Category 1
What are the three main flows in a supply chain?
Product flow, information flow, and funds flow.
What are the three decision phases in supply chain management?
Strategy/design, planning, and operation.
What does strategic fit mean?
Strategic fit means the supply chain strategy supports the customer needs targeted by the competitive strategy.
Name the six major supply chain drivers.
Facilities, inventory, transportation, information, sourcing, and pricing.
What is demand forecasting?
Demand forecasting is estimating future customer demand using past data, market information, and expected changes.
What is cycle inventory?
Cycle inventory is the average inventory used to satisfy demand between replenishment orders.
What is supply chain surplus?
Supply chain surplus is the difference between customer value and total supply chain cost.
A company choosing the location of warehouses is making which type of decision?
A supply chain strategy or design decision.
A company selling fashionable products with uncertain demand should usually have what type of supply chain?
A responsive supply chain.
Which supply chain driver includes factories, warehouses, and distribution centers?
Facilities.
Why is forecast error important?
It helps managers understand uncertainty and plan safety inventory, capacity, and replenishment decisions.
What is safety inventory?
Safety inventory is extra inventory held to protect against demand uncertainty, supply delays, or forecast errors.
Why should supply chain success not be measured only by one department’s profit?
Because one department may improve its own profit while reducing total supply chain surplus. The whole supply chain should be evaluated together.
What is the main difference between push and pull processes?
Pull processes start after a customer order is received, while push processes are based on forecasts before actual demand is known.
What is implied demand uncertainty?
It is the uncertainty the supply chain faces because of the customer needs it chooses to satisfy.
How can transportation improve responsiveness?
Faster transportation can reduce delivery time and improve customer service, although it usually increases cost.
What is aggregate planning mainly used for?
It is used to match supply and demand over a medium-term period using capacity, workforce, inventory, subcontracting, and production decisions.
A retailer keeps too many headphones that later become outdated. What inventory risk is this?
Obsolete inventory or overstocking risk.
In a supply chain, who is the only source of positive cash flow?
The customer.
What does the cycle view of a supply chain show?
It divides supply chain processes into cycles between successive stages, such as customer order, replenishment, manufacturing, and procurement cycles.
Name two customer needs that increase implied demand uncertainty.
Short lead time, high product variety, high service level, small order quantities, or frequent innovation.
Why is information an important supply chain driver?
It improves forecasting, coordination, visibility, planning, and decision-making across the supply chain.
What is Sales and Operations Planning, or S&OP?
S&OP is a planning process that aligns sales, demand, supply, production, finance, and inventory plans.
How can RFID help inventory management?
RFID improves real-time visibility, reduces counting errors, tracks stock movement, and helps identify fast-moving and slow-moving products.
Give one example of how poor supply chain decisions can reduce company performance.
Poor inventory planning can cause stockouts, lost sales, excess inventory, markdowns, and lower profitability.
Why is the push/pull boundary important?
It shows where the supply chain changes from forecast-based activities to customer-order-based activities, helping managers balance responsiveness and efficiency.
Why would a low-cost supermarket usually prefer an efficient supply chain?
Because its customers mainly value low prices and predictable availability, so the supply chain should reduce cost and avoid unnecessary responsiveness.
Give one metric related to inventory and explain its use.
Inventory turnover measures how often inventory is sold and replaced. A higher turnover usually means inventory is moving efficiently.
How can poor forecasting affect inventory?
It can cause overstocking, stockouts, high holding costs, lost sales, obsolete inventory, and poor cash flow.
For a product with uncertain demand and fast obsolescence, should the company focus only on low cost?
No. It should usually use a balanced strategy: enough responsiveness to avoid stockouts, but enough efficiency to control holding cost and obsolescence.
A company reduces purchasing cost by buying very large quantities, but this causes high storage cost, obsolete inventory, and slow response to market changes. Why might this reduce total supply chain surplus?
Because the savings in purchasing may be smaller than the added inventory holding cost, obsolescence cost, and lost responsiveness. A decision that helps one function can hurt the total supply chain if it increases total cost or reduces customer value.
A company produces standard products before customer orders arrive but customizes packaging only after the order is placed. Which part is push and which part is pull?
Producing the standard product is a push process because it is done based on forecasts. Customizing the packaging is a pull process because it starts after the customer order is received.
A fashion retailer offers many styles, short delivery times, and frequent new collections. What happens to implied demand uncertainty, and what type of supply chain is needed?
Implied demand uncertainty increases because variety, short lead time, and innovation make demand harder to predict. The company needs a more responsive supply chain.
A company closes several regional warehouses and serves customers from one central warehouse. Explain one efficiency benefit and one responsiveness risk.
The efficiency benefit is lower facility and inventory cost because inventory is centralized. The responsiveness risk is longer delivery time and possibly higher outbound transportation time to customers.
A company’s forecast is 1,000 units, but actual demand is 1,300 units. What problem can this create, and how should managers respond?
It can create stockouts, lost sales, poor service, and pressure on capacity. Managers should measure forecast error, update the forecast, review safety inventory, and adjust production or replenishment plans.
A retailer orders large batches of headphones to get a quantity discount, but demand changes quickly and models become outdated. What trade-off is the retailer facing?
The retailer is trading lower purchase cost against higher cycle inventory, holding cost, obsolescence risk, and possible markdowns. The quantity discount may not be beneficial if excess inventory reduces profit.
Explain how a supply chain can increase customer value and reduce total cost at the same time. Give one example.
A supply chain can use better coordination, forecasting, and information sharing to provide better product availability while reducing waste and excess inventory. For example, a retailer using real-time sales data can replenish fast-moving products more accurately, reducing stockouts and unnecessary inventory.
A manufacturer changes its production plan every month, decides daily shipment schedules, and chooses a new factory location every five years. Identify the decision phase for each activity.
Monthly production planning is a planning decision. Daily shipment scheduling is an operational decision. Choosing a new factory location is a strategy or design decision.
A company uses a low-cost supply chain for an innovative product with unpredictable demand and short life cycle. What strategic fit problem may occur?
The supply chain may be too efficient and not responsive enough. This can lead to stockouts when demand is high, excess inventory when demand is low, slow reaction to trends, and reduced supply chain surplus.
A retailer wants high product availability but low inventory cost. Which supply chain drivers can help achieve both, and how?
Information can improve forecasting and visibility. Transportation can speed up replenishment. Sourcing can improve supplier reliability. Facilities can be located closer to demand. Together, these drivers can reduce the need for excessive inventory while maintaining availability.
Explain how forecasting, aggregate planning, and inventory decisions are connected.
Forecasting estimates future demand. Aggregate planning uses the forecast to decide production, workforce, capacity, inventory, and subcontracting levels. Inventory decisions then determine how much cycle and safety inventory is needed to meet demand while controlling cost.
In the headphone case, explain why RFID and weekly forecast reviews work better together than separately.
RFID improves real-time inventory accuracy, while weekly forecast reviews update demand expectations more frequently. Together, they help managers know both what they actually have and what they are likely to need, reducing stockouts, overstocking, and inventory record errors.