B. Nithin, Class Representative, CSE – S1.

1(a). Explain the process / steps/ components of Sourcing decision.

A. Sourcing is the process of finding and evaluating suppliers of goods or services for a
business. The sourcing decision is critical because it can impact the quality, cost, and delivery
of goods or services, as well as the overall competitiveness of the business.
The process / steps/ components of Sourcing decision:

➢ Profile the product category in as much detail as possible, including the spending patterns
and departments involved.

➢ Analyse the market, identifying potential new suppliers, both local and global.

➢ Develop a sourcing strategy based on the goals of the business, deciding where to buy whilst
minimising risk and cost.

➢ Select the sourcing process by defining your request for proposal criteria for soliciting bids.

➢ Negotiate with and select suppliers after reducing to only the valid bids.

➢ Work with the new suppliers to integrate them into the existing processes, using the
communication plan to integrate improvements to specifications or processes.

➢ Benchmark the current state of the category by tracking performance metrics and the
effectiveness of the sourcing plan. This leads back to step one as the marketplace evolves.
1(b). Define sourcing in logistics management. Explain importance of sourcing.
A. Sourcing: Sourcing is the process of finding and evaluating suppliers of goods or services
for a business. The sourcing decision is critical because it can impact the quality, cost, and
delivery of goods or services, as well as the overall competitiveness of the business. This
includes the procurement of raw materials, equipment, transportation, warehousing, and other
resources required to support the movement of goods through the supply chain.
The importance of sourcing in logistics management can be summarized as follows:
1. Cost savings: Effective sourcing can help businesses reduce costs by identifying the
most cost-effective suppliers and negotiating favourable terms and prices.
2. Quality control: Sourcing allows businesses to evaluate and select suppliers who can
provide high-quality goods and services that meet their specific requirements. This can
help improve product quality and customer satisfaction.
3. Risk management: Sourcing helps businesses mitigate risks by identifying and
selecting suppliers who have a proven track record of delivering goods and services on
time and with consistent quality.
4. Innovation: Sourcing can also help businesses identify new technologies, materials,
and processes that can improve their logistics operations and provide a competitive
advantage.
 B. Nithin, Class Representative, CSE – S1.

5. Relationship building: Sourcing allows businesses to build strong relationships with

suppliers, which can lead to better communication, collaboration, and long-term
partnerships.
At the heart of strategic sourcing is the opportunity to build long-term relationships with
suppliers. Because suppliers are selected based on their capability and their compatibility with
the business’s needs and goals. This dependability leads to more benefits than just getting the
right components at the time they are expected; and the supplier to continue the pattern of
reliability so they can ensure future business.
2(a). What are the various key types of transportation in SCM?
A.

AIR:
Air freighting is commonly used by companies who work with short lead times, or advanced
service levels.
Air transportation is best suited for small, high- value items or time sensitive emergency
shipments that have to travel a long distance.
Advantages:
o It is the fastest mode of transport.
o It is useful in transporting goods to the area, which are not accessible by any other means.
Disadvantages:
o It is relatively more expensive mode of transport.
o It is not suitable for transporting heavy and bulky goods.
WATER:
Water transport uses ships and large commercial vessels that carry billions of tons of cargo.
Water transport is used primarily for the movement of large bulk commodity shipments and it
is the cheapest mode for carrying such load.
Inland Water ways: Refer to using inland water bodies like rivers, canals, backwaters, creeks
and etc.
 B. Nithin, Class Representative, CSE – S1.

Ocean Waterways: Navigation along the coastal places and foreign countries take places with
the help of ships.
Advantages:
o It is a relatively economical mode of transport for bulky and heavy goods.
o It promotes international trade.
Disadvantages:
o The depth and navigability of rivers and canals vary which affect different transport vessels.
o It is a slow mode of transport and therefore not suitable for transport of perishable goods.
SURFACE:
ROAD TRANSPORTATION:
Road transport offers a complete freedom to road users to transfer the vehicle from one lane to
the other and from one road to another according to the need and convenience.
The flexibility of changes in location, direction, speed, and timings of travel is not available to
other modes of transport.
Advantages:
o It is a relatively cheaper mode of transport as compared to other modes.
o It is a flexible mode of transport as loading and unloading is possible at any destination.
Disadvantages:
o Due to limited carrying capacity road transport is not economical for long distance
transportation of goods.
RAIL:
Rail transport uses freight trains for the delivery of merchandise. Freight trains are usually
powered by diesel, electricity and steam.
Rail is suited for bulk shipment of products like fertilizer, cement, food grains and coal etc.
from the production plant to the warehouses.
Advantages:
o It is relatively faster than road transport.
o It is suitable for carrying heavy goods in large quantities over long distances
Limitations:
o It is relatively expensive for carrying goods over short distances.
o It is not available in remote parts of the country.
PIPELINE:
 B. Nithin, Class Representative, CSE – S1.

Pipeline is used primarily for the transport of crude petroleum, refined petroleum products and
natural gas.
It include a significant initial fixed cost in setting up the pipeline and related infrastructure.
Advantages:
o Supply through pipelines is very reliable.
o Reduction in cost of transportation
Disadvantages:
o Illegal pilferage and wastage due to leak is a problem in pipelines
o In case of chemicals and petroleum pipelines any leak can cause an accident.
PACKAGE CARRIER:
Package carriers are transportation companies which carry small packages. Examples: FedEx,
UPS, DHL. etc.
Package carrier use air, truck and rail to transport the goods.
INTERMODAL TRANSPORTATION:
Intermodal Transportation is use of more than one mode of transport for the movement of
shipment from origin to its destination.
Intermodal operation is used two or more mode of transport to take the advantage of inherent
economies of each and thus provide the integrated service at lower cost.

2(b). What is Transportation Economics? What are the factors that influence the
transportation cost?
A. Transportation economics is the study of the economic factors that affect the transportation
of goods and people. It involves analyzing the costs, benefits, and trade-offs associated with
different modes of transportation, infrastructure investments, and policy decisions related to
transportation.
Factors that influence transportation costs include:
Cost Factors: The primary factors influencing transportation costs pricing are distance, weight,
and density.
1. Distance: As distance travelled increases, variable expenses such as labour, fuel, and
maintenance increase.
Transport cost α Distance
2. Weight: The transport cost per unit decreases as the load weight increases. This is as a result
of economies of scale as a result of spreading the fixed costs over more weight. That is why it
is always best to combine small loads into larger ones where possible, up to the capacity of the
vehicle carrying the load.
 B. Nithin, Class Representative, CSE – S1.

3. Density: This is the combination of weight and cubic volume. Vehicles have both weight
and cubic capacity and tend to cube out before weighting out. So, shipping higher-density
products enables the cost to be spread over more weight versus a lighter load such as paper
cups, where you are shipping a lot of air for your money. As a result, higher density products
are charged less per hundredweight.

Other factors: Can include factors such as the amount of handling necessary (smaller volumes
typically require more handling), type of handling (full pallets can be handled with more
automated equipment versus individual cases, which are handled manually in most cases),
liability (can be a function of the value or nature of the product), perishability, and market
factors such as market (origin and destination) volume and balance, which refers to amount of
freight flowing both ways.