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NMIMS assignment 2019 - How much safety stock of fabric should the company maintain

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Supply Chain Management

1. What are the three decision phases of Supply Chain Management? What are some key decisions made in each phase? Please give 2 examples of decisions in each phase. Also comment on how are the decisions made in each phase linked with each other (10 Marks)

2 . XYZ parts is a company making brake pads for trucks. It wants to set up its manufacturing and dispatch warehouse either in Delhi or Mumbai. From the city they select, they will make shipments to 6 cities- Delhi, Mumbai, Bangalore, Kolkata and Hyderabad and Chennai. Each parcel they ship to their customers in these cities weighs between 750 grams and 900 grams. They negotiated with a logistics company for shipping their parcels and the best rates they got for all parcels up to 1 kg are given in below table:


The number of orders they are expecting to get from each city per month are given in below table

For manufacturing, storing the inventory and dispatching, they need a 10000 sq. ft warehouse. Monthly rent in Mumbai for a 10000 sqft warehouse is Rs. 1.5 lakhs per month and in Delhi it is Rs. 90000. All other costs of operating the warehouse and manufacturing is same for both the cities. How will the company decide how which city is cost effective to operate? Which city as per your calculations should be there preferred location? (10 Marks)

3. Case Study/ Caselet Axis Apparels is a company based out of Delhi, India. They produce garments using fabric imported from a factor in China. The factory in China dispatches the goods on the same day when they receive the order. The shipments are made through air and the transportation lead time is 10 days include customs clearance at both countries. Once the fabric is received, the company performs QC test in a lab and only after that, the fabric can be used for making garments. QC test takes 10 days. On an average company uses 3,00,000 meters of fabric every month. However, the business development team of the company has informed that any day they can receive a new order from a client and in that case the consumption of fabric per month can go up to 4,50,000 meters
a) How much safety stock of fabric should the company maintain? (5 Marks)
b) At what inventory level the order for new lot of fabric should be placed. (5 Marks)

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