IMT-69: LOGISTIC AND SUPPLY CHAIN MANAGEMENT

PART - A

Q1. Explain some of the quantitative models used in logistics management.

Q2. How are value-added services classified? Explain in detail.

Q3. Who are the key actors involved in ensuring an efficient and effective logistics system?

Q4. 'Logistics is an integrated effort for creating customer value at the lowest total cost.' Comment on how a logistical manager may balance service expectations and cost expenditures while fulfilling business objectives in light of this statement.

Q5. What are the six operational objectives that determine logistical performance?

PART - B

Q1. 'Transportation management is the backbone of the entire supply chain.' Do you agree? Give reasons for your answer.

Q2. Consider the transportation problem having the following transportation costs and the demand and supply requirements indicated in the following table:

Destination

Use the north-west corner rule to obtain the optimal solution.

Q3. Explain the steps involved in designing an appropriate network design process.

Q4. Analyse the economic benefits of warehousing.

Q5. Explain the principles of packaging.

PART - C

Q1. Write a note on intermodal transportation.

Q2. Trace the evolution of the concept of supply chain management.

Q3. What are the obstacles that have to be overcome to efficiently coordinate a supply chain?

Q4. Explain how the balanced scorecard model acts not only as a measurement tool but also as a management system that helps in translating vision and strategy into strategic objectives.

Q5. 'The most significant technological impact on the supply chain has been information technology (IT).' Do you agree? Give reasons for your answer.

CASE STUDY-I

Wherever you may be staying in Mumbai, in whichever corner your workplace may be situated in this metropolis of more than thirteen million people, you never ever fail to receive your home-made food in time at the lunch hour at your workplace (provided you are willing to pay a nominal sum for the service)! Six days a week some 5000 semi-literate tiffin-wallahs (also called dibba-wallahs) in Mumbai deliver some 200,000 lunch boxes from home to office and take the boxes back again.

Each of these is an entrepreneur, with an investment of around Rs 1200, and a shareholder of the 'Nutan Mumbai Tiffin Box Suppliers Charity Trust (NMTBSCT)'. Dressed in typical attire, i.e., a half sleeved open shirt and a pyjama or trousers, plus a 'Gandhi cap' and Kolhapuri chappals, the tiffin-wallahs carry a wooden case on their heads with 25 to 30 boxes in it. They use a simple, but effective system based on the commuter train infrastructure.

One set of people collect the tiffin boxes from the homes and take them to the local train stations. They load them in the specified local train. Another set unloads them at the destinations. A third set of carriers waiting at the stations sort out and assemble their respective sets of tiffin boxes and deliver them to the customers. The carriers collect the empty tiffin boxes in the afternoon and deliver them back to the homes from where they were collected in the morning.

The tiffin boxes are marked with specific colour codes identifying the place of origin and the place of delivery. The origins of the codification system date back to around 1880-85 and can be traced to the nomads ('Gowaals' and 'Bharwaads') of the Saurashtra and Kutch region of Gujarat in India. Their system of codification was created some 120 years ago to recognize their individual cattle from the collective mass. The continued success of the tiffin-wallahs has been attributed to their reinventing and re-engineering their codification system to match the infrastructure, growth and spread of Mumbai.

The tiffin-wallahs of Mumbai are basically self-employed, and have formed a system that is so efficient at delivering tiffin boxes to the right person on time that they are recognized as the best case of network management in the world. Forbes magazine has accorded the tiffin-wallahs an accuracy rating of 99.99 per cent - one error per eight million deliveries. This exceeds the 'Six Sigma' performance.

According to many experts, the entire service is a feat in logistics. It encompasses all the activities involved in sourcing, procurement, conversion and logistics. This is reflected in the operations of the tiffin-wallahs which focusses on optimization of activities with a view to transporting the finished product using various modes of transportation to distribution centres, and ultimately to customers. The entire process of tiffin collection, delivery and the return journey of the tiffin box is a perfect example of excellence in supply chain management.

Question:

Is the performance of the tiffin-wallahs a feat in logistics or in supply chain management? Explain the reasoning for your answer.

CASE STUDY - II

Maruti Udyog, the leading manufacturer of cars in India, is a leader in supplier relationship management. Its turnover was Rs 12,481 crore and its profit before tax was Rs 1750 crore in 2005-06. It sold 561,822 vehicles in 2005-06 and captured a market share of over 55 per cent. It deals with about 7,100 components for its eleven major models. 70 per cent of its suppliers by number are located within a 100 km radius of its Gurgoan plant. They meet more than 80 per cent of Maruti's requirements by value, which was at a level of Rs 7150 crore in 2005-06.

Maruti has 220 approved vendors who supply the major components. The top 80 vendors supply 86 per cent by value of their purchases. The rest of the vendors supply only 14 per cent. It has also signed joint ventures with a large number of its vendors. Of the 86 per cent components supplied by vendors, joint ventures supply only 34 per cent; the rest of the 52 per cent by value is supplied by other vendors. These 80 vendors are considered strategic partners. Only 20 to 30 of them are Maruti joint ventures.

With strategic partners, Maruti has a number of programs. Their emphasis is on vendor productivity and quality. Maruti takes a major role in improving vendor productivity. It organizes Junkai VA or cost workshops with its vendors on an ongoing basis. Junkai is a Japanese word which basically means 'visiting'. It has 3 components called three G -Gemba, Gembutsu, and Genjitsu.

Gemba means taking a look to see what is happening at the site. Gembutsu means examining the affected piece to understand what exactly the defect is. Genjitsu means discussing under what conditions this has happened - something like a brainstorming session. Typically, a team from Maruti, along with the supplier team, visits the supplier's shop floor, has a look around, noting down points. They then have a brainstorming session at the Maruti office. At the end of the brain storming, they come out with various points relating to improvements in productivity, quality and cost.

Maruti has also constituted a group called Maruti Centre for Excellence. This is a team which continuously goes to suppliers to upgrade them. It audits the workings of its suppliers and comes out with a spider chart. The spider chart has 22 points. Each vendor is evaluated on these 22 points. Additional business is promised on the next new model to vendors who score over 60 per cent on the spider chart. Every vendor really tries to make sure that he goes above this mark.

Apart from this, it has also started second tier improvement in a very big way. This was the latest initiative it took up a year ago. The result has been that the second tier vendor's quality has also gone up. It has also started 'green initiatives'. Accordingly, all packing has been converted into reusable packing. It recently introduced a practice to check the pollution levels of all the trucks getting into Maruti; if the pollution levels were not right, then the trucks were sent back. This made its vendors understand that Maruti cared about the environment.

Further, it follows the Kaizen theme, which means to make it smaller, fewer, lighter, shorter and beautiful. It follows this theme in its plant and has been continuously teaching this practice its vendors. It conserves the usage of material and yield improvement. Moreover, along with CII and USAID, it has started a programme to help its suppliers get ISO 14000 certification. It has also started a programme on ELV compliance. Though this is not required in India, the idea is that by the time the requirement comes to India, Maruti's vendors will all be sufficiently equipped to take care of it. It also has a vendor finance cost reduction programme. It has lined up with banks to see that the loans of its suppliers are transferred to lower interest rates. Through these initiatives Maruti has become more agile and leaner.

In 2005-06, Maruti trained around 16 vendors and ultimately the savings of man hours per day came to 1580 man hours, which has resulted in a saving of over one crore rupees per annum. It was able to reduce component costs by 29 per cent on the Alto alone from 2001 to 2005.

Question:

As you can see, excelling in supplier relationship management is complex. It takes much effort and work. Motivation needs to be balanced with jeopardy. What is it that makes the results worthwhile?