Paper/Subject Code: 46001/Logistics & Supply Chain Management
Logistics & Supply Chain Management
(Q.P. April 2019 with Solution)
1) All Questions are compulsory with internal choice options and carry 15 marks each.
2) Figures to the right indicate full marks
3) Use of simple Calculator is allowed
4) Working note should form part of your answer for practical questions.
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1) November 2018 With Solution (PDF)
2) April 2019 Q.P. with Solution (PDF)
3) November 2019 Q.P. with Solution (PDF)
4) November 2022 Q.P. with Solution (PDF)
5) April 2023 Q.P. with Solution (PDF)
Q.1) a) Choose the correct option (Any 8): [8 ]
1. The downstream supply chain is:
a. Exclusively inside an organization.
b. Involved with procurement of material from suppliers.
c. The distribution of products or delivery of services to customers.
d. None of the above.
2. The following is not a stage or phase in integration of supply chain management.
a. Base line integration
b. Financial integration
c. Internal integration
d. External integration
3. The following is not component of a warehouse.
a. Space
b. Equipment
c. Location
d. People.
4. To achieve the marketing objectives for the brand and satisfy the desires of consumers, the and functional components of packaging must be chosen correctly.
a. aesthetics
b. logo
c. characters
d. brand name
5. The benefit of reduction in per unit transportation cost as the bulk of the items transported increases is called as
a. Discount
b. Economies of scale
c. Trade Offs
d. Price Skimming
6. Which of the following is not an element of Ordering Cost
a. Internet Cost for Sourcing
b. Internet Cost for placing purchase order
C. Storing Cost
d. Telephone Cost to Supplier
7. customers. is a process of estimating the service or product quantity required by the end
a. Demand Forecasting
b. Prediction
c. Projection Method
d. Inventory Control
8. MRP-1 stands for:
a. Management Reaction Planning
b. Master Resources Production
c. Manufacturing Resource Planning
d. Materials Requirements Planning
9. Companies manage their global supply chains through
a. information
b. competitors
c. skilled operators
d. none of the above
10. The concept of Double Stack Containers was introduced in early 1984 by
a. British Presidential Lines
b. Canada Presidential Lines
c. France Presidential Lines
d. American Presidential Lines
Q.1 b) Match the right and closely related answer from Column Y with the terms given in Column X. (Attempt Any 7 questions): [7 M]
|
Column X |
Column Y |
|
1) Quality
Performance |
a) Time and
Place Utility |
|
2) Tertiary
Packaging |
b) Free Home
Delivery |
|
3) Value
added customer service |
c) Static,
Dynamic and Surrogate |
|
4) Mission
Based Costing |
d) 1 st Party
Logistics |
|
5)
Productivity Measure |
e) Downstream
Logistics |
|
6) In House
Logistics |
f) Macro
Costing concept |
|
7) Service
Level |
g) Goods
packed in boxes |
|
8) Outbound
Logistics |
h) Upstream
Logistics |
|
9) Logistics
adds value |
i) Wrapping
and Grouping of secondary packages |
|
10) General
Cargo |
j) Case Fill
Rate, Line Fill Rate, Order Fill Rate |
|
|
k) Perfect
Order |
|
|
l) Micro concepts |
Q.2 a) Define performance measurement. Discuss external performance measures.
Definition
Performance measurement refers to the process of evaluating and monitoring the effectiveness and efficiency of actions, processes, or systems within an organization. It involves using specific metrics or key performance indicators (KPIs) to assess whether objectives are being met, allowing for improvements in strategy, operations, and resource allocation. In logistics and supply chain management, performance measurement helps companies track progress in areas like cost control, quality, delivery, flexibility, and customer satisfaction.
External Performance Measures
External performance measures focus on how well an organization interacts with entities outside the company, such as customers, suppliers, and partners. These metrics provide insight into the company's ability to meet market demands, customer expectations, and supply chain relationships. Key external performance measures include:
1. Customer Service Level
This metric measures the company's ability to fulfill customer orders accurately, on time, and in the right quantity. It is a key indicator of customer satisfaction and retention.
Examples
On-time delivery rate: The percentage of orders delivered on or before the promised date.
Order accuracy rate: The percentage of orders delivered without errors (e.g., correct product, quantity, and packaging).
Importance: A high customer service level enhances customer satisfaction and loyalty, while poor service can lead to lost sales and damage to the company's reputation.
2. Lead Time
Lead time is the amount of time between the initiation of a process (e.g., placing an order) and its completion (e.g., receiving the product). It is often measured for various stages, such as order-to-delivery or procurement-to-production.
Examples
Order lead time: The time taken from receiving a customer order to delivering the product..
Supplier lead time. The time taken by suppliers to deliver materials after a purchase order is placed.
Importance: Shorter lead times improve responsiveness to customer demand and market changes, while long lead times can lead to customer dissatisfaction and stockouts.
3. Perfect Order Rate
This measures the percentage of orders delivered to customers without any issues, including on-time delivery, correct quantity, accurate documentation, and product quality. It provides a holistic view of order fulfillment performance.
Examples:
A company achieving a 98% perfect order rate means that 98 out of every 100 orders are delivered without errors.
Importance: A high perfect order rate reduces costs associated with returns, rework, and customer complaints, and it contributes to higher customer satisfaction.
4. Customer Satisfaction Index
This is a composite metric that captures customers' perceptions of the company's performance, quality, and service. It is typically gathered through surveys or feedback forms.
Examples:
Net Promoter Score (NPS): Measures customer loyalty by asking how likely a customer is to recommend the company to others.
Customer feedback surveys: Collect insights on areas like product quality, delivery service, and support.
Importance: Understanding customer satisfaction helps companies adjust their strategies to better meet customer expectations and reduce churn.
5. Market Share
Market share is the percentage of total sales in an industry or market segment that a company captures relative to its competitors. It is an indicator of competitive positioning and brand strength..
Examples:
A company with a 20% market share in the electronics market means it controls 20% of all sales in that category.
Importance: Monitoring market share helps businesses understand their competitive advantage and adapt their strategies to gain or maintain a leading position in the market.
6. Supplier Performance
Supplier performance measures how effectively a company's suppliers deliver goods and services. It includes metrics like delivery timeliness, quality of materials, and responsiveness to issues.
Examples:
Supplier on-time delivery rate: The percentage of shipments delivered by the supplier on or before the scheduled date.
Supplier defect rate: The number of defective items received from suppliers as a percentage of total items supplied.
Importance: Strong supplier performance ensures smooth production processes, reduces delays, and enhances the quality of final products.
7. Environmental Impact
This measure assesses the company's external environmental performance, focusing on how its operations affect natural resources, emissions, and sustainability practices.
Examples:
Carbon footprint: The total greenhouse gas emissions produced by the company's operations.
Waste management: The amount of waste generated and the percentage that is recycled or disposed of responsibly.
Importance: With increasing emphasis on sustainability, companies that actively reduce their environmental impact often improve their brand reputation and comply with regulatory requirements, while also gaining a competitive edge.
b) Explain reverse logistics with suitable example.
Definition
Reverse logistics refers to the process of moving goods from their final destination back to the manufacturer or a designated location for the purpose of returns, repairs, recycling, refurbishment, or disposal. It is the reverse of the traditional forward supply chain, where products move from the producer to the consumer.
Reverse logistics is essential for industries like retail, e-commerce, manufacturing, and automotive, where managing returns, recycling, and reusing materials is critical for reducing waste, saving costs, and improving customer satisfaction.
Components of Reverse Logistics
1. Returns Management: Handling product returns from customers due to defects, dissatisfaction, or other reasons.
2. Remanufacturing and Refurbishment: Processing returned or used products to restore them to "like-new" condition.
3. Recycling: Collecting used products for recycling their components or materials.
4. Disposal: Safely discarding products that can't be repaired, refurbished, or recycled.
5. Asset Recovery: Recapturing value from returned goods through refurbishment, reselling, or recycling.
6. Warranty Recovery Managing goods under warranty for repairs or replacement.
Example of Reverse Logistics: E-Commerce Returns
Let's consider an e-commerce company that sells electronics and clothing items online.
A customer purchases a smartphone and a pair of shoes from the company's online store. However, the customer decides to return both items due to:
The smartphone arriving with a minor defect.
The shoes not fitting as expected.
Steps in Reverse Logistics:
1. Return Authorization
The customer contacts the e-commerce company to initiate the return. The company issues a return authorization, providing instructions on how to ship the items back to their warehouse.
2. Collection and Transportation:
The items are shipped back to the company's designated return center using a prepaid return label, usually through a third-party logistics provider.
3. Inspection and Processing:
Upon receiving the items at the retum center, the smartphone is inspected for defects. The phone is sent to the manufacturer's repair facility or a third-party service provider for repair or refurbishment.
The shoes, if unworn and in good condition, are checked for resale quality and restocked in the inventory for future sales.
4. Disposition:
If the smartphone is repaired successfully, it is either sent back to the customer as a replacement or sold as a refurbished item.
If the shoes cannot be resold, they may be donated, recycled, or disposed of responsibly.
5. Customer Refund or Replacement:
The customer receives a refund for both items or an option for replacement, depending on the company's return policy.
6. Recycling and Disposal
If either product cannot be refurbished or resold, the e-commerce company recycles the components (like the smartphone's battery or screen) or disposes of them according to environmental regulations.
Benefits of Reverse Logistics:
Cost Recovery: By refurbishing and reselling the smartphone, the company can recapture some of the product's value.
Customer Satisfaction: Efficient return handling improves the customer experience, enhancing brand loyalty.
Environmental Benefits: Proper recycling of the smartphone's components reduces e-waste and environmental impact
Inventory Management: Returned products are assessed for resale, helping to manage stock levels effectively.
Industries Benefiting from Reverse Logistics
1. E-commerce: Manages product returns, exchanges, and customer satisfaction efficiently.
2. Automotive: Collects used parts for refurbishment, resale, or recycling.
3. Electronics: Handles the returns and refurbishment of devices like smartphones, laptops, and other gadgets.
4. Retail: Deals with seasonal returns, unsold goods, and product recalls..
5. Food and Beverage: Manages the recall of perishable items and packaging waste
OR
c) From the following data, calculate a 3 period weighted moving averages from 4 th Month to 8 th Month, with weights as 3, 2 and 1. The largest weight is being assigned to most recent period and current Demand Value.
|
Period (Month) |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
|
Demand in
Units |
160 |
180 |
190 |
210 |
230 |
240 |
250 |
? |
d) Compare Public and Private Warehousing. (5)
Ans:
Public and private warehousing are two types of storage options commonly used in supply chain management, each with distinct features, advantages, and disadvantages.
Here's a comparison of public and private warehousing:
1. Definition
Public Warehousing: A public warehouse is a third-party storage facility that is owned and operated by a company specializing in warehousing services. Businesses can rent space in a public warehouse for short-term or long-term storage, paying based on the amount of space and time they use.
Private Warehousing: A private warehouse is owned and operated by a company for its own storage needs. It is typically used by large organizations with consistent and high-volume storage requirements.
2. Ownership and Control
Public Warehousing: Owned and controlled by third-party companies that provide storage services to multiple clients. The renting company does not have control. over the facility's operations but benefits from flexibility in space usage.
Private Warehousing: Owned and operated by the business using It, giving the company full control over operations, layout, processes, and security.
3. Cost Structure
Public Warehousing:
Costs: Flexible pricing based on the volume of goods stored and the duration of storage
Payment Model: Pay as you go or lease model, making it cost-effective for businesses with fluctuating storage needs.
Upfront Investment: No large upfront investment is required for renting space.
Private Warehousing.
Costs: Higher upfront capital investment for building or buying the warehouse.
Ongoing Costs: Maintenance, staffing, equipment, utilities, and operational expenses are the responsibility of the owner.
Economies of Scale: More cost-effective for large companies with consistent high-volume storage needs.
4. Scalability and Flexibility
Public Warehousing:
Scalability: Highly scalable as companies can increase or decrease the amount of space used based on demand.
Flexibility: Offers greater flexibility, especially for businesses with seasonal demand or unpredictable storage needs.
Private Warehousing:
Scalability: Limited scalability, as the company must plan for future growth. Expanding space requires significant capital investment.
Flexibility: Less flexible due to fixed space capacity and long-term commitments to the facility.
5. Management and Operations
Public Warehousing:
Management: The warehouse provider manages the day-to-day operations, including staffing, security, and logistics.
Services: Often includes additional services such as packing, labeling, and shipping, making it attractive to smaller businesses without logistics expertise.
Private Warehousing:
Management The company owning the warehouse is responsible for all operations, staffing, and security.
Customization: Companies have full control over how the warehouse is managed and can customize processes to align with their specific needs.
6. Risk and Responsibility
Public Warehousing
Risk: Lower risk for the user, as the warehouse operator is responsible for liability, security, and operational issues.
Shared Space: Storage is shared with other clients, which can sometimes raise concerns about security or inventory handling.
Private Warehousing:
Risk: Higher risk as the company is responsible for all aspects of warehouse operations, including security, insurance, and regulatory compliance.
Exclusive Use: Full control over space and inventory management, reducing the risk of inventory mishandling.
7. Use Cases
Public Warehousing:
Ideal for: Small to medium-sized businesses with variable or seasonal storage needs, companies entering new markets, and businesses looking to avoid large capital investments.
Private Warehousing
Ideal for: Large companies with consistent high-volume storage requirements, businesses that need customized storage solutions, and those seeking greater control over their supply chain operations.
8. Technology and Automation
Public Warehousing: Public warehouses often use advanced technology systems, Including Warehouse Management Systems (WMS), RFID tracking, and automated picking, which smaller companies can benefit from without investing in these technologies themselves.
Private Warehousing: Companies have the option to implement their own technology and automation systems according to their specific requirements, but they must bear the cost of such investments.
Q.3. Answer the following.
a) State and explain various Information Technology tools used in Logistics and Supply Chain Management.
Information Technology (IT) plays a crucial role in enhancing efficiency, visibility, and coordination in logistics and supply chain management (SCM). Various IT tools are used to streamline operations, improve decision-making, and facilitate communication among stakeholders. Here are some key IT tools commonly used in logistics and supply chain management:
1. Warehouse Management Systems (WMS)
Software solutions designed to manage warehouse operations, Including inventory management, order fulfillment, and shipping.
Real-time tracking of inventory levels and locations.
Automated picking and packing processes.
Optimized storage space utilization.
Example: A retail company uses a WMS to manage its distribution center, allowing for efficient order processing and accurate inventory tracking.
2. Transportation Management Systems (TMS)
Software that helps companies plan, execute, and optimize the physical movement of goods.
Route optimization and carrier selection.
Load planning and shipment tracking.
Freight auditing and payment processing.
Example: A manufacturing company uses a TMS to plan its shipments, reducing transportation costs and improving delivery times.
3. Enterprise Resource Planning (ERP) Systems
Integrated management systems that facilitate the flow of information across various departments within an organization, including finance, HR, production, and logistics.
Real-time data access for better decision-making.
Coordination of supply chain activities.
Improved visibility across the organization,
Example: A multinational corporation uses an ERP system to streamline its supply chain operations, linking procurement, production, and distribution processes.
4. Supply Chain Management (SCM) Software
Comprehensive solutions that manage the end-to-end supply chain process, from raw material sourcing to final product delivery.
Demand forecasting and planning.
Supplier relationship management.
Collaboration tools for stakeholders.
Example: A food processing company uses SCM software to forecast demand and manage relationships with suppliers, ensuring timely delivery of raw materials.
5. Inventory Management Systems
Tools that track inventory levels, orders, sales, and deliveries to optimize stock levels and reduce holding costs.
Automated reordering and stock alerts.
Real-time inventory tracking across multiple locations.
Reporting and analytics for inventory turnover.
Example: A small retailer uses an inventory management system to monitor stock levels and automate reordering, ensuring that popular items are always available.
6. Customer Relationship Management (CRM) Systems
Software that manages a company's interactions with current and potential customers.
Customer data management and analytics.
Sales tracking and forecasting.
Communication tools for customer service.
Example: A logistics provider uses a CRM system to track customer inquiries. manage service requests, and improve customer satisfaction.
7. Electronic Data Interchange (EDI)
Technology that allows the exchange of business documents in a standardized electronic format between organizations.
Faster processing of orders and Invoices.
Reduced manual entry errors.
Improved collaboration with trading partners.
Example: A retail chain uses EDI to automate order processing with its suppliers, speeding up the supply chain and improving accuracy.
8. Blockchain Technology
A decentralized and distributed ledger technology that enhances transparency and security in supply chain transactions.
Secure and tamper-proof record-keeping.
Improved traceability of products throughout the supply chain..
Streamlined processes through smart contracts.
Example: A pharmaceutical company uses blockchain to track the provenance of its products, ensuring compliance with regulations and preventing counterfeit drugs.
9. Radio Frequency Identification (RFID)
Technology that uses radio waves to automatically identify and track. tags attached to objects, such as products or containers.
Real-time tracking of inventory and assets.
Reduced manual scanning and errors.
Enhanced visibility and control over supply chain operations.
Example: A warehouse employs RFID technology to monitor inventory levels in real-time, streamlining order fulfillment processes.
10. Data Analytics and Business Intelligence (BI) Tools
Software that analyzes data to provide insights and support decision-making in supply chain operations.
Data visualization and reporting tools.
Predictive analytics for demand forecasting.
Performance measurement and KPI tracking.
Example: A logistics company uses BI tools to analyze transportation costs and delivery performance, enabling data-driven improvements in their operations
b) Explain Milk Runs and RORO with suitable examples.
Milk Runs and Roll-on/Roll-off (RORO) are two logistics strategies that enhance the efficiency of transportation and supply chain operations. Below, I'll explain each concept with suitable examples.
1. Milk Runs
Definition:
A Milk Run is a logistics strategy used in supply chain management where a single vehicle makes multiple stops to pick up or deliver goods from/to various suppliers of customers. This method optimizes transportation by consolidating multiple deliveries or pickups into a single trip, reducing costs and improving efficiency.
Features:
Involves multiple stops along a predetermined route.
Focuses on maximizing the use of transport resources by consolidating loads.
Can be used for both inbound and outbound logistics.
Example:
Imagine a manufacturing company that produces electronic devices. To assemble their products, they need components from various suppliers located within a specific region. Instead of sending individual trucks to each supplier (which would be costly and inefficient), the company organizes a Milk Run.
Example: A truck leaves the manufacturing facility in the morning and follows a set route to pick up components from three suppliers:
1. Supplier A: Receives a pickup of circuit boards..
2. Supplier B. Collects plastic casings.
3. Supplier C: Gathers batteries.
After picking up these components, the truck returns to the manufacturing facility, ensuring that the assembly line has all necessary materials without incurring multiple trips. This approach saves time, reduces transportation costs, and minimizes the environmental impact by reducing the number of trips made.
2. Roll-on/Roll-off (RORO)
Definition:
Roll-on/Roll-off (RORO) is a shipping method designed for transporting vehicles and cargo that can be driven on and off a vessel without the need for cranes or other heavy lifting equipment. RORO vessels have built-in ramps, allowing vehicles to be loaded and unloaded easily.
Features:
Designed for vehicles that can move under their own power.
Ideal for transporting large quantities of automobiles, trucks, trailers, and heavy machinery.
Reduces loading and unloading times compared to traditional shipping methods.
Example:
A logistics company needs to transport a fleet of cars from a manufacturer in Japan to a dealership in the United States. Instead of using traditional container shipping (where cars would be loaded into containers), they opt for RORO shipping.
Example: The company schedules the shipment on a RORO vessel:
1. Cars are driven directly onto the ship at the port in Japan.
2. The ship sails across the Pacific Ocean to a port in California.
3. Upon arrival, the cars are driven off the vessel directly to the dealership or distribution center.
Using RORO shipping, the logistics company minimizes handling times, reduces the risk of damage during transit, and allows for quicker delivery of vehicles to the market.
OR
c) State various material handling equipment used for efficient handling.
Material handling equipment (MHE) is essential for the efficient movement, protection, storage, and control of materials throughout the manufacturing, warehousing, and distribution process. Here are various types of material handling equipment commonly used across industries:
1. Forklifts
Powered industrial trucks used to lift and move materials over short distances.
Commonly used in warehouses, manufacturing facilities, and distribution centers for lifting heavy pallets, containers, and goods.
2. Pallet Jacks
Manual or powered devices designed to lift and move pallets.
Used for moving pallets of goods in warehouses, retail stores, and production lines where larger forklifts are impractical.
3. Conveyors
Systems of belts, rollers, or chains that transport materials from one location to another.
Widely used in manufacturing, packaging, and distribution for moving items along a production line or between different workstations.
4. Automated Guided Vehicles (AGVs)
Robotic vehicles that transport materials without human intervention, following predetermined paths.
Used in warehouses and manufacturing facilities to automate the transport of materials, increasing efficiency and reducing labor costs.
5. Stackers
Equipment designed to lift and stack pallets or materials vertically.
Often used in warehouses to maximize vertical storage space by stacking pallets on top of each other.
6. Hoists and Cranes
Devices that use a hook or other lifting mechanism to raise and lower heavy materials.
Commonly used in manufacturing, construction, and warehouses for lifting heavy items such as machinery, steel beams, or bulk materials.
7. Bins and Containers
Storage units for organizing and transporting materials, often used with lifting equipment.
Used for storing smaller parts, tools, or bulk materials, they can be moved easily using forklifts or pallet jacks.
8. Racks and Shelving Systems
Storage solutions that provide vertical space for storing materials and products.
Used in warehouses, retail spaces, and manufacturing facilities for organized storage and easy access to materials.
9. Dollies and Hand Trucks
Manual equipment designed to move heavy items by rolling them on wheels
Ideal for moving boxes, furniture, and other materials over short distances.
10. Trolleys
Wheeled carts used to transport materials, often featuring shelves for stacking items.
Commonly used in warehouses, retail, and hospitals to move goods efficiently.
11. Order Pickers
Equipment designed to allow operators to pick Items from elevated storage locations.
Used in warehouses for order fulfillment, enabling workers to access Items stored high on shelves.
12. Mobile Platforms and Scissor Lifts
Elevated platforms that can be raised or lowered to provide access to materials at various heights.
Often used in construction and maintenance for accessing high areas safely.
13. Material Handling Robots
Automated robots designed for picking, packing, and moving materials.
Increasingly used in warehouses and manufacturing for repetitive tasks to improve efficiency and accuracy.
14. Gravity Roller and Skate Wheel Conveyors
Simple conveyor systems that use gravity to move items downhill or through gravity-driven wheels.
Commonly used in shipping and packaging areas for sorting and transporting goods.
d) Discuss benefits of ICD's/CFS.
Benefits of Inland Container Depots (ICDs) and Container Freight Stations (CFS)
Inland Container Depots (ICDs) and Container Freight Stations (CFS) play a crucial role in facilitating international trade and the efficient movement of goods. These facilities handle the storage, consolidation, and movement of containers and cargo, often located away from seaports. They help streamline the import-export process and ease congestion at major ports. Below are the key benefits of ICDs and CFS
1. Decongestion of Ports
Benefit: ICDs and CFSs significantly reduce congestion at major seaports by handling cargo away from the port premises.
Explanation: By serving as extensions of ports, these facilities allow importers and exporters to drop off or pick up containers from inland locations, thus reducing the volume of traffic at ports.
Example: A large number of containers are processed inland at an ICD, reducing the need for every container to be handled directly at the port, freeing up space and Improving port efficiency.
2. Cost Efficiency
Benefit: ICDs and CFSs offer cost-effective solutions for cargo handling and storage.
Explanation. By locating closer to manufacturing or industrial hubs, these facilities reduce the need for transporting containers over long distances, cutting down on fuel costs, transportation fees, and overall logistics expenses.
Example: A factory located hundreds of miles from the nearest port can store and clear customs for goods at a nearby ICD, avoiding the high costs associated with transporting containers to the seaport
3. Efficient Customs Clearance
Benefit: ICDs and CFSs offer customs clearance facilities, making the process faster and more convenient for businesses.
Explanation: These inland facilities provide customs services similar to those available at seaports, allowing businesses to clear their goods more quickly and efficiently without needing to visit the port.
Example: Importers can complete all necessary documentation and inspections at an ICD, ensuring that containers are ready for immediate shipment when they arrive at the port.
4. Improved Supply Chain Flexibility
Benefit ICDs and CFSs enhance supply chain flexibility by providing intermediate storage and handling facilities.
Explanation: These facilities act as distribution centers where goods can be consolidated, deconsolidated, stored, or forwarded, providing flexibility for businesses to manage their supply chain operations more efficiently..
Example: An exporter can consolidate multiple smaller shipments into one container at a CFS before sending it to the port, reducing shipping costs and improving operational efficiency.
5. Accessibility to Inland Regions
Benefit: ICDs make international trade more accessible to businesses located in landlocked or remote regions, away from major seaports.
Explanation. By providing port-like services closer to inland areas, ICDs reduce the logistical challenges and costs faced by businesses that are far from coastal areas.
Example: A company in a landlocked country can utilize a nearby ICD for its International trade needs, avoiding the time and cost of sending goods to distant seaports.
6. Reduction in Transit Time
ICDs and CFSs reduce transit times by streamlining cargo handling and enabling faster delivery to ports or end destinations.
Cargo can be pre-processed at these facilities, which helps speed up customs checks, consolidation, and onward shipping, reducing delays at the port.
Example: An exporter can prepare their shipment at a CFS, ensuring that all customs documentation is in order, allowing the container to move swiftly through the port for international shipment.
7. Enhanced Security
ICDs and CFSs provide secure facilities for storing and handling goods, minimizing the risk of damage or theft during transportation.
These facilities offer secure and monitored environments for cargo, reducing the risk of theft or damage, particularly when goods are stored for long periods.
Example: Containers stored at an ICD have security protocols in place, such as CCTV surveillance and secure fencing, providing peace of mind for businesses.
8. Better Utilization of Port Facilities
By offloading some of the storage and handling functions to ICDs and CFSs, ports can better utilize their core facilities for faster cargo handling and vessel turnaround.
Ports can focus on core operations, such as loading and unloading ships, while ICDs and CFSs manage cargo storage, consolidation, and deconsolidation, improving overall efficiency.
Example: Faster ship turnaround times at the port are achieved because ICDs handle cargo pre-processing and storage, reducing vessel idle times at the port.
9. Reduced Inventory Holding Costs
These facilities reduce inventory holding costs by providing short-term or long-term storage solutions, minimizing the need for businesses to maintain large
warehouse facilities.
With ICDs and CFSs offering cost-effective storage options, companies can avoid maintaining expensive warehouse space at their own facilities.
Example: A business can store goods at a CFS temporarily while awaiting export, reducing the need for expensive warehouse space on their premises.
10. Integration with Multimodal Transportation
ICDs and CFSs are often integrated with multiple modes of transportation, such as road, rail, and sea, providing seamless transfer between different transport modes.
These facilities allow businesses to move goods easily between different forms of transport, reducing delays and improving overall supply chain efficiency.
Example: An ICD located near a railway network allows goods to be transported by train to the port, then transferred to ships, reducing the reliance on road transport alone
Q.4. a) The annual demand for a particular item is 15000 units, unit cost is Rs. 4/- Carrying cost on an average inventory is 30% and the ordering cost per order Rs. 50/-.
Find 1) EOQ (3)
2) Total Inventory Cost. (3)
3) If purchase manager has decided to place purchase order with minimum order quantity of 3000 units to get unit cost discount of 10% per unit. State Purchase Manager is justified in his decision? (4)
Total cost with EOQ = Rs. 61,341.8
Total cost with 3,000 units (discount) = Rs. 56,050
Since the total inventory cost with the discounted price is lower, the purchase manager is justified in placing the order for 3,000 units to get the 10% discount.
b) What is global Supply Chain? Discuss objectives of global supply chain.
Global Supply Chain
A Global Supply Chain refers to the worldwide network used by companies to source, manufacture, and distribute goods across different countries and regions. It encompasses the entire process from the procurement of raw materials, production, and assembly of products to the delivery of finished goods to customers across the globe. Global supply chains rely on interconnected suppliers, manufacturers, logistics providers, and retailers operating in various geographic locations, optimizing costs and ensuring that products are available where and when needed.
Components of a Global Supply Chain:
1. Sourcing and Procurement: Acquiring raw materials, components, and services from suppliers across different countries.
2. Manufacturing and Production: Manufacturing or assembling goods in locations. that offer cost or efficiency advantages, often using multiple plants or partners globally.
3. Distribution and Logistics: Moving products from factories to warehouses, distribution centers, and customers, using multiple modes of transportation (air, sea, road, rail).
4. Inventory Management: Coordinating stock levels to balance supply and demand across different regions.
5. Technology Integration: Utilizing technology like ERP, SCM, and data analytics to manage and optimize the supply chain across borders.
Objectives of Global Supply Chain
The objectives of a global supply chain are driven by the need to ensure efficient operations while minimizing costs and meeting customer demands across the world. The key objectives include:
1. Cost Reduction
Objective: To minimize production, transportation, and operational costs by leveraging global resources.
Companies often source raw materials or manufacture goods in countries where labor, materials, or operational costs are lower. By distributing production globally, companies can reduce overall expenses.
Example: Many tech companies, like Apple, source components from multiple countries and assemble products in locations like China to take advantage of lower production costs.
2. Market Access and Expansion
Objective: To enter and expand in new international markets by setting up operations or distribution centers in those regions.
A global supply chain allows businesses to serve customers in various markets more effectively, providing localized products or faster delivery times.
Example: Companies like Coca-Cola operate plants worldwide to cater to regional tastes and reduce transportation time to local markets.
3. Risk Diversification
Objective: To spread risks by diversifying suppliers and production facilities across different regions.
Companies reduce their dependency on a single supplier or location, minimizing the impact of political instability, natural disasters, or supply chain disruptions in one region.
Example: After the COVID-19 pandemic, many companies started diversifying their suppliers across different countries to reduce the risk of over-reliance on one country.
4. Improved Customer Service
Objective: To enhance customer satisfaction by delivering products faster and more efficiently to global customers.
By strategically placing warehouses and distribution centers near key markets, companies can shorten delivery lead times, improve product availability, and offer better customer service.
Example: E-commerce giants like Amazon set up fulfillment centers in various countries to ensure fast delivery to their global customer base.
5. Flexibility and Agility
Objective: To create a responsive supply chain that can adapt to changes in demand, regulations, and market conditions.
A global supply chain allows companies to shift production, sourcing, or logistics as needed to respond to fluctuating demand, changes in trade policies, or supply disruptions.
Example: During trade wars or shifts in tariffs, companies may re-route products or switch suppliers from one country to another to maintain cost efficiency.
6. Quality Improvement
Objective: To maintain and enhance product quality through global sourcing of high- quality materials and leveraging advanced manufacturing techniques from different regions.
Explanation: Companies can source materials or components from countries known for their expertise or high-quality production capabilities, improving the overall quality of the final product.
Example: A luxury car manufacturer might source precision components from Germany due to the country's high standards in engineering and manufacturing.
7. Sustainability and Environmental Responsibility
Objective: To create a more environmentally sustainable supply chain by minimizing carbon emissions and waste through optimized logistics and production practices.
With growing concerns over climate change, companies are aiming to reduce their global carbon footprint by optimizing transportation, using renewable resources, and implementing sustainable practices across the supply chain.
Example: Many companies are using green logistics, such as optimizing shipping routes or using renewable energy in production facilities, to reduce their environmental impact.
OR
c) State merits and demerits of waterways and roadways as mode of transportation.
Merits and Demerits of Waterways and Roadways as Modes of Transportation
1. Waterways (Marine Transportation)
Waterways involve the movement of goods and passengers via rivers, seas, oceans, and canals. This mode of transportation is particularly suited for bulk goods and long- distance travel.
Merits:
Cost-Effective for Bulk Goods: Water transport is one of the most economical modes for shipping large volumes of heavy and bulky goods (e.g., coal, iron, oil) over long distances.
Environmentally Friendly: Compared to road and air transportation, water transport emits fewer greenhouse gases per ton of cargo, making it more sustainable.
Ideal for International Trade: Shipping via oceans and seas is vital for global trade, allowing companies to transport goods across continents at relatively low costs.
Capacity: Ships have the capacity to carry enormous quantities of goods, which makes them ideal for transporting raw materials, agricultural products, and large machinery.
Demerits:
Slow Speed: Waterways are slower than roadways or air transport, making them less suitable for perishable goods or time-sensitive deliveries.
Limited Accessibility: Waterways require access to ports and navigable rivers, restricting their usage to areas with coastline or river access.
Weather Dependency: Water transportation is vulnerable to adverse weather conditions (storms, rough seas), which can delay shipments.
High Initial Infrastructure Costs: Developing ports, terminals, and maintaining waterways can be costly, although these are generally long-term investments.
2. Roadways (Road Transportation)
Road transportation involves moving goods and passengers using motor vehicles such as trucks, cars, and buses via road networks. It is one of the most commonly used modes of transport for short to medium distances.
Merits:
Door-to-Door Service: Road transport provides direct delivery to the destination, reducing the need for transshipment and handling of goods.
Flexibility: Roadways offer the flexibility to adjust routes, schedules, and delivery points, making them ideal for short-distance and last-mile deliveries.
Speed and Efficiency for Short Distances: For short to medium distances, road transport is faster than most other modes, especially when compared to water or rail transport.
Accessibility: Roads connect almost all areas, including remote and rural locations, making roadways the most accessible mode of transportation.
Low Initial Investment: The infrastructure required for road transport (roads, highways) generally requires less capital investment compared to ports, railways, or airports.
Demerits:
Limited for Long Distances: Over long distances, road transport becomes less efficient and more expensive compared to rail or water transport due to fuel costs and vehicle wear.
Traffic Congestion and Delays: In many regions, road networks suffer from congestion, causing delays in deliveries and higher fuel consumption.
Environmental Impact: Road transport is a significant contributor to pollution due to emissions from motor vehicles, making it less eco-friendly.
Capacity Constraints: Trucks and other vehicles have limited cargo capacity compared to ships or trains, which can lead to multiple trips for large volumes.
Accident Risks: Road transport has a higher rate of accidents compared to other modes, posing risks to cargo and human life
d) Classify and explain elements of customer service.
Customer service in logistics refers to the entire process of meeting customer expectations through the effective management of logistics activities such as order fulfillment, delivery, and after-sales support. It is a critical component in maintaining customer satisfaction and loyalty. Customer service in logistics can be classified into pre-transaction, transaction, and post-transaction elements.
1. Pre-Transaction Elements
These are services offered before an order is placed to provide customers with the necessary information and support. They help set expectations and build confidence in the company's ability to meet customer needs.
Communication of Service Policy: Clearly outlining the terms, conditions, and service levels a customer can expect, including shipping options, payment terms, and return policies.
Example: Providing shipping estimates, return policy guidelines, and service commitments on an e-commerce website.
Ease of Doing Business: Making it easy for customers to place orders, inquire about products, and get support through various channels like websites, apps, or customer support hotlines.
Example: An online store offering a user-friendly interface with quick checkouts and 24/7 customer support
System Flexibility: Providing flexible options that allow customers to modify or customize orders based on their specific needs.
Example: Allowing customers to choose expedited shipping or delay deliveries if needed.
2. Transaction Elements
These services occur during the actual transaction and delivery process, focusing on the accurate and timely execution of customer orders.
Order Accuracy: Ensuring that the correct items are picked, packed, and shipped according to the customer's order.
Example: A company using barcode scanning in warehouses to ensure orders are packed accurately and prevent errors.
Order Cycle Time: The time it takes from when an order is placed until the product is delivered. Reducing order cycle time is essential for customer satisfaction.
Example: Amazon Prime's two-day delivery service, which provides quick order fulfillment.
Product Availability: Having the right products in stock and ready for immediate shipment. This includes inventory management and demand forecasting.
Example: A retailer maintaining optimal inventory levels to avoid stockouts, ensuring customers can purchase items when they need them.
Delivery Reliability: The ability to consistently deliver products on time, as promised,without damage or delays..
Example: A logistics company offering real-time tracking and delivering packages within the expected time frame.
Order Status Information: Keeping customers informed about the progress of their order through tracking and real-time updates.
Example: Sending SMS or email notifications about shipping, estimated delivery time, and delays.
3. Post-Transaction Elements
These services come into play after the order has been fulfilled, focusing on customer satisfaction, issue resolution, and building long-term relationships.
Returns and Reverse Logistics: Managing the return of goods efficiently by offering hassle-free return policies and processes.
Example: A retailer providing pre-paid return labels and clear return instructions to make it easy for customers to return unwanted items.
Warranty and Repairs: Providing support for defective or damaged products through warranty claims, repairs, or replacements.
Example: An electronics company offering free repairs within the warranty period and support for product malfunctions.
Customer Feedback and Support: Engaging with customers to gather feedback and resolve any issues after the sale is completed.
Example: Sending post-purchase surveys or having a customer support team ready to resolve complaints and issues.
Importance of Customer Service in Logistics:
Customer Retention: High-quality service leads to repeat business and customer loyalty.
Competitive Advantage: Superior customer service differentiates a company in the marketplace, often providing an edge over competitors. Reduced Complaints and Returns: Efficient logistics services reduce errors, leading to fewer customer complaints and lower return rates.
Improved Brand Reputation: Meeting or exceeding customer expectations enhances the company's reputation and brand image.
Q.5. a) Read the case and answer the following. M/s Aaradhya Limited is situated near Delhi. The company supplies dashboard assembly as a 4PL supplier to Amit Udyog Ltd. Since last 5 years. There are number of components in the dashboard. Aaradhya Limited Purchases these individual components from various suppliers and assembles them at their works for onward supply to Amit Udyog Limited.
One of the major component namely "starter switch" is always the problem. Since Aaradhya Limited does not observe any systematic inventory control method in their purchasing activities, they just order the quantity as and when the demand arises. As this product is not available off the shelf, many times delays occur in arranging for assembled dashboard to Amit Udyog Limited. This in turn, result into financial loss to Aaradhya Limited due to penalties imposed by Amit Udyog Limited. As per the agreement, towards delays in supply of dashboard assembly.
Questions:
1. Define out sourcing. Explain the role of 4th party logistics in the above case.
2. How Aaradhya Limited can avoid financial penalties imposed by Amit Udyog Limited?
OR
b) Write short notes on following. (Any 3 out of 5)
i) Extended Enterprise
The Extended Enterprise is a business concept that recognizes that an organization's success depends not only on its internal operations but also on the efficiency and effectiveness of its broader network, including suppliers, distributors, partners, and customers. The extended enterprise goes beyond the traditional boundaries of a single firm to include all external stakeholders involved in the value creation process.
Elements of Extended Enterprise:
1. Collaboration: A company works closely with suppliers, distributors, and other partners to ensure the smooth flow of goods, services, and information across the supply chain.
2. Information Sharing: Technology plays a vital role, with systems like ERP (Enterprise Resource Planning) and SCM (Supply Chain Management) used to share data on inventory levels, demand forecasts, and production schedules.
3. Integration: Seamless integration of processes across the extended network allows companies to respond faster to market changes and customer needs.
4. Joint Value Creation: The extended enterprise creates value collectively, where all members work toward shared goals, improving efficiency, quality, and customer satisfaction.
Benefits of the Extended Enterprise:
Increased Agility: The extended enterprise allows businesses to respond more quickly to market changes, disruptions, or new opportunities by leveraging the strengths of their partners.
Cost Efficiency: By integrating operations and sharing resources, companies can reduce costs related to inventory, production, and transportation.
Improved Innovation: Collaboration with partners encourages innovation by allowing companies to leverage the knowledge and expertise of their entire network
Enhanced Customer Satisfaction: By working closely with partners, companies can improve service levels, reduce lead times, and better meet customer expectations.
Example:
Automotive manufacturers like Toyota or General Motors rely heavily on an extended enterprise model. They collaborate with multiple suppliers and logistics providers to ensure the efficient delivery of parts and components for vehicle assembly, improving overall supply chain performance.
ii) Selective inventory control techniques
Selective inventory control techniques focus on managing inventory items based on their importance, demand, value, or other factors. These techniques allow businesses to prioritize resources and efforts on the most critical inventory items, improving overall efficiency and reducing carrying costs. Below are some commonly used selective inventory control techniques:
1. ABC Analysis
Concept: ABC analysis classifies inventory items into three categories based on their importance:
A items: High-value items with low sales volume but account for a significant portion of the inventory's total value (e.g., 70-80% of the value but 10-20% of the items).
B items: Moderate-value items that account for a medium portion of the total value.
C items: Low-value items that make up a large portion of the inventory but contribute less to the total value (e.g., 5-10% of the value but 60-70% of the items).
Benefit: Helps businesses focus on managing the most valuable inventory items (A items) more closely while automating or simplifying the management of less critical items (B and C items).
2. VED Analysis
Concept: VED analysis classifies items based on their criticality for operations:
V (Vital): Items that are critical and must always be available to avoid production stoppages or service interruptions.
E (Essential): Items that are important but do not cause immediate disruption if unavailable for a short time.
D (Desirable): Items that have the least impact on operations and can be replenished with some delay.
Benefit: This technique ensures that critical (V) items are given priority in procurement and stocking, reducing the risk of operational downtime.
3. FSN Analysis
Concept: FSN analysis classifies items based on their movement in inventory:
F (Fast-moving): Items that have a high demand and need frequent replenishment.
S (Slow-moving): Items that move slowly and are used less frequently.
N (Non-moving): Items that have not moved or been used in a specific period, often indicating obsolete stock.
Benefit: Helps identify items that need regular attention for stock replenishment (F items) and reduces costs by preventing overstocking or clearing obsolete items (N items)
iii) Total Cost Approach or Analysis
Ans:
Total Cost Approach (or Analysis) in Logistics
The Total Cost Approach in logistics refers to the comprehensive evaluation of all costs associated with the movement, storage, and handling of goods throughout the supply chain. Instead of focusing on minimizing individual costs (e.g., transportation or warehousing), this approach emphasizes optimizing the overall cost to ensure efficiency across the entire logistics process.
Key Elements of the Total Cost Approach:
1. Transportation Costs: The expenses incurred in moving goods from one location to another, including fuel, driver wages, and vehicle maintenance.
2. Warehousing Costs: Costs related to storing inventory, such as rent, utilities, labor, and material handling.
3. Inventory Holding Costs: The expenses of maintaining inventory, including capital costs, storage, insurance, and risk of obsolescence.
4. Order Processing Costs: Costs related to managing and fulfilling customer orders, including administration, packaging, and shipping..
5. Stockout Costs: The potential revenue loss and damage to customer relationships when products are out of stock.
6. Reverse Logistics Costs: Costs incurred in handling returns, recycling, and product disposal.
Importance of the Total Cost Approach:
Holistic View: It provides a complete picture of all logistics-related costs, helping businesses avoid sub-optimizing one area at the expense of others.
Cost Efficiency: By focusing on the total cost rather than individual cost elements, companies can make better decisions that reduce overall logistics costs.
Improved Decision-Making: The approach helps identify trade-offs between different logistics activities, such as balancing transportation costs with warehousing expenses.
Customer Satisfaction: By optimizing the entire logistics process, businesses can deliver products more efficiently, improving service levels and customer satisfaction.
Example:
A company might find that using a cheaper transportation option increases inventory holding costs due to longer lead times. In this case, the total cost approach would suggest using a slightly more expensive transportation option if it reduces the overall cost of logistics by lowering inventory holding and stockout costs.
iv) Principles of LIS
Ans:
Principles of Logistics Information Systems (LIS)
A Logistics Information System (LIS) is a system designed to manage, process, and distribute data and information related to logistics activities, such as transportation, Inventory management, warehousing, and supply chain coordination. It plays a critical role in enhancing efficiency, reducing costs, and improving decision-making in logistics and supply chain operations
Here are the key principles of an effective LIS
1. Integration
Explanation: LIS should integrate all logistics functions-such as procurement inventory management, transportation, and distribution-into a unified system Benefit Integration ensures that information flows seamlessly across different departments and stakeholders, enhancing coordination and reducing redundancies
2. Accuracy and Timeliness
Explanation. The system must provide accurate and up-to-date information to support informed decision-making and Timely execution of logistics activities.
Benefit Accurate, real-time data helps in minimizing error, Improving service levels, and ensuring customer satisfaction
3. Scalability
Explanation: The LIS should be scalable to accommodate growing business demands, new technologies, or expansions in the logistics network Benefit. A scalable system can adapt to changing needs without requiring a complete overhaul, ensuring long-term usability and cost-effectiveness
4. Visibility and Transparency
Explanation: The system should provide end-to-end visibility across the entire supply chain, offering insights into the movement of goods, inventory levels, and performance metrics.
Benefit Greater visibility improves operational efficiency, enhance collaboration with partners, and allows businesses to quickly respond to disruptions or customer demands
5. Flexibility
Explanation. An effective LIS must be flexible to accommodate different types of logistics activities and adapt to changes in market conditions, regulations, or customer needs.
Benefit Flexibility allows for the customization of logistics operations, making it easier to implement changes without major disruptions.
6. Cost Efficiency
Explanation: The system should help in minimizing costs related to logistics, Including transportation, inventory holding, and warehousing expenses, by optimizing logistics activities
Benefit An efficient Lis contributes to cost savings, making logistics more affordable while maintaining high service standards
7. Security
Explanation: The LIS must ensure data security, protecting sensitive information related to shipments, inventory, and customer data.
Benefit: Secure systems prevent data breaches, ensuring compliance with data protection regulations and building trust with stakeholders.
8. Decision Support
Explanation: A well-designed LIS provides decision support by offering analytical tools, reporting functions, and forecasting capabilities for better logistics planning.
Benefit: Advanced analytics help optimize logistics strategies, improve resource allocation, and enhance overall performance.
v) Green Logistics.
Ans:
Green logistics refers to the process of minimizing the environmental impact of logistics activities, such as transportation, warehousing, and distribution. It aims to reduce carbon emissions, energy consumption, waste, and other negative environmental effects by adopting sustainable practices in supply chain management. The goal is to balance economic efficiency with environmental responsibility.
Key Components of Green Logistics:
1. Eco-Friendly Transportation: Using energy-efficient vehicles, alternative fuels, and optimizing delivery routes to reduce emissions.
2. Sustainable Packaging: Reducing the use of non-biodegradable materials, adopting reusable or recyclable packaging, and minimizing packaging waste.
3. Energy-Efficient Warehousing: Implementing energy-saving technologies such as LED lighting, renewable energy sources, and better insulation in warehouses.
4. Reverse Logistics: Managing the return, recycling, and disposal of products to reduce waste and promote product reuse.
5. Optimized Supply Chain: Streamlining processes to minimize unnecessary transportation and inventory handling, reducing fuel consumption and emissions.
Importance of Green Logistics:
Environmental Conservation: Reduces pollution, greenhouse gas emissions, and waste, helping combat climate change.
Cost Savings: Energy efficiency and optimized transportation lead to lower operational costs in the long term.
Regulatory Compliance: Many governments are implementing stricter environmental regulations, and green logistics helps businesses comply with these rules.
Enhanced Brand Image: Companies adopting green practices are often viewed more favorably by consumers, leading to improved brand reputation.
By incorporating green logistics into operations, businesses contribute to a more sustainable future while maintaining efficiency in their supply chains.
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