Logistics Technology and E-Business

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  • 1. CII Institute of Logistics Post Graduate Diploma in Supply Chain Management Semester III- Assignment II LOGISTICS TECHNOLOGY AND E-BUSINESS Answer all questions 1. The goal of Supply chain information management system is to collect, analyze and share data/information across collaborative partners for a common purpose. True / False 2. Identify the competitive strategies from the below choices: i. Cost Leadership iv. Growth ii. Differentiation v. Alliance iii. Innovation vi. All of the above vii. None of the above 3. The IT department of HAL reveals that each one percent increase in the automation of software development is equal to increased annual revenue of INR 55,00,000 and the cost of implementation will be INR 20,00,000. The Return On Investment is: i. 250% iv. 275% ii. 10% v. 175% iii. 150% 4. Enterprise systems can be categorized into: i. No Organizing Rationale iv. All the above ii. Inwardly Organized v. None of the above iii. Outwardly Organized 5. Identify major decision areas in supply chain management: i. Location iv. Transportation (distribution) ii. Production v. All the above iii. Inventory vi. None of the above
  • 2. 6. The following is a generic eCommerce Architecture: True /False 7. A main goal of an ERP implementation is to provide better synchronization with trading partners in order to reduce inventories, foster strategic pricing, improve cycle times, and increase customer satisfaction throughout the supply chain. True / False 8. The practice of performing and coordinating critical business processes through the extensive use of computer and communication technologies and computerized data is called: I. e-commerce III. electronic data interchange II. e-business IV. an information system 9. Using a cell phone to pay for a soft drink in a vending machine is an example of: I. e-business III. m-business II. e-commerce IV. m-commerce 10. The ability of heterogeneous hardware and software components to work together conveniently and inexpensively is called: I. open systems III. interoperability II. convergence IV. e-commerce
  • 3. PART B Answer any Two Questions 1. “eSupply Network Management is important for forward looking companies”. Do you accept the statement? If yes, Please explain with an example. If No, Please justify your position with a business scenario. 2. What is eDemand Management? Discuss in detail with a simple example. 3. Discuss about the need of Business Intelligence for enterprises. 4. Discuss about eBusiness strategy formulation and implementation in detail. Part C Study the enclosed Case Study “SUPPLY CHAIN CHALLENGES: THE VICIOUS CYCLE” and answer all questions provided at the end of the Case Study. Your answers may be supported with any diagrams, models or algorithms, as may be necessary. SUPPLY CHAIN CHALLENGES: THE VICIOUS CYCLE Like all companies in the fast-moving consumer goods industry, “Masspro” managers fully understand that a well-functioning supply chain provides a huge competitive advantage in India. The logistics involved in dealing with the fragmented nature of India’s retail trade and the geographic spread of the market are extremely complex and difficult. First, as noted, the retail trade for “Masspro” consists of 0.7 million retailers, of which fewer than 1.8 % represent organized retailers in India. Indeed, more than 87% of the retailers are kiranas (grocery stores), each occupying less than 350 square meters. Part of Masspro’s business strategy is to expand continuously into ever-smaller locales until its brands are available to most Indian households. Currently, Masspro’s distribution network covers every Indian community with a population of 30,000 or more, and the plan is to penetrate more of the rural areas, where 70% of India’s people live. Currently, its rural sales and distribution network ranks among the top four in the industry and contributes 26 % to the company’s sales. (See Figure 1 for the different distribution networks used for urban and rural markets.)
  • 4. Figure 1 Massrpo supply chain To reach all areas of the nation, the company’s products, bought by 16 million Indian households monthly, are sold to approximately 950 distributors. These intermediaries in turn store, sell, and deliver “Masspro” products directly to those 0.7 million retailers or indirectly through 2,300 stockists. These goods, 32 million consumer packs per month, flow into the distribution network from Masspro’s own physical supply chain, consisting of five factories and 12 contract manufacturers, one redistribution center to manage logistics activities, and 40 depots. (All the fast-moving SKUs are shipped directly from the factories to depots, whereas slow-moving SKUs are shipped first to the redistribution center and subsequently to depots.) All these elements pose a logistical challenge for even the largest of manufacturers. Added to this mix is Masspro’s business strategy of growth through new brands and product lines. This entails more sales and markets to track, more forecasts to make, more production to plan, more SKUs to track, and more pallets and truckloads to configure and route. The SKU/distribution point combinations run in the millions. With three major brands, some shortcomings in forecasting, planning, and supply chain operations can be manageable. When the number increases to nine and the plan is for even more, as is Masspro’s strategy, critical shortcomings can make the supply chain extremely unstable. This is the position in which “Masspro” found itself in the mid 1990s when its forecasts and sales targets became increasingly inaccurate and its costly distribution errors multiplied. (See Figure 2 for an overview of the sequential supply chain transactions that are among the source of these issues). A vicious cycle of ever poorer supply chain performance had begun.
  • 5. Forecasting and Planning Several issues contributed to Masspro’s forecasting and planning problems, primarily poor visibility into internal operations and poor visibility into the marketplace. Internal Operations. Poor visibility into internal operations resulted largely from the lack of integration among its transaction systems. For the first few years after its founding, “Masspro” ran its operations largely with paper-based manual systems. In 1994, the company began developing standalone application programs for specific processes in several departments. Because the systems were not integrated, departments were often working with conflicting numbers, which resulted in serious coordination problems that affected supply chain planning and execution. The rationalization and consolidation of data for monthly financial statements were of little use for day-to-day supply chain planning. Figure 2 Masspro supply chain transactions This situation was aggravated by the fact that “Masspro” had built a planning tool based on the Excel spreadsheet, which has proved inadequate for the needs of an increasingly complex and growing enterprise. Furthermore, only one planner was qualified to run it. By the time all the data was gathered from sales and marketing, turned by the lone planner into an initial indicative plan, reviewed by the production department, and turned into a final production plan, 30 days had passed. If market realities changed during the process, it was nearly impossible to change the production plan. As a result, the sales department often circumvented the system, using their personal relationships to influence actual production and distribution decisions. This in turn compromised the entire integrity of the system and processes in place, leading to further supply chain problems.
  • 6. Marketplace Visibility. An equally large obstacle was sub optimal visibility into the marketplace. Traditionally, consumer goods firms in India have relied on primary data, their own sales to distributors, for forecasting and planning. This can severely skew sales. Current off take is ideal for a fast-moving consumer goods manufacturer, but this is not possible to obtain when most retailers are the very small grocery stores and national consumer research firms produce sales statistics 60 to 90 days after the fact. The next best option is distributor sales to retailers; also not generally available to producers at the time they occur. (See Figure 2.) How this manifested itself was severe skewing of sales at different periods. Lacking good visibility into the supply chain, “Masspro” operated with a “push” method; that is, supply chain planning was driven by the sales force and the demand they observed within their territories. The company prepared its plans on the basis of its own sales data and sales input, preparing quarterly targets to which sales had to adhere strictly. Hence, when distributor orders fell short in the first 20 days of the month, inventory was often dumped on distributors in the last 10 days. As a result, Masspro’s distribution levels averaged 15% and 31% for the first and second 10-day periods, respectively, and a hefty 56% for the final 10 days. “Masspro” was passing the production and inventory problems – created by poor forecasts – to its distributors. Adding to this situation was lack of synchronization between manufacturing and distribution; that is, they used different bucketed time horizons for planning: two weeks for production and one week for distribution. The result of these shortcomings was not only unhappy distributors but also high stocks in the channel during certain periods and low service levels at other times. This in turn affected the freshness of stocks. Certain “Masspro” products have short shelf lives, so products that stay in the chain beyond their expiration dates become obsolete, which results in a loss both financially and in terms of customer satisfaction. (In India it is mandatory for packaged goods companies to print manufacturing dates on the product.) Distribution Within a distribution network, poor visibility adds other elements to the vicious cycle. For instance, to minimize transportation costs, “Masspro” has always shipped goods in full truckloads. To do this, the distribution group must properly configure the shipments and the routes to meet the demands by the depots scattered around the country.
  • 7. In “Masspro”’s case, its distribution group had to deal with two major obstacles: poor visibility into the depot stocks of the growing numbers of SKUs and no prioritization rules in place that could help dispatchers make optimal choices in configuring full truckloads. As a result, they tended to make almost random decisions. Lacking depot stock data, they could not accurately take depot space constraints into account. The results were costly. When shipments to a depot exceeded the facility’s capacity, the managers there would be forced to hire temporary spaces and often had to pay truck demurrages as well. Faulty shipments might also result in excess inventory for some of their SKUs and in stock-outs in others. Depots that did not receive the right shipments in time, of course, would suffer stock-outs. In any case, the ma distribution of goods resulted in a higher delivery cost than necessary. Equally costly was the erosion of sales, customer satisfaction, and the distributors’ confidence. Furthermore, “Masspro” found that sales people spent significant time searching for stocks rather than selling and brand building. Their preoccupation with emergencies in particular hindered the progress of the small brands and hence Masspro’s plan to decrease its dependence on the big three brands. “Masspro” did attempt to build a planning system, but it fell short of the company’s intensifying needs. The PC-supported legacy system, which was specially developed for “Masspro” through the use of relational database libraries, was struggling to meet increased logistics requirements. We found our sales people were spending significant time in searching for stocks rather than doing the actual job, which is selling and merchandising and following competitor schemes. We realize that we need a reliable and responsive supply chain in place to manage our operations. Jagdeep Konkan, CEO – Sales QUESTION 1. What are the critical problems that Masspro is facing? 2. Can we use eSCM concepts to solve the problems? Justify your position with proper reasons. 3. As an Supply Chain Management Consultant, what are your recommendations to Masspro? *********