Description
Supply Chain Management
Jun 2026 Examination
Q1. A multinational electronics retailer operates 50 stores across India and currently manages inventory separately at each location. After noticing excessive safety stock and rising warehousing costs, management is considering shifting to a centralized distribution strategy using regional distribution centers. However, executives are concerned about higher transportation costs and longer delivery times to remote stores.
Apply the concept of inventory aggregation to recommend how the retailer should redesign its inventory network. Suggest three specific actions the company should take and justify how these actions will reduce safety stock while maintaining service levels. (10 Marks)
Ans 1.
Introduction
Managing inventory across 50 individual store locations creates a fragmented system where each store buffers against its own demand uncertainty independently. This leads to duplication of safety stock and inflated warehousing costs across the network. Inventory aggregation offers a solution by pooling demand variability across locations through centralized or regional distribution centers. When demand is pooled, statistical fluctuations offset each other, reducing the total safety stock the company needs to hold. This principle known as the risk-pooling effect is the core rationale behind redesigning the retailer’s inventory network.
Concept and Application
Inventory aggregation works on a straightforward statistical principle: when demand is pooled across multiple locations, the combined variability is lower than the sum of individual
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Q2 (A). A major Indian retail company is planning transportation for the upcoming festive season, needing to serve both urban and rural markets while balancing speed, cost, and reliability. The firm is considering a mix of air, road, and rail transport along with GPS-enabled route optimization, but faces challenges such as uneven infrastructure, high fuel costs, and last-mile delivery issues in remote areas.
Recommend a suitable multimodal transportation strategy for the festive season. Recommend three specific points and evaluate your choice based on cost, speed, reliability, or infrastructure considerations. (5 Marks)
Ans 2(A).
Introduction
The festive season creates a sharp demand surge across both urban and rural India, putting enormous pressure on transportation networks. A single-mode approach cannot efficiently balance the speed, cost, and reach required simultaneously. A well-designed multimodal transportation strategy combining rail, road, and limited air freight addresses each challenge while maximizing operational efficiency during this critical period.
Concept and Application
Multimodal transportation works by assigning each leg of the journey to the mode best suited for
Q2 (B). A large FMCG company in India has introduced cloud systems, IoT sensors, and AI analytics in its supply chain. While these technologies have improved inventory visibility and responsiveness, the company has also faced data breaches and supplier concerns regarding data sharing. The leadership team is divided on whether to accelerate digital adoption or proceed more cautiously.
Evaluate the available options that would allow the company to move forward with digitalization while minimizing the risk of data breaches. Provide three specific points to justify your recommendation. (5 Marks)
Ans 2(B).
Introduction
Digitalization in supply chains is not a choice anymore it is a competitive necessity. However, moving faster without addressing security vulnerabilities would expose the company to even greater risks. The right path is neither a full acceleration nor a cautious retreat, but a structured approach that embeds cybersecurity and governance directly into the digital adoption roadmap.
Concept and Application
The core challenge is that digital tools create access points and every new integration with a
