LAHORE SCHOOL OF ECONOMICS

Supply Chain Management

Instructor: Dr. Rizwan Subjective

Name: ________________________________________ ID: ___________________ SECTION: ________ Date: _______________

All questions carry equal marks

Total Marks 40
Dear students
Please follow these guidelines very strictly if you are willing to get good marks.
1. Your answer should not exceed given space.
2. Write small and meaningful sentences; and sentences MUST make sense.
3. Your writing should be easily readable. Your answer won’t be marked if it is unreadable.
4. Use bullet points as much as you can but appropriately.
5. Your answers must be very precise and to the point. Marking doesn’t depend on length or answer, rather clarity and
precision.

1. What are macro-functions of a supply chain? Briefly explain each one. (10)

The macro-functions of a supply chain refer to the high-level activities or functions that are
necessary to ensure that products and services are delivered to customers efficiently and
effectively. Three important macro-functions of a supply chain are:

1. Customer Relationship Management (CRM): This function involves managing relationships

with customers throughout the supply chain process, from initial inquiry to final delivery.
The goal of CRM is to build strong customer relationships and increase customer
satisfaction by understanding their needs, providing timely and accurate information, and
responding quickly to their inquiries and complaints.
2. Integrated Supply Chain Management (ISCM): This function involves managing the flow of
materials, information, and resources across the entire supply chain, from suppliers to
customers. The goal of ISCM is to optimize the entire supply chain process to improve
efficiency, reduce costs, and increase customer satisfaction.
3. Supplier Relationship Management (SRM): This function involves managing relationships
with suppliers, including selecting and qualifying suppliers, negotiating contracts, and
monitoring supplier performance. The goal of SRM is to build strong relationships with
suppliers to ensure that materials and components are available when needed, at the
right price and quality level.

Effective management of these macro-functions is critical to the success of a supply chain. By

improving CRM, ISCM, and SRM, companies can enhance their competitiveness, increase
customer satisfaction, and improve their overall performance.
 2. Why is market mediation function less important for efficient supply chains? Show it mathematically. (10)

The role of market mediation function in supply chains can depend on various factors, such as the
complexity of the product, the size of the market, and the nature of the demand. In some cases,
intermediaries may be necessary to reduce transaction costs, improve market access, and
enhance efficiency. In other cases, direct connections between producers and consumers may be
more efficient, as it can eliminate intermediary costs and reduce the total cost of the supply chain.

Mathematically, the impact of intermediaries on a supply chain can be represented using the
following equation:

TC = PC + IC + MC

where: TC = total cost of the supply chain PC = production costs IC = intermediary costs MC =
marketing costs

If intermediary costs (IC) are high relative to production costs (PC) and marketing costs (MC), then
the total cost of the supply chain will also be high. This can lead to higher prices for consumers
and reduced profitability for producers. In this case, reducing or eliminating intermediaries could
lead to lower costs and increased efficiency, as direct connections between producers and
consumers can reduce transaction costs. If intermediaries are eliminated or minimized, the
equation becomes:

TC = PC + MC

In this case, the total cost of the supply chain is the sum of production costs and marketing costs
only. This can lead to lower prices for consumers and increased profitability for producers, as
intermediaries are no longer adding additional costs. Therefore, reducing or eliminating
intermediaries in an efficient supply chain can lead to lower costs and increased efficiency, making
the market mediation function less important.

However, if intermediary costs are low relative to production costs and marketing costs, then
intermediaries may be necessary to reduce transaction costs and improve market access. In this
case, reducing or eliminating intermediaries could lead to higher costs and decreased efficiency, as
direct connections between producers and consumers may not be practical or cost-effective.

Therefore, the role of intermediaries in supply chains can depend on various factors, and the
impact of intermediaries on the total cost of the supply chain can be mathematically represented
using the equation above.
 3. What is the role of supply chain drivers in achieving strategic fit? Explain with an example (10)

The supply chain drivers are the operational components that determine the efficiency and
responsiveness of a supply chain. By aligning these drivers with the overall business strategy, a
company can achieve strategic fit, which means that the supply chain is designed to meet the
specific needs of the business and its customers.

Here are some examples of how the supply chain drivers can contribute to achieving strategic fit,
using the example of Jalal Sons, a grocery store chain:

1. Inventory: By managing inventory levels effectively, Jalal Sons can ensure that it has
enough stock to meet customer demand, without holding excessive inventory that ties up
capital and resources. For example, Jalal Sons may use a just-in-time inventory system to
receive deliveries from suppliers only when they are needed, reducing the need for large
warehouses and reducing inventory holding costs.
2. Information: By sharing information across the supply chain, Jalal Sons can improve
visibility and coordination, reducing lead times and improving responsiveness. For
example, Jalal Sons may use a centralized information system that allows suppliers to view
real-time inventory levels and adjust production schedules accordingly, reducing stockouts
and improving customer satisfaction.
3. Sourcing: By selecting suppliers strategically, Jalal Sons can ensure that it receives high-
quality products at a competitive price. For example, Jalal Sons may choose to work with
local suppliers who can provide fresh produce daily, reducing transportation costs and
improving product quality.
4. Transportation: By optimizing transportation routes and modes, Jalal Sons can reduce
transportation costs and improve delivery times. For example, Jalal Sons may use a hub-
and-spoke transportation system that consolidates shipments from multiple suppliers and
delivers them to stores efficiently, reducing transportation costs and improving delivery
times.
5. Pricing: By setting prices strategically, Jalal Sons can balance customer demand with
profitability. For example, Jalal Sons may use a dynamic pricing strategy that adjusts prices
based on demand and supply, maximizing profits while still meeting customer needs.
6. Facilities: By designing facilities strategically, Jalal Sons can improve efficiency and reduce
costs. For example, Jalal Sons may use a centralized distribution center that consolidates
shipments and reduces transportation costs, improving overall supply chain efficiency.

By aligning these supply chain drivers with its overall business strategy, Jalal Sons can achieve
strategic fit and create a supply chain that meets the specific needs of its customers and the
business.
 4. Manufacturer Storage with Direct Shipping Network vs. Manufacturer Storage with in-Transit Merge: which
network design is more preferable and why? (10)

Both manufacturer storage with direct shipping network and manufacturer storage with in-transit
merge network designs have their own advantages and disadvantages, and the preference of one
over the other will depend on the specific needs and circumstances of the company.

Manufacturer storage with direct shipping network involves storing inventory at the
manufacturer's warehouse and shipping directly to the customer or the retailer. This design can
reduce lead times and transportation costs, as the product is shipped directly from the
manufacturer's warehouse to the end customer or retailer. This design is particularly useful for
products that have a high demand and require quick delivery times.

On the other hand, manufacturer storage with in-transit merge network involves storing inventory
at the manufacturer's warehouse and shipping to a consolidation point, where it is merged with
other shipments from different manufacturers before being shipped to the end customer or
retailer. This design can reduce transportation costs by consolidating shipments and reducing the
number of trips made by carriers. This design is particularly useful for products that have lower
demand and do not require immediate delivery times.

Overall, the preference of one network design over the other will depend on factors such as
product demand, transportation costs, and delivery times. For example, if a company produces
perishable goods that require quick delivery times, the manufacturer storage with direct shipping
network may be more preferable. However, if a company produces bulk goods that can be
shipped in larger quantities, the manufacturer storage with in-transit merge network may be more
preferable to reduce transportation costs.

It is also worth noting that hybrid network designs that combine both direct shipping and in-
transit merge may be optimal in some situations. These hybrid designs can provide the benefits of
both network designs, such as reducing lead times and transportation costs while also optimizing
consolidation points to reduce transportation costs. Ultimately, the choice of network design
should be based on a thorough analysis of the company's specific needs and circumstances.