Master of Business Administration- MBA Semester 3

ML0001 – Warehousing and Supply Chain Management - 2 Credits

Assignment Set- 1
60 Marks
Note: Each question carries 10 Marks. Answer all the questions.

Q.1. Give a brief notes on building consumer driven supply chain networks.

Q.2. Write short notes on CPFR. Give a real time example of a business setup which practices the CRPF
strategies.

Q.3. Give short notes on:

(a) Bullwhip effect
(b) Advantages of CPG system
(c) Evolution of precision retailing

Q.4. Radio Frequency Identification (RFID) technology has been in use for decades, initially in military
applications, such as tracking material in rugged and fast-moving situations, where barcodes could not be
used. Only within the past few years has this technology been considered as a complement for barcode
technology in the retail industry. What does its evolution mean for the Indian retail industry? Discuss the
importance, applications, limitations and advancements of usage if RIFD in retail industry.

Q.5. Can retail boom take logistics to new heights?-support your answer real examples.

Q.6. Discuss the trends and challenges in new technologies in supply chain management?

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Q.1. Give a brief notes on building consumer driven supply chain networks.

Ans. Consumer-driven supply is an innovative approach to design supply chain network and operations. It
means designing single supply chain network into a more commercially competitive tool to deliver offering
in order to win over consumer’s preferences or choice. It acts as a substitute for the traditional supply
chain network designed to deliver goods and services to the customers which was regarded as a cost
centre, where savings were driven by simplification and automation.

Today’s Consumers and customers are more demanding, there’s more complexity in their decision making
process due to wide range of products, increased brand awareness and fuelling consumers knowledge
through mass advertising, high level of inventory and shrinking of the world into one single market.

In building consumer oriented supply chain networks, companies must adopt a CRM Tool known as
Efficient Customer Response (ECR). ECR is an initiative which is a blueprint for building an industry wide
solution to counteract competitive deterioration.

Consumer-driven supply is a strategic business tool which demands that profits and supply functions work
in a preserved environment to create value for customers. This requires partnership, aligned measures
and a much more multi level functional aspects to redesign the organization structure.

Overall, the focus is on improving fast and accurate information flow up the network and fast and efficient
product flow down it. Specifically, this means reducing end-to-end supply network time, driving out non-
value-added complexity and inventory, and providing differentiated service and product solutions.

The term “supply chain” evokes the image of a predefined and fixed series of linkages, which are serially
connected and unidirectional – currently an accurate description in most cases. The traditional supply
chain exists within the “four walls” of an enterprise, where material and information flow linearly along
fixed routes starting with the receipt of raw material through to shipment of the customer order. Some
supply chains have been extended to share information with trading partners, though these relationships
are generally limited to long-established, trusted customers and suppliers. To address the looming
competitive, consumer and regulatory pressures, consumer products companies must transform their
linear, internally-focused supply chains into consumer-driven supply chain networks.

The consumer-driven supply chain network is best thought of as a dynamic construct of organizations and
supply chains that come together, at a given point in time, to provide a seamless pipeline for products and
information from source suppliers through to end consumers. This union may be temporary – perhaps a
single transaction – or an enduring alliance. It will consist of multiple partners, each with a role to play:
from brand owners, product designers and contract manufacturers, through to co-packers and other
service providers which, when combined, act as a single entity to deliver the overall business value sought
by retail customers and consumers.

The advent of customer centric era took place in the early 1960s, arguably during the heyday of the
producer centric era. During the past decade the business landscape has changed dramatically. Following
points explain the changes.

1. Consumers, not producers, have become the dominant component. Today the production capacity is
greater than product demand for the majority of industries. Prices are determined by competitive market
forces and not set by the producer. The purely internal focus of the standard cost system is no longer
valid.

2. The local optimisation view encouraged by the competitive strategies did not often result in global
improvement. Quite to the contrary, actions take n to improve the cost performance at one stage actually
created more costs elsewhere, creating higher inventories and other inefficiencies.

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3. Factors such s reliability of deliveries, quality of products, speed with which orders can be filled and
variety of products offered are the dominant factors determining a company’s competitive position.

4. Direct labour cost on which most allocation decisions were made, was no longer the major cost
component.

Q.2. Write short notes on CPFR. Give a real time example of a business setup which practices the
CRPF strategies.

Ans. The Voluntary Inter-industry Commerce Standards Association (VICS) has defined CPFR as "a business
practice that combines the intelligence of multiple partners in the planning and fulfillment of customer
demand." According to VICS, since 1998, "’over 300 companies have implemented the process." In this
section we describe CPFR and some successful implementations. It is important to understand that
successful CPFR can only be built on a foundation in which the two parties have synchronized their data
and established standards for exchanging information.

Sellers and buyers in a supply chain may collaborate along any or all of the following four supply chain
activities.

1. Strategy and planning: The partners determine the scope of the collaboration and assign roles,
responsibilities, and clear checkpoints. In a joint business plan they then identify significant events such
as promotions, new product introductions, store openings/closings, and changes in inventory policy that
affect demand and supply.

2. Demand and supply management: A collaborative sales forecast projects the partners’ best estimate
of consumer demand at the point of sale. This is then converted to a collaborative order plan that
determines future orders and delivery requirements based on sales forecasts, inventory positions, and
replenishment lead times.

3. Execution: As forecasts become firm, they are converted to actual orders The fulfillment of these
orders then involves production, shipping, receiving, and stocking of products.

4. Analysis: The key analysis tasks focus on identifying exceptions and evaluating metrics that are used to
assess performance or identify trends.

A fundamental aspect of successful collaboration is the identification and resolution of exceptions.

Exceptions refer to a gap between forecasts made by the two sides or some other performance metric that
is falling or is likely to fall outside acceptable bounds. These metrics may include inventories that exceed
targets or product availability that falls below targets. For successful CPFR, it is very important to have a
process in place that allows the two parties to resolve exceptions. Detailed processes for identifying and
resolving exceptions are discussed in the VICS CPFR Voluntary Guidelines V 2.0 (2002).

One successful CPFR implementation has involved Henkel, a German detergent manufacturer, and Eroski,
a Spanish food retailer. Prior to CPFR Eroski saw frequent stock outs of Henkel products, especially during
promotions. At the inception of CPFR in December 1999, 70 percent of the sales forecasts had an average
error of over 50 percent and only 5 percent of the forecasts had errors under 20 percent. Within four
months of the CPFR implementation however, 70 percent of the sales forecasts had errors under 20
percent and only 5 percent had errors over 50 percent. CPFR resulted in a customer service level of 98
percent and an average inventory of only five days. This was accomplished despite 15 to 20 products being
promoted every month. Another successful implementation involved Johnson & Johnson and Superdrug. a
chain in the United Kingdom.

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It enables companies to have the product in the right place at a right time. Yet still achieve a major
reduction in inventory, lower total value of inventory, increase inventory turns, improve service and
ultimately gain a competitive advantage. The question is, has supply chain collaboration really been
adopted? In some industries, yes for example, collaboration throughout the supply chain is gaining strong
support in the retail industry where companies, such as Wal-Mart, share specific real time information
with their vendors on a continual basis. The data Wal-mart collects contains a wealth of significant sales
and customer-demand information.

Wall-mart knows how to use such information to keep its stores, merchandisers, distribution centers and
suppliers in synchronization. Modern retailers and manufacturers are becoming more and more market
driven. The Internet revolutionized the value chain by hype around online retailing and the introduction of
Business-to-Business (B2B), e-commerce. One can visualize that a number of e-marketplaces are becoming
mature by introducing new communication standards and collaborative planning, forecasting and
Replenishment (CPFR) initiatives.

For years, companies have engaged in the traditional behavior of pushing the supply chain slack
downstream. But now the time has come for organizations to work together to take time and cost out of
the entire length of the value chain. The evidence certainly exist that cost savings and time-to-market
gains are there. This really is a win-win situation for everyone involved. Companies can realize time and
cost gains, and reduce obsolescence risk, by setting up collaborative Supply Chain Management- typically
Internet portals that can run on electronic exchanges and provide shared access to relevant data to all
collaborators.

There are secured and collaborative environments that allow all authorized parties to use common
standards and data formats for product identification and work flow. By sharing and synchronizing supply
and demand plans, for example, companies can lower cost through reduced inventory holdings, maximize
profits through enterprise price optimization, and increase sales through better forecasting, grater
customer satisfaction and the ability to respond both more quickly and more proactively to changes in
demand.

Q.3. Give short notes on:

(a) Bullwhip effect
(b) Advantages of CPG system
(c) Evolution of precision retailing

Ans. (a) Bullwhip effect

Supply chain coordination improves if all stages of the chain take actions that together increase total
supply chain profits. Lack of coordination in supply chain leads to degradation of responsiveness and
increases cost. There are various obstacles that lead to this lack of coordination and exacerbate variability
through the supply chain. Supply chain coordination requires each stage of the supply chain to take into
account the impact its actions have on other stages.

Lack of coordination occurs either because different stages of the supply chain have objectives that
conflict or because information moving between stages is delayed and distorted. Different stages of a
supply chain may have conflicting objectives if each stage has a different owner. As a result, each stage
tries to maximize its won profits, resulting in actions that often diminish total supply chain profits.

Today, supply chains consist of stages with many different owners. For example, Ford Motors has
thousands of suppliers from Goodyear to Motorola, and each of these suppliers has many suppliers in turn.
Information is distorted as it moves across the supply chain because complete information is not shared
between stages. This distortion is exaggerated by the fact that supply chains today produce a large
amount of product variety. Ford produces many different models with several options for each model. The

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increased variety makes it difficult for Ford to coordinate information exchange with thousands of
suppliers and dealers. The fundamental challenge today is for supply chains to achieve coordination in
spite of multiple ownership and increased product variety.

Many firms have observed the Bullwhip effect in which information in orders increase as they move up the
supply chain from retailers to wholesalers to manufacturers to suppliers. Bullwhip effect distorts demand
information within the supply chain, with each stage having a different estimate of what demand looks
like. The result is a loss of supply chain coordination.

Minor changes in demand at the end user or the retail level results in huge variations in the demand at
upstream enterprises in the supply chain. This phenomenon, termed the Bullwhip effect, owes its origin to
the fact that a slight motion of the handle of a bullwhip can make the tip of the whip thrash widely.

In this context of supply chain, the bullwhip effect manifests itself through increasing demand variability
as you move upstream in the supply chain. That is, small shifts in the level of customer demand
experienced by the retailer are magnified as the demand information is passed up the supply chain
creating increasingly higher variation in the orders received by upstream suppliers.

The Bullwhip Effect or Whiplash Effect is an observed phenomenon in forecast-driven distribution

channels. The concept has its roots in J Forrester’s Industrial Dynamics (1961) and thus it is also known as
the Forrester Effect. Since the oscillating demand magnification upstream a supply chain reminds someone
of a cracking whip it became famous as the Bullwhip Effect.

Unexpected changes in demand patterns will continue to escalate further up the supply chain. Problems
tend to escalate in supply chains where communication is minimal between supply nodes. In virtually all
cases, the inventory levels of the retailer decline, followed in sequence by a decline in the inventory of
the wholesaler, distributor, and factory. As inventory falls, players tend to increase their orders. Players
soon stock out. Backlogs of unfilled orders grow. Faced with rising orders and large backlogs, players
dramatically boost the orders they place with their supplier. Eventually, the manufactures ships this huge
quantity of beer, and inventory levels surge. In many cases one can observe a second cycle.

The bullwhip effect results in tremendous inefficiencies in supply chain. It results in excessive inventory
investment, poor customer service, lost revenues, misguided capacity plans and ineffective transportation
and production schedules. Many enterprises have gained significant competitive advantages by
understanding the underlying causes of the bullwhip effect and working with their supply chain partners to
reduce it. This, in turn, enables them to reduce inventories and become more responsive to customer
demand.

It is an exercise that showcases the problems that arise in a company with minimal communication in the
supply chain. It is important for management to understand the causal factors that create supply chain
oscillations. Here are some examples:

(b) Advantages of CPG system

The consumer packaged goods (CPG) industry is a mature market and one where demand for its products
is relatively stable. Simply stated, we eat, drink, and clean regularly, and all of these actions having a
significant impact on this segment. The economy and the level of consumer spending directly affect CPG
industries. Spending trends, both up and down, ripple through the supply chain and often cause an over,
or under, supply situation.

Overall, the demand for CPG products – food processing, beverage and tobacco, health and beauty aids,
and general processing of farm, fish, meat, and logging – is consistent from year to year. However, CPG

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enterprises are tactically complex. They involve people and processes extended along a broad value chain
and segregated by roles and functions.

CPG industry products are manufactured by processes that combine and add value to raw materials, rather
than by the assembly of components parts that characterize discrete manufacturing operations.
Manufacturing operations acquire raw commodities, ingredients and packaging materials at the front end
of a manufacturing process. Then, through a series of processes that taps resources as time, motion, heat,
speed and pressure, these materials are transformed into finished goods that are distributed to
consumers.

>> Provide a Return on Investment (ROI) for the enterprise’s investment based upon improved sales, lower
production costs and fewer returns.

>> Develop an integrated to improve supply chain efficiency and reduce associated costs.

>> Base manufacturing and production planning upon market and customer demand, not human
estimation.

>> Make information accessible to participants in the manufacturing and distribution supply chain to
facilitate planning and distribution.

>> Leverage historical sales information contained within the enterprises distributed operational systems.

>> Maintain the operational efficiency of the existing legacy applications.

>> Implement and maintain an infrastructure that optimises the business processes and supporting
software applications, as well as minimizes Total Cost.

>> Annual reduction in network costs.

>> Optimising connectivity with distributors, yields greater revenue.

>> Reduction in inventory costs, including warehousing and logistics.

>> Production planning lead-time reduction.

>> Inventory carrying cost reduction.

>> Reduction in transportation and human resource costs as a result of greater efficiency in the supply
chain.

(c) Evolution of precision retailing

In order to meet the ever changing market demand, retailers must discover new tools and techniques to
analyze their business trends. Retailers use this tool of precision retailing to meet the ever chaining and
dynamic market trends. Following figure shows that how retailers have updated themselves with adequate
tools to meet the demand.

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Shoppers today expects more than the required level of satisfaction for the value they pay in buying a
product or service. Their expectations today are something different that of yesterday. In this ever
changing need, retailers have to know the expectations of his shoppers and formulate strategies
accordingly. A shopper expects rock-bottom prices for all the products that he buys from a retailer. In
achieving this, he would visit all the shops at his disposal, enquiry whole range of products and the prices
and they evaluate the alternatives to arrive at the decision. Nowhere in the prices, would a shopper
compromise on the quality of the products in specialty items. This behavior of the shopper puts an
obligation to the retailer to think again to connect him to shoppers.

In achieving this, a retailer may have to take many decisions related to assortment and variety for their
products. There are number of factors which influence a retailer’s decision.

They are:

· Greater variety

· Point of purchase

· Identification of fast moving products in the shelf

· Inventory control

· Assortment across channels

· Assortment across stores

· Customized assortments for end users

The above factors help retailer in providing category wise insights about their inventory levels in terms of
which products are selling well in which store with how much of quantity. This information helps a retailer
in correlating the effectiveness of sales with pricing, sales with promotion etc., with the help of precision
retailing, retailer will be moving from general strategy of what customers want to specific strategies like
which items would be a good fit for each store and each customer.

Through precision retailing, a retailer can achieve number of objectives related to various aspects of
retailing including customer level as well as organizational level. Customer level objectives are highly
influenced by consumer behavior factors which are highly uncontrollable by retailers. Organizational level
objectives are set by retailers which are influenced by customer level objectives. These organizational
level objectives can be termed as controllable variables which can be easily managed and altered by the
retailers.

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Precision assortment decisions are based on several criteria. Retailers before planning their strategies
should be able to answer some of the basic issues which are:

· Target customers
· Market trends
· Promotional tools
· Competitors assortment strategies
· Product line strategies
· Shelf capacity in attracting the customers etc.

Q.4. Radio Frequency Identification (RFID) technology has been in use for decades, initially in military
applications, such as tracking material in rugged and fast-moving situations, where barcodes could not
be used. Only within the past few years has this technology been considered as a complement for
barcode technology in the retail industry. What does its evolution mean for the Indian retail industry?
Discuss the importance, applications, limitations and advancements of usage if RIFD in retail industry.

Ans. An RFID tag consists of a small silicon microchip attached to an antenna. The chip itself can be as
small as half a millimeter square – roughly the size of a tiny seed. Some RFID tags are thin enough to be
embedded in paper. An RFID tag is capable of transmitting a unique serial number a distance of up several
meters in response to a query from a reading device. RFID tags can be either passive meaning they lack
batteries and obtain power from the antenna or it can be active meaning they have batteries and can
energize on their own.

RFID tags are already quite common in everyday life. Examples include proximity cards used as
replacements for metal door keys, Speed pass™, E-Z Pass™ and Fastback™ automated toll payment
devices. Tens of millions of pets around the world have surgically embedded RFID tags that make it easy to
identify them should they lose their collars. Electronic Article Surveillance (EAS) – a tiny tag is used to
prevent shoplifting books and articles. Airlines industry can tag baggage to track when they get lost.

· Advantages of RFID

RFID tags have two distinct advantages over traditional printed barcodes:

1. Barcodes just indicate a class of item whereas RFID tags show a unique item. For example, a barcode
printed on a box might state that the box contains breakfast cereal, and also indicate the manufacturer.
An RFID tag carries a serial number that is globally unique. This permits very fine-grained and accurate
control over product distribution. With a full history for every item, businesses can streamline their
manufacturing and distribution processes in unprecedented ways.

2. RFID tags do not require a human intervention to be read. In many cases, a tag can even be read
through objects. A barcode scanner must make close-range optical contact to read a barcode effectively.
In contrast, an RFID tag may be read without any real constraint on physical orientation. While an item in
a supermarket must be passed over a scanner with its barcode expressly exposed, an RFID tag may be
scanned just by being placed in the vicinity of a reader. Indeed, a reader is typically capable of scanning
hundreds of RFID tags simultaneously. This means extra efficiency and perhaps accuracy in the handling of
items.

· Why does RFID Raise Privacy Issues?

Privacy advocates are concerned about tags on products continuing to emit signals in the parking lot, on
the road and at home. They’re worried that by using RFID-enabled charge cards or loyalty cards during
checkout, customer identities could be written to or associated with the tags. In the extreme scenarios,
they imagine stalkers and thieves scanning cars and homes for expensive goods and personal information.

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Generally, privacy concerns regarding adoption of RFID technology include:

· “The unauthorized reading of RFID tags.”

· “The security of personal information contained on RFID tags to prevent the unauthorized use or
dissemination of such information.”

· “The ability of third parties to profile individuals by their possessions containing RFID tags.”

· “The use of RFID technology to provide covert tracking or surveillance of individuals.”

Key issues that pose privacy concerns regarding RFID are:

Lack of visibility – RFID tags and their readers are not clearly visible- unlike traditional bar codes that are
visible and have to be scanned one at a time from a close proximity. It offers the advantages of being able
to operate without a prominent tag and having a scan gun to scan each label. Thus, RFID tags and readers,
and their operation, may not have any visible indications to an observer. Therefore a user will not know if
an RFID tag is implanted on a device and it may be scanned and recorded without owner’s knowledge.

Unique Product ID – UPC (Universal Product Code) is the most commonly used tagging system. UPC does
not identify each and individual product. When a UPC label is scanned, the barcode scanner only reads the
kind of product it is- for example if I buy a bottle of Dasani, the scanner will read Dasani Water Bottle.
The RFID tag however identifies the individual product- and can identify which specific Dasani water
bottle I picked. Therefore, anyone interested would be able to track exactly which bottle I picked, when
it was shipped, where it was shipped from etc. If I litter that bottle someday, it can be easily tracked.

Interoperability – In the past, all RFID applications have been carried out by a single enterprise that
controlled its readers and retained the collected data. However, with the increased availability of RFID
tags and readers, the tags can be read and the data can be recorded by any enterprise anywhere.
Therefore any enterprise can access the tags history and whereabouts. Although certain protections can
be applied, this could potentially lead to leakage of data.

Personal Data – Medical or personal information can leak through with the RFID tagging system. If a
consumer purchases medicines and would like to have the record be confidential, because of the RFID
tagging, any scanner can read his medication and it would breach his privacy.

· Where is RFID Deployed and how does Deployment Affect Privacy?

In figure below, we see how RFID is being deployed and utilized at present and how it concerns privacy.

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i) RFID is used in manufacturing arena to track the products.

ii) RFID use is massive in global supply chain. Giant retailers such as Wal-Mart have asked selected
suppliers to tag at case and pallet level. They are tracking products from time of shipping all the way to
out to the sales floor. This provided real time tracking of items. Companies can use this information to
improve in stock, develop better replenishment methods, and increase sales.

iii) Tagging must happen at item level in order to gain benefits at the checkout counters. Applying tags at
store front is going to take more time as it requires the tag prices and readers to be more affordable. A
handful of companies such as Best Buy have started tagging at item level but a global deployment will
take few more years.

iv) Consumer scenarios are “after-market”, meaning that they would be based on item-level tags applied
by the manufacturer, and which remain present and active on the goods after the point of sale or
acquisition. Examples include smart shopping carts, or smart kitchen cabinets or refrigerators. Currently it
is primarily in research and no commercial use has been applied.

v) RFID tracking in public places is going to be challenging. Most of the current scenarios are mandated by
the government.

vi) Asset tracking is another fast growing area for RFID use. Companies can tag their assets such as
computers, pallets, network routers to track within enterprises. Health-care facilities may be among the
early adopters of RFID for asset management. Agility Heath Care [21] is one of the first companies to
deploy such type of RFID enabled solutions for the health care industry.

vii) Specialized uses are typically within-enterprise or single-data-holder, and characterize the traditional
uses of RFID. But inter-enterprise uses of RFID will grow since it makes sense to pay once to tag an item
even though ownership or control of the items might change over the life of the item.

From the above figure, we can identify key RFID privacy related concerns. One threat is that RFID
information can be obtained at multiple points and by multiple sources which leads to unauthorized access
of data. Primary privacy threat in RFID generally concerns with a consumer buying an item that can lead
to obtaining more information about that individual. This can be only accomplished through item level
tagging or items that are also selling units such televisions or vacuum cleaners.

If a consumer decides then he or she can deactivate the RFID tag after point of sale. Another motivation
might be compliance with requirements such as return or warranty policies, item function, or recycling
regulations. There are no such compliance requirements at this time. If someone decides to not
deactivate the product and takes it home for a smart kitchen cabinet the privacy threat is minimal within
the household.

It can only be a concern if an unwanted guest snoops into the household with a handheld RFID scanner and
obtains information which is very unlikely and a rare scenario. Carrying tags into public places definitely
raises a threat and something that would require legal compliance and privacy protection acts.

RFID privacy threats are real. However, the present wide scale deployment of RFID is in global supply
chain which is far from the serious concerns such as disclosure of a consumer identity. Most of the tracking
ends at backroom of the store which prevents it from going to sales floor and thus out of reach of the
consumers in general.

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Q.5. Can retail boom take logistics to new heights?-support your answer real examples.

Ans. The booming Indian retail. Industry, estimated at around $300 million, presents a kaleidoscopic view
of the emerging formats to meet the changing demands and expectations of different customer segments
with their distinct needs which are now becoming the driving force in this entire realignments process.

The unorganized sector, controlling over 95 percent of the retail business in the country and serving the
vast majority of Indian consumers in a somewhat undifferentiated manner, is now being turned on its head
and is in a state of flux. It offers an opportunity for the perceptive and the progressive among the
businesses with a long-term vision to identify their strengths, redefine their business strategies, and chalk
out their course of action fro the future to achieve some form and measure of “Strategic Fir” between
their supply chain strategies as the foundation for long-term survivability and growth.

The Indian middle class, of about 350 million, which the organized retail sector is trying to target, is by no
means a homogenous lot ready to embrace one single retail format. It is and diverse as the country itself
and, therefore, offers various options for the aspirants of the market share. There is room for several
formats to coexist and grow parallel till the organized retailing itself secures large enough a share of the
total market, when inter format competition may become relevant. In the meantime, several different
supply chain models will evolve and get tested in the Indian environment.

In this scenario, the Wal-Mart-Bharti combine presents the prospect of an efficient supply chain to
implement the business strategy of low-price leadership along the lines of Wal-Mart’s Everyday Low Price
(EDLP) Model. Efficiency will, possibly, come from economics of scale, volumes in sourcing and
production, and enhanced network visibility complimented by Bharti’s domestic network, leading to
effective control over the movement for products as well as fast and continual replenishment through
their well-honed and well-tested practices applied in Indian conditions.

Reliance Retail, the other major player in the field, seems more focused on developing an indigenous
sourcing base and concentrating on economics arising out of disintermediation of supply and distribution
channels. Its chosen route to growth in the food retailing lies in the establishing direct linkages with the
farmers through contract farming, moving the produce to its cold storages and warehouses in its own
transport, and further distributing the same through Reliance outlets.

For the consumer durables, Reliance has likewise chosen to enter into contracts with the leading
manufacturer and market the products through nationwide chain of a wide variety of stores reaching out
to about 800 cities and towns throughout the country. Both the models would, therefore, seem to
basically follow the volume route to growth and success.

The shopper’s Stop, an early entrant into the Indian retail sector; however seems to prefer targeting high-
end customers in a limited number of cities focusing more on value than on volumes. It aims at maximizing
returns from the limited retail space available and using the prime locations for generating returns
commensurate with investments. It has fixed its sights on the young and relatively affluent couples with
higher disposable incomes. The business strategy of focus seems apparent and it will reflect itself in the
design of its supply chain.

There are others who believe that businesses cannot begin to target high value customers unless they first
establish a market presence and capture a reasonable share of the business through the volume route.
There is thus a need to start with an efficient supply chain and then switch to a focused or innovative
supply chain as brand images are built across the product range and across different customer segments.
Continual realignment of the supply chain strategy with the business strategy would be indicated in such
cases.

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And finally, there are those who advocate a situational approach to the market, maintaining a proper
balance between the two routes applying differential practice to different products and customer
segments depending upon the product life cycle and customer needs.

The advent of organized retailing in the country, its projected exponential growth, the entry of major
foreign players in the field, and the increasingly aware and discerning customer base are bound to usher in
the business best practices in the field of supply chain management.

All in all, a great transformational process is unfolding in India and the retailing sector will possibly bring
home the all-important lesson that businesses cannot hope to succeed in this highly competitive
environment unless they can align their supply chain strategies with their business strategies and remain
alive to need for continual mid-course corrections.

With the rapid growth in organized retail and increased emphasis of manufacturers on understanding sales
at the retail level, the study of retailing has become increasingly relevant. Sales managers of consumer
products forms need to understand the perspective of retailers and design appropriate marketing
programs to attract retailers, particularly when large organized chains become more dominant. Products
and brand managers need to understand the factors behind the growth of retail brands to plan effective
product and branding strategies.

Q.6. Discuss the trends and challenges in new technologies in supply chain management?

Ans. Today, it would be difficult to find an organization, large or small, that doesn’t understand the
importance of supply chain management and how successfully implementation of supply chain
management principles can have a positive impact on its overall success. It is one of the major functions
common to many types of organizations: The overall goal of supply chain management is to impact the
organization’s bottom line in a positive way.

While it involves a number of actions, present supply chain management is trying to achieve the following
goals:

· Provide an uninterrupted flow of materials, supplies and service required to operate the organization.

· Keeps inventory investment at a minimum.

· Maintain and improve quality.

· Find or develop competent suppliers.

· Purchase required items and services at lowest total cost.

· Improve the organization’s competitive position.

· Achieve harmonious, productive working relationships with other functional areas within the
organization.

· Accomplish the purchasing and marketing objectives at the lower possible level of administrative costs.

Traditionally, marketing, distribution, planning, manufacturing and the purchasing organizations along the
supply chain operated independently. These organizations have their own objectives and these are often

SMU-MBA-3rd Sem Warehousing and Supply Chain Management Page No.12

conflicting. For example, high customer service and maximum sales objectives of marketing may conflict
with manufacturing and distribution goals.

Many manufacturing operations are designed to maximize output volumes and lower costs with little or no
considerations for the impact on inventory levels and distribution capabilities. Purchasing contracts are
often negotiated with very little information beyond historical buying patterns. The result of these
conflicting objectives is that there is not a single integrated picture for the organization as a whole.
Hence, there is a need for an integrated picture through which these different functions can be integrated
together.

Supply chain management is a strategy through which such integration can be achieved. Today, it is
indeed possible through IT (Information Technology) to achieve this type of integration. Supply chain
management is the combination of art and science that goes into improving the way your company finds
the raw components it needs to make a product or service, manufactures that product or service and
delivers it to customers.

Supply chain operations today is posing lot of challenges of the organizations in order to keep up the
expectations of the customers. In achieving so, supply chain operations act as a major area that every
company should examine. In order to boost up the profitability and make the organization more
successful, supply chain has a key role to play in it.

Information is crucial to the performance of a supply chain because it provides the basis on which supply
chain managers make decisions. Information technology consists of the tools used to gain awareness of
information, analyze this information and execute on it to increase the performance of the supply chain.
Without information, a manager cannot know what customers want, how much inventory is in stock and
when more products should be produced or shipped.

This is going to be biggest areas of improvement for manufacturer in the near future to face the
challenges of supply chain. The role of IT becomes very important to achieve the above said goals in an
effective manner. It is the future which is going to make radical changes to the supply chain to deliver
step changes in performance.

Today’s “one approach suits all” supply chains cannot provide an adequate solution to the challenges now
faced by companies. Yet, overnight transformation is an impossible issue, significant changes in supply
chain has to be brought in organizations to equip themselves to face the future challenges.

Companies are increasingly being watchful in learning the changes in consumer buying behaviors,
increased retailer demands, growth objectives and changing regulatory norms. The supply chain plays an
essential role in addressing these demands on the business.

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SMU-MBA-3rd Sem Warehousing and Supply Chain Management Page No.13