Supply Chain Exam #3

What are the 5 key network design decisions in supply chains? (SNACM)

1.) supply sources

2.) Number and location of facilities

3.) allocation of products

4.) capacity

5.) markets.

What is the role of network design in supply chains?

It sets limits for inventory, transportation, and helps reduce costs or boost responsiveness.

What is the long-term impact of facility location decisions?

They affect costs, responsiveness, and service levels over time.

What is a facility’s role?

The specific processes done there (typically production or storage).

What is capacity allocation?

Deciding how much capacity goes to each facility.

What is the difference between flexible and dedicated facilities?

Flexible facilities can do more tasks; dedicated ones are focused.

What are strategic factors in network design?

Choosing between low cost (cheap locations) or responsiveness (close to market).

What are infrastructure factors?

Roads, labor, utilities, and other physical needs.

What are macroeconomic factors?

Tariffs, taxes, exchange rates, and demand risks.

What is the gravity model used for?

Finding the best location to reduce total distance and cost.

What is the capacitated plant location model?

A model that picks facility locations based on cost and capacity limits.

What does the model for allocating demand do?

Decides how to split demand across existing factories.

What is the impact of globalization on supply chains?

Can raise revenue and lower costs, but adds risk and uncertainty.

What risks affect global supply chains?

Natural disasters, partner performance, fuel prices, currency, forecasting, and logistics complexity.

What is the importance of total cost in global supply chains?

You must look at total landed cost, not just unit cost.

What does offshoring do to the supply chain?

Makes product, info, and cash flows longer and more complex.

What is included in total cost?

Supplier price, delivery, inventory, customs, taxes, quality, risk, and exchange rates.

When is offshoring most attractive?

For products with high labor cost, large volumes, and low variety.

How can you lower global transportation costs?

Design dense or modular products; use consolidation hubs.

What are the three types of flexibility?

New product flexibility, mix flexibility, and volume flexibility.

Why use decision trees in global supply chains?

To handle uncertainty in demand, prices, or exchange rates.

Why is uncertainty important in planning?

It changes outcomes and must be included in cost analysis.

What is the discounted cash flow formula?

NPV = present value of future cash flows using a discount rate.

What does the decision tree help you do?

Compare options under uncertainty to find the best choice.

What is aggregate planning?

Planning production, inventory, capacity, and backlogs to match demand.

What decisions are made in aggregate planning?

Total production, inventory, capacity, and unmet demand over time.

What’s the difference between aggregate and SKU-level planning?

Aggregate is total quantity; SKU-level is specific products.

What is the typical planning horizon?

3 to 18 months.

What inputs are needed for aggregate planning?

Demand forecast, production costs, labor hours, inventory costs, and constraints.

What does aggregate planning output?

Production plans, inventory levels, workforce size, and backlogs.

Why is collaboration helpful in aggregate planning?

Upstream partners know constraints; downstream partners improve forecasts.

What are the three key trade-offs in aggregate planning?

Capacity, inventory, and backlog/lost sales.

What are the three aggregate planning strategies?

Chase strategy, flexibility strategy, and level strategy.

What is the chase strategy?

Change capacity to match demand (hiring/layoffs).

What is the flexibility strategy?

Use a steady workforce, change hours (like overtime).

What is the level strategy?

Keep production steady, use inventory or backlog to handle changes.

Why do forecasts affect aggregate planning?

Forecasts have errors; you must plan for uncertainty.

How can you build flexibility into plans?

Use safety inventory or safety capacity like overtime or subcontracting.

What is predictable variability?

Demand changes that can be forecasted.

What are the two main ways to handle predictable variability?

Manage supply (capacity, inventory, subcontracting, backlogs) or manage demand (discounts, promotions).

Why is coordinating supply and demand decisions important?

It helps reduce costs and improve profitability.

What are some options for handling seasonality?

Price promotions, building inventory, or having extra capacity.

What’s the benefit of using price promotions in low-demand periods?

Shifts demand to cheaper-to-serve times.

What’s the downside of building inventory during off-season?

High holding costs.

What’s the risk of maintaining enough capacity for peak demand?

Expensive idle capacity during slow periods.

What are supply-side options for managing variability?

Use flexible or seasonal workforce, inventory, or subcontractors.

What are demand-side options?

Price discounts and promotions.

What are the three effects of promotions on demand?

Market growth, stealing share, and forward buying.

What influences promotion timing?

Demand patterns, product margin, and costs (inventory, capacity changes).

What happens if you promote during peak demand?

Inventory rises and profits may drop if most demand comes from forward buying.

When does peak-period promotion work better?

When consumption really increases and forward buying is low.

What should the whole supply chain focus on?

One goal — maximizing profitability.

Why are early alerts in the S&OP process useful?

They help the company prepare for demand shifts early.