MGT 175 Quizzes + Midterm Study

Which of the following statements can best describe the functions of Supply Chain Management?

Minimizing system wide costs while satisfying service level requirements

A key issue that makes optimizing an international supply chain difficult and complex is:

The uncertainty and risks present in global business

It is necessary to maintain certain Inventory levels in the supply chain in order to:

Hedge against uncertainty and disruptions in supply

One of the key objectives of the supply chain is to minimize system-wide costs while maintaining customer service levels. Which of the following could increase costs and make it difficult to achieve the necessary customer service levels?

High inflation increases the costs of materials and reduces the shipping capacity available.

Companies often seek to improve their forecasting to manage demand uncertainty. However, a characteristic of product forecasts is:

Forecasts for a product family are most accurate if all the SKUs are aggregated in the forecast

The reason why a "Just-in-Time" End-to-End Supply Chain in the electronics industry can lead to shortages when a global Pandemic occurs and disrupts supply is:

Just-in-Time drives for less inventory in the system

In a Singler-Stage Inventory Control, Single-Period model, as the production quantity increases:

Average profit typically increases until the production quantity reaches a certain value, after which the average profit starts decreasing

If everything else remains the same, service levels for a consumer product will be higher when the product has:

Multi-echelon inventory planning

A key measure of a company's effectiveness in managing its cash-to-cash cycle is:

Days Payables Outstanding

A major insight of the Economic Lot Size Model is that:

Total inventory costs are relatively insensitive to order quantities around the total minimum inventory cost level

The Days Payables Outstanding (DPO) is a metric used to determine:

How well a company manages its payment terms to its suppliers

The accuracy of demand forecasts:

Increases with increased aggregation of the forecast

LP Retailers sells home appliances through its network of stores, and buys its TV products from Vista, a major manufacturer. The best-selling smart TV model has a lead time of 3 weeks from the time of order placement to Vista's warehouse to delivery to the retail outlet. LP places its demands based on a forecast that is done monthly and includes a large number of data points, based on its long history of demand and its high volume. They review their inventory every three weeks. However, owing to negotiations whereby Vista will increase its lead times in exchange for a small decrease in price, LP's lead time from order to delivery has now increased to 5 weeks. Acme intends to maintain its current customer service levels. The result of this is likely to be:

Higher inventory levels and working capital needs at Acme

In a single-stage system, as the optimal order quantity increases, which of the following is true:

Average profit typically increases until the production quantity reaches a certain value, after which the average profit starts decreasing.

One good strategy in dealing with the Bullwhip Effect and mitigating its impact on the extended supply chain is:

Have the retailer order to demand and minimize batch ordering

Acme Manufacturing has used the Economic Order Quantity method to order from its chief electro-mechanical supplier. Recently, however, they outsourced some of their back-office processes and acquired a new information system to streamline other processes. This has lowered the costs of placing an order by 50%. This has resulted in:

Lower economic order quantity for the major products

A major potential disadvantage and benefit of a. centralized inventory system in a retail supply chain (v. a decentralized model) is:

Lower response time to customers

John, the merchandising manager at WileE is assessing the Customer Service level for several products in the "Home Merchandise" section of the store that he is responsible for. Once John sets the service levels for each SKU (Stock Keeping Unit), he will then compute and set stock levels and ordering levels for the products in order to maximize the expected profit. Everything else being equal, he can expect the inventory levels to be lower for those products with:

Lower Service Levels (fill rates)

The Bullwhip effect is a serious problem in many supply chains that serve end consumers. Among the ways that companies along the supply chain can address this problem and reduce the Bullwhip effect are:

Reduce lead times between the different stages of the supply chain

One of ACME's products is seasonal and the bulk of its sales take place in the November timeframe. ACME can only place one order owing to the fact that the major supplier is in China and the lead times are long. The Optimal Order Quantity is the quantity that:

Maximizes Expected Profit

The Economic Lot Size (or Economic Order Quantity) Model:

Balances inventory holding costs with fixed/setup costs

The Coefficient of Variation is an important parameter in ascertaining demand stability and determining the inventory policy in the retail and distribution industry. The Coefficient of Variation:

compares the degree of variation from one data series of demand to another

In a multi-stage supply chain with Supplier-Manufacturer-Distributor-Retailer, the different entities have different objectives which lead to decisions making critical trade-offs. Among these trade-offs are:

Increased product variety at the retailer, in an attempt to satisfy the customer, results in higher inventories across the supply chain

Acme Manufacturing is planning to manufacture and launch a new major high-end product line. The Supply Chain for this product is an "international" one, with suppliers in different countries. Part of designing the supply chain involves developing a coherent Sourcing strategy for a particular sub-assembly. This sub-assembly has a relatively low impact on the product cost and profit. However, it is assessed by management to have a relatively high risk of supply owing to the fact that there are very few suppliers, and some are located in risky countries. Acme's best strategy to address this is:

Ensure supply availability through long term contracts and stocking up on inventory, thereby providing a hedge

In a multi-stage supply chain with Supplier-Manufacturer-Distributor-Retailer, the different entities have different objectives which lead to decisions making critical trade-offs. Among these trade-offs are:

Increase in delivery lead time by the distributor to the retailer leads to an increase in order size by the retailer, given the same service level to the customer

The Coefficient of Variation is an important parameter in ascertaining demand stability and determining the inventory policy in the retail and distribution industry. The Coefficient of Variation:

Compares the degree of variation from one data series of demand to another

Acme is setting up a Cost Sharing Contract with one of its major suppliers, HCC Manufacturing. HCC supplies Acme with a laser measuring device that Acme then sells to retailers. Acme and HCC are putting in place a Cost-Sharing Contract where Acme agrees to share 15% of HCC's Direct Production Costs (Material, Labor, Automation operation) in return for a 5 % discount on the price for a specified volume. This arrangement will require:

HCC to provide its complete direct production cost information to Acme

This laser measurement product is sold in a competitive market and given the number of available competitive products, selling prices have to be kept low in order to be competitive. As a result, Acme's margins are lower than most of its other products. Furthermore, Acme's forecasts have not been very accurate, and this has sometimes resulted in stockouts at the retail level. Acme has endeavored to address this situation through the use of increased safety stocks. Senior management, however, is putting pressure to increase margins. Which one of the following options would be Acme's best operational strategy for this product:

Minimizing total landed costs

Acme has had problems with forecasting for an important chipset that is used in several of its measuring products. These problems have resulted in excess inventory and an increase in Working Capital Costs, Obsolescence, and Holding Costs. To mitigate this, Acme decided to implement a Portfolio Contract strategy for the procurement of this chipset, as follows:

Base Commitment: 50% of potential volume

Option Level: 30% of potential volume

Spot Market purchase: 20% of potential volume

However, following several months of this arrangement, Acme now feels more confident in its forecasting and demand estimating capability. Acme now believes that it can reduce its supply costs. As a result, a good strategy for Acme would be to:

Increase its Base Commitment Level

Acme is considering outsourcing one of its high-volume, standard products to HCC Manufacturing. Acme wants to reduce its costs of manufacturing and design and take advantage of HCC's scale and design capabilities. HCC is, however, located offshore in a country that has had strained trade relations with the US (where Acme is located). Acme's COO, while leaning towards outsourcing the product, wants to mitigate the risks in this move. The actions he could take include:

Find alternative suppliers in other countries and distribute the supply in small quantities to those suppliers

Acme's COO is considering implementing a Pull-based system for one of its major consumer product lines. This product line is made by an autonomous Business Unit with its own facilities and operations. However, they share the Distribution network with the rest of Acme's Business Units. Many of the key components are sourced from Vietnam and China, with sub-assemblies done in Shenzhen and the final assembly in Texas. The cumulative lead times from the first supply to Acme's distribution facilities are long and demand at the retail level is variable. Acme's COO now wants to focus on building a "lean" supply chain with as much of a "just-in-time" operation as possible to maintain low inventory levels. What of the following is a major risk or disadvantage of Acme implementing such a Pull-based system:

A short-term supply disruption in Vietnam and China could result in inventory stockouts in Acme's markets