Learning Objectives:

• Define what pooling is in the context of supply chain management and its role in enhancing efficiency and reducing costs.
• Recognize the various forms of pooling, such as inventory pooling, transportation pooling, and demand pooling, and their applications.
• Explain the benefits of pooling, including reduced inventory levels, lower transportation costs, and improved service levels.
• Learn about different pooling strategies, including vendor-managed inventory (VMI), cross-docking, and collaborative distribution.

The idea behind risk pooling is to redesign the supply chain, the production process or the product to either reduce the uncertainty the firm faces or to hedge uncertainty so that the firm is in a better position to mitigate the consequences of uncertainty. Types of Pooling:

• Location Pooling:
• Reduces demand variability
• Reduces expected inventory
• However, creates distance between inventory and customers
• Product Pooling:
• Reduces demand variability
• Better performance in terms of matching supply and demand.
• However, potentially degrades product functionality.
• Lead Time Pooling:
• Decreases lead time
• Keeps inventory closer to customers.
• Reduces inventory investment
• However, extra cost of operating distribution center.
• Additional transportation cost.
• Capacity Pooling:
• Accomodate demand uncertainty
• However, large costs to have flexibility.

• Risk pooling strategies are most effective when damands are negatively correlated because then the uncertainty with total demand is much less than the uncertainty with any individual item. location.
• Risk pooling strategies do not help reduce pipeline inventory.
• Risk pooling strategies can be used to reduce inventory while maintaining the same service or they can be used to increase service while holding the same inventory.

Solved Example: 9022-01

Which of the following represents traditional logistics management approach?

A. A, B only

B. B, C only

C. A, C, D only

D. B, C, D only

Correct Answer: A

Learning Objectives:

• Understand the role of transportation in the movement of goods from suppliers to consumers.
• Understand factors influencing transportation decisions (e.g., cost, time, reliability).
• Discuss methods for minimizing transportation costs and improving efficiency.

• Transportation refers to the movement of product from one location to another as it makes its way from the beginning of supply chain to the customer.
• Transportation is an important supply chain driver because products are rarely produced and consumed in the same location.
• Shipper: the party who wants to transport the product from one place to another place.
• Carrier: Carrier is company that moves the goods from one place to another place. For example: DHL, Fed Ex. Etc.

• Transportation is the physical link connecting the firm to its suppliers and customers.
• In a nodes and links scenario, transportation is the link between fixed facilities (nodes).
• Transportation is an important supply chain driver because products are really not produced and consumrd at same location.
• Transportation also adds value to the product by providing time and place utility for the firm’s goods.
• As firms engage in global competition, transportation costs are becoming even more significant.
• Outbound transportation was clearly the largest component of total physical distribution costs.
• Cost trade-offs abound in transportation and are typified by trading lower inventory costs for higher transportation costs.

1. Economic factors
2. Technological factors
3. Geographical factors
4. Environment factors

Solved Example: 9020-01

Which of the following is NOT true for supply chain mangement approach?

A. Joint reduction in channel inventories

B. Large breadth of supplier base to increase competition and spread risk

C. Risks and rewards are shared over long term

D. Companies use intermodal transportation to reach to their markets

Correct Answer: B

Solved Example: 9020-02

Given below are two statements. One is labelled as Assertion (A) and the other is labelled as Reason (R).

Assertion (A): If the firm is prepared to incur increased cost on transportation, it may be in a position to reduce its inventory cost

Reason (R) : As in such a case, the firm can use the fastest mode of transport and rush the goods / stocks to the desired warehouse, unmindful of the cost of transportation

In the context of the above two statements related to logistics management, which of the following options is correct?

1. Both A) and R) true and R) is the correct explanation of A)

2. Both A) and R) true but R) is NOT the correct explanation of A)

3. A) is true but R) is false

4. A) is false but R) is true

A. 1

B. 2

C. 3

D. 4

Correct Answer: A

Learning Objectives:

• Familiarize with key components of supply chain network design, including facilities (e.g., factories, warehouses, distribution centers), transportation modes, inventory locations, and sourcing strategies.
• Understand how decisions regarding network design impact supply chain performance and cost.
• Explore different supply chain network models, such as distribution network models, transportation network models, and inventory network models.
• Understand the characteristics, assumptions, and applications of various network modeling techniques, such as optimization models, simulation models, and heuristic approaches.

Key components of network design include:

1. Facility locations: Determining the optimal locations for manufacturing plants, warehouses, distribution centers, and retail outlets to minimize transportation costs and lead times. Transportation routes: Selecting the most cost-effective and efficient transportation modes (e.g., truck, rail, air, sea) and routes for moving goods between locations.
2. Inventory positioning: Deciding where to hold inventory within the network to balance service levels with inventory carrying costs.
3. Sourcing strategies: Identifying suppliers and determining the optimal sourcing locations based on factors such as cost, quality, and lead times.

1. Optimization models: Mathematical programming techniques such as linear programming and mixed-integer programming are used to find optimal network configurations that minimize costs or maximize performance.
2. Simulation models: Discrete event simulation is used to model and analyze the behavior of complex supply chain networks under different scenarios and conditions.
3. Heuristic approaches: Rule-based or trial-and-error methods are employed to quickly generate near-optimal solutions for large-scale network design problems.

Solved Example: 9023-01

Market logistic planning has the following four steps. Arrange the steps in correct sequence

a) Develop operational excellence in sales forecasting, warehouse management transportation and material management

b) Select the best channel design and network strategy for reaching the customers

c) Implement the solution with the best information systems, equipment policies and procedures

d) Decide on company's value proposition to its customers

Select the correct option from those below

A. a) $\rightarrow$ b) → c) → d)

B. d) → b) → a) → c)

C. d) → b) → c) → a)

D. d) → c) → b) → a)

Correct Answer: B

Solved Example: 9023-02

In the recent years - the major gain in logistical efficiency have come from which one of the following?

A. Advances in Information Technology

B. Reduction in petroleum prices

C. Fast order processing

D. Increase in production of commercial vehicles

Correct Answer: A

Learning Objectives:

• Define single-level and multilevel distribution network structures in supply chain management.
• Differentiate between single-level (direct shipping) and multilevel (indirect shipping) distribution models in terms of the number of intermediate facilities and the flow of goods.
• Analyze trade-offs between single-level and multilevel distribution models in terms of transportation costs, inventory holding costs, lead times, service levels, and flexibility.
• Understand how factors such as product characteristics, demand variability, customer requirements, and market dynamics influence the choice of distribution model.

The single-level distribution model focuses on the flow of goods from a single distribution center or warehouse to various end customers or retail locations.

The multilevel distribution model involves a hierarchical distribution network, typically with multiple levels of distribution centers, warehouses, and retailers.

• Improved Service: Multilevel distribution allows for faster and more localized service to customers, as products are stored closer to the end consumers.
• Cost Reduction: By strategically locating distribution centers, transportation costs can be minimized, and economies of scale can be achieved.
• Reduced Lead Times: With distribution centers at various levels, lead times are reduced, enabling quicker responses to customer demands.
• Risk Mitigation: Multilevel distribution can provide redundancy in the supply chain, reducing the risk of disruptions.

Solved Example: 9017-01

Which of the following is not true while determining length of distribution channel?

A. The larger the market size, the longer the channel.

B. If the average lot size is large, it is better to have a longer channel.

C. If the product and the market require a high level of service, it is advisable to keep a shorter channel.

D. If customers shop for an assortment of products, it demands for a wider channel of distribution.

Correct Answer: B

Solved Example: 9017-02

Environmental characteristics/factors influencing distribution decisions are

(A) Government policy

(B) State of economy

(C) Social activistism

(D) Technological and infrastructure developments

(E) Statutory provisions

Choose the most appropriate answer from the options given below:

A. (A), (D) only

B. (B), (C), (E) only

C. (A), (C), (D) only

D. (A), (B), (D), (E) only

Correct Answer: D

Solved Example: 9017-03

Which of the following is not true for supply chain mangement approach?

A. Joint reduction in channel inventories

B. Large breadth of supplier base to increase competition and spread risk

C. Risks and rewards are shared over long term

D. Companies use intermodal transportation to reach to their markets

Correct Answer: B

Solved Example: 9017-04

The retail supply chain does NOT include:

A. Manufactures

B. Retailers

C. Wholesalers

D. Regulators

Correct Answer: D

Solved Example: 9017-05

The channel alternative is NOT to be assessed on the basis of:

A. Economic criteria

B. Control criteria

C. Adaptive criteria

D. Accumulation criteria

Correct Answer: D

Solved Example: 9017-06

Statement (I) : Designing a distribution system for a service (for-profit or non-business context) involves to select the parties only through which ownership will pass.

Statement (II) : The ownership channel for most of the services is long and quite complex because of inseparability characteristic.

Statement (III) : Short channels usually mean more control on the part of the seller.

Identify the correct code of being the statements correct or incorrect. These statements relate to channel strategies of products/services

A. Statements (I) and (II) are correct but (III) is not correct.

B. Statements (I) and (III) are correct but (II) is not correct.

C. Statements (I) and (II) are not correct but (III) is correct.

D. Statements (I), (II) and (III) all are not correct.

Correct Answer: C