Instructors’ Manual
Supply Chain Management
Text and Cases
Second Edition
Janat Shah
Indian Institute of Management Udaipur
Copyright © 2016 Pearson India Education Services Pvt. Ltd
Chapter 1
The Role of Supply Chain Management in Economy and Organization
Learning Objectives
After reading this chapter, you will be able to answer following questions:
Why is supply chain important?
What are the key supply chain decisions made by a firm?
How has the supply chain evolved over the last century?
What are the unique challenges of managing a supply chain in India?
The purpose of this book is to explore ways and means of improving performance on this
dimension.
Introduction
Teaching Note: If students are not familiar with inventory turn-over ratio, introduce the term.
Discuss the impact of inventory turnover ratio on profitability for Apple and Wal-Mart. The impact
of lead-time for Zara should also be discussed. To bring out the impact of poor supply chain
management, use slides 1–4 on supply chain horror stories.
What is Supply Chain Management? (Slides 3–7)
Teaching Note: Define supply chain management. Start by discussing the opening vignette.
Progress to link it with complexities of SCM at the VF Corporation presented in the interview
box. At this stage, you may like to introduce idea of mini projects where students are asked to
estimate length of chain for selected FMCG product companies.
Initiate a discussion to highlight the following issues:
a) What is the boundary of chain?
b) How do you identify focal firm in chain?
c) Firm performance versus chain performance?
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Chapter 1: The Role of Supply Chain Management in Economy and Organization
Historical Evolution of the Supply Chain (Slides 8– 9)
Teaching Note: Use Slides 1–7 to initiate the discussion on the evolution of the supply
chain.
Show Henry Ford’s quote on supply chain. Ask the students to guess the name of the
organization and the possible decade in which an automobile company managed operations
such that the tie taken in the supply chain (from mine to finished machine) was eighty-one
hours. Most students would give the answer as Toyota and the decade as either the
seventies or the eighties. They would be shocked to know that Ford had managed to work
with this kind of performance about 90 years back. At this stage instructor, discuss the three
major stages in the evolution of SCM:
First Revolution (1910–1920): Vertical Integrated firms offering low variety of products
(Ford Motor Co.)
Second Revolution (1960–1970): Tightly integrated supply chains offering wide variety
of products (Toyota Motor Co.)
Third Revolution (1955–2020): Virtually integrated Global supply networks offering
customized products and services (Apple, Dell Computer, Bharti Airtel)
Key Concepts in Supply Chain Management
Teaching Note: Contrast the Dell supply chain to the supply chain that ensured the
availability of Harry Potter books (caselet) and denims (Interview Box)
Decisions in a Supply Chain (Slides 10–12)
Teaching Note: Veer the discussion to the key concepts in supply chain management.
Discuss design and operations decisions using the caselet on Harry Potter, the opening
vignette and the interview box to highlight the concepts.
Design Decisions
Operations Decisions
1.3 The Importance of the Supply Chain (Slide 13)
Teaching Note: Building on the details provided in the Interview Box, shift the focus of the
discussion to the importance of supply chain management.
If the batch has students with work experience, ask them to discuss the relevance of
the following points based on their experience and observation.
Proliferation in Product Lines.
Shorter Product Life Cycles.
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Chapter 1: The Role of Supply Chain Management in Economy and Organization
Higher Level of Outsourcing
Shift in Power Structure in Chain
Globalization of Manufacturing
Teaching Note: You may like to use the VF Corporation interview to bring out relevant issues.
Conclude this section with a quick thought on how evolution has made supply chains more
complex. Sensitize the students to the fact that supply chains will get more complex in the future.
1.4 Enablers of Supply Chain Performance (Slide 14)
Teaching Note: Initiate the discussion on the enablers of supply chain performance by asking
students with work experience to share their experiences. Discuss these three points:
Improvement in Communication and IT
Entry of Third-party Logistics Providers
Enhanced Inter-firm Coordination Capabilities
Teaching Note: Veer the discussion around to the concept of ERP and its role in streamlining
information flow in internal supply chains.
Supply Chain Performance in India (Slides 15 to 22)
Teaching Note: Based on the response and inputs from the students, discuss the importance of
logistics and supply chain performance in India. Compare India and China and India and USA.
Lead the students to the issues of indirect costs which are not captured by logistics cost (poor
service, lost sales, etc.)
Discuss about how liberalisation (post-91 phenomenon) has forced in improving
performance on the inventory front. A comparison across sectors would reveal that the transport
sector (automobile industry) has shown the highest improvement and is likely to be larger in
supply chain innovations.
Challenges of Managing Supply Chain in India
Taxation Structure Drives Location Decisions
Poor State of Logistics Infrastructure
Teaching Note: You can ask the students to do some background work on these issues (For
example, the average speed of the truck, waiting time at ports). Discuss the impact of GST on the
supply chain structure.
Supply Chain Challenges for the Indian FMCG Sector
Managing Availability in the Complex Distribution Set Up
Working with Smaller Pack Sizes
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Chapter 1: The Role of Supply Chain Management in Economy and Organization
Entry of National Players in the Traditional Fresh Products Sector
Dealing with a Complex Taxation Structure
Dealing with Counterfeit Goods
Opportunistic Games Played by the Distribution Channel
Infrastructure
Emergence of Third-party Logistics Provider
Emergence of Modern Retail Chains
Reservation for Small-scale Sector
Teaching Note: Most students would be familiar with FMCG firms such as HUL, P&G, Amul
and Marico. So they would be able to relate to the issues raised in this section. This would allow
them to understand why solutions formulated for developed markets are not likely to be
appropriate in India. For example, you can try and compare distribution in India vis-à-vis
distribution in USA for P&G. One large retail chain such as Wal-Mart accounts for 17% of P&G
sales and has to deal with much fewer retailers while in India they have to go through large
number of intermediaries and has to finally deal with large number of retailers. An understanding
of the local context and the importance of innovations can be highlighted through use caselets
such as Amul, HUL and Dabbawala.
Summary (Slides 23 to 24)
Teaching Note: At this stage, you can go back to the learning objectives and relate the various
parts of the discussion with the specific objectives of the session. Emphasize that students may
not feel confident about various concepts and how they can be applied at this stage in the course.
Encourage your students to apply these concepts in case studies to hone their application skills
and develop greater confidence about the subject.
Discussion Questions
1. Describe the supply chain involved in making the bar of Lux soap that you have just picked
up from your neighbourhood retail store.
Solution: Refer to Fig. 1.1 and its related discussion. Use the material from Box 1.3 (Marico
distribution). Students should also look at the data available about the place and date of
manufacture on the packed soap.
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Chapter 1: The Role of Supply Chain Management in Economy and Organization
2. A customer planning to buy a book can either order the book on the net from
Flipkart; or go to the nearby Landmark outlet. How are the supply chains different
for these two companies? Are customers looking for the same kind of service from both the
companies? How would these factors affect the strategies of both these companies?
Solution: Flipkart has only one warehouse in India from where it supplies to customers
across the country vis-à-vis the large number of retail outlets of Landmark. Discuss the
implications of different supply chain structures and their effect on the various components
of cost. This question can be revisited after students have completed Chapter 6 (Transportation).
3. Though supply chain principles are universal in nature, application of these depends on the
context of the country, which is why India has to find its own unique solutions. Explain why
you agree or disagree with the above statement.
Solution: Refer to the section “Challenges of Managing Supply Chain in India”. Using various
caselets, students can argue why India needs unique solutions.
4. Compare and contrast the supply chains followed by the two food product firms mentioned
below:
a) A firm offering a food product targeted at the lower end of the economic pyramid (for
example, Tiger biscuit offered by Britannia).
b) A firm offering a premium food product.(Lays offered by Pepsi)
Solution: Not all supply chains are identical. Supply chain design and operations depend on the
objectives of the firm, the nature of product and the relevant cost structures. This question can be
revisited after students have completed Chapter 2.
5. Indian companies complain that high logistics costs make their products less competitive in
international markets. Identify products which are likely to be significantly affected by the
poor logistics infrastructure in India.
Solution: Classify products based on the likely logistics cost as percentage of the total cost. This
question can be revisited after students have completed Chapter 6.
6. Most Indian firms have increased their product variety by about 50 per cent in the last five
years. What are the implications of these increased varieties on supply chain management
practices in these firms?
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Chapter 1: The Role of Supply Chain Management in Economy and Organization
Solution: The impact of variety on forecast accuracy and inventory in the system may be
introduced here. This question can be revisited after students have completed Chapters 4 and 7.
7. HUL has decided to increase its reach in rural areas. What are the implications of this
decision for the department that manages the supply chain for HUL products?
Solution: The increase in reach would come at higher distribution cost. HUL has to understand
trade-offs between higher sales vis-à-vis higher profits.
8. With the emergence of organized retailing, power structure in the supply chain is likely to
shift over a period of time. What do you think are the implications of this for manufacturing
firms?
Solution: Refer to the discussion on the balance of power.
9. Can ideas of supply chain management be applied to firms like Wipro and Infosys that offer
software services?
Solution: Software service has to mange supply and demand of human resources. So SCM ideas
are applicable for software service firms. This issue is discussed in further details in Chapter 4.
Mini Project
Field Study: Estimating the Length of a Supply Chain for an FMCG
Company
The objective of the study is to estimate the length of the supply chain for packed goods. This
field study will help you in understanding supply chain opportunities in distribution in India..
Teaching Note: This should ideally be a graded project/assignment where students carry out field
survey and write up their analysis and submit it in the form of a report. Ask two to three groups to
present their findings to the class. This assignment helps them internalize the issues discussed in
the introductory session. This assignment also makes them active partners in the course.
Depending on the time and group size, you can vary product portfolio (number of SKUs) and the
number of retailers to be included in the study. Encourage your students to include Subhiksha as
one of the retailer in the sample as they can use learning from this field study while discussing the
Subhiksha case. While working on this assignment, encourage your students to integrate their
learning (distribution and retailing) from marketing courses. Should you choose to include this
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Chapter 1: The Role of Supply Chain Management in Economy and Organization
field study in the course design, you should also include the Subhiksha case study in the course
curriculum.
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