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Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme.



1 What is value engineering? List the main benefits of value engineering?


Answer : Value Engineering is a fuction oriented, systematic team approach and study to provide value in a product, system or service. Often, this improvement is focused on cost reduction; however other important areas such as customer perceived quality and performance are also of paramount importance in the value equation.


Value Engineering techniques can be applied to any product process procedure system or service in any kind of business or economic activity including health care, governance, construction, industry and in the service sector.





2 Case study: SABMiller revamps supply chain management


SABMilller, the $24bn global brewing giant, is revamping its supply chain management system to

reduce stock-outs caused by an increasingly complex and hard to predict market.

The firm is developing and testing the new system in South Africa with an eye on rolling it out to

group companies worldwide, says SABMiller programme manager Rudi van Schoor.

The trigger for the revamp came when the company’s customers ran out of stocks of popular

SABMiller brands during peak periods in two consecutive years, 2007 and 2008. The shortfall on

some brands was as high as 22%. “That had a direct impact on the bottom line,” Van Schoor



Given SABMiller’s ambition to be the world’s most efficient producer, such a gap was never going

to be tolerated. But instead of addressing the symptom, it called in management consultancy

McKinsey to look at the entire supply chain system to see where it could be improved and future

stock-outs avoided.

The study revealed a complex situation, one that wasn’t susceptible to a “quick fix”, Van Schoor



Demand factors

The ethnically and demographically diverse South African market is one of the world’s most

complex and fast-changing. Van Schoor cites economic growth, more disposable income in new

hands, changing and upgrading tastes, new product development and new routes to market

among the factors that influence demand for SABMiller’s products.

Add to that big events such as the British Lions tour and the 2010 World Cup, and climate

change, and the picture becomes more complex.

“Our brands are the same as any other brand, especially those at the luxury end,” says Van

Schoor. “If the customer comes into the shop and can’t find our product, he or she has the

disposable income and self-confidence to substitute our brand for our competitors’. That’s


Van Scoor says the group has a average stock availability target of 98%. “But for some premium

brands the target is 100%,” he says. That means it will live with excess stocks of some products,

just to ensure that a thirsty customer can get his or her favourite drink, every time.


Maximise profitability

But SABMiller also wants to maxmise its profitability. To do all this it must integrate information

from a lot of sources. These include sales forecasts for about 2,600 SKU locations or depots for

the brewing division and 3,100 for the soft drinks division, as well as planned promotions data

from the marketing and promotions division, as well as cost and production data, among others.

These data must then be converted into raw material purchases, manufacturing scheduling,

distribution and stockholding plans for 12 factories (seven breweries and five soft drink plants)

and three tiers of distributors, broken down into between 70 and 80 stock-keeping units (skus) for

the brewing division and around 270 for soft drinks.

And all this must be optimised for profit.


“There is inherent volatilty of demand in the soft drinks business because of seasonal change,

but less in the beer market,” Van Schoor says.

Even so, improving the accuracy of demand forecasts and schedules and integrating them to

boost profitability was too complex for SABMillers’s demand forecast and supply system. The inhouse system, developed over years, had most of the usual problems associated with legacy

systems: it was inflexible, complex, hard to communicate with, and hard to integrate with newer

systems, Van Schoor says.


Integration with SAP system

After a global search, SABMiller settled on Infor’s advanced supply chain management system, in

particular Infor’s demand forecasting system. This takes information from modules of SABMiller’s

SAP enterprise resource management system, integrates them with sales forecasts from the

field, and feeds back to the manufacturing resource planning system and financial systems to

generate production schedules, raw materials orders and volume and financial forecasts.

This will let SABMiller make any of its products in the most cost-effective location, given the local

demand, manufacturing, transport and inventory costs.

It will also increase its flexibility in responding to changes in demand. Products will no longer be

made only in a single plant to optimise production runs, but, based on more holistic data, in the

plants that optimise overall profitability.

This flexibility also gives the company greater cover to handle factory downtime and to meet

rapid changes in demand.

But some parts of the legacy system will still be around. “We are keeping it to manage the return

and reuse of empty bottles,” Van Schoor says.

But even that data will go into the Infor system so that it can create production schedules down to

tank, line and minute accuracy.

This attention to detail is part of the SABMiller ethos. Measurement and numbers are integral to

the company culture. Van Schoor says the Infor system will be tested in three ways: on its

“theoretical” answers, against actual results, and against causal factors that may have influenced

demand and supply.

Van Schoor says the $1.2m the firm spent on Infor licences was about 60% of the total project

cost. But this could be a drop in the ocean if the company adopts it worldwide. And interest from

group firms is high.

“We have used expertise from all around the group,” Van Schoor says. “One of the best people

on the project came from our European division, and we have lots of others keen to know how we


(Source :


Why did SAB Milller revamp its supply chain? Describe the domain application used for SCM



Answer : SABMilller, the $24bn global brewing giant, is revamping its supply chain management system to reduce stock-outs caused by an increasingly complex and hard to predict market.


The firm is developing and testing the new system in South Africa with an eye on rolling it out to group companies worldwide, says SABMiller programme manager Rudi van Schoor.



The trigger for the revamp came when the company’s customers ran out of stocks of popular SABMiller brands during peak periods in two consecutive years, 2007 and 2008. The shortfall on some brands was as high as 22%. “That had a



3 Write short notes on:

 Ingredients of a business process·

Answer : 1) Time: You must understand that time is money. In business, our objective is to makemoney. Period. But the question is how productively you convert your time into money. Areyou making full use of your time or you just let the time pass by you?


How much you make depends on how good you are at converting time to money. If you arealready productive, then you may want to ask what are



 Work Breakdown Structure·


Answer : A work breakdown structure (WBS) is a model of the work to be performed in a project organized in a hierarchical structure. The WBS is an important tool which helps you keep an overview of the project:


  • It forms the basis for organization and coordination in the project.
  • It shows the amount of work, the time required, and the costs involved in the project..

The work breakdown structure is the







Answer : Productivity is the ratio of output to inputs in production; it is an average measure of the efficiency of production. Efficiency of production means production’s capability to create incomes which is measured by the formula real output value minus real input value.





4 Collaborative Forecasting Running Smoothly at Brooks Sports


Brooks Sports designs and develops high-performance running footwear, apparel and

accessories which are sold in 80 countries worldwide. In 2001, when the company shifted from a

broad product line to focus on high-performance products targeted at serious runners, it was

clear that the forecasting process needed to change to support the strategic direction of the

company. The existing forecasting process, based entirely on the judgment of the sales team,

was limiting the company’s ability to grow.

The strategy shift created a number of forecasting challenges for Brooks including:

♦ Inconsistent style growth: the new line of products experience growth rates anywhere from 0 to

50 percent annually.

♦ Long production planning horizon coupled with short product life: production and capacity

decisions are typically made 18 months before a style is launched, average lead time for a style

is 6 months and the product life of Brooks’ styles range from 6 to 24 months. This means that

planners must sometimes set the entire demand plan for a style prior to ever receiving a

customer order, underscoring the importance of accurate forecasts.

♦ Increasing “at-once” orders: “at once” orders, which are placed for immediate shipment,

historically accounted for less than 20 percent of total sales. Since 2001, however, “at once”

orders have increased to nearly 50 percent of total sales.

♦ Evolving size curves: with its new focus on serious runners, the standard footwear size curve

would not adequately reflect distribution of sales by sizes.

♦ No exposure to retail sell-through: the high-performance products are sold primarily through

independent specialty stores who don’t have the capability to share sales data with vendors.

With a corporate mandate from senior management emphasizing the importance of creating

accurate and timely forecasts, Brooks completely revamped its forecasting process. An

independent forecasting group, reporting directly to the COO and CFO, was established to

coordinate input from various groups–sales, marketing, product development and production–

and to remove bias from the forecasting process.

The forecasting group established a collaborative forecasting process with three primary steps:

Step 1: Produce monthly statistical forecasts at the SKU level to capture level, trend, seasonality

and the impact of events based on historical data. Brooks chose Forecast Pro to create these

forecasts due to a number of features available in the software:

♦ Ability to create accurate forecasts

♦ Flexibility to choose forecast models or let software automatically select models

♦ Capability to model events (particularly important for predicting spikes in demand with new

product launches)

♦ Support for multiple-level models to produce consistent forecasts at all levels of aggregation

♦ Powerful override facility to enable collaborative forecasting

“Forecast Pro has been a great solution for Brooks,” says Tom Ross, Financial Analyst.

“Implementing Forecast Pro’s event modeling is very simple, which is an essential feature for us

because of our moving product launches. We also use event models to address the challenge of

forecasting events that don’t occur on a regular basis–such as races–which can have a

dramatic impact on the sales of specific products. Another powerful feature of Forecast Pro is the

ability to forecast a product hierarchy. This helps us to serve our multiple constituents within

Brooks–we review higher-level forecasts with management and easily generate detailed

forecasts at the SKU level for demand planning.”

Step 2: On a quarterly basis, get sales management and sales reps to forecast sales for a 12-

month horizon, focusing on major accounts. This input is gathered via the Web and then

aggregated by the forecasting group.

Step 3: Compare the statistical and judgmental forecasts, and make adjustments to create the

final monthly forecast. Ninety percent of the final forecasts are the same as the statistical

forecasts–changes are most commonly made to the forecasts for new styles where the sales

organization has important knowledge to add. These final forecasts are then automatically fed

into Brooks’ ERP system. “Forecast Pro allows us to easily apply judgmental overrides, which is

critical for us,” notes Ross. “We now can systematically track changes, giving us a better

understanding of our forecasting performance.”

The commitment to forecasting has paid off at Brooks. Forecast accuracy has improved on

average by 40 percent, unfulfilled demand has been lowered from approximately 20 percent to

less than 5 percent, and closeouts have been reduced by more than 60 percent. The improved

forecasting has also helped to smooth out production, resulting in lowered costs and better


Source :


What is the main issue of the case study? Analyse the forecasting solution


Answer : forecasting challenges :


Demand forecasting – defined as the ongoing process of projecting which products will be purchased, where, when, and in what quantities – serves five critical functions in the market for global health products and the effective delivery of medicines and supplies, all of which add up to lives saved:


Essential products are available because there is enough supply to meet demand. Demand forecasts allow manufacturers to plan and invest in




5 Explain the risk management and its various components

Answer : Four foundational elements frame what executive management and directors need to consider when evaluating the best way to implement enterprise risk management (ERM). These four elements — process, integration, culture and infrastructure — are intended to be flexible in application because strategies, organizational structures, operating philosophies and risk profiles vary in complexity across industries and firms. We discuss the process element below.

Like any other worthwhile business activity, risk management requires a process with a clear purpose, reliable inputs, well-designed activities





6 Why redesign of layouts may be necessary? List the differences between product and process



Answer : A redesign can be exciting but daunting task. The to-do list can be huge and the costs extravagant. But a redesign is a great way to inject new life into a stagnant business with fresh faces and new clients. It can mean increased productivity, interactivity and the ability to track important metrics.



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