TYBMS SEM 5 : Logistics & Supply Chain Management (Case Study)

 Paper/Subject Code: 46001/Logistics & Supply Chain Management 

TYBMS SEM 5 : 

Logistics & Supply Chain Management 

(Case Study)

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 Q. 5 Case Study-Read following case and attempt the given below questions. (15)

CASE 1

Customer satisfaction at minimum inventory has always been a challenge faced by industries in competitive business environment. Companies are restricting their businesses to meet this challenge. Colour dispensing machines have transformed manufacturing and distribution strategies followed by paint manufacturer's world over. Earlier paint companies used to manufacture and distribute 30 to 50 shades in 5 to 8 packs of different sizes.

The demand pattern to predict with historical demand, as consumer preferences were changing very fast.

The colour dispensing machines changed the production pattern from producing shades to producing bases. Variety of shades is produced by mixing these bases in prescribed proportions. This reduced the variety and produced economies of scale, reduced inventory levels and also eliminated redundancy of stock. New product introduction times reduced considerably. Range of shades expanded rapidly without the burden of inventory. Customer enjoyed the benefits of variety of shades in every color. Retailers did not lose business due to long lead time.

With the strategy of processing postponement, finished products are produced only when specific needs of the customer are identified. The final product is created only at the point of consumption and not at the factory. The paint companies set up these colour dispensing machines at dealer's place even at big garages which consume large volume of variety of shades. Paint companies have drawn huge benefits in terms of inventory reduction and customer satisfaction from the new strategy of manufacturing and distribution.

Questions

Q.1. Analyse the case and identify the main problems faced by the paint companies before the advent of the colour dispensing machines.

Q.2. Explain the concept of processing postponement with reference to the above case.

Q.3. What is disadvantage of producing large variety in anticipation of forecasted demand?

Q.4. In one dealer's locations a base colour is consumed at rate of 500 liters per day. The lead time for procurement is 3 days. A safety of 1000 liters is maintained by the dealer. Calculate reorder level.

Solution:

1. The problem faced by paint companies before the advent of colour dispensing machines were:

i. Rapidly changing customer preferences made it difficult to predict the future demand.

ii. Large amount of inventory was maintained. Thus blocking the companies funds which would otherwise be used for productive purposes.

iii. Long lead times which may end up being lost sales and dissatisfied customers.

iv. Large variety of stock 30 to 50 shades in 5 to 8 packs of different sizes, were maintained. Risk of unsold items was high.

v. Inventory carrying cost was also very high.

2. Processing Postponement:

i. It means to postpone/delay the final production of the product until the actual demand is known.

ii. Risk and the inventory level can be minimized by processing postponement.

iii. The paint companies do not produce the shade but simply the bases. By mixing these bases in prescribed proportions, variety of shades can be produced as per customer demand.

iv. This helps in reducing lead time, offers wide variety of shades, inventory level minimized, customer satisfaction, less wastage etc.

3. Disadvantage of producing large variety in anticipation of tin forecasted demand is: 

i. The forecasted demand is generally based on historical demand. But these days customer preferences are changing rapidly. So the forecasting is difficult and not accurate.

ii. If the forecast turns out to be incorrect, it will lead to stock out condition or excess of stock lying in the warehouses.

III. Producing large variety will again block companies capital, increase the inventory carrying cost, increase risk of unsold items and will create complexity in centralized location.

4. Lead Time Consumption Consumption Rate X Lead Time = 500 X 3 1500 units Safety Stock = 1000 units

Re-order Level = Lead Time Consumption + Safety Stock 1500+1000 2500 units Hence, new order should be placed when stock level reaches 2500 units.

CASE 2

M/s Compu-Tech is one of the reputed Indian companies producing various types of computer printers. Their production plant is situated in Noida in northern India and the products are distributed through their four distribution centers located in every region.

The company introduced its popular line of Desk Jet printers first time in India in 2005. Immediately on the launch of this product, they sold more than one lacs units during that year. But the problem came with the boom in sales. Already, the company was running into serious inventory snags, particularly with service to its customers situated in the southern region. The printers were generally shipped to all distribution centers and onward to the customer by road only. Unfortunately, that resulted in long lead times, making it tough to meet the shorter delivery time offered by the local sellers mainly from Southern India.

The company also found itself running short of production capacity to meet the quantity requirements to certain large institutional and industrial customers. To add it, quite often the company was running out of stock certain fast moving models and at the same time facing problems of excess inventory of other models. Working out product wise demand from each market was also proving difficult for their manufacturing plant.

Questions:

Q.1. What are the main problems in the logistical network of M/s. Compu-Tech?

Q.2. What solutions would you propose to overcome these problems?

Solution

1. Problems in M/s Compu-tech-

i. Improper inventory management. Fast moving models had to face stock outs while the slow moving & non-moving models were produced in excess & were lying in warehouse resulting in higher inventory carrying cost.

ii. Bad transportation policy, use of only roads to distribute printers.

iii. Long lead times.

iv. Dissatisfied local sellers from South India as M/s Compu tech can't meet short delivery time

v. Insufficient production capacity.

vi. Lack of demand analysis and forecasting. Products which were not demanded by market were produced in excess.

vii. Production capacity was misutilised in producing products that are not in demand.

2. Solutions and Recommendations

i. The problem of inventory control can be removed by making proper FSN analysis which is classified on the basis of demand rate of materials or products.

ii. Thus the fast moving goods should be kept in higher stock, stock of slow moving should be nominal, it can manufactured when required. Non moving products should find a way of getting rid of existing stock at whatever price.

iii. Thus, the production capacity can be utilized in optimum way. Also the company can bring inventory carrying cost under control.

iv. Scientific methods must be used for forecasting demand.

v. Multi-modal transport should be used to reduce transportation cost & time. thus the lead time can also be lowered.

vi. Check out feasibility of setting up another production plant in Western or Southern region to meet increasing demand.

CASE 3

M/s Excellent Dashboard Private Limited (EDPL) is situated at Gurgaon in Delhi. The company supplies dashboard assembly as 4PL supplier to Maruti Udyog Limited (MUL) since past 3 years. There are number of components in the dashboard like speedometer, level gauge, etc. EDPL purchases these individual components from various suppliers and assembles them at their works for onward supply to MUL..

One of the major components namely "Starter Switch" is always the problem. Since the EDPL does not observe any Systematic Inventory Control Methods 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 MUL. This in turn, results into financial loss to EDPL due to penalties imposed by MUL as per the agreement, towards delays in supply of Dashboard Assembly.

The information gathered from EDPL shows that the annual demand of the item, Starter Switch is 5000 nos. The unit price of the item is Rs. 50 each. The inventory carrying cost and ordering cost is 20% and Rs. 40 per order respectively.

Questions:

Q.1. Explain the role of Fourth Party Logistics in the above case.

Q.2. How EDPL can avoid financial penalties imposed by MUL?

Q.3. Calculate Economic Order Quantity (EOQ) for the item under reference, by using the available information

Solution:

1. i. 4PL is defined as 'a supply chain integrator that assembles and manages the resources, capabilities and technology of its own organization with those of complementary service providers to deliver solution." a comprehensive supply chain

ii. 4PL does not perform logistical activities but performs assembly activities.

HI. EDPL as 4PL supplier, supplies dashboard assembly to Maruti Udyog Ltd. since past 3 years.

iv. EDPL does not manufacture the components of the dashboard which include speedometer, level gauge, starter switch. But they purchase these individual components from various suppliers & assembles them at their works for onward supply to MUL.

2. 1. As per the terms of agreement, MUL can impose penalties on EDPL on the delay in supply of dashboard assembly.

H. Delay in supply is due to a major component namely "starter switch" which is not available off the shelf.

iii. EDPL needs to strictly follow some systematic inventory control Method in their purchasing activities.

iv. They should follow EOQ-ROL system for ordering starter switch.

v. Sufficient amount of safety stock should be maintained.00

vi. EDPL should source highly reliable suppliers who can deliver components of dashboard especially "starter Switch" on time at a fair price.

3. EOQ = sqrt((2APC)/(PI)) Where,

A = Annual consumption in units

PC = Ordering cost per order

P = Price per unit

1 Inventory Carrying cost (in decimal)

A = 5000 PC = 40 P = 50 I = 0.2

EOQ = sqrt((2 * 5000 * 40)/(50 * 0.2))

EOQ = sqrt(400000/10)

EOQ 200 units

Economic lot size corresponding with optimal inventory cost is 200 units.

CASE 4

Superb Automobiles, an automobiles manufacturing company, designed, developed & produced a deluxe car which is called Satisfaction. This vehicle was meant for the elite of the Indian corporate world & other higher income group customers. When the batch of Satisfaction hit the road, problems began cropping up. There was a steady flow of complaints regarding the performance & road- worthiness of Satisfaction. The service centers that were authorized to undertake the after sale service on behalf of the company were unable to meet the customers' expectation regarding after sales service. The problems ranged from availability of spares to expertise in repairing.

The customer has expected Satisfaction to be of international standards because of the reputation & image of Superb Automobiles regarding the unsatisfactory performance of Satisfaction. The CEO called for a meeting of the difference HOD's of the company & discussed the matter. The outcome of the meeting was as follows:

(a) The R&D department as well as the manufacturing department did not perform adequate user's trials on Satisfaction

(b) The workshops appointed for after expertise to repair the faults sales service had no

(c) Stocks of spares/ components were inadequate at the workshops

(d) The manufacturing department of the company faced serious problems in terms of technological personnel. There were also interface problems between the production department, the marketing department, the after-sales workshops & the stores departments. Due to this production & delivery schedules were affected.

(e) Quality control of materials was inadequate on the inbound side

Questions

Q.1. Discuss the logistical problems you see in the above case.

Q.2. Explain the steps you would recommend to re-instill confidence in the customers & prop up the company's image as a brand of repute & confidence. 

Solution:

1. Analysis of the case:

The company's major problem is angry customers & threat to their image in the market. The customers are furious due to

a. Poor product quality poor performance of "Satisfaction"

b. Poor service quality-poor after sales service

The obvious cause is company's logistics are poorly managed as per the discussion in the senior level meeting held by the CEO

Logistical problems in the above case.

Following logistical problems are observed :

Poor outsourcing decision, lack of professionalism in logistical management

Poor inventory control of spare parts at service centers

Poor interface between logistics & other functions

Failure of single plan by logistical management

Weak procurement performance cycle

2. Steps would recommend to re-instill confidence in the customers & prop up the company's image as a brand of repute & confidence

1. Product recall

2. Using the services of a 4th party logistics company

3. Inventory control t4echniques like kanban

4. Strengthening interface areas to strategize critical activities

CASE 5

M/s ABC Pvt. Ltd. (ABCPL) is situated in Lonavla near Pune. The company supplies wheel assemblies to a leading auto manufacturer, M/s BA Ltd. (BAL) at Pune for the past three years. Wheel assembly is made up of various parts rim, hub, spokes, tyre, tube, value, etc. ABCPL makes rims & spokes at their Lonavla plant & purchases other required individual components from various suppliers & assembles all of them at their factory. It then supplies the finished product to BAL.

The "air valve" of the wheel assembly has always been causing problem to ABCPL. They frequently run into stock-out of this item.

ABCPL do not observe any scientific technique for controlling inventory flow of various items. they order the required items of inventory as & when the demands for the items arise using judgement techniques. As a result, while stock out of key items was frequent, excess of other items was a common feature.

Air value are not manufactured ABCPL. Hence, many times delays occur in arranging for supply of required quantity of wheel assemblies to BAL. This, in turn, results in a substantial revenue loss to ABCPL since, as per the agreement signed between ABCPL & BAL, BAL can levy penalties towards delays in the supply of required quantity of wheel assemblies.

The information gathered from ABCPL regarding air valves is as follows.

holm The average lead time for procurement is one week.

Average demand is 1000 units per week

Safety stock is assumed to be 1000 units

Questions:

Q.1. Discuss various logistical alternatives in which ABCPL can reduce logistical costs imposed by BAL.

Q.2. Calculate the Re-order Level for air valve from available information

Q.3. How can the ROL calculated as above help ABCPL avoid stock outs?

Solution:

1. Logistical alternatives to reduce penalties:-

i. Sourcing of reliable suppliers who can deliver air valves on time at fair price and in required quantity.

ii. ABCPL should conduct ABC analysis for identifying products/materials on whom maximum expense is done.

iii. Economic order quantity should be calculated and same should be ordered. This will minimize total inventory cost.

iv. Delays in placing orders should be avoided. Orders should be given in optimum time considering the lead time for the same. Re-order level system should be used.

v. Sufficient amount of safety stock should be maintained.

2. Lead time consumption = Consumption rate X lead time = 1000 X 1 = 1000 units Safety Stock = 1000 units. ROL 2000 units Hence, new order should be placed when stock level reaches 2000 units.

3. Re-order level is a stock level at which order for next consignment should be placed so that new stock arrives just in time to avoid any stock out, at the same time, new stock does not arrive too much in advance to create unnecessary inventory carrying cost.

ROL depends on 2 factors: Lead Time and Safety Stock

If any of them increases, ROL also will be higher & vice versa.

By calculating ROL, ABCPL can make sure that it order the air valves as and when the stock level comes down to 2000 units.

April 2019

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?

1. Define Outsourcing. Explain the Role of 4th Party Logistics (4PL) in the Above Case.

Outsourcing: Outsourcing is a business practice where a company delegates specific functions or processes to an external supplier or service provider rather than handling them internally. This is done to improve efficiency, reduce costs, and allow the company to focus on its core competencies. Outsourcing can cover a range of functions, including manufacturing, logistics, IT services, and more.

Role of 4th Party Logistics (4PL) in the Above Case: 4th Party Logistics (4PL) providers manage the entire logistics process for a company, offering end-to-end solutions that include supply chain planning, coordination, and management. Unlike 3PL providers that focus on specific logistics services (like transportation and warehousing), 4PL providers take a more strategic role, overseeing the entire logistics network of a company.

In the case of M/s Aaradhya Limited:

• Aaradhya Limited acts as a 4PL provider for Amit Udyog Ltd. because it not only supplies the dashboard assemblies but also manages the sourcing of the required components, including the "starter switch" from various suppliers.
• Aaradhya Limited’s role involves managing the sourcing and procurement of individual components, assembling the dashboard, and ensuring its on-time delivery to Amit Udyog Ltd.
• The inefficiencies in their inventory management of the "starter switch" affect their ability to deliver the assembled dashboards promptly, leading to delays and financial penalties. As a 4PL provider, Aaradhya Limited is responsible for managing these logistics challenges to ensure smooth operations for their client.

2. How Aaradhya Limited Can Avoid Financial Penalties Imposed by Amit Udyog Limited?

To avoid financial penalties and improve their delivery performance, Aaradhya Limited should implement the following strategies:

1. Implement Systematic Inventory Control:

   • Adopt Inventory Management Techniques: Aaradhya Limited can adopt inventory control methods like Economic Order Quantity (EOQ), Just-in-Time (JIT), or ABC analysis to manage their stock levels effectively. For example, EOQ can help determine the optimal order quantity for the "starter switch," minimizing ordering and holding costs.
   • Reorder Point System: Establishing a reorder point for the "starter switch" will ensure that new orders are placed when inventory reaches a predetermined level, reducing the risk of stockouts.

2. Maintain Safety Stock:

   • To account for the variability in lead times and demand, Aaradhya Limited should maintain a safety stock of the "starter switch." This buffer stock can help prevent delays caused by unforeseen supply chain disruptions or unexpected demand increases.
   • This approach ensures that production of dashboard assemblies can continue even if there are delays in receiving new shipments of the starter switch.

3. Develop a Strong Relationship with Suppliers:

   • Negotiate Better Lead Times: Aaradhya Limited should work closely with its suppliers to negotiate shorter lead times for the starter switch and develop long-term partnerships. This can help in ensuring more reliable and faster deliveries.
   • Diversify Supplier Base: Identifying alternative suppliers for the starter switch can help in reducing the dependency on a single supplier, thus lowering the risk of delays.

4. Use Demand Forecasting and Planning:

   • Implement Demand Forecasting Techniques: By using demand forecasting, Aaradhya Limited can predict future demand for the starter switch based on historical data and trends, enabling better planning for inventory needs.
   • Production Scheduling: A better alignment of inventory management with production schedules will allow Aaradhya Limited to plan the procurement of the starter switch according to the demand forecast, reducing the risk of stockouts.

5. Technology Integration and Automation:

   • Using ERP systems or Inventory Management Software can provide real-time visibility into stock levels, demand, and supplier performance. This will help Aaradhya Limited to manage their supply chain more efficiently and respond promptly to demand changes.
   • Automated Purchase Orders: Automating the ordering process through software can ensure that orders for the starter switch are placed as soon as the inventory reaches a certain threshold, avoiding manual delays.

6. Improving Communication with Amit Udyog Ltd.:

   • Proactive Communication: Aaradhya Limited should maintain regular communication with Amit Udyog Ltd. regarding potential delays or supply chain issues. This transparency can help in managing expectations and reducing the risk of penalties.
   • Flexible Delivery Agreements: Negotiating more flexible terms or buffer periods in their agreement could help to accommodate occasional delays, providing a cushion before penalties are applied.

By implementing these strategies, Aaradhya Limited can enhance its inventory control, minimize delays in the procurement of critical components, and ensure timely deliveries of the dashboard assemblies to Amit Udyog Ltd., thus avoiding financial penalties.

April 2023

AGCO is a leading global force in the manufacture and supply of agricultural machinery. The company grew substantially over the course of two decades, achieving a considerable portion of that growth by way of acquisitions.

As commonly happens when enterprises grow in this way, AGCO experienced increasing degrees of supply chain complexity, along with associated increases in cost, but for many years, did little to address the issue directly, primarily due to the decentralized fragmented nature of its global network.

In 2012, AGCO's leaders recognised that this state of affairs could not continue and decided to establish a long-term program of strategic optimisation.

With five separate brands under when optimisation planning began, sourcing and inbound logistics were managed by teams in various countries, each with different levels of SCM maturity, and using different tools and systems.

As a result of the decentralised environment, in which inbound logistics and transport management were separate operational fields, there was insufficient transparency in the supply chain. The enterprise as a whole was not taking advantage of synergies and economies of scale (and the benefits of the same). These issues existed against a backdrop of a volatile, seasonal market.

Questions:

1) Explain the fact of the case with the help of SWOT analysis of the case. (08)

Ans: 

1) SWOT Analysis of AGCO Case

A SWOT analysis helps to assess the internal and external factors that AGCO is dealing with in its supply chain complexity and the broader organizational context.

Strengths:

• Strong Market Position: AGCO is a global leader in the manufacture and supply of agricultural machinery. This established brand strength helps the company to maintain competitive advantage and customer trust.
• Diverse Product Portfolio: AGCO operates with five separate brands, allowing for broader market coverage and product differentiation, which can attract a wide range of customers and meet different needs.
• Growth through Acquisitions: AGCO's substantial growth, achieved through acquisitions, has increased its global footprint and market reach.

Weaknesses:

• Supply Chain Complexity: The company's growth through acquisitions has led to a fragmented and decentralized supply chain, making it difficult to manage operations efficiently.
• Lack of Transparency: Due to the decentralized nature of sourcing, inbound logistics, and transport management, AGCO suffers from insufficient visibility across its supply chain.
• Inefficient Use of Synergies: The organization is not capitalizing on synergies or economies of scale because different teams operate independently, with different systems and levels of SCM maturity.
• Separate Operational Fields: The separation between inbound logistics and transport management has further compounded operational inefficiencies, increasing overall costs.

Opportunities:

• Strategic Optimization: The decision by AGCO's leadership in 2012 to establish a long-term program for strategic optimization presents an opportunity to streamline supply chain operations, reduce costs, and improve efficiencies.
• Technological Integration: Leveraging modern supply chain management tools and technologies can create an integrated and efficient system that improves visibility and operational performance.
• Economies of Scale: By unifying its supply chain functions, AGCO has the opportunity to benefit from economies of scale, reducing costs, and improving service delivery.
• Supply Chain Transparency: Implementing systems to provide better visibility into the supply chain will allow AGCO to make data-driven decisions and enhance supply chain management.

Threats:

• Volatile and Seasonal Market: The agricultural machinery market is subject to seasonal fluctuations and volatility, which makes demand forecasting and supply chain management more challenging.
• Global Supply Chain Risks: As a global company, AGCO faces various risks, including geopolitical instability, fluctuating exchange rates, trade barriers, and disruptions in global logistics.
• Competition: In a highly competitive market, any inefficiency in supply chain management could reduce AGCO's competitive edge and profitability.
• Resistance to Change: Implementing a new supply chain strategy and optimization program across a decentralized and fragmented organization could face resistance, making it harder to execute the plan effectively.

 2) Suggest some strategies to resolve global supply chain problems mentioned in the above case. (07)

To address the supply chain challenges identified in the case, AGCO can implement several strategies aimed at resolving global supply chain issues and improving overall efficiency:

1. Centralization of Supply Chain Management:

• Integrate Supply Chain Operations: AGCO should centralize its sourcing, logistics, and transport management functions under a unified supply chain management system. This would help to reduce operational fragmentation, improve communication between departments, and create a cohesive approach to supply chain management.
• Standardize Tools and Systems: Implementing common tools and systems across different countries and brands will standardize operations and ensure that every part of the organization follows best practices.

2. Implement Advanced Supply Chain Technology:

• Digital Supply Chain Platforms: Introduce a digital supply chain platform that integrates all components of the supply chain, including suppliers, manufacturers, and logistics providers. Technologies like cloud-based SCM software, Internet of Things (IoT), and data analytics can provide real-time visibility into the supply chain and improve decision-making.
• Transport Management Systems (TMS): AGCO should implement a Transport Management System to centralize transport operations. A TMS can optimize routing, reduce transportation costs, and improve delivery timelines.

3. Leverage Economies of Scale:

• Consolidate Suppliers: AGCO can optimize its supplier base by consolidating suppliers and negotiating better terms to reduce costs through bulk purchasing.
• Global Sourcing Strategy: Develop a global sourcing strategy that aligns the company’s needs across its various brands and regions to take full advantage of its global presence.

4. Improve Supply Chain Transparency and Collaboration:

• Enhance Visibility: AGCO should implement technologies like RFID, blockchain, or other tracking systems to gain better visibility into the movement of goods and materials. This will improve transparency and allow for proactive management of potential disruptions.
• Supplier Collaboration: Strengthen collaboration with suppliers to create stronger partnerships, ensuring better communication and problem-solving. Collaborative planning, forecasting, and replenishment (CPFR) models can be implemented to improve alignment and coordination with suppliers.

5. Risk Management and Flexibility:

• Develop Contingency Plans: AGCO should create a robust risk management plan to prepare for disruptions in global supply chains, including geopolitical risks, trade barriers, and natural disasters.
• Flexible Supply Chain: AGCO should focus on creating a flexible supply chain that can quickly adapt to market changes and seasonality. This includes adjusting inventory levels, production schedules, and sourcing strategies based on real-time market conditions.

6. Workforce Training and Development:

• SCM Skills Development: AGCO should invest in training its supply chain workforce across all levels, focusing on equipping employees with the skills to manage the new systems and tools effectively.
• Change Management: Establish a change management program to ease the transition toward a centralized and technologically integrated supply chain, addressing potential resistance and ensuring smooth implementation.

November 2023

A) Swayam Fabrics one of the leading brand in India for gents clothing, initially the company started marketing quality shirts and trousers for common man with reasonable pricing. The company adopted the policy of better products at affordable prices. Slowly and gradually company started catering middle and higher class gents' customers and also expanded their product range which included pants, suits and other men's accessories.

The philosophy of company is "Outsourcing". The cloth and thread are supplied by the company to garment factories and the labour is also outsourced. The quality control aspect of Swayam Fabrics is very careful, who ensures quality of finished products offered to the customers. The products are produced in standard size and in large quantities thereby availing the benefits of economies of scale.

There are about 40 company owned outlets in Mumbai. These outlets are fed by the company central store as per the orders received from the outlets. They use company owned tempos as a mode of transport for the inbound and outbound activities. Even though there are many brands of readymade garments available in the market, the company strongly believes that quality is their strength and don't want to compromise on this issue.

a) Bring out the factors contributing to the success of Swayam Fabrics.    (07)

Ans: Several factors have contributed to the success of Swayam Fabrics:

1. Quality Focus: Swayam Fabrics prioritizes quality in all aspects of its operations, from sourcing raw materials to manufacturing finished products. The company's commitment to delivering high-quality clothing at affordable prices has helped it build a reputation for reliability and customer satisfaction.

2. Affordable Pricing: By offering better products at reasonable prices, Swayam Fabrics has successfully targeted a wide range of customers, including both common consumers and those from middle and higher income classes. This pricing strategy has enabled the company to capture market share and expand its customer base.

3. Product Diversification: Swayam Fabrics strategically expanded its product range over time to cater to the evolving needs and preferences of its customers. By introducing new items such as pants, suits, and accessories, the company has diversified its offerings and increased its market presence.

4. Outsourcing Policy: Adopting an outsourcing policy for manufacturing allows Swayam Fabrics to focus on its core competencies, such as design, branding, and quality control. By outsourcing labor and production to garment factories, the company can leverage specialized expertise and resources while maintaining stringent quality standards.

5. Economies of Scale: Producing standard-sized garments in large quantities enables Swayam Fabrics to achieve economies of scale, reducing production costs and enhancing profitability. This cost advantage allows the company to offer competitive prices to customers while maintaining margins.

6. Quality Control: Swayam Fabrics places a strong emphasis on quality control throughout the manufacturing process. Rigorous quality checks ensure that only products meeting the company's standards are released to the market, enhancing brand reputation and customer trust.

7. Retail Network: The company's network of company-owned outlets in Mumbai provides a direct channel for distributing its products to customers. By controlling its retail operations, Swayam Fabrics can maintain consistency in branding, customer service, and product availability.

8. Efficient Supply Chain Management: Swayam Fabrics manages its supply chain efficiently, from sourcing materials to delivering finished products to retail outlets. Utilizing company-owned tempos for transportation ensures timely and reliable inbound and outbound activities, contributing to customer satisfaction and operational efficiency.

9. Brand Identity: Swayam Fabrics has built a strong brand identity based on its philosophy of offering quality products at affordable prices. This consistent brand message resonates with customers and distinguishes the company from competitors in the market.

.

b) What do you mean by 3PL? Explain its advantages and disadvantages.        (08)

Ans: Third-party logistics (3PL) refers to the outsourcing of logistics activities to third-party service providers. These providers offer a range of logistics services, including transportation, warehousing, distribution, inventory management, and freight forwarding, to support companies in their supply chain operations. 3PL providers specialize in managing logistics functions efficiently and effectively, allowing companies to focus on their core business activities. Here are the advantages and disadvantages of utilizing 3PL services:

Advantages of 3PL:

1. Cost Savings: Outsourcing logistics activities to 3PL providers can lead to cost savings for companies. By leveraging the expertise, resources, and economies of scale of 3PL providers, companies can reduce logistics costs related to transportation, warehousing, and inventory management.

2. Expertise and Specialization: 3PL providers are experts in logistics management and have specialized knowledge, skills, and technology to optimize supply chain processes. By partnering with 3PL providers, companies can benefit from their expertise and access to best practices, leading to improved efficiency and performance.

3. Scalability and Flexibility: 3PL services offer scalability and flexibility to adapt to fluctuating demand, seasonal variations, and business growth. 3PL providers can adjust resources, capacity, and services based on changing requirements, allowing companies to scale operations up or down as needed without major investments in infrastructure or personnel.

4. Focus on Core Competencies: Outsourcing logistics activities to 3PL providers allows companies to focus on their core competencies and strategic priorities. By delegating non-core functions to external specialists, companies can allocate resources and attention to areas where they can add the most value and differentiate themselves in the market.

5. Global Reach and Network: Many 3PL providers have extensive networks, infrastructure, and capabilities to support global supply chain operations. By partnering with 3PL providers with global reach, companies can expand their market presence, reach new customers, and navigate international trade complexities more effectively.

Disadvantages of 3PL:

1. Loss of Control: Outsourcing logistics activities to 3PL providers may result in a loss of control over critical aspects of the supply chain. Companies may have limited visibility, transparency, and decision-making authority over logistics operations, leading to potential risks and challenges.

2. Dependency on External Providers: Companies relying heavily on 3PL providers for logistics services may become dependent on their performance and capabilities. Any disruptions, delays, or quality issues on the part of the 3PL provider can impact the company's supply chain and customer satisfaction.

3. Communication and Coordination Challenges: Effective communication and coordination between the company and 3PL provider are essential for successful logistics outsourcing. However, differences in priorities, expectations, and communication styles may lead to misunderstandings, conflicts, and inefficiencies in collaboration.

4. Quality Control and Compliance: Ensuring quality control and regulatory compliance in outsourced logistics operations can be challenging. Companies must establish clear standards, protocols, and monitoring mechanisms to ensure that 3PL providers adhere to quality, safety, and legal requirements.

5. Cost Considerations: While outsourcing logistics activities to 3PL providers can lead to cost savings, companies must carefully evaluate the total cost of outsourcing, including service fees, contractual obligations, and potential hidden costs. In some cases, the cost of outsourcing may outweigh the benefits, especially for smaller companies with limited resources.

November 2018

Starbucks is pretty much a household name. But like many of the most successful worldwide brands, the coffee shop giant has been through its periods of supply chain pain. In fact, during 2007 and 2008, Starbucks leadership began to have serious doubts about the company's ability to supply its 16,700 outlets. As in most commercial sectors at that time, sales were falling. At the same time though, supply chain costs rose by more than $75 million. Supply Chain Cost Reduction Challenges: When the supply chain executive team began investigating the rising costs and supply chain performance issues, they found that service was indeed falling short of expectations. Findings included the following problems Fewer than 50% of outlet deliveries were arriving on time

A number of poor outsourcing decisions had led to excessive 3PL expenses

The supply chain had, (like those of many global organisations) evolved, rather than grown by design, and had hence become unnecessarily complex

The Path to Cost Reduction: Starbucks leadership had three main objectives in mind to achieve improved performance and supply chain cost reduction. These were to:

Reorganize the supply chain

Reduce cost to serve 

Lay the groundwork for future capability in the supply chain

In order to meet these objectives, Starbucks divided all its supply chain functions into three key groups, known as "plan" "make" and "deliver". It also opened a new production facility, bringing the total number of U.S. plants to four.

Next, the company set about terminating partnerships with all but its most ineffective 3PLs. The remaining partners were then managed via a weekly scorecard system, which was aligned with renewed service level agreements.

Supply Chain Cost Management Results: By the time Starbucks' supply chain transformation program was completed, the company had made savings of more than $500 million over the course of 2009 and 2010. of which a large proportion came out of the supply chain, according to Peter Gibbons, then Executive Vice President of Global Supply Chain Operations.

1) State the facts & analyses the case.    (8)

Ans: Facts:

1. Context: During 2007 and 2008, Starbucks faced challenges in its supply chain management due to falling sales and rising supply chain costs.

2. Issues Identified:

   - Less than 50% of outlet deliveries were arriving on time.

   - Poor outsourcing decisions led to excessive expenses with third-party logistics providers (3PLs).

   - The supply chain had become unnecessarily complex due to evolution rather than strategic design.

3. Objectives:

   - Reorganize the supply chain.

   - Reduce the cost to serve.

   - Lay the groundwork for future supply chain capability.

4. Actions Taken:

   - Divided supply chain functions into three key groups: plan, make, and deliver.

   - Opened a new production facility, increasing the total number of U.S. plants to four.

   - Terminated partnerships with ineffective 3PLs and managed remaining partners using a weekly scorecard system aligned with service level agreements.

Analysis:

1. Challenges Faced: Starbucks encountered significant challenges in its supply chain, including poor delivery performance, excessive expenses with 3PLs, and complexity arising from organic growth rather than deliberate design.

2. Strategic Objectives: The objectives set by Starbucks leadership were focused on restructuring the supply chain to improve performance and reduce costs while also ensuring future capability and flexibility.

3. Strategic Actions: The actions taken, such as reorganizing supply chain functions, expanding production facilities, and optimizing partnerships with 3PLs, were aligned with the strategic objectives and aimed at addressing the identified issues.

4. Financial Impact: The supply chain transformation program resulted in substantial cost savings of over $500 million, with a significant portion coming from supply chain optimization efforts.

5. Leadership and Execution: Effective leadership and execution were critical to the success of Starbucks' supply chain transformation program, as evidenced by the significant improvements in performance and cost savings achieved over a relatively short period.

2) Explain how Effective Supply chain management helped starbucks to improve their performance? (7)

Ans: Effective supply chain management played a crucial role in helping Starbucks improve its performance in several ways:

1. Increased Efficiency: By reorganizing supply chain functions into three key groups - plan, make, and deliver - Starbucks streamlined processes and improved operational efficiency. This reorganization allowed for better coordination and communication across the supply chain, reducing bottlenecks and delays.

2. Cost Reduction: Starbucks focused on reducing the cost to serve by optimizing its supply chain operations. By terminating partnerships with ineffective third-party logistics providers (3PLs) and renegotiating service level agreements with remaining partners, Starbucks was able to lower supply chain costs significantly. Additionally, by opening a new production facility, the company increased its production capacity, potentially reducing manufacturing costs.

3. Simplification and Standardization: The supply chain had become unnecessarily complex over time, leading to inefficiencies and higher costs. By simplifying and standardizing processes, Starbucks was able to eliminate unnecessary complexities and improve overall supply chain performance.

4. Improved Service Levels: With fewer than 50% of outlet deliveries arriving on time, Starbucks identified service level improvements as a key objective. By implementing a weekly scorecard system and aligning it with renewed service level agreements, the company was able to monitor and manage partner performance more effectively, leading to improved delivery reliability and customer satisfaction.

5. Future Readiness: Starbucks laid the groundwork for future capability in the supply chain by investing in strategic initiatives such as reorganization, cost reduction, and performance monitoring. These efforts not only addressed immediate challenges but also positioned the company for continued success and growth in the future.

November 2019

Super Robots is a toy manufacturing company which is in the business for the past two decades. The manufacturing unit is situated in Mumbai, while its sales and marketing are spread over a large geographical area, especially in the major cities across the country. Over the years, a number of competitors have sprung in the field. Far from child's play, the company found that the toys' sector is a tough business. Some of the problems faced by it are:

There is a massive sale during the festival seasons. If the company's product is delayed, the valuable market is missed.

"Fashion" or "cult" status products influence the market. Any wrong decision in this matter, means loss of sale and build-up of unwanted inventory. There are high marketing and promotional costs. If these programs go out, the sales drop massively Any misjudge of the market can also mean closing down of the company.

The company has problems regarding stock holding at its distribution centers. This is mainly due to wrong inputs from feedbacks and improper surveys.

The company relies mainly on hired fleet of road transport. The services are not up to the mark in terms of delivery schedules, safety of goods from pilferage/theft, and mishandling of product.

Marketing strategies are far from adequate. They are not effective enough to counter the strategies adopted by the competitors.

You are called upon by the management of Super Robots to head their logistics operations. You are required to study and guide the company regarding the following matters.

a) Warehousing at distribution centers and large retailers to cut down inventory costs plus other suggestions in order to reduce inventory carrying costs.

Ans: To improve warehousing at distribution centers and large retailers and reduce inventory carrying costs, several strategies can be implemented:

1. Optimized Inventory Management System: Implement an efficient inventory management system that tracks inventory levels in real-time, identifies slow-moving or obsolete items, and ensures optimal stock levels to prevent overstocking or stockouts.

2. Just-in-Time (JIT) Inventory System: Adopt a JIT inventory system to minimize inventory holding costs by receiving goods from suppliers only when needed for production or distribution, thereby reducing excess inventory and storage space requirements.

3. Strategic Location Selection: Evaluate and optimize the location of distribution centers and warehouses to ensure proximity to major markets and reduce transportation costs and delivery times. Consider factors such as customer demand patterns, transportation infrastructure, and labor availability.

4. Cross-Docking: Implement cross-docking practices to streamline the flow of goods through distribution centers, allowing for direct transfer from inbound to outbound trucks without the need for storage, thereby reducing inventory holding costs and improving order fulfillment efficiency.

5. Vendor-Managed Inventory (VMI): Collaborate with suppliers to implement VMI, where suppliers monitor and replenish inventory levels at distribution centers and retailers based on agreed-upon demand forecasts, reducing inventory carrying costs and stockouts while improving supply chain visibility and coordination.

6. Inventory Optimization Tools: Utilize advanced inventory optimization tools and algorithms to forecast demand, optimize replenishment quantities, and determine the optimal stocking levels for each product SKU, taking into account factors such as seasonality, trends, and market fluctuations.

7. Regular Inventory Audits and Cycle Counts: Conduct regular inventory audits and cycle counts to ensure inventory accuracy, identify discrepancies, and minimize shrinkage or loss due to theft or damage, thereby optimizing inventory levels and reducing carrying costs.

8. Collaborative Planning, Forecasting, and Replenishment (CPFR): Establish collaborative partnerships with key retailers and suppliers to share sales data, demand forecasts, and inventory information, enabling better demand planning, synchronization of supply chain activities, and reduction of excess inventory and stockouts.

b) Advantages of outsourcing in terms of preparing girls' and boys' toys, toys in local languages, toys for different age ranges, packaging, effecting savings on damages/ transport, responding fast to customers' requests, etc.

Ans: 

1. Cost Efficiency: Outsourcing production of girls' and boys' toys, toys in local languages, and toys for different age ranges to specialized manufacturers can often be more cost-effective than producing them in-house. This is especially true if these products require unique materials, technologies, or expertise that the company does not possess.

2. Expertise and Specialization: Outsourcing allows Super Robots to leverage the expertise and specialization of third-party manufacturers who may have dedicated facilities, equipment, and skilled personnel for producing specific types of toys or packaging. This can result in higher quality products and more efficient production processes.

3. Flexibility and Scalability: Outsourcing provides flexibility and scalability to quickly adapt to changes in customer preferences, market demands, or seasonal fluctuations. Third-party manufacturers can adjust production volumes or introduce new products more rapidly than in-house operations, enabling faster response to customers' requests.

4. Risk Mitigation: Outsourcing can help mitigate risks associated with production delays, quality issues, or market uncertainties. By diversifying production across multiple suppliers or outsourcing certain tasks, Super Robots can reduce its dependence on a single source and minimize the impact of unforeseen disruptions.

5. Focus on Core Competencies: Outsourcing non-core activities such as packaging or certain manufacturing processes allows Super Robots to focus its resources and efforts on core competencies such as product design, branding, and marketing. This can lead to greater innovation, brand differentiation, and competitive advantage in the market.

6. Reduced Overhead Costs: Outsourcing can help reduce overhead costs associated with maintaining in-house production facilities, equipment, and personnel. By outsourcing production to specialized manufacturers, Super Robots can eliminate or reduce costs related to facility maintenance, utilities, labor, and training.

7. Improved Supply Chain Efficiency: Outsourcing logistics operations such as transportation and warehousing to third-party providers with extensive networks and expertise can improve supply chain efficiency, reduce lead times, and lower transportation costs. This can result in faster delivery to customers and savings on damages or transport.

c) How to cut down cost on advertisement campaigns by alternative forms of spreading awareness?

Ans: 

1. Social Media Marketing: Utilize social media platforms such as Facebook, Instagram, Twitter, and TikTok to engage with target audiences, showcase products, run promotions, and build brand awareness. Social media marketing can be cost-effective compared to traditional advertising channels and allows for targeted advertising based on demographics, interests, and behaviors.

2. Content Marketing: Create high-quality and engaging content such as blog posts, articles, videos, and infographics related to toys, parenting tips, educational content, or entertainment for children. By providing valuable content, Super Robots can attract and retain customers, establish thought leadership, and indirectly promote its products without relying solely on paid advertising.

3. Influencer Marketing: Partner with influencers, bloggers, YouTubers, or social media personalities who have a relevant audience of parents, children, or toy enthusiasts. Collaborating with influencers can help Super Robots reach a larger audience, generate authentic product endorsements, and drive sales without the high costs associated with traditional advertising.

4. Email Marketing: Build and maintain an email subscriber list of customers, prospects, and interested individuals. Send out regular newsletters, promotional offers, and updates about new product launches or events to keep subscribers engaged and encourage repeat purchases. Email marketing is a cost-effective way to nurture customer relationships and drive sales.

5. Search Engine Optimization (SEO): Optimize Super Robots' website and online content for search engines to improve visibility and organic traffic. By incorporating relevant keywords, creating high-quality content, and optimizing meta tags and descriptions, Super Robots can increase its online presence, attract more visitors, and reduce reliance on paid advertising for website traffic.

6. Community Engagement: Participate in local community events, sponsor charity initiatives, or organize toy drives and donation programs to create goodwill and positive brand associations. Building strong relationships with local communities can generate word-of-mouth referrals, enhance brand reputation, and increase customer loyalty without significant advertising costs.

7. Partnerships and Collaborations: Explore partnerships with complementary brands, retailers, or organizations to cross-promote products, co-create content, or offer joint promotions. By leveraging each other's audiences and resources, Super Robots can expand its reach, drive sales, and reduce advertising expenses through shared marketing efforts.

8. Referral Programs: Implement a referral program that rewards existing customers for referring new customers to Super Robots. Encourage satisfied customers to spread the word about the company's products through incentives such as discounts, freebies, or exclusive offers. Referral marketing can be a cost-effective way to acquire new customers and increase sales without extensive advertising campaigns.