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Assignment 1

Q1. Define globalization. What are the driving forces of globalization?

Ans.:-

Globalization Definition

The term globalization refers to the assimilation of national economies into

international economy through trade, foreign direct investment, capital flows,

migration, and the spread of technology according to Bhagwati, Jagdish in his book In

Defense of Globalization.

According to the United Nations, globalization "is a widely-used term that can be

defined in a number of different ways. When used in an economic context, it refers to

the reduction and removal of barriers between national borders in order to facilitate

the flow of goods, capital, services and labor... although considerable barriers remain

to the flow of labor... Globalization is not a new phenomenon. It began in the late

nineteenth century, but it slowed down during the period from the start of the First

World War until the third quarter of the twentieth century. This slowdown can be

attributed to the inward-looking policies pursued by a number of countries in order to

protect their respective industries... however, the pace of globalization picked up

rapidly during the fourth quarter of the twentieth century..."

Saskia Sassen writes that "a good part of globalization consists of an enormous

variety of micro-processes that begin to denationalize what had been constructed as

national whether policies, capital, political subjectivity, urban spaces, temporal

frames, or any other of a variety of dynamics and domains."

Driving Forces of Globalization

Since the 1980s, global manufacturing industry has gone for major face lift exercise

with the arrival of Free Trade Policy introduced to promote globalization. Today,

majority of the manufacturers have global operations through exports, strategic

alliances, joint ventures or as a part of a committed strategy to sell and produce in off

- shore markets. The factors driving the globalization

concepts are classified into four main categories:

1. Global Market Forces

2. Technological forces

3. Global Cost Forces

4. Political and Macroeconomic forces

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III) Global Cost Forces

New competitive priorities in manufacturing today are product quality, delivery,

reliability, speed, customization and responsiveness to customers. Companies are

forced to reconsider cost factors which drive their global operation strategies.

Production Cost: Companies realized that early activities such as product design and

worker training considerably impacted production costs. Besides, they measured the

costs of poor design, low input quality and poor workmanship by calculating internal

and external failure costs. All these realizations led to the companies hiring skilled

manpower and best quality supplies to stay ahead of competition.

Mass Production Management: Most companies chose Just-in-time (JIT) manufacturing

methods for the management of mass production systems. This was further realized

by the importance of frequent deliveries by nearby suppliers. Ever since a number of

high-technology industries have experienced dramatic growth.

Single Location Production: Similarly, huge numbers apply for the development and

production of new drugs in the pharmaceutical industry. Such high costs drive firms totake up an economies-of-scale strategy that aims at production in a single location,

normally in a country that has the required labor and supplier infrastructure. They

then achieve high-capacity utilization of the capital-intensive facility by aggressively

marketing across the globe.

IV) Political and Macroeconomic Forces

Global Forex Trend Monitoring: Getting hit with unforeseen or unreasonable currencydevaluations in the foreign countries in which the companies operate is a nightmare

for organizations with global operations. Even Indian exporters face the threat of

political and macroeconomic forces. Example: When the dollar appreciates, it means

you pay more Indian Rupees to get the same US Dollar. So when exporters agree a

contract in US Dollar terms, they stand to benefit when the US Dollar appreciates,

because they end up getting more Indian Rupees. This is true for software companies

like Infosys, Wipro and TCS. The opposite is also true, that when the US Dollar

depreciates, you get lesser Indian Rupees. When the US Dollar depreciates, profits of

Indian exporters decline and their share prices also decline. In the case of

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organizations with extremely small profits, a profitable company turns into a loss

making company.

The trade protection mechanisms which exist in the form of tariff and non-tariff

barriers affect overall global operation strategies. Companies have clearly realized the

importance of building a single unit at a particular location and diversified distribution

systems to save on production costs and focus on selling across the globe rather than

to just a particular country.

Q2. What are the three basic operating models of SCM?

Ans.:-

There are 3 basic models of supply chain management and these are:

1) Supply Chain Operations Reference Model (SCOR)

The SCOR was established by a non profit organsiation called Supply Chain Council

(SCC). SCOR enables users to address, improve and communicate supply-chain

management practices within and between all interested parties. The SCOR-model

has been developed to describe the business activities associated with all phases ofsatisfying a customer's demand. By describing supply chains using process building

blocks, the Model can be used to describe supply chains that are very simple or very

complex using a common set of definitions. As a result, disparate industries can be

linked to describe the depth and breadth of virtually any supply chain. The Model has

been able to successfully describe and provide a basis for supply chain improvement

for global projects as well as site-specific projects.

SCOR has the following in its ambit and spans across the following:

All customer interactions, from order entry through paid invoice

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All product (physical material and service) transactions, from your suppliers supplier

to your customers customer, including equipment, supplies, spare parts, bulk product,

software, etc.

All market interactions, from the understanding of aggregate demand to the

fulfillment of each order the main aspects of the SCOR model and its various functions

are the following:

To set the functions of each of the participants of the supply chain and to highlight

their contribution in the supply chain.

To ensure that all the participants and parties in the supply chain are well aware of

their role in the supply chain.

To balance resources with the requirements and to ensure an even match so that the

customers are satisfied.

Management of business rules, supply chain performance, data collection, inventory,capital assets, transportation, planning configuration, and regulatory requirements

and compliance.

Make sure that the supply chain plan and the financial plan are evenly matched to

ensure that there are no problems later.

The SCOR model also aims at coordinating deliveries and making sure that they are

done in a timely and efficient manner.

The vendors need to be selected and fixed based on the needs of the specificorganization and industry that needs to be fixed.

Manage business rules, assess supplier performance, and maintain data.

Manage inventory, capital assets, incoming product, supplier network, import/export

requirements, and supplier agreements.

Schedule production activities, issue product, produce and test, package, stage

product, and release product to deliver.

Manage rules, performance, data, in-process products (WIP), equipment and facilities,transportation, production network, and regulatory compliance for production.

All order management steps from processing customer inquiries and quotes to routing

shipments and selecting carriers.

Warehouse management from receiving and picking product to load and ship product.

Receive and verify product at customer site and install, if necessary.

Invoicing customer.

Manage Deliver business rules, performance, information, finished product

inventories, capital assets, transportation, product life cycle, and import/export

requirements.

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All return of faulty and defective material and their replacement or renewal is done

under the SCOR model.

Five Management Processes

The SCOR model focuses on the following management processes:

SCOR Process Definitions

Plan Processes that balance aggregate demand and supply to

develop a course of action which best meets sourcing,

production and delivery requirements.

Source Processes that procure goods and services to meet planned or

actual demand.

Make Processes that transform product to a finished state to meetplanned or actual demand.

Deliver Processes that provide finished goods and services to meet

planned or actual demand, typically including order

management, transportation management, and distribution

management.

Return Processes associated with returning or receiving returned

products for any reason. These processes extend into post-

delivery customer support.

2) APQCs Supply Classification Model

APQC's Process Classification Framework (PCF) is a taxonomy of cross-functional

business processes intended to allow objective comparison of organizational

performance within and among organizations. APQC's PCF was developed in the early

1990s by APQC and a group of members from a number of industries and countries

throughout the world. Organizations can participate in complimentary research

projects to determine their performance against other organizations in terms of the

processes described in the PCF. Furthermore, the PCF enables organizations to

understand their inner workings. The PCF does not list all processes within a specific

organization, and every process listed in the framework is not present in every

organization. The PCF for every organization is different and based on the specific

needs of the organization. The PCF for each will be different. Smaller organizations

can easily leverage the breadth of the PCF to determine which processes need

additional review or development. Larger organizations leverage the deep research

that is organized along PCF guidelines to objectively aid in comparing performance to

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Organsiational goals are also set in this stage and also the relationship between the

various units in the organization are determined.

Design Products and Services

Under this function, the quality and cost estimates are set for the orgasnization and

newer products are designed and launched keeping in mind the demand patterns and

the demand forecasts for the upcoming time frame. Technology is integrated in the

supply chain and the supply chain is changed and modified according to the current

circumstances. The effectiveness of new models is tested and the same is analysed

and compared with standards which have been pre-determined.

Market and sell

This deals with the development of pricing strategy and the processing of customers

orders. The following are the main areas:

Develop pricing strategy

Develop advertising strategy

Develop marketing messages to communicate benefits

Estimate advertising resource and capital requirements Identify specific target customers and their needs

Develop sales forecast

Sell products or services

Negotiate terms

Produce and deliver for manufacturing oriented organizationsUnder this all the inputs required for manufacturing are included and the purchase of

the same is fixed. The selction of the suppliers is done and the terms and conditions

are fixed with them.

Q3. Discuss the objectives of category management in retail. How is

category management different from brand management?

Ans.:-

Category Management Objective Retail Sector

To make sure that key category sellers are on shelf

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1] Supply Chains Extend Beyond the Immediate Customer and Supplier

This principle states that the supply chain does not end with the individual who

demands the goods and the individual who is the final supplier of the goods. There are

intermediate links in the supply chain too. Consider the case of a manufacturer of

cotton pullovers, he is the final supplier of the cotton pullovers but he has a link of

vendors who supply the intermediate goods and services required to fulfill the

demand for the pullover. Here is a flowchart showing the linkages.

There can be many reasons for delays in delivery or a longer gestation period at anyof the stages and for a variety of reasons. One of the main reasons for the delay of the

orders could be because of faulty demand or retail forecasts and errors in production

estimates caused because of faulty forecasts.

A lot of time can be taken in issues like inspections, transportation problems and labor

issues. All the suppliers like to provide goods on time to their ultimate customer and

in doing so must ensure that all the quality checks and formalities are completed. This

is especially true in the case of small units and orders. When larger orders are therethen economies of scale can be utilized and the orders can be processed on time.

2] Supply Chains are not constant

Supply chains are not constant but keep on changing. This is not beneficial for the

business. Fixed or regular supply chains are good as there is an element of comfort

and reliability in the same. The more uncertain the supply chain, the more it is likely

to cause delays and unexpected obstacles. There are big rewards for those supply

chains which are fixed and constant. One of the first steps the businesses are doing is

sharing their sales, retail and demand data with their reliable suppliers. This helps in

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various ways. In case of standard and constant supply chains and fixed vendors there

are improvements seen in the following fields:

Delivery performance

Inventory reduction and therefore less wastage

The fulfillment time taken to complete the order is less and the time fulfillment

cycle is smaller and hence there is reliability and speedy delivery.

There is forecast accuracy as the supplier and consumer understand each other

and over a period of time reach an understanding regarding the delivery and other

features inherent to their business relationship.

The overall productivity will become better and their will be an increase in output

in the same time frame.

The costs relating to supply chains are lowered and there is cost saving which is

beneficial to the business. However, these improvements can only be made to if there is sharing of knowledge

between the supplier and the consumer. This is possible when the sales and

demand data is shared prior to the commencement of the order. This equips the

supplier to deal with the demand and also make allowance for emergencies based

on forecast and prior patterns of production.

3] Parallel Data Sharing Is Better Than SerialData that is shared in parallel is always better than when data is shared in series or

sequence. This is because when data is shared in series then there more chances for

errors and problems exist because an error committed by one vendor causes more

errors to be caused by the others. When data is shared by all suppliers in parallel,

then all the suppliers are seeing the data in tandem and hence the forecasts are more

useful.

In the first instance, the data is being shared in series. The data is first shared with

Vendor A then with Vendor B and so on. In the second instance data is shared in

parallel with all the vendors to enable easy forecasting and collaboration. Parallel data

sharing is better as it allows less room for errors and forecasting issues.

4] Forecasting and Lead Time are Symbiotic

What is forecasting?

Forecasts of future demand are essential for making supply chain decisions. They

form the basis for supply chain planning. For both pull and push processes the first

step that the manager must make is to make accurate forecasts of future demand.

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The same cotton pullover manufacturer that we were referring to earlier will make

orders on the yarn he needs for the cotton pullovers production based on anticipated

demand for the cotton pullovers. This is called demand forecasting and is an integral

process of supply chain management.

Next is the definition of lead time. Lead time is the gap between when an order is

placed and when it is received. The shorter this time is, the better it is. All companies

try to ensure that their lead time is low so that they customers remain happy and the

company develops a good reputation.

This principle says that forecasts and lead time are symbiotic. This means that

accurate forecasts mean a shorter lead time. This is obvious from the fact that the

more accurate the forecasts will be, the better able the company will be able toproduce the goods and the more ready the inventory will be. All these factors will lead

to quicker output of goods and that will lead to a shorter lead time.

5] Manufacturing and Logistic Costs have Inverse Relationship

The more widespread and far off the places of manufacture of intermediate goods

used in the production process, the longer will be the lead time. Though there may be

benefit in terms of cheaper rates by suppliers in these far off places but that benefitmay be offset by higher logistics cost. Though the vendors will offer better prices for

the goods and it may come out to be cheaper, the logistics cost of forecasting for

these vendors may offset these costs.

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Collaborative Planning, Forecasting and Replenishment (CPFR)

Collaborative Planning, Forecasting and Replenishment (CPFR), a set of guidelines

supported and published by the VICS Association helps to reduce the costs and the

unexpected problems that may occur. Companies throughout the supply chain areable to reduce the costs and increase their output. The partners share their plans and

forecasts and data for the future and then deal with exceptions as they come along.

They use an exceptions based plan to deal with any deviations and problems that

occur from the plan. This helps both the parties as it allows enough reaction time.

Both sides benefit and the ultimate winner is the consumer who gets lower costs.

However, in case the partners are spread out very far then this creates a logistical

problem. Communication regarding the data and sales is essential and long distances

and other geographical issues make it problematic for the information to filter through

correctly.

The CRPF Model and its steps are as follows.

Collaborative Planning, Forecasting and Replenishment (CPFR), a set of guidelines

supported and published by the VICS Association.

Here are the nine steps in the process.

Front end agreement

Joint business plan

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When supply chains are synchronized and geared towards specific data then the

entire supply process becomes streamlined and easy to manage. The process

becomes less costly and costs relating to miscommunication and lack of information

and lack of transparency are reduced. The supply chain process becomes more

effective and efficient as all of the data is easily and readily available.

9] Digitize Everything

The world is becoming smaller with the internet linking everyone. When all the data is

available to all the participants at a click of keys then it is easy to collaborate and

synchronies everything and makes the supply chain process less costly and efficient.

If the supply chain can be synchronized to convert the materials from digital form to

analogue form at the time when demand is known, the whole supply chain processbecomes more responsive and less costly. Digital inventory can be stored, changed,

moved around the world, and presented faster and at much less cost than the analog

forms.

Q5. Give a note on retail transport and retail warehousing.

Ans.:-

Retail TransportIn the supply chain the goods are rarely produced and consumed at the same place.

More often than not, the production of goods takes place in a different place and the

consumption of goods occurs in a different place. Transportation is that driver in the

supply chain that helps to bridge the gap between the place of production and the

place of consumption. This is the reason why transportation and its study is a very

important part of supply chain management.

The important aspect of transportation in the supply chain is the element of

responsiveness that it lends to the supply chain. A faster mode of transport will lead

to quicker delivery and hence a higher responsiveness. However, a higher

responsiveness is possible at the cost of inventory. The decision regarding the

transport element also depends on the competitive strategy of the firm. If the strategy

of the firm is provide quicker service then the firm would require a fast mode of

transport and would value responsiveness more than the costs of inventory.

The following are transport decisions that are required to be made:

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Strategy As discussed earlier, the competitive strategy of the firm is a significant

factor is deciding the importance of transport and responsiveness.

Design The locations, modes and routes of the transportation function is important

and the company must also fix whether the supply should be direct or indirect etc.Mode There are various modes of transport available. It is important to fix the correct

mode of transport that will be both effective and efficient in terms of money and time.

There are 4 main parties that are involved in the transport system and these parties

are:

Shipper Owners and operators of transport infrastructure

Carrier Policy makers of transport policy

With the advent of technology and liberalization and opening up of the economy there

are various modes of transport that are now available. These modes are enumerated

below:

Air

Package carriers

Truck

Rail

Water

Pipeline

Intermodal

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Let us briefly explain each of these:

Air

With Globalization and liberalization, there has been an increase in international

trade. The setting up of trade zones and easing of trade barriers has also resulted in

increased trade between different countries. Air transport is the fastest method of

transport and it helps in reducing the time needed for transportation also. It is

especially helpful for the transport of perishable, valuable and fragile goods. The

drawback of choosing air as the mode of transport can be that it is a costly mode of

transport and the larger the distance between the place of manufacture and the place

of consumption, the higher will be the cost. However, the responsiveness of products

greatly increases in the case of air transport. Being faster than other modes of

transport, it reacts faster and the client is able to receive the goods faster.

Package Carriers

With the advent of international trade, many new firms offering package carrying

services are also coming up. Some examples are Bluedart, FedEx etc. These firms

have no part in the actual production of the goods but are only involved in their

transport from the place of manufacture to the place of consumption. These firms

make use of economies of scale and they have a number of clients and they

aggregate their transport services over a number of clients.Truck

This is one if the most popular and cheapest mode of transport that is available. The

trucks are an efficient mode for transportation goods over small distance especially

within the same country. Trucks can be of different sizes and types based on

requirements. Trucks often cover distances at night and are an easy and cheap

alternative for transport.

Rail

Rail is another mode of transport that is very cheap and efficient. The ability of rails to

carry large amounts of goods over long distances is a very big advantage. It is also

one of the oldest type of mode of transport.

Water

The oldest mode of transport for transportation over long distances, it is still one of

the most popular. It is cheaper than air transport and it has the advantage of being

able to carry large loads for greater distances. The drawback of using water as a

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mode of transport for covering larger distances is that it is slow and takes time to

cover the distance. The responsiveness is affected and the decision to use this mode

of transport would depend on the competitive strategy of the firm.

Pipeline

This is a unique and specialized mode of transport for transporting goods such as

natural gas, petroleum, water etc. It is an effective way of transporting such items and

hence highly popular.

Intermodal

This is the type of mode that is a combination of various modes of transport and

involves usage of more than one mode like halfway shipping and the remaining by rail

etc.

Retail Warehousing

Warehousing is one of the most important aspects of supply chin management.

Warehouses help in storage of inventory and help the firm to react fast to the demand

of the customer. In the previous unit you have already studied the various processes

that are involved in the management of warehouses.

There are two types of warehouses that are there: Public Warehouses

Private Warehouses

Public Warehouses are those warehouses which are open to the public. The

warehouse is open to the public and anyone can become a client and store their

goods in the warehouse. Here the public warehouse charges 2 types of fees:

Materials handling fees

Storage fees

A number of firms can store their goods and the warehouse service provider can avail

economies of scale which benefit it and help it to minimize its cost and make a profit.

Private Warehouses are those warehouses which are owned by a particular company.

This privately owned warehouse only stores the goods of this company. Companies

construct, buy or rent the warehouse and it is for their exclusive use only. No other

individual or firm can use this storage space.

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Q6. How is inventory management and vendor management beneficial to

warehousing and SCM?

Ans.:-

Inventory Management

Inventory Management is an important aspect of Supply Chain Management.

Inventory basically exists because there is a mismatch between demand and supply in

the market. This mismatch between demand and supply may be planned and

unplanned. At times the demand for some goods is higher than the supply, in order to

prevent this from happening; the vendors like to have more stock of the good. This

excess supply over and above the current quantity demanded is known as Inventory.

This may be planned as in the case of supply of sweaters in the winter season by

sweater vendors. The planned inventory is that inventory which is kept in anticipation

of higher demand than current demand. For instance, the current demand of sweatersper day may be 4 per day in the month of August making an average of 120 sweaters

per month but the sweater vendor will keep 250 sweaters per month in the winter

months in anticipation of higher demand in those months. Therefore, the sweater

supplier has kept an inventory of extra sweaters. This is planned inventory. There can

also be unplanned inventory. This is the inventory that has been kept due to wrongful

estimates or forecasts of the demand. For instance, XYZ Company has launched a

new flavour of chips called Tasty Tomato. A shopkeeper orders 100 packets of TastyTomato chips because he feels that the chips will be a hit and the demand for them

will be very high. However, the chips are not that popular and the shopkeeper has 50

packets leftover. This is forced inventory, it is not planned.

Sometimes Inventories are also maintained to make use of economies of scale. An

aluminum machine manufacturer will buy large amounts of aluminum because he

feels that if he buys large quantities he will get cheaper rates and hence his cost willbe minimized.

One of the key roles of inventory is that it supports competitive strategy. This means

that the firms are able to build their strategy around inventory. In case a firm wants to

facilitate higher responsiveness to demand then they will choose to keep higher

inventory so as to satisfy customer demand as soon as possible. This gives the firm an

edge over the other firms. They are able to satisfy customers at premium prices

because of keeping inventory.

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Advantages of Inventory

Induce demand by having the goods ready at a moments notice.

Reduce costs by exploiting economies of scale.

Make the overall price level competitive.

Cause hindrance to speculative practices like black marketing.

Vendor Management

As it is important to manage the supply, demand and the customers it is also very

important to manage the vendors. The vendors are an important link in the supply

chain. The Vendor Management System (VMS) is a system of procuring materials and

labor. The labor is also an important aspect of VMS. It refers to both the permanent as

well as the temporary labor and man force requirements.

As the economy grows and markets open up, there is a new pattern of having multiple

vendors. There is a requirement for having a smooth system of vendor management

that is easy to operate and free of complexities.

The following are advantages of a sound VMS:

Improved labor planning

Increased worker productivity Optimal fulfillment execution

Enhance customer service

Vendor Managed Inventory (VMI)

In its simplest form, Vendor Managed Inventory is the process where the vendor

assumes the task of generating purchase orders to replenish a customers inventory.

VMI is a term that is used to describe many types of supply chain initiatives. The VMIprocess is a combination of e-commerce, software and people.

The implementations of VMI can be broken into three main categories:

Collaboration

Automation and

Cost transference

A collaborative planning model consists of sharing data, and jointly developing

forecasts and production schedules amongst supplier chain partners and participants.

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This collaborative process occurs at the item level. The buyer collaborates or shares

data with the supplier on demand plans in order to develop an agreed upon forecast

of future demand that both companies will use to enhance and drive their business.

This strictly collaborative model is applicable to supply chains where a few, distinct

items generate substantial volumes of business. In such a situation it is valuable for

people to review and arrive at consensus on forecasting and replenishment plans for

each item.

A Mandated Transfer model is a very simple process where the main goal of the

buying organization is to transfer the activity and costs of managing inventory to the

supplier. The execution of this model is very simple and requires minimal and also no

integration efforts by either party. This process is very simple as the supplier

dispatches a person to the customers site to count the inventory on the shelf andcompare the current counts to the previous counts to determine usage and

replenishment. Accordingly further decisions regarding restocking and replenishment

of the inventory takes place. This process provides some value to the customer by

offloading work and responsibility for inventory management, but the total supply

chain benefit is negligible as the supplier takes up the work saved by the customer.

Ultimately the costs are either transferred back to the buying organization or cut into

the suppliers operating profit. The Mandated Transfer model is typically seen where asupplier must provide a VMI service as a condition of business and lacks the

advantage of bargaining position, resources or time to implement an automated,

mutually beneficial solution.

A Fully Automated replenishment model combines the positive elements from the

other two models with a more comprehensive goal of total supply chain cost reduction

for the replenished site and supplier. This VMI model begins with a collaborativeprocess to define the goals and constraints of the VMI relationship at the macro level.

With goals established for inventory performance and service, the VMI software

develops the replenishment strategy at the micro level to achieve the established

goals at the lowest total cost. Execution against the replenishment strategy is done

automatically based on the daily changes in inventory and demand at the replenished

site.

In the absence of timely and accurate consumption data, each node in the supply

chain compensates for the lack of information with inventory. Not only does poor

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information flow build supply chain inventories, but it also restricts each companys

ability to react to increases in demand, causes extended outages, service

interruptions and lost sales. As actual demand for products is disseminated up the

supply chain in a more real time environment, the more closely aligned production is

with demand. As the gap between production and demand diminishes so do supply

chain inventories and service level interruptions.

For the replenished location, the major benefits are:

Increased service level to the final consumer

Increased sales

Increased return on assets

Elimination of routine replenishment activities, thereby limiting inventory to a

favorable rate

Reduced fulfillment costs as well as lead times Improved and expanded relationship with the supplying organization which leads to

long term relationship and the benefits of stability and continuity.

For the supplier, the major benefits are:

Increased service level to the ultimate consumer

Increased sales made available to the ultimate consumer

Reduced fulfillment costs and lead times Improved and expanded relationship with the organization whose inventory has been

replaced

Smoother and predictable demand patterns

Elimination of human errors and complete ownership and responsibility

Assignment Set- 2

Q1. What is warehouse layout plan? Explain its importance?

Ans.:-

Warehouse layout and space design is very important for effective and efficient warehouse

management. Merchandise stored in the warehouse utilizes space and it costs money to the

organization. This space needs to be efficiently allocated to the received merchandise. Space

should be allocated for goods receipts, order preparation, order loading and shipping, order

picking and packing, order assembly, and also to the warehouse back office. Organizations

also implement WMS to optimize their warehouse layout plans and space utilization.

In a well-organized warehouse merchandise can be picked up and put away quickly and

easily. This is done by segregating the warehouse into different zones or bins and ranking

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them. This way employees can ensure that merchandise in certain zones or bins needs to be

picked first and also put away first. A good warehouse layout also individually determines if a

bin or slot is fixed or floating. Merchandise to be stored in fixed slots or bins is pre determined

and it never changes where as in floating bins any merchandise can be stored on a need

basis. A good layout also helps employees to ensure on time bin replenishment. Thus, a good

warehouse layout can ensure optimum space utilization, reduce storage costs, and improve

employee efficiency. This enables organizations to meet the service levels and consistently

provide good customer service.

Warehouse Layout Plan

Following are the steps involved to plan warehouse layout:

I) Define Objectives:-While making a plan for the warehouse layout, the objectives should

be clearly defined. Objectives may vary from organization to organization.

However, some common objectives while setting up a warehouse are increase businessprofits, increase labor productivity, efficient space utilization, reducing storage costs, and

ultimately providing better customer service. Also, the layout should be flexible enough to

accommodate specified products and manage any changes in their quantity.

II) Collect Information:- Collect all the information from the architecture or designer

regarding the layout, space utilization, storage, and merchandise handling. Also, collection

information about the space allocation for merchandise receiving put away, loading, shipping,

truck yard, office etc. This information should be in the form of a physical map indicating the

aisles, columns, doors, racks and slots, entry, exit, docks, and height restrictions.

III) Perform Analysis:- Once all the necessary information is collected it is time to analyze

the information. Analysis includes the comparison of collected data with the defined

objectives. Analyze if the warehouse layout meets the set objectives. If it does not, then

necessary modifications in the plan are suggested.

IV) Create Plan:- After the layout design meets the set objectives, a plan is created to

implement the warehouse layout. A plan utilizes the information from the analysis, collected

information and set objectives. A good plan should first show the big picture of a warehouse,

indicating all-important tasks to be performed. These tasks are then subdivided into sub

activities to be carried out. Also, necessary resources are allocated to each activity. The plan

should also indicate the estimated time to complete each sub activity and also the complete

task. The plan should be signed off by the higher management to ensure the timeline

correctness and availability of required resources.

V) Plan implementation :- Real time implementation of the plan should match the signed

off plan. Most of the time this does not match, due to incorrect or unrealistic timelines, lack of

resources, and lack of necessary skills. Thus, it is important to time the implementation

correctly, make necessary changes in the WMS, and try not to disturb the regular warehouse

operations. Also, a physical inventory of the merchandise in the warehouse should be carried

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out after the plan implementation. This helps in identifying any shrinkage and maintains the

correct inventory count.

VI) Post implementation follow-up:- Once the layout is implemented regular audits should

be carried out to ensure that the layout is as per the plan. Also, all the merchandise should be

placed according the space allocated. If there are any errors or if the plan still needs little

modification, the entire process is carried out again. The new plan should not have any

warehouse operational problems. Finally, the results of warehouse layout are compared with

the set objectives. If the set objectives are met the plan is successful.

2.) Increasing warehouse space utilization

It is not an easy task to change or expand the existing warehouse. It costs time, capital, and

efforts to the organization. Thus, it is imperative to efficiently use the existing space of the

warehouse. Following are some basic steps for optimizing the use of available storage space.

Office space should be kept to minimum in the warehouse. Office can be set somewhere else

if possible. Always analyze the current layout of the warehouse and compare it with the set objectives.

Make any changes if necessary.

Return or discard any outdated, expired, damages and defective items.

Any space over the doors can be utilized. Empty pallets, creates and boxes can be stored on

the racks built over the doors. These materials can also be stored outside the warehouse if

space is available.

Do not store unnecessary material or junk in the warehouse. Instead use this space for

storage of merchandise or for other tasks.

Every centimeter in the warehouse should be effectively used. Any activities or tasks that can

be performed out of the warehouse should be moved out.

Keep the inventory levels to minimum, still achieving service levels.

Ensure that slots are allocated as per the size, weight, and height of the merchandise. Product

should correctly fit the slot, without wasting any space horizontal or vertical space.

Consider adding mezzanines for tasks or activities that require low clearance.

Utilize the total vertical cube of the warehouse. Vertical cube includes any space available

above the doors, walls, load, aisles, space above works and pick areas, and above docks.

Q2. Explain in detail the various aspects involved in assortment planning.

Ans.:-

To build a complete assortment plan, there are various details taken into account, the

automated system however enables the organizations to address key parameters in four

important areas:

Product Attributes This set of parameters enables the retailer relate to the consumer

choices, by taking a deep understanding of the brand, vendor, fabric, silhouette, price point,

and theme. These parameters enable the retailers to customize the assortment and then build

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the proper bouquet of various components. For instance, the retailer can determine the right

percentage of brands, quantity of each brand, and similar calculations before planning the

assortment mix.

Store Structure/Store Characteristics These parameters enable the retailers to

categorize stores into cluster, as it regarded as a most critical step even before product

assortments are defined. Hence the grouping by the size, volume, and type of store, the

climate, and the customer type helps the planner meet each stores particular demands. The

store characteristics are crucial in micromarketing as they provide the necessary support

distribution to the stores.

Time Dimension/Product Seasonality The time dimension for an assortment plan

considers the usual week, month, and season wise planning and execution, along with

product transition between seasons. But assortment planning also considers what is normally

known as mini season (smaller time periods) such as back-to-school, holiday, and summer

clearance. These seasonal periods reflect on events that help define the productcharacteristics needed to address customer demand.

Space Dimensions/Space Utilization As the assortment plan develops, it assigns on hand

space based on the product definition. Aspects such as the number of styles and quantities of

each style affect space utilization. Product dimensions, product density, product display

requirements, store structure, store layout, store look, and visual merchandising also impact

the overall space plan and, accordingly, the assortment plan as well.

Managing the Volume of Detail To handle all of the calculations and the volume of detail,

assortment planning uses systems that go beyond simple spreadsheets. These systems apply

the automation essential to hold the large and tedious detail needed in assortment planning

process.

Q3. For a retailer, what factors influence stock related decisions? Explain.

Ans.:-

Critical factors influencing the assortment rationalization and stock related decision making:

Merchandise/Financial Planning

Store Planning

Store Clustering

Space Planning

Allocation

Replenishment

Each of the above stated factors are explained in detail as under:

1) Merchandise/Financial Planning

In order to successfully execute the rationalization activity, sales forecasting activity isundertaken so that retailers are able to foresee and predict the pre-season and in season

sales trends for a particular assortment. This is done by clearly defining the trends in the past,

not to forget the prevailing market conditions and changing trends. Based on this information,

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the intelligence teams decide on the percent wise contribution as well as future sales

opportunities. As a result, the retailers are able to decide on mark up and mark down

tradeoffs.

2) Store Planning

Business Intelligence teams generate regular assortment analysis reports and based on this

information provided, sales are forecasted for each type of assortment and also the sales

contribution ratios are decided for the future and top down store planning is done in time. This

in turn helps the retailers to improve competition and understand other retail store estimates,

determine assortment related problems and concerns that require timely action before further

assortment planning takes place.

3) Store Clustering

Assortment Rationalization activity is also based on the in-season store sales projections; this

is because the store plans are made accordingly and the on-going development of

performance based store clusters is decided. Business Intelligence generates cluster analysisreports so as to define cluster problems and exceptions and in addition to this, they

determine the final cluster and assortment definition, criteria for the assortment

rationalization based on statistical analysis and data mining approach.

4) Space Planning

Assortment rationalization activity is also highly dependent on item movement estimates that

are derived from the sales forecast data and clearly highlighted in the unit assortment plan to

determine the space needs of a particular type of assortment. Business Intelligence teams

provide the necessary inputs, analysis and recommend the changes required for the overall

space utilization for the selected assortment. Assortment rationalization takes place once the

following actions are undertaken:

Optimum use of space based on available space Type of assortment

Density Fixture characteristics

Store layout

5) Allocation

Business Intelligence teams generate on -going store sales projections on regular basis in

order to derive the latest store plans; this in turn helps the retailers to better allocate and

conduct stock related decision making exercise. Several information inputs such as optimum

allocation quantities, case pack sizes, assortment shelf life, overstock and markdown status is

considered before any stock related decision is made and new assortment combinations are

planned or released.

6) Replenishment

Business intelligence teams release the latest item store sales forecasts every week in order

to drive the auto-replenishment function and make recommendations to the retail stores so

that they can monitor stock safety, lead time, order cycles etc.

To conclude we can say that:

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Assortment Optimization/rationalization is largely dependent on sales forecasts and in turn

influence the stock related decision making process. In other words, sales forecasts support

the advanced planning functions. Decision-making, plan review and parameter definition is

regularly looked into before any forecasting and assortment rationalization is applied. By

following these tools and techniques, the retailer's ability and capacity to manage a customer

centric retail environment is improvised.

Q4. In retail operations, how does SCM help and what role does it play?

Ans.:-

1) The Current Reality of the Retail Industry

Retailing involves sale of new or used goods to end consumers. Severe competition in retail

due to ever growing supply and consumer demand leads to hyper-markets and super-stores

battling with each other on the sales front.

On the other hand, direct marketers (including catalogs and online sites) are stealing

customers from stores. With the new online selling mantra, direct selling through online

retailers, catalog companies and home-shopping is picking up. Huge discounts are offered by

reducing overhead costs of manpower, store, and associated costs. Customers now buy

anything from automobiles to daily commodities online.

This has eventually forced the retail to think of the new avenues related supply chain

management mechanism. So how is supply chain management helping the retail industry in

these competitive times.

Strategic methods and tools like vendor managed inventory, ERP and SCM ensure real-time

visibility of sales and order status. In-store kiosks, service desk enhancements and strategic

technologies to track inventory are critical to improve customer experience and further

differentiate the brand.

New efficiencies in managing stock and collaborative forecasting and replenishment help

ensure that the products customers want are readily available on store shelves. This is

achieved by ensuring strategic collaboration of the internal process with the business

processes of the suppliers and customers.

2) Challenges in Retail

Many retail companies continuously work on improving their supply chain and demand

management initiatives such as:

Forecasting and inventory management

Peak season demand handling

Order management Warehouse management

The above 4 areas continue to pose challenges to the retail industry. Achieving close to 95%

and above accuracy consistently has been a challenge, let along achieving 100% accuracy.

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3) Important Supply Chain Management Related Areas

I) Fulfillment

Retailers regularly ensure that the stocks are filled at all times so that the customers do not

go back due to unavailability of the required items. To ensure the fulfillment process is driven

properly, there are several other steps that the retailers follow such as conducting regular

stock check exercises, calculating variances, quality control, etc.

II) Logistics

Retail operations look for options where they can opt for either a partnership or strategic

alliance with the transportation firms so as to ensure timely delivery of stocks at the lowest

possible costs. This requires integration between the retail operations and distribution teams.

It enables checking status of the deliveries, speed of deliveries and % of on-time deliveries.

III) Procurement

Retail operations choose and select vendors for procurement, who can deliver merchandise at

the lowest possible costs in the shortest lead time. Also retailers look for vendor partners who

are flexible in operations and can demonstrate an understanding of the changing demand

patterns.

Therefore it is correct to state that SCM gives an edge to companies to be flexible to

unforeseen demands.

Q5. What do you mean by asset management? Explain its importance in

supply chain.

Ans.:-

Definition of Asset Management

Asset management is the management of the assets of the company or the organization. It is

an important aspect of supply chain management and the correct management of the supply

chain makes the entire process of production and delivery very efficient and smooth. There

are two types of assets that are there in the supply chain i.e. Physical Assets and Capital

Assets. Management of both these assets is essential in the supply chain process.

Asset management is maintaining a desired level of service for what you want your assets to

provide at the lowest life cycle cost. Lowest life cycle cost refers to the best appropriate cost

for rehabilitating, repairing or replacing an asset.

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Fig. 7.2: Sourcing Decision Components

Physical assets these are the assets of the organization which are physical in nature. These

include:

Plant Building

Machinery Finished goods

Unfinished goods Stock of raw materials

Inventory Transport vehicles owned by the organization

The management of these assets includes the selection, maintenance, purchase, repair and

replacement.

Physical assets are one of the most important assets that are available to the organization

and faulty, incorrect or negligent management of these assets leads to a fall in the efficiency

of the output and obstacles in the way of management.

Capital Assets These are the assets that are not physical in nature and are related to the

capital and financial needs of the organization. It includes the stocks, bonds and other capital

investments that are held by the company. It is the investment management of the

companies financial assets and is very important in the supply chain process as it increases

the supply chain surplus at various levels if it is done in an efficient manner. In the retail

environment we shall focus more on the management of the physical assets of the

organization rather than the capital assets.

Asset Management is the art and science of making the right decisions and optimizing these

processes. Correct asset management is at the core of a successful supply chain and its

management is very important and helps increase the efficiency of the organization by a

great extent. It is one of the basic objectives of the supply chain management that the total

cost over the life time of the asset be minimized and reduced as much as possible. Asset

management ensures that the cost of the asset and its repair, maintenance and functioning is

kept at a low level and thereby increases the profit margin of the firm. There are factors such

as risk management and business continuity that also need to be considered before taking

decisions in asset management.

This emerging professional discipline deals with the optimal management of physical asset

systems and their life cycles.

Importance of Asset Management in Supply Chain

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Quality the assets must be of the quality that is expected by the organization and a check

must be kept on the vendors who are supplying the assets to the company. Quality checks

must be done to ensure that the assets are of the desired quality and not of substandard

quality.

Safety It is important to ensure that the assets that are being used are safe and that the

safety standards of the same are being met. Many employees of the organization are using

the assets on a daily level and therefore, a check must be kept on the safety standards of the

assets. Regular tests shall ensure that the assets are safe for use.

There are various ways in which the supply chain is important to the organization. The

following are the salient features of the comprehensive and sound asset management in an

organization: Changes to our understanding of how maintenance contributes to a companys strategic

advantage.

Explains the way in which we understand equipment failures.

The maintenance department alone is not capable of developing a sustainable and adequate

maintenance strategy regime.

Maintenance is not about preventing failures, it is about preventing the consequences of

failure.

An understanding of the ability of operational maintenance to drive capital expenditure.

More protection is not necessarily better.

An understanding of new ways of maintaining items, particularly those that dont fails

according to long-held views.

Extensive data is not required to take decisions on maintenance policies.

The asset management system is a very helpful system and if done in a sound manner will

lead to the following benefits:

Prolonging asset life and aiding in rehabilitate/repair/replacement decisions through efficient

and focused operations and maintenance.

Meeting consumer demands with a focus on system sustainability.

Setting rates based on sound operational and financial planning.

Budgeting focused on activities critical to sustained performance.

Meeting service expectations and regulatory requirements.

Improving response to emergencies.

Improving security and safety of assets.

Q6. What is multi-location inventory model? Is it beneficial for retail? Justify your

answer.

Ans.:-

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Multi-location Inventory Models

Multi location inventory models have become very prominent in dynamic environment of

retailing. With multiple locations; inventory management holds a critical position in any

organizations overall profitability. Inventory and logistics cost, freight cost, weak freight

connectivity are few concerns that cloud the minds of strategy makers at top management

level.

Traditional Approach

There are two factors that every organization has to consider one is timely deliverance of

inventory at each location and stock quantity at each location.

To deal with above mentioned challenges multi location inventory models were developed

known as MLIM. MLIM were divided into vertical, horizontal and mixed structure. But these

models had their limitations and were used with simulations to fill the gaps.

Modern Approach

With advent of technological age, organizations are taking help of technology to handle MLIM

efficiently. Softwares like JAB and Oracle are designed to handle logistics and inventory

management. Instead of manual simulations, now companies are using computer simulation

faster and foolproof inventory systems. These systems cover, delivery in multiple location,

freight costs, freight distribution and quantity of stocks per location, stock clutter etc.

Multi location inventory models have become very prominent in dynamic environment of

retailing. With multiple locations; inventory management holds a critical position in any

organizations overall profitability. Inventory and logistics cost, freight cost, weak freight

connectivity are few concerns that cloud the minds of strategy makers at top management

level.