Supply Chain Fundamentals and Efficiency

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Questions and Answers

Which of the following best describes the primary goal of every supply chain?

Maximizing the difference between revenue and the cost of goods sold.

Achieving maximum supply chain surplus, by maximizing consumer surplus in a cost effective manner. (correct)

Guaranteeing optimal facility and transportation utilization.

Ensuring the lowest possible cost of production and distribution.

Which factor has the most significant influence on implied demand uncertainty?

The lead time for the supply of a product to a customer.

The nature of the product and its life cycle. (correct)

The responsiveness of the supply chain to market demands.

The number of facilities in the distribution network.

Which of the following strategies best demonstrates a `chase` strategy in aggregate planning?

Minimizing changes in both production and inventory levels, with a focus on stable output.

Maintaining a consistent production output, while varying inventory levels.

Adjusting production rates to match demand fluctuations, with minimal inventory changes. (correct)

Keeping production levels constant and using backorders to bridge demand fluctuations.

What is the most direct consequence of a facility operating with minimal excess capacity?

<p>Reduced responsiveness to demand surges. (D)</p> Signup and view all the answers

What is the key relationship between the number of facilities in a distribution network and the cost of inventory?

<p>As the number of facilities increases, inventory costs generally increase due to higher safety inventory. (D)</p> Signup and view all the answers

Flashcards

Customer surplus

The difference between the value a customer places on a good or service and the price they pay for it. It represents the customer's satisfaction.

Time series forecasting

A method of forecasting that uses historical data to predict future demand. It assumes that past patterns will continue into the future. Examples include moving average and exponential smoothing.

Chase strategy

A supply chain strategy that focuses on producing goods only when they are needed. This reduces inventory holding costs and waste but requires faster response times and flexible production.

Mix flexibility

The ability to quickly adjust production plans to meet changes in customer demand. This is essential for companies that operate in volatile markets.

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Safety inventory

The amount of inventory held to protect against uncertainties in demand or supply. It helps to prevent stockouts but increases inventory holding costs.

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Study Notes

Chapter 1: Supply Chain Fundamentals

Supply Chain Objective: Maximizing supply chain surplus
Consumer Surplus: Difference between what a consumer is willing to pay and what they actually pay
Push/Pull View: Describes supply chain as either pushing products to the customer (push) or pulling products as customer orders are made (pull)
Supply Chain Surplus: Difference between the total value created in the supply chain and the total cost incurred
Cycle View of a Supply Chain: Focuses on the steps and activities within the supply chain cycle, like ordering, receiving, and fulfilling customer orders.
Customer Order Arrival: The point when a customer's order is received by the supply chain
Customer Order Entry: The process of recording and processing customer orders into the supply chain system

Chapter 2: Supply Chain Efficiency

Implied Demand Uncertainty: The uncertainty about future demand levels, which affects supply chain planning.
Supply Chain Efficiency: Measures how well a supply chain uses resources to meet customer demand in a cost-effective manner.
Cost-Responsiveness Efficient Frontier: A boundary that describes the trade-offs between cost-effectiveness and responsiveness in the supply chain
Scope of Strategic Fit: The alignment between the supply chain, the organization, and the overall business strategy.

Chapter 3: Facility Management and Inventory

Two Major Facility Types: Production sites and distribution centers
Limitations of a Facility with Little Excess Capacity: Inability to handle surges in demand and potential bottlenecks
Limitation of a High Utilization Facility: Potential for system failure if there is a disruption in the process
Cycle Inventory: Inventory held to meet expected demand during lead time
Safety Inventory: Inventory held to buffer against uncertainty in demand and supply lead times
Forecasting: Estimating future demand
Aggregate Planning: Planning production based on overall demand forecasts
Supply Lead Time: The time it takes for a product to move from order to delivery

Chapter 4: Distribution Networks and Logistics

Advantage of a Distribution Network with Local Storage: Faster response time and reduced transportation costs
Advantage of a Well-Structured Omni-Channel Supply Chain: Ability to meet customer demands from multiple channels effectively and efficiently
Response Time: The speed at which products are delivered to customers.
Inbound Transportation Costs: Costs involved in transporting raw materials and components to the production facilities.
Correlation between Number of Facilities and Cost of Inventory: More facilities result in higher inventory costs.
Correlation between Desired Response Time and Number of Facilities Needed: Faster response times require more facilities.

Chapter 5: Transportation and Facilities

Correlation between Transportation Costs and Number of Facilities Needed: Fewer facilities need to be closer to customers typically to reduce transportation costs.

Chapter 6: Flexibility

Mix Flexibility: The ability to quickly adjust and change product configurations and mixes.

Chapter 7: Forecasting Methods

Causal Forecasting Methods: Forecasting based on cause-and-effect relationships.
Qualitative Forecasting Methods: Forecasting relying on opinions and judgment of individuals and groups.
Time-Series Forecasting Methods: Forecasting using historical data.
Static Forecasting Method: A forecasting method using fixed inputs, without altering based on changes in underlying trends
Adaptive Forecasting Methods: Forecasting methods that adjust to changing trends over time.

Chapter 8: Aggregate Planning Strategies

Aggregate Planning: Planning production levels over a specified timeframe (e.g., a quarter, or a year)
Production Rate: The rate at which products are produced
Inventory on Hand: Current stock of finished goods
Chase Strategy: Adjusting production capacity to match demand
Level Strategy: Maintaining a consistent production level.

Exam Section 2: Short Answer Questions

Return on Assets (ROA) calculation: Calculating ROA from given financial data (sales, cost of goods sold, and fixed costs).
Cycle Inventory vs. Safety Inventory: Discussing the differences and similarities between cycle inventory—essential, consistent inventory from order lead times, and safety inventory—extra inventory held in case demand spikes.
Facilities and Transportation Costs: Linking facilities to transportation costs; more facilities, potentially lower transportation costs.
Customer Surplus: Defining customer surplus (difference between what a consumer is willing to pay and what they pay) and providing examples.
Customer Order Arrival vs. Customer Order Entry: Explaining the differences. Understanding the implications of each component of a supply chain's function, and how those components might impact the overall success of the supply chain.

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Description

Explore the key concepts of supply chain management in this quiz covering chapters 1 and 2. Understand the objectives, the push/pull view, surplus definitions, and the impact of demand uncertainty on supply chain efficiency. Test your knowledge and improve your understanding of these critical areas in supply chain management.