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BITS PILANI Second Semester 2006-07

Birla Institute of Technology and Science, Pilani


Comprehensive Examination
Second Semester 2006-07
Supply Chain Management (ITEB G621)
Closed Book Date: 08/05/2007 (AN)
Max Mark: 40 Max. Time: 3 Hours

Q1. a) What do you understand by bullwhip effect? Also explain its impact on supply chain
performance. [2]
b) Discuss the managerial levers that help in achieving coordination in a supply chain. [3]
c) What is ERP and how did it come about? How can an organization implement ERP system? [2]

Q2. a) Most firms offer their sales force monetary incentives based on exceeding a specified target.
What are some pros and cons of this approach? How would you modify these contracts to
rectify some of the problems? [2]
b) Discuss key drivers that may be used to tailor transportation. How does tailoring help? [3]
c) Discuss the managerial levers available to lower safety inventory and improve product
availability. [2.5]

Q3. a) What is the difference between lot size-based and volume-based quantity discounts? [1]
b) Discuss the issues that should be considered when implementing aggregate planning for supply
chain in practice. [2]
c) Why is it important to consider uncertainty when evaluating supply chain design decisions? [1]

Q4. a) Give arguments to support the statement that Wal-Mart has achieved very good strategic fit
between its competitive and supply chain strategies. [2]
b) How has globalization made strategic fit even more important to a company’s success? [1.5]

Q5. The Knitting Company (TKC) planning for its four styles those are popular during Christmas. All
four styles have demand that is normally distributed. The best-selling style has an expected
demand of 30,000 and a standard deviation of 5,000. Each of the other three styles has an
expected demand of 8,000 with a standard deviation of 4,000.Currently all sweaters are produced
before the start of the season .Production cost is $20 per sweater and they are sold for whole sale
price to $35. Any unsold sweaters at the end of the season are discounted to $15 and they all sell
at that price. It costs $2 to hold the sweater in inventory for the entire season if it does not sell.
• How many sweaters of each type should TKC manufacture?
• TKC is considering the postponement of knitting and using very flexible machines. This
will require the base sweaters to be made in advance (identical for each of the four types)
and the final patterns to be knit later. This will increase production cost per sweater to
$21.40.How many sweaters should TKC manufacturer with postponement to maximize the
profit? [6]

ITEB G621 Comprehensive Examination 1


BITS PILANI Second Semester 2006-07

Q6. Books-On-Line, an on line bookseller, charges its customers a shipping charge of $4 fro the first
book and $1 for each additional book, the average customer order contains 4 books. Books-On-
Line currently has one warehouse in Seattle and ships all orders from there. For shipping purposes,
Books-On-Line divides the US in to three zones i.e. western, central and eastern. Shipping cost
incurred by Books-On-line per customer order (average 4 books) is $2 within the same Zone, $3
between adjacent Jones, and $4 between nonadjacent zones. Weekly demand from each zone is
independent and normally distributed with a mean of 50,000 and standard deviation of 25,000.
Each book costs on average $10 and the holding cost incurred by Books-On-Line is 25 percent.
Books-on-line replenishes inventory every week and aims for a 99.7 percent CSL. Assume a
replenishment lead time of one week. A warehouse is designed to carry 50 percent more than the
replenishment order +safety stock. The fixed cost of ware house is $200,000+x, where is x is the
capacity in books. The weekly operating cot of a warehouse is $0.1y, where y is the number of
books shipped. Books-On-Line is planning to centralize all demand in one warehouse. Detail all
costs involved and mention the total cost involved in this option. [6]

Q7. ABC manufacturing has decided to introduce a new line of products. The Company wants to open
one or more production facilities to serve six geographic markets. It has narrowed the set of
possible sites to five and two plant capacities are possible at set either 150,000 or 300,000 units
per year. The fixed cost of smaller plant is $ 1,500,000 per year (including amortization of initial
cost) or $2,800,000 per year. The cost per unit of production is $ 20 for small plant and $ 19 for
larger plant. Formulate the problem to determine:
• The number of plants to open.
• The location of the plants that are to be opened.
• The capacity of each plant that is to open.
• The number of units to produce at each plant and ship to each market in order to minimize
the total cost of supplying the six markets with products.
Clearly mention the decision variables and input parameters. [6]

Unit transport costs and demands for ABC manufacturing


A B C D E F
AA 11 8 12 18 10 7
BB 9 4 11 20 12 6
CC 3 12 19 27 16 5
DD 25 19 9 6 13 21
EE 26 15 7 8 9 20
EAD (000) 70 120 80 150 100 130
EAD: Expected annual demand; PS: Potential Site; M: Market

ITEB G621 Comprehensive Examination 2


BITS PILANI Second Semester 2006-07

ITEB G621 Comprehensive Examination 3