MKT 367 Exam 3

Exam 3 (chapters 8-11)

Transportation deregulation

Allowed carriers to set flexible rates and routes, increasing efficiency and lowering costs.

Logistics cost categories

Transportation, inventory carrying costs, and administrative costs.

Motor carrier flexibility

Most flexible mode; fast, reliable, and supports JIT.

LTL shipments

Higher cost per unit due to more handling and consolidation.

TL shipments

Lower cost per unit because the truck is filled by one shipper.

Parcel shipments

Small package shipments handled individually.

Rail transportation

Less flexible and slower but cost‑effective for bulk commodities.

Air transportation

Fastest mode with highest cost; best for high‑value, low‑weight goods.

Marine transportation

Slow and inflexible; best for large tonnage over long distances.

Pipeline transportation

Used for liquids and gases; highly specialized.

Intermodal transportation

Combining modes such as rail and truck to improve efficiency.

COFC

Container on flatcar.

TOFC

Trailer on flatcar.

Common carrier

Provides service to all shippers at published rates.

Contract carrier

Provides service to specific shippers under contract.

Exempt carrier

For‑hire carrier exempt from rate regulation.

Private carrier

Transports a company's own goods.

3PL advantages

Economies of scale, expertise, IT integration, and cost reduction.

Straight bill of lading

Non‑negotiable shipping document.

Order bill of lading

Negotiable document used for credit purchases.

Clean bill of lading

Indicates goods were loaded in good condition.

FOB point

Determines who pays freight, when title transfers, who files claims, and who routes freight.

Freight consolidation

Combining small shipments to reduce transportation cost.

Integrated carriers

Provide end‑to‑end logistics services under one network.

Bullwhip effect

Variability increases as demand moves upstream in the supply chain.

Demand forecasting causal

Uses leading indicators and regression to predict demand.

Time series forecasting

Assumes demand follows patterns over time.

Delphi technique

Expert‑based qualitative forecasting method.

Collaborative forecasting

Shared planning methods like CPFR and VMI to reduce variability.

Independent demand

Demand driven by customer orders.

Dependent demand

Demand driven by production of parent items.

Transit inventory

Inventory in motion between locations.

Cycle inventory

Inventory produced or ordered in batches.

Safety stock

Inventory held to protect against uncertainty.

Anticipation inventory

Inventory built ahead of seasonal or expected demand.

Decoupling inventory

Buffers between stages of production to improve efficiency.

Forms of inventory

Raw materials, WIP, finished goods, MRO, resale items.

Carrying cost components

Capital, service, storage, and risk costs.

Ordering costs

Clerical, administrative, receiving, and inspection costs.

Setup costs

Costs of preparing equipment for production runs.

Stockout costs

Lost sales, expediting, idle time, and penalties.

EOQ model

Determines optimal order quantity by balancing ordering and carrying costs.

Carrying cost formula

(Q/2) × C × I.

Fixed order quantity system

Event‑triggered system using reorder points and fixed order sizes.

Fixed time period system

Time‑triggered system with variable order quantities.

Safety stock purpose

Protects against demand or supply uncertainty.

MRP inputs

Master production schedule, bill of materials, and inventory records.

Lot‑for‑lot ordering

Orders exactly what is needed each period.

Least total cost

Lot sizing method minimizing total cost.

Least unit cost

Lot sizing method minimizing cost per unit.

Closed‑loop MRP

Includes capacity planning feedback to the master schedule.

ERP system

Integrates business processes and requires accurate data.

Lean supply

Eliminates waste and non‑value‑adding activities.

Just‑in‑time

Produces only what is needed when needed; requires short lead times and high quality.

Kanban system

Visual pull system used for high‑volume, repetitive items.

Strategic cost management

Externally focused analysis of costs across the supply chain.

Direct costs

Costs traceable to a specific product or service.

Indirect costs

Overhead costs not directly traceable to a unit.

Variable costs

Costs that change with production volume.

Fixed costs

Costs that remain constant over the relevant range.

Semi‑variable costs

Costs that are partly fixed and partly variable.

ABC analysis

Categorizes items into A, B, and C based on annual spend.

A items

High‑dollar items requiring most attention.

B items

Moderate‑dollar items requiring moderate control.

C items

Low‑dollar items requiring minimal control.

Total cost of ownership

Acquisition + use + delivery + disposal costs.

Life cycle costing

TCO applied to capital assets.

Target costing

Market price minus desired profit equals allowable cost.

Value engineering

Improving product design to reduce cost while maintaining function.

Value analysis

Redesigning existing products to reduce cost.

Value formula

Value = Function / Cost.

Activity‑based costing

Assigns indirect costs based on cost drivers.

Cost drivers

Activities that cause indirect costs to be incurred.

Supply chain finance

Improves liquidity through early payment programs.

Negotiation

The most sophisticated method of price determination requiring judgment and tact.

Negotiation process

Steps including objectives, data gathering, issue identification, and strategy planning.

Zone of negotiation

Range between buyer and seller acceptable outcomes.

Competitive bidding requirements

Qualified bidders, clear specifications, sufficient competition, no collusion.

Conditions for competitive bidding

At least two qualified bidders who want the business.

Firm‑fixed‑price contract

Price does not change regardless of cost changes.

Cost‑plus‑fixed‑fee contract

Buyer pays all costs plus a fixed fee.

Cost‑no‑fee contract

Buyer reimburses only costs; supplier earns no profit.

Cost‑plus‑incentive‑fee contract

Cost overruns/underruns shared between buyer and supplier.

Guarantee against price decline

Buyer pays lower price if market price drops.

Price protection clause

Allows buyer to purchase at lower price if available elsewhere.

Escalator clause

Adjusts price up or down based on cost changes.

Most favored customer clause

Buyer receives the lowest price offered to any customer.

Forward buying

Purchasing ahead for known requirements, not speculation.

Commodity exchange

Marketplace where supply and demand determine prices.

Commodity hedging

Offsets price risk through futures contracts.

Hedging conditions

Requires futures trading and correlation between spot and future prices.

Fair price

Lowest price ensuring continuous supply and supplier profit.

Cost approach pricing

Price based on direct + indirect costs + profit.

Market approach pricing

Price determined by supply and demand.

Seven types of purchases

Raw materials, components, MRO, capital assets, services, resale, custom items.