision, and maintaining a consistent supply of materials and goods. This equilibrium is frequently achieved by exchanging information strategically to improve stock management.

Question4 : In the decentralized supply chain, why the supply chain efficiency is not maximized? What can be used to resolve the issue!

Brief Definition 

Decentralized operations are spread out over a series of nodes in a network. Often these nodes are small offices and warehouses, designed to be situated closer to the organization’s end customer. Further decentralized control means that decisions are produced centrally, based on material and demand status of the entire system. However, often the nodes are given a degree of autonomy to be able to manage their own unique business requirements. Typically, this will involve the purchasing of supplies and distribution of goods and may include some strategic autonomy depending on how different the node locations are to head office.

An Example 

 The example is Amazon. It is including the employee experience is like, and how product development works. It is the reason for some of the best and worst things about Amazon.

Why the SCM is not maximized ? 

1. Increased operational cost --> More facilities mean more building costs, more staff, more insurance. Even outsourcing to partners has a degree of cost, and for some companies, this extra burden on the budget can prove too much. 
2. Potential to increase inbound cost. As we noted earlier, suppliers aren’t always keen to split shipments across locations. This may mean companies that can’t find local suppliers may not be able to negotiate the best rates or could have to pay the extra shipping fees that come with LTL shipments spread out across a network.
3. Potentially Loss Control. For some organizations, the agility that comes with operating semi-autonomous nodes is a breath of fresh air that allows them to react quickly to new opportunities and changing conditions. The flip side is that companies that desire strong central control may find it more difficult, potentially more sluggish, to roll out new initiatives (i.e. standardization) which could prove frustrating, slow or costly
   

What can be used to resolve the issue.  

For my point of view improving technology would give improve decentralization on supply chain, for instance: 

1. Supply Chain Management software by spreading your operations out over a greater number of facilities, immediately you’re going to hit logistical challenges.
2. Automation such as smart warehousing, it covers cover any piece of technology, hardware or software, designed to handle repetitive, menial tasks so that your staff can focus on more value-adding activities.

Question5 : Using threshold service, elaborate how network can be designed!

The overall level of customer service associated with the least-total-cost-system design is referred to as the threshold service level. 

To develop a threshold service level, it is necessary to initiate network re-engineering with policies regarding desired inventory availability and capability. It is common practice to initiate the analysis assuming customer service capability based on: 

1. the existing order entry and processing system,
2. warehouse operations based on standard order fulfillment time at existing facilities,
3. transportation delivery time based on capabilities of existing transportation methods. 

The typical starting point for customer service availability analysis is to assume performance at a generally acceptable fill rate. Then, each customer is assigned a shipment location on the basis of least total cost.

The initial network is designed to achieve least logistics cost does not mean that threshold customer service will be low. Customers located near a warehouse facility in all networks have potential to receive rapid delivery. Because the least-cost location tends to favor areas of high demand concentration, a substantial number of customers will enjoy rapid delivery.

To evaluate potential modifications to the least-cost design, sensitivity analysis is used. Service levels may be improved by modifying 

1. variation in the number of facilities or location modification
2. change in one or more aspects of the performance cycle
3. change in safety stock, 
4. portfolio effect

Question 6: Elaborate how the centralized/decentralized strategy can be used in term of the production cost, (end) market price, fast-moving market, and uncertain demand.

Centralized 

Centralization refers to a central location or group of managerial personnel responsible for planning, decision-making, and action-taking activities. All of this organization’s significant rights and powers lie in senior management’s hands.

Decentralized 

Decentralized operations are spread out over a series of nodes in a network. Often these nodes are small offices and warehouses, designed to be situated closer to the organization’s end customer. The details information is presented as below table.

References:

Buurman, J. (2002). Supply chain logistics management. McGraw-Hill2020.

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