Inventory and Supply Chains Overview
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Questions and Answers

What does the Return on Assets (ROA) measure?

  • Cash flow statements only
  • The sales revenue of a company
  • Total liabilities against assets
  • Operating efficiency and profitability (correct)

Which of the following methods can improve cash flow?

  • Ignoring supplier payment timelines
  • Switching manufacturing to countries with strong exchange rates
  • Customers paying sooner and suppliers paid later (correct)
  • Increasing inventory levels unnecessarily

Which factor is NOT one of the six supply chain performance levers?

  • Demand
  • Inventory management (correct)
  • Lead times
  • Information

How is capital employed defined?

<p>Total assets minus current liabilities (D)</p> Signup and view all the answers

What impact do supply chain decisions have on Return on Capital Employed (ROCE)?

<p>They influence assets, costs, and sales (B)</p> Signup and view all the answers

Which of the following best describes the role of lead times in the supply chain?

<p>They measure the speed of product delivery and responsiveness (A)</p> Signup and view all the answers

What is the purpose of the cash flow statement?

<p>To show annual cash inflows and outflows (A)</p> Signup and view all the answers

Which strategy is NOT effective for improving supply chain performance?

<p>Delaying customer orders (C)</p> Signup and view all the answers

Which phase in the product life-cycle requires building stock prior to launch due to uncertain demand?

<p>Launch phase (C)</p> Signup and view all the answers

What is the primary purpose of product classification in demand and supply planning?

<p>To segment the product portfolio based on turnover (D)</p> Signup and view all the answers

How is forecast accuracy (FA) measured?

<p>FA equals one minus the error percentage (B)</p> Signup and view all the answers

In managing supply planning, what does the re-order point refer to?

<p>The stock level that triggers a new order when it falls below a certain point (B)</p> Signup and view all the answers

Which forecasting method is based on historical patterns for statistical forecasting?

<p>Time series method (A)</p> Signup and view all the answers

What aspect of demand planning is most influenced by patterns of demand?

<p>Inventory management (A)</p> Signup and view all the answers

During which product life-cycle phase does demand monitoring become critical to maintain sufficient inventory levels?

<p>Decline phase (B)</p> Signup and view all the answers

What defines the continuous review approach in order cycle management?

<p>Stock levels are constantly monitored to place orders when necessary (A)</p> Signup and view all the answers

What is the primary focus of a lean supply chain?

<p>To supply demand at the lowest cost (D)</p> Signup and view all the answers

Which statement best describes an agile supply chain?

<p>It is designed to respond quickly to demand changes. (C)</p> Signup and view all the answers

What is the concept of postponement in supply chain management?

<p>Delaying configuration until customer requirements are understood (B)</p> Signup and view all the answers

What does gearing measure in supply chain finance?

<p>The extent of capital investment funded by debt (B)</p> Signup and view all the answers

Which component does NOT directly influence return rates?

<p>Market share (C)</p> Signup and view all the answers

In the supply chain finance context, which scenario describes cash flow out?

<p>Payment for supplier materials (A)</p> Signup and view all the answers

Which inventory strategy utilizes common platform principles for delayed configuration?

<p>Postponement (D)</p> Signup and view all the answers

What occurs when a company goes bankrupt in terms of capital structure?

<p>The bank assumes ownership of all company assets (D)</p> Signup and view all the answers

What does it mean for a supply chain to consider supply and demand as a combination of processes?

<p>It allows for better synchronization and responsiveness. (C)</p> Signup and view all the answers

What is essential for a company to provide returns to both the bank and shareholders?

<p>Generating sufficient cash flow from sales (D)</p> Signup and view all the answers

What is a key advantage of transporting more expensive goods?

<p>Speed for long distances (B)</p> Signup and view all the answers

Which of the following is NOT a requirement for export packaging?

<p>Costly packaging materials (A)</p> Signup and view all the answers

What should be considered for maintaining effective stock control during transport?

<p>Type of packaging used (B)</p> Signup and view all the answers

What does material customs legislation require regarding goods?

<p>A customs destination must be indicated (D)</p> Signup and view all the answers

What can be an effective way to simplify customs legislation?

<p>Establish a compliance framework (B)</p> Signup and view all the answers

Which of the following is NOT a part of the system of formalities in operational customs clearance?

<p>Ensuring goods are thoroughly packed (D)</p> Signup and view all the answers

What is one of the primary benefits of clustering in export packaging?

<p>Enhances storage ease (D)</p> Signup and view all the answers

What should be analyzed in the implementation of material customs legislation?

<p>Tariffs associated with products (A)</p> Signup and view all the answers

What is one of the benefits of joint selling for the companies involved?

<p>Standardisation leads to reorganisation of product ranges (D)</p> Signup and view all the answers

What characteristic best describes joint ventures?

<p>Participating companies retain their independence while collaborating (D)</p> Signup and view all the answers

Which is a drawback of piggy-backing in joint selling?

<p>The exporter has no say in how the foreign market is handled (C)</p> Signup and view all the answers

Which is a reason to consider a joint venture?

<p>It enables faster entry into new markets (A)</p> Signup and view all the answers

What is an example of an export function in an export combination?

<p>Creating export opportunities for members (D)</p> Signup and view all the answers

What is a common interest in export areas that can benefit companies in an export combination?

<p>Joining complementary product ranges to meet foreign market needs (D)</p> Signup and view all the answers

What is one of the reasons for companies to enter a joint venture?

<p>To access global investment and research and development (B)</p> Signup and view all the answers

What characterizes a real merger?

<p>Companies lose their independence partly or wholly. (D)</p> Signup and view all the answers

What is a primary advantage of exporting for companies that participate in an export combination?

<p>The central body handles execution of the export marketing strategy (C)</p> Signup and view all the answers

Which of the following represents high risk in setting up a distribution channel?

<p>Establishing an own sales office abroad. (A)</p> Signup and view all the answers

What is a primary benefit of mergers and acquisitions?

<p>Immediate profit realization through economies of scale. (C)</p> Signup and view all the answers

Which risk category involves low costs and existing distribution networks?

<p>Low risk. (C)</p> Signup and view all the answers

What approach is characterized by intensive change of experience between companies?

<p>Realization of economies of skills. (B)</p> Signup and view all the answers

What is an unreal merger often described as?

<p>Take-over or acquisition. (B)</p> Signup and view all the answers

Which channel might be banned by legislation in certain countries?

<p>Certain wholesalers. (A)</p> Signup and view all the answers

What does the medium risk category depend on?

<p>Influence of foreign intermediary links. (C)</p> Signup and view all the answers

Flashcards

Qualitative Forecasting

Predicting future demand based on intuition and experience. It's used when historical data is limited or unavailable.

Quantitative Forecasting

Predicting future demand using historical data and statistical methods.

Level of Demand

The level of demand can be classified as high or low, depending on the number of units sold.

Frequency of Demand

Describes how frequently demand occurs over a period of time. It can be fast or slow.

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Patterns of Demand

Refers to the consistent, upward or downward trends in demand over time. It helps identify stable, trending, or seasonal patterns.

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Product Life Cycle

A product's journey through its life cycle, from launch to withdrawal. Each phase presents different demand patterns that influence planning and inventory management.

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Re-order Point

A fixed quantity is ordered when inventory falls below a certain level, ensuring a continuous supply.

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Economic Order Quantity (EOQ)

Determines the optimal amount to order each time to minimize inventory holding costs and ordering costs.

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Cash Flow Statement

A financial statement that shows the cash inflows and outflows of a business over a specific period.

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Operating Profit (P&L)

The amount of profit a company makes before deducting interest and taxes.

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Return on Assets (ROA)

A measure of how efficiently a company uses its assets to generate profit.

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Capital Employed

The total value of a company's assets minus its current liabilities.

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Gross Profit Margin

A measure of the company's ability to generate profit from its sales.

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Inventory Turnover Ratio

The speed at which a company's inventory is sold and replaced.

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Lead Time

The time it takes for a company to receive goods from suppliers and deliver them to customers.

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Supply Chain Management (SCM)

The process of managing the flow of goods and information from suppliers to customers.

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Lean Supply Chain

A supply chain strategy that focuses on minimizing costs by ensuring the supply of goods meets demand as efficiently as possible.

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Agile Supply Chain

A supply chain strategy that prioritizes responsiveness to rapidly changing market needs or customer demands.

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Postponement

A strategy that delays product customization until the final market destination or customer requirement is known, allowing for greater flexibility and reduced inventory.

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Gearing

The ratio of debt to total capital (debt + equity) in a company.

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Hurdle Rate

The minimum acceptable rate of return on investment required by investors (banks or shareholders).

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Profit and Loss Account (Income Statement)

A financial statement that summarizes a company's revenues and expenses for a specific period, showing profitability.

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Cash Flow In

Cash flow generated from the sale of products or services, typically the primary source of revenue for most companies.

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Cash Flow Out

Cash outflow used to acquire or maintain assets (like inventory or equipment) for business operations.

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Return on Investment (ROI)

The return on investment (ROI) expected by a bank or shareholder in exchange for providing capital to a business.

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Supply Chain Strategy

A comprehensive plan outlining the key stages of a business's supply chain, from sourcing materials to delivering products and providing customer support.

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Horizontal Integration

A company attempts to control another company in a different part of the distribution channel, often a competitor.

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High Risk Distribution

A company controls its own distribution channels, gaining more control but increasing risks and costs.

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Low Risk Distribution

A company relies on existing distribution networks like trading houses or piggy-back systems, minimizing risks but limiting control.

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Medium Risk Distribution

A company partners with foreign intermediaries like distributors, wholesalers, or agents, achieving a balance between control and risk.

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Real Merger

Companies combine their operations either fully or partially, losing their former independence.

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Unreal Merger

One company takes over another, often referred to as an acquisition or takeover.

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Realization of Economies of Skills

Various companies share their experience and expertise, leading to more efficient operations.

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Local Acquisitions for Growth

Acquiring local businesses allows a company to quickly adapt to changing market conditions and capitalize on strong market growth.

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Passive Upgrading

Goods that are re-imported after being temporarily exported for upgrading or modifications, often to take advantage of lower labor costs or specialized services in another country.

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Air Freight

A method of transporting goods that involves shipping them by air, which is faster than sea freight but more expensive. This option is suitable for urgent deliveries of high-value items and might be less suitable for bulky cargo.

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Export Packaging

The process of preparing goods for export, including protecting them from damage during transportation and ensuring they meet customs requirements.

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Clustering in Export Packaging

A type of export packaging where multiple shipments are grouped together for easier handling, loading, unloading, and storage. This approach can save time and resources.

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Material Customs Legislation

The legal framework and regulations that govern the movement of goods across international borders.

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Preferential Origin Requirements Check

The process of verifying and documenting the origin of goods to determine if they qualify for preferential trade agreements or duty-free status.

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Simplification of Customs Legislation

A simplified approach to customs compliance that focuses on creating a framework for consistent adherence to regulations and minimizing risks.

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Joint Selling

Two companies from different countries collaborate, with one using the other's sales network to export products.

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Standardization in Joint Selling

Standardization helps streamline product lines, leading to cost reductions for both companies involved in joint selling.

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Financial Benefits of Joint Selling

Joint selling allows companies to enter foreign markets quickly without substantial upfront investment.

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Export Combination

A collaboration of companies forming a central body to manage export functions, like market research and building international relationships.

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International Joint Venture

Companies join forces to create opportunities for new products or services, combining expertise and resources for mutual benefit.

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Advantages of International Joint Venture

Joint ventures can lead to faster market entry, shared technology development, and access to global funding.

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Shared Resources in Export Combination

The export combination allows for shared marketing and distribution channels, increasing efficiency and reach.

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Data Sharing in Joint Ventures

Joint ventures provide access to each other's company data, including financial reports and business history, promoting transparency and trust.

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Study Notes

Inventory and Supply Chains

  • Inventory is the amount of goods available.
  • Inventory formats include raw materials, work-in-progress (WIP), and finished goods.
  • Cycle stock is necessary for regular demand.
  • Safety stock is a buffer against errors and supplier unreliability.
  • In-transit stock is in the process of shipping.
  • Seasonal stock is built up during peak times.
  • Promotional stock is used in marketing campaigns.
  • Speculative stock protects against price increases.
  • Average cycle stockholding is the average amount of cycle stock held over a period.
  • Average cycle stock investment is the cost of the average cycle stock.
  • Safety stock is calculated by adding safety stock supply and safety stock demand together.
  • Safety stock supply is found by multiplying the average demand by the supplier uncertainty (SU).
  • Safety stock demand is the standard deviation of demand multiplied by the service level factor multiplied by the square root of the lead time plus the SU.
  • Demand and supply planning includes level and frequency of demand, patterns of demand, and forecasting.

Forecasting Methods

  • Qualitative forecasting uses intuition.
  • Quantitative forecasting is historical or casual.
  • Time series methods use statistical forecasting based on historical patterns.
  • Forecast accuracy (FA) uses mean absolute percentage error (MAPE).
  • Error = (Actual - Forecast) / Actual.

Supply Planning

  • Order cycle management decides when to order.
  • Calculating economic order quantity (EOQ) decides how much to order.
  • Continuous review (fixed order quantity) and periodic review (fixed order cycle) are order management approaches.
  • The EOQ formula is EOQ = √(2CR/F).

S&OP Implementation

  • Stakeholder commitment is crucial for a successful implementation.
  • A single set of numbers for sales, marketing, etc. is best.
  • Accountability and decision-making structures should be well defined.
  • Business objective alignment improves efficiency.
  • Time horizon alignment helps managers think ahead.
  • Understanding and recognizing S&OP imperfections allows for adjustments and improvement.

Customer Service Improvements

  • Improved forecasts and reconciliation of demand and supply lead to improved customer service.
  • Reasons for S&OP failures can be attributed to issues like people, processes between departments, strategy, or performance measurement.

Supply Chain Finance

  • Companies generate cash flow and return to investors through supply chain management.

  • Gearing is the proportion of external and internal funds in capital investment.

  • Return on assets (ROA) evaluates the profitability and efficiency of asset usage.

  • ROCE (return on capital employed) is how efficiently a company utilises its available capital.

  • Profit and Loss accounts (income statements) detail sales and costs for a financial year.

  • Hurdle rates, cost of debt, and cost of equity capital combine to calculate WACC.

Outsourcing

  • Outsourcing involves moving company aspects or functions to an external supplier.
  • Globalization, increasing complexity, and emerging markets are key drivers for outsourcing.
  • Operational excellence, product leadership, and customer intimacy are types of competitive strategies.
  • Common reasons for outsourcing are increased operating flexibility and reduced fixed assets.
  • Potential concerns for outsourcing include loss of direct customer interface, time investment for the external supplier to understand the business, and potential diminished customer-focus for the external supplier after long-term commitments.
  • Steps in outsourcing include reviewing scope of operations and requirements, identifying potential providers, developing and issuing requests for information (RFI) and quotations (RFQ), assessing tenders, selecting contracts and assessing risks, implementing contracts and managing ongoing relationships.

Choosing an Entry Strategy

  • Choosing an entry strategy involves methods such as direct, indirect or cooperative exports.
  • Methods may be dictated by naïveté, pragmatism or a strategic approach. and are potentially influenced by home country practices and other external market factors.

Logistics and Customs Policy

  • Logistics is the process of organizing, planning, managing, and processing the flow of goods.
  • Logistics activities can include, but are not limited to, purchasing (logisitcs), production logistics and physical distribution.
  • Customs legislations and requirements have to be considered for operations abroad.
  • International trade (international shipments abroad) sometimes involve multiple forms of transport to arrive at the final destination.

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Description

This quiz explores essential concepts in inventory and supply chain management, including types of inventory, cycle stock, safety stock, and their calculations. It also addresses various stock formats such as in-transit and seasonal stock, highlighting their importance in optimizing supply chains. Test your knowledge and understanding of these fundamental principles.

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