Technical, Vocational Education and Training Institute of Ethiopia
Department of Garment Technology
Assignments and projects SCM
By; Kassu Jilcha (PhD)
Chapter one Assignment Three: Principles of Supply Chain
Descriptive questions
1. Define and discuss the following issues
a. Quick Response
b. Logistic
c. Supply chain
d. Barcoding
e. CAD
f. JIT
2. What is the importance of Technologies Electronic Data Interchange (EDI) for Quick
Response supply chain operation?
3. One method of shaping an organization is to benchmark from a strategic and tactical
perspective.
a. What are types of benchmarking?
b. What are Benchmarking Logistics Process Key Steps?
c. What are the benefits of bench marking?
d. List out the basic key performance indicator /KPI/of benchmarking in SCM.
4. Overall supply chain inventory can be lowered if the manufacturer synchronizes its
production to be ready just in time to be shipped to the retailer.
a. What is the role of JIT in supply chain management quick response?
b. What are the Pros & Cons of Operational Efficiency in JIT system in SCM?
5. A recent concept for the supply of standard materials is the vendor managed inventory (VMI),
where the supplier decides on time and quantity of the shipments to the customer but has to
keep the stock in the customer’s warehouse between agreed minimum and maximum levels.
In this case, the customer’s warehouse has the same function as a DC, so that the planning of
VMI supply is similar to the DC replenishment.
a. What is Vendor Managed Inventory?
b. What is the scope of VMI?
c. What are the benefits of supplier And Distributor from VMI?
6. Case study of Postponements
Shall It Be Postponed?
Foxcompany (Fox) Co. Ltd. was founded in 1974 in Taiwan as a manufacturer of electrical
components for computers. With strong research and development efforts, by 2011, it had
accumulated more than 25,000 patents granted worldwide. Fox is now one of the world’s 500
biggest companies, according to Fortune magazine. Its biggest production operation is located in
Shenzhen Longlong Science & Technology Park, which covers more than 3 square km with 15
factories.
Not only does Fox have dormitories, a hospital, and a fire brigade, but it also broadcasts its own
TV channel within the park. Fox is highly specialized in producing computer components and
produces and packages private-label components for various famous brand names, including
Acer, Apple, Dell, and Hewlett-Packard. The components manufactured are basically identical
but are labeled and packaged differently for the various customers. The Shenzhen manufacturing
facility replenishes a distribution center (DC) in Taiwan where the lead time is nine weeks. Fox
adopts a continuous review policy to manage the inventory at its DC and wants to maintain a
cycle service level of 95 percent for all orders.
The previous month had been challenging: Apple asked for 5,000 extra units than were available
at the DC, whereas Acer and Dell ordered 3,500 units and 4,000 units fewer, respectively.
Although there was sufficient inventory available at the DC in the form of basic product, Fox
was not able to meet Apple’s demand because the excess inventory available was labeled and
packaged for Acer and Dell. As a result, Fox lost the extra business opportunity and surplus
inventory because of the wrong labels and packaging.
Labeling and Packaging at the DC To allow more flexibility for Fox production to accept such
additional orders from customers by simply switching the inventory, the senior logistics supply
chain manager proposes to postpone the labeling and packaging work to the DC, where the lead
time of manufacturing and transportation remains unchanged. As a consequence, Fox would be
able to meet Apple’s sudden additional order more readily if other customers (e.g., Acer) placed
a smaller order. However, the management at the DC worried about the additional labeling and
packaging work. Moreover, a detailed study revealed that the postponement would cost $1 more
per unit. In particular, the DC managers believed that those $1 increases in cost per unit would
be held against them once the process was changed and they would be under pressure to lower
costs. They also thought the added workload would affect the overall service level of the DC.
Evaluating the Two Options A task force was set up to look into this matter. It would focus its
study mainly on three major components—motherboards, graphics cards, and chassis—and the
four key customers—Acer, Apple, Dell, and HP. Weekly demand is shown in Table. In each case,
the mean denotes the average demand per week, and SD denotes the standard deviation of the
demand per week. Furthermore, all demands follow the normal distribution pattern. Fox incurred
a total cost of $100 per motherboard, $50 per graphics card, and $30 per chassis. As per the rule
of thumb of the industry, Fox used a holding cost of 30 percent when making all inventory
decisions. The task force studied the impact of postponement on safety inventories before
providing its final recommendation.
TABLE: Distribution of Weekly Demand by Product and Customer
Case Study Questions
1. What is the annual inventory cost before postponement?
a. How would the inventory cost change if postponement were implemented? Evaluate
the change in inventory costs as the correlation coefficient of demand between any
pair of customer varies from 0 to 0.5 to 1.0.
2. Should Fox postpone its labeling and packaging process to the DC? Would the answer
change if the additional cost of labeling and packaging at the DC were reduced to $0.5 (from
the current $1)?
Submission Date:
within a week of the end of chapter lecture
