Supply Chain Distribution Tradeoffs
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Supply Chain Distribution Tradeoffs

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Questions and Answers

What is a significant benefit of establishing warehouses for a manufacturer?

  • Access to international markets
  • Increase in direct shipping to customers
  • Elimination of inventory costs
  • Reduction of transportation costs (correct)

    • What can occur if too many distribution centers (DCs) are built?

  • Enhanced customer service due to proximity
  • Reduction in total inventory costs
  • Rise in transportation expenses for less-than-truckload shipments (correct)
  • Increased efficiency in shipping

    • How does the addition of more distribution centers typically affect inventory carrying costs?

  • Increases total inventory carrying costs (correct)
  • Eliminates the need for safety stock
  • Decreases inventory carrying costs significantly
  • Keeps inventory levels stable

    • What is a common fulfillment strategy for managing items of different velocities?

    <p>Utilizing regional warehouses for mid- to high-velocity items</p> Signup and view all the answers

    What is a tradeoff when considering distribution operations and customer service?

    <p>Higher operational costs may lead to improved customer comfort</p> Signup and view all the answers

    Why is it challenging to adopt a risk pooling strategy with decentralized inventory?

    <p>Additional safety stock must be held at each facility</p> Signup and view all the answers

    What is one consequence of maintaining a centralized facility for low-velocity items?

    <p>It offsets higher transportation costs with lower inventory costs</p> Signup and view all the answers

    What factor can influence the comfort level of buyers regarding a supplier's DC location?

    <p>The distance from the buyer's operations</p> Signup and view all the answers

    What is the primary tradeoff when considering space within a distribution facility?

    <p>More space allows for greater equipment utilization</p> Signup and view all the answers

    How does increased automation in a distribution facility affect labor requirements?

    <p>Reduces the need for manual labor</p> Signup and view all the answers

    What relationship exists between the number of people employed and the size of the distribution facility?

    <p>Larger workforce allows for greater facility throughput</p> Signup and view all the answers

    What tradeoff should be considered when aiming for internal efficiency in a distribution operation?

    <p>Balancing financial expenditure with resource capability</p> Signup and view all the answers

    Which factor allows distribution managers to handle demand surges effectively?

    <p>Quickly hiring more temporary labor</p> Signup and view all the answers

    What is a benefit of proper equipment use in a distribution facility?

    <p>It speeds up the movement of products</p> Signup and view all the answers

    What would likely happen if a distribution facility relies entirely on manual operations?

    <p>It may struggle to manage larger operations effectively</p> Signup and view all the answers

    What impact does having a small workforce have on facility operations?

    <p>It limits the size of the facility that can be operated efficiently</p> Signup and view all the answers

    Study Notes

    Supply Chain Distribution Tradeoffs

    • Distribution vs. Transportation: Direct shipping from plants to customers is costly. Warehouses (DCs) reduce costs by allowing large shipments to distant facilities and smaller deliveries to customers. However, too many DCs decrease efficiency, leading to less-than-truckload shipments and higher transportation expense.

    • Distribution vs. Inventory: More DCs mean higher inventory carrying costs. Inventory increases with the addition of facilities, but at a decreasing rate. Decentralized inventory hinders risk pooling strategies as each facility needs safety stock.

    • Regional vs. Centralized Facilities: Firms often use regional facilities for high-velocity items and a central facility for slow-moving items (e.g., replacement parts, costly products). Centralized inventory reduces carrying costs despite longer delivery distances.

    • Distribution vs. Customer Service: More facilities improve customer service—buyers prefer DCs within a day's drive. However, this is balanced against the higher costs of operating additional facilities and carrying inventory.

    Facility-Level Tradeoffs

    • Space vs. Equipment: Larger facilities benefit from automation and materials handling. Proper equipment leverages vertical space and speeds up product flow.

    • Equipment vs. People: Automation reduces labor needs. Manual operations require more people for distribution activities.

    • People vs. Space: Larger workforces allow for larger facilities and higher throughput. Small teams need more automation in large facilities to efficiently serve customers.

    • Resource tradeoffs: Financial and performance tradeoffs are necessary for internal efficiency. Efficient use of resources like space, equipment, and people is critical to meeting distribution goals.

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    Description

    Explore the complexities of supply chain distribution tradeoffs in this quiz. Understand the balance between distribution costs, inventory management, and customer service levels. Learn how the choice of centralized versus regional facilities impacts efficiency and service quality.

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