The risks associated related to each supplier is to be studied and evaluated. Also, a back up supplier should be selected who can supply in case the first supplier fails. The last step is to implement the strategy and employ regular evaluation of the supplier, its quality and performance. Methods should be used to increase the performance and reduce the extra costs of logistics through various service methods and technologies. Question 2 In the existing scenario of volatile markets, organizations are searching for solutions to reduce costs along the entire enterprise chain. The key is to pursue both the strategic as well as tactical cost reduction and improvement measures which help the management to stay ahead in the com[petition. Further to balance out the long and short term margin pressures, cost reductions have become a necessity. Lean management has definitely been a stress reliever to companies in order to reduce waste and cut down costs. Lean management approach assist the management to drive a continuous bottom up approach with regular small improvements down the line along all areas and departments in the chain. The fundamental approach of lean is to provide higher value to the end customer by increasing the product quality and reducing the waste. The five concepts of lean are – understanding the concept of the value addition stream and the waste being produced, staff training to help them reduce waste within their own working environment and nurturing the Lean culture among them so that they can become trainers for other teams. The main approach in the lean concept to reduce costs are as follows – 1. Identifying the value preference of the end user – since the end value of the product matters to the client, it is important that the management identifies those activities that add value to the product and those who do not. Activities who do not add value must b e eliminated and thus costs are automatically reduced. 2. Identifying the true value stream or chain of activities – identifying the correct value stream which consist of those activities which when followed in the right sequence, provide the desired value for the customer. It is significant that the management identifies the correct sequence of activities that constitute the Value stream. This significantly reduces the waste that is generated in the value stream at some points where there is no order. 3. Enhanced Flow of the stream – Lean management lays stress upon steady and continuous flow of activities which support product value addition. Any kind of hindrances are identified by the lean approach and eliminated. 4. Pull approach rather than a push approach – In lean organizations, the production schedules are dictated by a pull approach and not by the arbitrary production plans of the shop floor personnel or Operations Managers. Most services would rather be pulled by the Customer Demand in the lean management. Production only in the case of demand leads to less inventories, less and optimal use of resources, and less cost. 5. Imporvement cycle – when the lean approach progresses within a system, it becomes easier to

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