Interactive Distance Learning Centre INDIAN INSTITUTE OF MANAGEMENT KOZHIKODE, Executive Management Education Programme {@MEP-08) End Term Examination - August 2003 ‘Supply Chain Management Maxiraum Marks: 50 Duration : 2 hours Note: Exam is Open Book. However, only the Text Book authored by Simchi-Levi etal. is allowed. No other resourees are allowed in the exam. Question 1 is compulsory and carries 14 marks. OF the remaining five questions attempt any four questions each of these carries 9 marks. Assume suitably, if required. but do not forget to mention these assumptions. Calculators are allowed. Q. 1. KLF Electronics is an American manufacturer of electronic equipments. The company has a single manulacturing facility in San Jose, California KLE Electronics distiibutes its products through five regfonal warehouses located in Atlanta, Boston, Chicago, Dallas, and Los Angeles. In the current distribution system, the United Siates is partitioned into five major markets, each of which is served by a single regional warehouse. Customers, typically retail outlets, receive items directly from the regional warehouse in their market, That is, in the current distribution system, each customer is assigned to a single market and receives deliveries from one regional warehouse. The warehouses receive items from the manufacturing facility. Typically. it fakes about two weeks to satisfy an order placed by any of the regional warehouses. Currently. KLF provides their customers with a service level of about 90 percent Ip recent years, KLF has seen a significant increase in competition and huge pressure from their customers to improve service level and reduce costs. To improve service level and reduce costs. KLP would like to consider an alternative disteibution strategy in which the five regional warehouses are replaced with a single, central Warehouse that will be in charge of all customer orders. This warehouse should be one of ihe existing warehouses, The company CEO insists that whatever distribution stratcy used, KLE will design the strategy so that service level is increased lo about 97 percent Now answer the following three questions: A. A detailed analysis of customer demand in the five market areas reveals that the demand in the five regions are very similar; that is, it is common that if weekly demand in one region is above average, so is the weekly demand in the other regions. How does this observation affect the attractiveness of the new system? [1] B. To perform a rigorous analysis, you have identified a typical product, product A. Table | provides historical data that includes weekly demand for this produet for the last 12 weeks in cach of the market areas. An order (placed by a warehouse (o the factory) costs $ 5,550 (per orden), and holding inventory costs $ 1.25 per unit per week. In the current distribution system, the cost of transporting. a product thom the manufacturing facility to & warehouse is given in Table 2 (see the column “Inbound”). Table 2 also provides information about transportation eost per unit from each warehouse to the stores in its market arca (see the columa “Outbound” Finally, Table 3. provides information about transportation costs per unit product from cach existing regional warehouse to all other market ates, assuming this regional warehouise becomes the central warehouse. Suppose you have to compare the two systems for product A oniy, what is your recommendation’ [6] . Itis proposed that in the centralized distribution strategy, that is, the one with a single warehouse, products will be distributed using UPS Ground Service, which guarantees that products will arrive at the warehouse ibr three days (0.5 week). OF course. inthis. case, (ransportation cost for shipping a unit product fon aSuppler A | Price en ea [Quality O94 2 5000 PPM [Delivery on time | 95% 99% 98% [Order cycle time | 2 Weeks [3 Weeks | 24 Hours (a) Discuss the critical factors that you should consider when deciding whether to single-source or multiple-source Ql (b) What other factors or information besides what this ease presents might a buyer or buying. team require when evaluating the worthiness of the potential supplices? [3] ’ {e) Recommend a possible sourcing strategy. 4] VA: 3. (2) Consider the supply chain for packaged fruit juice sold by @ major food processing company. What are the sourees of uncertainties in this supply chain’? What [45] ge € ‘one, ~{b) Name some industries in which products have protiferated and life cycle © shortened? How the supply chains of these industries have reacted to this change? [43] Q. 4. Answer any two of the following {@) Measures that you would like to use in evaluating the performance of a bus Amazon.com and its supply chain? yy [45] (b) List the various uncertainties involved in the processed food! supply chain, Haw these uncertainties can be effectively tackled’? 4.5] irm that is about to develo hedge strategy, ora leaible #3 (©) You are the CEO of a small electronics manufacturing: slobal strategy. Would you prefer a speculative stratepy. a “ : is ques Fi , sy! stratezy? Would your answer o this question change if you were the CEO ofa large “0 Hectraics frm? 45} Q.5. (a) Diseuss how each of the following helps to alleviate the bullwhip effect: Yh, commerce and Internet, Everyday Low Pricing, Vendor Managed fnventory [4. a (h) Consider a manager developing a logistics strategy. Discuss specific situations. for ‘which the best approach would be to: () employ internal logistics expertise, (i aequive a KT company with this expertise i} develop a strtegy and then employ specific suppliers to carry out well-defined partions ofthe strategy. 145] ). 6. (a) Discuss the appropriate sourcing strategy for a component with Jaw custo.ner importance, fast clock speed, and no competitive advantage. Also give examples of stich components . 143]manufacturing fecility «@ the watehouse inereases. In fact, in this case, transportation costs increase by 30 percent. Thus, for instance, shipping one unit from the manufacturing facility to Atlanta will cosi $ 18. Would you recommend using this strategy? Explain your answer. {7] Table 1 Historical Data [Week Tu se 1s [6 [oy] Atanta [33/45/37 [38] 55 [30] 18 37] 23 [55 Boston [26 [35 [41 | 40] 46 | 48 | 55 wat a0 fas] Chicago | 44 | 34] 22 [55 [48 }72 [02 95/35 [45 | Dallas 27 | 42 | 35 [4051 | 64 [70] 43 | 38/47] Los Angeles32 [3 4 0 flo [74 HO 35 bs 18 [se | Table ‘Transportation cast per unit of product [Warehouse ‘Ailanta Boston Chicago [11 Dallas a Los Angeles | 7. Inbound | Outbound | Table 3 Transportation costs per un in contwatized system Atlanta 3 1414 [ Boston 4 [78 08 15 7 Chicago 14 i Dallas 15 / | Los Angeles | 17 “Warehouse | Atlanta | Baston [ Chicago fe i Q. 2. The director of supply chain management at XYZ Co. Lid. Has come to you regarding his company’s sourcing strategy for a high volume electronic component ih most of your company’s products rely on. Many different suppliers have the capability 10 deliver the component. In the past, the firm has used competitive bidding but has typically relied on three different suppliers. The suppliers” performance across the four areas is as follows:(b) Vou are the CEO of # medium sized appare! manufacturer. and you are considering. a ofp mass-customization sttepy for some of your products. How will you decide which any, of your pzoduets are appropriate candidates for mass customization? [4.5]