ISE 310L
GEZA BOTTLIK
Spring 2013
MIDTERM No. 1
3/20/2013
DO YOUR WORK ON THIS HANDOUT. THIS WILL EXPEDITE THE GRADING OF THE
PAPERS.
NAME ________________________
MIDTERM SCORE _________________________
Read these instructions!!
Please read the problems carefully and provide the information requested and only the
information requested in each question. Use the minimum amount of work required to
answer each question. Show all your work. The test is worth 8 points. (About 8% of your
total grade).
Do your work on this handout – you should not need more space.
The test papers are to be handed in no later than 1:50 P.M. or one hour and 20 minutes
after we start, whichever is later. It is unfair to your fellow students who hand in their
papers on time to use more time than they had.
The test is open notes and open book. Use your calculator or laptop if needed.
If you want to ask a question, come up to me and ask me. In general it is better to make
assumptions than to ask questions. If you want to borrow your neighbor’s calculator, ask
me to do it for you. No talking to your neighbors.
Move on to the next problem if you are stuck.
Good luck, I hope you all do well.
Page 1 of 8
ISE 310L
GEZA BOTTLIK
Spring 2013
MIDTERM No. 1
3/20/2013
Problem No. 1
You work for a company that buys accessories for laptops from overseas suppliers and then
sells them in the U.S. Your job is to establish criteria with which to continuously monitor the
performance of these suppliers. Describe the three criteria that you deem most important to you,
why you have selected these criteria and the performance that you would find acceptable or
unacceptable and why. (1 point)
The most important criterion to me would be the quality of the product because my
reputation depends on the products being fully functional. A decrease in quality would
rapidly diminish my business. A good guess at the quality level would be about 99.9%,
that is one defective per 1000 maximum.
Second is on time delivery. I cannot sell what I do not have. It is especially bothersome
when I have promised delivery and cannot deliver. This too would affect my reputation in
a negative way and eventually lead to a loss of sales. I would expect somewhere around a
97% on time performance
Third – Aging of orders – pretty much the same reason as the second one. Maximum
allowable aging 5 days.
Page 2 of 8
ISE 310L
GEZA BOTTLIK
Spring 2013
MIDTERM No. 1
3/20/2013
Problem No. 2
Circle the correct choice in each question. (1.75 points)
1.
Which of the following is not a cycle in the supply chain cycle view?
a.
Analysis cycle
b.
Customer order cycle
c.
Replenishment cycle
d.
Manufacturing cycle
e.
Procurement cycle
2.
The manufacturing and shipping process in the manufacturing cycle is equivalent to the
a.
order receiving process in the replenishment cycle.
b.
order fulfillment process in the replenishment cycle.
c.
order entry process in the replenishment cycle.
d.
order trigger process in the replenishment cycle.
e.
none of the above
3. Which component of the supply chain decision-making framework would be established first?
f.
Customer strategy
g.
Supply chain strategy
h.
Supply chain structure
i.
Competitive strategy
j.
Replenishment strategy
4. Which of the following is not a component of facilities decisions?
a. Warehousing methodology
b. Forecasting methodology
c. Operations methodology
d. Capacity
e. Location
5. Which of the following would be a characteristic of a facility with little excess capacity?
a. allows a facility to be very flexible and to respond to wide swings in the demands placed on
it
b. costs money and therefore can decrease efficiency
c. requires proximity to customers and the rest of the network
d. will likely be more efficient per unit of product it produces
e. none of the above
6. The following warehousing methodology is one in which goods are not actually warehoused in a
facility. Instead, trucks from suppliers, each carrying a different type of product, deliver goods to a
facility. There the inventory is broken into smaller lots and quickly loaded onto store-bound trucks
that carry a variety of products, some from each of the supplier trucks.
a. warehouse unit storage
b. stock keeping unit (SKU) storage
c. job lot storage
d. cross-docking
e. none of the above
Page 3 of 8
ISE 310L
GEZA BOTTLIK
Spring 2013
MIDTERM No. 1
3/20/2013
7. The average amount of inventory used to satisfy demand between receipt of supplier shipments is
referred to as
a. cycle inventory.
b. safety inventory.
c. seasonal inventory.
d. sourcing.
e. none of the above
8.
9.
10.
11.
12.
13.
Distribution is a key driver of the overall profitability of a firm because
a. the addition of distributors only adds cost to the supply chain.
b. it directly impacts both the supply chain cost and the customer experience.
c. it slows down the responsiveness of the supply chain.
d. it cannot be developed as a part of supply chain strategy.
e. Distribution is not a key driver of profitability.
Companies in the same industry often select very different distribution networks because
a. some companies are poorly run.
b. different companies try to avoid using the same approach.
c. different companies have different objectives for their supply chain.
d. all of the above
e. none of the above
Which of the following is not a measure of customer service that is influenced by the structure
of the distribution network?
a. Returnability
b. Customer experience
c. Customer maturity
d. Product availability
e. All of the above are measures of customer service.
The time between when a customer places an order and receives delivery is
a. response time.
b. product variety.
c. product availability.
d. customer experience.
e. order visibility.
The probability of having a product in stock when a customer order arrives is
a. response time.
b. product variety.
c. product availability.
d. customer experience.
e. order visibility.
Outbound transportation costs per unit tend to be
a. about the same as inbound costs.
b. higher than inbound costs.
c. lower than inbound costs.
d. neither higher or lower than inbound costs.
e. none of the above
Page 4 of 8
ISE 310L
GEZA BOTTLIK
Spring 2013
MIDTERM No. 1
3/20/2013
14.
As the number of facilities in a supply chain increases
a. the inventory and resulting inventory costs also increase.
b. the inventory and resulting inventory costs decrease.
c. the inventory increases and resulting inventory costs decrease.
d. the inventory decreases and resulting inventory costs increase.
e. the inventory and resulting inventory costs remain the same.
15.
As the number of facilities in a supply chain increases, total transportation cost
a. decreases.
b. remains the same.
c. increases.
d. increases to a point and then decreases.
e. decreases to a point and then increases.
16.
Total logistics costs for a supply chain network are a sum of
a. inventory and facility costs.
b. inventory, facility, and distributor costs.
c. facility, transportation, and distributor costs.
d. inventory, transportation, and facility costs.
e. none of the above
17. Which of the following is not a key to the success or failure of a company?
f.
The competitive strategy and all functional strategies must fit together to form a
coordinated overall strategy.
g.
The competitive strategy and all functional strategies operate independently of
each other.
h.
The different functions in a company must appropriately structure their processes and
resources to be able to execute strategies successfully.
i.
Each functional strategy must support other functional strategies and help a firm reach
its competitive strategy goal.
j.
All of the above are keys to success.
18. Which of the following is not a supply chain capability that will impact supply uncertainty?
a. Evolving production process
b. Inflexible supply capacity
c. Limited supply capacity
d. Product margin
e. Unpredictable and low yields
19. The first step in achieving strategic fit between competitive and supply chain strategies is to
a.
understand the supply chain and map it on the responsiveness spectrum.
b.
understand customers and supply chain uncertainty.
c.
match supply chain responsiveness with the implied uncertainty of demand.
d.
ensure that all functional strategies within the supply chain support the supply chain’s
level of responsiveness.
e.
none of the above
Page 5 of 8
ISE 310L
GEZA BOTTLIK
Spring 2013
MIDTERM No. 1
3/20/2013
Problem No. 3
In this problem you are asked to write the equations that will maximize the total annual profit of a
distribution network for ten products. Do not solve! (2.5 points):
You know the production cost per unit for each product (Cij) at the two suppliers. You also know the unit
transportation cost per mile (T) to each of 3 potential distribution centers from these suppliers, as well as
the fixed annual cost of each distribution center (Fk) and capacity Kk. The location of both suppliers and
the three distribution centers is known in xy coordinates. The total annual demand for each product (Di)
is known and cannot be exceeded. The price Pik is known for each product in each distribution area.
It’s best to start with defining the subscripts – i for product (1..10), j for supplier (1.2), k
for distribution areas (1..3)
Next the decision variables – the only thing missing is the number of products shipped
from each supplier to each distribution center, let’s call it Sijk.
We now come to constraints:
1. Total demand cannot be exceeded for any product. Note that it is total, not for each
distribution area. ∑𝟐𝒋=𝟏 ∑𝟑𝒌=𝟏 𝑺𝒊𝒋𝒌 ≤ 𝑫𝒊 for i=1 to 10
2. The capacity at each distribution center cannot be exceeded. . ∑𝟐𝒋=𝟏 ∑𝟏𝟎
𝒊=𝟏 𝑺𝒊𝒋𝒌 ≤ 𝑲𝒌 for
k=1 to 3
3. All variable must be greater than 0. 𝑺𝒊𝒋𝒌 ≥ 𝟎 for all i,j, and k
4. This leaves the objective function = Maximize Total revenue less all expenses
Total revenue is product shipped time price . ∑𝟐𝒋=𝟏 ∑𝟑𝒌=𝟏 ∑𝟏𝟎
𝒊=𝟏 𝑺𝒊𝒋𝒌 𝑷𝒊𝒌
Expenses are production cost, transportation cost and fixed annual cost
Production cost . ∑𝟐𝒋=𝟏 ∑𝟑𝒌=𝟏 ∑𝟏𝟎
𝒊=𝟏 𝑺𝒊𝒋𝒌 𝑪𝒊𝒋
Transportation Cost We need to define distance Rjk =sqrt((xj-xk)^2+(yj-yk)^2)
𝟐
𝟑
𝑻∑∑
𝒋=𝟏
𝟏𝟎
∑
𝒌=𝟏
𝑺
𝒊=𝟏 𝒊𝒋𝒌
𝑹𝒋𝒌
Fixed cost . ∑𝟑𝒌=𝟏 𝑭𝒌
Page 6 of 8
ISE 310L
GEZA BOTTLIK
Spring 2013
MIDTERM No. 1
3/20/2013
Problem No. 4
Explain the push/pull view of the processes within a supply chain and how it contributes to its
overall success. (1.05 points).
By push we mean we mean that we anticipate and estimate demand at a place and time
and order the items from our supplier without knowing the actual demand.
By pull we mean that we order from our supplier when the customer requests the item.
The more pull processes there are in the chain, the lower the resulting inventory. We of
course need short lead times to accomplish this.
At some point in the chain we switch from pull to push – this is the push pull interface.
The earlier in the chain that it occurs the higher the profit of the chain.
Page 7 of 8
ISE 310L
GEZA BOTTLIK
Spring 2013
MIDTERM No. 1
3/20/2013
Problem No. 5 (1.7 points)
1. T F The objective of every supply chain is to maximize the overall value generated.
2. T F The objective of every supply chain is to maximize the value generated for the
manufacturing component of the supply chain.
3. T F The major drivers of supply chain performance are customers, facilities, inventory,
transportation, and information.
4. T F Inventory is an important supply chain driver because changing inventory policies can
dramatically alter the supply chain’s efficiency and responsiveness
5. T F The high utilization facility will have difficulty responding to demand fluctuations
6. T F Stock keeping unit (SKU) storage is the warehousing methodology that uses a
traditional warehouse to store all of one type of product together
7. T F The components of inventory decisions include capacity, cycle inventory, safety
inventory, seasonal inventory, and sourcing
8. T F Cycle inventory is inventory that is built up to counter predictable variability in demand
9. T F Companies in the same industry often select very different distribution networks,
because the choice of the distribution network can be used to achieve a variety of supply
chain objectives ranging from low cost to high responsiveness
10. T F A customer always wants the highest level of performance along all dimensions of
customer service, including response time, product variety, product availability, customer
experience, order visibility, and returnability
11. T F Outbound transportation costs per unit tend to be lower than inbound costs, because inbound
lot sizes are typically larger
12. T F The main advantage of a distribution network with local storage is that it can lower the
delivery cost and provide a faster response than other networks
13. T F The major disadvantage of a distribution network with local storage is the increased
delivery cost
14. T F A company’s competitive strategy defines the set of customer needs that it seeks to satisfy
through its products and services
15. T F A company’s supply chain strategy specifies how the market will be segmented and how the
product will be positioned, priced, and promoted
16. T F To achieve complete strategic fit, a firm must ensure that all functions in the value chain
have consistent strategies that support the competitive strategy
17. T F The intercompany scope of strategic fit is no longer relevant today because the
competitive playing field has shifted from company versus company to supply chain versus
supply chain
Page 8 of 8