Name:

SARATH KUMAR NAIR

GR Number: D20701100003

Study centre: Usha Pravin Gandhi College of Management

Year of Registration: January- 2010

Programme Name: PGDSCM

Semester: Fourth

Course(Subject): Advanced Supply Chain Management

1. How will you manage inventory of short life cycle products? Explain Inventory is defined as the blocked Working Capital of an organization in the form of materials . As this is the blocked Working Capital of organization, ideally it should be zero. But we are maintaining Inventory. This Inventory is maintained to take care of fluctuations in demand and lead time. In some cases it is maintained to take care of increasing price tendency of commodities or rebate in bulk buying. Inventory Management must tie together the following objectives ,to ensure that there is continuity between functions : Companys Strategic Goals Sales Forecasting Sales & Operations Planning Production & Materials Requirement Planning. Inventory Management must be designed to meet the dictates of market place and support the companys Strategic Plan . The many changes in the market demand , new opportunities due to worldwide marketing , global sourcing of materials and new manufacturing technology means many companies need to change their Inventory Management approach and change the process for Inventory Control . Inventory Management system provides information to efficiently manage the flow of materials , effectively utilize people and equipment , coordinate internal activities and communicate with customers . Inventory Management does not make decisions or manage operations, they provide the information to managers who make more accurate and timely decisions to manage their operations. Managing inventory of short life cycle products: Inventory Models in which demand is assumed to be fixed and completely predeterminded. The heart of inventory analysis resides in the identification of relevant costs. The basic approach to determining fixed order sizes are

the economic order quantity (EOQ) models . The basic EOQ model is concerned primarily with the cost of ordering and the cost of holding Inventory.

Waiting for demand

Demand occurs, units withdrawn from inventory or back order

Is Position < Recorder point

< Issue an order for exactly Q units

Fixed- order Quantity system

The basic assumption in the model is as follow: 1. The rate of demand for the item is deterministics and is a constant D unis per annum independent of time. 2. The Production rate is infinite i.e production is instantaneous 3. Shortages are not allowed.

4. Lead time is Zero or constant and it is independent of both demand as well as the quantity ordered. 5. The Entire quantity is delivered as a single package. The objective of the model is to minismise the average annual variable costs. And it provides a solution to the problem of determining when an order should be place and how much sould be ordered. The schematic representation of the EOQ model is given in figure. It shows the inventory levelvs time relationship.

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Time In developing the EOQ model, we will attempt to minimise total annual costs by varying the order quantity, or lot size. From the figure it is obvious that since the inventory is consumed at uniform rate and since maximum inventory level is Q, the average inventory will be Q/2. The miniimum total annual cost(TC) of holding inventory is given by the formula:

TC

xAxDxrxv

Ordering cost and holding cost can be imagined as two children on a see saw. When one goes up, the other goes down and vice versa. This way out of this dilemma is to cmbine the two costs as total annual costs and worry only about minimizing that cost. EOQ Model with Lead Time In the above disussion we conisdered that lea time is zero. However , if lead time a constant the above results can be used without any modification.

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EOQ with a Fixed Lead Time Reorder level

If lead time is say constant and equal to L (in weeks ). The during leading time the consumptio is L xD units. This menas order will have to released for quantity the new order will arrive exactly after time period L at which time inventory level will by Zero and the system will repeat it self. The inventory level at which the order is released is known as reorder level is shown as above. It can be mathematically expressed by the question.

Economic order quantity model with shortages: This model considers the situation when back orders are allowed i.e stock out is allowed for some period in the system . in case of shortage of demand is assumed to reflect as a back order and is not lost. The model assumes three costs , unlike the earlier model that assumed only the first two costs shown below:

1. Ordering or set-up cost 2. Inventory holding cost and 3. Shortage or stock out cost.

The total annualaverage cost (TC) can be wriiten as : TC = ordering cost + Inventory holding cost + cost of back orders Total Annual cost= [(Q-S) 2 x v x r/2Q] + A x (D/Q) + S x 2 x b/2 x Q EOQ

The average inventory and stock out can be derived using the below figure. The average inventory during period T1 will be I and the inventory level during T2 us negative and hence in practise on hand on inventory will zero.

The acerage inventory through period T will be: Average Invenotory= (Q-S)2 /2Q Average inventory Holding cost= [(Q-S)2 /2Q] x v x r Q EOQ = x A x D/r x v) x ( (r x v + b)/b)

The above equation will be reduced to Q= Q EOQ TC = x A x D/r x v

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EOQ with a Fixed Lead Time Reorder level

Q.2) What is the impact of e-business on supply chain? The Internet era has revolutionized not only the way we conduct business but also the methods adopted with the management of the supply chain, such as the way businesses communicate with each other and how each member in the supply chain is impacted. The purpose of the study is to analyze how e-Business has influenced the supply chain management with reference to its past trends, present operations and future techniques. Throughout history, innovation and the adoption of new technologies have led to productivity improvements that generate stronger economic growth and higher living standards. In business, technological innovation over the past century has focused on the design and manufacturing processes that are used largely within individual firms. At the same time, the process of physically moving raw materials, components and products through a firms value chain comprises a significant portion of the total cost of goods in many industries. Mechanized transportation, telecommunications networks and integrated information systems have significantly helped supply chain managers improve their ability to plan, order, monitor, and evaluate their processes. In particular, new information technologies and e-business solutions have transformed supply chain operations from mass production to mass customization. This paper assesses the impact of these innovations on economic productivity. Using various empirical data, we trace the long-run economic impact from improved. supply-chain management practices brought on by systems that move more accurate. information faster and more cheaply. Our focus is on the macroeconomic benefits. resulting from the adoption of supply chain management techniques as they have evolved. from simple production and material requirements planning to todays real-time. performance-management information systems using advanced e-business technologies. Rather than focus on the individual firm as has commonly been the approach in. the literature In particular, we explore how the implementation of e-business technologies on supply. chain operations has affected prices, employment, economic output, living standards, and productivity. While our analysis is exploratory and does not consider all the potential factors that may impact these macroeconomic variables, we find

evidence that strongly suggests that the impact of e-business technologies on supply chain operations has benefited consumers and the macro-economy in many significant ways. In order to analyze the impact of e-business technologies on supply chain operations, we break down the supply chain into three distinct components: the business channel, the transportation/distribution channel, and the payments channel. All three channels have been transformed and have become more tightly interconnected by e-business technologies that bring more accurate information to decision-makers in real time. Information can be stripped from products/services and analyzed separately to make better decisions regarding production, distribution, marketing, sales, etc. Each of these channels is explored in greater detail below. The business channel of supply chain operations concerns what goods or services. A business should focus on producing and at what levels. This involves knowing your customer and satisfying their needs and desires. Information needed to make these decisions comes from the market as it sends out its many signals. Producing this information entails consumer and market research, and is often very data intensive to most accurately understand changing preferences, tastes, styles, etc. The transportation/distribution channel of supply chain operations addresses what is the best way to move products to customers, essentially answering the question, How should goods (and services) be moved and stored? This involves understanding the entire supply chain, from the raw materials to the end consumer, and then taking advantage of the most efficient and effective logistics and inventory systems. Again, information at all points along the supply chain can be integrated using new e-business technologies, enabling better decisions regarding necessary inventory levels and efficient movement of products. The payments channel of supply chains pertain to the best way to move money in exchange for delivered goods and services. The essential question addressed here is, How (and when) should suppliers be paid? Knowing and understanding the supply chain operations of all the firms involved is crucial to making the payments system flow smoothly and accurately. ERP systems that communicate and share information in real time can lead to competitive advantages. All three of these channels have

been transformed by new e-business technologies. The effective implementation of new information technologies allows firms to quickly collect and analyze important information throughout the supply chain, including monitoring demand in real-time. In short, information flows within and between businesses can be reorganized through e-business technologies, resulting in better and more timely decisions across all channels of the supply chain .