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(300-400) words

(Spring/Feb 2013

Master of Business Administration - MBA Semester 3

Operations Management Specialization

OM 0012 Supply Chain Management (4 credits)

(Book ID:B1234)

ASSIGNMENT- Set 1

Note: Assignment Set -1 must be written within 6-8 pages. Answer all questions.

Marks 60

Q1. Explain sixstep approach that helps an organisation perform

effective forecasting10 marks

Forecasting helps managers and businesses develop meaningful plans and reduce uncertainty of events in thefuture. Managers want to match supply with demand; therefore, it is essential for them to forecast how much

space they need for supply to each demand.

Two important aspects associated with forecasting are the expected level of demand and the forecast's degree o

accuracy. Two general approaches to forecasting are qualitative and quantitative. Also, there are three types of

forecasting techniques:

1. Judgmental forecasts,

2. Time-series forecasts, and

3. Associative models.

Judgmental forecasts rely on subjective inputs from various sources. Time-Series forecasts projects patterns

identified in recent time-series observations. A time-series is a time-ordered sequence of observations taken at

regular time intervals. Associative models are based on the development of an equation that summarizes theeffects of predictor variables. Predictor variables are used to predict values of the variable of our interest.

It is important to know how to calculate a forecast error: Error = Actual - Forecast. There are three ways of

measuring the accuracy of forecasts: MAD, MSE, and MAPE. MAD weighs all errors evenly. MSE weighs erroraccording to their squared values. Lastly, MAPE weighs according to relative error.

Qualitative forecasting is subjective, while quantitative forecasting involves projecting historical data, ordeveloping associative models. Judgmental forecasts are qualitative, while time-series forecasts and associative

models are both quantitative. Quantitative forecasting methods include the Nave forecasting method, the moving

average method, the weighted average method, and the exponential smoothing method. Forecasts are never 100%accurate; hence, there is always room for improvement.

Chapter 3 introduced different kinds of forecasting techniques; however no single technique works best in every

situation. Random variation is always present within forecasts and there will always be a degree of residual errorwithin forecasts. Forecasts are the basis for an organization's schedule, and therefore the accuracy of these

forecasts will dictate how many resources must be used, the output production, and the timing of a production

schedule.The higher the accuracy the higher the cost, therefore the best forecast is generated from some

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combination of accuracy and cost. The availability of historical data, computer software, as well as the time

needed to gather and analyze data must be taken into consideration when selecting a forecast technique.

Computers play an important role in preparing forecasts based on quantitative data.Because forecast error equalsthe actual value minus the forecast value. Positive errors will occur when the forecast is too low and negative

errors will occur when the forecast is too high.

There are a wide variety of forecasting techniques that can broadly be classified in three mainapproach

1. Judgmental Forecasts: Useful when forecasts must by done in a short period of time, when data is out

dated, unavailable, or there's limited time to collect it.

2. Time Series Forecasts: Most Common, are used to identify specific patterns in data and use them to

project future forecasts

3. Associative models: identify related variables in order to predict necessary forecasts.

Forecasting is a method used to predict and place all information mainly in design and operating systems.They both estimate what that information will look like in the future. In order to do so, one must determinthe purpose, establish a time horizon, select a forecasting technique, make it, and then monitor the newforecast. The methods used to decrease error include: Delphi method, naive method, and weighted average

method. A major issue in forecasting is seasonal variations because it has a repeating movement. This iswhere the control chart becomes important mainly because it monitors forecasting errors.

Q2. How CPFR model helps guiding Supply Chain partners in setting up

their relationship and processes.10 marks

(300-400) words

Collaborative Planning, Forecasting and Replenishment (CPFR, a trademarkof the Voluntary InterindustryCommerce Standards) (VICS) Association), is a concept that aims to enhance supply chain integration by

supporting and assisting joint practices. CPFR seeks cooperative management of inventory through joint visibility

and replenishment of products throughout the supply chain. Information shared between suppliers and retailers

aids in planning and satisfying customer demands through a supportive system of shared information. This allowfor continuous updating of inventory and upcoming requirements, making the end-to-end supply chain process

more efficient. Efficiency is created through the decrease expenditures for merchandising, inventory, logistics, an

transportation across all trading partners.

CPFR began as a 1995 initiative co-led by Wal-Mart's Vice President of Supply Chain, Chief Information Office

Vice President of Application Development, and the Cambridge, Massachusetts software and strategy firm,

Benchmarking Partners. The Open Source initiative, was originally called CFAR (pronounced See-Far, forCollaborative Forecasting and Replenishment). According to an October 21, 1996 Business Week article entitled

Clearing the Cobwebs from the Stockroom, New Internet software may make forecasting a snap , "Benchmarkingdeveloped CFAR with funding from Wal-Mart, IBM, SAP, and Manugistics. The latter two are makers of

accounting and supply chain management software, respectively. To promote CFAR as a standard, Benchmarkin

has posted specifications on the Web and briefed more than 250 companies, including Sears, J.C. Penney, and

Gillette. About 20 companies are implementing CFAR."

Warner Lambert (now part ofPfizer) served as the first pilot for CFAR. The pilot's results were publicly

announced at a CFAR industry session at Harvard University, July 30, 1996 of executives from Wal-Mart'ssuppliers as well as other retailers and the Uniform Code Council. Benchmarking Partners then presented CFAR

to the Board of Directors of the Voluntary Interindustry Commerce Standards Committee (VICS). VICS

http://www.vics.org/committees/cpfr/http://en.wikipedia.org/wiki/Trademarkhttp://en.wikipedia.org/w/index.php?title=Voluntary_Interindustry_Commerce_Standards&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Voluntary_Interindustry_Commerce_Standards&action=edit&redlink=1http://www.vics.org/http://en.wikipedia.org/wiki/Supply_chainhttp://en.wikipedia.org/wiki/Wal-Marthttp://en.wikipedia.org/wiki/IBMhttp://en.wikipedia.org/wiki/SAP_AGhttp://en.wikipedia.org/wiki/Manugisticshttp://en.wikipedia.org/wiki/Supply_chain_management_softwarehttp://en.wikipedia.org/wiki/Sears,_Roebuck_and_Companyhttp://en.wikipedia.org/wiki/J.C._Penneyhttp://en.wikipedia.org/wiki/The_Gillette_Companyhttp://en.wikipedia.org/wiki/Warner_Lamberthttp://en.wikipedia.org/wiki/Pfizerhttp://en.wikipedia.org/wiki/Harvard_Universityhttp://en.wikipedia.org/wiki/Uniform_Code_Councilhttp://www.vics.org/committees/cpfr/http://en.wikipedia.org/wiki/Trademarkhttp://en.wikipedia.org/w/index.php?title=Voluntary_Interindustry_Commerce_Standards&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Voluntary_Interindustry_Commerce_Standards&action=edit&redlink=1http://www.vics.org/http://en.wikipedia.org/wiki/Supply_chainhttp://en.wikipedia.org/wiki/Wal-Marthttp://en.wikipedia.org/wiki/IBMhttp://en.wikipedia.org/wiki/SAP_AGhttp://en.wikipedia.org/wiki/Manugisticshttp://en.wikipedia.org/wiki/Supply_chain_management_softwarehttp://en.wikipedia.org/wiki/Sears,_Roebuck_and_Companyhttp://en.wikipedia.org/wiki/J.C._Penneyhttp://en.wikipedia.org/wiki/The_Gillette_Companyhttp://en.wikipedia.org/wiki/Warner_Lamberthttp://en.wikipedia.org/wiki/Pfizerhttp://en.wikipedia.org/wiki/Harvard_Universityhttp://en.wikipedia.org/wiki/Uniform_Code_Council

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established an industry committee to prepare for rolling CFAR out as an international standard. The original

committee was co-chaired by the Vice President of Customer Marketing from Nabisco and the Vice President of

Supply chain from Wal-Mart. Based on the suggestion of Procter & Gamble's Vice President of Supply Chain, thstandard was renamed CPFR to emphasize the role of planning in the collaborative process.

The first publication of the VICS CPFR Voluntary Guidelines came out in 1998. Currently there are committees

"to develop business guidelines and roadmaps for various collaborative scenarios, which include upstreamsuppliers, suppliers of finished goods and retailers, which integrate demand and supply planning and execution.

The committee is continuing to improve the existing guidelines, tools and critical first steps that enable the

implementation of CPFR." These committees gained experience from pilot studies which have occurred over thepast six years. VICS continues to lead much of the research and implementation of CPFR through its guidelines

and project investigations.

Q3. Explain the components of Procurement10 marks(300-400) words

Procurement is the acquisition of appropriate goods and/or services at the best possible total cost o

ownership to meet the needs of the purchaser in terms of quality and quantity, time, and locationCorporations and public bodies often define processes intended to promote fair and open competitio

for their business while minimizing exposure to fraud and collusion.

Overview

Almost all purchasing decisions include factors such as delivery and handling, marginal benefit, an

price fluctuations. Procurement generally involves making buying decisions under conditions of scarcit

If good data is available, it is good practice to make use of economic analysis methods such as cos

benefit analysis orcost-utility analysis.

An important distinction is made between analysis without risk and those with risk. Where risk

involved, either in the costs or the benefits, the concept ofexpected value may be employed.

Based on the consumption purposes of the acquired goods and services, procurement activities ar

often split into two distinct categories. The first category being direct, production-related procuremen

and the second being indirect, non-production-related procurement.

Direct procurement occurs in manufacturing settings only. It encompasses all items that are part o

finished products, such as raw material, components and parts. Direct procurement, which is the focu

in supply chain management, directly affects the production process of manufacturing firms. In contras

indirect procurement activities concern operating resources that a company purchases to enable it

operations. It comprises a wide variety of goods and services, from standardised low value items lik

office supplies and machine lubricants to complex and costly products and services lik

heavy equipment and consulting services.

http://en.wikipedia.org/wiki/Total_cost_of_ownershiphttp://en.wikipedia.org/wiki/Total_cost_of_ownershiphttp://en.wikipedia.org/wiki/Scarcityhttp://en.wikipedia.org/wiki/Cost-benefit_analysishttp://en.wikipedia.org/wiki/Cost-benefit_analysishttp://en.wikipedia.org/wiki/Cost-utility_analysishttp://en.wikipedia.org/wiki/Riskhttp://en.wikipedia.org/wiki/Expected_valuehttp://en.wikipedia.org/wiki/Supply_chain_managementhttp://en.wikipedia.org/wiki/Lubricantshttp://en.wikipedia.org/wiki/Equipmenthttp://en.wikipedia.org/wiki/Total_cost_of_ownershiphttp://en.wikipedia.org/wiki/Total_cost_of_ownershiphttp://en.wikipedia.org/wiki/Scarcityhttp://en.wikipedia.org/wiki/Cost-benefit_analysishttp://en.wikipedia.org/wiki/Cost-benefit_analysishttp://en.wikipedia.org/wiki/Cost-utility_analysishttp://en.wikipedia.org/wiki/Riskhttp://en.wikipedia.org/wiki/Expected_valuehttp://en.wikipedia.org/wiki/Supply_chain_managementhttp://en.wikipedia.org/wiki/Lubricantshttp://en.wikipedia.org/wiki/Equipment

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Procurement topics

Procurement vs acquisition

The US Defense Acquisition University (DAU) defines procurement as the act of buying goods an

services for the government.

DAU defines acquisition as the conceptualization, initiation, design, development, test, contracting

production, deployment, Logistics Support (LS), modification, and disposal of weapons and othe

systems, supplies, or services (including construction) to satisfy Department of Defense need

intended for use in or in support of military missions.

Acquisition is therefore a much wider concept than procurement, covering the whole life cycle o

acquired systems. Multiple acquisition models exist, one of which is provided in the following section.

Procurement systems

Another common procurement issue is the timing of purchases. Just-in-time is a system of timing th

purchases of consumables so as to keep inventory costs low. Just-in-time is commonly used b

Japanese companies but widely adopted by many global manufacturers from the 1990s onwards

Typically a framework agreement setting terms and price is created between a supplier and purchase

and specific orders are then called-offas required.

Shared services

In order to achieve greatereconomies of scale, an organizations procurement functions may be joine

into shared services. This combines several small procurement agents into one centralize

procurement system.

Procurement process

Procurement may also involve a bidding process i.e, Tendering. A company may want to purchase

given product or service. If the cost for that product/service is over the threshold that has bee

established (eg: Company X policy: "any product/service desired that is over $1,000 requires a biddin

process"), depending on policy or legal requirements, Company X is required to state th

product/service desired and make the contract open to the bidding process. Company X may have te

submitters that state the cost of the product/service they are willing to provide. Then, Company X wi

usually select the lowest bidder. If the lowest bidder is deemed incompetent to provide the desired

product/service, Company X will then select the submitter who has the next best price, and

competent to provide the product/service. In the European Union there are strict rules on procuremen

http://en.wikipedia.org/wiki/Defense_Acquisition_Universityhttp://en.wikipedia.org/wiki/Military_acquisitionhttp://en.wikipedia.org/wiki/United_States_Department_of_Defensehttp://en.wikipedia.org/wiki/Just-in-time_(business)http://en.wikipedia.org/wiki/Inventoryhttp://en.wikipedia.org/w/index.php?title=Call-off_contract&action=edit&redlink=1http://en.wikipedia.org/wiki/Economies_of_scalehttp://en.wikipedia.org/wiki/Shared_serviceshttp://en.wikipedia.org/wiki/Biddinghttp://en.wikipedia.org/wiki/Defense_Acquisition_Universityhttp://en.wikipedia.org/wiki/Military_acquisitionhttp://en.wikipedia.org/wiki/United_States_Department_of_Defensehttp://en.wikipedia.org/wiki/Just-in-time_(business)http://en.wikipedia.org/wiki/Inventoryhttp://en.wikipedia.org/w/index.php?title=Call-off_contract&action=edit&redlink=1http://en.wikipedia.org/wiki/Economies_of_scalehttp://en.wikipedia.org/wiki/Shared_serviceshttp://en.wikipedia.org/wiki/Bidding

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processes that must be followed by public bodies, with contract value thresholds dictating wha

processes should be observed (relating to advertising the contract, the actual process etc).

Procurement steps

Procurement life cycle in modern businesses usually consists of seven steps:

Information gathering: If the potential customer does not already have an establishe

relationship with sales/ marketing functions of suppliers of needed products and services (P/S),

is necessary to search for suppliers who can satisfy the requirements.

Supplier contact: When one or more suitable suppliers have been identified, requests fo

quotation, requests for proposals, requests for information orrequests for tendermay b

advertised, or direct contact may be made with the suppliers.

Background review: References for product/service quality are consulted, and an

requirements for follow-up services including installation, maintenance, and warranty ar

investigated. Samples of the P/S being considered may be examined, or trials undertaken. Negotiation: Negotiations are undertaken, and price, availability, and customization possibilitie

are established. Delivery schedules are negotiated, and a contract to acquire the P/S

completed.

Fulfillment: Supplier preparation, expediting, shipment, delivery, and payment for the P/S ar

completed, based on contract terms. Installation and training may also be included.

Consumption, maintenance, and disposal: During this phase, the company evaluates th

performance of the P/S and any accompanying service support, as they are consumed.Renewal: When the P/S has been consumed and/or disposed of, the contract expires, or the product o

service is to be re-ordered, company experience with the P/S is reviewed. If the P/S is to be re-orderedthe company determines whether to consider other suppliers or to continue with the same supplier

Q4. Describe the various steps in the Supply Chain Management processthat facilitates the development and structuring of a relationship basedmapping

10 marks(300-400) words

Supply-chain operations reference-model (SCOR) is a process reference model developed by the management

consulting firm PRTM, now part of PricewaterhouseCoopers LLP (PwC) and endorsed by the Supply-ChainCouncil (SCC) as the cross-industry de facto standard diagnostic tool forsupply chain management. SCOR

enables users to address, improve, and communicate supply chain management practices within and between all

interested parties in the extended enterprise.

SCOR is a management tool, spanning from the supplier's supplier to the customer's customer. The model has

been developed by the members of the Council on a volunteer basis to describe the business activities associatedwith all phases of satisfying a customer's demand.

The model is based on 3 major "pillars":

Process modeling

http://en.wikipedia.org/wiki/Request_for_quotationhttp://en.wikipedia.org/wiki/Request_for_quotationhttp://en.wikipedia.org/wiki/Request_for_proposalhttp://en.wikipedia.org/wiki/Request_for_informationhttp://en.wikipedia.org/wiki/Request_for_tenderhttp://en.wikipedia.org/wiki/Warrantyhttp://en.wikipedia.org/wiki/Negotiationhttp://en.wikipedia.org/wiki/Expeditinghttp://en.wikipedia.org/wiki/Reference_modelhttp://en.wikipedia.org/wiki/PRTMhttp://en.wikipedia.org/wiki/Supply-Chain_Councilhttp://en.wikipedia.org/wiki/Supply-Chain_Councilhttp://en.wikipedia.org/wiki/Supply_chain_managementhttp://en.wikipedia.org/wiki/Extended_enterprisehttp://www.supply-chain.org/page.ww?section=Members&name=Member+Companieshttp://en.wikipedia.org/wiki/Request_for_quotationhttp://en.wikipedia.org/wiki/Request_for_quotationhttp://en.wikipedia.org/wiki/Request_for_proposalhttp://en.wikipedia.org/wiki/Request_for_informationhttp://en.wikipedia.org/wiki/Request_for_tenderhttp://en.wikipedia.org/wiki/Warrantyhttp://en.wikipedia.org/wiki/Negotiationhttp://en.wikipedia.org/wiki/Expeditinghttp://en.wikipedia.org/wiki/Reference_modelhttp://en.wikipedia.org/wiki/PRTMhttp://en.wikipedia.org/wiki/Supply-Chain_Councilhttp://en.wikipedia.org/wiki/Supply-Chain_Councilhttp://en.wikipedia.org/wiki/Supply_chain_managementhttp://en.wikipedia.org/wiki/Extended_enterprisehttp://www.supply-chain.org/page.ww?section=Members&name=Member+Companies

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Performance measurements

Best practices

The process modeling pillar

By describing supply chains using process modeling building blocks, the model can be used to describe supply

chains that are very simple or very complex using a common set of definitions. As a result, disparate industriescan be linked to describe the depth and breadth of virtually any supply chain.

SCOR is based on five distinct management processes: Plan, Source, Make, Deliver, and Return.

Plan Processes that balance aggregate demand and supply to develop a course of actionwhich best meets sourcing, production, and delivery requirements.

Source Processes that procure goods and services to meet planned or actual demand.

Make Processes that transform product to a finished state to meet planned or actualdemand.

Deliver Processes that provide finished goods and services to meet planned or actualdemand, typically including order management, transportation management, anddistribution management.

Return Processes associated with returning or receiving returned products for any reason.These processes extend into post-delivery customer support.

Enable - New process since Version 11 (Dec 2012).

With all reference models, there is a specific scope that the model addresses. SCOR is no different and the model

focuses on the following:

All customer interactions, from order entry through paid invoice.

All product (physical material and service) transactions, from your suppliers supplier to youcustomers customer, including equipment, supplies, spare parts, bulk product, software,etc.

All market interactions, from the understanding of aggregate demand to the fulfillment ofeach order.

SCOR does not attempt to describe every business process or activity. Relationships between these processes can

be made to the SCOR and some have been noted within the model. Other key assumptions addressed by SCOR

include: training, quality, information technology, and administration (not supply chain management). These area

are not explicitly addressed in the model but rather assumed to be a fundamental supporting process throughoutthe model.

SCOR provides three-levels of process detail. Each level of detail assists a company in defining scope (Level 1),configuration or type of supply chain (Level 2), process element details, including performance attributes (Level

3). Below level 3, companies decompose process elements and start implementing specific supply chain

management practices. It is at this stage that companies define practices to achieve a competitive advantage, andadapt to changing business conditions.

SCOR is a process reference model designed for effective communication among supply chain partners. As an

industry standard it also facilitates inter and intra supply chain collaboration, horizontal process integration, byexplaining the relationships between processes (i.e., Plan-Source, Plan-Make, etc.). It also can be used as a data

input to completing an analysis of configuration alternatives (e.g., Level 2) such as: Make-to-StockorMake-To-

Order. SCOR is used to describe, measure, and evaluate supply chains in support of strategic planning and

continuous improvement.

http://en.wikipedia.org/wiki/Build_to_Stockhttp://en.wikipedia.org/wiki/Build_to_Orderhttp://en.wikipedia.org/wiki/Build_to_Orderhttp://en.wikipedia.org/wiki/Build_to_Stockhttp://en.wikipedia.org/wiki/Build_to_Orderhttp://en.wikipedia.org/wiki/Build_to_Order

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Q5. Assess the role of E-business in a Supply Chain 10 marks(300-400) words

The ability to adapt to change, by quickly and easily locating new services or partners, learning their specific

capabilities, and forming a rapid "electronic bond" with them.

1. Introduction: A supply chain is a network of facilities and distribution options for the entire network o

companies to work together to design, produce, deliver, and service products. Since its inception about 10 year

ago, the field of supply chain management has become tremendously important to companies in an increasinglcompetitive global marketplace. On the contrary, e-commerce does not just mean trading and shopping on th

Internet. It means business efficiency at all operation levels. Executives know it is critical to effective busines

operations, but until now quantifiable performance measures have been as scarce. A very of us in the corporat

level who heard of the phrase "supply chain management" (SCM).

2. Definition & Relation with E-Commerce: Supply Chain Management means coordinating, scheduling ancontrolling procurement, production, inventories and deliveries of products and services to customers. The SCM

the backbone of Ecommerce, a very critical component of E-commerce. Supply Chain Efficiency means havin

the right product at the right place at the right time, can save money/reduce costs, and can enhance casutilization.

3. Leading Role of E- Commerce: So, lets going to highlight the leading role of e-commerce over supply chai

management.A. OVER ALL LEADING ROLE

1. Integrated, automatic system-to-system interaction with all trading partnersIn a simple phrase, an integrated supply chain management (SCM) system is the backbone to achieve the abov

ebusiness objectives. Although the phrase SCM interprets different meanings to different people but one fact i

clear: businesses have been striving to achieve efficiency in their "sourcing," "making" and "delivering"2. The ability to integrate those interactions seamlessly with your in-house applications and processes to provid

true end-to-end visibility and control

SupplyChain Management means coordinating, scheduling and controlling procurement, production, inventorie

and deliveries of products and services to customers. It includes all the steps people does everyday in his/headministration, operations, logistics, and information processing from your customers to suppliers.

3. A high-quality and reliable means of exchanging messages over the Internet, which provides business-levguarantees of delivery and integritySupply Chain Efficiency can improve customer service - having the right product at the right place at the righ

time. Supply Chain Efficiency can save money/reduce costs. According to a recent benchmarking study conducte

byPittiglio Rabin Todd & McGrath, one of the founders of the Supply-Chain Council, best in class companies hav

an advantage in total supply chain management cost of 3 to 6 percent of revenue.

Total supply chain management cost = Order-Management Cost+, Material Acquisition Cost+ Inventory CarryinCost+ Supply-Chain Finance Cost+ Planning Cost+ MIS Costs.

The global rush toward e-business is having a profound impact on organizations in very industry. It affects not

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only how they do business with their customers, suppliers, distributors and other trading partners, but also howthey must manage their businesses internally. What is more, the nature of e-business itself is rapidly evolving,further compounding the rate at which business transformation must occur. Business world is moving ever fasterthan before. Adaptation to change is very important for any e-business software. Agility will become a necessityfor any e-business infrastructure software. The credit on payment over Internet and lawful accounting practiceswill be a serious problem to affect e-business development. It relates to legal aspects and law enforcementpractices. It will be a very hard fight to overcome legal hurdles.Purposea. To increase enterprise satisfaction and confidence in doing business on the

Internet.b.To establish credibility and trustworthiness of enterprises, suppliers, anddistributors.c. To help enterprises provide a world-class customer experience, innovaterapidly and lower their costs.d. To support and enhance self-regulation of B2B Internet commerce.

Q6. What are the processes involved in Reverse Supply Chain

Management?

10 marks(300-400) words

Supply chain management (SCM) is the management of an interconnected or interlinked between network,

channel and nodebusinesses involved in the provision ofproduct and service packages required by the end

customers in a supply chain. Supply chain management spans all movement and storage ofraw materials, work-in-process inventory, and finished goods from point of origin to point of consumption.

Another definition is provided by the APICS Dictionary when it defines SCM as the "design, planning, execution

control, and monitoring of supply chain activities with the objective of creating net value, building a competitive

infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performanceglobally."

SCM draws heavily from the areas ofoperations management,logistics,procurement, information technology anstrives for an integrated approach.

Problems addressed

Supply chain management must address the following problems:

Distribution Network Configuration: number, location and network missions of suppliersproduction facilities, distribution centers, warehouses, cross-docks and customers.

Distribution Strategy: questions of operating control (e.g. centralized, decentralized orshared); delivery scheme (e.g. direct shipment, pool point shipping, cross docking, directstore delivery (DSD), closed loop shipping); mode of transportation (e.g. motor carrier,including truckload, Less than truckload (LTL), parcel, railroad, intermodal transport,including trailer on flatcar (TOFC) and container on flatcar (COFC), ocean freight, airfreight);replenishment strategy (e.g. pull, push or hybrid); and transportation control (e.g. owner-operated, private carrier, common carrier, contract carrier, or third-party logistics (3PL)).

Trade-Offs in Logistical Activities: The above activities must be well coordinated in ordeto achieve the lowest total logistics cost. Trade-offs may increase the total cost if only one othe activities is optimized. For example, full truckload (FTL) rates are more economical on acost per pallet basis than LTL shipments. If, however, a full truckload of a product is ordered

to reduce transportation costs, there will be an increase in inventory holding costs which

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may increase total logistics costs. It is therefore imperative to take a systems approachwhen planning logistical activities. These trade-offs are key to developing the most efficientand effective Logistics and SCM strategy.

Information: Integration of processes through the supply chain to share valuableinformation, including demand signals, forecasts, inventory, transportation, potentialcollaboration, etc.

Inventory Management: Quantity and location of inventory, including raw materials, work

in-process (WIP) and finished goods.

Cash-Flow: Arranging the payment terms and methodologies for exchanging funds acrossentities within the supply chain.

Supply chain execution means managing and coordinating the movement of materials, information and fundsacross the supply chain. The flow is bi-directional. SCM applications provide real-time analytical systems that

manage the flow of product and information throughout the enterprise supply chain network.