Table of Contents

Introduction.

Answer 1.

Answer 2 (A)

Answer 2(B)

Answer 3.

Answer 4.

Answer 5(A)

Answer 5(B)

Answer 6(A)

Conclusion.

References

Introduction to Logistics and Supply Chain 

The prominent inventory is defined as the core competent of the supply chain and is here all the areas of the supply chain come together. Supply chain digital explores why the inventory management is supply chain is the initial key towards the sustained success. Inventory management is defined as the products or the materials an organisation sells to the customers in order to make the entire profit.

Introduction to Logistics and Supply Chain - Answer 1

PR Corporation is a European based company basically operates in Spain and is a manufacturer and retailer of apparel, footwear and accessories. The company has rapidly growth since inception and operates in 24 countries in Europe. The company not only manufactures and sells its regular items but also manufacture and sells seasonal items depending upon the seasons (Singh and Verma 2018).

There are various methods of inventory management such as ABC analysis, Quadrant analysis, VED and many other methods (Kaasgari et al. 2017).Quadrant analysis is classifying goods and services in accordance to their value or profit potential and on the basis of risk. Generally, the four quad-rants are named critical, bottleneck, generics and leverage. So, on the basis of four quadrant analysis we will classify and reason out the rational for classification of the items that it purchases.

Critical: High value customised item and not easily available

Cotton which is the major item for producing apparel product is High value customised product and due to Covid-19 outbreak will not be available from china so it is categorised in this quadrant

Bottleneck/Distinctive: High risk, low value item, not easily available

Synthetic Leather is low value but not easily available and there it is available from a single supplier in Taiwan.

Generics: Low value, easily available item.

The following items are classified in the quadrant:

Buttons

Zipper

Interlining

Fuel for the vehicles

Paper for the employee newsletter

Commodities: High Value standard items, basis item used for production

The following items are classified in the quadrant:

Polyester rubber

EVA (Ethylene Vinyl Acetate) Foam

Lather

Introduction to Logistics and Supply Chain - Answer 2a

The Centralized Storage System

The PR Corporation is having a central distribution system in Spain, place where the core business activity of the company is situated and most of the domestic customers are located here. This distribution system is having various advantages and disadvantages to the company. In the initial years the distribution system was very beneficial for the company as management was very simple and cost effective to the company as well as the retailers buying the product but with the increasing demand and number of retailers the minor difficulties are also being faced (Caramés et al. 2019). The reason is also the increase in the number of products and requirement of customization for some distributors.

The centralized distribution system is very big in terms of storage thus the competitive advantage of economies of scale is available. All the products are available at a single place thus the requirement to collect the products from different points as per the demand of the customers is not required. This improves and ensures faster loading and unloading of the goods and maintaining the inventory level of all products. The company is having advantage over its competitors as no other company is having such a huge storage system (Wang et al. 2019).

The company is facing problem in case of retailers who have limited storage capacity but good demand for the product. Thus they want regular on time delivery of product which is becoming difficult as the company is currently having setup for large orders at a large and does have surplus distribution channel to facilitate the regular delivery to every vendor. Thus gives chance to the competitors to capture the market due to gap created between supply and demand of the product. Thus the company needs to develop some facility to overcome this petty issue and meet the requirements of the vendors.

Introduction to Logistics and Supply Chain - Answer 2b

The Distribution System

The company is currently having 4 types of distribution operations to cater the demand for its products. The direct shipment facility to the large sellers should be continued as it is best fit for the large vendors having huge capacity and requirements. The consolidation shipment to small vendors need to be corrected as waiting time may be required as the vehicle is not full or the product is not available the delay is caused to all the vendors (Zare, et al. 2018). The separate section for the value added customers should be dedicated as this will increase in the coming years as the retailers also want to give addition utility and show special facility as the demand for the product is increasing so the number of vendors selling the product. This is also an additional source of revenue for the company. The small satellite distribution centers are also needs to be promoted in Spain as is done in France and Germany. This is the best suitable for small vendors and thus the problem of one time delivery will be possible as required by the vendors in the recent past. The centralized storage system shall be the refiling counters for the satellite stores. The online sale is the core for the future sustainability and with the changing time the preference for the online shopping has increased and customers are resistant to go to offline stores.

Introduction to Logistics and Supply Chain - Answer 3

a) PR Corporation has own transportation and distribution capabilities but in recent times it is facing lots of challenges in delivering the goods to its retail store. In some retail stores goods are deliver much before the start of season and it led to increase in carrying cost of such retails store and in such retail stores goods are not deliver on time before the season starts and there is loss of sales for such retails (Suraj et al. 2016). The company is facing difficulties with its current transportation facilities is due to its centralised distribution system Moreover, small retailers are ordering small quantities and there are frequent deliveries to such retails. With increase in size and geographical area, as decided by the management they need to expand their existing capabilities to meet orders of all there small and big retails. Current for delivery with Spain own transportation facilities are used but in cases of overseas delivery company outsourced the delivery to third party.

 b) The other option with the management of PR Corporation is to do enter into a contract with third-party logistics for making delivery to retail stores and overseas. The management is of the option that it will increase the efficiency of the delivery and all the delivery will be made to the retailers on time.

But some person of the management is of the option that the company will loose the control over the deliveries and need to close the existing facilities (Duan and Ventura 2019). 

Yes, I agree that use of 3PL for the delivery of the goods will be better because in the current facilities the company is facing may issues and this 3PL will reduce the issues and 3PL will deliver the goods both to retail stores and overseas. All the products are available at a single place thus the requirement to collect the products from different points as per the demand of the customers is not required. The customers are very keen about the environmental impacts about the products of the company and they tend to prefer the environmentally friendly company over the other companies (Suraj et al. 2016).

Introduction to Logistics and Supply Chain - Answer 4

a) ABC analysis it one of the inventory management technique. In this technique material are analysed according to their value i.e in there descending order. And material with greater value are given more attention compared to value which are of lesser value. Value with lower value should be under the normal control procedures (Singh and Verma 2018).

“A” item is the high value items which may consist of only a small percentage of the total items

“B” items is the medium value item and should be under the normal control procedures

“c” item is the low value item and should be under simple and economical method of control

So, on these basis let us identify the product line on the basis of ABC analysis on the basis of yearly revenue

ABC analysis on the basis of yearly revenue

Product line code

Unit sold

Unit price (USD)

Revenue (USD)

Percentage of total revenue

Classification of item A,B or C

PC101

22000

200

4400000

26.07

A

PC104

18000

190

3420000

20.26

A

PC203

28000

120

3360000

19.91

A

PC502

4000

500

2000000

11.85

A

PC503

3800

260

988000

5.85

B

PC304

16000

60

960000

5.69

B

PC501

21000

25

525000

3.11

B

PC204

8000

30

240000

1.42

B

PC404

7000

25

175000

1.04

B

PC303

8500

20

170000

1.01

B

PC103

4000

30

120000

0.71

C

PC403

12000

10

120000

0.71

C

PC202

2500

40

100000

0.59

C

PC402

500

200

100000

0.59

C

PC302

700

80

56000

0.33

C

PC102

2000

25

50000

0.30

C

PC301

600

60

36000

0.21

C

PC504

700

30

21000

0.12

C

PC201

500

40

20000

0.12

C

PC401

200

90

18000

0.11

C

   

TOTAL REVENUE

16879000

   

ABC analysis on the basis of yearly profit

Product line code

Unit sold

Unit profit (USD)

Profit(USD)

Percentage of total profit

Classification of item A,B or C

PC203

28000

50

1400000

29.60

A

PC104

18000

70

1260000

26.64

A

PC304

16000

35

560000

11.84

A

PC503

3800

140

532000

11.25

A

PC101

22000

12

264000

5.58

B

PC501

21000

8

168000

3.55

B

PC502

4000

40

160000

3.38

B

PC204

8000

15

120000

2.54

B

PC303

8500

7

59500

1.26

B

PC403

12000

3

36000

0.76

C

PC404

7000

5

35000

0.74

C

PC103

4000

8

32000

0.68

C

PC202

2500

10

25000

0.53

C

PC302

700

30

21000

0.44

C

PC402

500

40

20000

0.42

C

PC102

2000

8

16000

0.34

C

PC201

500

15

7500

0.16

C

PC301

600

10

6000

0.13

C

PC401

200

20

4000

0.08

C

PC504

700

5

3500

0.07

C

   

Total Profit

4729500

   
  1. b) I would recommend doing ABC analysis on the basis of profit because we need to do strict monitoring on the product which gives 80% of the company’s total profit. Because profit increase the wealth of the company.
  2. c) ABC analysis is one of the best methods of inventory analysis and it has lots of benefits such as cost control, product management, profit management and create a brand value.

Introduction to Logistics and Supply Chain - Answer 5a

The company has rapidly growth since inception and operates in 24 countries in Europe. This distribution system is having various advantages and disadvantages to the company. The number of orders that the company should place depends on various factors. The demand for the product is also not constant over the year and thus the order should be placed according to the minimum stock level and expected sale in the coming period (Muller et al. 2018). The order should be placed in such a manner that the excess stock is not stuck in the storage and also the demand for the product is fulfilled. The seasonal changes and demand should also keep in mind while placing the orders. If the company wants to order on a monthly basis for 3000 pallets than total 12 orders will be placed during the year and so on.

Introduction to Logistics and Supply Chain - Answer 5b

The quantity ordered should be as per the Economic order quantity as determined in EOQ method. The cost will minimal at this level as according to the Economic Order Quantity the order of units as per EOQ ensures that the inventory carrying cost and inventory ordering cost is minimum.

Monthly Demand of Leather in pallets

3000

Number of Units in Pallet

50

Annual Demand in Pallet

36000

Annual demand in units

1800000

If the order is placed on a monthly basis for 3000 pallets than 12 orders will be placed.

Price per unit

 $ 25.00

Ordering Cost

 $ 600.00

Carrying Cost

6% of price

 $ 1.50

Annual Cost

Weight Loss

8% of price

 $ 2.00

Damage

4% of price

 $ 1.00

Obsolescence

2% of price

 $ 0.50

EOQ units

= Square Root of (2*Annual Demand*Ordering Cost)/Holding Cost

= Square Root of (2*1800000*600)/(1.5+2+1+0.5)

= Square Root of (2160000000/5)

= Square Root of 432000000

=20784.61

=20785

Number of Pallets to be ordered

=415.7

=416

At EOQ the total cost will be

Amount

Purchase Price

 $ 4,50,00,000.00

Ordering Cost

Number of Orders

=86.538

=86

Total Ordering Cost

 $ 51,600.00

Total Carrying Cost

 $ 90,00,000.00

TOTAL COST

 $ 5,40,51,600.00

Thus, as per EOQ total order quantity per order should be 416 pallets or 20800 units and total cost will be $54,051,600.

Introduction to Logistics and Supply Chain - Answer 6a

The future supply chain management should be designed in manner to meet the social and environmental norms. The customers are very keen about the environmental impacts about the products of the company and they tend to prefer the environmentally friendly company over the other companies (Yao and Minner, 2017).

Introduction to Logistics and Supply Chain - Answer 6b

The key area the company should work will be the use of environment friendly materials inputs and production methods. The product should be causing least harm to the society and the company in the long run. Thus may have some initial investment in the form of research and development or initial setup cost but will ensure long term durability of the company (Yao and Minner, 2017).

Conclusion on Inventory Management

Since company operates in so large scale so inventory management is most important activity in the company. And company need to manage its inventory in most optimal way. PR Corporation produces various products and stocks various raw material to produce that product so it need to do proper management of its inventory. The same norm comes when the question comes to social welfare and harmful effects of the product on the society. The compliance is also required to be done without any defaults. The sustainable growth is the only path in the long run

References for Inventory Management

Duan, L. and Ventura, J.A. 2019. A dynamic supplier selection and inventory management model for a serial supply chain with a novel supplier price break scheme and flexible time periods. European Journal of Operational Research272(3), pp.979-998.

Fernández-Caramés, T.M., Blanco-Novoa, O., Froiz-Míguez, I. and Fraga-Lamas, P. 2019. Towards an autonomous industry 4.0 warehouse: A UAV and blockchain-based system for inventory and traceability applications in big data-driven supply chain management. Sensors19(10), p.2394.

Kaasgari, M.A., Imani, D.M. and Mahmoodjanloo, M., 2017. Optimizing a vendor managed inventory (VMI) supply chain for perishable products by considering discount: Two calibrated meta-heuristic algorithms. Computers & Industrial Engineering103, pp.227-241.

Muller, J.J., Pignataro, C.M., Asati, R. and Nainar, N.K., Cisco Technology Inc 2018. Trust enabled decentralized asset tracking for supply chain and automated inventory management. U.S. Patent Application 15/482,043.

Singh, D. and Verma, A. 2018. Inventory management in supply chain. Materials Today: Proceedings5(2), pp.3867-3872.

Singh, D. and Verma, A. 2018. Inventory management in supply chain. Materials Today: Proceedings5(2), pp.3867-3872.

Suraj, B.S., Sharma, S.K. and Routroy, S. 2016. Positioning of inventory in supply chain using simulation modeling. IUP Journal of Supply Chain Management13(2), p.20.

Wang, Q., Wu, J., Zhao, N. and Zhu, Q. 2019. Inventory control and supply chain management: A green growth perspective. Resources, Conservation and Recycling145, pp.78-85.

Yao, M. and Minner, S. 2017. Review of multi-supplier inventory models in supply chain management: An update. Available at SSRN 2995134.

Zare, R., Chavez, P., Raymundo, C. and Rojas, J. 2018, October. Collaborative culture management model to improve the performence in the inventory management of a supply chain. In 2018 Congreso Internacional de Innovación y Tendencias en Ingeniería (CONIITI) (pp. 1-4). IEEE.

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