Operations and Supply Chain

Product Flow
Keeping in mind the concept of product flow, what is the correct order of product flow
in the following scenario?
1. Audi Q5 is delivered to the showroom centre.
2. Spare parts and engines are supplied to the Audi Q5 manufacturing plant.
3. The manufacturing of Audi Q5 is undertaken at the plant.
4. Customers visit the showroom to purchase Audi Q5.
4, 1, 3, 2
1, 4, 3, 2
2, 3, 1, 4
✓ Correct
Feedback:
Correct! The product flow is from the manufacturer to the customer.
Demand Information Flow

Keeping in mind the concept of demand information flow, what is the correct order of
demand information flow in the following business scenario?
1. Distributor gives an order of 800 steel bars to the manufacturer to fulfil orders
from 10 retailers.
2. Retailer gets an order of 100 steel bars.
3. Manufacturer orders 100 tons of iron ore to a mining company.
4. Since the retailer has only 20 steel bars in inventory, it gives an order to the
distributor to supply 80 steel bars.
1-2-3-4
2-3-4-1
2-4-1-3
✓ Correct
Feedback:
Correct! The demand information flow is from the customer to the manufacturer.
Supply Chain
Supply chain management refers to managing only the flow of goods or services from
the manufacturer to the customer.
True
False
✓ Correct
Feedback:
Correct Answer! Supply chain management refers to managing not only the flow of
goods but also the flow of cash and information from the customer to the manufacturer
through the intermediaries.
Customer Service
Following are two supply chain options for a company that operates in an online
grocery delivery industry.
 Option 01: The company collects a fresh supply of raw vegetables once every
three days from the farmers, and then, it fulfills the customer orders on a daily
basis.
 Option 02: The company collects a fresh supply of raw vegetables every day from
the farmers, and then, it fulfills the customer orders on a daily basis.
According to you, which option is better at providing customer service?
Option 01
Option 02
✓ Correct
Feedback:
Even though the cost associated with the procurement of vegetables will be high in this
case (as the collection process happens on a daily basis), the company is able to provide
fresh vegetables at the customer’s doorstep, thereby delivering better customer service.
Efficiency in Supply Chain

Taking into consideration the supply chain value creation model that you learnt earlier,
which of the following, according to you, would not lead towards increasing the
efficiency in the supply chain?
Reduction in delays
Low capacity utilisation
✓ Correct
Feedback:
Correct answer! Low capacity utilisation would lead to an inefficient supply chain.
Value Creation
Consider the following supply chain operations of a cloud kitchen company.
1. Procurement of raw vegetables is done from nearby vegetable retailers on a bi-

weekly basis.
2. Procurement of highly-perishable items such as raw meat is done from nearby

poultry shops that are open 24x7 on a bi-weekly basis.
3. Once the food is prepared, the delivery service team picks up the order, places it
in their backpacks and delivers it to the doorstep of the customer.
Which of the following operation is not suitable in creating a better value for the
customer and the company?
Procurement of raw vegetables can be done from the central city wholesale
market.
Procurement of highly-perishable items such as raw meat can be done from

nearby poultry shops only when such orders are received, thereby reducing
the inventory holding cost and risk of rotten food. This also translates into
serving fresh meat to the customers every time they order.
Rather than delivering orders as and when they arrive, the company should
aggregate these orders and deliver then only twice a day.
✓ Correct
Feedback:
While order aggregation will definitely reduce the transportation cost, it will lead to a
reduction in orders as the customers usually tend to order food as and when they need
it and not in advance.
Sustainability in Supply Chain

Which of the following is not a relevant question for an environment impact assessment
(EIA) of a baking business?
Are the ovens energy efficient?
How much of the supplied cream is used in the business and how much
perishes?
How many supervisors are there?
✓ Correct
Feedback:
Correct! EIA evaluates the environmental impact of a business or a process. The number
of supervisors isn’t the most relevant parameter to influence the environment directly.
How much plastic and cardboard is used in packaging of the cakes?
Supply Chain Touchpoints

Consider Hezenko Phlorensi Classic Watch Ltd situated in Switzerland. The company
sells an exclusive range of Swiss watches and caters only to the adjacent European
nations with an average selling price of $100,000. The company manufactures only 100
pieces every year.
For the distribution of its watches, the company has two options to choose from. Which
option do you think will provide more control to Hezenko Phlorensi Classic Watch Ltd
over its supply chain?
The company can transport the watches directly to its stores through
armoured vehicles owned by the company itself.
✓ Correct
Feedback:
Correct answer! Higher degree of control is possible only when the company directly
transfers the watches from its manufacturing plant to its stores without taking any stop
in between.
Supply Chain Touchpoints
Consider ABC Steels Pvt. Ltd. The company operates in a B2B set-up. It takes iron in the
form of raw material required for manufacturing of steel from two iron ore mines, Heavy
Iron Ltd and Solid Iron Ltd. and manufactures EN 10025 grade steel bars from raw iron.
EN 10025 grade steel is required in the real estate sector. ABC Steels transports these
steel bars first through cargo rails and then through large cargo ships to Europe and
USA, where it caters to two big real estate firms, Dream Homes Pvt. Ltd and Classic
Offices Ltd.
Taking into consideration the concepts of supply chain touchpoints that you learnt,
classify which entity or process falls under which of the following three buckets.
1. Supplier
2. Factory/Manufacturing
3. Customer
Word Count 25Word Limit 1 - 1000
Suggested Answer
Categorisation of the entities and processes given in the example is as follows:
1. Supplier: Heavy Iron Ltd and Solid Iron Ltd
2. Factory/Manufacturing:
1. ABC Steels Pvt. Ltd. manufactures EN 10025 grade steel. Manufacturing is

done in-house.
2. Transportation through rails and ships to USA and Europe
3. Customer: Dream Homes Pvt. Ltd and Classic Offices Ltd
Supply chain surplus = Customer value - Supply chain cost

Demand Uncertainity
Categorise the following products on the basis of their demand uncertainty (high or
low).
1. 4K Android TV
2. Wheat flour
3. Filter coffee
4. Aircraft engines
Demand uncertainty (high) - 1, 2; Demand uncertainty (low) - 3, 4
Demand uncertainty (high) - 1, 4; Demand uncertainty (low) - 2, 3
✓ Correct
Feedback:
Demand uncertainty is high for products that are highly innovative in nature. These are
the products that will become obsolete within some time due to better innovation.
Demand uncertainty is low for products that are not highly innovative in nature.
Supply Chain Management

Arun runs a small FMCG company. Currently, his company serves the customer with
three products - biscuits, tea and fruit juice with limited sub-categories. Seeing the
growth of the business, Arun is planning to also include chocolates in his product
offerings. How will the new product addition impact his business, considering that his
strategic fit remains the same?
Note: Use the strategic fit graph to answer this question.
The impact of the new product addition cannot be determined.
The new product addition will increase the efficiency of the supply chain.
✕ Incorrect
Feedback:
Strategic fit can be defined as the region of balance between uncertainty in demand and
the supply chain strategy. Supply chain strategy can either be responsive or efficient. As
the uncertainty increases, the responsiveness of the supply chain has to be increased to
maintain the strategic fit.
The new product addition will reduce the responsiveness of the supply chain.
The new product addition will decrease the efficiency of the supply chain.
✓ Correct
Feedback:
Correct Answer! Since Arun does not want to change the strategic fit of the company,
adding new products will increase supply chain uncertainties. Moreover, as uncertainty
increases, the supply chain moves away from the spectrum of efficiency towards
responsiveness.
In the case of Arun, the new product will replace the excess inventory of the existing
products. Hence, faster movement of products will be required to avoid opportunity
loss.
Types of supply chain strategies

From the scenarios provided below, which one do you think is better suited to have a
cost-efficient supply chain strategy and which one is better suited to have a responsive
supply chain strategy.
1. The electronic equipment manufacturing company X, situated in California,

having a market in Germany, has outsourced its sales and marketing operations
to a third party in New York and has kept the manufacturing in-house within
California
2. The electronic equipment manufacturing company Y, situated in California,

having a market in Germany, has kept sales and marketing in-house and has
outsourced the manufacturing part to a third party in China
Cost-efficient supply chain - Company X; Responsive supply chain - Company

Y
Cost-efficient supply chain - Company Y; Responsive supply chain - Company

X
✓ Correct
Feedback:
China is renowned in manufacturing low-cost electronic equipment. The labour cost in
China is also comparatively low when compared to the US. The US is renowned for its
innovation, including technological innovation.
Role of a Supply Chain Manager

Consider one of the top component suppliers for Apple Inc. The supplier provides the
best material quality in the industry, and thus, Apple has been partnering with them for
many years.
However, due to increasing demand from other mobile phone manufacturers such as
Samsung and Oppo, whenever a new flagship phone is released by these competitors,
the supplier falls short of its commitment to supply to Apple.
List down two steps that can be taken by Apple’s supply chain managers to mitigate this
issue and ensure a continuous supply of these high-quality components.
Word Count 95Word Limit 10 - 100
Suggested Answer
The following steps can be taken by Apple:
1. Apple can renegotiate with the current supplier to reserve some of their assembly
lines only for Apple, thereby ensuring continuous supply in the future.
2. Signing exclusivity deals with other similar suppliers who are supplying the same
component in the industry. The quality will take a hit; however, as has been done
by Apple with other suppliers, it would have to invest heavily in these suppliers in
building up their capabilities and to bring the quality up to Apple’s standard.
3. Push and Pull strategies
4. Statement 1 - Every year, a factory in China begins manufacturing ornaments
required for Christmas holiday season in September.
5. Statement 2 - Dell computers start assembling a computer post receiving an
order from a customer.
6. How are the two strategies different?
7. Statement 1 - Push strategy; Statement 2 - Push strategy
8. Statement 1 - Push strategy; Statement 2 - Pull strategy
9. ✓ Correct
10. Feedback:
11. A push supply chain pushes material both in production and distribution based
on projected demand. Under this system, companies have predictability in their
supply chains.
12.
13. In a pull strategy, products enter the supply chain when customer demand
justifies it. With a pull strategy, companies avoid the cost of carrying inventory
that may not sell. The risk is that they might not have enough inventory to meet
demand if they cannot ramp up production quickly enough.
14. Type of Flow
15. Rakesh visits a Tata Motors showroom to buy Tata Harrier. He has already test-
driven the vehicle, as his friend Suresh bought the car from the same showroom a
few weeks ago.
16. However, due to huge demand for the car, it has been out of stock in the
showroom for the past few days. Thus, Rakesh had to leave the showroom
without buying the car.
17. As per Rekha, the sales person at the Tata Motors showroom, there are other
people similar to Rakesh who wanted to buy the car but could not do so due to
its unavailability. She periodically prepares a list of such buyers and shares it with
the top management.
18. Which type of flow is this?
19.Demand information flow
20. ✓ Correct
21. Feedback:
22. Correct answer! Rekha is taking up the demand information that she has received
from the buyers and sending it to the top management to ensure that proper
supply is maintained in the future.
23. Role of a Supply Chain Manager
Every year in the month of December, Hyundai Motors launches a scheme,
wherein it gives a lot of add-ons in the form of car accessories (worth $100,000–
$200,000) for free to sell its existing inventory of cars. This is done because the
car models usually get updated once every year. This offer runs from 1 December
to 31 December every year.
At one such instance on 22 December, while the booking of cars had already
happened, the cars did not arrive at the respective showrooms for the customers.
Upon introspection, it was found that the supplier for add-on car accessories was
demanding a higher per-unit price than what was written in the contract. Hyundai
has been working with this supplier for almost a decade.
Which of the following measures should be taken by Hyundai’s supply chain
manager?
Pay the demanded price to the supplier and pass on the additional costs
to the customers
Scrap the contract with the supplier and source the accessories from a
new supplier
Try to negotiate with the supplier on coming up with a per unit price
that is agreeable to both the parties
✓ Correct
Feedback:
Correct answer! The supply chain manager should negotiate and try to understand
why the supplier has taken such a drastic step. Since the relationship of the company
with the supplier is old, there is a possibility that the supplier might have a genuine
reason to increase the cost, thereby putting their decade-old relationship in
jeopardy. The supply chain manager should then come up with a cost per unit that is
agreeable to both parties.
Push and Pull processes

Consider MetaPlus, a new company entering into the smartphone selling business. The
company releases only one device every year with top-of-the-line specifications. It has
two options:
Option 01: The company decides not to invest in inventory at all. It will take pre-orders
from its customers once a week. and produce only so much quantity that is able to fulfill
these pre-orders and then deliver it to its customers.
Option 02: The company will anticipate quarterly demand and manufacture accordingly,
thus keeping an inventory of handsets in its stock.
Determine which of the following processes is followed by MetaPlus in this example.
Option 01 - Push strategy; Option 02 - Push strategy
Option 01 - Push strategy; Option 02 - Pull strategy
Option 01 - Pull strategy; Option 02 - Pull strategy
Option 01 - Pull strategy; Option 02 - Push strategy
✓ Correct
Feedback:
In a pull strategy, products enter the supply chain when customer demand justifies it.
With a pull strategy, companies avoid the cost of carrying inventory that may not sell.
The risk is that they might not have enough inventory to meet demand if they cannot
ramp up production quickly enough. In this example, MetaPlus supplies the mobile
phones only when it has received information from the market that its product is
needed in the market. Hence, option 01 is a pull strategy.
A push supply chain pushes material both in production and distribution based on
projected demand. Under this system, companies have predictability in their supply
chains. Hence option 02 is push strategy.
Sustainable supply chain

Taking into consideration the supply chain value creation model that you learnt earlier,
which of the following situations, according to you, is not an example of a sustainable
supply chain?
Amul using CNG trucks instead of diesel trucks for transportation of milk.
To ensure product safety, e-commerce companies using plastic wrappings to

ship their products.
✓ Correct
Feedback:
Correct answer! Even though using plastic wrappings on the products definitely helps in
their safety, plastic has an adverse impact on the environment due to its non-
degradable nature.
Sales and Demand

Categorise the following as demand and sales.
1. Hot Pan Restaurant receives an order for 10 pizzas; however, due to shortage, it is
unable to fulfill the order.
2. Hot Wok Restaurant receives an order for 10 rolls and fulfills the complete order.
Demand - 1, Sales - 1
✓ Correct
Feedback:
Demand from the market does not depend on whether it can be fulfilled by an
organisation or not; however, sales is that portion of demand that is fulfilled by the
organisation.
Identify the factors responsible for demand planning

Which of the following data is not helpful for predicting the future demand for the next
month at Flipkart?
Number of monthly orders for the past six months
Number of orders in the same month last year
Number of daily orders fulfilled from Flipkart warehouses
✓ Correct
Feedback:
The number of orders fulfilled from Flipkart warehouses determines the supply-side
capacity of Flipkart and is not an indicator of the expected demand from customers.
Supply-side capacity only determines the number of orders that can be fulfilled by
Flipkart from its existing warehouses; however, it is not an indicator of the expected
demand from the customers. If the demand is higher, then Flipkart may need to build
additional capacity to meet the demand.
Demand Forecasting
Flipkart forecasts its demand from multiple geographies and for multiple product
categories (mobiles, lifestyle, electronics, etc.) to make various operational decisions,
including the inventory placement decision, i.e., how to distribute its inventory between
various warehouses in such a way that the orders are delivered to the customers in
minimum possible time. Which of the following demand forecasts at Flipkart is likely to
be the most accurate?
Expected number of orders in April from Delhi for mobiles
Expected number of orders in April–June from Delhi for mobiles
Expected number of orders in April–June from Delhi, Haryana and Punjab for
mobiles
Expected number of orders in April–June from Delhi, Haryana and Punjab for
mobiles and mobile accessories
✓ Correct
Feedback:
Aggregate forecasts are more accurate than disaggregate forecasts because of lesser
chances of error, as the horizon or scope of the forecast is broadened. As the forecast
becomes more specific, the scope of the forecast reduces, leading to the possibility of
an increase in error. For example, it is easier to predict the total demand from Delhi,
whereas it is difficult to predict the demand from each block in Delhi and more difficult
to predict the demand from each house in Delhi.
Your answer is Correct.

Demand Forecasting
Errors in demand forecasting can lead to subpar fulfillment of orders, customer
dissatisfaction and loss of business for companies. In order to serve the customers
better, companies should be able to forecast the customer demand with exceptional
accuracy so that supply levers can be built and deployed accordingly.
From the following list of techniques used by Flipkart, which technique will lead to the
most accurate demand prediction?
Flash sale construct, e.g., an exclusive launch of a smartphone at a pre-decided

time
Big billion day sale, i.e., heavy discounts and offers during a limited period of
time
Pre-book deals, i.e., giving the customers an option to book a product before
its launch
✓ Correct
Feedback:
Correct answer! Since the interested customers have already booked the product before
its launch, Flipkart accurately knows the demand for the product and can build supply to
satisfy this demand.
Planning Horizons
Supply chain teams at Flipkart are required to take a host of decisions in order to ensure
the smooth running of operations in warehouses at all times. These include inventory
procurement decisions, manpower hiring decisions and decisions to employ new
machinery in the warehouses. While some of these are short-term decisions, other
decisions usually require planning for a long-term horizon.
Which of the following decisions at Flipkart warehouses is a short-term decision and

does not require forecasting and planning for a long-term horizon?
Decision to set up a new warehouse facility
Decision to add new permanent employees in existing warehouses

Decision to deploy new equipment across all the existing facilities
Decision to procure spare parts for the existing equipment
✓ Correct
Feedback:
Correct answer! The decision to procure spare parts for the existing equipment is taken
for a short-term horizon and is not a long-term decision. The decision to deploy new
equipment, however, is usually a long-term decision because of its capital-intensive
nature.
Planning Horizons
Flipkart has three types of warehouses: Type A, Type B and Type C. Type A warehouses
are the largest warehouses with millions of square feet and are located closer to supplier
locations. Type B warehouses are medium-sized warehouses located right outside the
major cities. Type C warehouses are small warehouses located in the high-demand
clusters. Fast-moving inventory (which is high-demand inventory) is transferred at
regular intervals from Type A / B warehouses to Type C warehouses so that it can be
delivered to the customers in the shortest time.
The planning horizon for which of these warehouses is likely to be the shortest for
Flipkart?
Type A warehouses
Type B warehouses
Type C warehouses
✓ Correct
Feedback:
Since Type C warehouses have fast-moving inventory, their inventory replenishment
cycles are shorter, i.e., they have to quickly replenish their inventory. Therefore, their
planning horizon is shorter to make sure that they always have the inventory that is in
high demand at that point of time.
Supply Planning and Strategic Fit

According to you, for which of the following companies will it be easiest to achieve a
strategic fit through their supply chain (keeping other parameters constant across these
companies)?
Company A, selling two variations of smartwatches every year
Company B, selling five variations of smartwatches every year
Company C, selling only a single variation of smartwatch every year
✓ Correct
Feedback:
Correct! The path of an organisation in achieving the desired strategic fit becomes
difficult as product variety increases, thus with only a single variation to be sold per year,
it will be easiest for company C to achieve strategic fit.
Decision Making under Demand Uncertainty

Company A manufactures a highly specialised set of mattresses. This product is meant
only for tropical seasons as it absorbs all the sweat and bad odour from the body while
sleeping . Owing to the nature of the product, its demand is highly uncertain. Which of
the following steps is more suitable to mitigate this uncertainty in demand?
The company should sell its product only during the tropical season and stop
the production in non-tropical seasons. The unsold inventory from the
production in the tropical season could be sold in the subsequent non-tropical
seasons.
The company should sell its product online through e-commerce retailers and
let them handle the excess inventory.
The company should keep its production running throughout the year at an
optimal production rate with the least possible labour.
✓ Correct
Feedback:
Different states have different temperature and weather profiles throughout the year.
There are states that have a sweaty atmosphere even in winters. Maintaining production
throughout the year would ensure that the company is not losing on sales from such
states
Decision Making under Demand Variability

Customer demand for any company or any product can vary from one time period to
another. However, in certain situations, the variability in demand is predictable,
especially when the variability occurs because of the internal factors in the company. In
such cases, a company can plan for the variability in advance and deploy its supply
capabilities accordingly (some of the supply levers used by companies to meet the
predictable variability in demand are a flexible workforce, a flexible production facility,
distribution of the production of complementary product portfolio uniformly across the
year, etc.).
However, if the variability in demand occurs because of external factors, it becomes

difficult for the company to predict this and take suitable measures.
According to you, which of the following scenarios describes a predictable variability in

demand for a company?
A new product launched by the competitor
Changes in compliance and taxation rules by the government
Increase in the demand for ACs and refrigerators during summers
✓ Correct
Feedback:
Correct answer! The fact that there will be an increase in demand for ACs and
refrigerators during summers is predictable, and companies can start planning their
supply in advance.
Aggregate Planning Strategy

Food delivery start-ups generally have a fixed number of delivery executives, sufficient
to perform routine operations. In certain periods like festivals, events or even on
weekends, the start-ups face a substantial increase in demand. How can the food
delivery start-ups deal with such variations?
The start-ups can hire more permanent delivery executives to avoid all such
uncertainties.
The start-ups can contract part-time delivery executives depending on the

expected increase in demand.
✓ Correct
Feedback:
Correct Answer! One of the supply options to deal with uncertainties is subcontracting.
The food-delivery start-ups can hire extra workforce for certain time periods when the
demand is expected to increase like festivals or events. Similarly, for weekends, a few
extra delivery executives can be hired on a contractual basis.
This way, the company can manage the increased demand while also keeping the cost
under control.
Supply Planning Case Study

Select the correct statement from the following statements that compare road transport
and rail transport.
Road transport led to waiting time at factories, as there were 12 transporters
Containerisation impacted the lead time of rail transport.
✓ Correct
Feedback:
Containerisation is required to ensure that only full rakes of 2,600 tons are loaded onto
rails. Hence, it resulted in waiting time until 2,600 tons of material were produced by
manufacturing units.
After rail rakes transported the material to goods sheds, there was no
additional external dependence for transporting material to the required
destination.
None of the above.
Supply Planning Case Study

Regarding the usage of road transport for fulfilling cement demand, select the correct
statement from the options given below.
Road transport does not depend on any external labour for handling material.
✓ Correct
Feedback:
As there are no intermediate destinations, there is no dependency on any external
labour.
Incorporation of S&OP in an Organisation

According to you, which of the following is not a benefit of incorporating S&OP in an
organisation?
Due to proper interaction and flow of information across cross-departmental teams:
The amount of unsold inventory at any point in time is very less.
The amount of time from the manufacturing stage of a product to its

placement on retail shelves has been reduced.
The profitability at the end of a business cycle has decreased.
✓ Correct
Feedback:
With the incorporation of S&OP, the manufacturing, logistics and other supply chain
costs decrease, thereby increasing the overall profitability. Profitability also
increases due to the information flow across cross-departmental teams.
Customer service levels have increased
S&OP Horizons
In the table provided below, on the left-hand side, you can see some key decisions that
are taken by the management while planning for sales and operations. On the right-
hand side, the planning horizon (strategic, tactical or operational) is given. Match each
decision with the correct planning horizon.
Sl. Planning
Decisions
No. Horizon
Operating a beverage manufacturing plant in two shifts instead
1 P Strategic
of three due to reduced demand during winter
Relocating the engine manufacturing plant from Gujarat to
2 Q Tactical
Maharashtra
Offering voluntary retirement to 10% of the office staff within
3 R Operational
one year
1-Q, 2-P, 3-R
1-P, 2-Q, 3-R
1-R, 2-Q, 3-P
1-R, 2-P, 3-Q
✓ Correct
Feedback:
Relocating an engine manufacturing plant is a capital-intensive decision and is generally
made if an organisation sees its benefits in the long run. Such decisions lie in the
strategic planning horizon.
Voluntary retirement cannot be offered to employees with a very short notice period.
Hence, this decision lies in the tactical planning horizon.
Changing operations from three shifts to two shifts in order to deal with the demand
variability is a decision taken in the operational planning horizon.
S&OP Horizons
Match the following:
Sl. Planning
Decisions
No. Horizon
Increasing the headcount of factory workers from 100 to 150 to
1 P Strategic
meet the continuously increasing demand
Setting up manufacturing operations in neighbouring countries
2 Q Tactical
to cater to the rising demand from those areas
Increasing the work hours of factory labourers from the current
3 9 hours to 12 hours for the next couple of weeks to meet the R Operational
sudden spike in demand due to change of season
1-Q, 2-P, 3-R
✓ Correct
Feedback:
Increasing the headcount of factory workers involves hiring new permanent employees
and needs changes in the hiring process. Thus, it falls in the tactical horizon.
Setting up new manufacturing plants is a capital-intensive decision and is generally

made if an organisation sees its benefits in the long run. Such decisions lie in the
strategic planning horizon.
Increasing the daily working hours for the next couple of weeks is done to meet the
immediate future demand and, thus, falls in the operational horizon of planning
Supply Planning and Strategic Fit

At Flipkart, a packer can pack about 80 items per hour. Each packer works for one shift,
which is eight hours long. Assuming that the packer remains productive for 80% of the
shift time, what is the manpower (number of packers) required on a normal day to
supply the requirement of packing 84,000 items per day?
156 packers per day
160 packers per day
165 packers per day
✓ Correct
Feedback:
Each packer packs (80 * 8 * 80%) = 512 items per day.
Therefore, to pack 84,000 items per day, the number of packers that will be required =
(84000/512=164.06)
Aggregate Planning
If the demand is higher, a company hires additional manpower to increase the output
and meet the demand. If the demand is as usual, the company is able to meet the
demand with the regular number of workers. However, if the demand is low, the
company lays off a certain number of workers to achieve the lower output.
Which of the following issues can arise for this company because of the aforementioned
aggregate planning strategy?
High storage costs
Labour union strikes
✓ Correct
Feedback:
Correct answer! In the aforementioned planning strategy, the company is constantly
chasing the demand, hiring additional manpower in the peak season and laying off
manpower during the low-demand period. Therefore, it is more likely to face manpower
planning and labour union-related issues, such as strikes by the labour union because of
constant hiring and firing of workers and no job security.
Lost sales/business
Underutilisation of manpower
Decision Making under Demand Uncertainty

Which of the following products do you think has the highest demand uncertainty?
Engine oils for vehicles
Intra City bus tickets
Anti pollution face wash
Fifth generation defense aircrafts
✓ Correct
Feedback:
Fifth generation defense aircrafts have cutting edge technology and require huge capital
investment for their manufacturing. They are made only in small quantities and require
careful inspection right from their manufacturing and even after their induction. Thus,
they have the highest demand uncertainty within the options provided.
Aggregate Planning
Company A plans its production according to the forecast demand. It hires additional
manpower when the demand is high and lays off manpower during the period of lean
demand. Which of the following aggregate planning strategies does it deploy?
Level strategy
✕ Incorrect
Feedback:
A level strategy allows a company to maintain a steady production rate as well as a
steady workforce in the organisation.
Chase strategy
✓ Correct
Feedback:
Correct answer! A chase strategy is employed when the company's production is
constantly chasing the demand. Here, capacity is the lever for the company and the
workforce keeps changing to meet the demand.
Aggregate Planning
Company B is in the small water turbine manufacturing business. The manufacturing
process is a complex one and requires heavy training of the workforce. Thus, the
company does not lay off its workforce frequently. The demand for small water turbines
is constant throughout the year.
Which of the following aggregate planning strategies does it deploy?
Level strategy
✓ Correct
Feedback:
Correct! A level strategy allows a company to maintain a steady production rate as well
as a steady workforce in the organisation. The advantage of using a level strategy is a
well-trained workforce. Thus, it is best suited for company B.
Product Journey
Keeping the journey of the product in mind, what is the correct order which forms the
foundation for creating a world-class supply chain? (Note: Assume that the planning
phase is already completed)
i. Maruti 2800 ZX is delivered to the showroom centre

ii. Spare parts and locomotives are supplied to Maruti manufacturing plant
iii. The manufacturing of Maruti 2800 ZX is undertaken at the plant
iv. Customers visit showroom to purchase Maruti 2800 ZX
iv, i, iii, ii
i, iv, iii, ii
ii, iii, i, iv
✓ Correct
Feedback:
This is the correct order of activities which make up the business value for an
automobile manufacturer. Source- make- move- sell.
iii, i, ii, iv
Direct vs Indirect Sourcing
Suppose you are planning to open a design studio that creates unique embroidery art.
Which of the following will fall under direct materials (Note: More than one option can
be correct)
The beads and crystals used to make the art and jewellery
✓ Correct
Feedback:
This is directly needed which forms part of the final product sold
The silver used to create the jewellery
✓ Correct
Feedback:
This is directly needed which forms part of the final product sold
The coffee machine for the designers
The machinery used to cut the gold and silver
✓ Correct
Feedback:
This is a correct example of an direct material required to make the final product
Product form considerations

A sourcing manager working at an automotive firm needs to decide whether to
manufacture engines in-house or to outsource engine manufacturing to an external
party. Consider the factors given:
1. Engine manufacturing is a very specialised domain as years of R&D goes into

perfectly manufacturing an engine.
2. Vendors in consideration in the above case are all specialised vendors with 20+ years
of experience in engine manufacturing.
3. The automotive manaufacturing firm requires 3,000 engines in 5 different variants per
year. If they go for in-house production then the minimum capacity they have to plan
for is 15,000 engines annually.
What option would be better suited for this automotvie firm?

Outsource
✓ Correct
Feedback:
Considering the factors given and the capital investment required to manufacture
engines it would be advisable to outsource the engines.
Industry based sourcing

A two-wheeler manufacturer wants to expand its reach and start producing cars. What
will likely be the impact on its sourcing strategy as a result of this decision?
The bill of materials will increase and the number of vendors will decrease
The bill of materials and number of vendors will likely decrease
The bill of materials and number of vendors will both increase
✓ Correct
Feedback:
As product complexity goes up, the bill of materials and the number of vendors
increase.
Outsourcing
Suppose you run a travel boutique company and are deciding whether to hire a developer in-
house or outsource the web and software development. You are aware that there are no other
technical people in the company with experience in software development. What is the potential
risk of going ahead and hiring a developer in-house?
Spending on in house developers would be more costly than outsourcing
In house developers will be less skilled than developers who are outsourced
Having managers who are not able to support the developer, with regards to project
planning and building processes with them will be a risk for the project
✓ Correct
Feedback:
This would be a relevant risk in case there are no technical people in the company with the
relevant software development experience
Business Value Chain

Which function is the most critical to the given industries?
i. Source
ii. Make
iii. Move
I. Walmart is able to offer low prices to consumers due to aggressive and strategic
procurement practices
II. Delivery of perishable agri products by Ninjakart (a fruits and vegetables e-commerce
company)
III. Manufacturing of high-quality aviation engines and parts by aircraft manufacturer
I -iii ; II - i; III - ii
I - ii; II - i; III - iii
I - i; II - iii; III - ii
✓ Correct
Feedback:
Aggressive sourcing strategies by Walmart help them to procure items at extremely low
prices compared to its competitors.
Perishable products have a low shelf life and hence, efficient move function becomes
critical.
Aircraft manufacturing involves a high quality manufacturing process as any degree of

failure can’t be accepted.

State whether the following statement is true or false.
Direct materials have a lesser impact on production as opposed to indirect materials.
True
✕ Incorrect
Feedback:
Direct materials have a higher impact on the production as opposed to indirect
materials, as a delay in receiving the direct materials will cause a delay in the production
of the final product.
False
✓ Correct
Feedback:
Any delay in receiving the direct materials will cause a delay in the production of the
final product.
Apple Case Study

Minimal interruptions in production capacity was a critical requirement for Apple. What
was Apple’s strategy to reserve and assure production capacity?
Control over intellectual property
Focusing on high value add work
✕ Incorrect
Feedback:
Apple did maintain responsibility for new product development and design, however
this is not a relevant strategy which helped Apple reserve and assure production
capacity
Investing large amounts of capital in suppliers
✓ Correct
Feedback:
By strategically investing large amounts of capital in suppliers, Apple assured production
capacity would be uninterrupted, effectively restricting supply options for competitors
Industry-Based Sourcing
Without the need for raw materials to feed production, the sourcing team of company X
is spending more time managing what would be traditionally considered indirect
sourcing aspects such as operating, maintenance, and support costs: ‘the business of
doing business as it were.
Company X belongs to which of the below-mentioned industries?
A dairy plant
An autombile manufacturer
A blogging website
✓ Correct
Feedback:
With the rapid evolution of the global marketplace websites which are typically more
geared toward service based products would be spending more time on indirect
sourcing

Match the following -
i. High processing cost relative to the value of the transaction
ii. Forms part of cost of goods sold
iii. Any delay in sourcing will lead to a delay in production
iv. Relatively low number of transactions
1- Direct sourcing
2-Indirect sourcing
Direct Sourcing: i, iii

Indirect Sourcing: ii, iv
Direct Sourcing ii, iii, iv
Indirect sourcing i
✓ Correct
Feedback:
The options have been matched correctly.
i) Processing cost & number of transactions - High processing cost (relative to price of
items sourced) for indirect materials due to higher number of transactions.
ii) Accounting: Direct sourcing forms the part of cost of goods sold while indirect
sourcing forms part of selling & general expenses
iii) Impact on production: Any delay in arrival of direct material is going to affect
production adversely. On the other hand, for an indirect material, it has a lesser impact.
iv) Number of transactions is low for direct materials and high for indirect materials
Outsourcing
Soul Foods sells vegan cheese locally. The vegan cheese market is extremely niche with
a high demand, and hence, Soul Foods is growing rapidly. So far, the company has been
making 100 kgs of vegan cheese at their in-house facility. They are looking to cater to a
demand for an additional 20 kgs. According to you, should they outsource the
additional production or manage it in-house?
Consider the options below and select the most appropriate strategy.
Soul Foods continue making the vegan cheese in house by incentivising labor
to work overtime for 30 days
✓ Correct
Feedback:
It is best to manage additional 20% capacity using existing infrastructure as compared
to the alternative options
Vendor Selection
Which of the following is NOT a benefit of selecting a supplier which has Just in Time
(JIT) capabilities?
Higher productivity rates
Reduction in storage costs
Higher overheads
✓ Correct
Feedback:
Just in time (JIT) can actually lead to lower overhead costs. As inventory is minimum, the
production setup can even operate from relatively smaller locations.
Vendor Selection
Identify long term strategic partnership vs short term contract?
Statement I - Fast Payments is an online payment gateway and decide to tie up with IT
Solutions Inc for their security integration services
Statement II - Fast Payments is looking to hire a sales executive and tie up with KS
Recruitment for their headhunting services
Statement I - Short term contract; Statement II - Long term strategic partner
Statement I - Long term strategic vendor; Statement II - Short term contract

✓ Correct
Feedback:
In this case, Fast Payments will constantly be needing the services of IT Solutions Inc and
the security integration will be strategically critical. However, the contract with KS
Recruitment would be short term as once a sales executive is hired, their services would
no longer be required
Supplier Selection
In the half-yearly review process, A mobile manufacturer wants to evaluate its vendors
based on their sourcing performance. The sourcing performance of these vendors will
be evaluated based on their delivery, quality and cost performance. Which of the
following KPIs is NOT an important factor while evaluating the sourcing performance?
Number of assembly line disruptions faced
✕ Incorrect
Feedback:
Disruptions in the assembly line and complaints regarding quality at the buyer
organisation’s end create doubt with respect to the vendor’s manufacturing ability.
Hence, this is an important factor to be considered while evaluating vendor
performance.
Number of cost-saving ideas implemented on parts
Rejection of parts during pre-fitment inspection
Inventory of raw material parts at the vendor’s end
✓ Correct
Feedback:
Raw material inventory with the vendor has a limited implication on the purchasing
organisation because the cost of carrying the inventory is not the purview of the buyer.
Sourcing Challenges
An American smartphone manufacturer has been facing significant budget overruns
because of an increase in wages mandated by the US Government’s Regulation. In order
to retain the operating profit, the company is planning to procure parts from Southeast
Asia.
Which of the following problems might the company face because of this strategy?
(Note: More than one option may be correct.)
Inability to fulfil the volatile demands of the customer
✓ Correct
Feedback:
In the case of a global supply chain of a product, the flexibility to tailor the quantity of
the order based on the revised demand reduces the ability to fulfil the snap demands of
the customer and results in a sales loss.
Increase in the cost of logistics
✓ Correct
Feedback:
In the case wherein the vendor is positioned far away from the manufacturing set-up,
the cost of logistics increases.
Change in customer service and quality preference
✓ CorrectYou missed this!

Feedback:
Customer service and quality preference are functions of change in the supply chain of a
product.
Increased inventory carrying cost
✓ Correct
Feedback:
Sourcing parts from another country would increase the lead time, and hence,
manufacturers will have to order in bulk, which will increase the inventory carrying cost
Sourcing Challenges
For an automobile manufacturer, which of the following is a challenge with regard to
sourcing strategies?
Increase in the prices of steel and rubber that are used as raw materials in
vehicle manufacturing
✓ Correct
Feedback:
An increase in the price of raw materials will force a round of re-negotiations between
the supplier and the buyer.
Increased consumer expectations of multiple variants, such as petrol, diesel,
hybrid, etc.
✓ Correct
Feedback:
A change in consumer expectations with regards to a demand for more variants of a
product will lead to changes in terms of sourcing strategies.
A pure transactional relationship between a supplier and a buyer wherein both

parties try to get the most out of the relationship

Feedback:
The supplier and buyer need to collaborate and innovate together to navigate new
business challenges
An automobile manufacturer transitioning to recyclable packaging material to

move towards sustainability

Feedback:
A shift to recyclable material will require new sourcing strategies
Increase in price of petrol
✕ Incorrect
Feedback:
This is not related to the sourcing aspect for the manufacturer.
Apple Case Study

What are Apple’s key advantages in how it manages its supply chain? (More than one
option can be selected)
Apple’s manufacturing costs are variable, as the company does not

manufacture any iPhone components

Feedback:
This is a key advantage in how Apple manages its supply chain
Apple focuses on innovation to drive its sales

✓ Correct
Feedback:
Apple optimizes third party production
✓ Correct
Feedback:
Apple invests in large amount of fixed assets to support its distribution
✕ Incorrect
Feedback:
Apple does not invest in large amount of assets to support distribution and instead
rents air and sea freight capacity
Session Summary
What do you think was the most critical parameter L’Oreal considered when selecting a
supplier for their simulation machines and 3D printers
Supplier location
Just in time capability
After-sale service
Technical ability
✓ Correct
Feedback:
3D printers and simulation machines are high tech specification products, hence a
supplier who invests considerably in R&D and has the most advanced technical abilities
would be most
Session Summary
Suppose that one of the 3D printers received by L’oreal from a contracted vendor was
missing a few agreed specifications which enabled the 3D printer to be able to run
longer on a high printing speed setting.
Which step of the purchasing cycle would this issue be addressed?
Approving suppliers’ invoice for payment
Receiving and accepting goods
✓ Correct
Feedback:
In this step the printer would be received by the supplier and a strict quality check
would be conducted. In this scenario, the product may be rejected and the company
may request the supplier to replace the 3D printer
Following up to ensure that delivery dates are met
Selecting suppliers
Graded Questions
Vendor Selection
Having a reliable output with a low rejection percentage is desired and a critical
requirement for companies. What is a standard industry method to measure reliability of
a vendor?
Measuring the company’s investment in R&D
Maintaining good after sales services
Measure performance through quality vendor certification programs
✓ Correct
Feedback:
Quality certification program helps to monitor reliability of vendor processes
Purchasing Cycle
What is the correct order of the following points?
i. Request for Quotation (RFQ) is a standard business process followed when an organisation
wants to buy a specific product or service and vendors share their quotations.
ii. A Goods Receipt Note (GRN) is issued to record the delivery of items from your suppliers. It
is also known as a delivery note, which is used as an evidence that goods are delivered and the
customers have received them. Moreover, both suppliers and customers use Goods Receipt
Note (GRN) to compare orders and delivery quantities.
iii. The company issues a Purchase Order (PO) to a supplier to confirm the orders.
i, ii, iii
iii, ii, i
i, iii, ii
✓ Correct
Feedback:
RFQ (Request for Quotation) is for issuing requests for quotation, receiving and analyzing
quotations and selecting the right supplier based on the quotations received
Once the negotiation process is over with a supplier, PO is raised so that supplier can start
production and deliver accordingly.
On receiving and accepting goods, a GRN (Goods Receipt Note) is issued. This also helps in the
supplier's invoicing process.
ii, i, iii
Attempt 1 of 2
Continue
Vendor Selection
Jiten owns a silk textile business and is looking to source silk. Which of the following
vendors can be considered -
Vendor 1 commands best quality but production happens in inhumane working

conditions
Vendor 2 has sufficient production capacities with 2 existing contracts
Vendor 3 waste disposal methods aren’t environmentally friendly
Vendor 4 offers extremely reasonable prices at a subpar quality
Vendor 1
Vendor 2
✓ Correct
Feedback:
It would be most appropriate to select this vendor as they have sufficient capacity and
an existing relationship exists
Vendor 2 and Vendor 3
Vendor 1 and Vendor 4
How To Manage Inventory?

Motive of Carrying Inventory
Caviar is a delicacy. These are the eggs from sturgeon fish and are extracted by hand.
This entire process of extraction results in making them highly expensive.
HighSea is a hypothetical company that sells caviar to rich Indians. HighSea sources its
caviar from a single supplier in Russia.
As the awareness regarding the benefits of caviar is increasing, its demand is also
increasing. The rising demand and low supply of caviar have been leading to sales loss
for HighSea. In order to fulfill the demand, HighSea started sourcing caviar from two
more suppliers in Serbia and Russia. This was done to avoid loss of sales due to the
unavailability of caviar.
Based on this scenario, under which motive has HighSea decided to purchase more
inventory of caviar?
Transactional motive
✓ Correct
Feedback:
Correct! If an organisation is keeping inventory to avoid stock-out of finished goods or
raw materials for its sales and production, then it is said to be keeping inventory to fulfil
the transactional motive. In this case, HighSea is trying to prevent future stock-out of its
raw material inventory due to any bottleneck in its production process.
Make To Stock vs Make To Order

Consider the case of two rival pizza delivery companies: Fastmovers and Authenticity.
Both these companies are catching up with the trend of ‘cheese burst pizzas’, in which
pizza bases have an extra layer of cheese within. The companies enjoy equal shares of
the demand for cheese burst pizzas and even price them similarly. However, they differ
in the manner in which they prepare their pizzas. Fastmovers prepares the bases for
cheese burst pizzas beforehand and stocks these bases for use as and when orders are
placed. On the other hand, Authenticity prepares the base only when an order for a
cheese burst pizza is placed.
Select the correct statement from the options given below.
Fastmovers operates on a make-to-order (MTO) model, whereas Authenticity

operates on a make-to-stock (MTS) model.
Fastmovers operates on a make-to-stock model, whereas Authenticity

operates on a make-to-order model.
✓ Correct
Feedback:
As Fastmovers has eliminated the step of preparing a special base by pre-making it and
stocking it as inventory, it is operating on an MTS model, unlike the case of Authenticity,
which is operating on a make-to-order model.
Role of Transport
What type of transportation is suitable for product line 1?
Water
Air
✓ Correct
Feedback:
Correct! Air transport is used to transfer products to international markets where the
delivery has to be done at the earliest.
Role of Transport
What type of transportation is suitable for product line 2?
Water
Air
Road
✓ Correct
Feedback:
Correct! Road transport is used to transport materials to the domestic markets that have
a land route between them.

Waterless Ltd is a Mumbai-based raincoat-making company. Raincoats have extremely
high demand in Mumbai and its suburbs owing to the prolonged rainy season. However,
the demand for raincoats is extremely seasonal in nature and completely depends on
the arrival of monsoons. As soon as the monsoons hit the shores of India, the sales of
raincoats skyrocket. When the sales of raincoats start booming, the demand for raw
material required in the manufacturing of raincoats, i.e., waterproof fabrics also
increases. When this happens, the raincoat manufacturing process takes a hit due to
shortage of raw material and so do the raincoat sales.
The exact date when the monsoon hits the country is not known and thus,
manufacturers are afraid of stocking excessive raw material beforehand.
Being in the business for many years now, Waterless Ltd is aware of this cycle. To
overcome it, the company studies the weather conditions through sophisticated tools
and starts to predict the arrival of monsoons with high accuracy. The company then
orders raw material only a few days before the monsoon arrival date as is calculated by
its sophisticated tools.
Based on this scenario, under which motive has Waterless Ltd decided to purchase the
inventory?
✓ Correct
Feedback:
Correct! If an organisation is keeping inventory to avoid stock-out of finished goods or
raw materials for its sales and production, then it is said to be keeping inventory to fulfil
the transactional motive. In this case, Waterless Ltd is trying to prevent future stock-out
of its raw material inventory.
Inventory Costs
Rock On Pub is a friday night destination for all the people who want to party and have
fun with their friends. The pub has the capacity to provide services to 200 people at a
time, and it remains full on Friday and Saturday nights, and many times, people have to
wait to get a seat. The situation is completely opposite on weekday nights. The pub
remains mostly empty at that time.
Rock On Pub has studied its historical sales and found that it requires 1,000 beer bottles
every week. In order to serve its customers, the pub places the order for 1,000 beer
bottles every Thursday. The beer supplier has standard trucks with a capacity for 4,000
beer bottles and ships the order in such trucks. The diesel and driver expenses, that
amount to be $100 for every trip from the supplier to the pub, have to be borne by the
pub itself.
Soon, the pub realised this overhead and decided to order 4,000 beer bottles once a
month. This reduced its expenses that were spent on diesel and driver.
Based on this scenario, Rock On Pub has cut which kind of cost by adjusting the
ordering of its inventory?
Ordering cost
✓ Correct
Feedback:
Correct! Ordering cost is the cost that is incurred every time an order is placed by an
organisation.
Make To Stock vs Make To Order

Albert is one of the most renowned tailors in New york city. He took over his family's
tailoring business in 1980 when his father passed away. Since then, he has been known
all over the town for his craftsmanship with clothes. He has remained the favourite of
people who are 40 and above in age. These people prefer to wear tailor-made clothes
and are popularly known as Generation X. However, Generation Y (people who are 25–
40 years old) prefer ready-made clothes, and as this population is expanding, it is
becoming even more challenging for Albert to cater to this segment. Albert’s son, Ethan,
is aware of this change and has convinced his father to open a new shop for him that
will only sell ready-made clothes from top brands around the country. Soon, Ethan’s
shop flourished, and now, both father and son are operating their shops; Albert is
targeting the generation X demographic, while Ethan is dealing with the generation Y
demographic.
Based on this scenario, determine the type of inventory model used by Albert.
Make-to-stock
Make-to-order
✓ Correct
Feedback:
Correct! In the make-to-order model, an organisation does not have any inventory of
finished goods with itself. It involves preparing the finished goods only when an order is
received. This is true of Albert’s case. He makes clothes such as trousers and shirts only
when an order is received. So, he takes his time to prepare the finished product.

Consider Coppo Ltd, a company renowned for its high-quality but relatively inexpensive
mobile phones in the market. While the flagship phone of Coppo, Coppo XZ2 Pro, is
priced at $1,000, other companies sell mobile phones with the same specifications at a
price of 2,000. The cost of manufacturing the phones is the same for all the companies.
While other companies are earning a profit of around 20% on every unit they sell,
Coppo is earning a profit of only 5% per unit sold. Since Coppo is working on extremely
low margins, it has to efficiently manage its supply chain so that no extra costs and
expenses are incurred that can reduce its earnings.
All the mobile phone companies source their camera lenses from the same vendor.
There have been rumours in the market that the vendor is going to increase the cost of
the lenses from next month. Anticipating that the vendor may increase the prices,
Coppo decided to purchase an additional inventory of 1,00,000 camera lenses for its
mobile phones from the vendor at the current market price.
Based on this scenario, under which motive has Coppo decided to purchase the
inventory?
Precautionary motive
Speculative motive
✓ Correct
Feedback:
Correct! If an organisation is keeping inventory to take advantage of price fluctuations
that may happen in future, then it is said to be keeping inventory to fulfil the speculative
motive. In this case, Coppo is purchasing inventory to take advantage of the current
market price.
Role of Transport
FreshUp is a hypothetical company having apple orchards in Srinagar. The company
supplies fresh apples to its retail clients in big metropolitan cities such as Kolkata,
Mumbai, and Delhi. The shelf life of apples is five to seven days. The company currently
uses the road as a mode of transport, which takes around 72 hours to transfer the
apples to the above-mentioned cities. On average, it takes 24 hours for apples to be
picked up by the consumers from the retail stores. Thus, four days (of their five to
seven-day shelf life) are wasted until the apples reach the consumers.
The company wants to shorten the time that it spends on transportation without
increasing its costs significantly. Which of the following options is the most suitable for
the company to adapt in order to shorten this time period?
The company should start using air as a mode of transport.
The company should start using rail as a mode of transport.
✓ Correct
Feedback:
Correct! Using rail to transport apples will reduce transportation time by as much as 30
hours. This will also reduce the chances of cargo being compromised due to road
accidents.
Principles of Logistics Systems

Match each of the scenarios given below with the relevant principles that they follow.
1-R, 2-P, 3-S, 4-Q
✓ Correct
Feedback:
1. By forecasting sales (demand) and working backwards from the endpoints,
such demands can be allocated to factories/manufacturing units
2. Overtime allowances are an incentive provided by organisations for
achieving better efficiencies.
3. By ensuring that their vehicles are always in proper condition, the
wholesaler is creating a logistics system that is always reliant.
4. By updating a customer on their order status, the e-commerce organisation

is ensuring that the same information is visible to the customer.
Distribution Strategies
Match each of the following scenarios with the distribution strategies used:
1-R, 2-S, 3-Q, 4-P
1-R, 2-Q, 3-S, 4-P
✓ Correct
Feedback:
1. By maintaining its own delivery fleet, the restaurant prefers to have a direct
mode of delivery.
2. School buses or other vehicles that follow a designated route for picking up
or dropping off children examples of are milk runs. (Now you know why
milk runs require extreme coordination and synchronisation)
3. In the case of the coffee bar, as each collection centre serves its nearest
location, the strategy adopted is the hub-and-spoke model.
4. The live organ is not stored anywhere but is transported through multiple
modes; hence, this is cross-docking and not direct shipping.
5. Types of Facility
The American company Bausch + Lomb operates its Italian/American brand of
luxury sunglasses and eyeglasses by the name of Ray-Ban. Its sunglasses range
from $35 to $350 and higher.
The brand has a very high consumer pull and has markets in multiple countries.
While the South-asian markets in India, Bangladesh and Sri Lanka are price
sensitive in nature and demand products of a relatively lower cost, the East Asian
markets in Japan, Hong Kong and South Korea as well as European American
markets are not price-sensitive and demand new product designs.
The company is thinking of catering all the markets through a single facility located
in Bangladesh, as there are no trade barriers imposed by any of the above-
mentioned countries while exporting products from Bangladesh. However, the
Bangladeshi government is not giving any tax benefits for setting up a
manufacturing facility either.
Determine the type of facility that will be constructed in Bangladesh.
Offshore facility
Server facility
Outpost facility
Source facility
✓ Correct
Feedback:
Correct! A source facility is used to serve global requirements; this includes the
country where the plant is located and other markets where the products will be
exported to. A facility in Bangladesh is constructed only for such a purpose
Considerations of a Distribution Network

Dhabas are traditional Indian roadside restaurants that are typically found on highways
in the outskirts of cities. Usually, these dhabas are found in a cluster; you will mostly see
three or four such dhabas adjacent to each other or on opposite sides of the highway.
List two possible reasons for such a phenomenon.
Suggested Answer
You learnt that competitive factors play a major role while setting up a distribution
network of an organisation. Based on the learnings from that section, the following two
points can be concluded:
1. Dhabas are generally located in a cluster to take advantage of positive
externalities. As a result of this, the combined demand for food increases, which
ensures that customers (mostly families who are travelling and truck drivers) have
to come to one location for their meal breaks.
2. There have been instances of loot on highways in the past. Thus, families who are
travelling on these highways have a sense of insecurity in stopping at unfamiliar
and deserted spots. They usually stop at places where they see other
families/travellers stopping. Taking this into consideration, dhaba owners plan
the location of their dhabas in a cluster rather than setting them up in separate
and deserted spots.
Distribution Network Design

Flipkart operates two different supply chains for the following two types of product
categories: small product category and large product category.
The small product category includes mobiles, electronics, lifestyle and home furnishing
products.
The large product category includes large appliances such as ACs, refrigerators, TV and
washing machines.
Flipkart is planning to open a new warehouse for its small product category supply
chain. Which of the following is not an important factor in deciding the optimum
location for the new warehouse in this category?
Locations of the suppliers for the small product category
Demand clusters for the small product category
Locations of the vendors for the packaging material
Location of the suppliers for the large product category
✓ Correct
Feedback:
Correct! The locations of the suppliers in the supply chain for the large product category
do not have an impact on the location of the warehouses in the supply chain for the
small product category. The two supply chains can work independently, assuming that
there are no inter-warehouse transfers / inter-network transfers between the supply
chains.
Performance of a Distribution Network

Company A was touted to have the best supply chain across the entire FMCG industry.
The company used to sell only soaps and shampoos.
The time it took for company A to make its product available in the market was the least
among its competitors. Its customer service was also among the best in the industry. Its
products were available in all the shops across the country.
The space utilisation rate (space utilised by an organisation as a percentage of the total
space with the organisation) of company A was close to 70%, which was way more than
that of its competitors who were struggling at 30%–35%.
The company was able to achieve such an excellent space utilisation rate through the
following mechanism: It had predefined dimensions for its storage boxes of soaps and
shampoos. The boxes were specially meant to keep soap bars of 125 grams and
shampoo bottles of 1 litre only.
For some time, company A remained at the top of the best supply chains lists. However,
suddenly, it fell from the list and is now taught in supply chain classes as an example of
‘what not to do with your supply chain’.
According to you, which of the following performance parameters led to this fall of
company A?
Product availability
Customer service
Product variety
✓ Correct
Feedback:
Correct! Company A’s storage boxes were specially designed to keep soap bars of 125
grams and shampoo bottles of 1 litre only. As a result of this, it was not able to cater to
customers who were demanding its products in different sizes.
Time to market
Distribution Network
Rally racing is a special form of car racing in which cars run on different types of off-
road surfaces such as gravel and snow. The race involves the participation of special
types of cars from top car manufacturers such as Toyota, Hyundai and Ford. Winning a
rally race means a lot to a car company, as it directly sends a message that cars from a
winning car company have more power than the rest.
The popularity of rally racing is quite high in the European countries of France, Germany,
Britain and Scandinavia where there are a plethora of passionate fans.
Rally championships are held throughout the year in different European countries.
An important aspect of racing cars is their appearance (i.e., their paint job), which needs
to resonate and connect with the target audience who is watching these races.
Taking into consideration all the above-mentioned factors, according to you, where
should car companies locate their respective facilities for painting rally cars?
India
China
Kenya
Germany
✓ Correct
Feedback:
Correct! Even though the cost of painting and its associated labour cost will be higher in
Germany than those in the other countries provided in the options, the car manufacturer
would be to quickly adapt to the continuously changing preferences of European fans
and then transport the car’s body quickly to the racing location, as their locations are
near each other.
Company A operates one of the largest cheese factories in Italy and sells its cheese
directly to its consumers by taking pre-orders on its website. It has invented a new type
of cheese, and the initial testing results are quite encouraging. The company wants to
sell this new cheese in the North American markets along with the European markets.
This cheese is made by fermenting milk using a special type of ingredient that is found
only in the villages surrounding the Italian city of Naples. Let’s call this ingredient ‘X’. For
every litre of milk, half a litre of ingredient ‘X’ is required. Thus, to produce cheese from
100 tons of milk, the company requires 50 tons of ingredient ‘X’ that is to be collected
by visiting every home in all the villages around Naples. The shelf life of this cheese is
only five days.
Once the special cheese is ready and pre-orders are received, the company transfers it
to its consumers in North American and European markets using third-party logistics
partners, as it does not have any delivery infrastructure of its own. These third-party
logistics partners use different modes of transport.
Based on the scenario described above, which of the following is the most suitable
distribution strategy that the company has to adopt to procure ingredient ‘X’?
Cross-docking
Milk run
✓ Correct
Feedback:
Correct! Milk run is the best distribution strategy to be adopted when a product is to be
taken from or delivered to multiple locations.
Direct shipping
Based on the scenario described in the previous question, which of the following is the
most suitable distribution strategy that company A has to adopt to supply cheese to
customers who are located in Milan (Italian city) and have already pre-ordered it?
Milk run
✓ Correct
Feedback:
Correct! Milk run is the most suitable strategy here. Cheese has to be picked from a
single location, i.e., factory of company A. It then has to be distributed to the doorsteps
of every consumer in the city of Milan, i.e., there are multiple delivery points. All this has
to be done as quickly as possible owing to the low shelf life of the cheese.
Principles of logistics systems

Company A provides third-party logistics services to its client through a fleet of trucks
by transporting motorbikes from Nagpur to Indore. However, when the motorbikes are
unloaded in Indore and the trucks are travelling back to Nagpur, they are empty.
Moreover, the diesel expense for returning from Indore to Nagpur is borne by company
A. The company wanted to eliminate this cost as soon as possible. Soon, the company
struck a deal with a manufacturer in Indore who was looking for a logistics partner to
supply its bicycles from Indore to Nagpur. As a result of this deal, company A started
charging the motorbike manufacturer when trucks are travelling from Nagpur to Indore
and the bicycle manufacturer when they are travelling back from Indore to Nagpur.
In the scenario described above, which of the following principles of logistics is followed
by company A?
Working backwards from the endpoints to meet customer requirements
Ensuring that the logistics system is always reliable
Utilising assets to the maximum extent possible
✓ Correct
Feedback:
Correct! Before the deal, the trucks of company A were underutilised, as they were
empty while travelling from Indore to Nagpur. Moreover, transportation expenses were
also borne by the company. This changed after the deal, and now, the trucks are being
utilised to the fullest.
Providing incentives to achieve efficiency
Distribution Startegy
Company A is a major e-commerce company. It has a large distribution centre in
Newyork which consolidates the products and acts a center for all its orders. The orders
are then routed directly to their specific locations in and around the region. Which
distribution startegy is the company A employing?
Hub and spoke model
✓ Correct
Feedback:
A hub holds the inventory for a large region, with each spoke leading to a smaller
location based on the region’s requirement. The main driver for the hub-and-spoke
model is the proximity to customers.
Cross-docking
Direct shipping
Milk run
Cost To Serve
Wasabi by Morimoto in Mumbai has been a constant name on the ‘India’s best
restaurants’ list. The restaurant is known for its quality and luxury. Dining in the
restaurant is nothing short of a status symbol and shows that you have reached the top
of your societal hierarchy. The food, prepared by the legendary chef Masaharu
Morimoto, has been regarded as “the food that you are served in heaven”. Rather than
providing the typical Indian food that is served in other restaurants, Wasabi serves
authentic Japanese food.
The restaurant takes only a fixed number of reservations every day, which are booked
even before it opens in the evening.
The restaurant places quality at the core of its business. Even the dishes in which the
food is served are sourced from Japan. These utensils are made in the traditional
Japanese way, and the supplier needs to be notified about the order at least two months
in advance. The storage area required to store such crockery items has to be
temperature, humidity and moisture controlled in order to avoid the ageing process.
This increases the cost of storage.
These utensils are very delicate and are often broken, mostly due to mishandling on the
part of the customers and sometimes by the staff as well.
Unavailability of even a single item from the entire dinner set means that the complete
reservation has to be cancelled or put on hold until the new piece arrives. This translates
into a loss of sales, but the restaurant needs to do that to maintain its brand image.
However, cancelling an already booked reservation adversely also affects the
restaurant’s image.
What measures can the restaurant take so that its brand image is saved?
The restaurant should have some amount of crockery available as a back-up

that it can use.
✓ Correct
Feedback:
Correct! Even though the cost to store the inventory, crockery in this case, is high, the
target audience expects consistency from the brand. Therefore, in order to provide this
consistent experience on a daily basis, the restaurant should hold the inventory.
The restaurant should find new suppliers that can make such crockery on
Wasabi’s request.
The restaurant should ask the supplier to hold finished crockery products with
themselves, which can then be flown out of Japan as and when required by
Wasabi. The flight time from Tokyo to Mumbai is 19 hours.
Causes of Bullwhip Effect

Richard has opened a dairy business in Qatar. He planned to buy cottage cheese from a
wholesaler and sell it to customers. The current cottage cheese prices are floating at 15
Qatari Rial per kilogram. To gain the attention of his customers and capture a big
market share, Richard decided to sell the cheese at 12 Qatari Rial per kilogram for the
first month. At this price, he was making neither a profit nor a loss. As a result, his shop
became extremely popular in Qatar. On average, he was selling 200 kilograms of cottage
cheese every day. Taking this as a positive sign, he got into a contractual agreement
with his wholesaler to provide him with 200 kilograms of cottage cheese every day. After
the first month, Richard had captured a significant market share. Then, to stabilise the
prices, he started selling the cheese at 15 Qatari Rial per kilogram. This resulted in a
huge loss of sales, and his average daily sales fell to only 20 kilograms. He did not know
what to do with the excess supply of 180 kilograms (200-20) of cottage cheese.
Determine what caused the bullwhip effect in the aforementioned scenario.
Price fluctuations
✓ Correct
Feedback:
Correct! Price fluctuations cause the bullwhip effect when a heavy discount or other cost
changes disturb regular buying patterns. In this case, the cottage cheese was being sold
at a heavy discount, which resulted in a disturbance of the regular buying patterns of
cheese.
Supply Chain Coordination

Sandy and Robert are owners of grocery stores in Indonesia. They both have a
childhood friend, Rizky, who has a small coconut farm on the outskirts of Lombok
Island, Indonesia. Sandy and Robert have asked Rizky to provide them with a
continuous supply of coconuts for their shops. Rizky started by providing 50 coconuts
each to Sandy and Robert. Every time Rizky returns from his farm to his home in the city,
he replenishes the reduced quantity back to 50. As a result, Sandy and Robert never
faced stock-out situations.
Based on this scenario, determine the method of replenishment for Sandy and Robert’s
shops.
Electronic data interchange (EDI)-based ordering
Rationing based on past sales
Continuous replenishment program (CRP)
✓ Correct
Feedback:
Correct! In the CRP approach, there is no optimum ordering point, i.e., the time at which
an order is placed by the seller for the supply of products. In this case, Sandy and
Robert are not setting up any ordering point for Rizky, who, by himself, replenishes the
diminished stocks of coconuts every time he visits the city.
Causes of Bullwhip Effect

RealU has developed a huge market in India by selling smartphones with higher specifications at
very low prices. It usually sells new smartphones through online flash sales, where the product is
available in a limited quantity. The online retailer takes the sales figures after every flash sale
and provides them to RealU, which then plans the next flash sale accordingly. In a flash sale, it is
extremely difficult to place an order. In order to overcome this difficulty, people usually ask their
friends to add the smartphone to their online cart and proceed with the payments as soon as the
product is made available for sale. In such a case, if out of five friends, three are successful in
ordering the product, then two of them have to return the smartphone as soon as it arrives at their
doorstep. The online retailer does not charge its customers a fee when they are returning a
product. As a result, the initial sales numbers go down. This results in a bumped-up demand for
RealU, whereas the ground reality is slightly different. This translates to the bullwhip effect.
Determine what caused the bullwhip effect in the aforementioned scenario.
Price fluctuations
Lack of communication
Free return policy
✓ Correct
Feedback:
Correct! A free return policy causes the bullwhip effect when the demand is purposely overstated
due to product shortage and the customers then return the purchased items. RealU is facing a
similar scenario with its flash sales.
Order Batching
Attempt 1 of 2
Continue
Consensus vs Average Techniques of Forecasting
To accurately predict the demand for its products for the next year, HUL (Hindustan
Unilever) follows a couple of forecasting techniques, both qualitative and quantitative in
nature.
Consider the scenario of the Cornetto brand of ice-cream from HUL. The company has a
team of five forecasters who predict the demand for Cornetto.
In the first stage, every forecaster predicts the demand using the quantitative demand
forecasting method of their choice. The following table provides the forecasted figures
from each of the forecasters.
Forecaster Forecast Demand (in million units)

1 11
2 18
3 14
4 12
5 15
Once the individual forecast figures are ready, the forecasters use two techniques to
arrive at a single figure.
The first technique is consensus-based forecasting, wherein all the five experts give their
opinions on why their predicted figures are correct and then arrive at a consensual
figure (a single demand forecast agreed by all teams). In this scenario, the team arrived
at a consensual figure of 15 million units.
In the second technique, the forecasting team takes an average of all the forecast
figures. For the given scenario, the average figure comes out to be 14 million units.
The company then proceeded with these two figures in mind. After the end of the year,
the actual demand was found to be 16 million units.
Determine the forecasting error for both the techniques.
Hint: Forecasting error = (Actual demand - Forecast demand) * 100 / Actual demand
Consensus-based technique = 10%; average taking technique = 4%
Consensus-based technique = 1.25%; average taking technique = 2.5%
✓ Correct
Feedback:
Forecasting error (F.E.) = (Actual demand - Forecast demand) * 100 / Actual demand
1. Consensus-based technique:
1. Actual demand = 16 million units
2. Forecast demand = 15 million units
3. F.E. = (16 - 15) * 100 / 16 = 100 / 16 = 6.25%
2. Average taking technique:
1. Actual demand = 16 million units
2. Forecast demand = 14 million units
3. F.E. = (16 - 14) * 100 / 16 = 200 / 16 = 12.5%
Standard Deviation
Adidas has decided to launch a product range of highly specialised sport shoes that are
specially designed to cater to top athletes around the world. This product range will be
launched to compete with Nike’s Fly range of products.
The company has shortlisted two types of shoes, Product X and Product Y, one of which
will be launched under this program. The cost-to-make as well as the market price of
both types of shoes is exactly the same. The demand for both of them for the next year
as determined by the forecasting team is given in the table provided below.
Shoe Mean (Average) of Forecast Standard Deviation (in

Type Demand (in Number of Units) Number of Units)
Product
2,00,000 10
X
Product
2,00,000 50
Y
According to you, which of the aforementioned products has less risk associated with its
launch?
Product X
✓ Correct
Feedback:
Correct! Standard deviation signifies the spread of observations from the average. The
lower the standard deviation, the higher the probability that the forecast number is
closer to the mean. This means that Product Y having a standard deviation of 50 may
sell 1,99,950 units in the worst-case scenario, whereas Product X with a standard
deviation of 10 will sell at least 1,99,990 units. Thus, less risk is associated with the
launch of Product X.

Operations and Supply Chain

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Operations and Supply Chain

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Product Flow

1. Audi Q5 is delivered to the showroom centre.

3. The manufacturing of Audi Q5 is undertaken at the plant.

4. Customers visit the showroom to purchase Audi Q5.

Demand Information Flow

2. Retailer gets an order of 100 steel bars.

3. Manufacturer orders 100 tons of iron ore to a mining company.

Efficiency in Supply Chain

Low capacity utilisation

1. Procurement of raw vegetables is done from nearby vegetable retailers on a bi-

2. Procurement of highly-perishable items such as raw meat is done from nearby

Procurement of highly-perishable items such as raw meat can be done from

Sustainability in Supply Chain

How many supervisors are there?

How much plastic and cardboard is used in packaging of the cakes?

Supply Chain Touchpoints

Word Count 25Word Limit 1 - 1000

1. Supplier: Heavy Iron Ltd and Solid Iron Ltd

1. ABC Steels Pvt. Ltd. manufactures EN 10025 grade steel. Manufacturing is

2. Transportation through rails and ships to USA and Europe

3. Customer: Dream Homes Pvt. Ltd and Classic Offices Ltd

Supply chain surplus = Customer value - Supply chain cost

Demand uncertainty (high) - 1, 2; Demand uncertainty (low) - 3, 4

Demand uncertainty (high) - 1, 4; Demand uncertainty (low) - 2, 3

Supply Chain Management

Note: Use the strategic fit graph to answer this question.

The impact of the new product addition cannot be determined.

Types of supply chain strategies

1. The electronic equipment manufacturing company X, situated in California,

2. The electronic equipment manufacturing company Y, situated in California,

Cost-efficient supply chain - Company X; Responsive supply chain - Company

Cost-efficient supply chain - Company Y; Responsive supply chain - Company

Role of a Supply Chain Manager

Word Count 95Word Limit 10 - 100

Push and Pull processes

Determine which of the following processes is followed by MetaPlus in this example.

Option 01 - Push strategy; Option 02 - Push strategy

Option 01 - Push strategy; Option 02 - Pull strategy

Option 01 - Pull strategy; Option 02 - Pull strategy

Option 01 - Pull strategy; Option 02 - Push strategy

Sustainable supply chain

To ensure product safety, e-commerce companies using plastic wrappings to

Sales and Demand

Identify the factors responsible for demand planning

Number of orders in the same month last year

Number of daily orders fulfilled from Flipkart warehouses

Expected number of orders in April from Delhi for mobiles

Expected number of orders in April–June from Delhi for mobiles

Your answer is Correct.

Flash sale construct, e.g., an exclusive launch of a smartphone at a pre-decided

Which of the following decisions at Flipkart warehouses is a short-term decision and

Decision to add new permanent employees in existing warehouses

Decision to procure spare parts for the existing equipment

Supply Planning and Strategic Fit

Company B, selling five variations of smartwatches every year

Company C, selling only a single variation of smartwatch every year

Decision Making under Demand Uncertainty

Decision Making under Demand Variability

However, if the variability in demand occurs because of external factors, it becomes

According to you, which of the following scenarios describes a predictable variability in

A new product launched by the competitor

Changes in compliance and taxation rules by the government

Increase in the demand for ACs and refrigerators during summers