MGMT343 Exam 1

What are the six supply chain drivers?

Facility, inventory, transportation, sourcing, information, pricing

Vendor managed inventory (VMI) and continuous replenishment systems (CRP) both serve to A) maximize information quality. B) maximize information flow. C) minimize information distortion. D) minimize channel confusion.

C) minimize information distortion.

For the fiscal year 2019, Walmart reported annual sales of $514.4 billion, year-end inventory of $44.3 billion, year-beginning inventory of $43.8 billion, and an annual cost of goods sold (COGS) of $385.3 billion. What is the value of average inventory? A) $44.05 billion B) $43.8 billion C) It is confusing, and I don't know. D) $44.3 billion

A) $44.05 billion

Which of these statements about Dell's supply chain is best? A) Dell's initial success was largely driven by their Assembly → Customer supply chain linkage. B) Dell's supply chain consists of only two members, Dell and the customer. C) Dell's initial success was largely driven by the ability to accurately forecast what customers wanted and supply those models to retail outlets that carried their computers. D) Dell's supply chain surplus was largely driven by their negative shipping model.

A) Dell's initial success was largely driven by their Assembly → Customer supply chain linkage.

Sport Obermeyer is a major supplier of fashion skiwear. Each year, 95% of its products are completely new designs for which demand forecasts often err by as much as 200%. Because the retail season is only a few months long, the company has little time to react if it misguesses the market. Which of the following supply chain strategy is appropriate for Sport Obermeyer's fashion skiwear? A) Invest aggressively in ways to reduce lead time. B) Maintain very high utilization rate of its manufacturing plants. C) Minimize inventory throughout the supply chain to reduce cost. D) Select suppliers primarily based on cost.

A) Invest aggressively in ways to reduce lead time.

Which of these words best describes a typical supply chain structure? A) Network. B) Cyclical. C) Customer. D) Static.

A) Network.

Which sequence of stages is typical for product flow in a supply chain? A) Supplier → Manufacturer → Distributor B) Manufacturer → Retailer → Distributor C) Supplier → Customer → Retailer D) Retailer → Distributor → Customer

A) Supplier → Manufacturer → Distributor

A process is a series of actions or steps taken to meet predefined outcomes. By describing supply chains using processes, virtually any (very simple or very complex) supply chain can be described using a common set of definitions. Which of the following statement regarding the process view of supply chains is not true? A) The SCOR Model categorizes all supply chain activities into three processes: Source, Make, and Deliver. B) The push/pull view of a supply chain holds that the processes in a supply chain are divided into 2 categories depending on whether they are initiated in response to or in anticipation of customer orders. C) The cycle view of a supply chain holds that the processes in a supply chain are divided into a series of activities performed at the interface between successive stages. D) All supply chain activities within a firm belong to one of three macro processes — CRM, ISCM and SRM.

A) The SCOR Model categorizes all supply chain activities into three processes: Source, Make, and Deliver.

A key issue facing Toyota is A) design of its global production and distribution network. B) how to implement model changes. C) whether to specialize in a particular market. D) developing an Internet marketing system.

A) design of its global production and distribution network.

A supply chain features a constant flow of A) information, product and money. B) processes, funds, and product. C) personnel, information, and policies. D) product, processes, and support.

A) information, product and money.

Forward buying results in A) large orders during the promotion period followed by very small orders after that. B) small orders during the promotion period followed by very small orders after that. C) small orders during the promotion period followed by large orders after that. D) a stabilized buying pattern.

A) large orders during the promotion period followed by very small orders after that.

Based on the previous two questions, if we assume there are 365 days in a year, how long (or how many days) does the inventory stay at Walmart's stores? A) 30 days B) 42 days C) 41 days D) 40 days

B) 42 days

Based on the previous question, what is the inventory turnover for Walmart in 2019? A) 8.80 B) 8.75 C) 8.70 D) 11.68

B) 8.75

Since order batching contributes to the bullwhip effect, understanding the reasons why companies batch orders help them devise strategies that lead to smaller batches or more frequent resupply. Which of the following does NOT explain why companies batch orders? A) Often suppliers cannot handle frequent order processing because of the time and cost of processing an order can be substantial. B) A third-party logistics company is not available therefore there is no efficient way to make frequent small orders. C) Full truckload rate is substantially lower than less-than-truckload rates, and companies have a strong incentive to accumulate orders to fill a truckload. D) Many manufacturers place purchase orders with suppliers when they run their material requirements planning (MRP) systems, which are often run monthly.

B) A third-party logistics company is not available therefore there is no efficient way to make frequent small orders.

Blue Nile is an online retailer of diamonds that has used responsive transportation to ship diamonds to customers in the United States, Canada, and several countries in Europe and Asia. Which is the mode of transportation used with this strategy? A) Water B) Air C) Internet D) Rail

B) Air

Which of the following characteristics is not associated with innovative products? A) High product variety B) Low profit margin C) High stockout rate or forced markdown D) Short life cycle E) Unpredictable demand

B) Low profit margin

The fact that each stage in a supply chain forecasts demand based on the stream of orders received from the downstream stage results in A) forecasts based on actual consumer demand patterns. B) a magnification of fluctuations in demand as we move up the supply chain from the retailer to the manufacturer to the supplier. C) a reduction in demand as we move up the supply chain from the retailer to the manufacturer to the supplier. D) an increase in forecast accuracy

B) a magnification of fluctuations in demand as we move up the supply chain from the retailer to the manufacturer to the supplier.

A common way to visualize a supply chain is to 'map it out', e.g. to identify in a map the geographical location of the different entities that compose the supply chain and depict the physical flow of goods among them. One of the advantages of this supply chain perspective is that it makes it easier to: A) reduce the costs of transportation in the network B) identify sources of risk associated to a region C) optimize the flow of information across members D) shorten the geographical length of the longest links

B) identify sources of risk associated to a region

The situation in which fluctuations in orders increase as they move up the supply chain from retailers to wholesalers to manufacturers to suppliers is known as A) the butterfly effect. B) market fluctuations. C) the bullwhip effect. D) the whiplash effect.

C) the bullwhip effect.

Geoff receives course transfer requests on a continual basis from student advisors throughout the week. His policy has always been to sign the accumulated course transfer requests on Friday afternoons. Once he signs them, they are forwarded to his assistant and then on to the student advisor for that student's major. The Friday afternoon procedure is creating a(n): A) pricing obstacles. B) operational obstacles. C) information processing obstacles. D) incentive obstacles.

B) operational obstacles.

Which of the following statement regarding the obstacles to coordination in a supply chain is NOT true? A) Information-processing obstacles occur when demand information is distorted as it moves between different stages of the supply chain. B) Pricing obstacles refer to situations in which the pricing policies for a product lead to an increase in variability of orders placed. C) Behavioral obstacles are often related to the way the supply chain is structured and reduce the bullwhip effect. D) Incentive obstacles refer to situations where incentives offered to different stages or participants in a supply chain lead to actions that increase variability and reduce total supply chain profits.

C) Behavioral obstacles are often related to the way the supply chain is structured and reduce the bullwhip effect.

One cause of the bullwhip effect is Demand Signal Processing, i.e., an upstream site forecasts its demand based on the orders placed by the downstream site rather than the actual consumer demand. Which of the following practices does NOT mitigate Demand Signal Processing? A) Get demand information about the downstream site by bypassing it (e.g., Dell sells directly to consumers without going through resellers and distribution channels). B) Allow the upstream site control resupply from upstream to downstream (e.g., VMI, CRP). C) Increase resupply lead times to allow more corrections. D) Make demand data at a downstream site available to the upstream site.

C) Increase resupply lead times to allow more corrections.

An aggressive investment in customer analytics represents the use of which lever to reduce supply chain uncertainty? A) Time. B) Pricing. C) Information. D) Capacity.

C) Information.

The major drivers of supply chain performance are facility, transportation, inventory, sourcing, information, and pricing. Which of the following describes transportation? A) The choice of who will perform a particular supply chain activity (e.g., production, storage, transportation, or the management of information). B) The actual physical locations in the supply chain network where products are stored, fabricated, or assembled C) Moving inventory from point to point in the supply chain. D) All raw materials, work-in-process, and finished products within a supply chain.

C) Moving inventory from point to point in the supply chain.

Zara sources basic products such as white t-shirts from low-cost countries because demand is predictable. For trendy products for which demand is unpredictable, Zara manufactured in company-owned higher-cost factories in Europe. For the predictable demand, Zara strives for ________ and for the unpredictable demand, Zara hopes to achieve ________. A) social responsibility, quality B) quality, efficiency C) efficiency, responsiveness D) flexibility, social responsibility

C) efficiency, responsiveness

Walmart's supply chain features clusters of stores around distribution centers, which facilitates A) sharing of information with suppliers. B) rapid design cycles from their R&D group. C) frequent but inexpensive replenishment at the stores. D) high transportation costs.

C) frequent but inexpensive replenishment at the stores.

Wilma has invested in a 30,000-square foot warehouse to stock a wide variety of cold cuts and dressings for her hoagie shop in Upper Darby Township. There is no order she has been unable to accept and fill promptly over her forty years in the same location. Wilma's approach to mitigating uncertainty is by the use of A) information. B) capacity. C) inventory. D) time.

C) inventory.

The lack of coordination within a supply chain will result in a decrease in A) manufacturing cost. B) replenishment lead time. C) level of product availability. D) inventory cost.

C) level of product availability

Efficient supply chains A) respond quickly to demand changes. B) are appropriate for products that have high profit margins because price is not a prime customer driver. C) maximize performance at a minimum cost. D) maintain high levels of inventory to deal with demand/supply uncertainty

C) maximize performance at a minimum cost.

For any supply chain, A) if each member focuses on profitability, the overall supply chain profit will be maximized. B) management rests solely in the hands of the manufacturer. C) there is only one source of revenue, the customer. D) management rests solely in the hands of the distributor.

C) there is only one source of revenue, the customer.

When people talk about a firm's 'first tier' or 'tier one' suppliers, they mean: A) those suppliers that get first to the market. B) those suppliers that are that firm's number 1 priority. C) those suppliers that sell directly to that firm. D) those suppliers that are also that firm's customers.

C) those suppliers that sell directly to that firm.

The five levers for dealing with supply chain uncertainty (what are they and how to use them)?

Capacity, inventory, time, information, price

Information

Consists of data and analysis concerning facilities, inventory, transportation, costs, prices, and customers throughout the supply chain; decisions include demand planning, SC coordination and information sharing, sales and operations planning

For the fiscal year 2019, Target reported annual sales of $77.1 billion, year-end inventory of $9.50 billion, year-beginning inventory of $8.60 billion, and an annual cost of goods sold (COGS) of $54.9 billion. If we assume that there are 365 days in a year, how many more days does the inventory stay in Target compared with Walmart in the previous questions? A) 20 B) 19 C) 21 D) 18

D) 18

Which of the following describes collaborative planning, forecasting, and replenishment (CPFR)? A) A business practice that assigns replenishment responsibility across the supply chain to a single entity. B) For successful CPFR, it is not important to have a process in place that allows the supply chain partners to any exceptions. C) In many instances of CPFR, the inventory is owned by the supplier until it is sold by the retailer. D) A business practice that combines the intelligence of multiple partners in the planning and fulfillment of customer orders.

D) A business practice that combines the intelligence of multiple partners in the planning and fulfillment of customer orders.

A company's competitive strategy A) determines the nature of procurement and transportation of materials as well as manufacture and distribution of the product. B) specifies the portfolio of new products that it will try to develop. C) specifies how the market will be segmented and how the product will be positioned, priced, and promoted. D) defines the set of customer needs that it seeks to satisfy through its products and services.

D) defines the set of customer needs that it seeks to satisfy through its products and services.

Webvan designed a supply chain with large warehouses in several major cities in the United States, from which groceries were delivered to customer homes. They failed partly because of A) poor quality products. B) low demand for their service. C) slow inventory turnover compared to industry averages. D) higher labor costs for picking orders.

D) higher labor costs for picking orders.

Stefan's compensation plan rewards his hard work by paying him ten cents per mile driven while he delivers orders to the downstream members of his supply chain. Some managers view this reward as counterproductive since there is a temptation to take the longest route between two points rather than making more deliveries. This obstacle to supply chain coordination falls into the category of A) behavioral obstacles. B) operational obstacles. C) information processing obstacles. D) incentive obstacles.

D) incentive obstacles.

Which of the following is not the common symptom when a supply chain is plagued with a bullwhip effect that distorts its demand information as it is transmitted up the supply chain? A) uncertain production planning B) poor customer service due to unavailable products or long backlogs C) poor product forecasts D) increased supply chain profitability. E) insufficient or excessive capacities F) expedited shipments and overtime G) excessive inventory

D) increased supply chain profitability.

Customer Rick places orders with retailer Negan, who orders from Dwight, who orders from Simon, who orders from Regina. Simon is a whiz at statistics and makes his forecast for the coming year based on the orders he receives from Dwight. Simon's process is creating a(n) A) behavioral obstacle. B) incentive obstacle. C) operational obstacle. D) information processing obstacle.

D) information processing obstacle.

The lack of coordination within a supply chain will result in an increase in A) profitability. B) level of product availability. C) inventory accuracy. D) replenishment lead time.

D) replenishment lead time.

For any supply chain, the only source of revenue is generated by A) efficient operations B) information flows C) product flows D) the customer

D) the customer

The sales typically measured by a manufacturer are A) the quantity purchased from key suppliers. B) the quantity reported by the salesperson. C) the quantity sold to final customers (sell-through). D) the quantity sold to distributors or retailers (sell-in).

D) the quantity sold to distributors or retailers (sell-in).

Competitive strategy

Defines a set of customer needs that it seeks to satisfy through its products and services; includes: product price, quality, variety, availability, response time, innovation

Innovative product

Demand uncertainty is high, life cycle is short <1 year. profit margin is high 20-60%, average forecast error is high 40-100%, average stockout rate is high 10-40%, forced markdown is high 10-25%, lead time for MTO is short 1 day to 2 weeks

Functional product

Demand uncertainty is low, life cycle is long >2 years, profit margin is low 5-10%, average forecast error is low 10%, average stockout rate is low 1-2%, forced markdown 0%, lead time for MTO is high 6 months - 1 year

Pricing

Determines how much a firm will charge for the goods and services that it makes available in the supply chain

Supply chain strategy

Determines the structure of the supply chain and the capability of its supply, operations, and logistics functions - what they should do particularly well

Transportation

Entails moving inventory from point to point in the supply chain; modes include air (fast, high value), truck (retail), rail (slow), water (international), pipeline; firms can increase responsiveness by shipping directly to customer, choosing a fast transportation mode, shipping frequently; Efficiency is consolidation, slow (water, rail), infrequent; Responsiveness is direct, fast (air, truck), and frequent

A supply chain includes only the organizations directly involved in supplying components needed for manufacturing.

False

The bullwhip effect reduces the profitability of a supply chain by making it simpler to provide a given level of product availability.

False

The drawback of Zara's responsive supply chain is that it tends to sell more products at markdown than most of its competitors.

False

Bullwhip effect

Fluctuations in orders increase as they move up the supply chain from retailers to wholesalers to manufacturers to suppliers

Cycle view

Four primary process cycles: customer order cycle, replenishment cycle, manufacturing cycle, procurement cycle; cycles occur between SC stages; not every SC will have all four cycles; used by ERP systems to support SC operations; customer at the top, then retailer, then distributor, manufacturer, supplier; going down the chain, order size and lead time increases; going up the chain, demand uncertainty increases

Inventory turnover

INVT = cost of goods sold / average inventories

Remedies of bullwhip effect

Improving information accuracy: sharing customer demand data, implementing collaborative forecasting and planning, designing single-stage control of replenishment; improving operational performance: reducing replenishment lead times, reducing lot sizes, rationing based on past sales and sharing information to limit gaming; aligning goals and incentives, designing pricing strategies to stabilize orders, building strategic partnerships and trust

Inventory

Includes all raw materials, work-in-process, and finished products within a supply chain; roles include: overall to satisfy customers responsively at a low cost, to cover processing time, to decouple processes, to smooth operations, to exploit economies of scale, to buffer against uncertainties - demand supply manufacturing/processing; decisions include: efficiency will have low level of inventory held, it will be far from customer, replenishment is infrequent, should be held in raw form; responsiveness will have high level of inventory held, close to customer, frequent replenishment, and finished inventory form

Consequences of bullwhip effect

Indicates a lack of supply chain coordination, which increases variability and hurts supply chain surplus; impacts on the following performance: manufacturing cost increase, inventory cost increase, replenishment lead time increase, transportation cost increase, labor cost for shipping and receiving increase, level of product availability decrease, relationships across the supply chain decrease

Causes of bullwhip effect

Information processing obstacles - when demand information is distorted: forecasting based on orders, not customer demand, lack of information sharing; operational obstacles - occur when actions taken in the course of placing and filling orders lead to an increase in order variability: ordering in large lots, large replenishment lead times, rationing and shortage gaming; incentive obstacles - occurs when incentives offered to different stages of supply chain lead to actions that increase order variability: lead to optimization within SC functions/stages, sales force incentives; pricing obstacles - occur when the pricing policies for a product lead to an increase in variability of orders placed: lot-size based quantity decisions, price fluctuations; behavioral obstacles - problems in learning within organizations that contribute to information distortion: each stage of the SC views its actions locally, unable to see the impact of its actions on other stages, different stages of the SC react to the current local situation rather than trying to identify the root causes, different stages of the SC blame one another for the fluctuations, no stage of the SC learns from its actions over time, a lack of trust among SC partners causes them to be opportunistic at the expense of overall SC performance

Push/pull view

Make to stock and make to order; push processes - execution is performed in anticipation of an order, demand is forecasted, proactive process based on projected demand; pull processes - execution is performed in response to an order, demand is actual (known with certainty), reactive process based on actual demand; push/pull boundary - the point that separates push processes from pull processes; pure push leads to high inventory levels, pure pull is very rare; mixed systems are common - benefits include allows for efficient mass customization (postponement), allows for pooling of products by aggregating demand

Accounts payable turnover

Measures how quickly a firm makes payments to creditors and suppliers, a key indicator of the firm's liquidity and how it is managing its cash flow; APT = COGS / average accounts payable

Cash to cash cycle

Measures the average amount of time (in days) from when cash enters the process as cost to when it returns as collected revenue; C2C = -days payable + days in inventory + days receivable; days payable = 1 / APT, days in inventory = 1 / INVT; days receivable = 1 / ART

Return on assets

Measures the return earned on each dollar invested by the firm in assets, how efficiently a firm is using its assets/resources to generate earnings/profits; ROA = net income/average total assets; can be written as product of two ratios: ROA = net income / sales revenue x sales revenue / average total assets = profit margin x asset turnover

Return on equity

Measures the return on investment made by a firm's shareholders, the main summary measure of a firm's performance from a shareholder's perspective; ROE = net income / average SHE

Supply chain mapping

Method of keeping track of thousands of suppliers

Property, plant, equipment turnover

PPET = sales revenue / PPE

SCOR model

Plan, Source, Make, Deliver, Return, Enable

Supply chain efficiency

Reducing or minimizing costs; supply predictable demand at the lowest cost possible, maintain high average utilization rate, generate high turns and minimize inventory, shorten lead time as long as it doesn't increase cost, select primarily for cost and quality, maximize performance and minimize cost; functional matches with efficiency

Accounts receivable turnover

Sales revenue / average accounts receivable

Macro processes

Software view, 3 steps - Supplier Relationship Management (SRM) - sourcing, negotiation, design & supply collaboration; Internal Supply Chain Management (ISCM) - strategic planning, demand planning, supply planning, fulfillment; Customer Relationship Management (CRM) - marketing, selling, call centers, order management; different macro processes should be aligned to support supply chain design, planning, and operation

Supply chain structure/configuration

Suppliers, manufacturers, distributors, retailers

Describe different ways you can visualize a supply chain

Supply chain structure/configuration, supply chain mapping, process view: cycle view, push/pull view, macro processes, SCOR model

Sourcing

The choice of who will perform a particular supply chain activity (production, storage, transportation, or the management of information); firms can increase responsiveness by having multiple suppliers, having suppliers close to the market, selecting suppliers based on speed, flexibility, and quality - comes at a cost; efficiency has one supplier and offshoring in low cost countries; responsiveness has many suppliers and uses on shoring, near shoring

Facility

The physical locations in the supply chain network where products are stored, fabricated, or assembled; firms can increase responsiveness by increasing the number of facilities, increasing capacity, and/or making them more flexible - comes at a cost; efficiency would have centralized (few) locations, lean capacity, dedicated capability; responsiveness would have decentralized (many) locations, excess capacity, flexible capability

Supply chain management

The planning and management of all activities involved in sourcing and procurement, conversion, and all logistics activities. It also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. Deals with the management of materials, information, and financial flows in a network consisting of suppliers, manufacturers, distributors, and customers

Supply chain responsiveness

The supply chain's ability to handle a large variety of products, meet high service/high product availability, meet short lead times, build highly innovative products; respond quickly to unpredictable demand to minimize stockouts and forced markdowns, deploy excess capacity, deploy excess inventory, invest aggressively in ways to reduce lead time, select primarily for speed, flexibility, and quality, use modular design to postpone product differentiation; innovative matches with responsiveness

A lack of coordination occurs either because different stages of the supply chain have objectives that conflict or because information moving between stages gets delayed and distorted.

True

Supply chain coordination requires each stage of the supply chain to take into account the impact its actions have on other stages.

True

Supply chain strategy specifies the structure of the supply chain and what supply chain functions (including operations, distribution, and service), whether performed in-house or outsourced, should do particularly well.

True

The objective of every supply chain is to maximize the total net value generated.

True

Supply chain

Two or more parties linked by flows of information, products, money that ultimately satisfy customer needs; only one source of revenue - the end customer; the goal of every supply chain is to maximize the total net value generated (or supply chain surplus); upstream from 1st tier suppler to raw materials supplier, downstream from 1st tier customer to end customer

Examples of competitive strategies

Walmart - low price, high product availability and variety; Whole Foods - product quality, high product availability and variety; Zales - convenience, quick response time; Blue Nile - high product variety, low price

Drawing of supply chain diagram for any product

raw materials suppliers - rubber supplier, second tier supplier - tire supplier, gear supplier, etc., first tier supplier - hardware supplier, frame supplier, product, 1st tier customers - wholesaler, second tier customers - retailers, end customer - customers