Supply Chain Questions Practice MID
Chapter 1
Q1. Discuss the goal of a supply chain and explain the impact of supply chain decisions on the success
of a firm.
The goal of a supply chain is to grow the overall supply chain surplus which is the difference between
the value generated for the customers and the costs incurred across all stages of the supply chain. By
focusing on the supply chain surplus, each supply chain member is guaranteed a bigger slice of the pie.
Supply chain decisions can have huge impact on the success or failure of a firm since they influence the
revenue generated and the costs incurred. They manage the flow of products, information, and funds in
order to provide high product availability to customers at a low cost.
Q2. Identify the three key supply chain decision phases and explain the significance of each one.
The three key supply chain decision phases are categorized as either strategic (design), planning, or
operational decisions depending on the time period during which they apply. Strategic decisions relate
to supply chain configuration and have a long lasting impact that could last for several years. Planning
decisions cover a time period from a few months to a year and include decisions such as product
planning, sub-contracting, and promotional activities during that period. Finally, operational decisions
span from minutes to days and include decisions such as sequencing production and filing for specific
orders. Strategic decisions define the constraints for planning decisions and planning decisions define
the constraints for operational decisions.
Q3. Describe the cycle and push/pull views of a supply chain.
The cycle view divides processes into cycles which are performed at the interface between two
successive stages of the supply chain. One cycle starts when an order is received by one stage of the
supply chain and ends when the order is received by the supplier’s stage. The push/pull views of a
supply chain characterizes processes based on their timing relative to customer orders. Pull processes
are performed in response to a customer order while push processes are performed in anticipation of
customer orders. There is a boundary which separate push and pull processes. These views of a supply
chain are very useful when it comes to making strategic decisions related to supply chain since they
keep in mind global considerations of supply chain when it comes to the customer.
Q4. Classify the supply chain macro processes in a firm.
Supply chain processes can be categorized into three main macro processes which are performed at the
interface between the firm and its customers, the firm and its suppliers, or at an internal level. The first
macro process is the CRM macro process which is performed at the interface between the firm and its
customers to generate, receive, and track customer orders. The ISCM macro process or Internal supply
chain management macro process is performed at an internal level and is used to plan for and fulfill
customer orders. Finally, the SRM macro process is performed at the interface between the firm and its
suppliers and is used to select and evaluate suppliers and source goods and services from them.
Q5. Describe the cycle view of the processes within a supply chain.
The cycle view divides processes into cycles which are performed at different interfaces between two
successive stages of the supply chain. One cycle starts when an order is received by one supply stage
and ends when the order is received by the suppliers’ stage. The cycle view divides supply chain process
into 4 cycles between five different stages. These cycles are the customer order cycle, the
replenishment cycle, the manufacturing cycle, and the procurement cycle. The customer order cycle is
performed at the customer/retailer interface and includes activities related to filling customer orders.
The replenishment cycle is performed at the retailer/distributor interface and involves processes related
to replenishing retailer inventory. The manufacturing cycle is performed at the distributor/manufacturer
interface and includes processes which are related to the replenishment of distributor inventory. Finally
the procurement cycle is performed at the manufacturer/supplier interface and includes processes
related to ensure that materials are available for the manufacturer on schedule.
Q6. Explain why supply chain flows are important.
Supply chain flows are very important because there is a close connection between the design and
management of supply chain flows (information, product, and cash) and the success of a supply chain.
Many company successes are linked with the management and design of its supply chain flows while
many other company’s fail because of their inability to effectively design and manage supply chain
flows.
Chapter 2
Q1. Explain why achieving a strategic fit is critical to a company’s overall success.
Lack of strategic fit between the companies’ competitive and supply chain strategy will cause the
company’s supply chain to perform actions without keeping in mind the needs of the customers which
will result in a decrease in supply chain surplus as well as in profitability. Strategic fit requires all
functions in an organization and stages of supply chain to have a common goal- one that is consistent
with customer needs.
Q2. Describe how a company achieves a strategic fit between its supply chain strategy and its
competitive strategy?
A company can achieve a strategic fit between its supply chain strategy and its competitive strategy by
first understanding the needs of its customers, understanding the uncertainty of the supply chain, and
identifying that implied uncertainty. Secondly, the company should understand supply chain capabilities
in terms of responsiveness and efficiency. The key to a strategic fit is ensuring that supply chain
responsiveness is consistent with customer needs, supply capabilities, and the resulting implied
uncertainty. Tailoring the supply chain is essential for achieving a strategic fit when a firm is targeting a
wide variety of customers with different products through different channels.
Q3. Discuss the importance of expanding the scope of strategic fit across the supply chain.
The scope of the strategic fit refers to all functions and stages within the firm’s supply chain. In the case
of a narrow scope, individual functions perform based on their own goals resulting in conflicting actions
and a falling supply chain surplus. However, when the scope of the strategic fit is enlarged to include all
areas and functions of the supply chain, all functions perform in a way that would increase supply chain
performance resulting in an increase in supply chain surplus.
Q4. Describe the major challenges that must be overcome to manage a supply chain successfully.
Globalization, increasing product variety, decreasing product life cycles, fragmentation of the supply
chain, changing technologies, and increased focus on sustainability poses a huge challenge to achieving
a strategic fit. However, this also brings an opportunity to businesses who want to address these
challenges with their supply chain strategies.
Q5. Discuss the two keys to the success or failure of a company.
A company can be successful due to the following factors:
1. The competitive and functional strategies must be aligned together to help execute an overall
coordinated strategy. The functional strategies must complement each other to help reach the
competitive strategy goal.
2. The functions within the organization must allocate processes and resources in such a way
which would help execute these strategies.
Q6. List the attributes along which customer demand from different segments can vary.
Customers demand differently from different segments based on these attributes:
 The quantity of the product required from each lot
 The lead time which the consumer can tolerate
 The price of the product
 The level of service being provided
 The variety of products being offered
 Innovativeness in product
Q7. List the abilities included in supply chain responsiveness.
 Ability to meet short lead times
 Offering high level service
 Ability to deal with different types of quantity demanded
 Offering wide product variety
 Offering innovativeness in products
 Dealing with supply chain uncertainties
Q8. Discuss the impact of the product life cycle on strategic fit between implied demand uncertainty
and supply chain responsiveness.
As a product passes through different stages of the product life cycle, its demand characteristics in
terms of what consumers demand and how they react are likely to change over time and so do the
supply characteristics of the product. Once a product is introduced, the leading edge of consumers
demand the product while its supply is uncertain. Over time, the supply becomes more predictable
while the market becomes saturated. Therefore, in order to achieve a strategic fit, a company must keep
in mind that as a product passes through stages in the PLC, its demand and supply characteristics are
likely to change which is why the company’s supply chain strategies should also evolve and change over
time if the company wishes to successfully achieve a strategic fit. As a product matures the supply chain
should focus on efficiency rather than responsiveness.
Chapter 3
Q1. Describe key financial measures of a firm performance.
ROE, ROA, Profit margin, asset turnover, accounts receivable turnover, accounts payable turnover,
inventory turns, property, plant, and equipment turns, and cash to cash cycle.
Q2. Identify the major drivers of supply chain performance.
1.
2.
3.
4.
5.
6.
Facilities
Inventory
Transportation
Information
Sourcing
Pricing
Facilities refer to the locations within a supply chain network where goods are stored,
manufactured, or fabricated. There are two types of facilities: production sites and storage sites.
Inventory refers to the raw materials; work in process, and finished goods within a supply chain.
Inventory directly influences the efficiency and responsiveness of a supply chain.
Transportation involves the moving of a certain amount of inventory from point a to point b within a
supply chain. Also linked with responsiveness and efficiency.
Information is perhaps the most important driver of supply chain performance since it relates to all
the information related to the company’s facilities, transportation, inventory, sourcing, and pricing
and the right investment in information can increase both efficiency and responsiveness.
Q3. Discuss the role of each driver in creating strategic fit between the supply chain strategy and the
competitive strategy.
Firms who are able to successfully achieve a strategic fit have found the right balance between
efficiency and responsiveness. Each driver influences this strategic fit. In the case of facilities, the higher
the number of facilities; the more responsiveness is the firms supply chain. Fewer but more centralized
facilities will increase efficiency. Faster modes of transport will increase supply chain responsiveness
while slower modes will increase efficiency. Holding high levels of inventory will increase responsiveness
while holding low levels will increase efficiency. Investing more in information will increase both
responsiveness and efficiency. Sourcing services to the right people can also improve both as well as
supply chain profits. Pricing strategies can influence overall efficiency and responsiveness as well as
target the right customer segment. Differential pricing can be used to target customers who value
responsiveness as well as efficiency.
Q4. Define the key metrics that track the performance of supply chain in terms of each driver.
Facility related metrics: Capacity, utilization, theoretical flow time of production, actual flow time, and
product variety.
Transportation related metrics: Average inbound transportation cost per shipment, shipment size,
outbound transportation cost per shipment.
Inventory related metrics: Average inventory, average safety inventory, product with more than
specified number of days ‘inventory, and seasonal inventory.
Information related metrics: Forecast error, forecast horizon
Sourcing related metrics: days payable outstanding, average purchase quantity, average purchase price
Pricing related metrics: incremental fixed cost per unit, incremental variable cost per unit, profit margin,
day’s sales outstanding.
Chapter 4
Q1. Identify the key factors to be considered when designing a distribution network.
Managers should consider the needs of the customers and the cost of satisfying those needs. These
customer needs include response time, customer experience, product variety, convenience, order
visibility, and returnability. Important costs which need to be considered include costs of facilities,
transportation, inventory, information, and handling costs. Increasing the number of facilities can
reduce response time and transportation costs but can increase inventory and facility costs.
Q2. Discuss the strengths and weaknesses of various distribution options.
Distribution networks which ship directly to customers are more suitable for high variety of high value
products which have low or uncertain demand. These networks carry low levels of inventory but incur
high transportation costs and have a slow response time. On the other hand, distribution networks
carrying local inventories are suitable for products with high demand, especially for those where
transport costs are a large fraction of total costs. These networks have high inventory costs but low
transport costs and a quicker response time.
Q3. How online sales have affected the design of distribution networks in different industries.
The introduction of E-commerce has affected the customer experience as well as the costs which are
incurred in a supply chain. Online sales have created an increase in product variety and availability by
centralizing inventories. Customer experience has also been enhanced since customers are offered
services 24/7 by the internet and customization is also possible. Due to online sales, facilities cost can
increase if there is no loss of customer participation. However, online sales mean a higher response time
than that of retail stores. Higher transportation costs will be incurred which is a disadvantage for goods
which are high in volume but low in value with predictable demand. Online sales are mainly beneficial
for high value goods with an uncertain demand since consumers are willing to wait long period for their
order. Online sales have been very beneficial for products like books, music, and movies since they can
be digitized and this eliminates the two disadvantages of physical distribution: slow response time and
high transport costs.
Q4. Explain the measures of customer service that are influenced by the structure of the distribution
network.
Response time: the time difference between when an order is placed and when it is successfully
delivered to the final consumer.
Customer experience: The ease with which a customer receives his/her order during the lead time of the
order.
Product variety: The number of different products a consumer desires from a distribution network
Availability: The likelihood of a product being in stock at the distribution center when the customer
places an order
Order visibility: The extent to which the customer is able to track the order from the time it is placed to
when it is delivered.
Returnability: The likelihood of a product being eligible for return in case it is damaged or faulty.
Q5. Explain how the design of the distribution network affects the cost of the four supply chain
drivers.
Having a larger number of facilities in a supply chain network is likely to increase inventory costs. This is
why firms try to limit the number of facilities they possess in order to lower inventory costs. Having an
increased number of facilities is likely to reduce transportation costs since outbound transportation
costs per shipment are likely to be higher than inbound costs due to a larger lot size. Therefore, firms try
to have more storage space by increasing the number of facilities since it will cause a fall in
transportation costs. Having increased facilities will cause logistics costs to first decline but eventually
rise. This is why it is essential for firms to have a certain number of facilities that will minimize costs.
Then firms should only decide to increase their number of facilities if they are guaranteed that a greater
response from customers due to lower response time because of higher number of facilities will reflect
in sales so much that the sales revenue generated is likely to exceed the logistics costs of having more
facilities. Therefore, no firm can perform better than the other in all areas of the distribution network as
far as costs are concerned. This is why firms should design their distribution networks in line with their
strategic position.
Q6. Explain the six distinct distribution network designs that may be used to move products from
factory to customer.
1. Manufacturer storage with direct shipping: When the manufacturer stores goods and directly
ships them to the end customer without any intervention from the retailer or distributor. Also
known as drop shipping.
2. Manufacturer storage with direct shipping and in transit merge: it is similar to drop shipping but
in this case the products being delivered to the customer are coming from different locations
and once these parts arrive to the customer, they can be merged into a single offering.
3. Distribution storage with package carrier delivery: When goods are kept with the distributor and
then are shipped to the customer through a package delivery carrier.
4. Distribution storage with last mile delivery- When goods are kept with the distributor and are
delivered directly to the home of the customer without any package delivery carrier.
5. Distribution/Manufacturer storage and customer pick up: Goods are stored by the
manufacturer/distributor in their facility and the customer places an order online and is
designated a time and place to pick the order up from the designated facility.
6. Retail store storage and customer pick up: When the customer picks up the goods directly from
the retail store after receiving a call from the store.
Q7. Explain how distributors add value to a supply chain and improve its performance.
Distributors add value to a supply chain between the supply stage and the customer stage if there are
many small players at the customer stage requiring quantities of different manufactured goods. This is
why in order to increase and add value to a supply chain it is better if distributors carry inventory from
many different manufacturers. It leads to a fall in inbound transport costs, fall in outbound transport
costs since the goods from different manufacturers can be combined into a single outbound shipment,
quicker response time since goods will be closer to the point of sale (distributors are closer to customers
than manufacturers), and fall in inventory costs since the distributor will aggregate average safety
inventory.
Chapter 5
Q1. Understand the role of network design in a supply chain.
Network design in a supply chain is used to identify facility roles, capacity, and location as well as
allocating different markets and supply to facilities. They define the physical constraints under which a
network must operate. Good network design decisions will increase supply chain profits.
Q2. Identify factors influencing supply chain network design decisions:
1.
2.
3.
4.
5.
6.
7.
Strategic factors
Macroeconomic factors
Political factors
Technological factors
Infrastructure factors
Competitive factors
Operational factors
Q3. Develop a framework for making network design decisions
1. Define a supply chain strategy that is consistent with the company’s competitive strategy
2. Use supply chain strategy, regional demand, costs, infrastructure and competitive environment
to define regional facility configuration.
3. For regions where the facilities will be located, select the best possible location based on
available infrastructure
4. Determine optimal configuration using taxes, tariffs, factor costs, demand, logistics costs, and
margins.
Q4. Optimization for facility location and capacity allocation decisions.
Gravity location models are used to identify a location that will minimize inbound and outbound
transport costs. These models are simple to implement but do not account for other costs.
Network configuration models are taking into account contribution margins, tax rates, tariffs, and
inventory, transport, and production costs. Used to maximize profitability. Used to identify location for
facilities, allocate capacity to facilities, and allocate markets to facilities.
Q5. Explain the two situations in which managers use network design models.
1.
When location of facilities has to be identified, capacity and markets have to be allocated to
facilities.
2. When current demand has to be allocated to some facility which is available.
Q6. Explain how supply chain network design decisions are classified.
Supply chain network design decisions are made to identify a location for manufacturing, storage, and
transport related facilities. They can be classified by:
1.
2.
3.
4.
Facility role: what is the role of each facility and what processes are applied to them
Facility location: where are the facilities to be located
Capacity allocation: What capacity should be allocated to each facility
Market and supply allocation: What markets should be allocated to each facility and which
supply sources will feed each facility.
Chapter 14
Q1 Role of transportation in supply chain.
Transportation is one of the most important drivers of supply chain since it involves the movement of
products from one point to another in a supply chain. The importance of transportation has increased
with the rise of globalization and online sales since the distance travelled by products is increasing
globally. Transportation decisions are linked with supply chain profitability as well as inventory and
facility decisions.
Q2. Evaluate the strengths and weaknesses of different modes of transportation:
Modes of transport: air, package carrier, truck, intermodal, pipeline, water, rail.
Water is the cheapest mode of transport but the slowest. Rail and water usually have the slowest
response time. Air and package carrier have the fastest response time but are the most expensive.
Intermodal and TL are faster than rail and water but slightly more expensive. Rail and water is suitable
for goods which are of high volume low value and there’s no rush as far as delivery is concerned. Air and
package carrier is suitable for those products which are low volume, high value and are needed in an
emergency. LTL is used for shipments which are too large for package carrier but not large enough for
TL.
Q3. Discuss the role of infrastructure and policies in transportation.
Infrastructure related to transportation includes ports, roads, and airports. They have a significant
impact on the transportation since it requires public ownership or regulation. Monopolistic nature,
pricing is based on average cost causing congestion. Important to have some congestion so that users
internalize the network cost they cause.
Q4. Relative strengths and weaknesses of various transportation network design options.
Shipping directly to the destination from point of origin or using a point of consolidation point. For large
bulky shipment direct shipping is more suitable. Smaller shipments which can be broken down can be
shipped through intermediaries (distributors) but it will lead to a slower response time and other
complexities.
Q5. Identify the tradeoffs shippers need to consider when designing a transportation network.
Tradeoffs among inventory costs, facilities costs, operating costs, and customer responsiveness. Goal is
to minimize total cost, increase SC surplus and maximize responsiveness.