Q1.

Through secondary research identify the salient features of supply chain of following
companies. Maruti Udyog Limited, Asian Paints, Public distribution system in India, A major
retail chain, a groceries store.

MARUTIUDYOG LIMITED:
Maruti has two state-of-the-art manufacturing facilities in India. The first facility is at Gurgaon
spread over 300 acres and the other facility is at Manesar, spread over 600 acres. Below are
some of the salient features of MUL Supply Chain:-

1) Inventory levels of 0.7- 0.8 Days only. Maximum is just in time (JIT): The level of
inventory is a measure of success in any manufacturing company. High levels of inventory
are a waste that a supply chain can ill-afford to have. Maruti adopted the Japanese system,
Just in Time (JIT) to achieve higher operational efficiencies and reduce inventory carrying
cost. Also sharing of the parts by several models has also helped in the same cause.

2) 70% Vendors are locally based in NCR : To achieve JIT material supplies, the company
has given preference to locally based suppliers. Over 76% of the company's 250 suppliers
are located within 100 kms of radius.

3) Use of IT - Supply schedule is online system based, no manual involvement: Maruti has
adopted online system for replenishment of inventory on an electronic card system called
E-Nagare system which has completely transformed its supplier chain. Maruti receives
multiple supplies in a day within a slot of two hours based on the information given out to
its vendors the previous night.

4) Cost reduction to each Vendor on yearly basis: The JV Initiatives taken by Maruti and its
team of suppliers have generated over 29% reduction in cost over 3 years for Maruti. Less
than 20% of car is made is manufactured in-house. The rest is accounted for by 250
suppliers and hundreds of second and third tier of vendors who in turn supply to them.

5) Concept of extended enterprise: Suppliers or component manufacturers on supply side

and dealers on distribution side are taken into consideration by Maruti. It introduced a host
of Japanese manufacturing practices like Kaizen, lean, cost reduction system, quality circle
and a suggestion scheme to produce components that are cost effective and have
consistent quality. On the distribution side, helped dealers design showrooms, interact with
customers, and meet servicing requirements.

6) Launch of several programs to improve the efficiency and support the vendors: Maruti
supports it’s vendors in all possible ways. This includes finding technology partners, giving
 financial, technical and management support and bringing transparency in its dealings. Of
late Maruti has been collaborating with its suppliers to smooth HRD issues which had
resulted in strikes and delays

Maruti adopted the 'Maruti Production System' based on lean manufacturing programme.
Vendors were called for classroom training and several waste elimination methods were
identified and executed jointly. An initiative called 'Shikhar' was introduced along with the
suppliers' quality teams where 'poor ' vendors were identified and even eliminated

Programs like “Quality Circle Competition” have completely revolutionized the supply chain
and helped Maruti immensely in becoming cost effective. Maruti has strong servicing
system across the whole India which is also a main component responsible for its high sales.

ASIAN PAINTS
Below are some of the salient features of MUL Supply Chain:-

1) Forward Integration: Launch of retail shops offering a series of decision making tools and
shade options along with a communication campaign to create the excitement. Also, they
have a JV with Automotive Coating (OEM coating company). Asian paints goes direct to
mom and pop retailers in the decorative paints market, and direct to the OEM or
contractors in the industrial paints markets.

2) Supply Chain in India consists of 2 chemical plants, 18 processing centers,380 raw material
and intermediate suppliers, 140 packaging vendors, 6 regional distribution centers and 72
depots which are all integrated.

3) IT in Supply Chain: Asian Paints implemented i2 Factory Planner,™ i2 Demand Planner,™

and i2 Supply Chain Planner,™ parts of i2 SCM. It helps to integrate all its plants, regional
distribution centres, outside processing centres and branches in India. The Supply Chain
Management is backed by IT efforts that help the company in demand forecasting, deriving
optimal plant, depot and SKU combinations, streamlining vendor relation, reducing
procurement costs and scheduling production processes for individual factories. It is the
only company in India to integrate SCM from i2 & ERP from SAP. Benefits include:

i) RM & FG inventory reduction

ii) Revenue Increase by avoiding retail shorts

iii) Reduction in dead & slow moving stock

iv) Plant through-put improvement

4) The supply chain runs through a wide spectrum of functions right from materials planning
to procurement to primary distribution

5) Flexibility of operations: Agile procurement, production and delivery systems.

6) Lowered output time

7) Reduced delivery costs: High operational efficiencies

8) Commitment to quality - ISO 9001 compliant

9) Commitment to Health, Safety & Environment - ISO 14001 compliant

10) Backward Integration: Acquisition of ‘Powder Coatings’ of Hawcoplast Chemicals which

was the pioneer in India in industrial coatings in 2001

11) Vital Statistics: 12,000 SKUs, 800 raw materials, 5 manufacturing locations, 300 packaging
material, 15000 dealers, 500 industrial customers, 34 job work centres, 80 sales locations
and 25,000 retailers.

PUBLIC DISTRIBUTION SYSTEM:

India’s Public Distribution System (PDS) with a network of 4.78 Lakh Fair Price Shops (FPS) is
perhaps the largest retail system of its type in the world. Since 1951 public distribution of food
grains has been retained as deliberate social policy by India with the objectives of:

(i) Providing food grains and other essential items to vulnerable sections of the society
at reasonable (subsidized) prices
(ii) To put an indirect check on the open market prices of various items and
(iii) To attempt socialization in the matter of distribution of essential commodities

Fig: PDS Supply chain overview

India’s Planning Commission has acknowledged the fact that , ‘For every Rs 4 spent on the PDS,
only Rs 1 reaches the poor' and that '57% of the PDS food grain does not reach the intended
people.' Hence we know that the Indian PDS system is inefficient and rotten with loopholes
giving scope to widespread corrupt practices.

India’s Public Distribution System (PDS) was introduced during the Second World War to
address food security concerns in the face of scarcity, with the intention of maintaining price
stability and checking dishonest practices in private trade. The scheme was initially heavily
dependent on imported food. In the 1960s the coverage of the PDS was expanded owing to a
food crisis. The Green Revolution, coupled with favorable weather, led to the growth of
comfortable buffer stocks in the 1980s, through the procurement operation of the Food
Corporation of India (FCI), which in turn expanded the volume of food grain provided through
the PDS.

However, despite its expansion, the PDS has been subject to various systemic problems and has
faced increasing criticism since 1991:

I. Mismanagement has led to a massive increase in operational cost and to market

distortion
II. The scheme has an urban bias and has been criticized for neglecting the rural sector
III. Below poverty line (BPL) households have not been properly covered owing to leakages
through widespread corruption, illegal sales, creation of false cards and the use of
facilities by better-off households.

Fig: Supply chain overview

RETAIL SUPPLY CHAIN : PANTALOON RETAIL – FUTURE GROUP

The Future group concentrates on four main verticals in the retail industry – Home, Fashion,
Food and general merchandise. These four main domains of consumption constitute of 30
supply chains of consumption.
 Regional Distribution Centre
International/ Factory
gate logistics

Warehouse
management System

Distribution Centre

Retail/Customer
FLSL ERP
ERP

Factory Outlet Stores

Transportation
management System
Home Delivery

Reverse Logistics centre GPS/GPRS

Reverse Logistics

Retail Stores

Fig: Pantaloons Supply chain overview

Pantaloons in one of the successful formats in the Fashion vertical of the group and the main
supply chain characteristics include:

 Independent supply chains for fashion and value

 Low cost supply chains for value apparels
  Fast and responsive supply chain with short time to market for high fashion products
 Continuous improvements to Fashion supply chains by (i) prepacks and unitization and
(ii) auto replenishment systems

The end to end supply chain solution for Pantaloons is being provided by the Future logistics, a
Future group venture. Their supply chain solution for fashion domain is totally technology
enabled. The flowchart below gives an idea on the supply chain network of Pantaloons.

The vendors use the international or factory gate logistics to transport the orders to the
regional distribution centres from where the orders for each of the local distribution centres
are sorted out and despatched. The local distribution centres have replenishment systems
installed which helps them identify the SKUs that require reorder. Warehouse management
systems and Transport management systems are the IT applications used for the control and
monitor or warehouse space and location of the SKUs in the warehouses.

In warehousing, Pantaloons makes use of technology for storage and handling, picking and
sorting. RF scanners are used for all these purposes. IT plays an important role in the supply
chain and inventory management systems. Every time a stock in the stores goes below the
reorder point, the automatic replenish system places order with the distribution centres for the
SKUs to be delivered. The transfer of stock form one DC to another DC or store is processed and
kept track of in the database. Also, the system stores data on purchase orders, customer data,
supplier data, inventory data, mark-up/ mark-down of prices.

Transportation of the orders is tracked using the GPS/GPRS systems. Similarly home delivery of
items is also done directly from the distribution centre or from the store whichever proves to
be closer. Future Groups also plans to invest 400 Crores in the next five years to strengthen its
Pantaloons supply chain further by automating a number of processes.

GROCERY STORE- SUPERVALU

SUPERVALU®'s roots in distribution date back to the 1870's when they first began servicing
grocers' needs. Today, it sets the standard in grocery distribution and logistics and provides the
product variety, on-time delivery, competitive rates and services our grocery retail customers
require to meet the needs of their shoppers. They are the leaders in Grocery distribution. As
the largest publicly held distributor to grocery retailers in the United States, they are the
product-supply lifeline for more than 5,000 retail end points from coast to coast. Its network of
35 product distribution canters delivers overall product integrity, order accuracy and
exceptional service while meeting tight delivery schedules.

It operates one of the largest grocery supply chain networks in the country with more than 21
million square feet of facilities strategically located to support our coast-to-coast retail
operations and customers. It’s distribution canters offer complete programs and support for the
following departments: grocery, meat, produce, dairy, frozen foods, floral, bakery, deli, home
and beauty care, general merchandise and pharmacy. While they deliver the best products
available at competitive prices, they also support retailers with successful merchandising
programs. SUPERVALU's highly skilled professionals — from buyers and inspectors in the field
through retail business consultants — work together to deliver merchandising programs built
on quality. Its experienced buyers and category managers evaluate and administer hundreds of
sales and profit opportunities on a daily basis. We tailor new items, promotions and special
programs to the specific market needs of our retail customers. Customer service professionals
work around the clock to support our distribution customers. The Customer Service Centre,
located in Denver, Colorado, handles more than 85,000 customer contacts each month and
closes over 90% of transactions the same day they are opened.

It optimizes its vast logistics network by measuring the cost to move products from the
manufacturer to our customers' locations. In the warehouse, we separate the slow- and fast-
moving product items so product selectors log fewer miles. Hands-free radio devices linked to
our warehouse management system are used to significantly reduce the costly process of
correcting mispicks. SVHarbor, our Web-based business-to-business portal, streamlines
business processes for retailers. From nearly any PC connected to the Internet, retailers can
place and modify orders; order items for upcoming ads; view and print reports such as invoices,
customer statements, price books, ad planners and price changes; and initiate customer service
transactions.

Many of our distribution customers rely on us for much more than logistics. Our host of support
services for retailers builds traffic and sales, controls expenses and improves retailers'
profitability. Our buyers, category managers, logistics experts, transportation staff and
technology professionals are just a few of the teams available to our customers to create more
efficient and cost-effective operations.
Q2. Consider a supply chain for a domestic automobile and answer few questions.

QUESTION 2 A,B,C
These are the components of supply chain

1) Plan/Strategy: The plan generally refers to the overall strategy of the supply chain
including the aspects like vendor development, inventory management, vendor and
distributor relation etc.

2) The Source: This component refers to the suppliers who’ll provide the OEM with the goods
and services necessary to manufacture the automobiles and providing after sales services.

3) The Make: This is essentially the manufacturing component in the SCM which refers to the
execution of processes needed to produce, test and package the products and services.

4) The delivery: This refers to the system for analysing the orders from the customers,
developing a network of warehouses, dealers and showrooms for providing the products to
the customers.

5) The return: This system is responsible for processing the customer returns and providing
support to the customer with the problems in their vehicles. This involves providing the
customers with after sales-service warranty services etc.

Role of the components and firms along with their objectives:

The orders of the industry arise from the bottom of the supply chain and go through the
automakers and climbs up until the third tier suppliers. However the products, as channeled in
every traditional automotive industry, flow from the top of the supply chain to reach the
consumers. The description and the role of each of the contributors to the supply chain are
discussed below.

Third Tier Suppliers: These companies provide basic products like rubber, glass, steel, plastic
and aluminum to the second tier suppliers.

Second Tier Suppliers: These companies design vehicle systems or bodies for First Tier
Suppliers and OEMs. They work on designs provided by the first tier suppliers or OEMs. They
also provide engineering resources for detailed designs. Some of their services may include
welding, fabrication, shearing, bending etc.
 Fig: Supply chain overview

First Tier Suppliers: These companies provide major systems directly to assemblers. These
companies have global coverage, in order to follow their customers to various locations around
the world. They design and innovate in order to provide “black-box” solutions for the
requirements of their customers. Black-box solutions are solutions created by suppliers using
their own technology to meet the performance and interface requirements set by assemblers.

First tier suppliers are responsible not only for the assembly of parts into complete units like
dashboard, breaks-axel-suspension, seats, or cockpit but also for the management of second-
tier suppliers.

Automakers/Vehicle Manufacturers/Original Equipment Manufacturers (OEMs): After

researching consumers’ wants and needs, automakers begin designing models which are
tailored to consumers’ demands. The design process normally takes five years. These
companies have manufacturing units where engines are manufactured and parts supplied by
first tier suppliers and second tier suppliers are assembled. Automakers are the key to the
supply chain of the automotive industry. Examples of these companies are Tata Motors, Maruti
Suzuki, Toyota, and Honda. Innovation, design capability and branding are the main focus of
these companies.

Dealers: Once the vehicles are ready they are shipped to the regional branch and from there,
to the authorized dealers of the companies. The dealers then sell the vehicles to the end
customers.

Parts and Accessory: These companies provide products like tires, windshields, and air bags
etc. to automakers and dealers or directly to customers.

Service Providers: Some of the services to the customers include servicing of vehicles,
repairing parts, or financing of vehicles. Many dealers provide these services but, customers can
also choose to go to independent service providers.

QUESTION 2 D
Supply chain activities often span many different organizations and departments. These
organizations and departments all follow different policies and procedures, working towards a
range of objectives and operating based on various reward and incentives schemes.

What works best for one particular organization may be ineffective in another. The methods
that work well for one particular department won't necessarily be the most effective use of
resources for the supply chain as a whole.

For example, the manufacturer of a product decides that it can increase its profit by marginally
increasing the price of the product they produce. In turn, the retail seller increases the price of
the product in their stores, resulting in reduced customer demand. The sales for the product
decrease, and the retail store orders less of the product from the manufacturer. The
manufacturer then has to reduce its order of raw materials and produce less of the product.

The short term, profit generating objectives of the manufacturer have resulted in a negative
outcome for each participant in the supply chain, including the end consumer. This could have
been prevented if the manufacturer had discussed the impact of a price rise with the retail
store.

Conflicting objectives can also be a problem within an organization. One department realizes
that they can save costs by changing to a cheaper and slower production process. However, this
has a significant, negative impact on the rest of the organization. The attempt at saving costs in
one department has increased the overall expenses of the organization.
The most effective way to combat the issue of conflicting objectives is to encourage
communication and negotiation between the different organizations and departments that
form the supply chain. By aligning each business and department's strategies, objectives and
goals, you can improve the efficiency and productivity of the entire supply chain, leading to cost
savings and opportunities to generate more profit.

QUESTION 2 E)
Following are the various risks that are inherent in a supply chain.

Fig: Risks involved in a supply chain

Some of the important risks shown above are explained below:

1. Inventory and back-order levels fluctuate considerably across the supply chain, even
when customer demand for specific products does not vary greatly. To illustrate this issue,
consider Figure 1-3, which suggests that in a typical supply chain, distributor orders to the
factory fluctuate far more than the underlying retailer demand.
2. Forecasting doesn’t solve the problem. Indeed, we will argue that the first principle of
forecasting is that “forecasts are always wrong.” Thus, it is impossible to predict the precise
demand for a specific item, even with the most advanced forecasting techniques.
3. Demand is not the only source of uncertainty. Delivery lead times, manufacturing yields,
transportation times, and component availability also can have significant supply chain
impact.
4. Recent trends such as lean manufacturing, outsourcing, and offshoring that focus on
cost reduction increase risks significantly. For example, consider an automotive
manufacturer whose parts suppliers are in Canada and Mexico. With little uncertainty in
transportation and a stable supply schedule, parts can be delivered to assembly plants “just-
in-time” based on fixed production schedules. However, in the event of an unforeseen
disaster, such as the September 11 terrorist attacks, port strikes, or weather-related
calamities, adherence to this type of strategy could result in a shutdown of the production
lines due to lack of parts.