mgmt 343 exam 2

Coefficient of variation (CV)

Another important measure of uncertainty. It is calculated as the ratio of the standard deviation to the mean. CV = Std/Mean

Facility location decisions have a long-term impact on a supply chain's performance because it is easy to shut down a facility or move it to a different location. True False

False

Which one of the following parties requires the movement of the product between two points in the supply chain? Carrier Producer Shipper Consumer

Shipper

Which mode of transportation is the dominant form of domestic freight transportation? Air Truck Rail Water

Truck

A milk run is a route in which a truck delivers products from a single supplier to multiple retail stores. True False

True

Network design decisions have a significant impact on performance because they determine the supply chain configuration and set constraints within which inventory, transportation, and information can be used to either decrease supply chain cost or increase responsiveness. True False

True

Supply chain network design decisions include the location of manufacturing, storage, or transportation-related facilities and the allocation of capacity and roles to each facility. T/F?

True

Transportation is a significant component of the costs incurred by most supply chains. It usually accounts for about 1/3 to 2/3 of the logistics costs. True False

True

Transportation plays a key role in every supply chain because products are rarely produced and consumed in the same location. Therefore, transportation is needed to move products from the place where they are produced to the place where they are consumed. True False

True

When faced with a network design decision, the goal of a manager is to design a network that minimizes the firm's costs while satisfying customer needs in terms of demand and responsiveness. True False

True

Which of the following transportation modes is appropriate for transporting grain? Water Air Truck Pipeline

Water

A milk run network lowers transportation costs by consolidating shipments to multiple locations on a single truck. Which of the following justifies the use of a milk run network? - The quantity destined for each location is too small to fill a truckload but multiple locations are close enough to each other such that their combined quantity fills the truck. - The demand at each location is large enough to fill a truckload. - The transportation economies require large shipments on the inbound side or shipments on the outbound side cannot be coordinated. - The economies of scale in transportation can be achieved on both the inbound and the outbound sizes and both inbound and outbound shipments can be coordinated.

A

Supply chain network design decisions include - the number of supply chain stages, the role of each stage, the number, location, capacity and capability of facilities. - only the location of manufacturing, storage, or transportation-related facilities. - only the allocation of capacity and roles to each facility. - only the broad structure of the supply chain and the role of each supply chain stage

A

Suppose you are the manager of Kwik Trip #472, you know the average daily demand for Otis Spunkmeyer Chocolate Muffin is 57, but you have never sold exactly 57 in a day. Your sales could be as high as 80 and as low as 40. Which of the following statement is true? - Your demand forecast should be 57 plus an estimate of forecast error. - Your demand forecast should be 57. - You should give up forecasting because it is always wrong. - Your demand forecast should be 80 so that you will never miss a sale.

A

What costs do we try to minimize for the supply chain network design problem? - Both the fixed and the variable costs. - Only the fixed cost of opening or location the facilities. - Only the variable cost of producing and shipping the product from the facilities to the markets. - Neither the fixed nor the variable costs.

A

Which of the following constraints should be included in the supply chain network design problem? - All of them. - The demand at each demand point must be satisfied. - The total quantity shipped from a facility cannot exceed its capacity, and no quantity can be shipped if the facility is not open. - A facility is either open or closed.

A

Which of the following statements regarding forecasting is not true? - Mature products with stable demand are usually the most difficult to forecast. - For pull processes, a manager must forecast what customer demand will be to plan the level of available capacity and inventory. - The demand for functional products is easier to predict than that for innovative products. - Long-term forecasts have a larger standard deviation of error relative to the mean than short-term forecasts.

A

Which transportation network design option establishes an extra layer between suppliers and retailers to store inventory and to serve as a transfer location? - Transshipment (Hub-and-Spoke) Network. - Direct shipping network - Milk runs - None of them

A

Which of the following statements regarding models is not true? - Models provide insights because they are the reality. - Models help the user find good answers although they do not directly give an answer. - Models rely mostly on quantitative data. - All models are wrong.

A - Models provide insights but a model is not the reality. Because a model only includes a few factors that are quantifiable. Most qualitative data cannot be easily included in a model. All models are wrong although they can guide us to find good answers.

As a way to validate the forecast above, the VP of Marketing has decided to invite a dozen of her peers to a meeting at UWEC Cereals' headquarters, including VPs of Marketing from other companies that are not direct competitors of UWEC Cereals but do have first-hand experience with muesli products. The expectation is that their combined expertise with this type of cereals should allow them to produce a decent forecast for UWEC Cereals. - Judgmental - Experimental - Time Series - Causal

A - The VP of Marketing has assembled a jury of experts, a judgmental approach to forecasting. Although subjective, the idea is that their experience with the product in other regions of the United States should give them insights into how the muesli may play out in Eau Claire.

According to the lecture, why should we capture errors in our past forecasts? - so that we can estimate the error of future forecasts. - so that we can just focus on the expected value of the forecast - so that we can disaggregate the forecast by SKU - so that we know demand is a continuous variable.

A - The purpose of this question is to help you understand Forecast Truism #1: Forecasts are always wrong. It is very very rare that the actual demand is exactly the expected or average demand. So, it is always good to maintain an estimate of forecast error in your forecasting.

Busy Bee (a retailer) used to forecast their next year's demand using weeks as their time unit. However, the company has recently decided to change the time unit from weeks to months. It will continue to forecast for the next year's demand. Which of the following statement is TRUE? - Busy Bee's forecast will likely improve since the company's new policy has aggregated the forecast in terms of time units. - Busy Bee's forecast will likely remain the same since the time horizon for the forecast will still be one year. - It is impossible to tell what effect the change will have on the quality of the forecast. - Busy Bee's forecast will likely deteriorate since one month is a longer-term than a week.

A - This is to test your understanding of the #2 forecasting truism "aggregated forecasts are more accurate". In this case, the time is aggregated from weeks to months, therefore, BusyBee should anticipate an improvement in their forecasting accuracy. The time horizon does not change, it is still one year because they are forecasting for next year.

risk pooling

A statistical concept that suggests that demand uncertainty can be reduced if one aggregate demand, for example, across locations, across products, or even across time. (e.g., if demand is aggregated across different locations, it becomes more likely that high demand from one customer will be offset by low demand from another.) Similar concepts include aggregation, centralization, modularity (or component commonality) (The underlying idea of these concepts is that demand uncertainty is reduced when demand is aggregated.)

In almost all countries, roads, seaports, airports, rail, and canals have what in common? - They are located near the water. - They were built and/or managed by the government. - They are staffed by foreign nationals. - There were built to collect taxes.

B

One of the truisms (or properties, or characteristics) of forecasts is - aggregate forecasts are usually less accurate than disaggregate forecasts. - Shorter horizon forecasts are usually more accurate than longer horizon forecasts. - forecasts are accurate most of the time. - collaborative forecasts are usually less accurate than separated forecasts.

B

Supply chain network includes - only facilities - facilities and the links between facilities - only flows of product, information, and money - only warehouses or distribution centers

B

What is the meaning of ∑i=1 nxij=Dj, for j=1,2,...,m? - Demand at market j must be satisfied. - Demand at each market must be satisfied. - If a facility is not open, it cannot supply any market. - The quantity shipped from a facility cannot exceed its capacity.

B

Which of the following statements regarding the forecasting method is not true? - Collaborative forecasting based on sales to the end customer can help enterprises further up the supply chain and reduce forecast error. - Qualitative forecasting methods are most appropriate when there is good historical data available or when experts do not have market intelligence that is critical in making the forecast. - Causal forecasting methods find a correlation between demand and environmental factors and use estimates of what environmental factors will be to forecast future demand. - It is not appropriate to use Time Series techniques when there are dramatic changes in historical patterns.

B

The VP of Supply Chain has received from Marketing a projection of the volume of products they expect will be sold for the new products. This projection was prepared based on a small-scale market test they ran in three cities in Eau Claire. This approach to forecasting can be best described as: - Judgmental - Experimental - Time Series - Causal/Relational

B - Testing the market is an experimental approach to forecasting. The expectation is that demand for the new product in the three selected cities should be representative of the demand that can be expected once the product is deployed throughout the region.

Walmart's excellent transportation network design has contributed to its supply chain success. Walmart builds many large stores in a geographic area supported by a DC. As a result, the total lot size to all stores from each supplier fills trucks on the inbound side to achieve economies of scale. On the outbound side, the sum of the lot sizes from all suppliers to each retail store fills up the truck to achieve economies of scale. Which of the following describes Walmart's transportation network design? - Direct shipment. - Cross-docking. - Milk run. - Transshipment with inventory stocked at the DC.

B - The correct answer is cross-docking because both the inbound and the outbound shipments can be coordinated therefore there is no need to stock (or accumulate) inventory at the DC (in order to fill a truckload).

Firms focusing on cost leadership tend to - locate facilities very far from the market they serve. - locate facilities close to the market they serve. - find the lowest cost location for their manufacturing facilities. - select a high-cost location to be able to react quickly.

C

Cheaper modes of transport typically have - shorter lead times and smaller minimum shipment quantities. - shorter lead times and larger minimum shipment quantities. - longer lead times and larger minimum shipment quantities. - longer lead times and smaller minimum shipment quantities.

C - Cheaper transportation modes usually have longer lead times and larger minimum quantity requirements because both of them reduce the transportation cost per unit, therefore, provide a lower transportation rate.

According to the lecture, which of the following statement is not true? - Demand forecasting forms the basis for all strategic and planning decisions in a supply chain. - Forecasts should include both the expected value of the forecast and a measure of forecast error. - The result when each stage in the supply chain makes its own separate forecast is often a match between supply and demand because these forecasts are often very different. - The underlying idea of risk pooling, centralization, and modularity is that aggregated forecasts are more accurate.

C - Recall the beer game we played. The result when each stage in the supply chain makes its own separate forecast is often a mismatch between supply and demand because these forecasts are often very different.

Busy Bee's president is considering the question of expanding their current distribution center and has asked the sales department to prepare two long-term demand forecasts: (1) an estimate of the demand for next year, and (2) an estimate of the demand in five years. Which of the following statement is TRUE? - Likely, the estimate of the demand for next year is less accurate than that in five years. - The longer-term forecast will, in general, outperform the shorter-term forecast. - Likely, the estimate of the demand in five years is less accurate than that for next year. - Likely, neither one of the estimates can be trusted, since they are both given as the expected forecasts with a forecast error.

C - This is to test your understanding of the #3 forecasting truism "shorter horizon forecasts are more accurate". In this case, a one-year forecast is a shorter horizon than a five-year forecast. Therefore, the one-year forecast should be more accurate than the five-year forecast.

Which one of the following parties moves or transports the product? Shipper Producer Consumer Carrier

Carrier

According to the lecture, there are different levels of forecasting, in terms of their time horizon: strategic level, tactical level and operational level. Forecasts at different levels are used for different purposes. Which of the following forecast is at the strategic level? - Materials requirement planning. - Inventory planning. - Transportation planning. - Large infrastructure investment.

D

Firms focusing on responsiveness tend to - select a high-cost location to be able to react slowly. - find the lowest cost location for their manufacturing facilities. - locate facilities very far from the market they serve. - locate facilities close to the market they serve.

D

In most of the world, trucks carry a large fraction of the goods moved. The trucking industry consists of two major segments: truckload (TL) and less-than-truckload (LTL). Which of the following statement is not true? - TL is characterized by shipments of 10,000 pounds or more. - LTL is suited for shipments that are too large to be mailed as small packages (typically more than 150 lbs) but that constitute less than half a TL. - LTL shipments take longer than TL shipments because of other loads that need to be picked up and dropped off. - LTL usually is cheaper than TL because it encourages shipments in small lots.

D

Home Depot started with a direct shipment network, given that most of the stores it opened until 2002 were large stores. However, the direct shipment network proved to be problematic as Home Depot started to open smaller stores. Which of the following justifies the use of a direct shipment network? - The large number of stores. - The small shipment size from each supplier to each store. - The small number of suppliers. - The large shipment size from each supplier to each store.

D - A direct shipment network is justified only if demand at each store (location) is large enough so that optimal replenishment lot sizes are close to a truckload from each supplier to each location.

Postponement

The delay of product differentiation or customization until closer to the time the product is sold. (The underlying idea of this concept is that demand uncertainty is reduced when the forecasting time horizon is reduced.)

Demand uncertainty

The variability of the demand. Common measurements of demand uncertainty include: (1) the standard deviation of demand, (2) the coefficient of variation.

Which of the following products is best transported by air? Coal Natural gas Flowers Autos

flowers

Judgmental forecasting approach

someone somewhere "knows" what the demand is....

Causal/relational forecasting approach

the demand is driven or caused by some underlaying factors which can be captured and measured ahead of time

Experimental forecasting approach

we can sample local extrapolate that to the population

Time series forecasting approach

what happened in the past will happen again in the future