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Title Name Supply Chain Management
University AMITY
Service Type Assignment
Course MBA
Semister Semester-III-RETAIL Cource: MBA
Short Name or Subject Code Supply Chain Management
Commerce line item Type Semester-III-RETAIL Cource: MBA
Product Assignment of MBA Semester-III-RETAIL (AMITY)

Solved Assignment


  Questions :-

Assignment A

1.Discuss the need of logistics. 

2.Differentiate between ABC and VED analysis.       

3. Explain inventory management.        

4. Discuss the Economic Order Quantity.         

5. Explain mass production system.       

6. Discuss different types of supply chains.      

7.Discuss JIT.    

8. Explain production planning and control.

Assignment B

Case Detail: 

EOQ applies only when demand for a product is constant over the year and each new order is delivered in full when inventory reaches zero. There is a fixed cost for each order placed, regardless of the number of units ordered. There is also a cost for each unit held in storage, commonly known as holding cost, sometimes expressed as a percentage of the purchase cost of the item.

We want to determine the optimal number of units to order so that we minimize the total cost associated with the purchase, delivery and storage of the product.

The required parameters to the solution are the total demand for the year, the purchase cost for each item, the fixed cost to place the order and the storage cost for each item per year. Note that the number of times an order is placed will also affect the total cost, though this number can be determined from the other parameters. 

1.         Discuss the parameters required to calculate EOQ.

2.         When can EOQ be implemented?

3.         Explain various costs associated with inventory.

 Assignment C

Question No.  1           Marks - 10

Also referred to as "best practice benchmarking" or "process benchmarking", this process is used in management and particularly strategic management, in which organizations evaluate various aspects of their processes in relation to best practice companies´ processes 

Options          

  1. MATERIALS
  2. finance
  3. human resource          
  4. Benchmarking

 Question No.  2           Marks - 10

In some companies materials management is also charged with the procurement of materials by establishing and managing a supply base          

Options          

  1. sale     
  2. procurement   
  3. lease   
  4. hire 

Question No.  3           Marks - 10

This ... department ensures that the launch materials are procured for production and then transfers the responsibility to the plant materials management      

Options          

  1. logistics          
  2. finance
  3. human resource          
  4. legal     

Question No.  4           Marks - 10

Most companies use ... systems such as SAP, Oracle, BPCS, MAPICS, and other systems to manage materials control.            

Options          

  1. ERP    
  2. MRP   
  3. SR      
  4. TRP

Question No.  5           Marks - 10

One challenge for materials managers is to provide. releases to the supply base.     

Options          

  1. costly  
  2. easy    
  3. timely 
  4. all 

Question No.  6           Marks - 10

Materials management plans and designs for the       

Options          

  1. delivery          
  2. storage
  3. distribution     
  4. all

Question No.  7           Marks - 10

………….is the management of the flow of goods between the point of origin and the point of consumption in order to meet some requirements, of customers or corporations.      

Options          

  1. MATERIALS
  2. finance
  3. human resource          
  4. logistics 

Question No.  8           Marks - 10

 The resources managed in logistics can include        

Options          

  1. physcal items  
  2. equipment      
  3. timely 
  4. all 

Question No.  9           Marks - 10

This covers the acquisition of spare parts and replacements, quality control of purchasing and ordering such parts, and the standards involved in ordering, shipping, and warehousing the said parts.    

Options          

  1. MATERIALS
  2. finance
  3. human resource          
  4. all 

Question No.  10         Marks - 10

The logistics of physical items usually involves the integration of    

Options          

  1. information flow        
  2. distribution     
  3. transportation 
  4. all 

Question No.  11         Marks - 10

The …………..of the use of resources is a common motivation in logistics for import and export.

Options          

  1. maximisation  
  2. minimization  
  3. reduction        
  4. increase 

Question No.  12         Marks - 10

Logistics is commonly seen as a branch of engineering that creates "…….. systems" rather than "machine systems."        

Options          

  1. people 
  2. MATERIALS
  3. finance
  4. logistics

Question No.  13         Marks - 10

………...logistics is one of the primary processes of logistics, concentrating on purchasing and arranging the inbound movement of materials, parts, and/or finished inventory from suppliers to manufacturing or assembly plants, warehouses, or retail stores.     

Options          

  1. INBOUND    
  2. outbound        
  3. procurement   
  4. warehouse

Question No.  14         Marks - 10

…….logistics is the process related to the storage and movement of the final product and the related information flows from the end of the production line to the end user.    

Options          

  1. INBOUND    
  2. outbound        
  3. procurement   
  4. warehouse

 Question No.  15         Marks - 10

……… is the branch of military science relating to procuring, maintaining and transporting material, personnel and facilities    

Options          

  1. MATERIALS
  2. finance
  3. human resource          
  4. logistics 

Question No.  16         Marks - 10

The targets in procurement logistics might be

Options          

  1. maximizing efficiency by concentrating on core competences,         
  2. outsourcing while maintaining the autonomy of the company          
  3. minimizing procurement costs while maximizing security within the supply process.
  4. all 

Question No.  17         Marks - 10

………. logistics has as its main function to reduce logistics cost(s) and enhance service(s) related to the disposal of waste produced during the operation of a business.         

Options          

  1. disposal          
  2. INBOUND    
  3. outbound        
  4. procurement 

Question No.  18         Marks - 10

……..logistics denotes all those operations related to the reuse of products and materials.  

Options          

  1. reverse
  2. outbound        
  3. disposal          
  4. INBOUND 

Question No.  19         Marks - 10

The opposite of reverse logistics is ………. logistics.

Options          

  1. forward          
  2. reverse
  3. outbound        
  4. disposal

Question No.  20         Marks - 10

………..logistics has, as main tasks, the delivery of the finished products to the customer. It consists of order processing, warehousing, and transportation.

Options          

  1. INBOUND    
  2. outbound        
  3. procurement   
  4. distribution 

Question No.  21         Marks - 10

…………...Logistics describes all attempts to measure and minimize the ecological impact of logistics activities.           

Options          

  1. green  
  2. reverse
  3. outbound        
  4. disposal

Question No.  22         Marks - 10

…...logistics describes logistic processes within a value adding system        

Options          

  1. production      
  2. green  
  3. reverse
  4. outbound 

Question No.  23         Marks - 10

……….. involves using external organizations to execute logistics activities that have traditionally been performed within an organization itself         

Options          

  1. production      
  2. green  
  3. reverse
  4. 3PL

Question No.  24         Marks - 10

……….is the application of computer software and/or automated machinery to improve the efficiency of logistics operations.     

Options          

  1. logistics automation   
  2. production      
  3. green  
  4. reverse 

Question No.  25         Marks - 10

Industrial machinery can typically identify products through           

Options          

  1. bar code         
  2. RFID  
  3. both    
  4. none 

Question No.  26         Marks - 10

…... tag is card containing a memory chip and an antenna which transmits signals to a reader.       

Options          

  1. bar code         
  2. RFID  
  3. both    
  4. none 

Question No.  27         Marks - 10

………..includes any form of outsourcing of logistics activities previously performed in house.     

Options          

  1. production      
  2. green  
  3. reverse
  4. 3PL 

Question No.  28         Marks - 10

…...logistics is a term used by the logistics, supply chain, and manufacturing industries to denote specific time-critical modes of transport used to move goods or objects rapidly in the event of an emergency.    

Options          

  1. emergency      
  2. reverse
  3. outbound        
  4. disposal

Question No.  29         Marks - 10

…………...is the process of planning, implementing, and controlling the effective and efficient flow of goods and services from the point of origin to the point of consumption    

Options          

  1. logistics          
  2. MATERIALS
  3. finance
  4. human resource 

Question No.  30         Marks - 10

They are usually large plain buildings in industrial areas of cities and towns and villages.  

Options          

  1. warehouse      
  2. airport 
  3. station
  4. all 

Question No.  31         Marks - 10

………….management is a science primarily about specifying the shape and percentage of stocked goods.           

Options          

  1. logistics          
  2. MATERIALS
  3. finance
  4. inventory         

Question No.  32         Marks - 10

………..may be found on merchandise, animals, vehicles and people as well.          

Options          

  1. bar code         
  2. RFID  
  3. both    
  4. none 

Question No.  33         Marks - 10

….is a commercial building for storage of goods.      

Options          

  1. warehouse      
  2. airport 
  3. station
  4. all 

Question No.  34         Marks - 10

……..logistics aims to ensure that each machine and workstation receives the right product in the right quantity and quality at the right time.   

Options          

  1. production      
  2. green  
  3. reverse
  4. outbound 

Question No.  35         Marks - 10

It is "the process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal.         

 Options         

  1. reverse
  2. outbound        
  3. disposal          
  4. INBOUND

Question No.  36         Marks - 10

………...refers to operations within a warehouse or distribution center, with broader tasks undertaken by supply chain management systems and enterprise resource planning systems.         

Options          

  1. logistics automation   
  2. production      
  3. green  
  4. reverse 

Question No.  37         Marks - 10

……….are used by manufacturers, importers, exporters, wholesalers, transport businesses, customs, etc. 

Options          

  1. warehouse      
  2. airport 
  3. station
  4. all        

Question No.  38         Marks - 10

Inventories are maintained as buffers to meet uncertainties in …... supply and movements of goods.         

Options          

  1. demand          
  2. supply 
  3. cost     
  4. time 

Question No.  39         Marks - 10

The goal of ………... management is to provide an unbroken chain of components for production to manufacture goods on time for the customer base.

Options          

  1. MATERIALS
  2. finance
  3. human resource          
  4. all

Question No.  40         Marks - 10

………. logistics stands for all operations related to the reuse of products and materials.   

Options          

  1. reverse
  2. outbound        
  3. disposal          
  4. INBOUND
  Answers :-

 

Supply Chain Management 

Assignment A

  1. Discuss the need of logistics.

Ans.Even small businesses deal with finding suppliers, if not with transporting merchandise to a store. Small business owners also conduct distribution logistics with inventory and warehousing. And, every small business owner can tell you about how they handle reverse logistics, with returned merchandise or refusal of services. Larger businesses may deal in all four logistic fields.

In the business environment, logistics either have an internal or external focuses (inbound or outbound). Depending upon the business involved, this part of the chain can be simple or complicated. For more complicated procedures, third parties often are hired to conduct any one of the four fields within business logistics. 

Third-party logistics (3PL) involves using external individuals or organizations to execute logistics activities that have traditionally been performed within an organization itself. If, for example, a company decides to export its product, it may hire a person or organization to help with distribution logistics. Today, there is a movement toward building fourth-party logistics (4PL), which integrates 3PL competencies and other organizations to design, build, and run comprehensive supply chain solutions. A 4PL general contractor would manage other 3PLs, truckers, forwarders, custom house agents, and others, essentially taking responsibility of a complete process for the customer.

Another specialty includes logistics consulting services. Firms in this industry specialize in the production and distribution of goods, from the first stages of securing suppliers to the delivery of finished goods to consumers. Such firms give advice on improvements in the manufacturing process and productivity, product quality control, inventory management, packaging, order processing, the transportation of goods, and materials management and handling. In the process, these consulting firms might suggest improvements to the manufacturing process in order to use inputs better, increase productivity, or decrease the amount of excess inventory. Consulting firms in this segment of the industry also advise on the latest technology that links suppliers, producers, and customers together to streamline the manufacturing process. 

Even project management requires logistics, as one vein of this science coordinates a sequence of resources to carry out projects. Typical constraints in project management include scope, time, and budget, or the same constraints involved in business logistics. The time constraint refers to the amount of time available to complete a project. The cost constraint refers to the budgeted amount available for the project. The scope constraint refers to what must be done to produce the project’s end result. 

  1. Differentiate between ABC and VED analysis.

Ans.‘V’ stands for vital, ‘E’ for essential, ‘D’ for desirable. This classification is usually applied for spare parts to be stocked for maintenance of machines and equipment’s based on the criticality of the spare parts. The stocking policy is based on the criticality of the items. The vital spare parts are known as capital or insurance spares. The inventory policy is to keep at least one number of the vital spare irrespective of the long lead-time required for procurement. Essential spare parts are those whose non-availability may not adversely affect production. Such spare parts may be available from many sources within the country and the procurement lead time many not be long. Hence, a low inventory of essential spare parts is held. The desirable spare parts are those, which, if not available, can be manufactured by the maintenance department or may be procured from local suppliers and hence no stock is held usually.

VED analysis, per the modern practices it is actually VEDI.

VEDI classification system on the other hand, segregates the entire inventory set into Vital, Essential, Desirable and Insurance Spares. Insurance Spares are those spares that form an essential part of their machinery and their cost is capitalised along wit hthe machinery. They are insured along with the insurance of the machinery and hence the name Insurance Spares. Vital stores are those who are vital to the production and/ or machine´s functioning. Hence, their stock is required in order to maintain continuity of production. Essential store items are those, absence of which will not halt the production altogether but can impede the performance, Desirable items are those which are good if kept in stock but lack of which will not affect normal operations.

In a nutshell, ABC analysis of inventory is based on the value and usage analysis of the stock. It is basically, a derivative of the Pareto Rule (i.e., the 80-20 principle). A large volume of the inventory which is not of a very high value is classified into B&C categories, whereas, a small volume of the inventory which constitutes a significant value of the inventory is classified as A category.

The ABC analysis is a business term used to define an inventory categorization technique often used in materials management. It is also known as

Selective Inventory Control

Policies based ABC analysis:

  1. A) ITEMS: very tight control and accurate records
  2. B) ITEMS: less tightly controlled and good records
  3. C) ITEMS: simplest controls possible and minimal re

The ABC analysis provides a mechanism for identifying items that will have a significant impact on overall inventory cost, 

While also providing a mechanism for identifying different categories of stock that will require different management and controls.

The ABC analysis suggests that inventories of an organization are not of equal value.

 Thus, the inventory is grouped into three categories (A, B, and C) in order of their estimated.

A’ Items are very important for an organization. Because of the high value of these ‘A’ items,

Frequent value analysis is required. In addition to that, an organization needs to choose an

Appropriate order pattern (e.g. ‘just

- in-time’) to avoid excess capacity.

“B’´items are important, but of course less important, than ‘A’ items and more important than ‘C’ items. Therefore ‘B’ items are intergroup items.

C´ Items are marginally important.

  1. Explain inventory management.

Ans. Inventory management is a very important function that determines the health of the supply chain as well as the impacts the financial health of the balance sheet. Every organization constantly strives to maintain optimum inventory to be able to meet its requirements and avoid over or under inventory that can impact the financial figures. 

Inventory is always dynamic. Inventory management requires constant and careful evaluation of external and internal factors and control through planning and review. Most of the organizations have a separate department or job function called inventory planners who continuously monitor, control and review inventory and interface with production, procurement and finance departments. 

Defining Inventory

Inventory is an idle stock of physical goods that contain economic value, and are held in various forms by an organization in its custody awaiting packing, processing, transformation, use or sale in a future point of time.

Any organization which is into production, trading, sale and service of a product will necessarily hold stock of various physical resources to aid in future consumption and sale. While inventory is a necessary evil of any such business, it may be noted that the organizations hold inventories for various reasons, which include speculative purposes, functional purposes, physical necessities etc. 

From the above definition the following points stand out with reference to inventory:

All organizations engaged in production or sale of products hold inventory in one form or other.

Inventory can be in complete state or incomplete state.

Inventory is held to facilitate future consumption, sale or further processing/value addition.

All inventoried resources have economic value and can be considered as assets of the organization. 

Meet variation in Production Demand

Production plan changes in response to the sales, estimates, orders and stocking patterns. Accordingly the demand for raw material supply for production varies with the product plan in terms of specific SKU as well as batch quantities. 

Holding inventories at a nearby warehouse helps issue the required quantity and item to production just in time. 

Cater to Cyclical and Seasonal Demand

Market demand and supplies are seasonal depending upon various factors like seasons; festivals etc and past sales data help companies to anticipate a huge surge of demand in the market well in advance. Accordingly they stock up raw materials and hold inventories to be able to increase production and rush supplies to the market to meet the increased demand. 

Economies of Scale in Procurement

Buying raw materials in larger lot and holding inventory is found to be cheaper for the company than buying frequent small lots. In such cases one buys in bulk and holds inventories at the plant warehouse.

Take advantage of Price Increase and Quantity Discounts

If there is a price increase expected few months down the line due to changes in demand and supply in the national or international market, impact of taxes and budgets etc., the company’s tend to buy raw materials in advance and hold stocks as a hedge against increased costs.

Companies resort to buying in bulk and holding raw material inventories to take advantage of the quantity discounts offered by the supplier. In such cases the savings on account of the discount enjoyed would be substantially higher that of inventory carrying cost. 

Reduce Transit Cost and Transit Times

In case of raw materials being imported from a foreign country or from a faraway vendor within the country, one can save a lot in terms of transportation cost buy buying in bulk and transporting as a container load or a full truck load. Part shipments can be costlier.

In terms of transit time too, transit time for full container shipment or a full truck load is direct and faster unlike part shipment load where the freight forwarder waits for other loads to fill the container which can take several weeks. 

There could be a lot of factors resulting in shipping delays and transportation too, which can hamper the supply chain forcing companies to hold safety stock of raw material inventories. 

Long Lead and High demand items need to be held in Inventory

Often raw material supplies from vendors have long lead running into several months. Coupled with this if the particular item is in high demand and short supply one can expect disruption of supplies. In such cases it is safer to hold inventories and have control.

  1. Discuss the Economic Order Quantity.

Ans.In inventory management, economic order quantity (EOQ) is the order quantity that minimizes the total holding costs and ordering costs. It is one of the oldest classical production scheduling models. The model was developed by Ford W. Harris in 1913, but R. H. Wilson, a consultant who applied it extensively, and K. Nadler are given credit for their in-depth analysis.

Economic order quantity (EOQ) is a decision tool used in cost accounting. It’s a formula that allows you to calculate the ideal quantity of inventory to order for a given product. The calculation is designed to minimize ordering and carrying costs. It goes back to 1913, when Ford W. Harris wrote an article called “How Many Parts to Make at Once.”

EOQ is based on the following set of assumptions:

  • Reorder point:The reorder point is the time when the next order should be placed. EOQ assumes that you order the same quantity at each reorder point.
  • Demand, relevant ordering cost, and relevant carrying cost:Customer demand for the product is known. Also, the ordering and carrying costs are certain. A relevant cost refers to a cost you need to consider when you make a decision. The term is used throughout this book.
  • Purchase order lead time:The lead time is the time period from placing the order to order delivery. EOQ assumes that the lead time is known.
  • Purchasing cost per unit:The cost per unit doesn’t change with the amount ordered. This removes any consideration of quantity discounts. Assume you’ll pay the same amount per unit, regardless of the order size.
  • Stock outs:No stock outs occur. You maintain enough inventory to avoid a stock out cost. That means you monitor your customer demand and inventory levels carefully.
  • Quality costs:EOQ generally ignores quality costs.

Economic order quantity uses three variables: demand, relevant ordering cost, and relevant carrying cost. Use them to set up an EOQ formula:

  • Demand:The demand, in units, for the product for a specific time period.
  • Relevant ordering cost:Ordering cost per purchase order.
  • Relevant carrying cost:Carrying costs for one unit. Assume the unit is in stock for the time period used for demand.
  • Note that the ordering cost is calculated perorder. The carrying costs are calculated per unit. Here’s the formula for economic order quantity:
  • Economic order quantity = square root of [(2 x demand x ordering costs) ÷ carrying costs]
  • That’s easier to visualize as a regular formula:
  • Q is the economic order quantity (units). D is demand (units, often annual), S is ordering cost (per purchase order), and H is carrying cost per unit.
  • Economic order quantity model

As the name suggests, Economic order quantity (EOQ) model is the method that provides the company with an order quantity. This order quantity figure is where the record holding costs and ordering costs are minimized. By using this model, the companies can minimize the costs associated with the ordering and inventory holding. In 1913, Ford W. Harris developed this formula whereas R. H. Wilson is given credit for the application and in-depth analysis on this model.

Definition

The economic order quantity (EOQ) is a model that is used to calculate the optimal quantity that can be purchased or produced to minimize the cost of both the carrying inventory and the processing of purchase orders or production set-ups.

Formula

Following is the formula for the economic order quantity (EOQ) model:

Where Q = optimal order quantity

D = units of annual demand

S = cost incurred to place a single order or setup

H = carrying cost per unit

This formula is derived from the following cost function:

Total cost = purchase cost + ordering cost + holding cost

Limitations of the economic order quantity model:

It is necessary for the application of EOQ order that the demands remain constant throughout the year. It is also necessary that the inventory be delivered in full when the inventory levels reach zero.     

  1. Explain mass production system.

Ans."Mass production", "flow production" or "continuous production" is the production of large amounts of standardized products, including and especially on assembly lines. Together with job production and batch production, it is one of the three main production methods. 

The term mass production was popularized by a 1926 article in the Encyclopaedia Britannica supplement that was written based on correspondence with Ford Motor Company. The New York Times used the term in the title of an article that appeared before publication of the Britannica article. 

The concepts of mass production are applied to various kinds of products, from fluids and particulates handled in bulk (such as food, fuel, chemicals, and mined minerals) to discrete solid parts (such as fasteners) to assemblies of such parts (such as household appliances and automobiles). 

Mass production is a diverse field, but it can generally be contrasted with craft production or distributed manufacturing. Some mass production techniques, such as standardized sizes and production lines, predate the Industrial Revolution by many centuries; however, it was not until the introduction of machine tools and techniques to produce interchangeable parts were developed in the mid-19th century that modern mass production was possible. 

The Mass Production Of Automobiles

The traditional example of mass production is the automobile industry, which has continued to refine the basic principles originally laid down by Henry Ford and other pioneers of mass production techniques. Today’s automobile is the result of a large number of mass production lines established in a multitude of manufacturing and assembly facilities throughout the world. The assembly plant from which the finished automobile emerges is only the final element of a mass production operation that, for many companies, includes plants in several different countries. Into the final assembly plant flow large subassemblies such as the automobile chassis, the engine, major body components such as doors, panels, upholstered seats, and many electronic, electrical, and hydraulic systems such as brakes, lighting systems, and sound systems. Each of these, in turn, is usually the product of a mass production line in another factory. Stamping plants specialize in producing the formed metal parts that constitute the body of the automobile. Radio assembly plants, in turn, depend upon other assembly plants for components such as transistors and integrated circuits. There are glass plants for windows, transmission plants, tire plants, and many others, each specializing in the mass production of its own product, which is, in turn, fed into the final assembly plant. The control of the flow of material into and out of final assembly plants, including the scheduling of production from feeder plants and the timing of rail and truck shipments, is among the major engineering tasks that make the total mass production system for automobiles work. 

In the final assembly line one can see clearly how machinery and human effort in assembly are divided into many specialized skills. The special tooling and machinery developed to handle assembly parts and to aid operators in their tasks can also be observed. At a given point on the line a robot welder—unaided by a human operator—may weld body parts together. At another position the motor is mounted on the chassis by a large machine guided by an operator. In other places body panels and doors are assembled to the chassis, and dashboard instruments and wiring are added by hand with simple tools. Each operator learns his task in detail and uses tools specialized for that task. The total operation is paced by the speed of movement of the conveyor that carries the partially assembled automobiles. The number of operators, machine stations, and flow of materials to the conveyor have all been planned so that the conveyor can maintain an essentially constant speed with each operator and machine functioning near optimum effectiveness. 

In Ford’s early lines, parts and product were precisely standardized. Only one car model was manufactured, and each unit was identical to every other unit in all aspects, including colour—black. Today’s automotive manufacturing engineers have learned to mass produce a highly customized product. The same assembly line may turn out a variety of models with many colours and options. This is achieved by continued insistence on standardization of critical elements such as the methods by which parts are held together internally. Thus, the operator who specializes in assembling doors can handle a variety of models and colours equally well. In addition, the flow of materials to the various line positions is carefully scheduled and controlled so that the specific part required for a given model, colour, or option list arrives at the line at the precise moment that the partially assembled unit requiring the part has arrived along the conveyor. The exquisitely designed production-control systems operating in the automotive and other industries make it possible for the consumer to obtain a greatly enhanced variety of product without sacrificing the cost advantages of mass production techniques. 

Nonmanufacturing Examples Of Mass Production

The mass production principles of the division and specialization of labour and the use of standardized parts and processes have been applied to a wide area of productive activity. In agriculture the development of specialized machines for plowing, seeding, cultivating, and harvesting followed by factories for preparing, preserving, and packaging food products has drawn heavily on mass production principles. There are specialized manual tasks supplementing the specialized machines both in the fields and in the processing plants. 

In the service industries, such as air transportation, the division and specialization of skills can be observed among ticket agents, pilots, navigators, baggage handlers, flight attendants, maintenance crews, and traffic controllers. All major engineering projects in both design and manufacture generally require a complement of engineering specialties including chemical, mechanical, and electrical engineers and further subdivisions of these professions such as semiconductor engineers, circuit designers, and so forth.

Thus, as industry becomes more complex at each level, the division of labour and specialization become necessary. At the same time, the need for coordination and communication between specialized members of the team becomes greater.

Mass Production And Society

Both the quantity and the variety of material goods in industrialized countries have resulted directly from the application of mass production principles. At the same time the environment and circumstances of those employed by, and associated with, the production of material goods have changed. The benefits that have arisen from the greatly improved productivity made possible by mass production techniques have been shared by employees, investors, and customers. The working environment has greatly changed, however. Similarly the complexities of management have increased substantially, and the investment requirements and risks faced by owners and investors have become much greater. 

Before the introduction of mass production techniques, goods were produced by highly skilled craftsmen who often prepared their basic raw materials, carried the product through each of the stages of manufacture, and ended with the finished product. Typically, the craftsman spent several years at apprenticeship learning each aspect of his trade; often he designed and made his own tools. He was identified with his product and his craft, enjoyed a close association with his customers, and had a clear understanding of his contribution and his position in society. 

In contrast, the division of labour, the specialization of narrow skills, the detailed engineering specification of how each task is to be carried out, and the assemblage of large numbers of employees in great manufacturing plants have greatly diluted the identification of employees with their productive functions and with their employers. Many surveys in the United States and in the industrialized countries of Europe have shown that workers do not fully understand and appreciate their roles and positions in society. In addition, the division and specialization of labour may lead to such narrowly defined skills and highly repetitive operations, paced by the steady progression of a machine or conveyor line, that tedium and fatigue arise to reduce the sense of satisfaction inherent in productive work.

These physical and psychological factors have been the subject of numerous studies by industrial psychologists and others. Special attention has been paid to work factors which affect the psychological motivation that is a prime determinant of employee productivity. The psychological effects of the repetitive aspects of some mass production tasks have been examined in great detail. Tasks that are precisely paced by the rhythm of machine operation or conveyor-belt movement appear to be particularly fatiguing. For this reason, efforts are made to structure each job so that the operator can vary his pace by working ahead of the conveyor for a period and then slowing down, and by interspersing work breaks with productive periods. Some individuals prefer tasks that are sufficiently repetitive and narrowly skilled that they do not require any substantial amount of mental concentration once the function is mastered. Most fatiguing are those repetitive tasks whose pace is out of the operator’s control but which also require moderate mental concentration. 

With this understanding in mind, work tasks can be structured to produce a minimum of mental and physical fatigue; this planning is an important part of the design of a successful production operation.

Economic Effects

Mass production, with its heavy dependence upon mechanized facilities and high levels of production volume, presents great challenges for industrial leadership. The importance of advanced planning and the coordinated control of the large human and capital resources associated with mass production have been described. The day-to-day problems of monitoring the status of a major manufacturing complex are also immense. Up-to-the-minute knowledge of status is essential to effective response when difficulties such as the breakdown of a machine, the shortage of required materials or components, or the absence of important employees occur. Many aids to management have been devised for collecting data, analyzing them, and presenting alternatives for management decision. The electronic computer, with its great capability for collecting, analyzing, and comparing data, is becoming especially important as a management aid, both in the initial planning and simulation of production facilities and in computer-based production and resource-control systems. In fact, the increasing use of mainframe and personal computers as business tools is rapidly making the management of mass production operations a quantitative technology in its own right.

The need for substantial investment is another result of the application of mass production principles. Much of the increase in productivity that has been achieved by mass production is a direct result of the development and use of automatic machinery and processes to supplement human effort. This, in turn, requires the support of a sizable technical staff in advance of production and later substantial capital investment for production facilities. Increased levels of capital, which must often be committed years before production begins, and before the true market for the product can be established, greatly increase the risks that investors must assume and have markedly affected the investment climate in manufacturing industries. 

As capital needs have grown, the nature of ownership and investment in industry has changed dramatically. Economies of scale favour large, high-volume operations that require capital investment levels often well beyond the means of an individual owner. This has been the prime stimulant for corporate ownership of major manufacturing firms. Furthermore, the direct managers of the manufacturing enterprise seldom possess ownership control of the enterprise. This has created a new spectrum of relationships between the owners, the managers, and the employees of large manufacturing firms. Frequently the owners are principally concerned with the profits on their investments and leave the planning and managerial operations to professional managers.

At the same time the large capital needs of growing industries place special emphasis on the ability to acquire the necessary capital resources. Thus, the financial markets become extremely important in determining the general directions in which manufacturing industry will grow. This emphasizes the importance of profit incentives to encourage private investment, which is vital to achieve the productivity advances possible in mass production operations.

Similarly, industrial nations are strongly encouraged to retain and reinvest a significant fraction of their gross national product if national industries are to grow and to compete successfully in international markets. These problems of capital formation have been especially troublesome in introducing mass production in the developing nations. 

Other consequences of a mass production economy have become apparent. The increased consumption associated with low-cost production has created problems of conservation of natural resources and the disposal or reconversion of the wastes of production and of goods whose utility is ended. There are technological solutions for the resulting problems of solid wastes and air and water pollution, but the political and economic problems of how the costs will be distributed are difficult to solve. 

  1. Discuss different types of supply chains.

    Ans.1 Supply Chain Planning Systems:

   These systems provide information that help businesses in the planning of their supply chain. Some of the important supply chain planning functions are as follows:

  • Forecasting demand for specific products and preparing sourcing and manufacturing plan for those products.
  • Estimating the quantity of the product to be manufactured in a given time period
  • Deciding the location where the finished goods are to be stored
  • Identifying the transportation mode to be used for delivering the products
  • Setting the inventory levels for raw materials, intermediate products, and finished goods
  • Determining the product quantity a business should make in order to meet all its customers’ demands

Supply Chain Execution Systems:

These systems provide information that help businesses in the execution of their supply chain steps. Some of the major supply chain execution functions are as follows:

  • Managing the flow of products from the manufacturers to distributors to retailers and finally to customers in order to ensure the accurate delivery of products
  • Providing information about the status of orders being processed so that the vendors could provide the exact delivery dates to customers
  • Tracking the shipment and accounting for the products that have been returned or are to be repaired and serviced

Customer relationship management:

Customer relationship management concerns the relationship between an organization and its customers. Customer service is the source of customer information. It also provides the customer with real-time information on scheduling and product availability through interfaces with the company´s production and distribution operations. Successful organizations use the following steps to build customer relationships:

  • determine mutually satisfying goals for organization and customers
  • establish and maintain customer rapport
  • induce positive feelings in the organization and the customers

Customer service management:

Customer relationship management concerns the relationship between an organization and its customers. Customer service is the source of customer information. It also provides the customer with real-time information on scheduling and product availability through interfaces with the company´s production and distribution operations. Successful organizations use the following steps to build customer relationships:

  • determine mutually satisfying goals for organization and customers
  • establish and maintain customer rapport
  • induce positive feelings in the organization and the customers

Demand management style

Demand management is a planning methodology used to forecast, plan for and manage the demand for products and services. This can be at macro-levels as in economics and at micro-levels within individual organizations. For example, at macro-levels, a government may influence interest rates in order to regulate financial demand. At the micro-level, a cellular service provider may provide free night and weekend use in order to reduce demand during peak hours.

Demand management has a defined set of processes, capabilities and recommended behaviors for companies that produce goods and services. Consumer electronics and goods companies often lead in the application of demand management practices to their demand chains; demand management outcomes are a reflection of policies and programs to influence demand as well as competition and options available to users and consumers. Effective demand management follows the concept of a "closed loop" where feedback from the results of the demand plans is fed back into the planning process to improve the predictability of outcomes. Many practices reflect elements of systems dynamics. Volatility is being recognized as significant an issue as the focus on variance of demand to plans and forecasts. 

  1. Discuss JIT.

Ans.Just-in-time (JIT) manufacturing, also known as just-in-time production or the Toyota Production System (TPS), is a methodology aimed primarily at reducing flow times within production system as well as response times from suppliers and to customers. Following its origin and development at the British Motor Corporation (Australia) plant in Sydney in the mid-1950s (though the term JIT was not used at that time), it was also adopted in Japan, largely in the 1960s and 1970s and particularly at Toyota.

Alternative terms for JIT manufacturing have been used. Motorola´s choice was short-cycle manufacturing (SCM).[3][4] IBM´s was continuous-flow manufacturing (CFM), and demand-flow manufacturing (DFM), a term handed down from consultant John Constanta at his Institute of Technology in Colorado. Still another alternative was mentioned by Goddard, who said that "Toyota Production System is often mistakenly referred to as the ´Kanban System,´" and pointed out that Kanban is but one element of TPS, as well as JIT production.

But the wide use of the term JIT manufacturing throughout the 1980s faded fast in the 1990s, as the new term lean manufacturing became established as "a more recent name for JIT. As just one testament to the commonality of the two terms, Toyota production system (TPS) has been and is widely used as a synonym for both JIT and lean manufacturing.

Advantages:

1) There should be minimal amounts of inventory obsolescence, since the high rate of inventory turnover keeps any items from remaining in stock and becoming obsolete.

2) Since production runs are very short, it is easier to halt production of one product type and switch to a different product to meet changes in customer demand.

3) The very low inventory levels mean that inventory holding costs (such as warehouse space) are minimized.

4) The company is investing far less cash in its inventory, since less inventory is needed.

5) Less inventory can be damaged within the company, since it is not held long enough for storage-related accidents to arise. Also, having less inventory gives materials handlers more room to maneuver, so they are less likely to run into any inventory and cause damage.

6) Production mistakes can be spotted more quickly and corrected, which results in fewer products being produced that contain defects.

Disadvantages

A supplier that does not deliver goods to the company exactly on time and in the correct amounts could seriously impact the production process.

A natural disaster could interfere with the flow of goods to the company from suppliers, which could halt production almost at once.

An investment should be made in information technology to link the computer systems of the company and its suppliers, so that they can coordinate the delivery of parts and materials.

A company may not be able to immediately meet the requirements of a massive and unexpected order, since it has few or no stocks of finished goods.

  1. Explain production planning and control.

Ans.Planning and control are an essential ingredient for success of an operation unit. The benefits of production planning and control are as follows:

  1. a) It ensures that optimum utilization of production capacity is achieved, by proper scheduling of the machine items which reduces the idle time as well as over use.
  2. b) It ensures that inventory level are maintained at optimum levels at all time, i.e. there is no over-stocking or under-stocking.
  3. c) It also ensures that production time is kept at optimum level and thereby increasing the turnover time.
  4. d) Since it overlooks all aspects of production, quality of final product is always maintained. 

Production Planning

Production planning is one part of production planning and control dealing with basic concepts of what to produce, when to produce, how much to produce, etc. It involves taking a long-term view at overall production planning. Therefore, objectives of production planning are as follows:

  • To ensure right quantity and quality of raw material, equipment, etc. are available during times of production.
  • To ensure capacity utilization is in tune with forecast demand at all the time.

A well thought production planning ensures that overall production process is streamlined providing following benefits:

  • Organization can deliver a product in a timely and regular manner.
  • Supplier are informed will in advance for the requirement of raw materials.
  • It reduces investment in inventory.
  • It reduces overall production cost by driving in efficiency.

Production planning takes care of two basic strategies’ product planning and process planning. Production planning is done at three different time dependent levels i.e. long-range planning dealing with facility planning, capital investment, location planning, etc.; medium-range planning deals with demand forecast and capacity planning and lastly short term planning dealing with day to day operations.

Production Control

Production control looks to utilize different type of control techniques to achieve optimum performance out of the production system as to achieve overall production planning targets. Therefore, objectives of production control are as follows:

  • Regulate inventory management
  • Organize the production schedules
  • Optimum utilization of resources and production process

The advantages of robust production control are as follows:

  • Ensure a smooth flow of all production processes
  • Ensure production cost savings thereby improving the bottom line
  • Control wastage of resources
  • It maintains standard of quality through the production life cycle.

Production control cannot be same across all the organization. Production control is dependent upon the following factors:

  • Nature of production (job oriented, service oriented, etc.)
  • Nature of operation
  • Size of operation

Production planning and control are essential for customer delight and overall success of an organization.

For efficient, effective and economical operation in a manufacturing unit of an organization, it is essential to integrate the production planning and control system. Production planning and subsequent production control follow adaption of product design and finalization of a production process.

Production planning and control address a fundamental problem of low productivity, inventory management and resource utilization.

Production planning is required for scheduling, dispatch, inspection, quality management, inventory management, supply management and equipment management. Production control ensures that production team can achieve required production target, optimum utilization of resources, quality management and cost savings. 

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Assignment B

Case Detail:

EOQ applies only when demand for a product is constant over the year and each new order is delivered in full when inventory reaches zero. There is a fixed cost for each order placed, regardless of the number of units ordered. There is also a cost for each unit held in storage, commonly known as holding cost, sometimes expressed as a percentage of the purchase cost of the item.

We want to determine the optimal number of units to order so that we minimize the total cost associated with the purchase, delivery and storage of the product.

The required parameters to the solution are the total demand for the year, the purchase cost for each item, the fixed cost to place the order and the storage cost for each item per year. Note that the number of times an order is placed will also affect the total cost, though this number can be determined from the other parameters.

  1. Discuss the parameters required to calculate EOQ.
  • AnsP = purchase unit price, unit production cost.
  • Q = order quantity.
  • Q* = optimal order quantity.
  • D = annual demand quantity.
  • K = fixed cost per order, setup cost (not per unit, typically cost of ordering and shipping and handling. This is not the cost of goods)
  • h = annual holding cost per unit, also known as carrying cost or storage cost (capital cost, warehouse space, refrigeration, insurance, etc. usually not related to the unit production cost)
  • The Total Cost function and derivation of EOQ formula
  • The single-item EOQ formula finds the minimum point of the following cost function:
  • Total Cost = purchase cost or production cost + ordering cost + holding cost
  • Where:
  • Purchase cost: This is the variable cost of goods: purchase unit price × annual demand quantity. This is P × D
  • Ordering cost: This is the cost of placing orders: each order has a fixed cost K, and we need to order D/Q times per year. This is K × D/Q
  • Holding cost: the average quantity in stock (between fully replenished and empty) is Q/2, so this cost is h × Q/2

TC=PD+DK/Q+Hq/2

To determine the minimum point of the total cost curve, calculate the derivative of the total cost with respect to Q (assume all other variables are constant) and set it equal to 0:

0=-Dk/+h/2

To determine the minimum point of the total cost curve, calculate the derivative of the total cost with respect to Q (assume all other variables are constant) and set it equal to 0:

0=-Dk/ +h/2

Solving for Q gives Q* (the optimal order quantity):

Q=2DK/h

Therefore: 

  1. When can EOQ be implemented?

Ans.EOQ is implemented only when demand for a product is constant over the year and each new order is delivered in full when inventory reaches zero. There is a fixed cost for each order placed, regardless of the number of units ordered. There is also a cost for each unit held in storage, commonly known as holding cost, sometimes expressed as a percentage of the purchase cost of the item. 

Factors which matter in implementation are-

Economic Order Quantity Model

For many small businesses, the primary source of revenue is inventory turnover. If a company maintains too large an inventory, inventory storage, spoilage and obsolescence costs can increase operating costs and decrease a company’s income. The economic order quantity model minimizes these inventory costs by determining the optimal inventory quantity the company should keep on hand and ensuring inventory arrives in time to meet customer needs.

EOQ Model Assumptions

To determine the point at which a company must receive vendor shipments to maintain required inventory levels, the EOQ model assumes that demand is constant, company operations deplete inventory at a fixed rate and that inventory replenishment occurs instantaneously. By making these assumptions, the model eliminates the need to consider such costs as those due to over- and under-stock. As a result, the primary concern of the EOQ model is the tradeoff between order costs and holding costs.

EOQ Calculation

The EOQ model finds the economic order quantity by taking the square root of 2 multiplied by the number of units sold per year and the order-placement cost divided by a unit´s carrying cost per period. Annual usage may equal the prior year´s units sold, forecast-sales units or a combination of both. In turn, the order-placement cost includes order-processing costs, shipping and order-receipt costs and stocking costs. Such costs include the cost to create a purchase order, process the materials on receipt, process a vendor invoice and issue a payment. Carrying costs are the variable per-unit-holding costs, such as credit interest, inventory-insurance costs and storage costs.

Minimize Order Costs

The EOQ model attempts to minimize order costs, such as requisition and purchase order processing costs, shipping costs, stocking costs and invoice processing costs. A larger order quantity decreases the frequency with which a company places orders and minimizes a company’s order costs, whereas a smaller order quantity increases the ordering frequency and order costs. The EOQ model helps a company make the tradeoff between storage costs and order costs by identifying the quantity a company should use to replenish its inventory, which minimizes both its order costs and holding costs.

Minimize Holding Costs

The EOQ model identifies optimal inventory levels to optimize production processes by preventing stock outs and minimizing total costs, including holding costs, such storage costs and the opportunity cost of committing capital to the company’s inventory rather than other business opportunities. Larger order quantities mean a larger inventory, but a lower number of stock-outs and the increased likelihood that stock will be available to meet customer requirements. But larger-order quantities mean higher storage or holding costs, including inventory obsolescence. In addition, if money is tied up in inventory, it can’t be used elsewhere in ways that might generate a higher return. Smaller order quantities decrease the average-inventory size and the company’s storage costs and increase stock-outs and decrease customer satisfaction. 

  1. Explain various costs associated with inventory.

Ans.Inventory costs are basically categorized into three headings:

1) Ordering Cost

2) Carrying Cost

3) Shortage or stock out Cost & Cost of Replenishment

  1. a) Cost of Loss, pilferage, shrinkage and obsolescence etc.
  2. B) Cost of Logistics
  3. C) Sales Discounts, Volume discounts and other related costs.

1) Ordering Cost

Cost of procurement and inbound logistics costs form a part of Ordering Cost. Ordering Cost is dependant and varies based on two factors - The cost of ordering excess and the Cost of ordering too less. 

Both these factors move in opposite directions to each other. Ordering excess quantity will result in carrying cost of inventory. Whereas ordering less will result in increase of replenishment cost and ordering costs.

These two above costs together are called Total Stocking Cost. If you plot the order quantity vs the TSC, you will see the graph declining gradually until a certain point after which with every increase in quantity the TSC will proportionately show an increase. 

This functional analysis and cost implications form the basis of determining the Inventory Procurement decision by answering the two basic fundamental questions - How Much to Order and When to Order. 

How much to order is determined by arriving at the Economic Order Quantity or EOQ. 

2) Carrying Cost

Inventory storage and maintenance involves various types of costs namely:

a) Inventory Storage Costb) Cost of Capital

Inventory carrying involves Inventory storage and management either using in house facilities or external warehouses owned and managed by third party vendors. In both cases, inventory management and process involves extensive use of Building, Material Handling Equipment’s, IT Software applications and Hardware Equipment’s coupled managed by Operations and Management Staff resources.

Inventory Storage Cost

Inventory storage costs typically include Cost of Building Rental and facility maintenance and related costs. Cost of Material Handling Equipment’s, IT Hardware and applications, including cost of purchase, depreciation or rental or lease as the case may be. Further costs include operational costs, consumables, communication costs and utilities, besides the cost of human resources employed in operations as well as management.

Cost of Capital

Includes the costs of investments, interest on working capital, taxes on inventory paid, insurance costs and other costs associate with legal liabilities.

The inventory storage costs as well as cost of capital is dependent upon and varies with the decision of the management to manage inventory in house or through outsourced vendors and third party service providers. 

Current times, the trend is increasingly in favor of outsourcing the inventory management to third party service provides. For one thing the organizations find that managing inventory operations requires certain core competencies, which may not be in line with their business competencies. They would rather outsource to a supplier who has the required competency than build them in house.

Secondly in case of large-scale warehouse operations, the scale of investments may be too huge in terms of cost of building and material handling equipment’s etc. Besides the project may span over a longer period of several years, thus blocking capital of the company, which can be utilized into more important areas such as R & D, Expansion etc. than by staying invested into the project. 

Assignment C

Question No.  1          Marks - 10

Also referred to as "best practice benchmarking" or "process benchmarking", this process is used in management and particularly strategic management, in which organizations evaluate various aspects of their processes in relation to best practice companies´ processes   

Options          

  1. MATERIALS
  2. finance
  3. human resource
  4. Benchmarking

 Ans.Benchmarking 

Question No.  2          Marks - 10

In some companies materials management is also charged with the procurement of materials by establishing and managing a supply base   

Options          

  1. sale
  2. procurement
  3. lease
  4. hire 

Ans.procurement

Question No.  3          Marks - 10

This ... department ensures that the launch materials are procured for production and then transfers the responsibility to the plant materials management   

Options          

  1. logistics
  2. finance
  3. human resource
  4. legal

Ans.logistics

Question No.  4          Marks - 10

Most companies use ... systems such as SAP, Oracle, BPCS, MAPICS, and other systems to manage materials control.        

Options          

  1. ERP
  2. MRP
  3. SR
  4. TRP

Ans. ERP

Question No.  5          Marks - 10

One challenge for materials managers is to provide. releases to the supply base.            

Options          

  1. costly
  2. easy
  3. timely
  4. all 

Ans.timely

Question No.  6          Marks - 10

Materials management plans and designs for the   

Options          

  1. delivery
  2. storage
  3. distribution
  4. all 

Ans.all 

Question No.  7          Marks - 10

………….is the management of the flow of goods between the point of origin and the point of consumption in order to meet some requirements, of customers or corporations.        

Options          

  1. MATERIALS
  2. finance
  3. human resource
  4. logistics

Ans. logistics

Question No.  8          Marks - 10

 The resources managed in logistics can include 

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