TSCM Eq Solution

TSCM EQ SOLUTION
TOPIC 1 – INTRODUCTION TO SUPPLY CHAIN MANAGEMENT
APR 04,05,06
NIL
APR 07
Q1(D)
ANS -- Logistics is the management of the flow of the goods,

information and other resources in a repair cycle between the
point of origin and the point of consumption in order to meet the
requirements of customers. Logistics involves the integration of
information, transportation, inventory, warehousing, material
handling, and packaging, and occasionally security. Logistics is a
channel of the supply chain which adds the value of time and
place utility.
Q2(B)
ANS A supply chain is a network of facilities and distribution options that

performs the functions of procurement of materials, transformation of these
materials into intermediate and finished products, and the distribution of these
finished products to customers. Supply chains exist in both service and
manufacturing organizations, although the complexity of the chain may vary
greatly from industry to industry and firm to firm.
The following are five basic components of SCM.
1. Plan—This is the strategic portion of SCM. Companies need a strategy for

managing all the resources that go toward meeting customer demand for their
product or service. A big piece of SCM planning is developing a set of metrics to
monitor the supply chain so that it is efficient, costs less and delivers high quality
and value to customers.
2. Source—Next, companies must choose suppliers to deliver the goods and

services they need to create their product. Therefore, supply chain managers must
develop a set of pricing, delivery and payment processes with suppliers and create
metrics for monitoring and improving the relationships. And then, SCM managers
can put together processes for managing their goods and services inventory,
including receiving and verifying shipments, transferring them to the
manufacturing facilities and authorizing supplier payments.
3. Make—This is the manufacturing step. Supply chain managers schedule the

activities necessary for production, testing, packaging and preparation for delivery.
This is the most metric-intensive portion of the supply chain—one where
companies are able to measure quality levels, production output and worker
productivity.
4. Deliver—This is the part that many SCM insiders refer to as logistics, where
companies coordinate the receipt of orders from customers, develop a network of
warehouses, pick carriers to get products to customers and set up an invoicing
system to receive payments.
5. Return—This can be a problematic part of the supply chain for many

companies. Supply chain planners have to create a responsive and flexible network
for receiving defective and excess products back from their customers and
supporting customers who have problems with delivered products..
Benefits Of Supply Chain Management
1. Make informed decisions

2. Increase effectiveness of sales, marketing and customer management
3. Retain customers
4. Integrate demand planning with sales, manufacturing and logistics planners
by working together with marketing
5. Improve security and compliance with safe cargo requirements and other
regulations
6. Drive cost and performance gains in nearly every part of your organization
7. Position your company with a low cost structure and high speed to drive
profitable growth — on a global level.
APR 08
Q1(A)
ANS SAME AS --APR 07 Q1(D)

APR 09
Q2(A)
1)Primary logistics activities-- goods physically move through the

distribution channel using logistic activities
Transportation – Transportation plays the key role in the economic

success by allowing for the safe and the efficient distribution of goods
and services through the supply chain. Transportation links the various
logistics activities without transportation the integrated logistics system
breaks down. Without the transportation raw materials ca not flow into
the warehouse and plants and the finish product cannot flow out of the
plant to the warehouses and finally to the customer. An effective
transportation system forms the backbone of sound economy. Without
transportation system domestic and international economic growth
would impossible.
Facility structure- facility structure refers to the management of

warehouses and the distribution centers. Warehouses can play a key
role in integrated logistics strategy and in building and maintaining
good relationship between supply chain partners. Warehousing affects
customer service, stock out rates and forms a sale and marketing
success. A warehouses smoothes out markets supply and demand
fluctuation. When supply exceeds demand, a warehouse stores product
according to the customers requirement. When demand exceeds supply
the warehouse can speed product movement to the customer by
performing additional services like marking price, packaging product
or final sub assembly. Warehousing can link the production facility and
the consumer or suppliers.
Inventory- Inventory management is the reduction of inventory while

maintaining customer service and production levels. The idea is to keep
the production line running at a minimum inventory class. The key to
good inventory management is to know when to accept the stock outs.
Material handling- it is the movement of raw material, work in process

inventory, and finished products within a facility. The art and science of
moving, packaging and storing of substances in any form is known as
material handling a properly installed material handling system can
reduce cost and labor increase safety, increase productivity, reduce
waste, increase capacity and improve service
Communications and information- As goods move so must information.

To move the right goods to the right place at the right time in the right
condition with the right document, the answers to all the “right”
questions must be known. The information could be simple as the
content of the package or complex as the propose design for a new
supply chain. The importance of information system in logistics is the
conversion of accurate data in to useful information. Inaccurate date in
an inventory system disrupt customer service, transportation,
warehouse operation, production and inventory management
APR 10
Q7(B)
ANS SAME AS APR 07--Q2(B)
TOPIC 2-CREATING OUTCOME- DRIVEN TASKS AND PROCESSES
NIL
TOPIC 3-MATERIALS MANAGEMENT
APRIL 04
Q1(A)
ANS RIGHT PRICE
• Price refered to the time ,effort and money a customer expends to get a
product or services.
• From point of selling firm price is the amount of money a firm receives
for its products and services .The price should cover fixed costs
,variables cost and some margin of profit.
• EG. Transportation charge may be embedded in the price of product.
when that is the case the seller lowers transportation costs per unit by
moving more in each shipment.
RIGHT PRODUCT
• Product is the sum of the attributes that the customer buys.

• Packaging protects product attributes meaning that the product is
delivered as it was manufactured.
• Packaging can also be one of the attributes in a purchase decision.
• Receiving the damage or incorrect order may annoy both industrial
buyer and consumer.
• Therefore protective packaging is vital in transporting the products to
the customer.
RIGHT PLACE
• Place or outbound logistics is final marketing interface.

• This involves choosing a channel of distribution, choosing the type and
number of middleman , and deciding where to locate warehouses to
ensure availability of product.
RIGHT CUSTOMER
Right customer means that selecting the correct kind of customer
Q1(B)
ANS- ORGANIZATION BASED ON COMMODITIES
1. In such organizations, the items are classified

according to there nature. For eg. Raw materials,
bought out components, spares, imported items,
finished goods.
2. These commodities are assigned to the individuals.
Taking into consideration the importance of each
product with respect to operations of the company,
the workload will vary between the groups.
3. On the basis of this, the determination of staff in
each commodity group is determined.
4. For Example: An automobile manufacturing firm
may have commodity groups such as castings,
pressed parts, raw materials and civil engineering
materials.
5. The advantages of such classification are as
follows:
i. There is no wastage of efforts as each
commodity is handled separately.
ii. The group to which each commodity is
assigned will be in touch with that commodity market and it becomes
specialized.
iii. Bulk buying and specialization is there in
each commodity group.
II. ORGANIZATION BASED ON LOCATION
1. When an organization has several plants, location in different parts of

the country there are two alternatives.
2. We can have a centralized organization which is located at the
headquarters.
3. We can have a decentralized materials management which is set up at
each location.
4. There are many advantages of having a decentralized material
management set up at each location.
5. When the distance between the organization is large in that case it is
better to have controlled headquarters both in terms of cost and time.
6. Some plants require unique material and in such cases a material
management department which is located at the plant will be in better
coordination with the production plant, finance and marketing department.
III. ADVANTAGES OF CENTRALIZED MATERIALS MANAGEMENT
i. When we combine the requirements of nearby plants and buy in

bulk quantities it results in reduction of cost.
ii. The transfer of materials in an emergency is possible.
iii. The surplus material in one plant can be utilized in meeting the
requirements of another plant.
Q2(A)
• ANS- There are total five steps to be followed

1. Recognizing need
2. Identifying a supplier.
3. Qualifying and placing an order.
4. Monitoring and managing delivery process.
5. Evaluating the purchase and supplier.
Recognizing the need
1. All departments need to buy something or the other.
2. A form called as “purchase requisition” is filled by the requisition

department head and forward to the purchasing department.
3. The purchasing requisition contains the following:

- Name of requestor
- The planned use of the item.
- The specification of the item.
- Number of units.
- Tentative price per unit.
- Expected of purchase.
4. The purchasing department places the order to authorized supplier.
5. Purchasing managers issues a “Purchase order” to the supplier

authorizing to supply the goods.
Identify the supplier:-
1. Important to purchase row material.
2. Can be purchase through news papers, advertizing, word-of-mouth.
3. Suppliers are asked to send proposal and bidders are invited.
4. Suppliers are requested to provide samples, demonstration and

customer references for further investigation.
5. For critical item of purchase, more than one supplier is evaluated and
shortlisted.
6. Further orders are supplier to selected supplier only.
Qualifying and placing an order
1. Once supplier is identified orders must be identified orders must be

identified.
2. Detailed order is being prepared with expected date of purchase.
3. Contracts are signed.

4. Purchasing department are then responsible to ensure that the orders are
filled completely and correctly, contracts terms are made.
5. Goods meet the standards.
6. Supply performs satisfactorily.
Monitoring and managing the delivery process
1. Purchasing department ensures the correct goods delivery.
2. It is of correct quantity and at right place.
3. They keep track of monitoring the supplier performance and the overall
quantity & service provided by the supplier.
Evaluating the purchase and the supplier:-
1. Supplier performance is evaluated in 2 stages.
2. The purchasing department may contact supplier to avoid future

problems.
3. In the second stage the origin summarize the accumulated experience

with the supplier through many transactions and many purchases.
4. The end of the evaluation period such as belonging the supplier such as
bringing the suppliers together online to share more timely and accurate
information.
5. Applying the barcode technology in receiving the inbound shipments and

generating order.
Q2(B)
ANS- USE OF COMPUTERS IN PURCHASING
1. Today, the purchasing managers rely heavily on computers.

2. The computer does not alter the decision making steps as described in the
purchasing process, but it speeds up the process.
3. The important use of computers in purchasing is electronic data
interchange(EDI).
4. The areas of primary interest are as follows:-
i. Bringing suppliers online to share more timely and accurate information.
ii. Applying a barcode technology in receiving inbound shipment and
generating orders.
5. The EDI provides following benefits in purchasing as follows:-
i. Electronic Funds Transfer
ii. Paperless purchasing
iii. Purchasing professionalism
iv. Increasing productivity
v. Inventory and lead time reduction
vi. Building enhanced communication with supplier
vii. Internet system impact
viii. Support for bar-coding.
Q3(A)
ANS Two types of cost
1) Carrying cost- physically storing goods
a) Capital or opportunity cost – compares inventory investment to other capital

investments.
Storage space cost- cost of moving goods into and out of inventory (includes
variable cost like rent, utilities and space)
c) Inventory service cost- contains insurance and taxes.
d) Inventory risk cost- cost of obsolescence, damage, relocation or theft.
2) Ordering cost- consist of
a) order cost- include preparing and processing the order request, selecting a
supplier, checking stock, preparing the payment and reviewing inventory
levels.
b) setup costs- cost involved in modifying the manufacturing process to make

different goods
Q4(B)
ANS- The art and science of moving, packaging , and storing of substances in any
form.
1. A properly installed material handling system can reduce costs and labor,
increase safety, increase productivity, reduce waste, increase capacity,
and improve service.
2. Depending on the industry material handling can account for 30 to 70
percent of the cost of manufacturing, so inefficiencies should be
eliminated.
Objectives of material handling
1. The first is movement of product into ,through, and out of warehouses

,efficient movement inside a facility helps control costs and improve
customer service.
2. Time is the second element parts and raw materials must be available
when needed at production stations, loading docks, and terminals.
3. The third element is quantity ,goods must be moved in the right quantity
between the production stations as well as to the customer.
4. The last element is space, the material handeling system should
effectively use the available space in the warehouse, terminal ,or plant.
Q6(A)
ANS— Material handling is the movement of raw material,

work-in-process (WIP) inventory, and finished products
within a facility.
The art and science of moving, packaging, and storing of substances in any
form.
 A properly installed Material handling system can reduce the costs and
labor, increase safety, increase productivity, reduce waste, increase
capacity and improve service.
 Depending on the industry, material handling can account for 30 to 70

percent of the cost of manufacturing, so inefficiencies should be
eliminated.
Q7(A)
ANS—It is the management of this end-to-end supply-

chain.
 the process of anticipating customer needs and wants, acquiring the

capital , materials , people, technologies and information necessary to
meet those needs and wants , optimizing the goods or service producing
network to fulfill customer request , and utilizing the network to fulfill
customer request in a timely way.
 Consist of inbound logistics, conversion operations and outbound

logistics
 It contain two activities
 1) logistics activities (goods physically move through the distribution

channel using logistic activities)
 2) service response logistics activities (non-material services move to

customers at all levels of distribution channel )
APRIL 05
Q1(A)
ANS Suppliers are evaluated as follows :
1. The suppliers are normally evaluated on price, quality, customer service and
delivery.
2. The below figure shows the supplier evaluation variables .
3. The area where all the four circles intercepts indicates that a specific supplier
meets the purchasing managers expectation.
4. Therefore, this is called as the area of supplier acceptance.
5. The supplier evaluation variables are as follows broken down in order to get a
detailed evaluation of the supplier. The simple breakdown of supply evaluation
variable is follows:
i. Price variables
a. Price of material
b. Financing terms.
ii. Delivery Variable
a. Reliability of delivery.
b. Total transit time
iii.Quality Variable
a. Overall supplier reputation
b. Product reliability
c. Technical specification
iv.Service Variable
a. Ease of operation or use.
b. Ease of maintenance.
c. Reliability of service.
d. Sales service.
e. Supplier flexibility.
f. Training offered.
g. Training time required.
h. Technical services required.
i. Ordering convenience.
6. After choosing the parameters to evaluate the purchasing manager chooses

rating of these parameters, based on their importance.
Example : A 1 to 5 rating scale assumes 1 as worst and 5 as best.
7. This Method not only ranks each variable but also weights it.
8. The analyst multiplies the rating rank by the importance rank to get an
overall score on that variable.
Example : The purchasing manager may rate price for supplier as 5 (best
price) and reliability.
Q2(A)
ANS
SAME AS APRIL-04, Q2(A)
Q2(B)
ANS—
ABC analysis is a system in inventory management to minimize the cost of

inventories incorporated and which are stored for long time ,these are classified
into ABC groups whereas
A stand for the most expensive inventories which are purchased on customer’s
demands so that it can be processed and then given to them on priority basis , these
items are carefully selected
B is classified for those goods which are less expensive than A items and which
can be stored for some time before it is processed
C goes for those items which are cheap and also can be abundantly used . These
are items where its loss won’t cost much to the company.
Q5(C)
ANS—
Same as APRIL 04, Q4(B)
Q7(C)
ANS-
: TYPES OF INVENTORY
1) Cycle stock- it is the product consumed through sales or use and
replenished through ordering.
2)Raw material.-- The purchased items or extracted materials that are transformed
into components or products.
3) Work in process.-- Any item that is in some stage of completion in the

manufacturing process.
4) Finished products.-- Completed products that will be delivered to customers.
5) In transit inventory-inventory which is in route via a carrier.
6) Safety stock- to prevent from stockouts.
7) Seasonal stock
8) Promotional stock
9) Speculative stock- considering the future demand
10) Dead stock
APRIL-06
Q1(A)
ANS- SAME AS APRIL-04,Q1(B)
Q1(B)
ANS- SAME AS APRIL-04,Q2(A)
Q2(A)
Q2(B)
ANS-
BUYING PURCHASING
1 To get something by paying The act of buying something is
called purchasing.
money for it is called buying.
OR
OR
Purchasing refers to a business
Buying is getting goods without any
or organization attempting to
evaluation and without any analysis
acquire good or services to
of requirements.
accomplish the goal of the
enterprise.
2 Buying is done unconditionally. Purchasing is done very
conditionally.
3 During buying, no contracts are During purchasing contracts
done. are made.
4 Buying is the short period of time. Purchasing is the long period of
time.
5 Buying is not a very much Purchasing consists of a
thorough and a very organized
organized process.
process.
Q2(C)
ANS- lead time- time elapsed in placing an order and receiving the order by
the customer is called lead time.
Chain management – managing the supply chain management in such a way

that lead time is the minimum.
Q3(A)
Q3(B)
Q4(A)
ANS- The art and science of moving, packaging, and storing of substances in any
form.
 A properly installed material handling system can reduce costs and labor,
increase safety, increase productivity, reduce waste, increase capacity, and
improve service.
Depending on the industry, material handling can account for 30 to 70 percent of

the cost of manufacturing, so inefficiencies should be eliminated.
Objectives Of Material Handling
 The first is movement of product into, through, and out of warehouses,

efficient movement inside a facility helps control costs and improve
customer service.
 Time is the second element parts and raw materials must be available when
needed at production stations, loading docks, and terminals.
 The third element is quantity, goods must be moved in the right quantity
between the production stations as well as to the customer.
 The last element is space, the material handeling system should effectively
use the available space in the warehouse, terminal, or plant.
Q4(B)
ANS- The EOQ model is a technique for determining the best answers to the how
much and when questions. It is based on the premise that there is an optimal order
size that will yield the lowest possible value of the total inventory cost. There are
several assumptions regarding the behavior of the inventory item that are central to
the development of the model
EOQ assumptions:
1. Demand for the item is known and constant.

2. Lead time is known and constant. (Lead time is the amount of time that
elapses between when the order is placed and when it is received.)
3. The cost of all units ordered is the same, regardless of the quantity ordered
(no quantity discounts).
4. Ordering costs are known and constant (the cost to place an order is always
the same, regardless of the quantity ordered).
5. When an order is received, all the items ordered arrive at once
(instantaneous replenishment).
6. Since there is certainty with respect to the demand rate and the lead time,
orders can be timed to arrive just when we would have run out.
Consequently the model assumes that there will be no shortages.
Based on the above assumptions, there are only two costs that will vary with
changes in the order quantity, (1) the total annual ordering cost and (2) the total
annual holding cost. Shortage cost can be ignored because of assumption 6.
Furthermore, since the cost per unit of all items ordered is the same, the total
annual item cost will be a constant and will not be affected by the order quantity.
EOQ symbols:
D= annual demand (units per year)
S = cost per order (dollars per order)
H = holding cost per unit per year (dollars to carry one unit in inventory for one
year)
Q = order quantity
We saw on the previous page that the only costs that need to be considered for the
EOQ model are the total annual ordering costs and the total annual holding costs.
These can be quantified as follows:
Annual Ordering Cost
The annual cost of ordering is simply the number of orders placed per year times
the cost of placing an order. The number of orders placed per year is a function of
the order size. Bigger orders means fewer orders per year, while smaller orders
means more orders per year. In general, the number of orders placed per year will
be the total annual demand divided by the size of the orders. In short,
Total Annual Ordering Cost = (D/Q)S
Annual Holding Cost
The annual cost of holding inventory is a bit trickier. If there was a constant level
of inventory in the warehouse throughout the year, we could simply multiply that
constant inventory level by the cost to carry a unit in inventory for a year.
Unfortunately the inventory level is not constant throughout the year, but is instead
constantly changing. It is at its maximum value (which is the order quantity, Q)
when a new batch arrives, then steadily declines to zero. Just when that inventory
is depleted, a new order is received, thereby immediately sending the inventory
level back to its maximum value (Q). This pattern continues throughout, with the
inventory level fluctuating between Q and zero. To get a handle on the holding cost
we are incurring, we can use the average inventory level throughout the year
(which is Q/2). The cost of carrying those fluctuating inventory levels is equivalent
to the cost that would be incurred if we had maintained that average inventory
level continuously and steadily throughout the year. That cost would have been
equal to the average inventory level times the cost to carry a unit in inventory for a
year. In short,
Total Annual Holding Cost = (Q/2)H
Total Annual Cost
The total annual relevant inventory cost would be the sum of the annual ordering
cost and annual holding cost, or
TC = (D/Q)S + (Q/2)H
This is the annual inventory cost associated with any order size, Q.
At this point we are not interested in any old Q value. We want to find the optimal
Q (the EOQ, which is the order size that results in the lowest annual cost). This can
be found using a little calculus (take a derivative of the total cost equation with
respect to Q, set this equal to zero, then solve for Q). For those whose calculus is a
little rusty, there is another option. The unique characteristics of the ordering cost
line and the holding cost line on a graph are such that the optimal order size will
occur where the annual ordering cost is equal to the annual holding cost.
EOQ occurs when:
(D/Q)S = (Q/2)H
a little algebra clean-up on this equation yields the following:
Q2 = (2DS)/H
and finally
Q = √2DS/H
(this optimal value for Q is what we call the EOQ)
Q5(B)
ANS-
VED Analysis means....
Vital, Essential and Desirable Analysis...

It is the Analysis for monitoring and control of stores and spares inventory by
classifying them into 3 categories viz., Vital, Essential and Desirable. The
mechanics of VED analysis are similar to those of ABC Analysis.
VED Classification
While in ABC, classification inventories are classified on the basis of their

consumption value and in HML analysis the unit value is the basis, criticality of
inventories is the basis for vital, essential and desirable categorization.
The VED analysis is done to determine the criticality of an item and its effect on
production and other services. It is specially used for classification of spare parts.
If a part is vital it is given ‘V’ classification, if it is essential, then it is given ‘E’
classification and if it is not so essential, the part is given ‘D’ classification. For
‘V’ items, a large stock of inventory is generally maintained, while for ‘D’ items,
minimum stock is enough.
Q5(C)
ANS- Safety stock is a term used to describe a level of stock that is maintained
below the cycle stock to buffer against stock outs. Safety Stock or Buffer Stock
exists to counter uncertainties in supply and demand. Safety stock is defined as
extra units of inventory carried as protection against possible stock outs. By having
an adequate amount of safety stock on hand, a company can meet a sales demand
which exceeds their sales forecast without altering their production plan. It is held
when an organization cannot accurately predict demand and/or lead time for the
product. For example, if a manufacturing company were to continually run out of
inventory, they would need to keep some extra inventory on hand so they could
attempt to meet demand while they were producing more inventories.
Safety stock can be utilized as a tool for a new company to judge how accurate
their forecast is in the first few years, especially when used strategically with a
materials requirements planning worksheet. With a material requirements planning
(MRP) worksheet a company can judge how much they will need to produce to
meet their forecasted sales demand without relying on safety stock. However, a
common strategy is to try and reduce the level of safety stock to help keep
inventory costs low. This can be extremely important for companies with a smaller
financial cushion or those trying to run on lean manufacturing, which is aimed
towards eliminating wastes throughout the production process.
The amount of safety stock an organization chooses to keep on hand can

dramatically affect their business. Too much safety stock can result in high holding
costs of inventory. In addition, products which are stored for too long a time can
spoil, expire, or break during the warehousing process. Too little safety stock can
result in lost sales and, thus, a higher rate of customer turnover. As a result, finding
the right balance between too much and too little safety stock is essential.
Reasons to have Safety Stock
Safety Stocks enable organizations to satisfy customer demand in the event of

these possibilities:
• Supplier may deliver their product late or not at all
• The warehouse may be on strike
• A number of items at the warehouse may be of poor quality and
replacements are still on order
• A competitor may be sold out on a product, which is increasing the demand
for your products
• Random demand (in reality, random events occur)
• Machinery Breakdown
• Unexpected increase in demand
Q7(A)
ANS-EOQ=SQRT(2*200*20000)/20%*10
=2000
2) NO OF ORDERS PER YEAR=20000/2000=10
3) TOTAL VARIABLE COST OF INVENTORY
=ORDER COST+ CARRYING COST
=(20000/2000*200)+(2000/2*10*0.20)
Q7(B)(i)
 ANS- All products or services have some impact on the environment,

which may occur at any or all stages of the products life cycle – raw
material acquisition, manufacture, distribution, use and disposal.
 This checklist focuses on the environmental impacts that may be

relevant to purchasers of packaging.
 The manufacture and disposal of packaging affects the environment

through the extraction of virgin resources, emissions associated with
energy used in manufacturing and disposal .
 These environmental impacts can be reduced by good packaging design.

 Assess the packaging using the ‘waste hierarchy’ (reduce, reuse,
recycle), bearing in mind the need for the packaging to do an effective
job in protecting and containing its content.
1) Avoid/Reduce: Favor zero packaging material where appropriate.
2) Reuse :For packaging that cannot be avoided or reduced, favour packaging

that is or can be reused. Eg: containers that are picked up by the supplier for
reuse.
3) Recycle : Where reuse is impracticable favor packaging that is made from

recycled material and/or material that can be easily recycled (for example,
give preference to packaging made from a single recyclable material rather
than multiple materials).
APRIL-07
Q1(c)
ANS-SAME AS APRIL-06,Q3(A)
Q2(A)
ANS-- SAME AS APRIL-04,Q1(A)
Q2(C)
ANS-- SAME AS APRIL-06,Q7(B)i
Q3(A)

within a facility.
form.
There are different types of materials in any organization.

Different strategies are used to manage them (like
according to their value of usage).
ABC analysis
Critical value analysis
VED Analysis
Q3(C)
ANS-- A properly installed Material handling system can reduce the costs
and labor, increase safety, increase productivity, reduce waste, increase
capacity and improve service.
Q4(A)
ANS-- SAME AS APRIL-04,Q1(B)
Q4(B)
Q4(C)
ANS-- SAME AS APRIL-06,Q5(C)
Q6(a)
Ans same as April-05,Q2(a)
Q7(B)
Q7(c)
ANS—SAME AS APRIL-06, Q2(C)

APRIL-08
Q1(B)
ANS---SAME AS APRIL-05,Q1(A)
Q1(c)
ANS-SAME AS APRIL-05,Q5(B)
Q2(A)
 ANS-- 1) TO PROVIDE UNINTERRUPTED FLOW OF

MATERIALS , SUPPLIES, AND SERVICES REQUIRED TO
OPERATE THE FIRM
 2) MINIMIZE INVENTORY INVESTMENT AND LOSS
 3) MAINTAIN ADEQUATE QUALITY STANDARDS
 4) FIND OR DEVELOP COMPETENT SUPPLIERS.
 5) STANDARDIZE WHEREVER AND WHENEVER POSSIBLE THE

ITEMS BOUGHT WHENEVER POSSIBLE
 6) PURCHASE REQUIRED ITEMS AND SERVICES AT THE

LOWEST ULTIMATE PRICE.
 7) IMPROVE THE ORGANIZATIONS COMPETITVE POSITION
 8) WORK HARMONIOUSLY WITH OTHER DEPARTMENTS IN

THE ORGANIZATION
 9) ACCOMPLISH THE PURCHASING OBJECTIVES AT THE

LOWEST POSSIBLE LEVEL OF ADMINISTRATIVE COSTS.
Q2(B)
ANS--
 Inventory is defined as usable but idle resources
Objectives of inventory
 To keep the inventory to minimum possible level which can be achieved

by JIT and controlling production in high or low demand times.
 Balancing supply and demand (managing seasonal demand and level

production eg crackers also level demand and seasonal production eg
canned fruits)
 Uncertainty of demand and supply- safety stock is kept for uncertain

high demand or uncertain low supply to prevent stockouts.
 Specialization – inventory allows firms with subsidiaries to specialize.

Each plant can produce a particular product or part instead of
producing variety of products or parts.
 Pipeline inventory (buffer interface)- stock is build up as pipeline

inventory from purchasing goods from supplier till they are sold to
customers. It includes materials actually being worked on or moving
between work centers or being in transit to distribution centers and
customers. Key interfaces are supplier and purchasing, purchasing and
production, production and marketing, etc.
 Ease of production system- feeling of safe and secured.
 Future increase in cost
 Economies of scale- a firm can get economies of scale in manufacturing

(longer production runs) , purchasing (quantity discounts), and
transportation (better equipment utilization) by holding inventory.
Q3(B)
 ANS-- Push model– order goods in advance of customer demand.

 Pull model– once demand is known then production is done
 The EOQ model is a technique for determining the best answers to the
how much and when questions. It is based on the premise that there is
an optimal order size that will yield the lowest possible value of the total
inventory cost. There are several assumptions regarding the behavior of
the inventory item that are central to the development of the model
EOQ assumptions
 Demand for the item is known and constant.
 Lead time is known and constant. (Lead time is the amount of time that
elapses between when the order is placed and when it is received.)
 The cost of all units ordered is the same, regardless of the quantity
ordered (no quantity discounts).
 Ordering costs are known and constant (the cost to place an order is
always the same, regardless of the quantity ordered).
 When an order is received, all the items ordered arrive at once

(instantaneous replenishment).
 Since there is certainty with respect to the demand rate and the lead
time, orders can be timed to arrive just when we would have run out.
Consequently the model assumes that there will be no shortages.
 Based on the above assumptions, there are only two costs that will vary
with changes in the order quantity
 (1) the total annual ordering cost and
 (2) the total annual holding cost.
Shortage cost can be ignored because of assumption 6. Furthermore, since the

cost per unit of all items ordered is the same, the total annual item cost will be
a constant and will not be affected by the order quantity.
EOQ symbols:
 D = annual demand (units per year)
 P= cost per order (dollars per order)
 C= annual inventory carrying cost expressed as a percentage of product

cost
 V = average cost or value of one unit of inventory
 EOQ=sqrt(2PD/CV)
Q4(B)
ANS-- There are 3 types of material handling systems
 manual
 mechanized and
 automated.
 Manual material handling systems -Tend to be labor-intensive. Typical

equipment would be hand dollies, drawers, low racks, pallet jacks, bins,
and gravity flow conveyors.
Manual systems yield low throughput because of a lack of handling

speed. Also, they, use cubic space poorly. Most firms have modified
manual systems to mechanized systems to increase efficiency.
 Mechanized material handling System – Is most efficient. It replaces

some manual handling systems with mechanical movement. The forklift
truck is the backbone of a mechanism material handling system. Other
equipment found in this system include pallets, towlines, cranes, storage
rack systems, and wheel conveyors.
 Automated Material Handling System – Most Sophisticated. It uses

carousels, automatic storage and retrieval systems, item-picking
equipment, optical scanners, high-rise rack systems, and robots. It can
fully utilize the available cubic space in the facility.
Automated systems seem superior in most situations, but are extremely

costly, may require special types or sizes of facilities, and create serious
problems when the system crashes.
Q5(A)

within a facility.
form
Objectives of Material Handling
 Movement - Movement of product into, through, and out of warehouses.

Efficient movement inside a facility helps control costs and improve
customer service.
 Time – Parts and raw materials must be available when needed at

production stations, loading docks, and terminals.
 Quantity – Goods must move in the right quantity between the

production stations as well as to the customer
 Space – The material handling system should effectively use the

available cubic space in the warehouse, terminal or plant.
Q6(B)
ANS-- PURCHASING AND OTHER FUNCTIONS
 INTERNAL INFORMATION FLOWING TO PURCHASING

 EXTERNAL INFORMATION FLOWING TO PURCHASING
 INFORMATION FLOWING FROM PURCHASING

USE OF COMPUTERS IN PURCHASING
EDI
 It helps to bring suppliers online to share more timely and accurate

information
 Applying bar code technology in receiving inbound shipments and

generating orders.
EDI benefits in purchasing
Q7(B)
Ans--
 ROUTINE ORDERS
 PROCEDURAL PROBLEMS (NON ROUTINE PURCHASES

REQUIRED FOR EMPLOYEES TO LEARN ABOUT THE
PRODUCT)
 PERFORMANCE PROBLEMS(NON ROUTINE PURCHASES OF

PRODUCTS DESIGNED TO BE SUBSTITUTES FOR CURRENT
PRODUCT AND HAVE TO BE TESTED(MAY BE WHEN THE
CURRENT RAW MATERIAL IS NOT PROFITABLE OF HAVING
ANY KIND OF PROBLEM))
 POLITICAL PROBLEMS(NON ROUTINE PURCHASES(LIKE
CHANGE IN RAW MATERIAL , SUPPLIER ETC WHOSE USE
MAY AFFECT MANY DEPTS OF THE FIRM)
APRIL-09
Q1(C)
ANS— MEASUREMENT
 PRICE EFFICTIVENESS( actual price performance against plan)
 COST SAVINGS( reducing per unit cost)
 WORKLOAD( measuring new work, the backlog of work and work

accomplished)
 ADMINISTRATION AND CONTROL( compares actual cost to the

purchasing budget)
 EFFICIENCY( purchasing outputs relative to purchasing inputs like

purchase orders per buyer or money committed per buyer or contracts
per buyer)
 VENDOR QUALITY AND DELIVERY( percentage of items accepted

or rejected)
 MATERIAL FLOW CONTROL MEASURES( flow of material from

supplier to buyer)
 REGULATORY, SOCIETAL AND ENVIRONMENTAL MEASURES(

govt rule like pollution control)
 PROCUREMENT PLANNING AND RESEARCH( price forecast

accuracy, lead time forecasting , plans proposed annually)
 COMPETITION( evaluates items like number of purchase made from a
single source)
 INVENTORY( inventory turnover ratio, inventory levels and

consignments)
 TRANSPORTATION( kind of transportation)
Q1(D)
Q2(B)
ANS---- SAME AS APRIL-08,Q2(A)
Q3(B)
ANS—MANAGERS should have good negotiating skill. They should have

strong relationships with suppliers. Good purchasing practices avoid
operational problems. Purchasing should be done to generate profits not just
to reduce costs.
Q4(C)
ANS---- SAME AS APRIL-04,Q4(B)
Q5(C)
ANS---- SAME AS APRIL-08,Q6(B)
Q7(A)
ANS--characteristics of JIT purchase
 1) quality (less product specification, supplier assisted by purchaser, no

sampling)
 2) transportation (purchasing manager schedules and controls
transportation activities)
 3)suppliers (few supplier located close are selected, repeat business is

preferred, continuous evaluation of suppliers is done, bidding of
materials is minimized , encouraged to do JIT purchasing)
 4) quantities (frequent , steady delivery of small lots in exact quantities ,

long term purchasing contracts, shortages and overages are
discouraged)
BENEFITS OF JUST IN TIME PURCHASE
 JIT purchaser benefits
1. JIT purchasing work best when buyers have consistent, reasonable ,

production schedule
2. They give large orders to few suppliers
3. Use long term contracts
4. Select responsive suppliers
5. reduced material cost
6. Less rework
7. Few delays
8. Less supervision
9. Administrative efficiency is achieved
10.Better and accurate communication
11.Low inventory cost
12. Low transportation cost
13. Less scrap
14. Few defects

15. Less inspection and better quality finished goods
16. Faster response to design innovation
JIT supplier benefits
1. Better training
2. more predictable schedules
3. Reduce labor turnover
4. Administrative efficiency
Q7(B)
Q7(D)
APRIL -10
Q1(A)
ANS— SAME AS APRIL-04,Q1(A)
Q1(B)
ANS— SAME AS APRIL-04,Q2(A)
Q2(A)
ANS--
SAME AS APRIL-04,Q2(B)
Q3(B)

Q4(A)
Q4(C)
ANS—SAME AS APRIL-06,Q2(C)
Q5(B)
ANS—
SAME AS APRIL-06,Q5(C)
Q6(C)
Q7(C)
TOPIC 4-LOGISTICS AND COMPETITIVE STRATEGY

APRIL-04
Q4(A)
ANS—
SAME AS APRIL-05,Q4(A)
Q5(B)
ANS—
SAME AS APRIL-05,Q3(B)
APRIL-05
Q1(B)
ANS- The globalization and customer service is changing the logistics or
globalization is a challenge to logistics because of the benefits as follows:
I.BENEFITS OF GLOBALIZATION
A. Benefits to Participating Countries:
1.Integration of Countries
i. Globalization leads to integration of countries of the world for

business purposes.
ii. Trade will be made free and there will be free movement of goods and
services among all countries.
iii. The isolation of countries from world trade will be removed and this
will be beneficial to all participating countries.
1.Integration of Countries
iv. Globalization leads to integration of countries of the world for

business purposes.
v. Trade will be made free and there will be free movement of goods and
services among all countries.
vi. The isolation of countries from world trade will be removed and this
will be beneficial to all participating countries.
3.Transfer of Capital and Technology

i. Globalization facilities easy transfer of capital from one country to the
other due to free convertibility.
ii. This will lead to flow of funds to poor and developing countries, and
also along with capital, technology will also be moved from developed to
developing countries.
iii. Such transfer of technology leads to modernization of industries.
4.New Global Economic Order
i. The process of globalization leads to a new economic order which

will facilitate global cooperation for economic development of poor
countries.
ii. Such countries will also get wider exposure and will get the benefits
of free trade at the global level.
5.Opportunities to expand Business & Promote Exports
i. Globalization leads to expansion of world trade and the benefits of

such expansion will be available to all participating countries.
ii. Business enterprises will have wider exposure and they can sell their
products in suitable markets all over the world.
iii. Even expansion in the employment opportunities within the country

will be possible due to global exposure to domestic industries.
6.Optimum Utilization of Resources
i. Globalization ensures utilization of natural and other resources in the

best possible manner.
ii. It will enable countries to use untapped resources fully with the
support and cooperation of other countries.
iii. Production and marketing activities will get new dimensions as a

result of globalization.
7.Higher Status
i. A global player gets higher status and reputation at the international

level.
ii. Such countries get different benefits of global participation and slowly
become a big economic power.
B. Benefits to Participating Companies/Enterprises:
1. High Profit
i. A company participating in global business, manufacturing quality

goods at lower cost due to the use of high technology.
ii. It can export goods in large quantities and earn high profits out of
export transactions.
2. Benefits of Liberal Government Facilities
i. Governments in developing countries offer special tax benefits,

financial facilities etc. to companies interested in global business.
ii. The benefits of such facilities are available to the company for
expanding its business activities.
3. Expansion in Business Activities
i. Companies operating in global market expand their business activities

due to export orders, government facilities and so on.
ii. Even latest technology is used in the production activities which

ensure quality production at lower cost.
4. Spreading Business Risks
i. Global enterprises can spread their business risks between domestics

and global markets.
ii. The loss in the domestic market can be covered from the high profits
available from global business.
iii. As a result, the total business risk is brought down considerably.
5. Better Utilization of Resources
i. Global marketing facilitates mass production. Global enterprises get

the benefit of big orders from abroad.
ii. They utilize available resources fully for production purposes, expand
business activities and earn huge profits.
6. Raises Competitive Capacity
i. A global company gets benefits of participation in global business. It

produces superior quality goods at lower production cost.
ii. This raises competitive capacity in the domestic and international

market.
7. Contribution to National Economy
i. A business enterprise participating in global marketing conducts large

scale production, exports on large scale and earns foreign exchange for the
benefit of the national economy.
ii. It strengthens the national economy and promotes its growth.
Q3(A)
ANS-- COMPETITIVE ADVANTAGE
A central theme of this book is that effective logistics management can provide a
major source of competitive advantage; in other words, a position of enduring
superiority over competitors in terms of customer preference may be achieved
through logistics.
Competitive Advantage and the Three Cs

Customers
Needs seeking
benefits at
acceptable price
Valu Valu
Assets and Assets and

Utilizations Utilizations
Company Competitor
Cost
The bases for success in the marketplace are numerous, but a simple model is
based around the triangular linkage of the company, formed by its customers and
its competitors-the "Three Cs." The Three Cs in question are the customer, the
competition, and the company.
Figure illustrates the three-way relationship.
The source of competitive advantage is initially found in the ability of the

organization to differentiate itself, in the eyes of the customer, from its competition
and also by operating at a lower cost and, hence, at greater profit.
Seeking a sustainable and defensible competitive advantage has become the

concern of every manager who is alert to the realities of the marketplace.[ns no
longer acceptable to assume that good products will sell themselves; neither is it
advisable to imagine that success today will carry forward into tomorrow.
Let us consider the basis of success in any competitive context. At its most
elemental, commercial success derives either from a cost advantage or a value
advantage or, ideally, both. It is as simple as that-the most profitable competitor in
any industry sector tends to be the lowest cost producer or the supplier providing a
product with the greatest perceived differentiated values. To be successful in the
automobile industry, for example, you either have to be a Nissan (i.e., a cost
advantage) or a BMW (i.e., a value advantage).
Put very simply, successful companies either have a productivity advantage or they
have a "value" advantage or a combination of the two: The productivity advantage
gives a lower cost profile, and the value advantage gives the product or offering a
differential "plus" over competitive offerings.
Let us briefly examine these two vectors of strategic direction
Productivity Advantage
In many industries there will typically be one competitor who will be the low cost
producer, and, more often than not, that competitor will have the greatest sales
volume in the sector. There is substantial evidence to suggest that "big is beautiful"
when it comes to cost advantage. This is partly due to economies of scale that
enable fixed costs to be spread over a greater volume but more particularly to the
impact of the" experience curve.
The experience curve is a phenomenon that has its roots in the earlier notion of the
learning curve. Researchers discovered during the last war that it was possible to
identify and predict improvements in the rate of output of workers as they became
more skilled in the processes and tasks on which they were working. Subsequent
work by Bruce Henderson, founder of the Boston Consulting Group, extended this
concept by demonstrating that all costs, not just production costs, would decline at
a given rate as volume increased. In fact to be precise, the relationship that the
experience curve describes IS between real unit costs and cumulative volume.
Further, it is generally recognized that this cost decline applies only to "value
added," that is, costs other than those used for supplies.
Traditionally, it has been suggested that the main route to cost reduction was by
gaining greater sales volume, and there can be no doubt about the close linkage
between relative market share and relative costs. However, it must also be
recognized that logistics management can provide a multitude of ways to increase
efficiency and productivity and, hence, contribute significantly to reduced unit
cost. How this can be achieved will be one of the key themes of this note.
Value Advantage
It has long been an axiom in marketing that "customers don't buy products, they
buy benefits." Put another way, the product is purchased not for itself but for the
promise of what it will deliver. These benefits may be intangible; that is, they
relate not to specific product features but rather to such things as image or
reputation. Alternatively, the delivered offering may be seen to outperform its
rivals in some functional aspect.
Unless the product or service we offer can be distinguished in some way from its
competitors, there is a strong likelihood that the marketplace will view it as a
"commodity," and so the sale will tend to go to the cheapest supplier. Hence, the
importance of seeking to add additional values to our offering to mark it out from
the competition.
What are the means by which such value differentiation may be gained?
Essentially, the development of a strategy based on added values will normally
require a more segmented approach to the market. When a company scrutinizes
markets closely it frequently finds that there are distinct value segments. In other
words, different groups of customers within the total market attach different
importance to different benefits. The importance of such benefit segmentation lies
in the fact that often there are substantial opportunities for creating differentiated
appeals for specific segments.
For example, look at the automobile. A model such as the Ford Escort is not only
positioned in the middle range of American cars, but within that broad category
specific versions are aimed at defined segments. Thus, we find a basic, two-door
model, and also four-door and station wagon models. Each of these models
presents a whole variety of options, all of which seek to satisfy the needs of quite
different benefit segments. Adding value through differentiation is a pO"Ye1rful
means of achieving a defensible advantage in the market.
Equally powerful as a means of adding value is service. Increasingly we are

finding that markets are becoming more service sensitive, and this, of course, poses
particular challenges for logistics management. There is a trend in many markets
toward a decline in the strength of the "brand" and a consequent move toward"
commodity" market status. Quite simply, this means it is becoming progressively
more difficult to compete purely on the basis of brand or corporate image.
Additionally, there is an increasing convergence of technology within product

categories, which means that it is no longer possible to compete effectively on the
basis of product differences. Thus, the need arises to seek differentiation through
means other than technology (A number of companies have responded to this by
focusing on service as a means of gaining a competitive edge. Service in this
context relates to the process of developing relationships with customers through
the provision of an augmented offer.
This augmentation can take many forms including delivery service, after-sales
services, financial packages, technical support, and so forth.
In practice what we find is that the successful companies will often seek to achieve
a position based on both a productivity advantage and a value advantage. A useful
way of examining the available options is to present them as a simple matrix (see
Figure).
Let us consider these options in turn.
For companies who find themselves in the bottom left-hand comer of our matrix
(Figure 1-2), the world is an uncomfortable place. Their products are
indistinguishable from their competitors' offerings, and they have no cost
advantage. These are typical commodity market situations, and ultimately the only
strategy is either to move to the right on the matrix, that is, to cost leadership, or
upward into a "niche." Many times the cost leadership route is simply not
available. This is often the case in a mature market where substantial market share
gains are difficult to achieve. New technology may sometimes provide a window
of opportunity for cost reduction, but in such situations, the same technology is
often available to competitors.
Cost leadership, if it is to form the basis of a viable long-term marketing strategy,

should essentially be gained early in the market life cycle. This is why market
share is considered to be so important in many industries. The experience curve
concept, briefly described earlier, demonstrates the value of early market share
gains-the higher your share relative to your competitors, the lower your costs
should be. This cost advantage can be used strategically to assume a position of
price leader and, if appropriate, to make it impossible for higher cost competitors
to survive. Alternatively, price may be maintained, enabling above-average profit
to be earned that is potentially available to further develop the position of the
product in the market.
The other way out of the commodity quadrant of our matrix is to seek a niche or
segment where it is possible to meet the needs of the customers through offering
additional values. Sometimes it may not be through tangible product features that
this value added is generated, but, as we have noted, opportunities may often exist
for adding value through service. For example, a steel stockholder who finds
himself in the commodity quadrant may seek to move up to the niche quadrant by
offering daily deliveries from stock, by providing additional finishing services for
his basic products, or by focusing on the provision of a range of special steels for
specific segments. What does seem to be an established rule is that there is no
middle ground between cost leadership and niche marketing. Being caught in the
middle, as neither a cost leader nor a niche-based provider of added values, is
generally undesirable.
Finally, perhaps the most defensible position in the matrix is the top right-hand
corner, Companies who occupy that position have products that are distinctive in
the values they offer and are also cost competitive. Many Japanese products,
particularly in consumer markets, arguably have achieved this position. Clearly it
is a position of some strength, occupying high ground That is extremely difficult
for competitors to attack. There is a clear strategic challenge to logistics: to seek
out strategies that will take the business away from the commodity end of the
market toward a securer position of strength based on differentiation and cost
advantage.
Ques : How logistic information system can help achieve competitive advantage?
(8 marks)
Answer :
GAINING COMPETITIVE ADVANTAGE THROUGH LOGISTICS
Of the many changes that have taken place in management thinking over the last
10 years or so, perhaps the most significant has been the emphasis placed on the
search for strategies that will provide superior value in the eyes of the customer. To
a large extent the credit for this must go to Michael Porter, the Harvard Business
School professor, who, through his research and writing,34 has alerted managers
and strategists to the central importance of competitive relativities in achieving
success in the marketplace.
One concept in particular that Michael Porter has brought to a wider audience is
the "value chain”
Competitive advantage cannot be understood by looking at a firm as a whole. It

stems from the many discrete activities a firm performs in designing, producing,
marketing, delivering, and supporting its product. Each of these activities can
contribute to a firm's relative cost position and create a basis for differentiation.
The value chain disaggregates a firm into its strategically relevant activities in
order to understand the behavior of costs and the existing and potential sources of
differentiation. A firm gains competitive advantage by performing these
strategically important activities more cheaply or better than its competitors.
Value chain activities can be categorized into two types: primary -activities
(inbound logistics, operations, outbound logistics, marketing and sales, and
service) and support activities (infrastructure, human resource management,
technology development and procurement). These support activities are integrating
functions that cut across the various primary activities within the firm. Competitive
advantage grows out of the way in which firms organize and perform these discrete
activities within the value chain. To gain competitive advantage over its rivals, a
firm must promote value to its customers by performing activities more efficiently
than its competitors or by performing activities in a unique way that creates greater
buyer value.
Logistics management, it can be argued, has the potential to assist the organization
in the achievement of both a cost/productivity advantage and a value advantage/In
the first instance there are a number of important ways in which productivity can
be enhanced through logistics. While these possibilities for leverage will be
discussed in detail later in the book, suffice it to say that the opportunities for
better capacity utilization, inventory reduction, and closer integration with
suppliers at a planning level are considerable. Equally, the prospects for gaining a
value advantage in the marketplace through superior customer service should not
be underestimated. It will be argued later that the way we service the customer has
become a vital means of differentiation.
To summarize, those organizations that will be the leaders in the markets of the
future will be those that have sought and achieved the twin peaks of excellence:
They have gained both cost leadership and service leadership.
Q3(B)
ANS--3Cs-CUSTOMER, COMPETITION, CHANGE:
3 Cs are the new matters, which is driving the organization. These are the
Customer, Competition and Change. The organizations keeping these on their
cards are going to decide their future.
In 21st century, the companies having flexibility to attain these factors will come
up and sustain. We loot at these factors one by one.
Customer
Before the period from 1960 to 1970, the manufacturers were in position to sell
any thing, which they produced. After 1980 in all the fields the picture has
changed. The customer, consumer or the industries decide the demand.
What they want? When they want? At what place they want the delivery? And also
when he will pay? He has become wiser and decides the configuration of the
matter that he will purchase.
The organizations are picking need~ of the customers. If an organization looses a

customer for any reason, they have to get ready to loose yet another.
The customers have their choice. They do not behave alike. Customer, consumers,
companies demand products and services designed for their unique and particular
needs.
There is no such notion as the customer to whom the seller is dealing at a
movement and who has the capacity to instruct their personal taste. The mass
market has broken down into small and single customer. Customers expect that
they be treated individually. They expect products that are made to their needs,
delivery schedules and the place, at their payment terms, which are convenient to
them.
Such expectations have increased to a great extent after the effect of globalization
and entry of Japanese companies, who entered the markets with lower prices as
well as products with higher quality standards. Further they came with higher
levels of service standards.
Customer is aware that he can demand and get more. Technology of higher
sophistication, easily available database allows service providers to display their
basic information easily available on the net services to increase competitiveness.
When in a company consumer call for service the call is automatically routed to
the same service representative with whom consumer spoke last time. This creates
sense of personal relationship and intimacy.
Incredible consolidation of customers in the same market like automobile business

has greatly changed the terms of seller-customer relationships in the similar way of
restaurants. What holds true for industrial customers is also true for normal
consumer. When the industrial customer gets services in better way, the normal
consumer expects and gets in the similar style.
This is happening because customers now have easy access to enormously big
data. The information rich world made possible by new communications
technologies does not even required the consumer to have computer at home. Daily
newspapers around the country spread the data electronically and pass it on to the
readers with greater amount of analysis. Often the buyer has more information than
the supplier's marketing person. This makes the negotiations tougher. A customer
lost today can lead to lose yet another tomorrow this is not a picture of success for
the supplier.
Competition:
The second 'C' stands for competition. In the - sellers market before 1980 it was
easy for manufacturer to get an order on his table and provide the product at his
will and wish.
Now the scene has changed.
Few buyers have many suppliers of good quality products. This competitive base
has not only reduced the prices of the product but improve the quality, and service
levels. When the Japanese, Germans, French, Taiwanese have entered in the
globalized market, they are free to compete with each other. Only the best will
survive with a highest quality, lowest price and the best service. There after these
factors become the standard for all competitors. Adequate is not good enough.
If a company cannot stand shoulder to shoulder with the world's best it has to be
out of scene soon.
Newly started company coming up with better products with higher-level service
can beat the regular companies. The brand may not be considered by the new
generation of consumer. The competition can put the regular companies away
when a new comer's products give good results.
Technology changes the nature of competition in ways companies don't expect.

The logistics management gives upper hand to the sellers to get better edge over
the competitors by providing products as per the needs of consumer.
COMPANY
The rapidity of technological change promotes innovation products have got now
the short life.
For example Premier Automobile started the company in 1945 with a model (Fiat
Car), which lived for about 50 years and died down with the same model. It was ok
that time. In today's atmosphere in India itself we see number of automobile
companies come up with new models of car every two to three years of better
quality standards.
Today companies must move fast, or they won't be moving at all. Moreover they
have to be looking in many directions at a time. They must not only provide
products to the market but constantly collect data regarding future needs of
customers, their likings, the entry of new competitors etc. the changes that will put
a company out of business are, those that happen outside the light of its current
expectations, and that is the source of most change in today's business
environment. These three C's have created a new world for business and it is
becoming increasingly clear that organizations designed to operate in one
environment can not be fixed to work well in another.
Q4(A)
I. ANS— WAREHOUSE
1. Warehouse is a place, use to store products until customer require them.
2. Warehouse is an unavoidable acitivity.It increases the cost of the material

by simply carrying it.
3. No transformation of any type is to be done. Stores have a vital role to

play.
II. TYPES OF WAREHOUSE
There are three basic types of warehouse as follows:
• PRIVATE
• PUBLIC
• CONTRACT
III. A. PRIVATE WAREHOUSING
 Also known as proprietary warehousing

  Operated as a division within a company
  On-site* and off-site** warehousing
 Substantial corporate fixed investment in land, building, and
equipment
1. The firm producing or owning the goods own private warehouses

2. The focus of this type is to store, the firms own goods until they are
delivered to a retail outlet or sold.
3. High volumes and high utilization favor owning the warehouse
because of economies of sale.
4. The firm can maintain lower delivered prices or higher profit margin
based on such economies.
5. Private facilities also offer a great deal of control regarding hiring and
firing employees, benefits packages and operation within the
warehouse.
6. Another potential advantage of using a private warehouse is the ability
to maintain physical control over the facility, which allows managers
to address loss, damage and theft.
7. A firm can earn extra income from renting or leasing excess space in a
private warehouse.
8. To make a private warehouse cost-effective, the facility needs high
product throughput to achieve economies of scale and spread the fixed
costs of the facility over many items.
B. PUBLIC WAREHOUSING
  Warehouse is owned and operated by a third party

  Charges in particular for type of services used
  Mainly for short-term usage
1. A public warehouse rents space to individuals or firms needing

storage. The services these warehouse offers may vary.
2. Some provide a wide array of services including packaging,
labeling, testing, inventory maintenance, local delivery, data processing
and pricing
3. There are many reasons to lease space instead of owning a
warehouse.
a. First, Leasing lowers the capital investment needed to establish a
warehouse.
b. Second, leasing offers flexibility.
4. Public warehousing also allows for flexibility in the amount space leased.
5. The firm avoids responsibility for hiring and firing warehousing
employees as well as the paperwork associated with running a private
warehouse.
6. There are many types of public warehouses:
i. Merchandise warehouse
Provides standardized services for a wide variety of goods & potential

customers
ii. Refrigerated warehouse
Provides a temperature controlled environment for products like frozen

food.
iii. Bounded warehouse
Allows goods to stored without paying trade, tariff & duties until they
leave the warehouse
iv. Household good warehouse
Stores personal property such as furniture, clothes etc.
v. Speciality goods warehouse
Used to store agricultural products like grains
vi. Bulk storage warehouse
It holds liquids and dry goods like stone, sand & coal.
i. General Merchandise Warehouse

ii. Refrigerated warehouse
iii. Bonded warehouse
iv. Household goods warehouses
v. Specialty goods warehouse
vi. Bulk storage warehouse
C. CONTRACT WAREHOUSING
  A variation of public warehousing

  A long-term contract and/or services
  Warehouse is owned and operated by a third party
  Customized services/space over a long term
  A trade-off between location flexibility for assured space over the
contract period and a lower price that is usually lower than warehousing
rates
  Contact for either an entire building or for a defined, fixed portion of
square-foot or cubic-foot space
. Contract warehousing is a specialized form of public warehousing.

2. In addition to warehousing activities, a contract warehouse
provides a combination of integrated logistics services, thus allowing the
liaising firm to concentrate on its speciality
3. Contract warehousing often provides customized services.
4. Contract warehousing is a third party integrated logistics
organization that provides higher quality services than are available from
public warehouse.
5. There are many reasons for the growth of contract warehouses as
follows:-
i. Product seasonality
ii. Geographic coverage requirements
iii. Flexibility in testing new marketing
iv. Management expertise and dedicated resources
v. Off - balance sheet financing
vi. Reduction in transportation cost
Figure : Warehouse
Q4(B)
Ans-- Packaging is enclosing of a physical object, typically a product that

requires protection from tampering, protection against dust & dirt, Marketing,
Reducing theft.
1. Packaging can not only help prevent theft and damage but also help
promote goods.
2. Packaging may also interest production, since production employees often

package the goods.
3. Packaging is not as costly as transportation, 10 percent of integrated

logistics cost can be attributed to packaging.
4. The size. Shape and type of packaging material influence the type and
amount of material handling equipment as well as how goods are stored in
warehouse.
5. The interface of Packaging with integrated logistics is no more evident
than with transportation packaging varies by mode of transportation.
Oceangoing package protection requires moisture proof containers that add to

the overall cost of the product.
Functions of Packaging
1. Packaging should contain the goods to prevent shifting.
2. It should protect the good from damage during handling, storing

and transporting.
3. Packaging should apportion goods. This refers to reducing

production output to a size and shape desired by the consumer.
4. Utilization, this allows packages to be consolidated into larger

packages & finally unitized into a single unit for shipping.
5. Packaging should be convenient, allowing customers to use the

product with ease.
Packaging should also communicate. Communication allows information to be
conveyed to the consumer.
Q5(B)
Ans--Two types of cost
4) Carrying cost- physically storing goods
b) Capital or opportunity cost – compares inventory investment to other capital

investments.
Storage space cost- cost of moving goods into and out of inventory (includes
variable cost like rent, utilities and space)
c) Inventory service cost- contains insurance and taxes.
d) Inventory risk cost- cost of obsolescence, damage, relocation or theft.
2) Ordering cost- consist of
c) order cost- include preparing and processing the order request, selecting a
supplier, checking stock, preparing the payment and reviewing inventory
levels.
d) setup costs- cost involved in modifying the manufacturing process to make

different goods
APRIL 06
Q3(C)
ANS--
SAME AS APRIL 05, Q4(A)
Q5(A)
ANS-- GAINING COMPETITIVE ADVANTAGE THROUGH LOGISTICS

the "value chain”

buyer value.
Q7(B)ii
ANS-- SAME AS APRIL 05, Q3(B)
APRIL 07
Q1(A)
ANS-- SAME AS APRIL 05, Q3(B)
Q6(B)
ANS-- SAME AS APRIL 05, Q4(A)
APRIL-08
Q1(D)
ANS—
Reverse logistics refers to logistics activities and management skills used to

reduce, manage and dispose waste from packaging and products.
SOME COMMON TYPES OF

REVERSE LOGISTICS:
 Recycling.
 Customer returns of new products.
 Customer returns of used products.

 Re-usable items.
1. Recycling
 The logistics system must take the empty package from the customer and
return it to the party responsible for the actual recycling process.
 Recycling refers to carrying a used material or product backward through the

distribution network.
 Several supply chain members usually participate in a recycling system.
 Example:- recycling a used aluminum can or a soft drink bottle, etc.
 Collectors, sorters, processors and remanufacturers are a part of this.
2.CUSTOMER RETURNS OF NEW PRODUCTS:
 Allows customers to return unwanted products.
 Customers can also return defective or damaged products and can obtain an
exchange or credit.
 If the party responsible for the damage cannot be reliably determined, the
retail outlet is likely to bear the loss.
3.CUSTOMER RETURNS OF USED PRODUCTS:
 Occasionally, customers are encouraged to return used products to their

retail outlet and obtain a financial credit. {for eg; in an automotive industry}
 Automotive alternators, starters and water pumps can all be remanufactured

from used parts.
 The used product is packaged for shipment and returned to the distributor.
 The distributor credits the retailer and ships the used parts to a
remanufacturer.
 The remanufactured parts are marketed as an inexpensive alternative to new

replacement parts.
 This logistics system starts with the incentive to return the used product to
the retail outlet—“MAINLY TO OBTAIN DISCOUNTS”.
 To receive the discount, the customer must return the used part at the time of
purchase.
 Failure to provide it would result in a extra charge that will increase the cost
of a remanufactured part.
4.CUSTOMER RETURNS OF
REUSED PRODUCTS:
 Many returned products must undergo some sort of remanufacturing or

alteration process.
 Some may be reused with minimal effort. {for eg: a glass bottle }
 When these are returned to the retail store, the store credits the customer.
 The store takes possession of these products and uses the reverse logistics
system to return them to a bottling plant.
 The bottling plant cleans and sterilizes the used bottles, refills them, caps
each bottle and returns it to the market.
Q3(C)
ANS—
Primary service response logistics activities
 Waiting time
 Service capacity
 Service delivery
Q5(B)
ANS—SAME AS APRIL-05 Q3(B)
Q5(C)
ANS——SAME AS APRIL-05 Q4(A)
APRIL-09
Q1(B)
ANS— SAME AS APRIL-08 Q1(D)
Q2(C)
ANS—
COMPETITIVE ADVANTAGE
A central theme of this book is that effective logistics management can provide a
major source of competitive advantage; in other words, a position of enduring
superiority over competitors in terms of customer preference may be achieved
through logistics.
Competitive Advantage and the Three Cs

Customers
Needs seeking
benefits at
acceptable price
Valu Valu
Assets and Assets and
Utilizations Utilizations
Company Competitor
Cost
The bases for success in the marketplace are numerous, but a simple model is
based around the triangular linkage of the company, formed by its customers and
its competitors-the "Three Cs." The Three Cs in question are the customer, the
competition, and the company.
Figure illustrates the three-way relationship.
The source of competitive advantage is initially found in the ability of the

organization to differentiate itself, in the eyes of the customer, from its competition
and also by operating at a lower cost and, hence, at greater profit.
Seeking a sustainable and defensible competitive advantage has become the

concern of every manager who is alert to the realities of the marketplace.[ns no
longer acceptable to assume that good products will sell themselves; neither is it
advisable to imagine that success today will carry forward into tomorrow.
Let us consider the basis of success in any competitive context. At its most
elemental, commercial success derives either from a cost advantage or a value
advantage or, ideally, both. It is as simple as that-the most profitable competitor in
any industry sector tends to be the lowest cost producer or the supplier providing a
product with the greatest perceived differentiated values. To be successful in the
automobile industry, for example, you either have to be a Nissan (i.e., a cost
advantage) or a BMW (i.e., a value advantage).
Put very simply, successful companies either have a productivity advantage or they
have a "value" advantage or a combination of the two: The productivity advantage
gives a lower cost profile, and the value advantage gives the product or offering a
differential "plus" over competitive offerings.
Let us briefly examine these two vectors of strategic direction

Productivity Advantage
In many industries there will typically be one competitor who will be the low cost
producer, and, more often than not, that competitor will have the greatest sales
volume in the sector. There is substantial evidence to suggest that "big is beautiful"
when it comes to cost advantage. This is partly due to economies of scale that
enable fixed costs to be spread over a greater volume but more particularly to the
impact of the" experience curve.
The experience curve is a phenomenon that has its roots in the earlier notion of the
learning curve. Researchers discovered during the last war that it was possible to
identify and predict improvements in the rate of output of workers as they became
more skilled in the processes and tasks on which they were working. Subsequent
work by Bruce Henderson, founder of the Boston Consulting Group, extended this
concept by demonstrating that all costs, not just production costs, would decline at
a given rate as volume increased. In fact to be precise, the relationship that the
experience curve describes IS between real unit costs and cumulative volume.
Further, it is generally recognized that this cost decline applies only to "value
added," that is, costs other than those used for supplies.
Traditionally, it has been suggested that the main route to cost reduction was by
gaining greater sales volume, and there can be no doubt about the close linkage
between relative market share and relative costs. However, it must also be
recognized that logistics management can provide a multitude of ways to increase
efficiency and productivity and, hence, contribute significantly to reduced unit
cost. How this can be achieved will be one of the key themes of this note.
Value Advantage
It has long been an axiom in marketing that "customers don't buy products, they
buy benefits." Put another way, the product is purchased not for itself but for the
promise of what it will deliver. These benefits may be intangible; that is, they
relate not to specific product features but rather to such things as image or
reputation. Alternatively, the delivered offering may be seen to outperform its
rivals in some functional aspect.
Unless the product or service we offer can be distinguished in some way from its
competitors, there is a strong likelihood that the marketplace will view it as a
"commodity," and so the sale will tend to go to the cheapest supplier. Hence, the
importance of seeking to add additional values to our offering to mark it out from
the competition.
What are the means by which such value differentiation may be gained?
Essentially, the development of a strategy based on added values will normally
require a more segmented approach to the market. When a company scrutinizes
markets closely it frequently finds that there are distinct value segments. In other
words, different groups of customers within the total market attach different
importance to different benefits. The importance of such benefit segmentation lies
in the fact that often there are substantial opportunities for creating differentiated
appeals for specific segments.
For example, look at the automobile. A model such as the Ford Escort is not only
positioned in the middle range of American cars, but within that broad category
specific versions are aimed at defined segments. Thus, we find a basic, two-door
model, and also four-door and station wagon models. Each of these models
presents a whole variety of options, all of which seek to satisfy the needs of quite
different benefit segments. Adding value through differentiation is a pO"Ye1rful
means of achieving a defensible advantage in the market.
Equally powerful as a means of adding value is service. Increasingly we are

finding that markets are becoming more service sensitive, and this, of course, poses
particular challenges for logistics management. There is a trend in many markets
toward a decline in the strength of the "brand" and a consequent move toward"
commodity" market status. Quite simply, this means it is becoming progressively
more difficult to compete purely on the basis of brand or corporate image.
Additionally, there is an increasing convergence of technology within product

categories, which means that it is no longer possible to compete effectively on the
basis of product differences. Thus, the need arises to seek differentiation through
means other than technology (A number of companies have responded to this by
focusing on service as a means of gaining a competitive edge. Service in this
context relates to the process of developing relationships with customers through
the provision of an augmented offer.
This augmentation can take many forms including delivery service, after-sales
services, financial packages, technical support, and so forth.
In practice what we find is that the successful companies will often seek to achieve
a position based on both a productivity advantage and a value advantage. A useful
way of examining the available options is to present them as a simple matrix (see
Figure).
Let us consider these options in turn.
For companies who find themselves in the bottom left-hand comer of our matrix
(Figure 1-2), the world is an uncomfortable place. Their products are
indistinguishable from their competitors' offerings, and they have no cost
advantage. These are typical commodity market situations, and ultimately the only
strategy is either to move to the right on the matrix, that is, to cost leadership, or
upward into a "niche." Many times the cost leadership route is simply not
available. This is often the case in a mature market where substantial market share
gains are difficult to achieve. New technology may sometimes provide a window
of opportunity for cost reduction, but in such situations, the same technology is
often available to competitors.
Cost leadership, if it is to form the basis of a viable long-term marketing strategy,

should essentially be gained early in the market life cycle. This is why market
share is considered to be so important in many industries. The experience curve
concept, briefly described earlier, demonstrates the value of early market share
gains-the higher your share relative to your competitors, the lower your costs
should be. This cost advantage can be used strategically to assume a position of
price leader and, if appropriate, to make it impossible for higher cost competitors
to survive. Alternatively, price may be maintained, enabling above-average profit
to be earned that is potentially available to further develop the position of the
product in the market.
The other way out of the commodity quadrant of our matrix is to seek a niche or
segment where it is possible to meet the needs of the customers through offering
additional values. Sometimes it may not be through tangible product features that
this value added is generated, but, as we have noted, opportunities may often exist
for adding value through service. For example, a steel stockholder who finds
himself in the commodity quadrant may seek to move up to the niche quadrant by
offering daily deliveries from stock, by providing additional finishing services for
his basic products, or by focusing on the provision of a range of special steels for
specific segments. What does seem to be an established rule is that there is no
middle ground between cost leadership and niche marketing. Being caught in the
middle, as neither a cost leader nor a niche-based provider of added values, is
generally undesirable.
Finally, perhaps the most defensible position in the matrix is the top right-hand
corner, Companies who occupy that position have products that are distinctive in
the values they offer and are also cost competitive. Many Japanese products,
particularly in consumer markets, arguably have achieved this position. Clearly it
is a position of some strength, occupying high ground That is extremely difficult
for competitors to attack. There is a clear strategic challenge to logistics: to seek
out strategies that will take the business away from the commodity end of the
market toward a securer position of strength based on differentiation and cost
advantage.
Q4(B)
Five variables considered in Warehouses design are----
 Land and building
 Management and staff
 Storage and handling equipment

 Computers and software
 Operating methods and procedures
Q5(A)
ANS ROLE OF WAREHOUSE
1. Warehousing acts as a reservoir for production overflow
2. This function known as stockpiling, can take a variety of forms,

including,
i. Seasonal production level demand
ii. Level production-seasonal demand
Seasonal production level demand: -
1. It is created with some food products like corn.
2. Corn has seasonal production and is typically once a ear, while demand
for corn is fairly uniform throughout the year.
3. Warehouses stockpile the corn until customers need it
Level production-seasonal demand
1. Some products like sunscreen are in high demand for one season but now
demand the rest of the year.
However, the product can be manufactured uniformly throughout the ywar and
warehoused to anticipate the peal season.
1. Warehouse acts as product mixing sites.
The facility can stock a variety of product lines
When customers order a variety of products, the warehouse picks all

the products ordered and transport them as one shipment
2. Warehouse also acts as Facilitate production
A warehouse can assist production on receiving a product almost

complete, and then performing final subassembly based on local customer
demand.
3. Warehouse acts as safety valves in plant strikes, supplier stock outs, or

transport delays.
If carrier strike is likely, the warehouse ca store extra inventory to reduce

the chances of a stock out at the customer level.
4. The primary role of warehouse is to produce service
5. Warehousing can help fill a customers’ order faster.
6. Orders are often filled at the closest warehouse instead of the manufacturing
plant
7. The customer gets the order faster, which usually reduces complaints
8. An effective warehousing system means: -
o Quicker delivery
o Fewer stock outs
o Better customer service
APRIL 10
Q3(A)
ANS—
SAME AS -APRIL -05 ,Q1(B)
Q3(C)
ANS-- SAME AS -APRIL -05 ,Q4(B)

Q4(B)
ANS-- Integrated logistics controls the flow and strategic storage of materials,
parts and finished inventory to benefit the company. It administer the total
movement of material into, within, and out of the facility structure.
If a company uses a mass production strategy, forecast are based on target
market and product design. The forecast become the operational plan for the
company and drive manufacturing, distribution, and sales. These companies set up
their plans in advance of customer contact. The company determines what the
customer needs and wants. By contrast, a responsive strategy involves askinfk the
customer what the customers needs and wants and then determining if the product,
service or benefits can be delivered. The company is more flexible to customer
needs and more responsive to change requirements. In essence, the customer pulls
the benefit through the channel
Q5(A)
ANS-- SAME AS –APRIL -05 ,Q3(B)
Q6(A)
ANS-- SAME AS -APRIL -08 ,Q1(D)
Q6(B)
ANS-- SAME AS -APRIL -05 ,Q4(A)
--------------------------------------------------------------------------------
Topic 5 -Supply Chain Management
April ‘04
5. (a) Explain the various factors that govern plant location
Answer :
Factors affecting plant location
 Plant location refers to the choice of region and the selection of a

particular site for setting up a business or factory.
 An ideal location is one where the cost of the product is kept to

minimum, with a large market share, the least risk and the maximum
social gain. It is the place of maximum net advantage or which gives
lowest unit cost of production and distribution.
 The important considerations for selecting a suitable location are

given as follows:
1) Land (Availability of land, cost, future expansion plans)
2) Manufacturing facility (good suppliers availability for machinery, tools,

accessories)
 3)Taxation and regional concessions --Both positive and negative

incentives to motivate an entrepreneur to choose a particular location
are made available. Positive includes cheap overhead facilities like
electricity, banking transport, tax relief, subsidies and liberalization.
Negative incentives are in form of restrictions for setting up industries
in urban areas for reasons of pollution control and decentralization of
industries.
 4) Access to transport (for heavy goods transportation should be

near. Transport costs in obtaining raw material and also distribution
or marketing finished products to the ultimate users).
 5) Power /fuel/energy availability of electricity or coal or energy

generating sources
 6) Water / climate availability of water, Natural or good climatic

conditions
 7) availability of work force Availability of skilled and non-skilled

labour and technically qualified and trained managers at lowest cost.
 8) union activities
 9) political pressure political leaders influence the decisions of the

industrialists.
 10)banks and finance facilities Banking and financial institutions are

located nearby.
 11) raw material Availability and nearness to the sources of raw

material. (weight of raw material.)
 12) safety and social security Strategic considerations of safety and

security should be given due importance.
 13) supporting industries developing in industrial areas or business

centers result in savings and cost reductions in transport overheads,
miscellaneous expenses.
 14) proximity to market small businesses in retail or wholesale or

services should be located within the vicinity of densely populated
areas.
 15) people culture and environment.
April ‘05
6. (b) describe the factors one need to consider while selecting plant
location
Answer : SAME AS APRIL-04 5(A)
7. (a) Value chain

Answer : A value chain is a chain of activities. Products pass through all
activities of the chain in order and at each activity the product gains some
value. The chain of activities gives the products more added value than the
sum of added values of all activities. It is important not to mix the concept
of the value chain with the costs occurring throughout the activities. A
diamond cutter can be used as an example of the difference. The cutting
activity may have a low cost, but the activity adds much of the value to the
end product, since a rough diamond is significantly less valuable than a cut
diamond.
The value chain categorizes the generic value-adding activities of an

organization. The "primary activities" include: inbound logistics, operations
(production), outbound logistics, marketing and sales (demand), and
services (maintenance). The "support activities" include: administrative
infrastructure management, human resource management, information
technology, and procurement. The costs and value drivers are identified for
each value activity. The value chain framework quickly made its way to the
forefront of management thought as a powerful analysis tool for strategic
planning. The simpler concept of value streams, a cross-functional process
which was developed over the next decade,[1] had some success in the
early 1990s[2].
The value-chain concept has been extended beyond individual

organizations. It can apply to whole supply chains and distribution networks.
The delivery of a mix of products and services to the end customer will
mobilize different economic factors, each managing its own value chain.
The industry wide synchronized interactions of those local value chains
create an extended value chain, sometimes global in extent. Porter terms
this larger interconnected system of value chains the "value system." A
value system includes the value chains of a firm's supplier (and their
suppliers all the way back), the firm itself, the firm distribution channels,
and the firm's buyers (and presumably extended to the buyers of their
products, and so on).
Capturing the value generated along the chain is the new approach taken
by many management strategists. For example, a manufacturer might
require its parts suppliers to be located nearby its assembly plant to
minimize the cost of transportation. By exploiting the upstream and
downstream information flowing along the value chain, the firms may try to
bypass the intermediaries creating new business models, or in other ways
create improvements in its value system.
(b) Channels of distribution
Answer : The channel of distribution for integrated logistics is called

logistics channel, where the channel of distribution for marketing is called
the transaction channel.
The marketing channel deals with the management of the people who work
in that channel.
 It is primarily concerned with the transfer of ownership of the product
or service through the channel.
 A formal definition of marketing distribution channel is :
A set of interdependent organizations
--middleman --involved in the process of making a product or

service available for consumption by the consumer.
 The integrated logistics channel focuses on the physical flow of

product through the channel ; that is ,transportation ,inventory, facility
stricture, material handling , communication & information.
Each plays a role to ensure the seven R’s : right product in right quantity
in right condition at the right place at right time at right cost is available to
right consumer.
Reasons to have Channels of Distribution
 In the above figure without a distributor the three manufactures with

three customers have nine transaction contacts
 With the distributor the total contacts would be six .
 Intermediaries offer contacts, expertise , specialization that may

otherwise be unavailable to the firm using them.
 Efficient intermediaries can also reduce transportation , inventory

order processing & customer service costs.
Functions performed by Channels of Distribution
Information :
Gather & disseminate research& other information about the

individuals & environment forces in the marketing & integrated logistics
environment needed to plan & aid change activites.
 Promotion : Develop & spread communications about the offer.
 Contact : Find & communicate with possible customers.
 Matching : Shape & fit the offer to the customers needs . This needs
can be producing allocating , assembling & packing.
 Negotiation : Reach agreement on price & other terms so that

ownership can be transferred .
 Physical Distribution : Transport & warehouse goods.
 Financing : acquire and use money to pay for cost of channel work.
 Risk Taking : Assumes risks of performing the channel work
TYPES OF DISTRIBUTION CHANNELS
 1 INDUSTRIAL DISTRIBUTION CHANNELS
 2 MARKETING OR CONSUMER DISTRIBUTION CHANNELS
FACTORS AFFECTING CHANNEL DESIGN
 1 MARKET COVERAGE OBJECTIVES
Buying behaviours
Intensive distribution products
Selective distribution products
Exclusive distribution products
2 PRODUCT CHARACTERSTICS
 VALUE
 MARKET ACCEPTANCE
 TECHNICALITY
SUBSTITUTABILITY
BULK
PERISHABILITY
 MARKET CONCENTRATION
 SEASONALITY
 WIDTH AND DEPTH
3 CUSTOMER SERVICE OBJECTIVES
Product availability
Speed and consistency of the order cycle
Communication between buyer and seller
4 PROFITABILITY
April ‘06
Q4c
Ans
Different types of SCM depends on the types of distribution channel they

have
1 INDUSTRIAL DISTRIBUTION CHANNELS
2 MARKETING OR CONSUMER DISTRIBUTION CHANNELS

6. © write a short note on channels of distribution
Answer same as April ’05 ,7 (b) Above
April ’07
1. (b) write a short note Channels of distribution
Answer same as Topic 5 April ’05 7. (b) Above
6. © write a short note on channels of distribution
Answer same as Topic 5 April ’05 7. (b) Above

5© Write note on Integrated Supply Chain
Answer: The supply chain is a network of suppliers, factories, warehouses,

distribution centres and retail-ers through which raw materials are acquired,
transformed and delivered to the customer. Supply chain management is the
strategic, tactical and operational level decision making that optimises supply chain
performance. The strategic level defines the supply chain network, i.e., selection of
suppliers, transportation routes, manufacturing facilities, production levels,
warehouses, etc. The tactical level plans and schedules the supply chain to meet
actual demand. The operational level executes plans. Tactical and operational level
decision making functions are distributed across the supply chain.
In order to optimise performance, supply chain functions must operate in an

integrated manner. But the dynamics of the enterprise and the market make this
difficult; materials do not arrive ontime, production facilities fail, workers are ill,
customers change or cancel orders, etc. causing deviations from plan. In some
cases, these events may be dealt with locally, i.e., they lie within the scope of a
function. In other cases, the problem cannot be "locally contained"; modifications
across many functions are required. Consequently, the supply chain management
system must coordinate the revision of plans/schedules across supply chain
functions.
The Integrated Supply Chain Management (ISCM) project addresses coordination

problems at the tactical and operational levels. It is composed of a set of
cooperating, intelligent agents, each per-forming one or more supply chain
functions, and coodinating their decisions with other agents -this is called a
Logistical Execution System (LES).
April ‘08
4. (a) explain the functions performed in distribution channel
Answer :
Functions performed by Channels of Distribution
Information :
Gather & disseminate research& other information about

the individuals & environment forces in the marketing &
integrated logistics environment needed to plan & aid change
activites.
 Promotion : Develop & spread communications about the

offer.
 Contact : Find & communicate with possible customers.

 Matching : Shape & fit the offer to the customers needs .
This needs can be producing allocating , assembling &
packing.
 Negotiation : Reach agreement on price & other terms so

that ownership can be transferred .
 Physical Distribution : Transport & warehouse goods.
 Financing : acquire and use money to pay for cost of channel

work.
 Risk Taking : Assumes risks of performing the channel work
6. (a) what are the objectives of plant layout?
Answer :
FACTORS AFFECTING PLANT LAYOUT
1) Overall integration of factors
It should integrate men materials machines and supporting activities and

others in a way that the best compromise is obtained
2) Minimum movement
3) Uni-directional flow
4) Effective use of available space
 5) maximum visibility
 6) maximum accessibility
 7) Minimum handling
 8) Inherent safety
 9) Safe and improved environment

 10) Maximum flexibility
 11) Maximum security
7. (a) what are components of customer service? What is a role of

customer service in logistics?
Answer :
Components of Customer service:
Pretransaction elements 1. Written statement of policy
2. Customer receives policy statement
3. Organizational structure
4. System flexibility
5. Management services
Transaction elements
1. stockout level
2. order information
3. elements of order cycle
4. expedite shipments
5. transship
6. system accuracy
7. order convenience
8. product substitution
Posttransaction elements
1. installation, warranty, repairs, alterartions, parts
2. product tracing
3. Customer claims, complaints, returns
4. Temporary replacement of products
Customer service defines the effectivess of integrated logistics in the

channel of distribution. A 98 percent in-stock level means that the desired
product is available to the customer when required 98 percent of the time.
This also means that the firm accepts a 2 percent atockout level.
Integrated logistics determine stock availability, which may, in turn
determine whether the firm loses a customer or lose a sale, two major
factors in customer service cost. Customer service costs may be difficult to
measure, so the trade-off may also be difficult to analyze
Integrated logistics activites determine
7. © explain any three intermediaries involved in distribution
Answer :
 1 INDUSTRIAL DISTRIBUTION CHANNELS
 2 MARKETING OR CONSUMER DISTRIBUTION CHANNELS

April ‘09
4. (a) Explain the functions performed in distribution channels
Answer same as April ’08 4. (a) Above
5. (b) discuss the factors considered for deciding plant location and layout.
Answer:SAME AS APRIL 04,Q5(A)
6. (a) ‘Selection of proper distribution channel decides the acceptance of

product in the market’. Discuss.
Answer: market coverage objectives:

The customer’s buying affects maket coverage objectives. Customer
buying behaviour depends on the type of products being purchased.
Market coverage is also strongly affected by the types of distribution
Q6 c
Ans same as april 08, Q7(a)
April’10
5. © Write short note on: Channels of distribution
Answer same as Topic 5April ’05 7. (b) Above
Q7 a
Ans same as April -04, Q5-a
Topic 6- Transportation System
April ‘04
3. (b) Explain any two intermodal transportation types
Answer: Intermodal transportation is using more than one mode of

transportation to move goods from origin to destination. Intermodal
transportation allows shippers to compromise on the benefits of each mode
used to transport the product. For instance, trailer an flatcar(TOFC) or
piggyback service may start with motor carrier. The freight is loaded into a
semitrailer nd driven to a railhead where the trailer is placed on a flat
railcar. Piggyback services may use ocean container are taken from a ship
with specialized cranes or forklifts and placed on a railcar or flatcar(COFC)
service allows a shipper to transport goods over water and surface without
having to waste time and efficient transportation of a wide variety of goods.
In roll-on-roll-off (RO-RO) operations, a ship acts as a ferry for loaded

trucks. The truck drives onto the ship, the ship sails to the destination port,
and the truck drives off the ship to deliver the goods.
April ‘05
3. © Write a note on bill of lading
Answer: bills of lading can be endorsed much like a check. A straight bill of
lading is non-negotiable, which means endorsement does not transfer title
of goods. An order bill of lading is negotiable and server as a title to the
goods listed on the documents.
The bill of lading includes the terms and conditions of transportation. The
terms address issues like carrier liability for loss and damage and
reasonable dispatch requirements. Common carrier are typically held liable
for the full value of lost or damaged products unless they can prove one of
five exceptions. The exceptions are 1) act of god (2) act of public enemy
(3) act of shipper (4) act of public authority (5) act of resulting from the
inherent nature of the goods
A shipper must file a claim for lost or damaged goods. This document
represents a claim against the carrier to recover financial from loss,
damage, or unreasonable delay. The shipper must file a written claims with
the carrier within a specified time limit, usually nine months after delivery of
the product.
5 (a) How will price, access to carriers, transit time and nature og
goods help in selection of mode of transport?
Answer:
1) Nature of goods- low value goods like sand
High value like diamonds, silicon chips
2) Access to carriers- which ever mode of transportation available

that can only be used
3) Price- air is costly than motor transportation-railways- waterways-

pipelines
Higher cost---higher speed
4) Transit time—travel time
Time from shipment of the order at the origin to the receipt of the
order at the destination.
Measured from shippers door to customer door
Shorter time improve customer service and reduce in transit inventory
Some may prefer longer transit time
Longer times allow a firm to use the transportation vehicle as a

moving warehouse.
6. (a) what are the responsibilities of transportation manager
Answer : Transportation Manager find jobs in many settings.

Responsibilities of managers are
1) Contrast Negotiations
Deregulation brought contrast negotiation to the forefront of the

transportation industry. A transportation manager negotiate to buy
transportation services, to sell transportation services, or both. The
role of buyer requires different presentation from the role of seller.
2) Efficiency improvement
Most transportation managers seek to improve operational efficiency.

Increased competition creates pressure to eliminate unnecessary
expenses. The cost of transportation may catch the attention of upper
management.
3) Evaluation of customer service quality levels
Transportation managers must measure customer service, as surely

as the system must deliver service. This demands a process to
monitor and improve those services.
7. (d) Write short note on Airline a mode of transport
Answer: Airlines are the fastest terminal-to-terminal mode of transportation.

They specialized in time sensitive movement of documents, perishable
items, technical instruments, medical supplies, and high-valued products.
Airline transportation has highest percentage of revenues coming from
passengers travel. Whilt airline are important for some freight movements,
their primary business has traditionally been passengers travel. Airlines are
reasonable reliable. While weather-related flight delays might disrupt
service, the disrupted service is often still faster than the next fastest mode,
the motor carrier. Airlines transport small volume shipments rather than
large volumes, and packaged products rather than heavy, bulk
commodities. The physical configuration and cost of air service also limit
the variety of products shipped by air. Measured by weight, airlines
transport very little freight.as customer service expectations increase, so
does the demand for shorter transit times. As a result, many shippers have
turned to air transportation. Most airline costs change over a short period of
time and depend on output, making airlines predominatly variable cost
carrier. While the initial cost of the sir fleet is significant, these fixed costs
are spread over the long useful lifeof the aircraft. Terminals represent a
major fixed cost in other modes, but airline terminals are publicly owned
facilities for which the airline pay user fees
April ‘06
6. (a) Compare and contrast between multimodal and intermodal

transportation
Answer: MULTIMODAL TRANSPORTATION- one mode of transport

having different types of vehicles
INTERMODAL TRANSPORT-when different mode of transport used in

moving a material from one place to other.
Q6 (B)
Ans same as April 05 ,Q5-a
7 .(b) (iii) Advantages and disadvantages of Air Transportation
Answer same as Topic 6 April ’05 7. (d)
April ‘07
7. (a) what are responsibilities of transport manager? Explain.
Answer same as Topic 6 April ’05 6. (a)

April’08
Q 2 © Explain any two documents involved in transportation process
Answer: Topic 6 April’05 3 ©
Q3(a)
Ans same as April 05 ,Q5-a
4. © Write a note on Inter modal transportation
Answer:
 Intermodal Transportation uses more than one mode of

Transportation to move goods from origin to destination.
 Intermodal Transportation allows shippers to compromise on the

benefits of each mode used to transport the product
TOFC trailer on flatcar or piggyback
COFC container on flatcar
 RO-RO roll on roll off
 Here a ship acts as a ferry for loaded trucks.
 LASH lighter aboard ships are liners that carry barges previously
loaded along an inland waterway. It travels through the inland
waterways to oceans port and is loaded onto an oceangoing vessel
and then shipped across the ocean.
 Intermodal Transportation also uses land bridges (water-land-water)
April ‘09
1. (a) Writea note on Global Transportation management

Answer:
Transportation management once dominated logistics. Because
transportation services were often purchased, the costs were both
significant and highly visible. As manager became aware of less
obvious logistics costs, like inventory carrying costs,
transportation no longer represented all of logistics. Nonetheless,
transportation remains critical to effective integrated logistics.
Transportation costs trade off against other integrated logistics
and still account for a large portion of total logistics costs in many
systems.
Transportation management may be defined as the planning,
implementation, and control of transportation services to achieve
organizational goals and objectives. Where once a traffic manager
controlled the modes of transportation, the integrated logistics
manager now assumes that control.
Transportation management involves assigning people and
equipment to general tasks and dispatching them to specific
tasks.
Transportation management may also involve negotiating with
outside carriers for services the firm prefers not to perform
Q3(A)
ANS
 It links the various integrated logistics activities.
 It forms the backbone of a sound economy.

 It gives the trading advantage.
 It provides domestic and international growth
6. (b) Discuss the criteria’s concerned for selection of transportation world
Answer:
Modal characteristic and selection
1) Nature of goods- low value goods like sand
High value like diamonds, silicon chips
2) Access to carriers- whichever mode of transportation available that can

only be used
3) Price- air is costly than motor transportation-railways- waterways-

pipelines
Higher cost---higher speed
4) Transit time—travel time
Time from shipment of the order at the origin to the receipt of the order at
the destination.
Measured from shippers door to customer door
Shorter time improve customer service and reduce in transit inventory
Some may prefer longer transit time
Longer times allow a firm to use the transportation vehicle as a moving

warehouse.
5) Security of the goods – more damage is done at the time of loading

unloading.
Poor handling and poor packaging also results in damage.

The safety of transportation personnel and system shows how goods are
secured and what mode they take.
Greater security for hazardous materials. Like uranium, weapons
6) Government regulations- goods may be handled differently on different

modes. The hazards differ in different modes and also their results
Because of govt. rules the choice of modes changes
7) Safety- protecting the general public from explosions and to protect

carrier employees in loading unloading
Chemical require more packing in drums with proper security measures
8) Other aspects of integrated logistics- the mode of transportation

chosen must fit with the storage and handling equipment other factors
like customer service goals
7. © Explain any two documents involved in transportation
Answer: APRIL 08,Q7(C)
April ‘10
2 © Explain any two intermodal transportation types

ANS SAME AS APRIL 04 Q3(B)
Topic 7-LOGISTICS COST STRUCTURE
April’04
6. (b) Discuss the Total Cost Analysis with help of a suitable

example
Answer: The contribution margin approach or marginal cost
method focuses on the impact of costs on the contribution
margin. This approach looks at the top portion of the equation.
The excess contributes to fixed cost and profits. For example,
an aircraft may be only 80 percent full. If it is scheduled to
leave in ten minutes, it will leave whether the remaining seats
are sold or not. If the airline can sell tickets for more than the
variable cost of adding one additional person on the plane, the
total contribution to fixed costs will increase.
The full cost method employs the entire equation.
April’05
Nil
April’06
Nil
April ‘07
5 (b) Discuss the total cost analysis with the help of a suitable
example
Answer:Topic 7 April 04 6 (b)
April ‘08
Nil
April ‘09
Nil
April’10
1. © Discuss the Total Cost Analysis with help of a suitable example
Answer: Topic 7 April 04 6 (b)
Topic 8- Logistics information System

April’04
7. (b) Write a short on Logistics information System
Answer:
An ILIS can be defined as:
the involvement of people, equipment, and procedures required to

gather, sort, analyze, evaluate, and then distribute needed information to
the appropriate decision-makers in a timely and accurate manner so they
can make quality logistics decisions.
● An ILIS gathers information from all possible sources to assist the

integrated logistics managers in making decision.
● It also interfaces with marketing, financial, and manufacturing

information system.
● All of this information is then tunneled to top level management to

help formulate strategic decisions.
Components of ILIS
The ILIS has four primary components:
 The order processing system
 Research and intelligence system
 decision support system
 Reports and outputs system.
The Order Processing System
This is without a doubt the most important subsystem in ILIS

because of its direct impact on the customer.
● Research and Intelligence System (RIS)
This subsystem continually scans and monitors intrafirm,

external and internal environment, observing and drawing conclusions
about the events that affect integrated logistics operations.
 External environment
events which are taken outside the firm and out of the firm’s control
● Interfirm environment
elements in the external environment that directly affect the firm &
over which the firm does exercise some control, such as channel of
distribution.
● Intrafirm environment
Internal work of firm & elements that are controlled by the firm.
Environmental scanning should cover, at a minimum, the following:
1) The integration of integrated logistics planning with overall corporate

planning
2) The management of interfaces with other corporate functions
3) Strategic options for organization & staffing
4) The integration of information technologies,
5) The make v/s buy decisions,
6) The utilization of third party,
7) The appropriate of integrated logistics n/w form &functions, and
8) Emphasis on productivity and quality in integrated logistics.
Decision Support System

Decision support system (DSS) are computer-based and
provide solutions complex integrated logistics problem using analytical
modeling.
The heart of any DSS is a comprehensive database containing the

information that integrated logistics managers can use to make decisions.
Normally the database contains:
1) A basic file of internal & external data for analytical modeling,
2) A critical factor data file that defines the scope of decision making,
3) Policy & parameter data files that define integrated logistics operating
for each functional area , and
4) A solution file of past analysis results that are continually compared

against future analyses.
 Reports and Outputs System
Normal reports are used for planning, Operating, and controlling integrated
logistics.
 Planning output – sales trends, economic forecasts, and other

marketplace information.
 Operating reports – used in inventory control, transportation

scheduling & routing, purchasing & production scheduling,
 Control reports – used to analyze expenses, budgets and

performance
April’05
4 © Discuss logistics information system
Answer: Topic 8 April’04 7. (b)
April’06
Nil
April’07
3 (b) Discuss how logistics information system can help to achieve

competitive advantage.
Answer: GAINING COMPETITIVE ADVANTAGE THROUGH

LOGISTICS
the "value chain”

buyer value.
Q5(a)
Ans same as april -5 Q4(c)
April’08
6. © What is LIS? What are the principles if Logistics information
April’09
3 © What is LIS? Discuss the various functions
April’10
2. (b) Write note on Logistics Information System


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TSCM EQ SOLUTION

TOPIC 1 – INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

ANS -- Logistics is the management of the flow of the goods,

ANS A supply chain is a network of facilities and distribution options that

1. Plan—This is the strategic portion of SCM. Companies need a strategy for

2. Source—Next, companies must choose suppliers to deliver the goods and

3. Make—This is the manufacturing step. Supply chain managers schedule the

5. Return—This can be a problematic part of the supply chain for many

Benefits Of Supply Chain Management

1. Make informed decisions

ANS SAME AS --APR 07 Q1(D)

1)Primary logistics activities-- goods physically move through the

Transportation – Transportation plays the key role in the economic

Facility structure- facility structure refers to the management of

Inventory- Inventory management is the reduction of inventory while

Material handling- it is the movement of raw material, work in process

Communications and information- As goods move so must information.

ANS SAME AS APR 07--Q2(B)

TOPIC 2-CREATING OUTCOME- DRIVEN TASKS AND PROCESSES

TOPIC 3-MATERIALS MANAGEMENT

ANS RIGHT PRICE

• Product is the sum of the attributes that the customer buys.

• Place or outbound logistics is final marketing interface.

1. In such organizations, the items are classified

II. ORGANIZATION BASED ON LOCATION

1. When an organization has several plants, location in different parts of

i. When we combine the requirements of nearby plants and buy in

• ANS- There are total five steps to be followed

3. Qualifying and placing an order.

4. Monitoring and managing delivery process.

5. Evaluating the purchase and supplier.

Recognizing the need

1. All departments need to buy something or the other.

2. A form called as “purchase requisition” is filled by the requisition

3. The purchasing requisition contains the following:

- The planned use of the item.

- The specification of the item.

- Tentative price per unit.

4. The purchasing department places the order to authorized supplier.

5. Purchasing managers issues a “Purchase order” to the supplier

Identify the supplier:-

1. Important to purchase row material.

2. Can be purchase through news papers, advertizing, word-of-mouth.

3. Suppliers are asked to send proposal and bidders are invited.

4. Suppliers are requested to provide samples, demonstration and

6. Further orders are supplier to selected supplier only.

Qualifying and placing an order

1. Once supplier is identified orders must be identified orders must be

2. Detailed order is being prepared with expected date of purchase.

3. Contracts are signed.

5. Goods meet the standards.

6. Supply performs satisfactorily.

Monitoring and managing the delivery process

1. Purchasing department ensures the correct goods delivery.

2. It is of correct quantity and at right place.

Evaluating the purchase and the supplier:-

1. Supplier performance is evaluated in 2 stages.

2. The purchasing department may contact supplier to avoid future

3. In the second stage the origin summarize the accumulated experience

5. Applying the barcode technology in receiving the inbound shipments and

ANS- USE OF COMPUTERS IN PURCHASING

1. Today, the purchasing managers rely heavily on computers.