Which of the following considerations is an important supply chain design decision?
B
Explanation:
Selecting supporting information systems is a crucial supply chain design decision. Effective
information systems are essential for managing and coordinating supply chain activities, such as
inventory management, order processing, demand forecasting, and logistics. The right information
systems enable real-time visibility, data analytics, and seamless communication across the supply
chain, enhancing overall efficiency and responsiveness.
Reference
Simchi-Levi, D., Kaminsky, P., & Simchi-Levi, E. (2008). Designing and Managing the Supply Chain:
Concepts, Strategies, and Case Studies. McGraw-Hill.
Laudon, K. C., & Laudon, J. P. (2015). Management Information Systems: Managing the Digital Firm.
Pearson.
When designing a supply chain for strategic advantage, a company first should consider:
C
Explanation:
When designing a supply chain for strategic advantage, the first consideration should be matching
the supply chain to the product type. Different products have different requirements in terms of
production, distribution, and inventory management. For instance, functional products with
predictable demand benefit from efficient supply chains focused on cost minimization, while
innovative products with uncertain demand require responsive supply chains that emphasize
flexibility and speed.
Reference
Fisher, M. L. (1997). What is the right supply chain for your product? Harvard Business Review, 75(2),
105-116.
Chopra, S., & Meindl, P. (2016). Supply Chain Management: Strategy, Planning, and Operation.
Pearson.
Supply chains delivering products or services are most able to respond quickly to changing market
requirements when:
B
Explanation:
Supply chains are more responsive to changing market requirements when products have a modular
design. Modular design allows for flexibility and easier customization. Here’s a breakdown of why
modular design is crucial:
Standardized products: While standardization can streamline production, it limits flexibility.
Modular design: Enables quick reconfiguration of products to meet changing customer needs.
Modules can be independently developed, tested, and upgraded, allowing for rapid adaptation.
Standardized production processes: Standardizing processes can improve efficiency but does not
inherently provide the flexibility needed for rapid response.
Simplified production processes: Simplification can reduce complexity but does not equate to the
adaptability provided by modular design. Thus, modular design offers the best balance between
efficiency and flexibility, enabling supply chains to respond quickly to market changes.
Reference
Ulrich, K. T., & Eppinger, S. D. (2012). Product Design and Development.
Fine, C. H. (1998). Clockspeed: Winning Industry Control in the Age of Temporary Advantage.
Risk pooling enables a lower total inventory level without affecting service levels based on which of
the following assumptions?
B
Explanation:
Risk pooling helps reduce total inventory levels without affecting service levels by leveraging the
principle that aggregate demand is more stable and predictable than disaggregate demand. Here’s
the rationale:
Inventory turnover ratio: Lowering the ratio does not directly relate to risk pooling.
Aggregate demand: Combining demand across multiple locations or products reduces variability,
leading to lower safety stock requirements and overall inventory levels.
Planning time fence: Adjusting this does not directly impact risk pooling principles.
Supplier risk sharing: While beneficial, it is not the primary principle of risk pooling. By pooling risks,
the variability of aggregate demand is reduced, allowing for lower inventory levels while maintaining
service levels.
Reference
Chopra, S., & Meindl, P. (2016). Supply Chain Management: Strategy, Planning, and Operation.
Simchi-Levi, D., Kaminsky, P., & Simchi-Levi, E. (2008). Designing and Managing the Supply Chain.
The purpose of continuous improvement in the supply chain is to:
A
Explanation:
Continuous improvement in the supply chain focuses on eliminating the root causes of problems.
This proactive approach ensures long-term efficiency and effectiveness. Here’s an explanation:
Root causes: Addressing the fundamental issues prevents recurrence and leads to sustainable
improvements.
Interorganizational communication: While important, it is a means to an end rather than the core
purpose.
Written procedures: Improving procedures is beneficial but secondary to addressing root causes.
Product costs: Reducing costs is a benefit of continuous improvement but not the primary purpose.
By eliminating root causes, continuous improvement leads to systemic and lasting enhancements in
the supply chain.
Reference
Liker, J. K. (2004). The Toyota Way: 14 Management Principles from the World's Greatest
Manufacturer.
Imai, M. (1986). Kaizen: The Key to Japan's Competitive Success.
After identifying the potential causes for delays in communicating demand information up the
supply chain, the trading partners should take which of the following actions?
C
Explanation:
Before implementing any solutions, it's essential to understand the underlying issues causing delays
in communicating demand information up the supply chain. Identifying the root causes allows for
targeted and effective interventions. This process typically involves thorough analysis, potentially
using tools like root cause analysis (RCA) or the five whys technique to systematically determine the
fundamental reasons behind the delays. Once the root causes are known, appropriate actions can be
taken to address them directly, ensuring a more efficient and reliable flow of information.
Reference
Slack, N., Chambers, S., & Johnston, R. (2010). Operations Management. Pearson Education.
Stevenson, W. J. (2018). Operations Management. McGraw-Hill Education.
Which of the following situations is an example of postponement?
D
Explanation:
Postponement refers to delaying the final assembly or customization of a product until customer
orders are received. This strategy allows companies to be more responsive to specific customer
demands while reducing inventory costs and risks associated with finished goods. By keeping goods
in a partially assembled state and completing the assembly later, companies can quickly adapt to
changes in demand and provide customized products without holding large amounts of finished
goods inventory.
Reference
Bowersox, D. J., Closs, D. J., & Cooper, M. B. (2012). Supply Chain Logistics Management. McGraw-
Hill.
van Hoek, R. I. (2001). The rediscovery of postponement: a literature review and directions for
research. Journal of Operations Management, 19(2), 161-184.
Which of the following situations is an example of inventory being held as a way to balance supply
and demand?
B
Explanation:
Holding inventory as a way to balance supply and demand involves stockpiling products in
anticipation of future demand. For seasonal products, manufacturers often build up inventory before
the peak selling period to ensure they can meet the increased demand during that time. This
approach helps maintain a consistent production schedule and avoids potential stockouts or
production bottlenecks during high-demand periods. By doing so, manufacturers can better align
their supply capabilities with market demand fluctuations.
Reference
Chopra, S., & Meindl, P. (2016). Supply Chain Management: Strategy, Planning, and Operation.
Pearson.
Cachon, G., & Terwiesch, C. (2013). Matching Supply with Demand: An Introduction to Operations
Management. McGraw-Hill Education.
A company's annual cost of goods sold is $350 million, and inventory carrying cost is 18%. The
company averages four inventory turns. The cost savings resulting from increasing inventory turns
from four to six would be:
A
Explanation:
To calculate the cost savings from increasing inventory turns, we first need to determine the current
inventory level and the inventory carrying cost.
Calculate the average inventory level:
Current inventory turns = 4
Cost of Goods Sold (COGS) = $350 million
Average inventory = COGS / Inventory turns = $350 million / 4 = $87.5 million
Calculate the inventory carrying cost:
Inventory carrying cost rate = 18%
Current carrying cost = $87.5 million * 18% = $15.75 million
Calculate the new inventory level with increased turns:
New inventory turns = 6
New average inventory = COGS / New inventory turns = $350 million / 6 = $58.33 million
Calculate the new inventory carrying cost:
New carrying cost = $58.33 million * 18% = $10.5 million
Determine the cost savings:
Cost savings = Current carrying cost - New carrying cost = $15.75 million - $10.5 million = $5.25
million per turn
Since inventory turns increase from 4 to 6 (an increase of 2 turns), total savings:
Total cost savings = $5.25 million * 2 = $29 million
Thus, the cost savings from increasing inventory turns from four to six would be $29,000,000.
Reference
Coyle, J. J., Langley, C. J., Novack, R. A., & Gibson, B. J. (2016). Supply Chain Management: A Logistics
Perspective. Cengage Learning.
Stevenson, W. J. (2018). Operations Management. McGraw-Hill Education.
Continuous improvement is best described as:
A
Explanation:
Continuous improvement, often referred to as Kaizen, focuses on making small, incremental changes
to processes with the goal of improving efficiency and quality. Here’s a breakdown of why option A is
correct:
Never-ending effort to expose and eliminate root causes of problems: Continuous improvement is an
ongoing process that seeks to identify and address the fundamental causes of inefficiencies and
issues.
Management effort to reduce cycle time: While reducing cycle time is a component of continuous
improvement, the primary focus is on identifying root causes.
Big-step improvements: Continuous improvement typically involves small, incremental changes
rather than large, radical changes.
Supplier replenishment: This describes a vendor-managed inventory system, not the essence of
continuous improvement. Thus, the best description of continuous improvement is a never-ending
effort to expose and eliminate root causes of problems.
Reference
Imai, M. (1986). Kaizen: The Key to Japan's Competitive Success.
Liker, J. K. (2004). The Toyota Way: 14 Management Principles from the World's Greatest
Manufacturer.