SCLM End Term IV Notes
SCLM End Term IV Notes
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5. Cost Management in a Supply Chain
Cost management in a supply chain focuses on optimizing expenses across all
stages—from sourcing and production to distribution. The aim is to balance
quality and customer satisfaction while minimizing costs. Key strategies include
negotiating better rates with suppliers, reducing waste, optimizing inventory
levels, and improving logistics efficiency. For example, Walmart’s success is largely
attributed to its cost management strategy, using its bargaining power to
negotiate low prices and streamline its distribution network. Cost-effective supply
chain practices can significantly increase profit margins and competitive
positioning. Technologies like automation, artificial intelligence, and predictive
analytics also play a role in modern cost management by providing insights into
areas where expenses can be reduced without compromising on service quality.
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### OR: *Supply Chain of a T-Shirt Purchased Online and Customer Service
Management*
plaintext
Raw Material Source → Fabric Manufacturing → T-Shirt Production →
Warehousing → Order Fulfillment → Delivery to Customer
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### 3. *Risk Management in SCM with Focus on Natural Disaster and Climate
Change*
Risk management is about preparing for unexpected issues that can impact the
supply chain. Some of the most significant risks include natural disasters, such as
earthquakes, floods, or hurricanes, and the long-term impact of climate change.
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1. *Economy of Scale*: Moving large volumes of goods at once reduces the cost
per unit, making transportation more efficient and affordable.
2. *Economy of Distance*: The cost per mile or kilometer decreases as the
distance traveled increases, as fixed costs (like fuel) are spread out over a greater
distance.
3. *Flexibility*: Using different transportation modes (like trucks, ships, or planes)
based on customer needs or delivery timeframes.
4. *Dependability*: Ensuring reliable and timely deliveries builds customer trust
and maintains business operations smoothly.
5. *Responsiveness*: Choosing transportation options that allow for fast
deliveries when needed, such as using air freight for urgent shipments.
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### 4. *Voice of Process (VoP)*
Voice of Process (VoP) refers to the measurements taken to monitor how well a
process performs. It captures data like how long each task takes, the quality of
outcomes, and consistency in meeting standards.
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1. *Conveyor Belts* - Automated belts that move materials from one place to
another, commonly used in assembly lines.
2. *Forklifts* - Vehicles designed to lift and transport heavy loads, like pallets,
within warehouses or distribution centers.
3. *Pallet Jacks* - Tools for lifting and moving pallets; available in both manual and
electric versions for short-distance transport.
4. *Cranes* - Machines used to lift and move heavy items, often found in
construction or large warehouses.
5. *Automated Guided Vehicles (AGVs)* - Robots that carry goods from one place
to another without human intervention, often used in large warehouses.
1. *Planning Principle*
The planning principle emphasizes the importance of strategic planning in
material handling processes. Companies should analyze material handling needs,
including the type of materials to be moved, the movement frequency, the
distance covered, and safety considerations. A well-defined plan helps avoid
bottlenecks and reduces handling time, resulting in better efficiency.
Example: A retail distribution center might plan for optimal placement of items
based on order frequency, putting fast-moving items closer to loading bays to
minimize retrieval time.
2. *Standardization Principle*
Standardizing material handling methods and equipment helps improve
efficiency, reduce maintenance costs, and increase compatibility across different
stages of the supply chain. By using standardized containers, pallets, and
equipment, companies can simplify processes and reduce the need for specialized
training.
Example: Many companies, like Amazon, use standardized bins and conveyor
systems in warehouses. This enables easy sorting, handling, and transportation of
packages, irrespective of their destination or contents.
3. *Work Principle*
The work principle aims to minimize the effort required to move materials. This
can be achieved by reducing distances traveled, using efficient movement
patterns, and eliminating unnecessary handling steps. Using automation or
mechanized equipment can also minimize physical labor and improve overall
efficiency.
Example: Warehouses may use robotic arms to retrieve items from shelves,
reducing the amount of physical work required by human workers and speeding
up the picking process.
4. *Ergonomic Principle*
The ergonomic principle focuses on designing material handling processes and
equipment to ensure worker safety and comfort. It helps reduce workplace
injuries, fatigue, and errors, which can lead to a more productive workforce and
reduced downtime.
Example: In the beverage industry, bottles are often bundled into crates or cases,
making them easier to transport through the warehouse and reducing individual
handling requirements.
7. *System Principle*
Material handling should be integrated with other supply chain functions, such
as inventory management, production, and distribution. By creating a cohesive
system, companies can improve the flow of materials and information, leading to
more coordinated operations.
8. *Automation Principle*
The automation principle involves using automated systems like conveyors,
robots, and software for tasks such as sorting, retrieving, and moving materials.
Automation can reduce human error, increase speed, and improve consistency in
material handling.
9. *Environmental Principle*
This principle highlights the importance of environmental considerations in
material handling. Companies are encouraged to use recyclable or reusable
materials, reduce waste, and implement energy-efficient practices to lessen the
environmental impact of material handling operations.
Example: Companies like IKEA use flat-pack designs for their furniture, which
reduces packaging waste, optimizes space in transportation, and makes handling
easier, contributing to sustainability.
### Conclusion
Effective material handling is essential for the efficient operation of a supply chain.
By applying these principles, companies can reduce costs, enhance safety,
improve productivity, and support sustainability. Adopting automated and
integrated systems is especially valuable in large-scale operations, allowing
companies to streamline processes, adapt to changing demands, and maintain a
competitive edge in their industries.
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### Conclusion
Store design and layout mean how a store is arranged to make shopping easy and
enjoyable. In a hypermarket like *Big Bazaar* in India, these elements help
customers find what they need, feel comfortable, and enjoy the shopping
experience.
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### 5. *Lighting*
- Good lighting makes the store inviting and products easy to see.
- *Example*: Bright lights in the fresh produce area highlight freshness, while
softer lighting in clothing sections creates a relaxed feel.
Intel faced a substantial challenge in reducing supply chain costs for its low-cost
Atom chip. Unlike previous high-priced chips, the Atom’s price of $20 required a
substantial cost cut in the supply chain, as earlier processes were not sustainable
for this low-margin product. Here’s how Intel approached and addressed the
issue:
Reducing Order Cycle Time: Inventory levels were high due to a nine-week order
cycle, and Intel’s only viable option was to cut down this cycle time. By reducing
the cycle time, Intel could reduce the amount of inventory required to meet
demand.
Pilot Testing in Malaysia: Intel began testing process improvements with a pilot
project in Malaysia, which focused on identifying and eliminating inefficiencies.
This iterative process allowed Intel to refine their approach and gradually improve
cycle time.
Process Adjustments:
Reducing Assembly Test Time: Intel shortened the chip assembly test window
from five days to a bi-weekly, two-day schedule, speeding up production and
cutting down on idle inventory.
Formal S&OP (Sales and Operations Planning): Introducing S&OP helped Intel
better align demand forecasts with production schedules, reducing surplus
inventory.
Results: Intel's incremental changes drove the order cycle time for the Atom chip
down from nine weeks to two weeks, leading to a $4 reduction in supply chain
costs per chip. This new rate was far more sustainable for a product with a slim
margin.
Last-Mile Delivery: Amazon uses delivery partners or its own logistics to bring the
sugar to the customer’s doorstep.
End User (Customer): The sugar reaches you, the end user, completing the supply
chain.
Types of warehousing:
Private Warehousing: Owned by a company for its exclusive use. It offers more
control over operations.
Public Warehousing: A third-party facility available for rent. It's flexible for
seasonal demand.
Given data:
Unit price
EOQ formula:
EOQ = \sqrt{\frac{{2DS}}{H}}
Substituting values:
EOQ = \sqrt{\frac{{2 \times 6000 \times 250}}{300}} = \sqrt{\frac{{3,000,000}}
{300}} = \sqrt{10000} = 100 \text{ units}