Supply Chain Management Concepts Quiz
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Questions and Answers

What is the primary goal of Supply Chain Management (SCM)?

  • To enhance product availability across retail outlets
  • To fulfill customer requests efficiently
  • To manage suppliers and reduce costs
  • To maximize profit by managing flows between stages (correct)

Which cycle is NOT considered a type of supply chain cycle?

  • Customer Order Cycle
  • Inventory Management Cycle (correct)
  • Procurement Cycle
  • Replenishment Cycle

What triggers the Bullwhip Effect in a supply chain?

  • Effective communication between suppliers
  • Inaccurate demand forecasting (correct)
  • Stable demand patterns
  • Increased transportation efficiency

What is a consequence of the Bullwhip Effect?

<p>Increased inventory holding costs (C)</p> Signup and view all the answers

How does increasing the number of facilities in a distribution network typically impact response time?

<p>Response time decreases (A)</p> Signup and view all the answers

What is meant by the term 'Fill Rate' in inventory management?

<p>The percentage of customer demand met from available inventory (B)</p> Signup and view all the answers

What is a key characteristic of Continuous Review inventory management?

<p>Orders are made when inventory reaches a specific reorder point (A)</p> Signup and view all the answers

Cross-Docking in distribution has which of the following benefits?

<p>Enhances lead time and reduces inventory costs (A)</p> Signup and view all the answers

What is the primary goal of an efficient supply chain?

<p>Minimize costs (B)</p> Signup and view all the answers

Which product type is best suited for an efficient supply chain?

<p>Functional products (C)</p> Signup and view all the answers

What defines a pull process in supply chain management?

<p>Reacting to actual customer orders (C)</p> Signup and view all the answers

What is a key advantage of frequent deliveries in supply chain management?

<p>Reduced markdowns (A)</p> Signup and view all the answers

How does safety stock primarily function in inventory management?

<p>To minimize stockout risks (B)</p> Signup and view all the answers

What is the main purpose of aligning competitive strategy with supply chain strategy?

<p>To achieve a strategic fit (A)</p> Signup and view all the answers

Which scenario best illustrates the push/pull boundary concept?

<p>Pre-producing blank jerseys while customizing after orders (A)</p> Signup and view all the answers

Which of the following is a performance driver in supply chain management?

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

What effect do stable pricing strategies have on managing the bullwhip effect?

<p>They stabilize demand forecasting (C)</p> Signup and view all the answers

What is the focus of a responsive supply chain?

<p>Adapting quickly to market changes (A)</p> Signup and view all the answers

What is the primary function of the reorder point in inventory management?

<p>To trigger new inventory orders (B)</p> Signup and view all the answers

Which strategy is typically utilized by a company like McMaster-Carr?

<p>Hybrid distribution network (B)</p> Signup and view all the answers

What happens when demand forecasting errors occur in the supply chain?

<p>Increased variability in orders may result (A)</p> Signup and view all the answers

What does the EOQ formula primarily help to minimize?

<p>Ordering and holding costs (A)</p> Signup and view all the answers

Flashcards

Supply Chain

All stages involved in fulfilling a customer request, including sourcing, production, distribution, and returns.

Bullwhip Effect

Amplification of demand variability as you move up the supply chain, causing larger fluctuations in orders than actual customer demand.

What causes the Bullwhip Effect?

Demand variations (order batching, price fluctuations), long lead times, and poor information sharing contribute to the Bullwhip Effect.

Cross-Docking

A distribution strategy where goods are received directly from suppliers and immediately shipped to customers without being stored in a warehouse.

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Fill Rate

The proportion of customer demand that is met from available inventory.

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Cycle Service Level (CSL)

The probability that a customer's order will be fulfilled without a stockout during a given replenishment cycle.

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EOQ (Economic Order Quantity)

The optimal order quantity that minimizes the total inventory costs (holding and ordering costs).

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Continuous Review

An inventory management policy where inventory levels are constantly monitored, and an order is placed when the reorder point is reached.

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Efficient Supply Chain

A supply chain focused on minimizing costs by optimizing processes, reducing inventory, and minimizing lead times.

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Responsive Supply Chain

A supply chain designed for quick response to changes in demand, often employing flexible sourcing, short lead times, and high service levels.

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Push Process

A supply chain where production is based on demand forecasts, with goods produced in advance of actual customer orders.

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Pull Process

A supply chain where production is triggered by actual customer orders, with goods produced only when needed.

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Push/Pull Boundary

The point in a supply chain where the transition from a push process to a pull process occurs.

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Strategic Fit

Aligning the supply chain strategy with the overall competitive strategy of a company.

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Functional Products

Products with stable demand and predictable sales patterns, suitable for efficient supply chains.

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Innovative Products

Products with uncertain demand and often subject to rapid changes in technology or trends, requiring responsive supply chains.

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Reorder Point (Continuous Review)

The inventory level at which an order is placed, used in continuous inventory review systems.

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Safety Stock

Additional inventory held to buffer against uncertainties in demand or lead time.

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Base Stock Level (Periodic Review)

The target inventory level to which inventory is replenished at fixed intervals, used in periodic inventory review systems.

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Demand Variability Reduction

Strategies aimed at stabilizing demand fluctuations, such as stable pricing or promotion avoidance.

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Information Sharing

Sharing real-time demand information across the supply chain to improve forecasting and coordination.

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Study Notes

Supply Chain Management Concepts

  • Supply Chain Management (SCM): Managing flows of products, information, and funds between stages in a supply chain to maximize profit. All stages involved in fulfilling a customer request are part of a supply chain.

Bullwhip Effect (BWE)

  • Definition: Amplification of demand variability as it moves through the supply chain.
  • Causes:
    • Demand variations (order batching, price fluctuations).
    • Long lead times.
    • Inaccurate information sharing and forecasting.
  • Consequences: Higher costs (inventory, transportation, production), longer lead times, poor supply chain relationships.
  • Mitigation Strategies: Stable pricing policies (everyday low prices), shorter lead times (e.g., EDI), improved information sharing (POS data, vendor-managed inventory, collaborative planning, forecasting and replenishment).

Distribution Strategies and Network Design

  • Customer Service Factors: Response time, product variety, availability, experience, returnability.
  • Facility Impact:
    • More facilities = faster response time but higher inventory and facility costs, with inbound transportation costs increasing & outbound decreasing.
  • Distribution Network Options: Direct shipping, in-transit merge, distributor storage, last mile delivery, customer pickup, cross-docking.
  • Cross-Docking: Reduces lead time and inventory costs; requires coordination and advanced systems.

Managing Product Availability

  • Key Metrics: Fill rate (proportion of demand met), cycle service level (probability of no stockout).
  • Costs: Holding costs (storage, capital, spoilage), ordering costs (transport, receiving), stockout costs (backorders, lost sales).
  • Inventory Management Policies:
    • Economic Order Quantity (EOQ): Balances ordering and holding costs.
    • Continuous review: Order when inventory hits Reorder Point.
    • Periodic review: Review inventory at fixed intervals, order to Base Stock Level.
  • Reducing Safety Stock: Reduce demand variability, shorten lead times, and improve demand and information pooling.

Supply Chain Strategy

  • Strategic Fit: Align competitive strategy and supply chain strategy.
  • Supply Chain Types:
    • Efficient Supply Chain: Minimize cost (low inventory, low lead times).
    • Responsive Supply Chain: Quick response to demand (flexibility, high service levels).
  • Product Types:
    • Functional products: Stable demand, efficient supply chain.
    • Innovative products: Uncertain demand, responsive supply chain.
  • Achieving Strategic Fit: Match supply chain responsiveness with demand/supply uncertainty.

Push/Pull Processes

  • Push Process: Anticipate demand (speculative).
  • Pull Process: Respond to actual demand (reactive).
  • Push/Pull Boundary: Determines inventory form (components vs. finished products) and forecast aggregation.

Supply Chain Decision Phases

  • Strategic Decisions: Long-term (facility locations, product types).
  • Planning Decisions: Medium-term (inventory policies, production plans).
  • Operational Decisions: Short-term (order fulfillment, delivery scheduling).

Supply Chain Performance Drivers

  • Facilities: Location, capacity, storage.
  • Inventory: Amount, location, management policies.
  • Transportation: Modes, routes, trade-offs.
  • Information: Coordination, systems (ERP, RFID).
  • Sourcing: In-house vs. outsourced.
  • Pricing: Strategies to match supply with demand.

Key Formulas

  • EOQ: Q* = √(2DK/H)
  • Reorder Point (Continuous Review): R = μL + zασL
  • Safety Stock: SS = zασL
  • Base Stock Level (Periodic Review): S = μ(T+L) + zασ(T+L)

Real-World Supply Chain Cases

  • Zara: Responsive supply chain for fast fashion; frequent deliveries, local sourcing, push/pull boundary.
  • Reebok (NFL Jerseys): Push/pull process: blank jerseys are pushed; dressing is pulled based on demand.
  • W.W. Grainger & McMaster-Carr: Grainger: hybrid distribution (stores & DCs); McMaster-Carr: centralized distribution.
  • Reebok (Inventory Management): Combines push (bulk orders) and pull (customization) for minimizing stockouts.
  • Strategic Fit (Zara & W.W. Grainger): Zara's fast fashion aligns with a responsive SC; Grainger's broad availability and convenience requires a hybrid approach.

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Description

Test your knowledge on the fundamental concepts of Supply Chain Management, including the Bullwhip Effect and distribution strategies. This quiz covers key causes, consequences, and mitigation strategies to optimize supply chain performance.

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