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CR1 Report of SCM-X Session 2 held on 3-Oct-2017

Note on Group Work:

The groups need to choose topics related to supply chain from different sectors or different product lines
in case same sector is chosen. The focus needs to be on pricing mechanism, structures in place and how
supply chain management (SCM) works in that area. Data collection will be preferred compared to
secondary research. One group will volunteer to do the work on Impact of GST on SCM.

Discussion
Partnership: In SCM, the focus is always on the adjacent member. A retailer and a customer working
together is a partnership in which retailer has the downstream
Retailer Customer
communication and the customer has upstream communication. A
strategic partnership agreement is drawn between the partners which is typically valid for 2-3 years.
To implement a strategy, at least 3 or more entities/members are required.

Supplier Factory Customer

Span of the supply chain is determined by how much benefit one is expecting at what cost. The chain
can be further extended to include all the entities contributing value, in that case it is called ultimate
supply chain.
Logistics deal with planning, storing and movement of goods in any scenario.
Best operating level (Capacity Utilization) is derived from economies of scale, outsourcing is preferred
due to economies of scale, not for arbitrage.
Difference between 3PL and 4PL: 3PL is the 3rd party logistics providers. 4PL is a jargon which was
developed to bring in changes in the existing processes and it allows better integration and
management of the overall supply chain.
Maximum Retail Price(MRP), distributor and retailers margin is decided by the manufacturer.
In a supply chain, the profit for the distributor will be: (sale price to retailer purchase price from
manufacturer operational cost), the customer for the manufacturer is the distributor, for the
distributor it is retailer and for the retailer it is the final product user.
Walmarts pricing strategy Everyday Low Price allows to spread out the demand evenly across the
time horizon.
Toyotas decision to collaborate with component suppliers for gear manufacturing allowed reduction in
cost to the tune of 25%.
Corporate purchase departments and their partners are adversaries at best.
Supply chain profit:

=Total Revenue (CS+CM+CD+CR) Indicates Optimization at global level


CR1 Report of SCM-X Session 2 held on 3-Oct-2017

Current supply chain profit:

=(RS-CS) + (RM-CM) + (RD-CD) + (RR-CR) Optmization at individual level

Example:

Case 1:

Manufacturer Retailer
Demand 60,000 Demand 360000-60000*P
Cost 2 Cost 4
Price 4 Price 5
Demand 60,000 Demand 60,000
Profit 120,000 Profit 60,000

Case 2:

Manufacturer Retailer
Demand 90,000 Demand 360000-60000*P
Cost 2 Cost 3.5
Price 3.5 Price 4.5
Demand 90,000 Demand 90,000
Profit 135,000 Profit 90,000

In case 1, the total profit is 180,000 while in case 2 total profit is 225,000. By reducing profit at unit
level, the manufacturer can generate further demand and increase the total profit.

Prepared by: Anindya Basu (UM16069)