DEPARTEMENT OF GARMENT TECHNOLOGY

Course: Supply chain management

NAME- Temesgen Desalegn MTR/326/12

Submission Date: 1.20.2021

Descriptive questions
Define and discuss the following issues

A) Quick Response?

Most people are familiar with this word in our community either in business environment or non-
business activity.

The rapid replenishment of a customer's stock by a supplier with direct access to data from the
customer's point of sale (collins, 2021)

Lawson defines QR:

A state of responsiveness and flexibility in which an organization seeks to provide a highly

diverse range of products and services to a customer or consumer in the exact quantity, variety
and quality, and at the right time, place and price as dictated by real-time customer or consumer
demand.

Vendors receive POS data from retailers, and use this information to synchronize production and
inventory activities at the supplier. The retailer still prepares individual orders, but the POS data
is used by the supplier to improve forecasting and scheduling.

B) Logistic

Logistics is generally the detailed organization

and implementation of a complex operation. In
a general business sense, logistics is the
management of the flow of things between the
point of origin and the point of consumption to
meet the requirements of customers or
corporations.

Source: (newes, 2021)

 Logistics means having the right thing, at the right place, at the right time

• Before 1970: function were garmented as transport, warehouse Management, material

management and inventory control

• 1970: Logistics came into practice in two broad areas of material management and physical
distribution

• 1980: logistics started getting inbound, conversions and outbound

• 1990: Supply Chain Management and integrating operations with suppliers and customers
started getting focus.

The logistics of physical things – things we can touch – generally involves the integration of
material handling, information flow, production, packaging, transportation, inventory,
warehousing and security.

Source: (newes, 2021)

 C) Supply chain?
All stages involved, directly or indirectly, in fulfilling a customer request Includes
manufacturers, suppliers, transporters, warehouses, retailers, and customers Within each
company, the supply chain includes all functions involved in fulfilling a customer request
(product development, marketing, operations, distribution, finance, customer service).
Customer is an integral part of the supply chain Includes movement of products from
suppliers to manufacturers to distributors, but also includes movement of information,
funds, and products in both directions Probably more accurate to use the term “supply
network” or “supply web”) All stages may not be present in all supply chains (e.g., no
retailer or distributor for Dell)

 Generally

A supply chain is a system of

organizations, people, activities,
information, and resources involved
in supplying a product or service to a
consume

Source: (Uploaded by: AIMS Education, 2016)

 D) Barcode
Barcodes: reading between the lines

Barcode inventory control provides data the scientific community

recently discovered new innovative ways to utilize barcoding technology
as a part of research: tagging subjects of interests (such as rodents and
insects) with barcodes as a means of tracking and collecting data.

Barcodes: utilizing them for inventory control

Barcoding is a popular method for businesses to manage and control inventory. When a product
has a barcode, the barcode can be scanned using a handheld mobile unit (barcode hardware) that
is synchronized with your business’ inventory management software system (barcode software).
We discuss the relationship between barcoding hardware and software on this page about the role
of barcode inventory software in business.

 Scanning barcodes can be used in many ways for inventory control, including:
 Conducting inventory counts
 Receiving inventory
 Order picking
 Warehouse transfers

Where do you barcode?

 Retail Operations
 Receiving & Shipping Operations
 Manufacturing Operations
 Asset Management
 Warehousing
How does a barcode work?

The bars are either wide or narrow and the spaces between the bars are likewise

Either wide or narrow. The length of the bars have no significance other than to make it

Easier for the scanner to find the barcode.5 Barcodes are measured by the width of the narrow
bar and are recorded in mils, or 1/1000 inch. A 15 Mil bar code, for instance, has a narrow bar
that is 15/1000 inches wide. Further, "quiet zones," or blank spaces to the left and right of
barcode symbols, are included to insure the barcode can be read

E) CAD
Cash against Documents is a method used in conducting global transactions which entail the use
of an intermediary to protect all the parties involved. It is commonly used in the international
shipment of goods. In such a transaction, a bank serves as the neutral intermediary and retains
shipment documents to serve as security until that time the payment is made. Once payment is
made, the bank will surrender the documents signalizing ownership of the subject good.

After the goods have been imported, the relevant documents are delivered to the intermediary
bank which then deposits them to the importers bank until he/she pays the owner of the goods.
This is the only way that the client can now fully possess the products.

F) JIT
Just-in-time manufacturing, also known as just-in-time production

Or the Toyota Production System, is a methodology aimed primarily

At reducing times within the production system as well as response

Times from suppliers and to customers.

Source: (D.R. Kiran, 2019)

Expose problems and bottlenecks caused by variability associated with poor process and
customer demand:

 Eliminate waste
 Remove variability
 Improve throughput (Manufacturing cycle time)
 Add ’Pull’ verses ‘Push’ to the system

JIT is an approach that seeks to eliminate all sources of waste in production activities by
providing the right part at the right place and at the right time

Characteristics of JIT system

 Constant high quality

 Pull method of material Flow
 Small lot sizes
 Uniform work station loads
 Standardized components and work methods
 Flexible work force

2) What is the importance of Technologies Electronic Data Interchange (EDI) for Quick?

Response supply chain operation?

Electronic data interchange is the computer to computer exchange of business data in an

agreed format (Noor, 2003).In addition to that, Electronic data interchange is the structured
transmission of data between organizations by electronic means. It is use to transfer
electronic documents or business data from one computer system to another i.e. from one
trading partner to another trading partner without human intervention. (Robert Wachira
Kiggira,Dr. Fred Mugambi Mwirigi, PhD,Dr. Noor Ismail Shale, PhD, 2015, )
For each link in the logistics chain, the application of EDI results in important concrete
benefits:
 Agility. EDI solutions allow for the automation of internal management processes such as
generating, sending and recording any electronic transactions, and interacting with ERP
systems so that orders, dispatch notices, electronic invoices etc., are processed without
human intervention..
 Minimize errors in management by automating the generation and sending of commercial
messages (orders, shipping notices, delivery notes…)
 Standardized messages. The exchange of electronic information via EDI uses a
standardized language that structures the message and is shared by senders and receivers.
Thanks to the use of a common language, the different information systems interact with
each other overcoming language barriers and technical barriers.
 EDI systems improve aspects as important as the traceability of the product. Through
electronic data interchange solutions, the load and its traceability are monitored, so that
the person in charge knows the status of the merchandise at all times. Users can validate
the information that arrives and solve possible incidents quickly.
 It provides information in real time that can avoid delays in the processes involved in
dispatching and receiving products as well as transporting them to storage.
 For the logistics operator, it integrates all operations by sea, land or air in the same
communication flow.
 In the management of Customs, PIF, etc., it streamlines and provides secure
administrative procedures.
 For the distributor, it helps in the planning of the resupply chain. In the case of perishable
products, this management is fundamental since the expiration periods are shorter and
therefore the stock must be well controlled.
 Tools such as the CRP FLOW developed by EDICOM, facilitates the management of the
continuous replenishment of the supply chain from end-to-end. This technology is based
on the electronic exchange of data between the distributor, supplier and logistics operator
through EDI tools. The analysis and treatment of the information and the automatic
generation of orders, dispatch notices and purchase orders aim to respond to the
anticipated demand through the efficient delivery of goods at the required time.
Electronic data interchange (EDI) is an inter-organizational information system that is
intended to facilitate computer-to-computer exchange of data among multiple business
 trading partners in standard, machine readable formats through a web of business-to-business
communication network. EDI is useful for efficient and effective supply chain management,
because EDI can help reduce lead time, save documentation processing cost, eliminate
procurement errors, clarify inventory status information, and enhance strategic alliances
throughout the supply chain. In a broader perspective, EDI plays three important roles in
supply chain management. These roles are classified as: (1) electronic integration; (2)
information diffusion and sharing; and (3) electronic marketplaces.

3) One method of shaping an organization is to benchmark from a strategic and tactical

Perspective.
a. What are types of benchmarking?
b. What are Benchmarking Logistics Process Key Steps?
c. What are the benefits of bench marking?
d. List out the basic key performance indicator /KPI/of benchmarking in SCM.

A) What are types of benchmarking?

Types of Benchmarking:
Benchmarking is mainly used to assess the competitive insight and also gather the
information based on the performance which was done throughout the product or
organization development process.

With the help of this benchmarking process, we can evaluate and identify the process to
eliminate hindrances which help further in improving and enhancing our performance.
There are two primary types of benchmarking:
I. Internal benchmarking:
In this type of benchmarking the comparison of practices and performance is done
between teams, individuals or groups within an organization
II. External benchmarking:
In the external benchmarking process, the comparison of organizational performance
towards the company peers or across companies.
 These above discussed benchmarking processes can be further diluted as follows
I. Internal benchmarking
The internal benchmarking refers to the comparison of the organizational performance
internally. Either with its previous performances or with that of its competitors, i.e., the
companies belonging to the same industry. Here, the information is usually gathered and
circulated within the organization itself.
Following are the various strategies falling under this category:

 SWOT: In this benchmarking strategy, the strengths, weaknesses, opportunities and

threats of the company are listed out and analyzed by the management.
 Best Practice Benchmarking: The management themselves studies and identifies the
strategies and practices of the other companies who are the market leaders, to plan the
desired course of action.
 Performance Metrics: This strategy is based on the statistical metrics derived through
the analysis of the client’s preference and the comparison made with competitors. The
company can find out the loopholes in its performance and work over it.
 Financial Benchmarking: The management conducts a comparative study of the
financial forecast with the actual results or financial reports to find out the areas of
shortcomings and take corrective actions.
 Functional Benchmarking: The Company compares its performance and products with
that of other related industries to innovatively improve its functionality.

II) External benchmarking:

In external benchmarking, the companies compare their performance with that of its competitors
in the industry or across the globe. Usually, by the data collected through associations or third
party.

To know about the different external strategies in detail, read below:

 Collaborative Benchmarking: To improve the performance standards, the companies

belonging to a particular industry collaborate with the industrial associations. These
associations provide the benchmarking data on best practices and a comparative
 analysis of all the companies, to facilitate the improvement of the underperforming
companies.
 Process Benchmarking: In process benchmarking, the company analyzes the
competitor’s methods, tasks, techniques of production, means of distribution, etc. It
also studies the standard mechanisms of performing a particular function, to modify its
ways accordingly.
 Product Benchmarking: This strategy focuses on the in-depth analysis of the
competitor’s product to know its features and composition. The company uses this
strategy to improve and redesign its products.
 Corporate Benchmarking: The company compares its various departments like finance,
production, distribution, marketing, human resource, etc. with those of its competitors
to enhance the efficiency of each division.
 Strategic Benchmarking: This strategy is usually adopted when the company plans to
implement a new policy or idea or modify the existing one. The team compares the
company’s approach with that of the other successful companies in the industry before
bringing it into practice.
 Global Benchmarking: It is similar to strategic benchmarking, the only difference is
that here the company compares its strategies with those of its other branch or the
various competitors spread across the globe, to take corrective actions.

B) What are Benchmarking Logistics Process Key Steps?

The benchmarking process is a process in which all the different steps are included which
helps all the companies from similar or different work field find out their strengths and
weakness.
 Planning:
 Collection of data
 Analyze data
 Reporting
 learning from best practices
 Plan and implement
 Institutionalize the learning
 Identify point of delay and other pinch points
 Estimate the value added by each step and judge the value against the cost
 Consider the reasons for problems and how to improve specific activities or processes
SO here an information which collected will may be from either the following areas of
logistics may require benchmarking:
1. Loading/ offloading;
2. Warehousing;
3. Transportation;
4. Value added services;
5. Packaging
 Generally
 understand the process : use those most closely involved and develop flow chart
 Identify critical point
Producing flow chart bay highlighted value adding and non-value adding time

c) What are the benefits of bench marking?

Benchmarking is a common practice and sensible exercise to establish baselines, define
best practices, identify improvement opportunities and create a competitive environment
within the organization.
Integrating benchmarking into your organization will result in valuable data that
encourages discussion and sparks new ideas and practices. At its best, it can be used as a
tool to help companies evaluate and prioritize improvement opportunities. (solution,
2021).
Benefits of bench marking
 Implements creative ideas:
 Increased competitions:
 Developing improvement:
 Identifies essential activities:
 Quality of work:
 Increased performance:

Due to above reason

 o Gain an independent perspective about how well you perform compared to other
companies
o Drill down into performance gaps to identify areas for improvement
o Develop a standardized set of processes and metrics
o Enable a mindset and culture of continuous improvement
o Set performance expectations
o Monitor company performance and manage change

d) List out the basic key performance indicator /KPI/of benchmarking in SCM?

A Key Performance Indicator is a measurable value that demonstrates how effectively a company is
achieving key business objectives. Organizations use KPIs at multiple levels to evaluate their success
at reaching targets. High-level KPIs may focus on the overall performance of the business, while low-
level KPIs may focus on processes in departments such as sales, marketing, HR, support and others.
Key Performance Indicators (KPIs) are among the most commonly used tools that companies
employ to help manage more effectively and guide their progress. In brief, KPIs are the top
level data companies use to measure performance and plan for the future. Managers need
KPIs for a number of reasons:

1. To determine where you have been and what performance looks like from the past

2. To track the progress of change

3. To plan and prepare where you are going, what success looks like in the future and

Identify how to achieve success” (Pacific-Crest-Group 2012).

4) Overall supply chain inventory can be lowered if the manufacturer synchronizes its
Production to be ready just in time to be shipped to the retailer.
a. What is the role of JIT in supply chain management quick response?
b. What are the Pros & Cons of Operational Efficiency in JIT system in SCM?

A) JIT’s Role in the Supply Chain management quick response

JIT’s Role in the Supply Chain

 Quality production that thoroughly, systematically and continually fulfills the need and
requirements of the consumers.
 Creates a connection among manufacturer, customers and suppliers.
 It reduces the level of the items in the stock and prevents from the effects of Inflation,
unwanted material, out of date inventories and also the damages.

 Or JIT in supply chain management quick response

 Reduction of Warehousing Costs cause of in time

Companies that implement JIT inventory models can ultimately reduce the number of
warehouses they need to maintain, or even enable them to get rid of the warehouses entirely.

 It lead toward Improved Supply Chain Management

. An optimally efficient supply chain can lower manufacturing costs, which can also influence
customer costs, making your products more affordable while increasing market share.

 The way for Better Customer Satisfaction

Companies have more control over the manufacturing process, which makes it easier to issue a
quick response when customers request a change. For example, a computer company may use
the JIT model to more quickly increase production of a particularly popular model while
reducing the number of outdated and unsold products.

 It is aim to decreased Waste

The company may be required to slash prices to get rid of this unsold inventory, which can also
reduce the value of other products, but using the JIT inventory model can help reduce this waste
and increase response time.

B) What are the Pros & Cons of Operational Efficiency in JIT system in SCM?
PROS of JIT: IN SCM
 JIT aims at keeping the stock holding to bare minimum leading to much lower inventory cost
and much lower storage and warehouse cost.
 Minimum inventory at all stages of supply chain means lesser expiry and lesser wastage for
the organization
 Lower inventory means lower investment for the same level of production. This reduces
working capital investment to a greater extent. This in turn leads to better ROI and
profitability for the organization
 JIT manufacturing aims at producing items based on the demand. Hence all items produced
will be sold. So no obsolete items in the finished goods section. It helps the organization to
adapt well to any changes in product specification from the market without the fear of having
any kind of waste and obsolete stocks.
 To achieve JIT production, there is a need for very close communication between all the
parties involved in the entire supply chain. This communication technique is often referred as
“Kanban”.
 In JIT, immense focus is on quality of the final product and companies work to achieve “first
time right” for all goods.

CONS of JIT: IN SCM

 JIT production can be very sensitive to any kind of error. Since bare minimum inventory
levels are maintained, there is no room for any kind of error.
 JIT production will not be able to adapt well to sudden increase in volume of demand from
the market, since the inventory levels are maintained at much lower level.
 Just in time manufacturing is a philosophy which is achieved only when all the parties
involved in the whole supply chain will work in great tandem and coordination. JIT may fail
sometime if any of the suppliers will fail to fulfil their obligations and respond to the
requirements in a timely manner.
 JIT focuses on lean inventory; hence there is not much buffer in stock levels. For any reason,
if there is any kind of failure that happens in the supply chain, that can lead to sudden down
time in production leading to huge losses for the organization
5) A recent concept for the supply of standard materials is the vendor managed inventory (VMI),
where the supplier decides on time and quantity of the shipments to the customer but Has to keep
the stock in the customer’s warehouse between agreed minimum and maximum Levels. In this case,
the customer’s warehouse has the same function as a DC, so that the Planning of VMI supply is
similar to the DC replenishment.

a. What is Vendor Managed Inventory?

b. What is the scope of VMI?

c. What are the benefits of supplier And Distributor from VMI?

A) What is Vendor Managed Inventory?

Vendor Managed Inventory (VMI) is when suppliers manage their customer’s inventory. This
occurs through physical counts or using data from their customers. Once inventory levels reach
their reorder points, vendors will replenish their customers’ stock for them.

The primary goal of this is to cut down on costs and be more efficient. How does this happen?
Vendors can often manage inventory more effectively than their customers. This is because their
focus is inventory goals. Vendors work to reduce obsolete inventory and stock outs. But,
customers may be trying to meet other metrics. For example, they may take into account
customer service goals. As a result, this can impact when they reorder their products.

As a result, this can lead to large, rushed orders that confuse vendors. In contrast, VMI can mean
smaller, more consistent orders that help hit inventory level targets. Since customers have other
focuses besides inventory targets, errors are more likely. In addition, customers may be receiving
diverse orders and cannot manage inventory as efficiently as their vendors. VMI allows
customers to focus on other metrics.

 Vendor Managed Inventory (VMI) is currently used to monitor the customer’s inventory
replenishment.
 SOURCE: (share, 2021)
 Managing Inventory is one of the biggest tasks at hand any organization has.
• Ensuring it is under the specified level, simultaneously making sure it does not run out
when needed, is a herculean task in itself.
B) What is the scope of VMI?
 The scope of VMI are aim at the customer’s target is to insure higher consumer service
level with lower inventory costs. Supplier’s is to reduce production, inventory and
transportation costs. However, we can identify common objectives, which permit to build
up a better collaboration between the partners and so to reach the main objectives: tensing
the different flows, speeding up the supply chain and reducing the bullwhip effect
 VMI has been widely adopted by many industries for years. The classical success story for
VMI Implementation is the partnership between Wal-Mart and Procter & Gamble. Some
studies show the difficulties to implement VMI successfully (Tyan J. and Wee H., 2002)
 the confidentiality of information sharing, the risk of loss of control by the customer or the
increase of supplier’s administrative costs cause the failure of more than one out of two
attempts of implementation. The reasons are attributed to business culture, complicated
logistics flows and complex distribution channels.
 Key characteristics of VMI as short replenishment lead times and frequent and punctual
deliveries that optimize production and transport planning. Furthermore, according to
them, the middle/long term collaboration allows to proportion supplier’s production
capacity and to determinate the minimum and maximum customer’s inventory level
c. What are the benefits of supplier And Distributor from VMI?
 Suppliers BENEFITS: from VMI
 Reduction in safety stocks as the actual real-time demand information is readily available
Due to increased visibility.
 Reduction in errors related to the purchase orders.
 The actual customer need can be foreseen and hence supplier can plan her operations
accordingly.
 Strategic relationships are formed with the buyers.

 Visibility to the customers Point of Sale data makes forecasting easier.

 Promotions can be more easily incorporated into the inventory plan.
 A reduction in customer ordering errors (which in the past would probably lead to
a return)
 Visibility to Stock Levels helps to identify priorities (replenishing for stock or a
stock out?). Before VMI, a supplier has no visibility to the quantity and the
products that are ordered. With VMI, the supplier can see the potential need for an
item before the item is ordered.

 Distributor BENEFITS: from VMI

 Reduce inventory costs

In VMI network, each link of the supply chain can anticipate when stock replenishment is
required .when this level of uncertainty is reduce ,manufacturer and distributer can operate with
reduced inventory of raw material and finished product.

 Automatic ordering: reduced human error

With vendor managed inventory, traditional “ordering” is eliminated as distributor stock reach
predetermined levels. The supplier automatically produce and ships to replenish the distributor
inventory as needed.
  Increased distributor velocity: improving space efficiency

For the distributor ,the benefits of VMI are realized from nearly ‘ just-in-time” operation .with
clear picture of the depletion rate of inventory at the retail customer location, inventory at faster
rate while anticipating upcoming deliveries

 Optimizing deliveries
 6) Case study of Postponements
Shall It Be Postponed?
Foxcompany (Fox) Co. Ltd. was founded in 1974 in Taiwan as a manufacturer of electrical components for
computers. With strong research and development efforts, by 2011, it had accumulated more than 25,000 patents
granted worldwide. Fox is now one of the world’s 500 biggest companies, according to Fortune magazine. Its
biggest production operation is located in Shenzhen Longlong Science & Technology Park, which covers more
than 3 square km with 15 factories.
Not only does Fox have dormitories, a hospital, and a fire brigade, but it also broadcasts its own TV channel
within the park. Fox is highly specialized in producing computer components and produces and packages private-
label components for various famous brand names, including Acer, Apple, Dell, and Hewlett-Packard. The
components manufactured are basically identical but are labeled and packaged differently for the various
customers. The Shenzhen manufacturing facility replenishes a distribution center (DC) in Taiwan where the lead
time is nine weeks. Fox adopts a continuous review policy to manage the inventory at its DC and wants to
maintain a cycle service level of 95 percent for all orders. The previous month had been challenging: Apple asked
for 5,000 extra units than were available at the DC, whereas Acer and Dell ordered 3,500 units and 4,000 units
fewer, respectively. Although there was sufficient inventory available at the DC in the form of basic product, Fox
was not able to meet Apple’s demand because the excess inventory available was labeled and
Packaged for Acer and Dell. As a result, Fox lost the extra business opportunity and surplus inventory because of
the wrong labels and packaging.
Labeling and Packaging at the DC To allow more flexibility for Fox production to accept such additional orders
from customers by simply switching the inventory, the senior logistics supply chain manager proposes to postpone
the labeling and packaging work to the DC, where the lead time of manufacturing and transportation remains
unchanged. As a consequence, Fox would be able to meet Apple’s sudden additional order more readily if other
customers (e.g., Acer) placed a smaller order. However, the management at the DC worried about the additional
labeling and packaging work. Moreover, a detailed study revealed that the postponement would cost $1 more per
unit. In particular, the DC managers believed that those $1 increases in cost per unit wouldbe held against them
once the process was changed and they would be under pressure to lower costs. They also thought the added
workload would affect the overall service level of the DC. Evaluating the Two Options A task force was set up to
look into this matter. It would focus its study mainly on three major components—motherboards, graphics cards,
and chassis—and the four key customers—Acer, Apple, Dell, and HP. Weekly demand is shown in Table. In each
case, the mean denotes the average demand per week, and SD denotes the standard deviation of the demand per
week. Furthermore, all demands follow the normal distribution pattern. Fox incurred a total cost of $100 per
motherboard, $50 per graphics card, and $30 per chassis. As per the rule of thumb of the industry, Fox used a
holding cost of 30 percent when making all inventory decisions. The task force studied the impact of
postponement on safety inventories before providing its final recommendation
 Case Study Questions
1. What is the annual inventory cost before postponement?
a. How would the inventory cost change if postponement were implemented? Evaluate the change in
inventory costs as the correlation coefficient of demand between any pair of customer varies from 0
to 0.5 to 1.0.

2. Should Fox postpone its labeling and packaging process to the DC? Would the answer
change if the additional cost of labeling and packaging at the DC were reduced to $0.5
(from the current $1)?

Solution A = ANNUAL INVENTORY COAST =