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ISBM Assignments Supply Chain Management-ISBM-1
Product Name : Supply Chain Management-ISBM-1
Product Code : AC1
Category : ISBM
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Description :

CASE – 1


The e-tendering process has meant a transformation from a traditional vendor selection process through tenders to an online process making huge advances in efficiency, transparency and Data Storage solutions and retrieval systems. Wipro Infotech Enterprise application practice through its e-procurement application development service has ensured a smooth migration for governments.


The e-tendering service offering allows vendors to electronically upload and download documents, access project details as well as enabling you to maintain a track on the overall status of the tenders.


The key benefits of our E-tendering service offering include:


  • Reducing collusion among vendors and making the process fair and competitive
  • Enabling systematic documentation of the complete tendering process and hence reducing administrative costs and minimising human error
  • Ensuring significant reduction in processing time and tender cycle time
  • Ensuring timely completion of tendering process thereby resulting in better utilisation of available funds from financial institutions
  • Providing onsite service and training to ensure that government adopts the new system without any difficulties



  • How has technology helped SCM ?
  • Is e-tendering a good process to select vendors?



Supply Chain: definition of a supply chain as a partnership of organizations sharing a common goal of delivering a set of goods or services to an end-customer. Thus, the supply chain includes not only the upstream suppliers of an item and the organizations that make the components used to create that item, but also the downstream retailers or distributors for the item. Other authors have called these value chains or webs, in an attempt to highlight the fact that supply chains don't just include suppliers but also their customers and that the relationships aren't always linear but more commonly look like a network or web.

Supply Chain Collaboration: any kind of joint, coordinated effort between two parties in a supply chain to achieve a common goal. Note that these words on their own give no indication of whether the effort I am talking about is at a strategic, tactical, or operational level, what kind of business process is involved, or the degree of collaboration. These things aren't often stated explicitly enough when we talk about collaboration or the tools used to support it.

Since there are numerous processes that partners can collaborate on, it is critical that we are clear about which processes are involved in the collaboration. On this site, we focus primarily on Collaborative Planning, Forecasting, and Replenishment (CPFR) activities when talking about supply chain collaboration, rather than other activities such as collaborative design or marketing. However, once organizations begin the strategic shift towards more collaborative relationships, it is much easier to experience process gains in many other areas.


Define supply chain and supply chain collaboration?



Decisions on Three Levels

Supply chain management decisions are often said to belong to one of three levels; the strategic, the tactical, or the operational level. Since there is no well defined and unified use of these terms, this Section describes the how they are used in this thesis. Figure  shows the three level of decisions as a pyramid shaped hierarchy. The decisions on a higher level in the pyramid will set the conditions under which lower level decisions are made.

On the strategic level long term decisions are made. According to Ganeshan and Harrison [12], these are related to location, production, inventory, and transportation. Location decisions are concerned with the size, number, and geographic location of the supply chain entities, such as plants, inventories, or distribution centers. The production decisions are meant to determine which products to produce, where to produce them, which suppliers to use, from which plants to supply distribution centers, and so on. Inventory decisions are concerned with the way of managing inventories throughout the supply chain. Transport decisions are made on the modes of transport to use.

Decisions made on the strategic level are of course interrelated. For example decisions on mode of transport are influenced by decisions on geographical placement of plants and warehouses, and inventory policies are influenced by choice of suppliers and production locations. Modeling and simulation is frequently used for analyzing these interrelations, and the impact of making strategic level changes in the supply chain.

On the tactical level medium term decisions are made, such as weekly demand forecasts, distribution and transportation planning, production planning, and materials requirement planning. The operational level of supply chain management is concerned with the very short term decisions made from day to day. The border between the tactical and operational levels is vague. Often no distinction is made, as will be the case in this thesis.


Define hierarchy of decision making in supply chain management?




Inventory is a ``Flexibility Buffer''


A manufacturers flexibility is its ability to respond to changes in demand. Imagine a company that can receive customer orders, order and receive components, assemble these, fill the orders, and ship them to customers in one single day. This company would have a total flexibility. It would be able to respond to any unforeseen events on a daily basis, and could easily attain a hundred percent customer satisfaction without any inventory. But this is of course rarely the case. A supply chain may consist of many levels of production, transportation, and warehousing, each level adding to the lead time. The time from the first materials are ordered at the beginning of the supply chain till the finished products reach the customer may be long. In the US apparel industry this time is typically 58.5 weeks ! (from 1990, Flaherty.


It is evident that customers will not wait this long from order to delivery. The manufacturer needs to plan ahead, and therefore also to estimate future demand by making demand forecasts. If planning of production and inventories was perfect we would be able to implement a pure Just in Time strategy, with components arriving as they are needed, and finished goods being shipped as they leave the assembly line. But in a supply chain there are many events that can not be foreseen and uncertainties that need to be accounted for. These may be: late shipments from suppliers, defect incoming material, imperfect production yield, production process breakdown, or highly uncertain product demands.


The longer the planning horizon, the less accurate the plans will be. A typical US apparel manufacturer must see more than a year into the future ! For it to maintain a high level of customer service, all uncertainty of the year must be accounted for (see Pitfall 5 below). The long lead times make the manufacturer inflexible, and vulnerable to unforeseen changes and inaccurate demand forecasts.


A manufacturer will account for the uncertainties and unforeseen events by keeping safety stocks. The safety stocks assure the necessary flexibility, or rather they act as buffers for the lack of flexibility in the supply chain.


As we decrease lead times in the supply chain, we decrease the planning horizon, and thereby increase the flexibility. The need for a buffer in the form of inventory will also diminish. In other words; higher flexibility allows less inventory to maintain the same level of customer service.

Inventory vs. Customer Service: A Trade-Off

If we assume lead times to be constant, the ability to fill orders is directly dependent on the inventory levels in a supply chain. As long as there are products in the finished goods inventory (FGI), from which products are taken, orders can be satisfied. Other inventories, such as raw product inventories will have a more indirect effect on customer satisfaction. Stock-outs in any of these will obstruct production and may eventually lead to stock-out in the FGI. For this reason, it is common in supply chain management to keep exaggerated inventory levels. But as mentioned above inventory holding costs are often calculated as high as 30-40% of inventory values.


While oversized inventories is a costly inventory management strategy, low fill rates are also costly. Business may be lost through cancelled orders, and the company's reputation may be severely damaged. It is therefore in a company's interest to balance inventory holding cost and the cost of imperfect customer satisfaction. The trade-off inventory vs. customer satisfaction is one of the classic issues of logistics and supply chain management.


Pitfalls in Inventory Management

Based on knowledge and experience from supply chain management in electronics, computer, and automobile companies, Lee and Billington [16] identify 14 pitfalls in inventory management. Eight of which are found relevant to this project:


Pitfall 1.    No Supply Chain Metrics:

                  In a supply chain with multiple sites, each site will often have its fairly autonomous
                  management team. The objectives of the various teams may differ, and even be
                  conflicting. Inventory may for example be reduced at a Site A of a supply chain, and
                  thereby, seen from a local perspective, the performance is enhanced. But the inventory
                  decrease may also decrease Site A's flexibility. Because Site A now responds more slowly
                  to changes, Site B, which is Site A's customer will have to increase its inventory (of Site
                  A parts) in order to maintain its flexibility and level of customer service. The lack of
                  supply chain metrics has prevented managers at Site A to see that their local
                  improvements has not lead to improved overall performance of the supply chain. The
                  objective of supply chain metrics is to give the basis for evaluations of the performance of
                  the whole supply chain as one system.


Pitfall 2.    Inadequate Definition of Customer Service:

                  Too few and in-concise metrics for customer service. The evaluation of performance  
                  becomes difficult, and certain aspects of customer service may be overlooked.


Pitfall 3.    Inaccurate Delivery Status Data:

                  Customers are not correctly informed of delivery dates of orders and of late deliveries.
                  Companies can often not readily retrieve the information needed to do so.


Pitfall 4.    Inefficient Information Systems:

                  Databases at different operation sites that describe system environment, inventories,
                  backlog, future production plans, and so on are often not linked. Information must be
                  retrieved manually, and this can be a long process. Planning cycles may therefore be long,
                  using highly uncertain demand forecasts. The wrong products are made, and inventories
                  and backlogs grow.


Pitfall 5.    Ignoring the Impact of Uncertainties:

                  Too often supply chains do not track uncertainties such as suppliers' delivery times, the
                  quality of incoming materials, manufacturing process time, transit times, and so on. This
                  leads to non-optimal stocking levels. In some cases uncertainties are properly tracked, but
                  there is no follow-up.


Pitfall 6.    Simplistic Inventory Stocking Policies:

                  Stocking policies are often not linked to knowledge of the uncertainties mentioned above.
                  Stocking policies are often based on the quantity usage of the items stocked. This says
                  nothing about the uncertainty associated with the usage. Analysis show that stocking
                  levels could be greatly reduced by transferring stocking policies from being quantity  
                  based to being uncertainty based.


Pitfall 7.    Organizational Barriers:

                  Entities in a supply chain may belong to different organizations within the same company.
                  The organizations will independently measure the performance of the entities. While each
                  entity is occupied with achieving local goals (much like in pitfall 1), important synergies
                  may be lost.



Pitfall 8.    Incomplete Supply Chain:

                  Supply chain managers are often focussed only on the internal supply chain. Going
                  beyond the internal supply chain by including external suppliers and customers often
                  exposes new opportunities for improving internal operations



v  Define Inventory is a ``Flexibility Buffer’’?


What are the various pitfalls in inventory management?
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