2020

Presented on: 03-07-2020

Proposed to:
Bangladesh Institute of Human
Resource Management (BIHRM)
Supply Chain Management

Assignment

Proposed by:

Md. Yousuf Ali

Roll No: SCM-8053/820-1st Semester
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 Bangladesh Institute of Human Resource Management (BIHRM)

Supply Chain Management

1) What do you mean by Supply Chain Management (SCM)?

Answer to the question No 01

Supply chain management (SCM) is the broad range of activities required to plan, control and execute a
product's flow from materials to production to distribution in the most economical way possible.
SCM encompasses the integrated planning and execution of processes required to optimize the flow of
materials, information and capital in functions that broadly include demand planning, sourcing,
production, inventory management and logistics -- or storage and transportation. Companies use both
business strategy and specialized software in these endeavors to create a competitive advantage.
Supply chain management is an expansive and complex undertaking that relies on each partner -- from
suppliers to manufacturers and beyond -- to run well. Because of this, effective supply chain
management also requires change management, collaboration and risk management to create alignment
and communication between all the participants.
In addition, supply chain sustainability -- which covers environmental, social and legal issues, in
addition to sustainable procurement -- and the closely related concept of corporate social responsibility
-- which evaluates a company's effect on the environment and social well-being -- are areas of major
concern for today's companies.

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2) Explain the drivers/areas of SCM.

 Answer to the question No 02

Supply chain capabilities are guided by the decisions you make regarding the five supply chain drivers.
Each of these drivers can be developed and managed to
emphasize responsiveness or efficiency depending on changing business requirements. As you
investigate how a supply chain works, you learn about the demands it faces and the capabilities it needs
to be successful. Adjust the supply chain drivers as needed to get those capabilities.  

The five drivers provide a useful framework for thinking about supply chain capabilities. Decisions
made about how each driver operates will determine the blend of responsiveness and efficiency a supply
chain is capable of achieving. The five drivers are illustrated in the diagram below:

1. PRODUCTION – This driver can be made very responsive by building factories that have a lot of
excess capacity and use flexible manufacturing techniques to produce a wide range of items.  To be
even more responsive, a company could do their production in many smaller plants that are close to
major groups of customers so delivery times would be shorter.  If efficiency is desirable, then a
company can build factories with very little excess capacity and have those factories optimized for
producing a limited range of items.  Further efficiency can also be gained by centralizing production in
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large central plants to get better economies of scale, even though delivery times might be longer.
2. INVENTORY – Responsiveness can be had by stocking high levels of inventory for a wide range of
products.  Additional responsiveness can be gained by stocking products at many locations so as to have
the inventory close to customers and available to them immediately.  Efficiency in inventory
management would call for reducing inventory levels of all items and especially of items that do not sell
as frequently.  Also, economies of scale and cost savings can be gotten by stocking inventory in only a
few central locations such as regional distribution centers (DCs).

3. LOCATION – A location decision that emphasizes responsiveness would be one where a company
establishes many locations that are close to its customer base.  For example, fast-food chains use
location to be very responsive to their customers by opening up lots of stores in high volume markets.
Efficiency can be achieved by operating from only a few locations and centralizing activities in
common locations.  An example of this is the way e-commerce retailers serve large geographical
markets from only a few central locations that

4. TRANSPORTATION – Responsiveness can be achieved by a transportation mode that is fast and

flexible such as trucks and airplanes.  Many companies that sell products through catalogs or on the
Internet are able to provide high levels of responsiveness by using transportation to deliver their
products often within 48 hours or less.  FedEx and UPS are two companies that can provide very
responsive transportation services. And now Amazon is expanding and operating its own transportation
services in high volume markets to be more responsive to customer desires.  Efficiency can be
emphasized by transporting products in larger batches and doing it less often.  The use of transportation
modes such as ship, railroad, and pipelines can be very efficient. Transportation can also be made more
efficient if it is originated out of a central hub facility or distribution center (DC) instead of from many
separate branch locations.

5. INFORMATION – The power of this driver grows stronger every year as the technology for
collecting and sharing information becomes more wide spread, easier to use, and less expensive. 
Information, much like money, is a very useful commodity because it can be applied directly to enhance
the performance of the other four supply chain drivers.  High levels of responsiveness can be achieved
when companies collect and share accurate and timely data generated by the operations of the other four
drivers. An example of this is the supply chains that serve the electronics market; they are some of the
most responsive in the world.  Companies in these supply chains, the manufacturers, distributors, and
the big retailers all collect and share data about customer demand, production schedules, and inventory
levels. This enables companies in these supply chains to respond quickly to situations and new market
demands in the high-change and unpredictable world of electronic devices (smartphones, sensors, home
entertainment and video game equipment, etc.).
The table below summarizes what can be done to guide the five supply chain drivers
toward responsiveness or efficiency. Companies and supply chains continually adjust their mix of
responsiveness and efficiency as situations change.
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Over the long run, the cost of one driver — Information — continues to drop while the cost of the
other four drivers continues to rise. Companies that make best use of information to increase their
internal efficiency, and increase their responsiveness to external supply chain partners will gain the
most customers and be the most profitable.

3) What is the importance of SCM.

Answer to the question No 03

SCM has significant impacts on both the enterprise and the consumer.
Supply chain management activities can improve customer service. Done effectively, they have the
ability to ensure customer satisfaction by making certain the necessary products are available at the
correct location at the right time. By increasing customer satisfaction levels, enterprises are able to build
and improve customer loyalty.
SCM also provides a major advantage for companies by decreasing operating costs. SCM activities can
reduce the cost of purchasing, production and the total supply chain. Lowering costs improves a
company's financial position by increasing profit and cash flow. Furthermore, following supply chain
management best practices can minimize overuse of large fixed assets -- such as warehouses and
vehicles -- by allowing supply chain experts to redesign their network, for example, to maintain
customer service levels while operating five warehouses instead of eight, reducing the cost of owning
three extra facilities.
Perhaps lesser known and underappreciated is SCM's critical role in society. SCM can help ensure
human survival by improving healthcare, protecting people from climate extremes and sustaining life.
People rely on supply chains to deliver necessities like food and water as well as medicines and
healthcare. The supply chain is also vital to the delivery of electricity to homes and businesses,
providing the energy needed for light, heat, air conditioning and refrigeration.
SCM can also improve quality of life by fostering job creation, providing a foundation for economic
growth and improving standards of living. It provides a multitude of job opportunities, since supply
chain professionals design and control all of the supply chains in a society as well as manage inventory
control, warehousing, packaging and logistics. Furthermore, a common feature of most poor nations is
their lack of developed supply chains. Societies with strong, developed supply chain infrastructures --
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such as large railroad networks, interstate highway systems and an array of airports and seaports -- can
efficiently exchange goods at lower costs, allowing consumers to buy more products, thus providing
economic growth and increasing the standard of living.

4) Discuss the process view of SCM.

Answer to the question No 04

Each major phase of a product's movement through the supply chain -- from materials to production and
distribution -- has its own distinct business processes and disciplines. Most of them began decades ago
as paper-based methods but now are usually handled in specialized software.
The SCM process starts with figuring out what products customers want -- the early stages of supply
chain planning, traditionally considered one of the two overarching categories of SCM, along with
supply chain execution.
Supply chain planning starts with demand planning, a process for gathering historical data, such as past
sales, and applying analytics and statistical modeling to create a forecast or demand plan that the sales
department and operational departments -- such as manufacturing and marketing -- can agree on. The
forecast determines the types and quantities of products to be manufactured. Some companies perform
demand planning as part of a formalized process called sales and operations planning (S&OP), which
prescribes an iterative process of data gathering, discussion, reconciling of demand plans with
production plans and management approval. Some companies include S&OP in a broader process called
integrated business planning (IBP) that incorporates other departments' plans in a single, companywide
plan.
In the next major step, production planning, the company nails down the specifics of where and how
the products called for in the demand plan will be manufactured. (Production planning is also used in
other industries, such as agriculture and oil and gas.) A more fine-tuned variation -- typically automated
in specialized software -- called advanced planning and scheduling seeks to optimize the resources
that go into production and make them more responsive to changes in demand.
Material requirements planning (MRP) is a process dating back to the '60s that most manufacturers
use to ensure sufficient materials and components (such as subassemblies) are available for use in the
manufacturing process by taking inventory of what's on hand, identifying gaps and buying or making
the remaining items. The central document in both MRP and production planning is the bill of materials
(BOM), a complete list of the items needed to make a product.
MRP is sometimes done as part of manufacturing resource planning (MRP II) which broadens the MRP
concept to other departments such as HR and finance. MRP and MRP II were the predecessors of
enterprise resource planning (ERP) software, which is designed to integrate the major business
processes of companies in any industry.
Two complex processes play important roles in most of the major steps of SCM: inventory
management and logistics. Inventory management consists of various techniques and formulas for
ensuring adequate supply -- from raw materials in a manufacturing plant, perhaps managed in an MRP
system, to packaged goods in a retail store -- for the least expenditure of time and resources.
Manufacturers are faced with a variety of inventory management issues, many of which involve
coordinating demand planning with inventory at both ends of the production process. For example,
sometimes material requirements planning leads to more inventory, especially when the system is first
implemented and the manufacturer must work to synchronize MRP parameters with the inventory
already on hand.
Logistics is everything having to do with transporting and storing goods from the start of the supply
chain, with delivery of parts and materials to manufacturers, to delivery of finished products to stores or
direct to consumers and even beyond for product servicing, return and recycling -- a process called
reverse logistics. Inventory management is threaded throughout the logistics process.
Procurement, sometimes called sourcing, is the process of finding suppliers for goods, managing those
relationships, and acquiring the goods economically -- along with all the communication, such as
sending out requests for bids, and paperwork, including purchase orders, invoices, etc. It is a major
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component of supply chain management, given how much is bought and sold at all points along the
chain. Most players in the supply chain -- suppliers, manufacturers, distributors and retailers -- have
dedicated procurement staff.
Strategic sourcing is an elevated and more sophisticated type of procurement that aims to optimize a
company's sourcing process by taking advantage of its consolidated purchasing power and align it with
overall business goals.
Supplier relationship management (SRM), in contrast, addresses sourcing issues by focusing on the
suppliers the company deems most critical to success and systematically strengthening relationships
with them while fostering optimal performance.

5) Discuss the decision phases in SCM.

Answer to the question No 05

Decision phases can be defined as the different stages involved in supply chain management for taking
an action or decision related to some product or services. Successful supply chain management
requires decisions on the flow of information, product, and funds that fall into three decision phases.
Here we will be discussing the three main decision phases involved in the entire process of supply
chain. The three phases are described below −

Supply Chain Strategy

In this phase, decision is taken by the management mostly. The decision to be made considers the
sections like long term prediction and involves price of goods that are very expensive if it goes wrong.
It is very important to study the market conditions at this stage.
These decisions consider the prevailing and future conditions of the market. They comprise the
structural layout of supply chain. After the layout is prepared, the tasks and duties of each is laid out.
All the strategic decisions are taken by the higher authority or the senior management. These decisions
include deciding manufacturing the material, factory location, which should be easy for transporters to
load material and to dispatch at their mentioned location, location of warehouses for storage of
completed product or goods and many more.

Supply Chain Planning

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Supply chain planning should be done according to the demand and supply view. In order to
understand customers’ demands, a market research should be done. The second thing to consider is
awareness and updated information about the competitors and strategies used by them to satisfy their
customer demands and requirements. As we know, different markets have different demands and
should be dealt with a different approach.
This phase includes it all, starting from predicting the market demand to which market will be provided
the finished goods to which plant is planned in this stage. All the participants or employees involved
with the company should make efforts to make the entire process as flexible as they can. A supply
chain design phase is considered successful if it performs well in short-term planning.

Supply Chain Operations

The third and last decision phase consists of the various functional decisions that are to be made
instantly within minutes, hours or days. The objective behind this decisional phase is minimizing
uncertainty and performance optimization. Starting from handling the customer order to supplying the
customer with that product, everything is included in this phase.
For example, imagine a customer demanding an item manufactured by your company. Initially, the
marketing department is responsible for taking the order and forwarding it to production department
and inventory department. The production department then responds to the customer demand by
sending the demanded item to the warehouse through a proper medium and the distributor sends it to
the customer within a time frame. All the departments engaged in this process need to work with an
aim of improving the performance and minimizing uncertainty.

6) Discuss the supply chain macro processes in a firm.

Answer to the question No 06

Supply chain macro processes in a firm

Supplier Relationship Management.

 Those processes focused on the interaction between the enterprise and suppliers that are
upstream in the supply chain
 Key processes:

o Design Collaboration

o Source
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o Negotiate
 o Buy

o Supply Collaboration

 There is a natural fit between ISCM and SRM processes.

Internal Supply Chain Management.

 Includes all processes involved in planning for and fulfilling a customer order.
 ISCM processes:

o Strategic Planning

o Demand Planning

o Supply Planning

o Fulfillment

o Field Service

 There must be strong integration between the ISCM and CRM macro processes.

Customer Relationship Management.

 The processes that take place between an enterprise and its customers downstream in the supply
chain
 Key processes:

o Marketing

o Selling

o Order management

o Call/Service center

7) What do you understand about Efficient & Responsive Supply Chain? Give relevant example.

Answer to the question No 07

Efficiency is a perennial business buzzword. After all, it describes the very best of business practices
across the board. Efficient production means making products without wasting materials, natural
resources or man hours. Efficient facility management means running your business while reducing
your energy costs and minimizing its carbon footprint. Efficient advertising means targeted ad
campaigns that make the very most of your marketing dollars.
And while efficiency may be a well-worn tern, the digital age has seen a new buzzword rise to
prominence: responsiveness. Responsiveness allows businesses to act and react swiftly to change—both
internally and in the marketplace.
Both are solid characteristics, but can one be more important than the other? Is it time to put efficiency
on the back-burner in favor of responsiveness?
When it comes to the supply chain, the answer is complex.

Supply Chain Efficiency in Action

Efficiency saves money and increases profits throughout your business, but an efficient supply chain
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can be particularly beneficial to your bottom line.

An efficient supply chain gets your products to their destinations in the most cost-effective way. In
today's global marketplace, this is essential. Your supply chain costs are a major part of your overhead,
which are expressed in the prices you ultimately offer to your customers. If your supply chain adds
unnecessary expenses to your end products, then your ability to successfully compete with others
companies offering the same products is effectively hobbled.
It's as simple as this: if your competitors have more efficient supply chains than you, they will be able to
offer the same products for less.
Hallmarks of an efficient supply chain:

Optimization. This can include optimized shipping routes, warehouse locations, personnel and even
your computer network to get the best and fullest use out of your existing infrastructure. Half empty
trucks, unused warehouses and redundant computer systems are simply a waste of your assets.
High quality partners. Your third party logistics partners need to be the best of class. Your 3PL should
have state-of-the-art technologies at their disposal, have a policy of transparency, and have a proven
track record.
Inventory management. Too much inventory is costly to purchase, handle, store and track. Too little
inventory can be costly, as well. It can mean lost production time, expensive last minute orders and
even angry customers. An efficient supply chain finds the right balance when it comes to inventory.
Customer satisfaction. Supply chain efficiency is directly linked to customer satisfaction. It gets your
products into the hands of the people who need them quickly and at the best price.

The Responsive Supply Chain

A responsive supply chain has to do two things: it has to be responsive to your needs, and it has to be
responsive to the needs of your customers.
Order-fill accuracy. In today's highly competitive market, a guarantee of quick deliver is a real selling
point. If that order arrives quickly but is inaccurate or incomplete, then you've wasted time and money
and may have lost a customer as well.
Scalable fulfillment. All businesses experience ups and downs. Sales can be affected by the season, the
weather and the economy. A responsive supply chain is one that can accommodate changing sales
volumes.
Communication. When you— or your customers— have questions, problems or concerns, it's vital that
there be open lines of communication.
Customer satisfaction. People can sometimes throw a monkey wrench into to the best supply chain.
They order the wrong thing. They change their minds. They need something sooner, not later. This is
when a responsive supply chain really shines. It is flexible enough to handle returns, for instance, and
offers high-quality customer service. Customers who feel that their specific needs are being met, and
who can reach out for help when there is a problem to be solved, are satisfied customers.

How are the two interconnected?

Did you notice the overlap? Customer service.
Some business experts believe that responsiveness and efficiency are polar opposites. Supply chain
efficiency requires speed, and large, uniform orders. Responsive demands a slower pace, and,
sometimes, customized orders. But they both serve the same end goal, and both are equally important.
So how do you incorporate one without sacrificing the other?
A quote from a recent article from Supply Chain Movement aptly captures the current wisdom: "As
responsive as required, as efficient as possible."

8) Discuss the Supply Chain Concepts.

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Answer to the question No 08

Supply Chain Concepts
Shortly after your alarm clock goes off and the coffee maker kicks on, the aroma of your favorite coffee
fills the air. The supply chain is responsible for getting those coffee beans across the world and to your
kitchen. Something so common in every household, takes a great deal of planning, demand forecasting,
procurement, and logistical expertise to move those beans to local sellers while still fresh. Without a
strong supply chain in place, your caffeine-fix options would be severely limited.
SCM involves a series of key activities and processes that must be completed in an efficient (fuel-
conserving, cost-reducing, etc.) and timely manner. Otherwise, product will not be available when
needed by consumers like you.

The Seven Rights of Fulfillment

The ability to meet customer requirements, for everything from coffee beans to Crocs, is built upon the
expectation that everything is done correctly in the supply chain. And that means doing it right the first
time – no mulligans, no mistakes are allowed. In the quest to provide quality service and satisfy
customers, world-class companies along the supply chain are guided by the Seven Rights of Fulfillment.
If you think about it, every order needs to be executed according to these seven goals. You must attempt
to deliver a “perfect order” to every customer every time. Doing it right the first time makes the
customer happy, saves the cost of fixing errors, and doesn't require extra use of assets. Thus, every part
of the organization has a vested interest in pursuing perfection. A “perfect order” delivery is only
attained when all Seven Rights of Fulfillment are achieved. To accomplish a perfect order fulfillment,
the seller has to have your preferred product available for order, process your order correctly, ship the
entire order via the means that you request, provide you with an advanced shipping notification and
tracking number, deliver the complete order on time and without damage, and bill you correctly. A
seller’s ultimate goal is to make the customer happy by doing the job right, which gives them a good
reason to use the seller’s services again in the future.

SCM Flows
If the goal of SCM is to provide high product availability through efficient and timely fulfillment of
customer demand, then how is the goal accomplished? Obviously, you need effective flows of products
from the point of origin to the point of consumption. But there’s more to it. Consider the diagram of the
fresh food supply chain. A two-way flow of information and data between the supply chain participants
creates visibility of demand and fast detection of problems. Both are needed by supply chain managers
to make good decisions regarding what to buy, make, and move. Other flows are also important. In their
roles as suppliers, companies have a vested interest in financial flows; suppliers want to get paid for
their products and services as soon as possible and with minimal hassle. Sometimes, it is also necessary
to move products back through the supply chain for returns, repairs, recycling, or disposal. Because of
all the processes that have to take place at different types of participating companies, each company
needs supply chain managers to help improve their flows of product, information, and money. This
opens the door of opportunity to you to  to a wide variety of SCM career options for you! 

SCM Processes
Supply chain activities aren't the responsibility of one person or one company. Multiple people need to
be actively involved in a number of different processes to make it work.
It's kind of like baseball. While all the participants are called baseball players, they don't do whatever
they want. Each person has a role – pitcher, catcher, shortstop, etc. – and must perform well at their
assigned duties – fielding, throwing, and/or hitting – for the team to be successful.
Of course, these players need to work well together. A hit-and-run play will only be successful if the
base runner gets the signal and takes off running, while the batter makes solid contact with the ball. The
team also needs a manager to develop a game plan, put people in the right positions, and monitor
success.

Winning the SCM “game” requires supply chain professionals to play similar roles. Each supply chain
player must understand his or her role, develop winning strategies, and collaborate with their supply
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chain teammates. By doing so, the SCM team can flawlessly execute the following processes:
  Planning – the plan process seeks to create effective long- and short-range supply chain
strategies. From the design of the supply chain network to the prediction of customer demand,
supply chain leaders need to develop integrated supply chain strategies.
 Procurement – the buy process focuses on the purchase of required raw materials, components,
and goods. As a consumer, you're pretty familiar with buying stuff!
 Production – the make process involves the manufacture, conversion, or assembly of materials
into finished goods or parts for other products. Supply chain managers provide production
support and ensure that key materials are available when needed.
 Distribution – the move process manages the logistical flow of goods across the supply chain.
Transportation companies, third party logistics firms, and others ensure that goods are flowing
quickly and safely toward the point of demand.
 Customer Interface – the demand process revolves around all the issues that are related to
planning customer interactions, satisfying their needs, and fulfilling orders perfectly.

Seven Principles of SCM
More than ten years ago, a research study of 100+ manufacturers, distributors, and retailers uncovered
some widely used supply chain strategies and initiatives. These ideas and practices were distilled down
to seven principles and presented in an article in Supply Chain Management Review, a magazine widely
read by SCM professionals.
Principle 1:
Segment customers based on the service needs of distinct groups and adapt the supply chain to serve
these segments profitably.
 Principle 2: Customize the logistics network to the service requirements and profitability of
customer segments.
 Principle 3: Listen to market signals and align demand planning accordingly across the supply
chain, ensuring consistent forecasts and optimal resource allocation.
 Principle 4: Differentiate product closer to the customer and speed conversation across the
supply chain.
 Principle 5: Manage sources of supply strategically to reduce the total cost of owning materials
and services.
 Principle 6: Develop a supply chain-wide technology strategy that supports multiple levels of
decision making and gives clear view of the flow of products, services, and information.
 Principle 7: Adopt channel-spanning performance measures to gauge collective success in
reaching the end-user effectively and efficiently.
Though they are more than a decade old, these timeless principles highlight the need for supply chain
leaders to focus on the customer. They also stress the importance of coordinating activities (demand
planning, sourcing, assembly, delivery, and information sharing) within and across organizations.
Here's an excerpt from the article:
“Managers increasingly find themselves assigned the role of the rope in a very real tug of war—pulled
one way by customers’ mounting demands and the opposite way by the company’s need for growth and
profitability. Many have discovered that they can keep the rope from snapping and, in fact, achieve
profitable growth by treating supply chain management as a strategic variable.”
These savvy managers recognize two important things:
 They think about the supply chain as a whole—all the links involved in managing the flow of
products, services, and information from their suppliers' suppliers to their customers' customers
(that is, channel customers, such as distributors and retailers).
 They pursue tangible outcomes—focused on revenue growth, asset utilization, and cost.”

9) What is demand Forecasting? Describe different types of demand & forecasting demand
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Answer to the question No 09

Demand Forecasting
Demand forecasting is a combination of two words; the first one is Demand and another forecasting.
Demand means outside requirements of a product or service. In general, forecasting means making
estimation in the present for a future occurring event. Here we are going to discuss demand forecasting
and its usefulness.

Different Types of Demand

Demand forecasting is an essential activity in sales and marketing. The demand forecasting has to be
done so that the company does not store huge inventories and at the same time, does not under utilize its
operation setup. By taking into considerations the various type of demands in the market, the firm can
thereby have a proper forecast and can plan its inventories accordingly, meeting the objectives of the
firm.
There are mainly 8 type of demands in Marketing which have to be taken into consideration by
the marketing manager during demand forecasting. The various type of demand, and how to tackle
the challenges for marketers in these various demands, is discussed below.
1) Negative Demand
Negative demand is a type of demand which is created if the product is disliked in general.
The product might be beneficial but the customer does not want it. Example of negative demand
is a) Dental work where people don’t want problems with their teeth and use preventive measures to
avoid the same.
b) forms of demand in Insurance, which people should have but they delay buying an insurance policy.
Similarly, people would like to avoid heart attacks and hence may pay for a full body check up where
the results might be negative, but still the customer has to pay. The marketer has to solve the issue of no
demand by analyzing why the market dislikes the product and then counter acting with the right
marketing tactics.
2) Unwholesome demand
Unwholesome demand is the other side of Negative demand. In negative type of demands, customer
does not want the product even though product might be necessary for the customer. But in
unwholesome demand, the customer should not desire the product, yet the customer wants the product
badly. Best example of unwholesome demand are cigarettes, alcohol, pirated movies, guns etc.
3) No demands
Certain products face the challenge of no demand. The best example for the same can be education
courses where there is very low demand or no demand at all. Such cases are very hard to counter.
4) Latent Demand
Latent demand is, as the name suggests, a demand which the customer realizes later. Thus, while buying
the product, he might not desire some features. But later on, he might think about those features and buy
the product. The best example of latent demand are normal phones vs smart phones.
People nowadays want more and more features in the smartphone. They might settle for a normal
phone, but then later on they get the itch to buy a smart phone. Similarly, people might buy a petrol car.
But most likely their second car will be a diesel car. A marketing managers job is to find out the
features which people might be looking for later and market them to the customer in such a manner that
he immediately wants them.
5) Declining demand
Declining demand is when demand for a product is declining. For example, when CD players were
introduced and IPOD came in the market, the demand for walkman went down. Although there was still
a demand for the product, the demand was a declining demand. A marketers job in such a case to think
ways to revive the product so that the demand is not declining.
6) Irregular demand
Irregular demand can be demand which is not consistent. The best example of irregular demand is
seasonal products like umbrellas, air conditioners or resorts. These products sell irregularly and sell
more during peak season whereas their demand is very low during non seasons. The best way to counter
irregular demand is to introduce incentives for the customer to buy the product.
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7) Full market demand

In an ideal environment, a company should always have full demand. Full demand means that
the demand is meeting the supply potential of the company. It also means that the markets are happy
with the products of the company and that people want to buy from the same company. The marketing
challenge in this type of demand is to maintain the same level of interest in the product and the
company.
8) Overfull demands
Overfull demands happen when the companies manufacturing capacity is limited but the demand is
more than the supply. This can be observed in the cement industry occasionally. Generally, most
cement industries have limited manufacturing capacity. And hence, brand switching in cement industry
is high. Many companies use de-marketing techniques to counter act overfull demands. This is because
if the company keeps marketing, but it is not able to supply the material, then the company might suffer
badly in brand equity.
Above are the 8 type of demand which a marketing manager has to forecast and manage at all times.
Each type of demand has its own challenges and the marketing manager needs to be quick on his feet to
manage all the different type of demands.

10) Describe ways of forecasting demand. Discuses Quantitative analysis of demand forecasting.

Answer to the question No 10

Ways of forecasting demand

 Expert opinion

- Scenario analysis
- Delphi technique

 Market testing

 Quantitative analysis

- Moving straight average

- Moving weighted average

 Using computer-based material planning system

- MRP
- DRP
- ERP
Ways of forecasting demand : Expert Opinion
Scenario analysis
 It is made by the group of experts. The results express identifying the best and worst case
scenarios, together with what is believed to the most likely case scenario(s). i.e. somewhat in
between two extremes.
Delphi technique
 This method of forecasting means a group of experts making predictions anonymously and
independently of each other. Each prediction is compared to the others and any differences are
debated.
A consensus usually emerges.
Market Testing:
 This needs identifying a sample of population that a company’s product or services is aimed at,
and conducting trial sales for a limited a period of time to ascertain likely demand. This
approach might be applied where there is significant uncertainty about likely future demand.
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Quantitative analysis:
  This indicates a series of that use past techniques data (i.e. quantities purchased over a period of
time) to generate a forecast. This method assumes that the past patterns of demand will continue
in the future. They are appropriate where conditions are relatively stable. They may work for
hurt well short term forecasts, but tend not to work so well for making long term forecasts term
forecasts.

11) Mention 3 phases of demand for forecasting. Discuses material recruitment planning & its flow.

Answer to the question No 11

Definition: Demand Forecasting is a systematic process of predicting the future demand for a firm’s
product. Simply, estimating the potential demand for a product in the future is called as demand
forecasting.
The demand forecasting finds its significance where the large-scale production is involved. Such firms
may often face difficulties in obtaining a fairly accurate estimation of future demand. Thus, it is
essential to forecast demand systematically and scientifically to arrive at desired objective. Therefore,
the following steps are taken to facilitate a systematic demand forecasting:

Specifying the Objective: The objective for which the demand forecasting is to be done must be
clearly specified. The objective may be defined in terms of; long-term or short-term demand, the whole
or only the segment of a market for a firm’s product, overall demand for a product or only for a firm’s
own product, firm’s overall market share in the industry, etc. The objective of the demand must be
determined before the process of demand forecasting begins as it will give direction to the whole
research.

Determining the Time Perspective: On the basis of the objective set, the demand forecast can either
be for a short-period, say for the next 2-3 year or a long period. While forecasting demand for a short
period (2-3 years), many determinants of demand can be assumed to remain constant or do not change
significantly. While in the long run, the determinants of demand may change significantly. Thus, it is
essential to define the time perspective, i.e., the time duration for which the demand is to be forecasted.

Making a Choice of Method for Demand Forecasting: Once the objective is set and the time
perspective has been specified the method for performing the forecast is selected. There are several
methods of demand forecasting falling under two categories; survey methods and statistical methods.

The Survey method includes consumer survey and opinion poll methods, and the statistical methods
include trend projection, barometric and econometric methods. Each method varies from one another in
terms of the purpose of forecasting, type of data required, availability of data and time frame within
which the demand is to be forecasted. Thus, the forecaster must select the method that best suits his
requirement.

Material Requirement Planning

 Materials requirement planning referred to by the initials MRP is technique which assists a
company especially an industry concern in the details planning of its production.
 MRP is a system for planning that determine when materials should be purchased and when
works orders should be schedule to manufacture goods.
 MRP implies three question:
o What materials required
o When the materials required
o How much materials required
 Input and output of MRP
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Input Output
Master Production Schedule ( MPS) Purchase Orders
 Bill of Material (BOM) Work Orders
Inventory Record Rescheduling /Action Notice

Materials Requirement Planning Floe Chart

MRP Supply Chain Management

Customer

Sales Order or F.G Stock in

Scheduling
Projection Hand

B.O.M
No Yes
R.M Store

Raw
Materials in
Stock
N F.G
o Warehouse

Ye
Purchase s
Vendor
Order Production Sales
Invoic
e

12) Meeting deferent demands in SCM. Discuses Four strategies to Meet demand

Answer to the question No 12

The Hatchimal toy was one of the big hits of the 2016 Christmas season, leaving desperate parents
clamoring to find the coveted gift in time. Producing such a hit could be a toy company’s dream—or
nightmare, if their supply chain is not prepared to handle the surge in orders. For the company
producing the product, there are a number of methods that can help them meet demand if they have the
“it” toy of the season (or a hit anytime during the year)—while not being stuck with warehouses full of
product if demand isn’t there.
1. Predicting launch and early stage demand. 
The company could use data analytics around sales performance of similar products in
previous years, or look for geographic/retailer ‘bell-weather’ locations to point to demand
take-up at the very early stages of launch—and use that information to decide the level of
follow-up orders and production. Ultimately, the company could use heuristics that combine
information from multiple sources—consumer demographics, consumer segments, channel
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 segments, retailer shelf space, competing launches, weather trends—to predict demand and
channel behavior.
2. Multi-strand manufacturing. 
The company could estimate its base load supply—the initial and follow-up production
quantities that will be needed—and place a corresponding order for components with
upstream suppliers around the world. These would most likely be preferred suppliers.
If the observed consumer take-up is good, the company may  need to call upon a larger 
number of alternative manufacturers/suppliers in its supply-side network to achieve quick
replenishment by taking advantage of available capacity.
As a backup, the company could book spare capacity through its selected manufacturers in
anticipation of a certain level of sale, and cancel (at a cost) if the anticipated demand doesn’t
happen. Some suppliers might adopt postponement protocols to speed their response.
3. Hold back and optimize positioning. 
The company should closely monitor the off take pattern of the initial production batch, and
hold off fully committing stock. It could, for example, only commit 60% of the initial
production run to certain markets/channels, then use the balance to quickly respond where the
uptake is strongest.
4. Prioritize allocation. 
By deciding to commit a certain percentage—say 80% of the initial 60% produced—
to trusted outlets where the relationship is truly collaborative, the sales pattern data is more
likely to be transferred back to the company on a close to real-time basis, and those customers
with long-standing, loyal relationships are rewarded.
5. Leverage multi-channel fulfillment. 
Looking downstream on the distribution side, the company could use its chosen Omni-
channel structure to reach consumers as quickly as possible when sales exceed expectations—
like emphasizing ecommerce channels to minimize pipeline time, taking orders online and
fulfilling direct through a global air express delivery company—or by support wholesalers
and retailers via drop-shipments designed to be distributed to their consumers, separating the
physical and the commercial fulfillment.
6. Minimize pipeline time. 
The key for all parties in multi-distribution channels is to keep the supply pipeline as short (in
time) as possible, thereby defraying the risk of being caught with excess stock if/when sales
tail off. For example, Zara does this very well by monitoring its sales on an hourly basis at its
retail outlets, coupled with its 3-weekly cycle to launch a new range of products, leading to
much less inventory at risk of mark-downs.
7. Organize strategically.
 The other aspect to this problem of launching new and potentially volatile products is the
internal organization design. Companies like Zara, Li & Fung and Adidas use multi-
disciplinary teams or clusters, co-located, and focused on particular customer segments. In
this way, the loss of communications time internally is minimized, and is a big factor in
improving responsiveness in the face of volatile demand patterns.
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 13) Explain the production scheduling.

Answer to the question No 13

Production and manufacturing run on timelines. You receive orders, sometimes concurrently, and
you plan the steps in your manufacturing schedule to ensure parts of the process are completed in
proper sequence as efficiently as possible. Creating an effective and efficient production schedule
can cut payroll costs and keep frustration to a minimum .
Areas of Production Scheduling
Procurement: Production can't proceed if you don't have the materials necessary for manufacturing.
Procurement scheduling is an art and a science that involves keeping enough on hand without
carrying a bloated inventory. You can tighten procurement systems by using digital or manual
spreadsheets to track inventory and by developing relationships with suppliers who can get you what
you need consistently and quickly.
Personnel: Planning and scheduling employee time is critical to developing a successful production
work flow plan. There should be enough workers on hand to finish projects within the promised time
frame but not enough to bloat your payroll or create inefficiencies by crowding your work space. It
helps to understand the strengths and weaknesses of each staff member so you can leverage
employee skills and circumvent potential difficulties.
Machinery: Like your employees, your equipment has a limited number of capacity hours that
should be scheduled thoughtfully. Machines should be well maintained according to a schedule that
doesn't take them out of production any longer than necessary.
Tools for Scheduling Production
Software: Once the logistics of your production schedule become complex enough to bog you down,
there is a range of software options available to help you manage the details. Programs such as
Monday.com and Protected Flow Manufacturing help you to set priorities, coordinate processes and
manage staffing.
Written documents: If your production processes are relatively simple, you may be able to
effectively create useful and meaningful lists so team members and managers have a clear idea of
what needs to happen and in what order.  Timelines and flow charts can help to provide useful
visuals to help staff understand how processes interface.
Custom spreadsheets: You can also design your own spreadsheets to plan and communicate work
flow. Custom spreadsheets offer the advantage of being tailored specifically to your company and
your processes. They pose the disadvantage of potentially being less robust or nimble than a software
system designed by professionals drawing on a deeper and broader database of scheduling tools and
knowledge.
Obstacles to Effective Production Scheduling
Poor communication: No matter how good your production scheduling, it won't be effective unless
your crew is kept in the loop and knows what needs to be done. Your team should have systems in
place for conveying an overall plan and also relaying updates.
Outdated systems: If your business is growing at a healthy clip, your systems and software will
periodically become obsolete because the processes they manage will be continually evolving. For
successful production scheduling, evaluate your processes and information systems periodically and
update them as needed.
Unreliable vendors: If your vendors don't come through with the materials you need in the time
frame they promised, you could find yourself with people and machinery scheduled for processes
that cannot move forward. When you need inventory urgently, make sure your vendors know that
timing is critical. If they consistently don't come through for you when you need them, find other
vendors.
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14) Discuss the rules for efficient order management.

Answer to the question No 14

Making the sale is obviously a critical component in the success of any organization. But smart
companies know that is only the beginning when it comes to taking care of today’s smarter
customers. Creating satisfied customers and keeping them for life demands that you deliver high
touch service and a personalized experience every time. In fact, that is the one thing customers want
most. But, while 80% of CEOs believe they deliver superior customer service, a recent study shows
that only 8% of their customers agree with that claim. What is the cause of this disconnect and what
can you do to overcome it? A seamlessly orchestrated order management system lets companies
cross over from simply filling orders to effectively leveraging inventory, maximizing internal and
external resources and keeping order promises, which keeps customers happy. Achieving this level
of efficiency is possible with concerted focus on three critical goals:
1. Become truly cross-channel.
2. Remain nimble in your order management process.
3. Leverage inventory across all channels and organizations.
IBM Sterling Order Management helps you accomplish these goals by providing a single,
unified view of supply and demand across all networks, leveraging intelligent sourcing to
orchestrate order fulfillment, providing global visibility of all inventory and utilizing centralized
order information to provide real-time order visibility that boosts customer satisfaction. Read on
to learn how this flexible, scalable order management solution can help you model these three
best practices to differentiate and transform your organization.
Rule 1:
Become truly cross-channel.
Order management has become increasingly complex thanks to the rapidly increasing number of
customer interaction points, suppliers and partners that make up an organization’s network.While
having more options can be an advantage, managing all the moving parts of your extended network
and fully leveraging all it has to offer may seem like a formidable challenge. But truly successful
companies know that embracing a true cross-channel mentality can have a positive impact on the
way orders are fulfilled, in how fulfillment activities are managed and in how customer service
representatives respond to requests and inquiries. Sterling Order Management delivers the visibility
and event management you need to effectively execute order fulfillment across your entire supply
chain network. Global visibility into your inventory, combined with rulesbased order promising and
scheduling, lets you leverage the best possible options for delivery and service from any internal or
external source so you can meet your company’s performance objectives as well as your customers’
expectations for multiple fulfillment options. Sterling Order Management also helps you achieve
customized, line-level order fulfillment by breakingdown orders by specific functions, determining
the fulfillment process for each and splitting or consolidating order lines accordingly. Documents
and requests are sent to the appropriate partner and user-defined events are factored in, giving you a
complete picture of each order line’s fulfillment activity and allowing you to track multiple
activities. Sterling Order Management aggregates order information from multiple channels into a
single source that can be accessed from any channel. Having this single order record gives you the
simplified administration and order visibility you need to accurately service customers as they move
from one channel to another; whether they are making a purchase online and then returning it to the
store, or starting the order process online and completing it by phone with a CSR.
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Rule 2: Remain nimble in your order management process.
You may rely on multiple partners to facilitate order fulfillment but it’s likely that your customer is
relying on only one entity; yours. To keep your order promise, you need a solution that provides
transparency and seamless management as you move customers through the order process, whether
it is straightforward or requires complex execution of services and custom offerings. But that
solution needs to be more than seamless; it also needs to deliver a business process flow that is
adaptable to your partners’ disparate requirements, able to meet customers’ demands for order
information and flexible enough to accommodate fluctuating market factors by allowing you to
change order processes quickly and easily. Sterling Order Management provides flexible, process-
based management of orders from multiple channels and helps enable customized fulfillment
dictated by user-defined business requirements. This level of flexibility allows you to quickly
integrate partners and define their relationships and roles as well as switch out partners to meet
specific needs, all to keep pace with changes in your business environment. From an inventory
standpoint, it gives you the agility you need to source from the optimal location regardless of the
channel through which the order was placed. Sterling Order Management also utilizes milestone
alerts to monitor and manage orders and fulfillment across your extended enterprise, provide
critical, real time information about an order at any point along the continuum, and ensure delivery
execution that accounts for the type of order and the availability of resources.
Rule3:
Leverage inventory across channels and organizations.
In today’s fast-paced environment and with customer expectations higher than ever, staying on top
of supply and demand is no small feat. It’s not enough to simply know what inventory is on hand;
you need an intelligent system that tells you what orders are in process, tracks inventory in transit
and monitors current demand within your organization and across all partner locations. You also
need to support the various ways customers choose to interact with you; store, Web, call center and
more. By utilizing inventory from all locations, you prevent backorders in one location while you
are discounting excess inventory in another. Visibility is the key to success and with real time access
to mission-critical inventory information you can deliver accurate order promise dates while
effectively maintaining order over your inventory. Sterling Global Inventory Visibility aggregates
inventory from all locations and delivers it in a single, comprehensive view. By considering factors
such as availability, inventory in transit, lead times, notification times and the various points an
order will pass through, you can confidently quote an accurate delivery date when an order is
placed. Sterling Global Inventory Visibility ensures consistent inventory information is accessible to
all channel participants from any point; call center to store, web site to mobile device. This solution
also allows you to manage inventory in multiple locations with advanced search capabilities so you
can identify and manage shortages or overstocks, minimizing the possibilities of stock-outs or
inventory discounting. With IBM Sterling Reverse Logistics you can utilize return inventory data to
monitor the return-and-repair process, allowing you to factor refurbished inventory back into your
supply source. And, Sterling Store allows you to keep your promise of “order from anywhere, fulfill
from anywhere” while driving more sales through multi-store inventory visibility and by offering
alternative merchandise pick-up locations.
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15) Explain the role of distribution in SCM.

 Answer to the question No 15

Now, the first question that comes to mind is what distribution is. it is defined as a step wise procedure
of moving products from the suppliers to the end customer. For every stage in a supply chain whether
suppliers, manufacturers or customers there is distribution occurring from the previous stage. Raw
materials are moved from suppliers to the manufacturers and finished goods are moved from the
manufacturers to the customers. Distribution affects the supply chain cost and the experience the
customer has. In India, the distribution cost of cement constitutes about 30 % of the cost to produce and
sell it.
Choosing an appropriate distribution network can be helpful in achieving various supply chain
objectives ranging from high responsiveness to low cost. As in the case of 7-eleven Japan and Wal-Mart
respectively. Different companies use a different distribution network according to their need and may
even face some issues due to that. For example Dell until 2007 distributed computers directly to its
customers and hence took several days to deliver it to the customers. From June 2007 they started
selling computers through retailers such as Wal-Mart. Hence it is necessary to choose an appropriate
distribution network to satisfy customers at the minimum cost possible.

FACTORS INFLUENCING DISTRIBUTION NETWORK DESIGN

There are two main dimensions based on which the performance of a distribution network is evaluated:-
Customer needs that are met.
Cost of meeting customer needs
The customer needs that are met have an influence on the company’s revenues, which along with cost
decide the profitability of the delivery network. The customer service components that are mainly
influenced by the structure of the distribution network are:
Response time: it is the time taken for a customer order to reach the customer.
Product variety: it is the number of different products or configurations that are offered to the
customer.
Product availability: it is the probability of having a product in inventory when any customer order
arrives.
Customer experience: the convenience for the customer to place and receive an order as well as the
extent to which this experience is customized.
Time to market: it is the amount of time needed for the launch of a new product into the market.
Order visibility: it is the ability of a customer to track his/her order from placement to delivery.
Return ability: it is the ease with which any customer can return a product if unsatisfied.
Firms like Amazon target customers that can wait longer for their order or can tolerate a long response
time, these firms require only a few locations that may be far from the customers. They can focus on
improving the capacity of each location. Whereas firms that target customers who value short response
times need to have many facilities that too located near the customers. Thus we can conclude that a
decrease in the response time results in higher number of facilities (appendix 1).

Following are the costs affected by changing the distribution network design:
Inventories
Transportation
Facilities and handling
Information
As the number of facilities increase in a supply chain, the inventory cost also increases so firms try to
try to limit and consolidate the number of facilities in their supply chain network (appendix2). For
example, Amazon is able to turn its inventory 12 times a year because of fewer facilities, whereas
Borders with about 400 facilities turns its inventory 2 times only.
Inbound transportation costs are the costs incurred in bringing material into a facility and outbound
transportation cost is the one incurred in sending material out of a facility. Inbound lot sizes are larger
hence inbound cost per unit is lower than outbound costs. Increasing the number of warehouse locations
makes the outbound transportation distance a smaller fraction of the total distance travelled thus
increasing the number of facilities decreases the transportation cost as long as the inbound economies of
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scale are maintained (appendix 3). If the number of facilities is increased to a point that the inbound lot
sizes are very small and result in a significant loss of economies of scale, then increasing the facilities
increases the transportation cost (appendix 3).
The consolidation of facilities allows a firm to exploit economies of scale hence facility costs decrease
as the number of facilities is reduced (appendix 4).
As the number of facilities increases, total logistics costs (inventory costs + transportation costs +
facility costs) first decrease and then increase (appendix 5). Hence any firm should have at least the
number of facilities that minimize total logistics costs.
In general no distribution network outperforms the others along all dimensions. Hence it is important to
see to it that the strengths of the distribution network fit with the firm’s strategic position.

DESIGN OPTIONS FOR A DISTRIBUTION NETWORK

There are two key decisions that the managers should consider in order to design a distribution network:
Will the product be picked up from a predetermined site or has to be delivered to the customer location?
Will the product be flowing through an intermediary?
Based on the answers to these questions and also the company’s industry, any one of the following
distribution network designs may be used:
Manufacturer storage with direct shipping
Manufacturer storage with direct shipping and in-transit merge
Distributor storage with package carrier delivery
Distributor storage with last-mile delivery
Manufacturer/distributor storage with customer pickup
Retail storage with customer pick up

Manufacturer Storage with Direct Shipping

In this, the product is directly delivered to the customer from the manufacturer, the customer order is
taken by the retailer and information flows from the customer via the retailer to the manufacturer. The
retailer doesn’t need to keep any inventory. It is also known as drop-shipping. For example, eBags or
Nordstrom.com uses such a network design (appendix 6).
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The biggest advantage may be the ability to centralize the inventories at the manufacturer level. Thus
the supply chain can provide high availability of product with low inventories. An issue regarding drop-
shipping may be the ownership structure of the inventory at the manufacturer level. There is little
advantage of aggregations if certain portions are allocated to each retailer, benefit can only be achieved
if the inventory is allocated on an as-needed basis. The benefits of centralization are only for high value
products with low demand and not for items like grocery or staple items such as soaps. Using drop-
shipping for slow-moving products can result in increase of inventory turns by factor of 6.
Drop-shipping provides the manufacturer an option to delay customization after the customer order is
placed. For example, Dell who keeps common components as inventory and reduces the total amount of
inventory.
The transportation costs for drop-shipping increases as the outbound distance per unit is high to the end
customers. Supply chains can save on the fixed cost of facilities and eliminates the need of warehousing
in the supply chain. There can be savings on handling cost as well by using drop-shipping. The
evaluation of the handling cost however should be done carefully because manufacturer has to transfer
full cases into the factory and single units out of the factory. The response times are generally longer in
drop-shipping.
Another issue is that the response times may not be equal for every manufacturer hence for a order with
products from many different sources, the customer will receive many partial shipments over time.
Drop-shipping provides a good customer experience. In order to satisfy the customer, order visibility is
very important but it becomes difficult in drop-shipping as it needs complete integration of information
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infrastructure at both the retailer and the manufacturer level.

Manufacturer Storage with Direct shipping and In-Transit Merge
In this the issue of drop-shipping that the customer may receive order in several partial shipments is
eliminated as it combines the order from different manufacturing locations so that the customer receives
a single delivery. It can be used by direct suppliers like Dell and even firms using drop-shipping
(appendix 7).
It’s similar to drop-shipping in its benefits such as ability to aggregate inventories and also delay
product customization. As in drop-shipping it is best suited for high value products whose demand is
unpredictable.
The transportation cost is lower in this case. For example if the order needs to be picked up from three
different manufacturers, then the transportation cost would be less as only a single delivery to the
customer is required instead of three different deliveries. Facility and processing costs are similar to
drop-shipping for the retailer and the manufacturer. But the in-transit facility cost is higher due to the
merge in between. The need for sophisticated information infrastructure is similar to that in drop-
shipping and also response times, product variety, availability, time to market and return ability.

Distributor Storage with Carrier Delivery

In this, the inventories are kept with the retailers/distributors in warehouses, and package carriers are
used to transfer products to the end customer. For example Amazon uses this approach combined with
drop-shipping from a manufacturer (appendix 8).
The distributor warehouse aggregates demand uncertainty at a lower level than the manufacturer, hence
the distributor storage requires a higher level of inventory as compared to manufacture storage. They
store only medium to fast moving products at their warehouses, with slowly moving are stored farther
upstream.
As compared to manufacturer storage, the transportation costs for distributor storage is lower because
an economic mode of transportation can be used for inbound shipments to the warehouses. Unlike the
storage at the manufacturer level, where multiple shipments needs to be delivered for a single customer
order. The facility costs for distributor storage is higher than that for manufacturer storage. The
processing and handling costs are comparable to manufacturer storage unless the product is shipped
directly by factory to the customer from the production line.
The distributor storage uses less complex information systems as needed with manufacturer storage. It
also serves as a buffer in between the customer and the manufacturer, decreasing the need for proper
coordination between the two. Real time visibility is needed between the warehouse and the customer.
The visibility between the distributor warehouse and manufacturer can be achieved at a cheaper rate
than that between customer and manufacturer.
The response time is better for manufacturer storage than for distributor storage. This is because the
warehouses for distributor storage are usually near to the consumers and the entire order is aggregated
at the warehouse before being shipped. For example, Amazon takes three to seven working days to
deliver a product through ground transportation but takes only a day to process it. Ease for the customer
is high as only a single shipment reaches the customer instead of several partial shipments. Due to the
need to stock another stage, the time to market is higher in the case of distributor storage as compared to
manufacturer storage. Order visibility is a lot more easier in distributor storage as only a single
shipment is transferred from the warehouse to the end customer and only a single stage is involved in
the supply chain. In distributor storage return ability is better as all the returned products can be
processed at the warehouse itself. Also that the customer needs to return only a single product if
unsatisfied.
It is best suited for medium to fast moving products. It also makes sense when the customer doesn’t
want the product immediately but faster than manufacturer storage.

16) Explain the influencing factors of distribution.

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Answer to the question No 16

FACTORS INFLUENCING DISTRIBUTION DECISIONS
The distribution patterns, channel objectives and constraints are influenced by a host of variables. These
are explained in the following write up.

Market Characteristics
The market, characteristics play an influencing role on distribution decisions. For example, if the
customer wants a high level of service, the manufacturers will have to ensure that its channel members
are able to provide it or else the firm will have to provide it. The latter alternative may be costly but
may ensure a high level of customer confidence. In an automobile dealership, for example, the
automobile manufacturer insists on investment in tools, equipments and manpower training that will
ensure high precision and level of servicing. The manufacturer trains dealers’ employees in
servicing the automobiles. For a firm like Sumeet, a leader in mixer and grinder market has a mobile
service concept to serve its customer. It regularly announces the date, time and place where its service
van will be parked for the benefit of the housewives and retail outlets. Many other firms have adopted
this pattern to service their target markets.
Customer characteristics also involve attitude towards waiting time, expectations with regard to special
convenience and preference for buying in a comfortable and more relaxed environment.

Company Characteristics
The next variable is the company characteristics and objectives. The channel design is influenced by the
company€™s long term objectives, financial resources manufacturing capacity, marketing mix and
even its philosophy. For example, if the firm€™s manufacturing capacity can meet only 25% of the
total market demand it may be well advised to follow selective distribution, i.e. distribute only through
selected outlets in few markets or adopt an intensive distribution, i.e. cater to all outlets in a given
geographical market or exclusively distribute it all over the country.

Product Characteristics
The next important variable influencing distribution decision is the product characteristics. Here, the
key issues for analysis are product value and perceived risk, and the nature of the product. If the product
value and perceived risk is high, as in case of capital equipment, precious stones and gems, shorter
channels or rather direct marketing is the most preferred alternative. Here the firm sells the product
through its own sales force.. If the product is perishable like example milk, bread, and eggs they require
direct distribution. In the case of milk dairy the milk is distributed to the wholesalers and distributors
who in short give it to customers through delivery boys (Shorter Channels)

In the case of non-perishable goods like textiles, footwear, toiletries etc., are distributed through the
longer channels. The next product related factor to be considered is whether it is standardized or non-
standardized. The latter demands direct distribution. For example, a suit tailored to fit a specific
customer’s size and fashion preference will demand direct marketing by the tailoring firm. But
when the same makes shirts in different collar sizes, colors and fashion so as to appeal to different
customer groups it can now adopt a longer channel of distribution because it has now a standardized
product.

The product volume will also determine the length of the channel. Bulky products like construction
materials, chemicals or soft drinks require shorter channels to economically reach the customer. Lastly
the desired brand image sought by the firm will determine the distribution structure.

17) Discuss the role of network design in SCM.

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Answer to the question No 17

The primary purpose of a supply chain network design is to assess company policies and programs and
to meet targets to accomplish long‐term strategic objectives, and most business units or functional areas
within a company are impacted by a network design project. 

It is important to recognize that a company’s network determines its supply chain efficiency and
customer satisfaction.
Designing an optimal supply chain network means the network must be able to meet the long ‐term
strategic objectives of the company.
Most business units or functional areas within a company are impacted by a network design project.
When designing a supply chain the following steps must be followed:
1) Define the business objectives,
2) The project scope must be defined,
3) The form of analyses to be done must be determined,
4) Determine what tools will be used,
5) Finally, Project completion, the best design.
Once the path forward is determined and the design approach has been completed correctly, the
business will reap many significant benefits.
What Creates Real Economic Value?
Business and operations strategy - the formulation of strategies that drive investment, operations, and
competitive positioning - is where all value begins.
There are five strategic questions that need to be answered:

1. What business is the CPG company in and why?

2. How should value be added to the business?
3. What are the target markets?
4. What are the products and why will customers buy from the CPG company?
5. What capabilities are needed to assure that the company adds value and differentiates?
Most companies develop strategies for target markets and products #3 and #4. Some at least consider #1
and #2. Few companies resolve #5 effectively.
This is generally because operations strategies are not developed or implemented with the same
scenario plan or rigor that is given to the more often seemingly interesting issues of markets and
products. The alignment of business and operations strategies is often weak or non-existent.
Mission and vision statements, plans, goals, objectives, and performance measures while important for
driving execution, most often do not ensure that capabilities will be built for scenarios from the business
strategies.
Therefore, companies do not always have carefully developed alternatives for customer demand, new
channels, competition, supply risks, and product development.
Achieving clear and sustained alignment between operations execution and the plans derived from
business strategies is challenging. Leadership understands the complexities involved, but are concerned
that 90% of business strategies are not implemented as intended.
They are beginning to understand that supply chains are about more than logistics regarding the buying
and selling of goods, they are about competitive differentiation and profitable business growth.
18) Discuss the role of IT in SCM.

Answer to the question No 18

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Supply Chain Management - Role of IT
Companies that opt to participate in supply chain management initiatives accept a specific role to
enact. They have a mutual feeling that they, along with all other supply chain participants, will be
better off because of this collaborative effort. The fundamental issue here is power. The last two
decades have seen the shifting of power from manufacturers to retailers.
When we talk about information access for the supply chain, retailers have an essential designation.
They emerge to the position of prominence with the help of technologies. The advancement of inter
organizational information system for the supply chain has three distinct benefits. These are −
 Cost reduction − The advancement of technology has further led to ready availability of all the
products with different offers and discounts. This leads to reduction of costs of products.
 Productivity − The growth of information technology has improved productivity because of
inventions of new tools and software. That makes productivity much easier and less time
consuming.
 Improvement and product/market strategies − Recent years have seen a huge growth in not
only the technologies but the market itself. New strategies are made to allure customers and
new ideas are being experimented for improving the product.
 It would be appropriate to say that information technology is a vital organ of supply chain
management. With the advancement of technologies, new products are being introduced within
fraction of seconds increasing their demand in the market. Let us study the role of information
technology in supply chain management briefly.
 The software as well as the hardware part needs to be considered in the advancement and
maintenance of supply chain information systems. The hardware part comprises computer's
input/output devices like the screen, printer, mouse and storage media. The software part
comprises the entire system and application program used for processing transactions
management control, decision-making and strategic planning.
 Here we will be discussing the role of some critical hardware and software devices in SCM.
These are briefed below −
Electronic Commerce
Electronic commerce involves the broad range of tools and techniques used to conduct business in a
paperless environment. Hence it comprises electronic data interchange, e-mail, electronic fund
transfers, electronic publishing, image processing, electronic bulletin boards, shared databases and
magnetic/optical data capture.
Electronic commerce helps enterprises to automate the process of transferring records, documents, data
and information electronically between suppliers and customers, thus making the communication
process a lot easier, cheaper and less time consuming.

Electronic Data Interchange

Electronic Data Interchange (EDI) involves the swapping of business documents in a standard format
from computer-to-computer. It presents the capability as well as the practice of exchanging
information between two companies electronically rather than the traditional form of mail, courier, &
fax.
The major advantages of EDI are as follows −
 Instant processing of information
 Improvised customer service
 Limited paper work
 High productivity
 Advanced tracing and expediting
 Cost efficiency
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 Competitive benefit
 Advanced billing
  The application of EDI supply chain partners can overcome the deformity and falsehood in
supply and demand information by remodeling technologies to support real time sharing of
actual demand and supply information.
 Barcode Scanning
 We can see the application of barcode scanners in the checkout counters of super market. This
code states the name of product along with its manufacturer. Some other practical applications
of barcode scanners are tracking the moving items like elements in PC assembly operations and
automobiles in assembly plants.
 Data Warehouse
 Data warehouse can be defined as a store comprising all the databases. It is a centralized
database that is prolonged independently from the production system database of a company.
 Many companies maintain multiple databases. Instead of some particular business processes, it
is established around informational subjects. The data present in data warehouses is time
dependent and easily accessible. Historical data may also be accumulated in data warehouse.
 Enterprise Resource Planning(ERP) Tools
 The ERP system has now become the base of many IT infrastructures. Some of the ERP tools
are Baan, SAP, PeopleSoft. ERP system has now become the processing tool of many
companies. They grab the data and minimize the manual activities and tasks related to
processing financial, inventory and customer order information.
 ERP system holds a high level of integration that is achieved through the proper application of a
single data model, improving mutual understanding of what the shared data represents and
constructing a set of rules for accessing data.
 With the advancement of technology, we can say that world is shrinking day by day. Similarly,
customers' expectations are increasing. Also companies are being more prone to uncertain
environment. In this running market, a company can only sustain if it accepts the fact that their
conventional supply chain integration needs to be expanded beyond their peripheries.
 The strategic and technological interventions in supply chain have a huge effect in predicting
the buy and sell features of a company. A company should try to use the potential of the internet
to the maximum level through clear vision, strong planning and technical insight. This is
essential for better supply chain management and also for improved competitiveness.
 We can see how Internet technology, World Wide Web, electronic commerce etc. has changed
the way in which a company does business. These companies must acknowledge the power of
technology to work together with their business partners.
 We can in fact say that IT has launched a new breed of SCM application. The Internet and other
networking links learn from the performance in the past and observe the historical trends in
order to identify how much product should be made along with the best and cost effective
methods for warehousing it or shipping it to retailer.

19) Explain Customer Relationship Management (CRM).

Answer to the question No 19

CRM (customer relationship management)

Customer relationship management (CRM) is the combination of practices, strategies and

technologies that companies use to manage and analyze customer interactions and data throughout
the customer lifecycle, with the goal of improving customer service relationships and assisting in
customer retention and driving sales growth. CRM systems compile customer data across different
channels, or points of contact between the customer and the company, which could include the
company's website, telephone, live chat, direct mail, marketing materials and social media. CRM
systems can also give customer-facing staff detailed information on customers' personal
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information, purchase history, buying preferences and concerns.

Components of CRM
At the most basic level, CRM software consolidates customer information and documents into a
single CRM database so business users can more easily access and manage it.
Over time, many additional functions have been added to CRM systems to make them more useful.
Some of these functions include recording various customer interactions over email, phone, social
media or other channels; depending on system capabilities, automating various workflow
automation processes, such as tasks, calendars and alerts; and giving managers the ability to track
performance and productivity based on information logged within the system.

Marketing automation: CRM tools with marketing automation capabilities can automate repetitive

tasks to enhance marketing efforts at different points in the lifecycle. For example, as sales prospects
come into the system, it might automatically send the prospects marketing materials, typically via
email or social media, with the goal of turning a sales lead into a full-fledged customer.
Sales force automation: Sales force automation tools track customer interactions and automate certain
business functions of the sales cycle that are necessary to follow leads and attract and obtain new
customers.
Contact center automation: Designed to reduce tedious aspects of a contact center agent's job, contact
center automation might include prerecorded audio that assists in customer problem-solving and information
dissemination. Various software tools that integrate with the agent's desktop tools can handle customer
requests in order to cut down on the time of calls and to simplify customer service processes.
Geolocation technology, or location-based services: Some CRM systems include technology that can
create geographic marketing campaigns based on customers' physical locations, sometimes integrating with
popular location-based GPS apps. Geolocation technology can also be used as a networking or contact
management tool in order to find sales prospects based on a location.
Workflow automation: CRM systems help businesses optimize processes by streamlining mundane
workloads, enabling employees to focus on creative and more high-level tasks.
Lead management: Sales leads can be tracked through CRM, enabling sales teams to input, track and
analyze data for leads in one place.
Human resource management (HRM): CRM systems help track employee information, such as contact
information, performance reviews and benefits within a company. This enables the human resource
department to more effectively manage the internal workforce.
Analytics: Analytics in CRM help create better customer satisfaction rates by analyzing user data and
helping create targeted marketing campaigns.
AI: Artificial intelligence (AI) technologies, such as Salesforce Einstein, have been built into CRM
platforms to automate repetitive tasks, identify customer buying patterns to predict future customer
behaviors and more.

Types of CRM technology

The four main vendors of CRM systems are Salesforce, Microsoft, SAP and Oracle. Other providers are
popular among small to midmarket businesses, but these four tend to be the choice for large corporations.
The types of CRM technology offered are as follows:
On-premises CRM: This system puts the onus of administration, control, security and maintenance of the
database and information on the company using the CRM software. With this approach, the company
purchases licenses upfront instead of buying yearly subscriptions from a cloud CRM provider. The software
resides on the company's own servers and the user assumes the cost of any upgrades. It also usually requires
a prolonged installation process to fully integrate a company's data. Companies with complex CRM needs
might benefit from an on-premises deployment.
Cloud-based CRM: With cloud-based CRM, also known as SaaS (software as a service) or on-demand
CRM, data is stored on an external, remote network that employees can access anytime, anywhere there is
an internet connection, sometimes with a third-party service provider overseeing installation and
maintenance. The cloud's quick, relatively easy deployment capabilities appeal to companies with limited
technological expertise or resources.
Companies might consider cloud CRM as a more cost-effective option. Vendors such as Salesforce charge
by the user on a subscription basis and offer the option of monthly or yearly payments.
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Data security is a primary concern for companies using cloud-based systems, as the company doesn't
physically control the storage and maintenance of its data. If the cloud provider goes out of business or is
acquired by another company, an enterprise's data can be compromised or lost. Compatibility issues can also
arise when data is initially migrated from a company's internal system to the cloud.
Finally, cost may be a concern, since paying subscription fees for software can be more costly over
time than on-premises models.

Open source CRM: An open source CRM system make source code available to the public, enabling
companies to make alterations at no cost to the company employing the system. Open source CRM systems
also enable the addition and customization of data links on social media channels, assisting companies
looking to improve social CRM practices.
Open Source CRM platforms such as OroCRM, SuiteCRM and SugarCRM offer alternatives to the
proprietary platforms from Salesforce, Microsoft and other vendors.
Adoption of any of these CRM deployment methods depends on a company's business needs, resources and
goals, as each has different costs associated with it.

CRM examples in practice

Contact center: Traditionally, data intake practices for CRM systems have been the responsibility of sales
and marketing departments, as well as contact center agents. Sales and marketing teams procure leads and
update the system with information throughout the customer lifecycle, and contact centers gather data and
revise customer history records through service calls and technical support interactions.
Social CRM: Social media in CRM involves businesses engaging customers directly through social media
platforms, such as Facebook, Twitter and LinkedIn. Social media presents an open forum for customers to
share experiences with a brand, whether they are airing grievances or promoting products.
To add value to customer interactions on social media, businesses use various social CRM tools that monitor
social media conversations, from specific mentions of a brand to the frequency of keywords used, to
determine their target audience and which platforms they use. Other tools are designed to analyze social
media feedback and address customer queries and issues.
Companies are interested in capturing customer sentiments, such as the likelihood they will recommend
products and their overall customer satisfaction, to develop marketing and service strategies. Companies try
to integrate social CRM data with other customer data obtained from sales or marketing departments to get a
single view of the customer.
Another way in which social CRM adds value for companies and customers is through customer
communities, where customers post reviews of products and can engage with other customers to
troubleshoot issues or research products in real time. Customer communities can provide low-level customer
service for certain kinds of problems and reduce the number of contact center calls. Customer communities
can also provide new product ideas or feedback that companies can use in lieu of feedback groups.
Mobile CRM: CRM applications built for smartphones and tablets have become a must-have for sales
representatives and marketing professionals who want to access customer information and perform tasks
when they are not physically in their offices. Mobile CRM apps take advantage of features that are unique to
mobile devices, such as GPS and voice recognition capabilities, to give sales and marketing employees
access to customer information from anywhere.
Business-to-business (B2B) practices: A CRM system in a B2B environment helps monitor sales as they
move through the sales funnel, enabling a business to address any issues that might come up during the
process. CRM systems in the B2B market help create more visibility into leads and, therefore, increase
efficiency throughout the sales process.
CRM challenges
For all of the advancements in CRM technology, without the proper management, a CRM system can
become little more than a glorified database in which customer information is stored. Data sets need to be
connected, distributed and organized so that users can easily access the information they need.
Companies may struggle to achieve a single view of the customer if their data sets are not connected and
organized in a single dashboard or interface. Challenges also arise when systems contain duplicate customer
data or outdated information. These problems can lead to a decline in customer experience due to long wait
times during phone calls, improper handling of technical support cases and other issues.
CRM systems work best when companies spend time cleaning up their existing customer data to eliminate
duplicate and incomplete records before they supplement CRM data with external sources of information.
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20) Explain Internal Customer Relationship Management (ISCM).

 Answer to the question No 20

Managing business relationships of any kind takes work. This is even more true when it comes to your
internal customer base, which requires deliberate planning and an approach that is organized and
efficient. For example, your Information Technology (IT) department provides services to your
employees, making them important internal customers. Without IT support, they can’t do their jobs.
Depending on the size of your company, it may be difficult for IT to track support tickets, and keep
things running smoothly. They need a customer relationship management (CRM) system. Adding the
right CRM to your IT services will help you address each of your business’ unique challenges and
characteristics, starting with some of your most important customers, who reside on the inside of it all.
Your Employees: A Neglected Market

Employees, or internal customers, are the lifeblood of a business. While it varies by field, product or
service, internal customers are generally parties with whom your company exchanges services (think
colleagues, employees and vendors). Without these parties, your business couldn’t serve its external
customers and, therefore, wouldn’t be operational. They do important work for you, and it’s imperative
any problems, issues, inaccuracies or glitches standing in the way of completing that work be identified
and solved before workflow is interrupted.
This is where CRM comes in. You’ll find it to be an absolute necessity to the clean running of your IT
department—and your business as a whole.
An Informed Employee Is An Efficient Employee

Your business has many moving parts. In order to best serve your external customers, the people on the
inside of your business need to be armed with all the most accurate, up-to-date information they can get.
Few things are more frustrating for a customer service representative than to call a customer by the
wrong name, ask the same question the sales representative just asked yesterday, or receive a complaint
for sending correspondence via mail when the customer has specifically specified e-mail. These things
happen when a business not only fails to keep the information in their system current, but also neglects
to share accurate or updated information with anyone outside of the IT department. Frustrated
employees may soon become former employees; helping them to do their work efficiently is extremely
important, or it could cost you.
Customization and Ease of Use Are Key

Your business, customers and needs are unique, so your approach to managing internal customer
relationships should be, too. Now, while I don’t know many who’d balk at the idea of a one-stop-shop
solution to all their CRM and contact management needs, it’s still important to understand what goes
into successfully managing your company’s information and how a customized, well-structured CRM
can help you do so. Are there often breaks in communication between the enrollment team and
customer service? Are you still developing processes and want to be able to add fields whenever and
wherever you like? Take characteristics like these into account when deciding what features would suit
your company best.
The CRM you choose must also be easy for people in all areas of your business to understand and
navigate. Terms and abbreviations that make sense in the tech world may mean something completely
different to the marketing team. Way back when, CRM consisted of a Rolodex filing system and folders
in a file cabinet, and internal communication meant writing a memo summoning everyone to the
boardroom if a problem came to a head. Things have since become much more complex, and constant
technological advances often create challenges and threats to productivity as well as boosts to
efficiency. It’s important your CRM doesn’t confuse its users or have an impossibly steep learning
curve, or you’ll be back at square one.
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Integration, Integration, Integration

Take inventory of systems and processes your business already has in place and try to find a way for
them to communicate with one another. Does your business use Outlook or Google Mail? Do you prefer
everyone work off individual desktops, or in the Cloud? Is project management a main concern, or is
the successful uploading of large files what makes your business tick? Does everyone in your business
work remotely (possibly making management of internal contacts, roles and tasks a necessary feature)
or can you simply pop into your coworker’s office to ask for a status update? Integration is important
for information sharing and will limit the number of programs you’ll have to learn, maintain, and
support.
Simplify (Don’t Complicate) Your Processes

Technology is a blessing but it can quickly become a curse if it’s adding to—or creating—the
confusion. If your IT team receives a lot of help desk requests for things that can be easily solved or
prevented, or gets complaints about help tickets never being attended to, it may be time to update your
process. Try looking for a CRM that allows you to task teams or individuals, send mass emails, set
deadlines and reminders, or even grant and revoke certain permissions for when it’s time to go in and
investigate an issue.
Every business is one-of-a-kind and its employees, processes, and specific needs follow suit. A
customized CRM that is integrated with the things that really matter to you and make your business run
will do wonders for your productivity, information sharing, accuracy, and peace of mind.

20) Explain performance measurement of supply chain.

Answer to the question No 21

The supply chain is an important element in logistics development for all industries. It can improve
efficiency and effectiveness of not only product transfer, but also information sharing between the
complex hierarchy of all the tiers. There is no systematic grouping of the different performance
measures in the existing literatures. This paper presents the formulization of both quantitative and
qualitative performance measurements for easy representation and understanding. Apart from the
common criteria such as cost and quality, five other performance measurements are defined: resource
utilization; flexibility; visibility; trust; and innovativeness. In particular, new definitions are developed
for visibility, trust, and innovativeness. Details of choices of these performance measurements are listed
and suggested solutions are given, with the hope that a full picture of supply chain performance
measurements is developed. In addition, a multi-attribute decision-making technique, an analytic
hierarchy process (AHP), is used to make decisions based on the priority of performance measures. This
paper outlines the application and particularly the pairwise comparison which helps to identify easily
the importance of different performance measurements. An example from the electronic industry is used
to demonstrate the AHP technique.

21) iscuss Customer Service Metrics & Internal Efficiency Metrics.

Answer to the question No 22

Did you know that almost 70% of American consumers would prefer spending more money with
companies who provide excellent customer service?
For modern day businesses, customer service is no longer a support function. It has a direct impact on
several key organizational KPIs and is often the difference between an average company and an
industry leader.
But how do you really know if your service standards are up to your customers’ expectations?
After all, almost 80% of companies believe they provide “exceptional service” to their customers.
Unfortunately, only 3% of customer reciprocates that feeling.
Your customers are happier when your support team closes tickets swiftly. Hiver’s Shared Inbox lets
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you manage customer emails brilliantly. Know more.

This is why the only dependable way of knowing your actual service standard, and making any
informed decisions about it, is by calculating the right customer service metrics.
Customer service metrics are not just some fancy numbers that fill up your monthly performance
dashboards. They are key performance factors that give you a clear idea of the contribution your
services department is making to the overall progress of your company.
In this post, I’ve zoomed in to the most important organizational and operational level customer service
metrics that you should closely monitor. Instead of stretching yourself too far, just focus on these
metrics and try to maintain optimal performance against each one of them.

Operational Customer Service Metrics

1. Average Ticket Count (Daily/Weekly/Monthly)
No matter how good your product quality is, you’re bound to receive a certain number of complaints
from your customers. Calculating the average number of daily, weekly and monthly tickets will help
you in a number of ways.
First of all, you’ll be able to work out the standard ticket counts for different months which will help
you create benchmarks for your company staff. Secondly you’ll be able to identify frequently occurring
issues and determine whether they can be automated or not.
To be more precise, if you see an escalation in the number of service related tickets, you need to track
the reasons and rectify them. You can use this metric to assign service targets to your support staff and
gauge their performance against it.
How do you deal with a rise in support emails? With Hiver’s Shared Inbox, you can assign emails to
teammates in seconds, and your team works together seamlessly. Know more.

2. First Response Time

33% of customers in the US feel positive about a brand that gives a quick first response, even if it’s
ineffective. The first response time of your service staff is a crucial customer service metric.
Companies that really care about their customers have quick first response times, and bind their services
staff to approach clients as soon as possible. First response has the same effect with your customers as
first aid. It gives immediate relief and buys you additional time to understand and resolve the
customer’s issue.
The first response times usually vary with the number of customers you have. But to give you an idea,
Woo Themes, reports that 40% of its customer tickets are responded within 24 hours. While the rest are
contacted within 48 hours.
Many Seas customers, however, expect quicker responses from their service providers. For
example, this study by CMO Council shows that almost 47% customers expect a response within 24
hours while more than 22% expect an instant response.
How do you remind yourself that it’s time to get back to the customer? Try Hiver’s Email Reminders.

3. Average Ticket Resolution Time

A great indicator of the efficiency of your customer service staff is the average time they take to resolve
a ticket. Having quick first response times is fine, but if you take too much time resolving the
customer’s concerns, it will eventually hurt your customer experience.
But quick issue resolution times can mislead you as well. It’s a known practice among many service
based companies where the support staff tags tickets as resolved without actually resolving the issue
completely, only to meet their targets.
So you need to have a strong QA system that ensures that the resolved tickets actually represent
resolved issues. This, again, is one of the key customer service metrics that needs to be monitored
closely.
With Hiver’s Shared Inbox Analytics, you get deep insights into how your customer support team is
doing. Know more.
4. Number of Interactions per Ticket
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The ideal number of interactions per ticket is 0. Because you’d ideally want to resolve customer issues
even before they arise. But for operational purposes, you still need to define an ideal number of
interactions in which you’d want to resolve your customer’s issues.
Too many interactions can often mean that your support staff is not asking the right questions about the
customer’s issue, or the customer is not being directed to the right people. So if you see the average
number of interactions per ticket rising, you may need to look closely and find out the reasons for it.
5. Issue Resolution Rate
This is another important customer service metric that needs to be monitored closely at the operational
level. It represents the percentage of issues your staff actually resolves from the total queries received.
Again, this requires strong QA at the back-end to ensure that the issues are actually being resolved. A
rising resolution rate is a clear indication of the efficiency levels of your staff.
6. Preferred Communication Channel
This is an operational customer service metric that has organizational implications. It effectively tells
you about the general preferences of your customers. For example, the majority of customers in the US
prefer using direct phone calls when they face problems with a service.
According to a research by consultancy, US consumers prefer support from the following channels:
Phone support (61%), email (60%), Live Chat (57%), online knowledge base (51%), “click-to-call”
support automation (34%).
But this rate varies according to the nature of your business. So you need to track how your clients
contact you and then optimize those channels for an improved service experience.
Organizational Customer Support Metrics
7. Net Promoter Score (NPS)
One of the best indicators of the strength and effectiveness of your customer service is the word of
mouth it generates for your business. The Net Promoter Score (NPS) calculates just that. It’s often a
simple question that asks your customers about the likelihood, on a scale from 0 to 10, of them referring
your services to their friends.
Customers with responses from 9-10 can be classified as promoters, 7-8 as passives while the ones
below 6 can be categorized as detractors. You can calculate the NPS by subtracting detractors from
promoters.
To give you an idea, companies like Apple (iPhone) and Amazon recorded NPS scores of 70% and
69% respectively in 2013.
To make this customer support metric even more actionable, also add a quick question about the reasons
behind your customers’ response. This will help you find out the exact areas that need to be improved.
You can use tools like Promoter.io to measure NPS easily.
At the organizational level, the NPS metric will give you a strong sense of how satisfied the customers
are with your product/service, and will also play a key role in your marketing campaigns.
8. Customer Satisfaction
Customer satisfaction is another key performance indicator that you need to closely track and monitor.
Satisfaction is often a subjective metric and doesn’t always show you the full picture. So you need to
use it in combination with other customer support metrics to make sense of it.
For example, if the satisfaction rating for a customer is high but the NPS rating is low, you’ll need to
dig deeper to find out the reasons for it.
Related post: The Quintessential Guide to Measuring Customer Satisfaction
To track customer satisfaction, you’ll need to use a combination of surveys, and quick feedback ratings
every time the customer makes a purchase or visits your website. Survey Monkey has a detailed
manual on how Saabs companies can create effective survey questions. I recommend using it as a
guideline when creating your customer satisfaction surveys.
You can match your results with the your industry benchmarks. For example, according to the The
American Customer Service Index, the average customer satisfaction rating in the internet retail
industry for 2014, is 82% in the US. For the internet service provider industry, this rating is 64%.
An upward trend in satisfaction means both your product quality and the service standards are up to the
mark.
9. Frequency of Up-sells and Cross-sells
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The boundaries between sales and services departments have blurred for modern day businesses. That is
why upselling and cross-selling have become important customer service metrics for many
organizations.
Upselling is when you convince your clients, often with high quality service delivery, to opt for a higher
priced version of your product. Cross-selling is when you convince the clients to purchase a
complementing product to the existing product/service they have.
Higher upselling and cross-selling rates mean your service departments are doing an exceptional job
and successfully convincing customers to spend more on your products. This eventually improves the
per customer dollar value, another key organizational KPI.
10. Customer Experience Rating
Almost 90% of American consumers are prepared to spend more money for a superior customer
experience. More than your advertisements and your claims about your product, customers remember
their experiences of using your product and interacting with your services staff.
Customer experiences are built upon small things like the voice tone of your service staff, their
eagerness to resolve customer issues, the concern and understanding of the service staff, the time it
takes to resolve their queries etc.
This is a key customer service metric because it ultimately impacts your customer retention,
upselling/cross-selling and satisfaction rates. You can measure customer experience using a
combination of transactional surveys and in-person feedback.
If you have a sense of your customer’s preferences, you can provide customized service to create
memorable experiences.
11. Customer Retention Rate
The probability of selling to an existing customer is 60-70%, much higher than the 5-20% probability of
selling to a new prospect. This clearly suggests that retaining your customers is absolutely crucial, not
only for your sales figures, but also for your brand image and per customer dollar value.
Your services team has a major stake in customer retention, and that is why you need to monitor this
customer support metric from their perspective. Once a sale has been made and the customer is on
board, his major contact point is your service staff.
A rising retention rate means that your services team are doing an exceptional job. A decline, on the
other hand, means that things are not working as they should.
Wrapping it Up
You can’t improve your service standards unless you know where you currently stand. By measuring
the right customer service metrics, you’ll get a clear understanding of your existing service standards
and how you compare with the industry benchmarks. Once you have these numbers on your dashboard,
you can make calculated moves to improve each metric and enhance the overall performance and
service standards of your company.

22) Discuss Demand Flexibility Metrics & Product Development Metrics

Answer to the question No 23

Demand Flexibility Metrics

Demand flexibility describes a company’s ability to be responsive to new demands in the quantity
and range of products and to act quickly. A company or supply chain needs capabilities in this area in
order to cope with uncertainty in the markets they serve. Some measures of flexibility are:

 Activity Cycle Time

 Upside Flexibility
 Outside Flexibility

Activity Cycle Time

The cycle time measures the amount of time it takes to perform a supply chain activity such as
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order fulfillment, product design, product assembly, or any other activity that supports the supply
chain. This cycle time can be measured within an individual company or across an entire
supply chain. Order fulfillment within a single company may be fast but that company may
only be filling an order from another company in the supply chain. What is important is the
cycle time for order fulfillment to theultimate end use customer that the entire supply chain is there
to serve.
Upside Flexibility
It is the ability of a company or supply chain to respond quickly to additional order volume
for the products they carry. Normal order volume may be 100 units per week for a product. Can
an order be accommodated that is 25 percent greater one week or will the extra product
demand wind up as aback order? Upside flexibility can be measured as the percentage increase over
the expected demand for product that can be accommodated.
Outside Flexibility
This is the ability to quickly provide the customer with additional products outside the bundle of
products normally provided. As markets mature and technologies blend, products that were once
considered out-side of the range of a company’s offerings can become a logical extension of its
offerings. There is danger in trying to provide customers with a new and unrelated set of products that
has little in common with the existing product bundle. However, there is opportunity to acquire new
customers and sell more to existing customers when outside flexibility is managed skillfully.
Product Development Metrics
Product development measures a company or a supply chain’s ability to design, build, and deliver
new products to serve their markets as those markets evolve over time. Technical innovations,
social change and economic developments cause a market to change over time. Measurements
in this performance category are often overlooked, but companies do so at their own peril. A
supply chain must keep pace with the market it serves or it will be replaced. The ability to keep
pace with an evolving market can be measured by metrics such as:
 Percentage of total products sold that were introduced in the last year 
 Percentage of total sales from products introduced in the last year 
 Cycle time to develop and deliver a new product
Operations that Enable Supply Chain Performance In order for an organization to meet the
performance requirements of the markets it serves it must look to measure and improve its
capabilities in the four categories of supply chain operations:

1. Plan
2. Source
3. Make
4. Deliver

23) Describe the SCOR Model.

Answer to the question No 24

One of the most promising models for strategic decision-making in supply chain management is known
as the SCOR model. 70 leading members of the manufacturing, distribution, and solutions supplier
industries (in collaboration with the Supply Chain Council) developed the management tool, which is
short for "supply chain operations reference model." The program has been designed in a way that it can
applicable to any size operation. The SCOR model is a process meant to assess waste, establish
standards, and continuously improve. It is a repetitive framework of constant engagement and
discovery, developed to describe all the business activities associated with the phases of satisfying a
customer.

SCOR MODEL: MANAGEMENT PROCESSES

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The SCOR model is based on three major principles: process modeling/re-engineering, measuring
performance, and best practices. There are 5 distinct process-modeling building blocks to the SCOR
model:

1. Plan: These are processes that relate to demand and supply planning. Standards must be
established to improve and measure supply chain efficiency. These rules can span compliance,
inventory, transportation, and assets, among other things.
2. Source: This step in the SCOR model involves any processes that procure goods or services in
order to meet a demand (real or planned). Material acquisitions and sourcing infrastructure are
examined to determine how to manage the supplier network, inventory, supplier performance,
and agreements. This stage should help you plan on when to receive, verify, and transfer a
product in the supply chain.
3. Make: In order to meet planned or actual demand, this is the process in which a product is
transformed to its final state. This step is particularly important in the manufacturing and
distribution industries, and helps to answer the questions of: make-to-order, make-to-stock, or
engineer-to-order? The "make" part of the process includes production activities, packaging,
staging, and releasing the product. It also involves production networks and managing
equipment and facilities.
4. Deliver: Any process that involves getting the product out, from order management and
warehousing, to distribution and transportation. This step also involves customer service and
overall management of product lifecycles, finished inventories, assets, and importing/exporting
requirements.
5. Return: This final step focuses on all products that are returned or received, for any reason.
Organizations must be prepared to handle the return of defective products, containers, and
packaging. The return process involves the application of business rules, return inventory,
assets, and regulatory requirements. This final step directly extends to post-delivery customer
support and follow-up.

SCOR MODEL: SCOPE

The SCOR model does not attempt to explain every business process or activity. As in all business
models, there is a specific scope that the SCOR model addresses, including the following segments:

 Customer Interactions:  The entire process of the customer relationship, from order entry
through paid invoice.
 Product Transactions:  All product, from the supplier's supplier to the customer's customer,
including equipment, supplies, bulk products, etc.
 Market Interactions:  From the understanding of demand, to the fulfillment of every order.

The focus of SCOR can also be defined and measured on 3 levels of process detail.

 Level 1: Defining Scope - geographies, segments, and context

 Level 2: Configuration of the supply chain
 Level 3: Process element details - identifies key business activities within the chain.

A major supplier of light bulbs around the world, Philips Lighting has been using the SCOR model
since 1999. They recently reported to the Supply Chain Council that over the years, incorporating the
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SCOR model into their business framework has directly resulted in improved customer service and
reduced inventories. The SCOR model is a tried and true process for manufacturing and distribution
industries that has seen decades of success. When applied correctly, it can streamline processes and
refine your organization's supply chain.

24) What do you understand by competitive strategy?

Answer to the question No 25

What is a Competitive Strategy?

Competitive strategy is a long-term action plan of a company which is directed to gain competitive
advantage over its rivals after evaluating their strengths, weaknesses, opportunities and threats in the
industry and compare it with your own. Michael Porter, a professor at Harvard presented competitive
strategy concept. According to him there are four types of competitive strategies that are implemented
by businesses globally. It is necessary for businesses to understand the core principles of this concept
that will help them to make a well-informed business decisions in the course of action.

Definition of Competitive Strategy

As mentioned above, competitive strategy is a long-term action plan of firms so as to gain a competitive
advantage over its rivals in the industry. This strategy is focused to achieve above average position and
generate a superior Return on Investment (ROI). This strategy is very important when firms having a
competitive marketplace and several similar products available for consumers.

Four Types of Competitive Strategy

Michael Porter divided competitive strategy in four different types of strategies.
Cost Leadership Strategy
Cost leadership strategy is difficult to implement for small scale businesses as it involves making long
term commitment for offering products and services at lower prices in the market.  For this purpose
firms need to produce products at low cost otherwise it will not make profit.

Since the cost leadership means to become low cost producer or provider in the industry, Any large-
scale business which can provide and manufacture products at low cost by attaining economies of scale.
There are many cost leadership factors such efficient operation, large distribution channels,
technological advancement and bargaining power. Here Walmart is a good example.

Differentiation Leadership Strategy

Identifying attribute of a product which are unique from competitors in the industry is the driving factor
in the differentiation leadership strategy. When a product is able to differentiate itself from other similar
products or services in the market through superior brand quality and value added features it will be
able to charge premium prices to cover the high cost.

There are few business examples who successfully differentiated their brands e.g. Apple, Clif Bar and
Company, Ben & Jerry’s and T Mobiles.

Cost Focus Strategy

This strategy is quite a resemblance to the cost leadership strategy; however, a major difference is that
the cost focus strategy businesses target a particular segment within the market and that segment is
offered the lowest price of the product or service. This type of strategy is very useful to satisfy your
consumer and increase brand awareness.

For example, beverage companies manufacturing mineral water can target market segment like Dubai,
where people need and use only mineral water for drinking, can be sold at a lower than competitors.

Differentiation Focus Strategy

Similar to the cost focus strategy, differentiation focus strategy targets a particular segment within the
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market; however, instead of offering lower prices to consumer; firms differentiate itself from its
competitors. Differentiation strategy offers unique features and attributes to appeal its target segment.
For example, Breezes Resorts, is a company having several resorts and caters only couple having no
children and offer peaceful environment without any children disruption.

Examples of competitive Strategies

Case Study of Aldi
The rise of Aldi in the food retail industry is very impressive and this position is mainly associated with
its competitive strategy which is its use of ‘Lean Production’ which makes the organization more
efficient. Through lean production, Aldi aims to reduce the number of resources that are used in the
provision of goods and services to consumers. Additionally, the concept also involves eliminating waste
and utilizing lesser material, space, labour and time. The overall result is a reduced cost of production.

Another competitive strategy which stands for Aldi and against its competitors is that its investment in
staff members. Every member undergoes a comprehensive training program which makes them multi-
skilled and they are able to undertake different roles in the workplace. In this way, Aldi has to hire
lesser staff to run its stores.

Case Study of Apple

Apple Inc. is the manufacturer and marketer of computers and consumer electronic products including
tablets, smartphones, and music players. The company has attained a distinct position in the industry
through its competitive strategy which is innovation and premium pricing policy. Apple has a consistent
practice of developing new products and its ability to make product complement with each other and
strengthens customer loyalty and helps in creating a barrier for competitors in the market.

The company also sets premium prices for its products. The aim of the company is to offer a high-
quality product with unique features and uses higher prices to reinforce the perception of added value
along with maintaining profitability.

25) Explain the importance of people in SCM.

Answer to the question No 26

Pedro Rodríguez, an educator at the University of Wisconsin who specializes in the supply chain,
believes “companies need to invest more in talent in the supply chain.” [“Supply Chain Talent is
Every Company’s Most Important Asset,” Dustin Mattson’s Blog, 21 May 2012] Steve Hall agrees
completely with Rodríguez and further believes that if companies don’t invest more in their people
they could be “stuck with mediocre talent.” [“Attracting the next generation – is procurement
doomed to be stuck with mediocre talent?” Procurement Leaders, 14 May 2012] In his interview
with Dustin Mattson, Rodríguez noted that the current economic downturn has “increased focus on
supply chain as a key strategic value for companies.” That means that business executives are more
keenly aware of the processes, technologies, and people that provide that value. Mattson continues:
“In the future, Rodriguez believes increased visibility of supply chain management will be a key
strategic component of business models. ‘We know of two people that have been promoted to senior
vice presidents from vice presidents where there was a job that didn’t exist prior to the recession
because the CEO wanted to have a senior vice president of supply chain in their teams, at the
highest level. So, I guess that’s the good news,’ added Rodriguez.”
Rodríguez doesn’t believe that cheap capital will be a permanent fixture on the business landscape.
As a result, significant decisions will have to be made as companies move forward about how they
can provide the same level of service to their customers “with a lot less inventory.” Rodríguez
believes that a lot more (and a lot better) tactical planning is going to be required. He’s pretty certain
that companies will continue to invest in processes and technologies; but, he isn’t as sure that they
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will invest in their people. “I think if anything has been learned from this period,” Rodríguez told
Mattson, “[it] is that companies need to invest more in talent in the supply chain. And as an educator
myself, I cannot tell you how good it is to have good, educated people in supply chains. So my
parting comment is: invest in people, in supply chain, of course, and then processes and tools, but
first, people. Educated people are the key to success.”
A key part of the supply chain is procurement. Steve Hall focuses his comments about personnel in
that sector. He believes that too many functional heads (and supporting HR departments) are using
narrow thinking in their hiring practices. Narrow thinking, he insists, results in hiring narrow
individuals (i.e., people with limited skills and, therefore, limited potential to move a company
forward). He writes:
“The more sophisticated procurement organizations are coming up with some clever answers … to
snare the talent they need. … For Johnson & Johnson Consumer’s VP of global supply chain
procurement Ralf Garczorz, success has come by taking a personal approach in order to sell the
story of procurement. ‘I engage with talent on a one-on-one basis, and so educate them on what
procurement can be in the future,’ he advises. ‘It’s a place where there’s a lot of opportunity. And
people are sometimes surprised by that.’ On a trip to a conference in Switzerland to talk to a class of
students about sustainability, rather than procurement, he learned a valuable lesson. ‘I presented two
sustainability case studies and people were extremely surprised that this is what procurement could
be. Because of this interaction we hired two people and their reaction was “this is so cool”.'”
Helping the rising generation of students understand that supply chain jobs can be “cool” is an
important task. I have noted in several previous posts that, as some manufacturing returns to
developing countries, there are likely to be more jobs created in supporting supply chains than there
are going to be created on the factory floor. For a generation of graduates wondering what lies in
their future, now is a good time to convince them that the opportunities associated with jobs in the
supply chain makes it a good place to look for answers. Hall continues:
“Cynthia Dietrich, CPO of consumer goods group Kimberly-Clark, is equally positive about the
opportunities for organizations that can sell a good story to candidates. ‘We show them a three to
five-year plan and we’re very clear about how they fit into that plan. The market for talent is quite
robust – we can put out a strong message and there are definitely candidates who are eager to get
involved,’ she says.”
Hall’s anecdotal examples offer some hope that talent can be attracted to the supply chain field; but
not everyone is so sanguine. “Supply-chain professionals have been sounding the warning bell about
the coming talent shortfall for several years now,” writes Robert J. Bowman, managing editor
of Supply Chain Brain. “But who’s listening?” [“The Hunt for Talent: A Supply Chain of Its Own,”
29 May 2012] He continues:
“At a time when the economy at large is coping with high unemployment and sluggish job growth,
the notion of a sector that can’t attract enough qualified bodies is tough to grasp. Still, that’s the
reality in the supply-chain world today, and it’s only going to get worse. For those who are paying
attention, the message is coming through loud and clear. Finding and nurturing the right talent was
among the five most critical issues cited by the 42 corporate members of the advisory board to the
University of Tennessee’s Global Supply Chain Institute. Spanning a dozen industries, those
companies come together twice a year to share their observations about supply-chain management.”
Bowman notes that the UT gathering wasn’t the first alarm that had been issued. “Others identified
the trend earlier,” he writes. He continues:

“In the fall of 2010, MIT’s Center for Transportation & Logistics issued a white paper with the
provocative title ‘Are You Prepared for the Supply Chain Talent Crisis?’ In it, global
communications consultant Ken Cottrell speculated that the recession, ironically, was at least partly
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to blame. Eager to cut costs in a down economy, companies went too far in shedding themselves of
valuable (albeit expensive) supply-chain expertise. They took for granted their ability to pick up
suitable talent from a supposedly deep pool of applicants, when things got better. Meanwhile, baby
boomers, who make up the lion’s share of supply-chain professionals, are beginning to retire, and
younger replacements are in short supply. Add to that a discipline that’s ever-changing and more
challenging than ever before, and you have a situation that’s bordering on the critical.”
If people truly are a company’s greatest assets, these alarms need to be taken seriously. Like Hall,
Bowman wonders, “Why aren’t more young people drawn to a career in supply chain?” He
continues:
“For the most part, the jobs pay well, and provide interesting and challenging work. But they also
demand a set of skills that are rare in any one individual. ‘For supply-chain people, you need depth
everywhere,’ said Daniel Stanton, supply chain professional and development manager with
Caterpillar Logistics Inc. … An effective executive in that area today must be free-thinking, good at
managing people and dealing with multiple cultures, willing to travel, conversant with information
technology and able to crunch numbers.”
Bowman goes on to detail how Caterpillar realized it was facing a major personnel challenge and
what it did to meet it. He starts with how Caterpillar discovered the extent of the challenge. He
writes:
“Cat Logistics was hit by its own ‘lightning bolt’ after reading a December 2010 article about the
problem in the Wall St. Journal. Soon after, it got a lesson even closer to home. The third-party
logistics provider was unable to find an internal replacement for a retiring chief procurement officer.
It ended up filling the position from outside the company. ‘That was a wakeup call for us,’ said
Stanton. Stanton began assessing Cat’s needs for supply-chain talent over the next five years. (And
none too soon. The company was anticipating a boost in full-time employment from 104,000 to
120,000 between 2010 and 2011.) Accounting for natural attrition, it was looking at 15-percent
growth in its workforce – a level of demand that wouldn’t come close to being satisfied by job-
market entrants. Polling its account base, Cat uncovered the need for twice as many experienced
professionals as recent college grads. ‘We were focusing on career fairs,’ Stanton recalled.
‘Customers were telling us that’s not what [they] wanted.’ Next, Stanton broke down the cost of
failing to filling that gap. It turned out to be substantial.”
Stanton indicated that there “were five discrete areas of consideration: the initial cost of recruiting;
compensation and benefits; relocation and travel; education, training and development, and
opportunity cost.” Bowman writes that the opportunity cost “was the ‘eye-opener.'” He explains:
“It detailed the price of work that would get done badly or not at all, and employees burnt out by
overtime. Solving the dilemma meant striking a careful balance between paying for fresh talent and
meeting business needs. Bottom line: when it comes to assessing a workforce, you don’t give short
shrift to the supply chain.”
Bowman notes that the supply chain historically “accounts for between 60 and 70 percent of a
company’s cost structure.” David Auckland, program director of the University of Tennessee’s
Global Supply Chain Executive MBA program, told Bowman that supply chain’s cost structure
represents “most of the inventory and a pretty significant majority of the assets. It’s the single
organization in the company with the most impact on the customer.” Bowman continues:
“Understanding the full value of supply-chain talent will often lead a global company to depart from
the standard model of depending on expatriates to run an overseas operation, Auckland says. Kraft
Foods, for example, increased its reliance on nationals – the right move, no doubt, but one that
creates yet another challenge in finding the right individuals. Auckland counsels a ‘dual
development path’ – one that hones in on core supply-chain skills while simultaneously embracing
cross-functional capabilities. The transformation of talent requires a focus on standard competency
models, career and succession planning, continuing education and global networking. The last one,
he said, ‘is absolutely critical. You’ve got to get outside your own industry.’ Don’t just delegate the
job to Human Resources, Auckland adds. ‘I would encourage you not to take that approach. You
need to become directly involved in the recruiting and development process.'”
It appears that Auckland agrees with Hall that narrow thinking about who to hire into supply chain
positions is not a strategy for success. Bowman concludes:
“We often speak of the need for dramatic improvements in systems, processes and collaborative
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links within the supply chain. It begins, though, with the right individuals to make it all run. All
 companies should be undertaking an honest appraisal of their workforce requirements, and taking
steps to meet them. As Auckland put it: ‘You should start looking at talent as a supply chain.'”
Too often processes and technology receive priority over people. If, as it appears, there is a coming
shortage of supply chain talent to be found, people should probably head to the top of the priority
list.

26) Discuss the dimensions of Situational Leadership

Answer to the question No 27

Situational Leadership Theory

Situational Leadership Theory hinges on two dimensions:  leader style and follower maturity.
There are four (4) leadership styles that correspond with a follower's maturity or readiness level, which
relates to their ability to complete an assigned task.
The success of the model rests on matching the appropriate leader style with follower readiness.  

Situational Leadership Theory

Situational Leadership Theory was developed by Paul Hersey and Ken Blanchard.  They conclude that
"the right leadership style will depend on the person or group being led." Leadership style is a function
of these two behaviors:  
Leadership = Task Behavior + Relationship Behavior
Task relates telling or showing others what to do or how to do something specific.  Relationship relates
to supporting others.
Since leader style is a key component of this model, we will explore the four styles in more detail.
They are:
 Telling or Directing
 Selling or Coaching
 Participating or Supporting
 Delegating

Style 1:  Telling
Telling or directing is described as "High Task & Low Relationship."  It is prescriptive in nature; the
leader gives specific directions/instructions.  
This style is used when the follower is inexperienced or low in ability, as it relates to what is required in
the situation.
For instance, if a follower is responsible for completing a project or task that is relatively new and/or
complex in nature, the leader should use this style.  
In this style, the leader provides close supervision.

Style 2:  Selling
Selling helps the follower "buy-in to the process."  It involves coaching or guiding, and is "High Task &
High Relationship."  
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The leader provides direction and supervision, but s/he also provides a healthy dose of encouragement.  
The leader encourages the follower to be involved, serves in the role of coach, and takes time to answer
questions and explain decisions.  

Style 3:  Participating
Participating or supporting is "Low Task & High Relationship."  The leader enters into a more
collaborative role with the follower.  
Both parties take part in setting objectives.  There is "shared decision making" which means the leader
involves the follower in decision-making.
A more expansive description of participative management is shown here.
Style 4:  Delegating
Delegating is just that.  The follower has the freedom to determine how the task/project is to get done.  
This style is used when the follower is capable of delivering and confident that s/he can do so.  
The follower is encouraged to take as much responsibility as they can handle.
Please note:  Delegating does not mean "dumping" tasks you do not like or want to do.  

Want To Know More?

It is very easy to rely on one style.  But effective leaders step out of their comfort zones and lead with
style.  They master the style that matches the follower's readiness level.
Now that we have explored situational leadership styles, lets take a deeper look at how this theory
works: here.  
 Situational Leadership Theory
 Leadership Theories
 Contact Coach Gwen
 Go to Home

27) What do you understand about matching development level leadership style?

Answer to the question No 28

As a leadership model, one of the best known, easy to understand and apply, was developed by Paul
Hersey, a professor who wrote the book, ‘Situational Leader’ and Ken Blanchard, the management guru
who became famous for his ‘One Minute Manager’ series.
They created a leadership model that allows you to analyse the needs of any situation, then adopt the
most appropriate leadership style. Called Situational Leadership, It’s proved popular because it is
simple to understand, and works in most environments and for most people. The model rests on two
fundamental concepts; leadership style of the person leading, and development level of the person being
delegated to.
Leadership styles
Blanchard and Hersey characterised leadership style in terms of the amount of direction (sometimes
referred to as Investment in Task) and the level of support (sometimes referred to as Investment in
Relationships) that the leader provides to their employees.
They categorised all leadership styles into four behaviours, which they named S1 to S4:
 S1: Directing Leaders define the roles and tasks of the ‘follower(s)’, and supervise them
closely. Decisions are made by the leader and announced, so communication is largely one-way.
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 S2: Coaching Leaders still define roles and tasks, but seek ideas and suggestions from the
follower(s). Decisions remain the leader’s prerogative, but communication is more two way. The
 leader is more concerned with their peoples’ issues around confidence, motivation and
collaboration.
 S3: Delegating Leaders pass day-to-day decisions, such as task allocation and processes, to the
follower. The leader facilitates and takes part in decisions, but control is with the follower (s).
The Leader is concerned to support the follower and show appreciation for their efforts and
achievements.
 S4: Empowering Leaders are still involved in decisions and problem solving but control is
with the follower(s). The follower(s) decides when and how the leader will be involved.
Of these, no one style is considered optimal or desired for all leaders to possess. Effective leaders need
to be flexible, and must adapt themselves according to the situation. However, each leader tends to have
a natural style and in seeking to apply a more broad based Leadership style, they should consider what
their natural, intrinsic style is.
Development levels
Blanchard and Hersey extended their model to include the Development Level of the employees, saying
that the correct leadership style will depend upon the person or team being led. They asserted that the
leader’s chosen style should be based on the competence and commitment of their employees. They
categorised the possible development of followers into four levels, which they named D1 to D4:
 D1: Low Competence, High Commitment and / or Confidence – Here, the employees
generally lack the specific skills required for the job in hand. However, they are eager to learn
and willing to take direction.
 D2: Some Competence, Low Commitment and / or Confidence – They may have some
relevant skills, but won’t be able to do the job without help. The task or the situation may be
new to them or they may lack confidence, or there may be motivation issues affecting their
performance.
 D3: High Competence, Variable Commitment and / or Confidence – They are experienced
and capable, but may lack the confidence to go it alone, or the motivation to do it well or
quickly.
 D4: High Competence, High Commitment and/or Confidence – They are experienced at the
job, and comfortable with their own ability to do it well. They may even be more skilled than the
leader.
Development Levels are also situational
Employees might be generally skilled, confident and motivated in their job, but they could still drop
into Level D1 when faced, say, with a task requiring skills they don’t possess. For example, many
managers are D4 when dealing with the day-to-day running of their department, but move to D1 or D2
when dealing with a sensitive employee issue.
Leadership and Development matching
Blanchard and Hersey said that the leader’s leadership style (S1 – S4) must correspond to the
development level (D1 – D4) of the employee. Furthermore they asserted that it is the leader who must
adapt, not the employee. To achieve the maximum from Situational Leadership, a leader needs to
develop their effectiveness and confidence in each style.
As an example of a mismatch, imagine the following scenario. A new person joins your team and
you’re asked to help them through the first few days. You sit them in front of a PC, show them a pile of
documents that need to be processed today and then excuse yourself to a meeting. They’re at level D1,
and you’ve adopted S4, an obvious mismatch. Everyone loses because the new person feels helpless and
demotivated and you don’t get the documents processed.
For another example of a mismatch, imagine you have a very experienced and high performing team.
You are going to be out of the office and you’ve listed all the tasks that need to be done and given them
detailed instructions on how to carry out each one. They are at level D4, and you’ve adopted S1. The
work will probably get done, but your team will resent you for treating them like beginners. But leave
detailed instructions and a checklist for the new person, and they’ll thank you for it. Give your
experienced team a quick chat and a few notes before you go and everything will be fine.
By adopting the right style to suit employee’s development level, work gets done, progressive
relationships are built, and most importantly, your employee’s development level will rise, to
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everyone’s benefit.
 28) What is Outsourcing? What are the Growth Drivers in Outsourcing?

Answer to the question No 29

What is outsourcing?
Outsourcing is a business practice in which services or job functions are farmed out to a third party. In
information technology, an outsourcing initiative with a technology provider can involve a range of
operations, from the entirety of the IT function to discrete, easily defined components, such as disaster
recovery, network services, software development or QA testing.
Companies may choose to outsource IT services onshore (within their own country), nearshore (to a
neighboring country or one in the same time zone), or offshore (to a more distant country). Nearshore
and offshore outsourcing have traditionally been pursued to save costs.
Drivers in Outsourcing
Today I will discuss the top 10 things that will drive you to outsource business processes. Outsourcing
services remain in increasingly high demand, with offshore IT outsource services leading the way. I
want to discuss what factors drive you to outsource, and how we are able to help you in each
department.
Core Competencies
Outsourcing helps you get functions that your company does not have, but you require to run your
business. This is one of your main drivers to outsource business tasks. Our core competencies are SEO,
web design and development, PHP development, IT outsourcing and virtual assistance. These solutions
are designed to be flexible, allowing them to complement your operational structure no matter how
complex it is.
Need for Specialized Services
Some tasks are best left in the hands of specialists in that field. A good example of this is search engine
optimization. SEO requires time, consistent updates, and a thorough knowledge of Internet marketing
strategies accepted by search engines. By outsourcing your SEO services, you get the expertise of a
team of SEO specialists. We dedicate our time developing our core competencies and use proven
methodology to deliver the specialized services you need. We also offer the most advanced tools in the
industry.
Quality of Product or Service
This goes together with your need for specialized services. If you want to receive better goods or
services, then outsourcing is the way to go. This is because we spend our time creating the goods and
providing the services you hire us to complete. We dedicate ourselves to providing the highest quality
goods and services, whether you need SEO, web development, IT and marketing support, or any type of
content.
Internal vs. External Costs
Reducing operational costs is one of the most important factors that will drive you to outsource tasks.
Getting the professional level of service your company needs without the associated cost allows you to
reallocate funds for more important business projects. We keep our prices reasonable while maintaining
the level of service fulfillment your business needs.
Internal Capacity Constraints
When the demand for your service is high, meeting your clients’ requirements can be difficult.
Outsourcing gives you additional workforce to help fulfill your services and streamline your operations.
We’ve designed our BPO-IT services to easily integrate with your methodology, helping you meet
demands beyond your internal capacity.
Strategic Process
Being driven to outsource does not always have to be associated with a problem. You may simply want
to improve your overall production. Outsourcing helps improve your business processes by reallocating
specific tasks. This allows your staff to focus on industry-specific tasks while we deliver your general
needs. With our help, you can maximize the capacity of your internal staff and have a more streamlined
production line.
Delivery Time
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Having your staff work on basic IT and digital media tasks can take a while to finish. This is because
they will not focus on these tasks alone, and will prioritize industry-specific tasks. Outsourcing
improves your turnaround time and helps you increase production capacity. We prioritize your projects
according to urgency, and we meet these on or before our scheduled deadline.
Regulatory Requirements
Some business tasks you may have require thorough knowledge of rules and regulations. This is true in
the case of SEO – you should be constantly updated with search engine regulations, particularly
Google’s. We research and study regulations related to our services, especially our SEO. We use
practices and methodology approved by Google.
Record Keeping and Reporting
Keeping track of all your business-related tasks can be difficult, especially if you have a growing
business. Outsourcing lets you keep focused on your specialty while we track your outsourced processes
and IT support. We provide monthly executive summaries that detail our progress and our plan of
action.
Specific countries are able to give you a combination of the factors discussed above more efficiently
and at a more cost-effective rate. Our location, the Philippines, is one such country. We are located at
the leading outsourcing hub in the world, in the country’s business capital. We also attract and employ
skilled university graduates, who undergo training with our experienced multinational staff. We build
and offer a range of advanced technology using the latest materials the country has to offer. The level of
quality meets international standards.
These are the top 10 factors that will drive you to outsource. Contact us today to get started!

29) Discuss about Performance Monitoring & Operational Control.

Answer to the question No 30

Learning objectives
After studying this chapter, you should be able to:
• distinguish between feedback and feed-forward controls;
• discuss the factors that should be considered when operating a responsibility accounting system;
• prepare flexible budgets and analyses variances by price and quantity;
• explain why non-financial measures have become increasingly important as an aid to operational
control;
• describe activity-based cost management;
• explain how non-manufactl. Luring costs can be controlled;
• describe the approaches that can be used to measure performance in non-profit organic nations.
Control is the process of ensuring that a firm's activities conform to its plans and that its objectives are
achieved. There can be no control without objectives and plans, since these predetermine and specify
the desirable behavior and set out the procedure that should be followed by members of the organization
to ensure that the firm is operated in the desired manner. Ducker (1964) distinguishes between 'controls'
and 'control'. Controls are measurement and information, whereas control means direction. In other
words, 'controls' are purely a means to an end; the end is control. 'Control' is the function that makes
sure that actual work is done to fulfill the original intention, and 'controls' are used to provide
information to assist in determining the control action to be taken. For example, material costs may be
greater than budget. 'Controls' will indicate that costs exceed budget and that this may be because the
purchase of inferior quality materials causes excessive wastage. 'Control' is the action that is taken to
purchase the correct quality materials in the future to reduce excessive wastage. 'Controls' encompasses
all the methods and procedures that direct employees towards achieving the organization objectives
(e.g. job descriptions, operating manuals, training procedures and budgets). Such controls ore called
administrative controls. There are also social controls, which are exercised by individuals over one
another- for example, procedures used by small groups within an organization to regulate the
performance of their own members and to bring them into line when they deviate from the group norms.
These are often more effective in controlling behavior than any of the administrative controls. Hopwood
(1976a) states: Control, in whatever direction, is not only achieved by formal means but also by
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pressures exerted by individuals over one another. For in any situation, the controllers and the
potentially controlled have a social relationship with one another. The motivations, expectations and
personal relationships of all the members of the enterprise therefore exert a significant effect on the
outcome of the control process. The personalities of the managers and subordinates, their approach to
their job and the subordinates' acceptance of the legitimacy of managerial roles are also important
influences. Administrative and social controls cannot be considered independently of each other. If both
types of controls are not working in harmony, the potential power of each will be considerably reduced.
For example, administrative controls may be designed to reward productivity increases, but they are
unlikely to have any effect if the employees have developed their own social controls that place
restrictions on productivity. An effective control system must therefore ensure that administrative and
social controls are working in the same direction, so that control may be effectively exercised. In this
chapter and the following two we shall focus on operational control- in particular, responsibility
accounting, performance measurement and standard costing, which are administrative controls. In
Chapter 20 we shall consider the impact of social controls on budgetary control and standard costing
systems. Chapters 17-20 concentrate mainly on feedback information and performance measurement at
the operational (lower management) level for monitoring the day-to-day operations of different parts of
the business. In Chapter 25 performance measurement at the strategic business unit (divisional) level
is examined.
A control system is a communications network that monitors activities within the organization and
provides the basis for corrective action in the future. The control system can best be illustrated in terms
of a mechanical model such as a thermostat (Figure 17.1) that controls a central heating system. You
will see that the control system onsists of the following elements:

1. The process (the room's temperature) is continually monitored by an automatic regulator (the
thermostat).
2. Deviations from a predetermined level (the desired temperature) are identified by the automatic
regulator.
3. Corrective actions are started if the output is not equal to the predetermined level. The automatic
regulator causes the input to be adjusted by turning the
heater on if the temperature falls below a predetermined level. The heater is turned off when the output
(temperature) corresponds with the predetermined level.

The output of the process is monitored, and whenever it varies from the predetermined level, the input is
automatically adjusted. For a detailed description of a mechanical control model and its similarity to a
management control system see
Anthony Deaden eta/. (1989).
The elements of a mechanical control system also apply to a budgetary control system (Figure 17.2).
From this illustration you can see that planned inputs as reflected in the budgets are compared with the
actual results (i.e. the output) and
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