Supply Chain Exam 1

How can a company use each of the 5 supply chain drivers to operate a responsive versus efficient supply chain?

The right combination of responsiveness and efficiency in each of these drivers allows a supply chain to "increase throughput while simultaneously reducing inventory and operating expense"

T or F: Minimizing variable costs associated with movement and storage is an example of a service improvement-based logistics strategy.

False

What is the definition of supply chain management?

The coordination of production, inventory, location, and transportation among the participants in a supply chain to achieve the best mix of responsiveness and efficiency for the market being served

What is the definition of logistics?

Plans implements and controls the efficient, effective forward and reverses flow and storage of goods, services, and related information between the point of origin and the point of consumption to meet customers' requirements

What are the differences in supply chain operations characteristics for firms focused on higher service levels versus those focused on increased operating efficiency?

Higher Service Levels (effective):

(+) More product > (-) Higher carrying costs

(+) More warehouses > (-) Higher carrying + operating costs

(+) More stores > (-) Higher carrying + operating costs

Improved Operations (efficiency):

(+) Less product > (-) Lower carrying costs

(+) Less warehouses > (-) Lower carrying + operating costs

(+) Less stores > (-) Lower carrying + operating costs

What is the relationship between returns on investments and investing in increased customer service levels?

The return on investment in customer service levels begins to diminish past a certain level of investment

What are some customer service measures in supply chains, and why would some companies segment their supply chain customers?

Order fill rates, delivery rate, and product returns

Supply chain segmentation helps you better navigate supply chain challenges by delivering the right mix of product, service, and performance to your customer

What is the importance of return on assets to a business and how supply chains can impact ROA? How is ROA calculated?

Importance: CEO, CFO, investors look at it (changing, comparative to competitors)

Impact: Profit, asset deployment (utilization)

Calculation: Net Income / Average Total Assets = ROA

Identify and describe the 5 supply chain drivers.

Production - What, how, and when to produce

Inventory - How much to make and how much to store

Location - Where best to do what activity

Transportation - How and when to move product

Information - The basis for making these decisions

Why do some firms have a transportation advantage? What are the steps involved in calculating it?

Some firms manufacture/produce closer to the market than others; However, those production costs might come at a higher price

Inbound + Outbound Costs = Total Transportation Costs

Describe the three different types of logistics strategies that a company can use.

Cost Reduction - Minimizing the variable costs associated with movement and storage

Capital Reduction - Minimizing the level of investment in the logistics system; Maximizing the return of logistics assets

Service Improvement - Recognizing that revenues depend on the level of logistics services provided

What are the three main forms of inventory and what is the difference between them?

Raw Material Inventory - A good used in producing another finished good (e.g. glass for aquarium manufacturer)

Work-In-Process Inventory - A good being transformed into a final product (e.g. steering wheel in auto-making)

Finished Goods Inventory - The final product of the production process

Why is it more expensive to hold finished goods inventory versus raw material inventory?

Due to the added value of the production process

What are the various classifications of finished goods inventory?

Cycle stock, safety stock, anticipatory inventory, and transit inventory

What is lead time?

Time from the order being placed to the product being received in a facility and ready for use

How are lead time and supply chain uncertainty related?

Lead time variability brings the problem of supply chain uncertainty; Uncertain lead time can lead to increased inventory costs and unstable service levels, which will directly affect the overall operation performance of the supply chain

What are the components of lead time?

Order creation, order transmittal, order picking, staging, loading, transit, receiving, and putting away

What is lead time variability, and how is it related to increased inventory and stockouts?

The uncertainty in the time it takes for supply chain process to complete, from the moment an order is placed to the moment it is delivered

Relation to Increased Inventory: Companies often need to hold higher levels of safety stock to buffer against the uncertainty of delays in receiving goods

Relation to Stockouts: This can cause delays in replenishing inventory, leading to situations where customer demand exceeds available stock, resulting in unfulfilled orders

How can you determine [calculate] a company's inventory position?

Inventory On Hand + Inventory On Order - Back Orders = Inventory Position

Which two important questions guide inventory policy?

When do I order? How much do I order?

What is the difference between the continuous review and the periodic review approaches?

Continuous Review - Time between orders changes; Order quantity fixed (determining when to place an order)

Periodic Review - Time between orders fixed; Order quantity is different (determining how much to order)

How can you determine inventory carrying cost % and $s for a unit over a year?

(1) Determine the value at cost for the inventory (e.g. $100)

(2) Each carrying cost component needs to be measured as a percentage of the product value - capital costs, storage costs, service costs, risk costs (%s)

(3) Determine inventory carrying cost %

If we hold the unit for 1 year then it costs ____ % of that unit's inventory value

Capital Cost% + Storage Cost% + Service Cost% + Risk Cost% = ___%

(4) Multiply the item value by the inventory carrying costs to determine the cost in dollars

Logistics is the management of the flow and storage of inventory such that total cost is minimized and _____ are achieved.

Customer service levels

Mascot Retailing Inc.'s Vice President of Supply Chain wants to determine how the distance between facilities in the company's supply chain can impact supply chain operations. What does distance not impact?

Picking process efficiency

As the investment in supply chain service level increases...

ROI increases but eventually transitions to diminishing returns

No. of Items
10025 (last year)
15575 (this year)

No. of Warehouses
50 (last year)
50 (this year)

No. of Stores
225 (last year)
225 (this year)

The table above shows data provided by Bear Distribution LLC. regarding aspects of its supply chain operations i.e. items, warehouses, and stores; and the differences in them between last year and this year. Given this information, and assuming all items held last year retained the same retail value, you can conclude that...

Bear Distribution LLC's inventory carrying cost increased this year

No. of Items
10025 (last year)
12225 (this year)

No. of Warehouses
50 (last year)
75 (this year)

No. of Stores
225 (last year)
550 (this year)

The table above shows data provided by Bear Distribution LLC. regarding aspects of its supply chain operations i.e. items, warehouses, and stores; and the differences in them between last year and this year. Given this information, and assuming all items held last year retained the same retail value, you can conclude that...

Bear Distribution LLC's inventory carrying cost and facility operating costs increased this year

Inventory Carrying Costs
$2,253,270.00 (last year)
$563,317.50 (this year)

Warehouse Operating Costs
$5,375,250.00 (last year)
$4,568,962.50 (this year)

Store Operating Costs
$7,952,790.00 (last year)
$7,555,150.50 (this year)

The table above shows data provided by Bear Distribution LLC. regarding aspects of its supply chain operations i.e. items, warehouses, and stores; and the differences in them between last year and this year. Given this information, and assuming all items held last year retained the same retail value and cost increases did not occur at facilities it owned last year and still owns now, you can conclude that...

Bear Distribution LLC embarked on an initiative to improve supply chain efficiency this year compared to last year

Inventory Carrying Costs
$2,253,270.00 (last year)
$2,253,275.00 (this year)

Warehouse Operating Costs
$5,375,250.00 (last year)
$6,719,062.50 (this year)

Store Operating Costs
$7,952,790.00 (last year)
$13,917,382.50 (this year)

The table above shows data provided by Bear Distribution LLC. regarding aspects of its supply chain operations i.e. items, warehouses, and stores; and the differences in them between last year and this year. Given this information, and assuming all items held last year retained the same retail value and cost increases did not occur at facilities it owned last year and still own now, you can conclude that...

Bear Distribution LLC added both stores and warehouses to its supply chain

ROA is profit divided by _____.

Assets

What can be done in order realize higher service levels in a supply chain?

More fulfillment centers

Supply chain management is the ______ of production, inventory, location, and transportation among the _____ in a supply chain to achieve the best mix of _____ and _____ for the market being served.

Coordination, participants, responsiveness, efficiency

What will NOT be an action taken by the management of a firm interested in managing its transportation to maximize supply chain efficiency?

Increased shipment frequency

In a supply chain network, carrying lower levels of inventory can serve to...

Increase operating efficiency

T or F: A major managerial decision encountered by logisticians is the tradeoff between cost and service levels across logistics networks.

True

T or F: Regarding spatial relationships within supply chain networks, transportation costs normally decrease with distance.

False

T or F: Regarding spatial relationships within supply chain networks, distance between facilities impacts which warehouse is used but does not impact inventory carrying costs.

False

What will NOT be an action taken by the management of a firm interested in managing its production to maximize supply chain responsiveness?

Operate fewer central plants

Atilus Sports and Jump Inc. both compete in the sports apparel category. They both produce the most popular item in the category, the sweatshirt. Atilus is based in Columbus, OH while Jump Inc. is based in Jacksonville, FL. They both compete in the Atlanta, GA market. Atilus Sports' production cost is $5.75 per unit, and has inbound transportation costs of $1.25 per unit, with outbound transportation costs of $2.75 per unit. Jump Inc.'s production cost is $3.50 per unit, and has inbound transportation costs of $2.85 per unit, with outbound transportation costs of $1.50 per unit. Please use this information to answer the following:

Which of the following represents the amount in dollars that the firm with the total cost advantage per unit has an advantage by?

$1.90 (5.75 + 1.25 + 2.75 - 3.50 - 2.85 - 1.5)

Atilus Sports and Jump Inc. both compete in the sports apparel category. They both produce the most popular item in the category, the sweatshirt. Atilus is based in Columbus, OH while Jump Inc. is based in Jacksonville, FL. They both compete in the Atlanta, GA market. Atilus Sports' production cost is $5.75 per unit, and has inbound transportation costs of $1.25 per unit, with outbound transportation costs of $2.75 per unit. Jump Inc.'s production cost is $3.50 per unit, and has inbound transportation costs of $2.85 per unit, with outbound transportation costs of $1.50 per unit. Please use this information to answer the following:

Which of the following represents the amount in dollars that the firm with the transportation cost advantage per unit has an advantage by?

$0.35 (1.25 + 2.75 - 2.85 - 1.50)

Atilus Sports and Jump Inc. both compete in the sports apparel category. They both produce the most popular item in the category, the sweatshirt. Atilus is based in Columbus, OH while Jump Inc. is based in Jacksonville, FL. They both compete in the Atlanta, GA market. Atilus Sports' production cost is $5.75 per unit, and has inbound transportation costs of $1.25 per unit, with outbound transportation costs of $2.75 per unit. Jump Inc.'s production cost is $3.50 per unit, and has inbound transportation costs of $2.85 per unit, with outbound transportation costs of $1.50 per unit. Please use this information to answer the following:

Which of the two companies has the total cost per unit advantage?

Jump Inc. (Atilus: 5.75 + 1.25 + 2.75 = 9.75) (Jump: 3.50 + 2.85 + 1.50 = 7.85)

Atilus Sports and Jump Inc. both compete in the sports apparel category. They both produce the most popular item in the category, the sweatshirt. Atilus is based in Columbus, OH while Jump Inc. is based in Jacksonville, FL. They both compete in the Atlanta, GA market. Atilus Sports' production cost is $5.75 per unit, and has inbound transportation costs of $1.25 per unit, with outbound transportation costs of $2.75 per unit. Jump Inc.'s production cost is $3.50 per unit, and has inbound transportation costs of $2.85 per unit, with outbound transportation costs of $1.50 per unit. Please use this information to answer the following:

Which of the two companies has the transportation cost per unit advantage?

Atilus Sports (Atilus: 1.25 + 2.75 = 4.00) (Jump: 2.85 + 1.50 = 4.35)

T or F: Anticipatory stock refers to extra inventory used to protect against uncertainty in demand and lead-time.

False

Which type of inventory is used as a buffer against uncertainty in demand and lead time?

Safety stock

Which type of inventory is the amount of inventory that is expected to sell during a replenishment period?

Cycle stock

Which form of inventory is the most expensive to hold?

Finished goods

T or F: Tonoshi Enterprises manufactures flat screen TVs and current has an inventory position of $15,250,000. It has $7,500,000 on-hand and $11,250,000 on-order. Given this, the amount of inventory on backorder represents 28% of the firm's total inventory position.

False (11,250,000 - 7,500,000 = 3,750,000) > (7,500,000 + 11,250,000 = 18,750,000) > (3,750,000 / 18,750,000 * 100 = 20%)

T of F: To an electronic appliance manufacturer that produces tablets, a manufactured glass screen represents work-in-process inventory.

True

What is true about the relationship between lead-time length and supply chain uncertainty?

They share a direct relationship

Lead time variability is really a measure of lead time _____.

Uncertainty

Wazu Retail Inc. operates through the Midwestern United States and just received news of a series on windstorms to occur 6 months into the future. Jim Jommy, Vice President of Supply Chain, directs his team to pre-order 5000 pallets of cases of bottled water. From a finished good inventory perspective, these 5000 pallets represent...

Anticipatory stock

What is the correct order of lead time processes?

Order creation, picking, staging, transit