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AEREN FOUNDATION’S Maharashtra Govt. Reg. No.: F-11724
Subject: Trade Documentation & Logistics
Total Marks: 80
Case 1
(10 Marks)
If you are appointed as the logistics consultant, then advise M/s BPL in respect of ‘
Question.(a) How to achieve economy in transportation, by maintaining almost same service level?
Answer:M/s. Britecolor Paints Ltd. (BPL) is a manufacturer of decorative paints for households, commercial premises and industrial application.
M/s. BPL had embarked on a policy of satisfying every possible customer in respect of shades, delivery and durability. Thus it went ahead and created 25 depots, one almost in every major city. The manufacturing base however was maintained at Pune. The factory received information in connection with stocks from depots once in a week and there was no inter-communication between depots. Since they were in a competitive market, price was predetermined, i.e. the manufacturer had no liberty to price the product as per one’s own
Question.(b) Demand Forecasting technique to take care of seasonality, reduction in inventory.
Answer:While on one hand M/s BPL had a population of very satisfied customers, they had almost 50%of their total domestic sales lying as finish goods inventory at various depots, on the other hand.Industrial paints, though not very customised, the respective industrial customer was quite satisfied. Consequently, the inventory of finished goods was very low in this segment. But at the same time, realisation was also lower due to stiff competition from other industrial paint manufacturers than the domestic segment.
To handle the increasing variety and complexity of managerial forecasting problems, many forecasting techniques have been developed in recent years
Question.(c) Information technology to substitute maintenance of high inventory without affecting customerservice level.
Answer:Nevertheless, the economic runs of industrial paints were always assured due to high off-take by the industrial customers.The following information is the minimum information required:
Maintenance Requirements from an Inventory System
On-line or real-time parts information is necessary to plan maintenance activities. The planner must know when selecting parts for a job that they are in stock, out of stock, in transit, etc. The planner must have current information.
If the information the planner has is current, he will
Question.(d) Connectivity between factory and depots (networking Diagram)
Answer:The objective of the manufacturer was to increase the realization taking into account, economic runs, inventory, seasonality and individual choices of domestic/industrial customer.I think the main problem lies is in their distribution and manufacturing locations. They have 25 depots and only one manufacturing unit and that to in pune. They should have chosen bhiwandibecasue it connects all national highways and because of that communication and availability of the product becomes more easy.
From the point of view of Customer, there is no difference, because he can claim Excise Credit to the extent he has received in your Excise Invoice (factory or Depot). From your point of view, as far as Excise Calculation is concerned, there is one
Case 2
(10 Marks)
In case you are appointed as logistic consultant to solve the problems, you are required to put forwardyour suggestions for:
Question.(a) Proper transportation policy to ensure minimum transportation loss of vegetables and poultry products and reduction in the packaging costs.
Answer:ABCL Ltd. is leading/ Fast Food Processing Company operating from Thane. It is involved in the fast food business since last 10 years and has tie up with a foreign firm operating in the same field. It handles both Vegetable as well Non—Vegetable products for which it arranges the vegetables and chickens from the local vegetable vendors and poultry farms as well as from far off places like Nasik, Pune and Aurangabad.
It has very good market in Mumbai, Pune and surrounding cities. The products are sold in the brand name of ‘Nasta’ which is very popular brand amongst the
Question.(b) Demand Forecasting techniques to take care of the seasonality, reduction in inventory and shortageand other related problems.
Answer:ABCL Ltd is a leading Fast Food Processing Company operating from Thane. It is involved in the fast food business since last 10 years and has a tie up with a foreign firm operating in the same field. It handles both vegetable as well as non-vegetable products for which it arranges the required vegetables and chickens from local vegetable vendors and poultry farms as well as from far off places like Nasik, Pune and Aurangabad. It has very good markets in Mumbai, Pune and the surrounding cities. The products are sold in the brand name of Nasta which is very popular brand among the young collegians and office goers. It has its most modern kitchen at New Mumbai to cater to the needs for fresh Nasta. Vegetables and chicken items are transported from the procurement centres of Nasik, Pune, Aurangabad
Question.(c) Suggestion for improved Purchase and Distribution policy.
Answer:The team of senior executives has recommended your name as a Logistics Consultant. You are required to put forward your suggestions for the following:
Proper transportation policy to ensure minimum transportation loss of vegetables of vegetables and poultry products and reduction in the packaging costs. Advice on the company owning its own fleet of transport.
Demand forecasting techniques to take care of
Question. (d) Is it advisable to have company owned dedicated transport fleet?
Answer:Although many companies use dedicated truck fleets to transport their goods, few give adequate thought to which type of configuration they choose for those fleets. But they should consider the options carefully, because this decision can have a significant impact on cost and service.
The term “dedicated fleet,” also known as “dedicated contract carriage,” refers to tractors, trailers, drivers, and other resources exclusively devoted to serving a set of facilities or lanes in a transportation network. They usually are owned or
Case 3
(10 Marks)
Mumbai Flour Mills provide high quality bakery flours to commercial bakers as well as to the consumer market. The commercial buyers have consistent demand and brand loyalty, whereas the consumers have minimal brand loyalty. They, instead, generally prefer known names over store brands. Demand is seasonal for the flour with the annual break occurring just before Diwali. It slacks off drastically during January and February. To offset both these phenomena, Mumbai Flour Mills and its major super market chain accounts carry out special deals and sales promotions.
The Production Planning Department of the company which is located at Akola in Maharashtra, has the responsibility of controlling the inventory level at the plant warehouse at Nagpur as well as the three distribution centres located at Nasik in Maharashtra, Bhopal in Madhya Pradesh and Hyderabad in Andhra Pradesh.
Planning has been routinely based on past experience and history. No formal forecasting is performed by the company. Distribution centres get their requirements by rail from Nagpur. The lead time of replenishment from Nagpur to distribution centres is 7 days. The replenishment rate is 48 to 54 pallets per wagon depending upon the type of wagon used. In case there is any emergency demand, then 18 pallets can be made available by truck with 3 days transit time.
Recently, the company has experienced two major stock-outs for its consumer size 5 kg sacks of refined quality white flour. One of these was problems in the milling operations, the other occurred when the marketing department initiated ‘buy-one-get-one-free’ coupon promotion. Ever since these events took place, the planning has become excessively couscous and hence, errs on the side having excessive inventories at the distribution centres. Additionally, two other events have affected distribution centre’s throughputs
(1) implementation of direct factory supply for replenishing the five largest super market chains and (2) a price increasing making the Mumbai Flour Mills more expensive than its national brand competitors such as Eillsburry, or Tata maida.
Out of the 1,500 pallets in Hyderabad distribution centre, the Mumbai Flour Mills shows only 396 pallets for open orders. This has led the company to use outside overflow storage where there are another 480 pallets. Flour is easily damaged. Hence, the company prefers to minimize handling. Overstocking at the distribution centres alone costs Rs. 1.85 per pallet for outside storage to which must be added Rs. 4.25 per pallet extra handling charges and Rs. 225 oer truck load for transportation. Similar scenarios are seen at other distribution centres as well.
Mr. Mohan, the distribution manager, is contemplating various approaches to solve the inventory problem. It is clear that the product must be in place at the time a consumer is making a decision to buy the product At the same time, the company cannot tolerate the overstocking situation and the stress that it is putting on facilities and cash flow. Mr. Mohan’s first thought is “better information system”, which will provide timely and accurate information throughout the organization.
Question.(1) Evaluate the alternative solution that could be considered by Mr. Mohan.
Answer:
Question.(2) What additional solution do you propose?
Answer:
Question.(3) Examine the transportation system and its drawbacks?
Answer:
Case 4
(10 Marks)
Question.(i) Examine the possibility of alternatives in transportation of the inbound and outbound materials?
Answer:M/s Modern Garments is the manufacturer of ladies and gents garments, such as tops, shirts, undergarments, etc. Their manufacturing technology is advanced and, at the same time, there are several players who have access to such latest technologies. The supply chain for M/s Modern Garments includes significant purchases of raw materials, stitching of garments, packaging of finished products and supply of goods to its customers.
The logistics functions are the key competitive elements in the market. M/s Modern Garments is considering to take over the control over its inbound and outbound logistics functions. These have a direct bearing upon the inventories, reduction in the losses due to transit delays and improvement in transit time and service reliability. However, the company has to look into the cost implications of such changes.
Question.(ii) How to reduce the cost of inbound and outbound logistics functions?
Answer:M/s Modern Garments have been the leader in the readymade shirts market in India for a number of years. After liberalization, they entered into a joint venture with a French company to expand its business in the area of trousers and T-shirts. Despite the new joint venture, M/s Modern Garments still continues to manufacture its shirts at Thane near Mumbai and has started a new state-of-art garment manufacturing plant at Pune in Maharashtra, to compete with other market players. The company has planned to undertake the distribution of garments made and packed in its plants at Navi Mumbai and Kalyan so as to retain the
Question.(iii) What could be the major problem in exploiting the inbound and outbound logistic functions?
Answer:After liberalization, the market has grown more matured and the expectations of the customers towards the features of the product have increased and also the technology and the design has improved considerably. Now, in the market only the garments with good delivery quality are acceptable. All the competitors have equally good quality product in the market. Presently the area of logistics distribution, customer service and satisfaction are the areas of prime concern in order to have extra value addition to the product. The product defects due to stitching, cutting and transportation are now under increasing scrutiny.
Question.(iv) Is it advisable to have dedicated transport system to operate packaged materials mainly for thecompany?
Answer:
Question.(v) What arrangements have to be made to ensure the service quality for customers?
Answer:From the cost control point of view, the amount of money held up in distribution pipeline is significant. The large variety of garments now means more raw materials and components are to be held in stock. Presently, the incoming supplies are arranged by the vendor firms and also, they may have to be persuaded to opt for jointly approved transporters. Due to product variations, the order fulfillment and its processing are of considerable importance. The traditional information system has become inadequate. There are over 500 retail outlets through which the finished products are distributed with the help of more than 50 transporters. Lead-time variability is creating problems of buffer stocks with the distributors. The transit time
Case 5
(10 Marks)
Question.1. What are the company’s present logistical problems?
Answer:‘The company has four state-of-an-art manufacturing plants accredited with ISO certification & backed by strong technical support from their foreign collaborators. The company is also having a well established all India distribution network consisting of numbers of dealers. The products flow from the manufacturing plants to the warehouses, managed & maintained by the company, located at different places across the country. The dealers draw their requirements from these warehouses for onward delivery to their customers, The inventory of the products is under the ownership of the company and is maintained as per
Case 6
(10 Marks)
Question.1. Identify the main logistical problems of the Company
Answer:Corporate managers traditionally have viewed logistics as a mandatory cost bucket. But top-performing companies now recognize that mastering supply chain and logistics can be more than that: It can be the source of competitive advantage.
This strategic shift opens up significant growth opportunities for logistics providers, with winners using different paths and business models to foster growth. The major challenges for providers are aligning corporate strategy with the right organizational model and matching that strategy to targeted customer segments—by size, footprint, vertical category and market. Leading logistics providers excel at understanding key customers’ needs
Question.2. To offer better customer service level and reduce the operating cost, how will you go aboutredesigning the distribution network?
Answer:Indeed, network studies have been known to reduce distribution costs by as much as 25 percent. But cutting too much can compromise your ability to provide the highest levels of service that your customers have been expecting. A lot of effort and energy needs to go into understanding how your network is performing today before you can start picking away at where the opportunities are.
To accomplish this, you start by asking the right
Case 7
(10 Marks)
Question.1. What is the main problem in this case? What are your suggestions to the company on inventorymanagement?
Answer:M/s. Decorative Laminates Corporation (DLC) is a supplier of decorative sheets for wooden furniture makers in domestic as well as commercial markets. In spite of competition in this field their sales volumes shown growth during last 2 to 3 years. The last year was recorded 15% more sales compared to previous year. Even though the sales volume are increasing the profit margin is getting reduced day by day due to future competition. In one of the monthly management review meetings it was observed that the main cause for depleting profitability is the increasing procurement costs. The report presented by the new Purchase Manger revealed that in order to obtain quantity discounts from the suppliers the company was purchasing inputs & other maintenance items much more than their actual requirements. This has
Question.2. What type of logistical cost approach you would suggest to the company?
Answer:Systems approach – indicates that company’s objectives can be realized by recognizing the mutual interdependence of the major functional areas of the firm, such as marketing, production, finance, and logistics.
Implications of the systems approach:
One logistics system does not fit all companies
Stock-keeping units (SKUs) or line items of inventory (stocks of goods that are maintained for a variety of purposes)
From logistics perspective – the proliferation of
Case 8
(10 Marks)
Question.1. What are the main problems in the logistical network of M/s. Compu-Tech?
Answer:M/s. Compu-Tech is on the reputed Indian companies producing various types of computer printers. Their production plant is situated at Noida in northern India and the products are distributed through distribution centers located in every region. The company introduced LS popular line of Desk Jet printers first time in India in 2005. Immediately on the launch of this products.
The solo more than one lacs units during that year. But the problems came with the boom in sales.
Q2. What solutions would you propose of overcome these problems?
Answer: To see lean perfected – study the NASCAR pit. In a matter of seconds, the pit crew has changed tires, wiped down the windshield, filled up fuel, and given the driver a drink of water. Everything is in the right place at the right time. If only every distribution center would run that smoothly. What’s clear is that mastering inventory levels is central to the equation of eliminating waste, but inventory management is becoming a vexing problem for some organizations – compounded by multi-channel distribution, inadequate demand forecasting, and a lack of communication among appropriate parties.
Taking a closer look at the experiences of
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