TERM END EXAMINATION: DESCRIPTIVE ANSWER SCRIPT

*Candidate to mandatorily fill all columns in this block with correct details
Seat No. 118529 Batch 2020-22
Semester THIRD Programme MBA – IB (SCM) - 0241
Specialization SUPPLY CHAIN Exam date 18/11/2021
(if any) MANAGEMENT
Exam Paper RETAIL DISTRIBUTION AND LOGISTICS

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 *** START TYPING YOUR ANSWERS FROM THIS PAGE ONWARDS ***
Answer 1 (A):
 Cross dock is a commonly used warehousing strategy to deliver products with short-shelf
life. A traditional warehouse performs four main activities: receiving, storing, picking, and
shipping; the cross dock eliminates the storing and picking activities, which are the two
most expensive (and time-consuming) activities.
 In the case of perishable product distribution, implementing a cross docking warehouse
expedites product distribution, reduces delivery cycle time, and increases customer
satisfaction. A further benefit of cross-docking is that it allows for the consolidation of
orders and delivery in Full Truck Load (FTL) rather than Less Than Truck Load (LTL),
which lowers the transportation cost.
 When compared to a standard warehouse, cross docking offers significant cost benefits in
terms of storage, inventory, transportation, and manpower. It's utilised to increase delivery
frequency and cut down on the amount of time perishable products spend in the supply
chain.

Shipments are traditionally consolidated in warehouses, allowing suppliers to keep their items
close to their customers. As a result, the reduced shipping lead time improves customer service.
Furthermore, boosting the utilization of full truck loads reduces transportation costs by
consolidating products in warehouses (FTL). In comparison to traditional warehouses, cross-
docking centers feature no or very limited storage. The products will be sorted, repackaged,
and put into outbound trucks as soon as feasible after they are unloaded from inbound vehicles.
This technique reduces inventory and material handling costs inside the distribution center
while maintaining quick reactions to client needs and supply chain variations. Perishable
products cannot be stored for a long time due to their quality deterioration characteristics. For
the distribution of perishable products, cross docking appears to be a creative and effective
distribution approach.
- Cross docking of perishable goods maybe done in three ways:
 One Touch: The CDC receives products from a variety of sources and only touches them
once before loading them onto an outgoing truck without being docked. Thus cross-dock
productivity is at the highest
 Two Touch: Perishable products are delivered, staged on the dock, and then loaded into a
departing truck without being stored. The emphasis is on optimizing outbound loads and
enhancing transportation efficiency.
 Multi-touch: Products are received and staged on the dock, then reconfigured for shipment
and loaded on outbound vehicle directly from the dock. This method offers opportunity for
customization like mixing different type of vegetables, or meat as per order and end-user
value addition by adding labels or performing repacking.

Answer 1 (B):
Cross docking - Cross docking is the technique of directly transferring products from entering
vehicles onto departing vehicles with little or no warehousing required in between. This is done to
switch modes of transportation, sort and send stuff to different destinations, or mix material from
various origins into transport vehicles (or containers) going for the same or comparable
destinations. Sorting shipments, parcels, or products is a common example. The main goal of cross
docking is to generate effective customer response through quick fulfilment, and the standstill time

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is usually less than 24 hours. Other advantages include shorter delivery times, lower inventory
carrying expenses at the DC, and lower transportation costs.
Problems:
 For companies dealing with complex custom orders, timely fulfillment is a Herculean task.
Multi touch operation centric CDC proves to be very effective to meet timely fulfilment.
Such CDC should have streamlined order kitting, Pick & Pack process.
 Poor truck scheduling can cause traffic congestion at loading staging areas, poor product
flow in the DC, and delivery delays. This problem is caused by long processing times
(make span) and a lack of internal information. The routing and scheduling problem is
reduced using GPS and other simulation models.
 In practice, the number of trucks arriving at the cross-docking station outnumbers the
number of docks, forcing trucks to queue until the allocated trucks finish their operations
and release the docks. This will result in a demurrage charge (penalty for exceeding the
free halting time) and operational inefficiency for the company.
 At cross docking station, inbound and out bound vehicle are different leading to
transshipment activity. Contracting and scheduling the vehicle and vehicle type for timely
pickup is essential. Aligning dispatch ready loads according to the customer order will
improve the overall efficiency of the DC.
 Transshipment Problem: Depending on the route and consignment size, timely availability
of vehicle types (closed, small carrier, LCV chilled vehicle) is often a key challenge for the
DC. In these situations, shipments are transshipped while in transit. This results in further
delays, damages, and pilferage, among other things.
 Because inbound trucks do not adhere to the pre-planned timetable or the product
movement process efficiency from cross dock yard to staging station is low, a product
allocation problem emerges in a multi-touch CDC. In such instances, the manager is unable
to allocate resources to inbound shipments for the next stage of the process.

Answer 2 (A):
Inventory management challenges in a multi echleon distribution network include the following:
 The network maintains surplus inventory in the form of redundant safety stock.
 End-customer service problems occur even when the network is adequately stocked.
 While certain store locations encounter unfavourable stock outs, service across tiers is more
than adequate.
 External providers perform in an unreliable manner as a result of receiving inadequate
demand predictions.
 Synchronization of lead times between the supplier and the RDC and the local DC.

Inventory Optimization approach:

Risk Pooling:
 Demand is pooled across all products and locations and stocked at a distribution centre in
the higher echleon.
 When demand is aggregated across all locations and stocked at the upper echelon, demand
fluctuation is reduced.
 When demand is high in one area or for one product, it is offset by low demand in another.
 When variability is reduced, it is possible to reduce safety stock, which decreases average
inventory and holding costs.

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MEIO Approach: Inventory management can be a challenging task for a business with hundreds
of goods spread across thousands of locations. The purpose of the MEIO model is to efficiently
match inventory levels to expected demand. This enables the business to maintain low inventory
levels, move inventory fast, and provide superior service to customers. At each echelon (step) of
the network, optimal inventory levels are maintained. Demand volatility can be more properly
addressed using modern analytical/statistical techniques.
Benefits of MEIO: Improved service level, increased working capital, decreased operational
cost, less on hand inventory, Reduction in out of stock levels, Elimination of write offs of
inventory & expired inventory.
Steps in MEIO:
 Analyze demand and inventory levels at all stages of the distribution chain.
 Identify critical strategic decoupling points (RDCs) throughout the distribution chain
(where the customer orders are processed)
 If the DC holds a higher proportion of customized products, it is preferable to move
customer order fulfilment to decoupling points (CODP) upstream in the supply chain.
 Upstream inventory enables risk pooling across as many regions as possible. This risk
pooling strategy necessitates a smaller safety stock.
 With a high level of safety stock, standard high demand products can be pushed
downstream in the distribution chain. Keep more inventory closer to the point of sale,
where final demand has the largest range of conceivable applications.
 Periodically review the stock's age and sell surplus and outmoded inventory.

Answer 2 (B):
Average Demand = 2000 units

Standard Deviation of Demand = 365 units

Cost of over stocking (Co)

= Unit Selling price - Clearance sale price = 860 - 260 = Rs. 600

Cost of under stocking (Cu)

= Unit Selling price - Landed Purchase Cost = 860 - 560 = Rs. 300

Service Level =SL= Cu ÷ Co + Cu = 300 / 600 + 300 = 0.3

For P value of 0.3, corresponding Z score = 0.43

If Average demand = 2000 units, and SD = 365 units

Q = μ + (z) (σ) = 2000+ 0.43 × 365 = 2156.95

Answer 3 (A):
For FMCG business that deal in large quantities of inventory, transportation costs can have a
significant impact on profitability and growth. Transport costs can be mystifying for many
businesses, with a number of different freight products, classes and highly dynamic costs.
Although it pays to plan for cost spikes, the best strategy to reduce the financial burden of
transporting your inventory is to reduce freight costs on a day-to- day basis. Here are five
strategies to that I will follow.

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Strategies to be followed for reducing Freight costs:
 Signing a prior carrier contract for steady lane volume: Once we will sign a contract
with the carrier, we will receive a consistent flow of freight in the same lane, which we
may advertise to optimise our earnings. As a result, our bargaining power increases, and we
will end up paying less and the carrier is more efficient. Also with the capacity flowing
tight and in adequate availability of fleet in certain category, the carriers will focus on
moving the freight having prior contract and remain loyal and assure reliable movement of
freight volumes.
 Ship on off-peak days and negotiate for floating price- Shipping a day later or earlier
can yield measurable savings. As we know, Friday is typically an off-peak day for shipping
goods in retail because most retailers try to get their product to store by Thursday, so it can
be shelved Friday and ready for sale at the weekend. Shipping on off-peak days can,
depending on the local market, create significant savings. Backhaul shipping, where
carriers attempt to fill empty trucks heading back to base, can further reduce expenses. If
you ship significant volumes, consider contacting carriers based in destination centres to
see whether there is any backhaul capacity available.
 Consolidation at the terminals- we will allow for LCL transhipment in order to
consolidate shipments from different retailers in the same zone at the terminus for forward
movement. Contracting 3PLs with a greater capacity for freight consolidation should be
considered for onward freighting.
 Shipping less regularly - Shipping in bulk is typically less expensive than shipping the
same volume of product in multiple, smaller consignments. Bulk customers get cheaper
rates because carriers can load a container more efficiently – less time is required as the
carrier does not need to process, load and unload as many customers’ shipments. On the
other hand, regular shipping requires your customers to carry a larger quantity of inventory
than they immediately need. This incurs inventory carrying costs, so a small reduction in
price or otherwise favourable terms may therefore be necessary.
 Dunnage cost Reduction - We will utilize dimensional weight pricing methodologies to
determine the cost of dunnage. Dunnage is the use of strapping, blocking, and bracing, as
well as packing material, to keep objects from colliding.
Answer 3 (B):
Unitized load/Cargo - A unit load/Unitized cargo is an assembly of individual items or
packages of a same kind to enables convenient movement and stock accounting. Unit load is
mounted on material handling equipment like wooden pallets, roll cage pallets, tote bins and cage
pallets.
There are various advantages of unitizing the cargo:
 Easy movement of a larger quantity of goods during put away and pick operations. Hence
total cost is also reduced with increased efficiency.
 Effective space utilization in the DC.
 Enabling a use of standard handling system and equipment.
 Increase the speed in loading and unloading time.
 Minimize the risk of damage and pilferage.
 Increases security: Because unitized products are easier to track and control, wrapping the
pallet reduces the likelihood of theft. It also makes theft more visible because the wrap
must be cut to gain access to the product.
 Reduces the risk of damage: Stretch wrapping the load onto a pallet reduces the risk of
damage while in transit.

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  Protects the load: Stretch wrap will protect boxes and other items on pallets from the
elements, dirt and accidental contact.
 Unitized packaging is easier to move into carrier vehicles, reducing time spent at loading
docks and increasing shipping productivity.
 Palletized cargo can be easily handled, transported and tracked and stored. Unit loads make
handling, storage, and distribution more efficient. They help in reducing handling costs and
damage by reducing individual handling

Advantages in Logistics management:

- Cost-cutting
 Low labour costs: The movement and shipment of packaged items requires less man hours.
 Reduced Handling Fees
 Cost-cutting in internal transportation

- Protective Measures
 Safety and Security: Protection from water, dirt, and abrasion
 Preventing damage inside the DC and minimizing transit damage during LTL transport are
two important goals.

- Storage
 Easy handling and storage
 High storage space utilization
 Easy tracking of inventory

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