Diploma in Business Enterprise IT School of Information Technology

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IT1566 (BPIS)
Tutorial 7 – Supply Chain Management

1. List the parties involved in the supply chain.

It involves supply, manufacturing and distribution.

Ans : suppliers, manufacturers, distributors/wholesalers, retailers, transporters

and consumers.

2. What are the three key flows in SCM? Briefly explain them.

-Product flow, information flow and finances flow.

Product flow includes the movement of goods from a supplier to a customer, as
well as any customer returns or service needs.

Information flow involves transmitting orders and updating the status of delivery.

Finances flow consists of credit terms, payment schedules etc.

Ans :

Product flow, information flow and financial flow.

The product flow includes the movement of goods from a supplier to a

customer, as well any customer returns or service needs.

The information flow involves transmitting orders and updating the status of
delivery among the various supply chain partners.

The financial flow involves credit terms, payment schedule for goods & services
across parties in the supply chain.

3. What is meant by supply chain downstream & upstream?

Supply chain downstream is the product flowing from the source toward the
customer. For example, the chain goes from distributors to retailers and then to
consumers.
Supply chain upstream are the activities performed previous to a specific point.
For example, the chain goes from manufactures to suppliers and then to raw.

Ans :

- Downstream refers to product, information or financial flow from suppliers to

customers.
- Upstream refers to product, information or financial flow from customers to
suppliers.
4. A company has reported that their costs of goods sold for the year is $200
million and their total average inventory is worth $55 million.

A) Compute the Inventory Turnover.

Inventory Turnover = Average cost of goods sold / Average inventory
= $3.64 millon

Ans :

Inventory turnover = 200/55

= 3.64

B) Explain the term Inventory Turnover.

It is a measure of the number of times inventory is sold or used in a time period

such as a year.

Ans :

Inventory turnover is a measure of the number of times inventory is sold or used

in a time period such as a year.

5. Supply chain can be broadly classified as Push and Pull models. Compare
these models by filling the table below:

Push Model Pull Model

Driven by: Forecasts Demand
Suitable where demand Low High
uncertainty is:
Order batch size Large Small
Delivery frequency Low High

6. List the advantages and disadvantages of the Push and Pull Models.

The advantages of Push Models are low probability that stock-out. However,
this takes a longer response time to react to marketplace changes. Whereas the
advantages of Pull Models is more flexible & responsive to customer demands.
However, there is higher probability that stock-out.

Ans :

Push Model Advantages

- Low probability that stock-out

- More control & predictability in supply chain
- Take advantage of economies of scale in production, transportation etc.
 Push Model Disadvantages

- Excessive inventories due to the need for large safety stocks.

- Longer response time to react to marketplace changes.

Pull Model Advantages

- Lower inventory required
- More efficient use of resources
- Decrease in lead time
- More flexible & responsive to customer demands

Pull Model Disadvantages

- Higher probability that stock-out
- More difficult to take advantage of economies of scale (cannot mass
produce beforehand)
- Difficult to implement

7. Successful SCM requires a change from managing individual functions to

integrating activities into key supply chain processes. List some of the key
supply chain processes.

Ans :

Customer relationship management

Customer service management
Demand management
Order fulfilment
Manufacturing flow management
Supplier relationship management
Product development and commercialization
Returns management

8. What is the difference between a supply chain and a value chain?

Ans :

Supply Chain - All activities involved in sourcing, production, and delivering a

final product, from the supplier’s supplier to the customer’s customer.

Value Chain – All internal and external processes that add value to a product or
service.
9. According to Michael Porter’s value chain model, what are the primary and
secondary/support activities that can add value to the product?

Ans :

Primary activities : Inbound Logistics, Operations (production), Outbound

Logistic, Sales and Marketing and Services (maintainenance).

Secondary or Support activities : administrative & infrastructure management,

human resource management, R&D and procurement.

10. Explain what is Supply Chain Operations Reference (SCOR) model.

It is a process reference model that has been developed and endorsed by the
Supply-Chain Council (SCC) as the cross-industry de facto standard diagnostic
tool for SCM.

Ans :

SCOR is a process reference model that enables users to address, improve,

and communicate supply chain management practices within and between all
interested parties.

11. SCOR is based on 3 major pillars. What are they?

Ans :

Process Modeling, Performance Measurements and Best Practices.

 12. SCOR has 5 distinct processes. Identify the process for the following
activities:

Ans :

A) Provide products to meet demand, including order management, transportation

and distribution.

Deliver

B) Transform product to a finished state to meet planned or actual demand.

Make

C) Procure goods and services to meet planned or actual demand

Source

D) Return products, post-delivery customer support.

Return

E) Develop a course of action that best meets sourcing, production and delivery
requirements.

Plan

13. List and explain the best practices in the SCOR model.

Current method must not be emerging and must not be out-dated.

Structured method has clearly stated Goal, Scope, Process and Procedure.
Proven method that success has been demonstrated in a working environment.
Repeatable method that the practice has been proven in multiple environments.

14. List the 4 SCOR framework levels.

Top level, configuration level, process element level and implementation level.
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