Assignment#2

Operation & Supply

Chian Management

By: Akshat Bansal

1. Short Answer Type Questions:
1(a). Filling petrol or diesel in our vehicles is a very common activity that we all
do regularly. With the information available openly, can you identify the supply
chain for petroleum products? 
Answer
A supply chain consists of all parties involved, directly or indirectly, in fulfilling a
customer's request. The supply chain not only includes the manufacturer and suppliers,
but also transporters, warehouses, retailers, and customers themselves. Within each
organization, such as a manufacturer, the supply chain includes all functions involved in
receiving and filling a customer request. These functions include, but are not limited to,
new product development, marketing, operations, distribution, finance, and customer
service.
Supply Chain for Petroleum Products:

1(b). The definition of supply chain contains a very important word

“information”. In your opinion, what information is being referred to? 
Answer:
The word information in the definition of supply chain refers to the all the activities
including handling and managing of various resources in the supply chain of any
product, material or service. This is very important for managers to understand every
piece of information in the supply chain to make decisions. The decisions can be to
optimize the supply chain process, to optimize the transportation cost, to optimize the
resources at any stage, and so on.
1(c). A company is into manufacturing an antibiotic product. This is for
veterinarian purposes. During floods when animals such as cows, buffalos, or
other bovine species have digestive disorders, this medicine is very effective.
If you were to give a thought to have a supply chain designed for this
company, what will be your choice- responsiveness or efficiency. Ideally, how
will you balance these both? 
Answer:
During floods, the company needs to be highly responsive to the market situation to
supply the antibiotic products. The company can’t delay the supply of antibiotic products
in such situations. However, the company needs to operate efficiently as well
considering the high demand. To fulfill the high demand, the company might need to
manufacture a greater number of products. To balance supply-demand, the company
needs to responsive and efficient as well. In situations of no flood, the company needs to
be focused toward efficiency.
1(d). Consider the situation of a pharmaceutical manufacturer. The basic raw
material is abundantly available and that comprises almost 75% of the total
cost of the finished product. However, they also require some other
ingredients that are not very expensive and also are required in small
quantities but are available only seasonally. What type of inventory strategy
you would suggest to this company and why?
Answer:
We will go with Seasonal of Seasonal classification of inventory strategy. It is because
we can procure the ingredient only during a particular season, whereas we require the
ingredient to be in inventory throughout the year. As without that ingredient, we can’t
manufacture the finished product.
1(e). Following are the details of a major cycle manufacturer
 Have operations spanned in North India at three locations
 More than 300 suppliers have been contracted in the South East Asian
countries for the supply of parts
 All these supplies are not critical but need to have a steady flow at the
factory sites
 Each suppliers’ volume of supply is small.
Looking at these bare minimum facts, what macro-level logistics strategy
would you suggest. If need be, you may have assumptions, but do mention
them in your answer.
Answer:
With the given information, we must follow the time utility macro-level logistics strategy.
All the supplies need to be at the factory site at a specific time, but some delays can be
taken care of. In case a company doesn't receive the supply from a particular supplier,
the company can switch to a different supplier. But a final product can’t be manufactured
or termed as a finished product with a missing part, even if that part might not be critical.
Once, the finished product is manufactured, the company should follow place-level
logistics strategy. The finished product must reach the location depending upon the
demand of product at each location.
2. Following data is sourced from the regulatory authorities. Using this data,
build the below-given forecasting models:
Naive Forecast

2 Months moving Average

Exponential Smoothing (alpha =0.3)

 Out of the above three, which model will give the most accurate results (Using
MAD- Mean Absolute Deviation to compare the models)
MAD tells us the deviation of data from the actual one. Naïve Forecast MAD value is
smallest, and shows the most accurate results.
3. Below are the details of the inventory of a store dealing with automobile spare
parts. Using the concepts of ABC analysis, categorize the spare parts into A, B, and C
categories. (If required, you may have assumptions, but do mention them in your
answer) 

Unit
Sno Annual
Item Cost
. Usage
(Rs)
1 Oil Filter 2200 150
2 Head Lamp 395 140
3 Fuеl Filter 270 95
4 Rod Bearing 1430 45
5 Air Filter 860 120
Wind
6 12000 90
Screen
7 Piston Rink 4500 250
8 Bumper 8000 110
Main
9 1130 120
Bearing
10 Bush 169 1160
Answer:

4. Here is the data of Tata Motors and Ashok Leyland. Compare the year-wise performance
of these two companies based upon the techniques covered in SCM. Also please state which
company is doing better and why? 

Tata Motors
Year 2015 2014 2013 2012 2011
Inventories (in Cr.) 4802 3862 4455 4588 3891
Revenue (in Cr.) 43485 68764 58234 48078 46883
COGS (in Cr.) 26171 43748 37080 27651 24997
Gross Profit 17314 25016 21154 20427 21886

Ashok Leyland
Year 2015 2014 2013 2012 2011
Inventories (in Cr.) 1398 1188 1896 2230 2208
Revenue (in Cr.) 14234 10353 13020 13458 12034
COGS (in Cr.) 8626 5909 7539 9121 8064
Gross Profit 5608 4444 5481 4337 3970

Ashok Leyland is doing better as the company is better able to manage the gross profit.
5. Here is the data of passenger traffic of a very busy international airport. Using MS Excel
build-in Forecast Sheet, forecast for next 5 years for domestic and international passenger
traffic. Share insights on your forecast.  

Since the MASE for both forecast is less than 1, we can accept the forecast to be better than
naïve forecast method. However, the domestic passenger forecast is more accurate
compared to international passenger forecast due to lower MASE value. The same can be
interpreted through the trendline.
6. Demand for the Carrom Board at a sports shop is 500 units per month. This shop incurs a
fixed order placement, transportation, and receiving cost of Rs. 4,000 each time an order is
placed. Each carrom board costs Rs. 500 and has a holding cost of 20 percent. Evaluate the
number of carrom boards that the store manager should order in each replenishment lot?
Secondly, also calculate the total cost. 

Answer:
Annual demand = 500*12=6000
Order cost = 500
Annual carrying cost of 1 carrom= 0.20*500= 100
EOQ=

EOQ= 127 units

Number of orders per year = 6000/127= 47.2= 48 orders
Ordering cost= 48*4000=192000
Holding cost= 0.635
Ordering + holding cost = 192000.635