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RMG 434 > Exam > Flashcards

Exam Flashcards

1
Q

Define competitive strategy

A

The set of customer needs a firm seeks to satisfy through product and services; price/delivery time/variety/quality

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2
Q

What are the 4 aspects of competitive strategy

A
  1. Price,
  2. Delivery Time,
  3. Variety,
  4. Quality
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3
Q

What is a supply chain strategy

A

The nature of material procurement, transportation of materials, manufacture of product or creation service, distribtion of product

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4
Q

Define strategic fit

A

Aligned goals of competitive and supply chain strategies

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5
Q

How to achieve strategic fit (3)

A
  1. Understand customer and supply chain uncertainity,
  2. Understand SC capabilities,
  3. aligning SC strategy with competitive strategy
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6
Q

What are aspects of understanding the customer and supply chain uncertainty

A

Quantity, response time, variety, service level, price, desired rate of innovation

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7
Q

What is demand uncertainity

A

Uncertainty of customer demand for a product

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8
Q

Give an example of demand uncertainity

A

Emergency orders

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9
Q

What is implied demand uncertainity

A

Uncertainity for the supply chain given the portion of the demand the supply chain must handle based on the attributes the customer desires

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10
Q

Give an example of implied demand uncertainity

A

Long lead time

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11
Q

What affects implied demand uncertainty

A

Product demand uncertainty and various customer needs fulfillment

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12
Q

Fill in the blanks… Products with uncertain demand are often… AND how does this impact margins?

A

Products with uncertain demand are often less mature and have less direct competition. Margins tend to be high

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13
Q

When is forecasting more accurate

A

When demand has less uncertainty

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14
Q

What does increased implied demand uncertainity lead to

A

Leads to increased difficulty in matching supply with demand. This can lead to a stockout or oversupply situation

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15
Q

When are markdowns high for products

A

When there is greater implied demand uncertainty because oversupply often results

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16
Q

How is product margin impacted by implied uncertainty

A

Low implied uncertainty has low product margin; and high implied uncertainty has high product margin

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17
Q

What is the average forecast error for low vs high implied uncertainty

A

Low: 10%; High: 40-100%

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18
Q

What is the average stockout rate for low vs high implied uncertainty

A

Low: 1-2%; High: 10-40%

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19
Q

What is the average forced season-end markdown for low vs high implied uncertainity

A

Low: 0%; High: 10-25%

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20
Q

How do frequent breakdowns, unpredictable and low yields, poor quality, limited supply capacity, inflexible supply capacity, and evolving production process impact the supply source capability

A

Increases supply uncertainty

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21
Q

What is the first step in strategic fit

A

Understand customers by mapping their demand on the implied uncertainity spectrum

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22
Q

What is an example of predictable supply and demand

A

Salt

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23
Q

What is an example of highly uncertain supply and demand

A

New tech device

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24
Q

What is an example of predictable supply and demand, or uncertain supply and predictable demand, or somewhat uncertain supply and demand

A

Existing auto model

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25
Q

Supply chain responsiveness in the ability to…

A

Respond to wide ranges of quantities demanded, meet short lead times, handle a large variety of products, build highly innovative products, meet a high service level, and handle supply uncertainity

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26
Q

What is supply chain efficiency the inverse to

A

The cost of making and delivering the product to customer

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27
Q

Explain the cost-responsiveness efficient frontier

A

Shows the lowest possible cost for a given level of responsiveness

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28
Q

what is the cost-responsiveness efficient frontier

A

Demonstrates responsiveness and cost

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29
Q

What does higher responsiveness lead to

A

Increased cost, and lower efficiency

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30
Q

What do the x & y axis represent on the cost-responsiveness efficient frontier

A

X - Resposiveness, Y - Cost

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31
Q

What is the reponsiveness spectrum?

A

Highly efficient - Somewhat efficient - Somewhat responsive - highly responsive

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32
Q

What are trade offs of being highly efficient on the responsiveness spectrum

A

Production scheduled weeks or months in advance with little variety or flexibility

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33
Q

What are trade offs of somewhat efficient on the responsiveness spectrum

A

A traditional make-to-stock manufacturer with production lead time of several weeks

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34
Q

What are trade offs of somewhat responsive on the responsiveness spectrum

A

Delivering a large variety of products in a couple of weeks

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35
Q

What are trade offs of highly responsive on the responsiveness spectrum

A

Changing merchandise mix by location and time of day

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36
Q

Give examples of the responsivness spectrum

A

Highly efficient- Steel Mills,
Somewhat efficient- hanes apparel,
somewhat responsive- automotive production,
highly responsive- 7 Elleven

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37
Q

what is the zone of strategic fit

A

Looks at the responsivness spectrum and implied uncertainty spectrum

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38
Q

Give examples of the zone of strategic fit

A

Ikea is responsive and results in stores having uncertainity.. At the same time it is efficient and leds to less uncertainty and more reliability

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39
Q

What is the primary goal of efficient vs responsive SCs

A

Efficient: Supply demand at the lowest cost.

Responsive: Respond quickly to demand

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40
Q

What is the product design strategy of efficient vs responsive SCs

A

Efficient: max performance at the min product cost.

Responsive: create modularity of product differentiation

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41
Q

What is the pricing strategy of of efficient vs responsive SCs

A

Efficient: Lower margins (price is prime driver).

Responsive: higher margins (price is not a prime driver)

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42
Q

What is the manufacturing strategy of efficient vs responsive SCs

A

Efficient: lower costs.

Responsive: Capacity flexibilty to buffer against demand/supply uncertainty

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43
Q

What is the inventory strategy of efficient vs responsive SCs

A

Efficient: minimize inventory to lower cost.

Responsive: have a buffer inventory to deal with demand/supply uncertainty

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44
Q

What is the lead time strategy of efficient vs responsive SCs

A

Efficient: reduce lead time.

Responsive: reduce aggresively even if it brings up costs

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45
Q

What is supplier strategy of efficient vs responsive SCs

A

Efficient: select based on cost and quality.

Responsive: Select based on speed, flexibility, reliabilty, and quality

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46
Q

How do companies tailor the SC for strategic fit

A

Serve many customer segments with a variety of products across multiple channels

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47
Q

Define product life cycle (4 stages)

A

The product sales impacted by introduction, growth, maturity, and decline of the product stages

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48
Q

How does the beginning stage impact the SC for product life cycle (4 points)

A
  1. Demand is uncertain,
  2. Margins are high,
  3. Product availability is key,
  4. Cost is less important
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49
Q

How does the later stages impact the SC for product life cycle (3 points)

A
  1. Demand is more certain,
  2. Margins are lower due to competitive pressure,
  3. Price is a significant factor for customers
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50
Q

What are the 5 key levers of supply chain uncertainty

A
  1. Capacity,
  2. Inventory,
  3. Time,
  4. Price,
  5. Information
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51
Q

What are the 2 major drivers of supply chian performance

A

Logistical & Cross-functional

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52
Q

What aspects are part of the logistical drivers for SC performance (3)

A
  1. Facilities,
  2. Inventory,
  3. Transportation
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53
Q

What aspects are part of the cross-functional drivers for SC performance (3)

A
  1. Information,
  2. Sourcing,
  3. Pricing
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54
Q

Define facilities in regards to logistical drivers

A

The physical locations in the supply chain network where product is stored, assembled, or fabricated

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55
Q

Define inventory in regards to logistical drivers

A

All raw materials, work in process, and finished goods within a supply chain

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56
Q

Define transportation in regards to logistical drivers

A

Moving inventory from point to point in the supply chain

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57
Q

Define information in regards to cross-functional drivers

A

Data and analysis concerning facilities, inventory, transportation, costs, prices, and customers throughout the supply chain

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58
Q

Define sourcing in regards to cross-functional drivers

A

Who will perform a particular supply chain activity

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59
Q

Define pricing in regards to cross-functional drivers

A

How much a firm will charge for the goods and services that it makes available in the supply chain

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60
Q

How do the drivers of supply chian fit into the framework for structuring drivers and decision making

A

Competitive Strategy > Supply Chain Strategy > Suppy Chain Structure > Logistical/Cross-Functional Drivers

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61
Q

How can a firm increase ROA

A

By growing the profit margin or increasing asset turnover

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62
Q

What does accounts payable turnover define

A

How well a company is able to use the money it owes supliers to finance its own operations

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63
Q

What does cash to cash cycle measure

A

The average amount of time from when cash enters the process as cost to when it returns as collected revenue

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64
Q

Define markdowns

A

Discounts requried to convince customers to buy excess inventory

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65
Q

Define lost sales

A

Represent customer sales that did not materialize because of the absence of products the customer wanted to buy

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66
Q

What do customer needs influence

A

The structure of the distribution network

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67
Q

What are the customer service measures that are affected by the structure of the distribution network (7 measures)

A
  1. Response Time,
  2. Product Variety,
  3. Product availability,
  4. Customer experience,
  5. Time to market,
  6. Order visibility,
  7. Returnability
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68
Q

What does increasing the number of faciliies do

A

Moves them closer to the end consumer nad reduces the response time

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69
Q

How are costs impacted by increasing the number of facilities

A

Inventory costs increase, facility costs increase, transportation costs decrease

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70
Q

What are the 2 key factors to be considered when designing a distribtion network

A
  1. Will product be delivered to the customer location or picked up from a pre-arranged site?
  2. Will product flow through an intermediary (or intermediate location)?
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71
Q

What are the design options for a distribution network (6)

A
  1. Manufacturer storage with direct shipping,
  2. Manufacturer storage with direct shippings and in-transit merge,
  3. Distributor storage with carrier delivery,
  4. Distributor storage with last-mile delivery,
  5. Manufacturer/distributor storage with customer pickup,
  6. Retail storage with customer pickup
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72
Q

Describe the manufacturer storage with direct shipping (drop shipping)

A

Product flows from manufacturer to customers, information flows from customers to retailer to manufacturers

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73
Q

How do manufacturer storage with direct shipping networks address response time

A

Long response time because of increased distance and 2 stages for order processing

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74
Q

How do manufacturer storage with direct shipping networks address product availability

A

High level of product availability because of aggregation at manufacturer

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75
Q

How do manufacturer storage with direct shipping networks address product variety

A

Easy to provide a high level of variety

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76
Q

How do manufacturer storage with direct shipping networks address customer experience

A

Good in terms of home delivery but can suffer if sent in partial shipments

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77
Q

How do manufacturer storage with direct shipping networks address time to market

A

Fast with the product being available as soon as unit is produced

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78
Q

How do manufacturer storage with direct shipping networks address order visibilty

A

Order visibility is more difficult but more important from a customer service perspective

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79
Q

How do manufacturer storage with direct shipping networks address returnability

A

Expensive and difficult to implement

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80
Q

How do manufacturer storage with direct shipping networks address the SC driver of inventory

A

There are lower costs, and are best for low-demand, high value items

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81
Q

How do manufacturer storage with direct shipping networks address the SC driver of transportation

A

Have higher transportation costs due to distance and disaggregate shipping

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82
Q

How do manufacturer storage with direct shipping networks address the SC driver of facilities and handling

A

Have low facility costs and can ship small shipments or from production line

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83
Q

How do manufacturer storage with direct shipping networks address the SC driver of information

A

Have significant investment to integrate

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84
Q

What is an example of a distributor storage with carrier delivery

A

Amazon Fullfillment centres

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85
Q

What factors need to be icluded in total cost when making global sourcing decisions

A

Sum of transportation + inventory + facility costs

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86
Q

How do products flow for distributor storage and carrier delivery

A

From factories to warehouse storage by retailer or distributor then to customers

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87
Q

How does information flow for distrubutor storage and carrier delivery

A

From customers to retailer

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88
Q

What products are best for distrubutor storage and carrier delivery

A

High demand products

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89
Q

What products are best for drop shopping

A

Low demand products

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90
Q

How do distributor storage with carrier delivery address the SC driver of inventory

A

Higher inventory than manufacturer storage

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91
Q

How do distributor storage with carrier delivery address the SC driver of transportation

A

Lower than manufacturer storage, best for faster moving items

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92
Q

How do distributor storage with carrier delivery address the SC driver of facilities and handling

A

Higher for slow moving items

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93
Q

How do distributor storage with carrier delivery address the SC driver of information

A

Simplier infrastructure needed

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94
Q

How do distributor storage with carrier delivery address response time

A

Faster

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95
Q

How do distributor storage with carrier delivery address product variety

A

Lower variety

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96
Q

How do distributor storage with carrier delivery address product availability

A

Higher cost for availability

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97
Q

How do distributor storage with carrier delivery address customer experience

A

Better experience

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98
Q

How do distributor storage with carrier delivery address time to market

A

Higher time to market

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99
Q

How do distributor storage with carrier delivery address order visibility

A

Easier order visibility

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100
Q

How do distributor storage with carrier delivery address returnability

A

Easer returnability

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101
Q

How does information flow for manufacturer/distributor storage with customer pickup

A

From customer to retailer to factories

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102
Q

How does product flow for manufacturer/distributor storage with customer pickup

A

From factories to cross dock DC, to pick up sites

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103
Q

How does customer flow for manufacturer/distributor storage with customer pickup

A

From customer to pickup sites

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104
Q

What is an example for manufacturer/distributor storage with customer pickup

A

Penguin Pickup (click, click, collect)

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105
Q

How do manufacturer/distributor storage with customer pickup address the SC driver of inventory

A

Can match any other option depending on location

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106
Q

How do manufacturer/distributor storage with customer pickup address the SC driver of transportation

A

Lower transportation than package carriers

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107
Q

How do manufacturer/distributor storage with customer pickup address the SC driver of facilities and handling

A

If new facilties, high. If exsiting, low

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108
Q

How do manufacturer/distributor storage with customer pickup address the SC driver of information

A

Significant investment in infastructure

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109
Q

How do manufacturer/distributor storage with customer pickup address response time

A

Same day delivery possible for items stored locally at pickup site

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110
Q

How do manufacturer/distributor storage with customer pickup address product variety

A

Similar to manufacture or distributor storage options

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111
Q

How do manufacturer/distributor storage with customer pickup address product availability

A

Similar to manufacture or distributor storage options

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112
Q

How do manufacturer/distributor storage with customer pickup address customer experience

A

Lower customer experience due to lack of home delivery

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113
Q

How do manufacturer/distributor storage with customer pickup address time to market

A

Similar to manufacturer storage options

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114
Q

How do manufacturer/distributor storage with customer pickup address order visibility

A

Difficult order visibility, but essential

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115
Q

How do manufacturer/distributor storage with customer pickup address returnability

A

Somewhat easier since pickup locations can handle returns

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116
Q

What is the best and worst network for response time

A

B - retail stores,

W- manufacturer storage with direct ship

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117
Q

What is the best and worst network for product variety

A

B - retail stores,

W- manufacturer storage with direct ship

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118
Q

What is the best and worst network for product availability

A

B - retail stores,

W- manufacturer storage

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119
Q

What is the best and worst network for inventory

A

B - retail stores,

W- manufacturer storage

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120
Q

What is the best and worst network for transportation

A

B- retail stores,

W- last mile delivery

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121
Q

What is the best and worst network for facility

A

B- manufacturer storage,

W- retail stores

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122
Q

What is the worst network for handling

A

W - distributor storage with last mile delivery

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123
Q

What is the comparision for retail vs manufacturer storage with pick up for information

A

Retail stores may be less complex; manufacturer storage with pickup may be very complex

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124
Q

What opportunities are presented by globalization and supply chain networks

A

increase revenue, decrease costs

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125
Q

What are industries that have capitalized on significant cost reductions (2)

A

Consumer electronics & Apparel

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126
Q

How has consumer electronic industries had signficant cost reductions

A

Consolidating production to single location in low-cost contries

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127
Q

How has the apparel industry had significant cost reductions

A

shifting manufacturing to low-labour-cost countries

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128
Q

What is a downside of globalization on supply chain networks

A

Added risk

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129
Q

What uncertainties are relevant when designing global supply chains (5)

A
  1. Natural disasters,
  2. fuel prices,
  3. performance of partners,
  4. logistics capactity,
  5. forecasting/planning accuracy
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130
Q

What are 2 reasons for offshoring fails?

A
  1. Focus only on unit cost vs total cost,

2. ignoring critical risk factors

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131
Q

A global supply chain with offshoring increases what?

A

The length and duration of information, product and cash flows

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132
Q

How is the complexity and cost of SC for offshoring decisions

A

More expensive

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133
Q

What are the 8 key elements of offshoring total cost

A
  1. Supplier price,
  2. Terms,
  3. Delivery costs,
  4. Inventory and warehousing,
  5. Cost of quality,
  6. Customer duties,
  7. Cost of risk,
  8. Exchange rates
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134
Q

What are the 3 broad categories of flexibility

A
  1. New product,
  2. Mixed,
  3. Volume
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135
Q

What is new product flexibility + example

A

Introduce new prodcts into market quickly (eg. Apple)

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136
Q

What is mix flexibility + example

A

Produce variety of products within a short period of time (eg. Zara)

137
Q

What is volume flexibility + example

A

Operate profitbly at different levels of output (eg. Toyota)

138
Q

Describe a dedicated network in regards to flexibiliy configuration

A

Each product is only made at one dedicated plant

139
Q

Describe a fully flexible network in regards to flexibilty configuration

A

Each product is made at every plant and is fully flexible

140
Q

Describe a chained network in regards to flexibilty configuration

A

One plant works on two products exclusively (chained network with one long chain)

141
Q

Describe a containment network in regards to flexibility configuration

A

Two plants work on two products (chained network with 2 short chains)

142
Q

What is the benefit of chaining

A

Lowers costs due to flexibility

143
Q

What is the benefit of containment

A

Limits impact of disruption, lowers risk

144
Q

As flexibility increases, marginal benefits derived from the icreased flexibility decreases, what are the 3 points explaining this

A
  1. With demand uncertainity longer chains pool available capacity,
  2. Long chains may have higher fixed costs than multiple smaller chains,
  3. Coordintion more difficult across with a single long chain
145
Q

When are flexibility and chaining effective or not effective

A

When dealing with demand fluctuation but less effective when dealing with supply distruption

146
Q

Define distribution

A

Steps taken to move and store a product from the supplier stage to the customr stage in SC

147
Q

What does dristribution drive + how

A

Drives profitability by directly affecting supply chain cost and the customer value

148
Q

What can your choice of distribution network help you achieve

A

Help to achieve suply chain objectives from low cost to high responsiveness

149
Q

What does uncertainty of demand and price drive in regards to globalization

A

Drives the value of building flexible production capacity

150
Q

When dealing with demand uncertainty…

A

As flexibility is increased, the marginal benefit derived from the increased flexibility decreases

151
Q

What do demand forecasts form for SC

A

The basis for all planning decisions in a SC

152
Q

What does push view plan for

A

Production and transportation

153
Q

What does pull view plan for

A

Level of available capacity, inventory

154
Q

Push process ____ customer demand

A

anticipates

155
Q

Pull process _____ customer demand

A

responds

156
Q

What are forecasts?

A

Always wrong, and therefore should include expected valye and a measure of error

157
Q

Whih is more accurate short or long term forecasts

A

Short term forecasts

158
Q

Which is more accurate aggregate or disaggregate forecasts

A

Aggregate

159
Q

In general, the farther up the supply chain a company is…

A

The farther away from the products end user, the greater distortion of information it receives

160
Q

What are the 6 factors that influence forecasts

A
  1. Past demand,
  2. lead time,
  3. planned advertising,
  4. planned price discounts,
  5. state of the economy,
  6. competitive environment
161
Q

What does past demand show for forecasting

A

Historical sales figures

162
Q

What does lead time mean for forecasting

A

Product replenishment (total time from shipping to shelf)

163
Q

How does planned advertising impact forecasting

A

Timing can impact demand

164
Q

How does planned price discounts impact forecasting

A

Timing and offer can impact demand

165
Q

How does the state of the economy impact forecasting

A

Fear and uncertainity impact consumer spending

166
Q

How does competitive environment impact forecasting

A

Retailers who have better managed supply chains will steal customers

167
Q

What is the 5 step approach to demand forecasting

A
  1. Understand objective,
  2. Integrate demand planning and forecasting,
  3. Identify major factors that influence demand forecast,
  4. Forecast the appropriate level of aggregation,
  5. Establish performance and error measures
168
Q

Define demand

A

Anticipated or future sales

169
Q

Define sales

A

Actual results aka. Sales revenue

170
Q

What is the time series forecasting method

A

Use historical demand only, assumes past demand history is a good indicator of future demand

171
Q

What are the 4 components of the time series forecasting method

A
  1. Cyclical,
  2. Random,
  3. Trend,
  4. Seasonal
172
Q

Describe the trend component of the time series forecasting method

A

Overall upward or downward movement and data is taken over a period of years

173
Q

Describe the cyclical component of the time series forecasting method

A

Upward or downward swings, may vary in length and usually lasts 2-10 years

174
Q

Describe the random component of the time series forecasting method

A

Random fuctuations due to nature or accidents. Short duration and non-repeating

175
Q

Describe the seasonal component of the time series forecasting method

A

Upward or downward swings, regular paterns, and observed within 1 year

176
Q

How do you calculate observed demand

A

Systematic component (S) + Random Component (R )

177
Q

What does the systematic component measure

A

expected value of demand

178
Q

What is the static forecasting method

A

Assumes the level, trend and seasonality do not vary as new demand is observed

179
Q

what is sales and operations planning

A

A collaborative decision making process used to develop and align demand, supply, and financial plans in support of the overall business plan

180
Q

Who participates in sales and operations planning

A

Retailers and Manufacturers

181
Q

Who manages supply

A

manufacturers

182
Q

Who manages demand

A

retailers

183
Q

What does prefictable variability lead to

A

Increased costs and decreased responsiveness

184
Q

What are the 2 broad approaches to predictable variability

A
  1. Manage supply,

2. Manage demand

185
Q

What does managing supply in regards to predictable variability mean (4)

A
  1. Capacity (people),
  2. Inventory (product),
  3. Subcontracting (outsourcing),
  4. Backlogs (timing)
186
Q

What does managing demand in regards to predictable variability mean (2)

A
  1. Short term price discounts,

2. Promotions

187
Q

What are ways to manage capacity

A

Overtime, seasonal workers, subcontracting, flexible process, product flexibility

188
Q

What are ways to manage inventory

A

Common components across multiple products, build inventory of high demand or predictable products

189
Q

With promotion, what three factors lead to increase demand

A
  1. Market growth,
  2. Stealing share,
  3. Forward buying
190
Q

Does forward buying increase or shift demand

A

shifts

191
Q

What are the 4 key factors infleuncing timing of a promotion

A
  1. Demand,
  2. Inventory,
  3. Capacity,
  4. Margins
192
Q

What is the goal for sales and operations planning

A

To collaborate on pricing nad promotion to maximize supply chain profitability

193
Q

Why would a manufactuer want to promote during low-demand season (2)

A
  1. Level demand,

2. Lowers production costs

194
Q

Why would a retailer want to promote during peak period (3)

A
  1. Increases revenue,
  2. Steal market share,
  3. Doesn’t have to worry about manufacturing costs
195
Q

Low demand period is best when trying to achieve which factors

A

High forward buying, low margin, high holding cost, low flexibility

196
Q

High demand period is best when trying to achieve which factors

A

High stealing share, high growth of market, high margin

197
Q

When does average inventory increase/decrease in regards to promotion

A

Increases at peak period, decreases for off-peak period

198
Q

When can promoting during a peak demand month decrease profitability? Why

A

Yes, if there is a small increase in consumption and a demand increase from a forward buy

199
Q

Why is it more profitable to promote during the peak period

A

The consumption increase from discounting grows and forwad buying becomes a smaller fraction of the demand icrease from a promotion

200
Q

As the product margin declines, what happens

A

Promoting during the peak-demand period becomes less profitable

201
Q

Why is the role of safety inventory important?

A

Forecasts are rarely accurate

202
Q

What happens when average demand for an item is 1000 units/week accuracy wise?

A

50% of the time actual demand is greater, 50% demand is less

203
Q

What happens when actual demand is greater?

A

Keeping only enough inventory in stock would only satisfy average demand and in turn 50% of the time stock would run out

204
Q

Describe average vs actual demand

A

Average: Forecast
Actual: What is needed to satisfy demand

205
Q

What is safety inventory used for?

A

Satisfies the demand that exceeds the amount forecasted in a given period

206
Q

What happens when demand is certain

A

No need for safety inventory, can place to refill as last unit sold

207
Q

What is the safety inventory # when demand is certain

A

0

208
Q

What is the benefit of demand certainty

A

Lower inventory holding costs

209
Q

What happens if actual demand is higher than ordered? aka. not enough safety inventory

A

Loss of sales & potential profit; customers miss out

210
Q

What are benefits of higher safety inventory

A

Improved product availability & customer service

211
Q

How do you calculate average inventory

A

Cycle inventory & safety inventory

212
Q

What does the safety/inventory graph demonstrate

A

Inventory vs time which determines avg. inventory to determine the quantity needed in a lot

213
Q

What is quantity aka?

A

Replenishment size

214
Q

Define safety inventory

A

Avg inventory remaining when a replenishment lot arrives

215
Q

Define cycle inventory

A

Avg amount of inventory a business needs to meet customer demand between the times it orders more inventory from suppliers

216
Q

What are 3 trade offs of safety inventory

A
  1. Increases product availability/ customer service
  2. Increases inventory & inventory holding costs
  3. Higher risk
217
Q

What does increased product availability and customer service from safety inventory lead to

A

Increased profit potential

218
Q

What does increased avg inventory and inventory holding costs from safety inventory lead to

A

Reduced profit potential

219
Q

What industries face higher risk when inventory level are high (caused by safety inventory)

A

High tech & Fashion

220
Q

If demand is certain daily demand is ____

A

Constant

221
Q

If demand is certain we know how long it takes to ___ all inventory and satisfy demand

A

Consume

222
Q

If demand is uncertain is it likely accurate to the average

A

No, will always be less or more

223
Q

If demand is uncertain and ends up being larger, what happens

A

All inventory may be consumers before the next replenishment lot arrives

224
Q

What are the 4 factors that determine the level of safety inventory (USD PAIR)

A
  1. Uncertainty supply
  2. Uncertainty demand
  3. Product Availability
  4. Inventory Replenishment
225
Q

If uncertainty of demand or supply increases safety inventory… (does what)

A

Increases

226
Q

When desired level of product availability increases safety inventory… (does what)

A

Increases

227
Q

If replenishment orders can only be placed at certain times of the month safety inventory… (does what)

A

Increases

228
Q

Define product availability

A

Reflects retailers ability to fill a customer order from inventory

229
Q

Define stock out

A

Customer order is not satisfies due to no inventory

230
Q

What are the 3 measures of product availability

A
  1. Product fill rate (fr)
  2. Order fill rate
  3. Cycle service level (Csl)
231
Q

Define product fill rate (fr)

A

Fraction of product demand satisfied from product in inventory

232
Q

What should product fill rate (fr) be measured in? What not?

A

Specified amounts of demand (units), not time (months)

233
Q

Define order fill rate

A

Fraction of orders filled from available inventory

234
Q

What should order fill rate be measured in? What not?

A

Over specified number of orders, not over time

235
Q

What must all products be to fulfill the order

A

Available in inventory

236
Q

Define cycle service level (csl)

A

Fraction of replenishment that end without stockout

237
Q

Define replenishment cycle

A

The interval between 2 successive replenishment deliveries

238
Q

What should cycle service level (csl) be measured over

A

Specified number of replenishment cycles

239
Q

What are the 2 types of replenishment policies

A
  1. Continuous review

2. Periodic review

240
Q

How is inventory tracked/placed/ordered in a continuous review

A

Place order for a lot size (Q) when the inventory declines to the reorder point (ROP)

241
Q

For continuous review policies.. What happens to the size of an order from one order to another? What about time?

A

Size does not change.

Time may fluctuate

242
Q

When is inventory checked for periodic review

A

Regular periodic intervals

243
Q

When are orders placed in periodic review

A

Placed to raise the inventory level to a specified threshold

244
Q

For periodic review policies.. What happens to the size of the order from one order to another? What about time?

A

Size fluctuates

Time is fixed

245
Q

What do companies use to achieve desired levels of product availability

A

Replenishment policies: periodic or component

246
Q

What are the 2 components of demand

A

Systematic & Random

247
Q

What is the random component a measure of

A

Demand uncertainty

248
Q

Define lead time (L)

A

The gap between when an order is placed & when it is received

249
Q

What are the types of inventory (3)

A
  1. Raw material
  2. Work in Progress
  3. Finished Goods
250
Q

What stages do you need to consider for lead times

A

Raw materials to finished goods; re-order point to the time received

251
Q

What are the 5 steps to evaluating safety inventory given a replenishment policy

A
  1. Expected demand during lead time
  2. Safety inventory
  3. Cycle inventory (when demand is certain)
  4. Average inventory
  5. Average flow time
252
Q

Define manufacturer driven substitution

A

Allows aggregation of demand; reduces safety inventories

253
Q

Why is customer driven substitution useful

A

Allows aggregation of safety inventory

254
Q

Describe component commonality without common components (regards to uncertainty demand & safety inventory)

A

Uncertainty of demand for a component is the same as for the finished product;
Results in high levels of safety inventory

255
Q

Describe component commonality with common components (regards to uncertainty demand & safety inventory)

A

Demand for a component is an aggregation of the demand for the finished products; Component demand is more predictable; Component inventories are reduced

256
Q

What is the key enabler of product postponement

A

Component commonality

257
Q

What do you do when?

Have common components in the supply chain for most of the push phase

Move product differentiation as close to the pull phase of the supply chain as possible (when demand is known)

Inventories in the supply chain are mostly aggregate

A

Delay product differentiation or customization until closer to the time the product is sold

258
Q

What is an example of postponement

A

Paint stores can mix any color into a solid white base and produce exactly what the customer wants.

259
Q

What are the benefits of postponement

A

Reduced safety inventory

Reduced inventory storage costs

Increased responsiveness

Increased perception of product availability

260
Q

What is product availability measured by

A

cycle service level or fill rate

261
Q

What is product availability a primary measure of

A

supply chain responsiveness

262
Q

What are the trade offs of high level product availability

A

Increased responsiveness and higher revenues

leads to increased inventory levels and higher supply chain costs

263
Q

What must supply chain achieve balance between

A

level of product availability and cost of inventory

264
Q

What is product availability is related to

A

profit objectives and strategic and competitive issues

265
Q

Describe nordstroms supply chain responsiveness

A

higher product availability; higher retail prices

266
Q

Describe apple supply chain responsiveness

A

short product life cycles; high demand variability

267
Q

What are the costs to consider for optimal level of product availability

A

Cost of overstocking

Cost of under stocking

268
Q

What are possible scenarios of product availability

A

Season items

One time orders in presence of quantity discounts

Continuously stocked items

269
Q

What type of demand is seasonal items with a single order in a season? Give an example

A

Uncertain Demand

Ski jackets

270
Q

What type of demand is for one-time orders in the presence of quantity discounts

A

Uncertain demand

271
Q

What type of demand is for continuously stocked items

A

Certain demand

272
Q

Describe the level of product availability for Nordstrom

A

Higher margins; higher cost of understocking (foregone profit)

Should provide higher level of product availability

273
Q

Describe the level of product availability for Walmart

A

Lower margins; lower cost of understocking

Should provide lower level of product availability

274
Q

Want are the 2 obvious actions to improve supply chain profitability

A
  1. Increase salvage value of each unit

2. Decrease the margin lost from a stockout

275
Q

What do improved supply chain profitabilities result in

A
  1. Improved forecasting
  2. Quick response
  3. Postponement
  4. Tailored sourcing
276
Q

What does improved forecasts result in for demand uncertainty

A

Reduces

277
Q

What does less uncertainty for improved forecasts result in

A

Lower levels of safety inventory (and costs) for the same level of product availability, or

Higher product availability for the same level of safety inventory, or

Both

278
Q

What happens when there is a higher the standard deviation of forecast error

A

less accurate the forecast

279
Q

With forecast accuracy, expected overstocks and understocks _____, while profits ____.

A

decrease, increase

280
Q

What are the benefits of quick response actions taken by managers to reduce replenishment lead time

A

Lower order quantities thus less inventory with same product availability

Less overstock

Higher profits

281
Q

___ _ ___ __ until closer to the product, when demand is unpredictable

A

Delay of product differentiation

282
Q

Activities prior to product differentiation require _____ _____ more accurate than individual product forecasts

A

aggregate forecasts

283
Q

What is caused through better matching of supply and demand

A

Higher profits

284
Q

The value of postponement ____ as uncertainty ___

A

Decreases

Decreases

285
Q

Describe tailored sourcing

A

When a firm uses a combination of two supply sources

286
Q

What are the two combinations of supply sources

A

One is lower cost but is unable to deal with uncertainty well (efficient)

Second more flexible but is higher cost and handles uncertainty well (responsive)

287
Q

Why is Transportation Important?

A

Globalization

Trade: Goods, services, people

Transport enables trade, which enables prosperity

288
Q

Who are the 4 key players in transportation

A
  1. Shippers
  2. Carriers
  3. Transportation Policy Makers
  4. Owners/ Operators of Infrastructure
289
Q

Describe the role of carriers in transportation

A

The party that transports the product (ie. FedEx)

290
Q

Describe the role of shippers in transportation

A

The party that requires the transportation (eg. The retailer and/or manufacturer)

291
Q

Describe the role of owners/operators in infrastructure in transportation

A

Primarily government

Roads, ports, canals, airports

292
Q

Describe the role of transportation policy makers in transportation

A

Regulatory bodies who set transportation policies

293
Q

What do shippers care about (5)

A

Transportation costs

Inventory costs

Facility costs

Processing costs

Service levels + Fast delivery!

294
Q

What do carriers care about (5)

A

Vehicle related costs

Fixed operating costs

Trip related costs

Quantity related costs

Overhead costs

295
Q

What are the key transportation corridors in Canada

A

Western Corridor

Continental Corridor

Atlantic Corridor

296
Q

Describe the western corridor

A

Busiest rail and marine corridor in Canada

Access to Asian markets

Link from Asia to Central Canada

297
Q

Describe the continental corridor

A

Most densely populated and industrialized region in Canada

298
Q

Describe the atlantic corridor

A

Access to Europe

$26 billion worth of merchandise was exported through
Atlantic corridor

299
Q

What are the cost components of air transportation

A
  1. Fixed infrastructure and equipment
  2. Labor and fuel
  3. Variable depending on passenger/cargo
300
Q

What are the key issues of air transportation (5)

A
  1. Location/number of hubs
  2. Fleet assignment
  3. Maintenance schedules
  4. Crew scheduling
  5. Prices and availability
301
Q

What is the most popular transportation method

A

Truck

302
Q

What are the benefits of a truckload (TL)

A

Low fixed cost

Imbalance between flows

303
Q

What are the aspects of less than truckload (TL)

A

Small lots

Hub and spoke system

May take longer than TL

304
Q

Describe package carriers

A

Small packages up to about 150 pounds

Expensive

Rapid and reliable delivery

Small and time-sensitive shipments

Consolidation of shipments a key factor

305
Q

Describe rail transportation

A

Move commodities over large distances

High fixed costs in equipment and facilities

Scheduled to maximize utilization

Transportation time can be long

Trains ‘built’ not scheduled

306
Q

Describe water transportation

A

Limited to certain geographic areas

Ocean, inland waterway system, coastal waters

Very large loads at very low cost

Slowest

Dominant in global trade

Containers

307
Q

Describe pipeline transportation

A

High fixed cost

Primarily for crude petroleum, refined petroleum products, natural gas

Best for large and stable flows

Pricing structure encourages use for predicable component of demand

308
Q

Describe intermodal transportation

A

Use of more than one mode of transportation to move a shipmen

309
Q

What are the key issues of intermodal transportation

A

Exchange and coordination of information to facilitate transfer between different modes

310
Q

What happens to transportation infrastructure & policies without a monopoly

A

Deregulation and market forces help create an effective industry structure

311
Q

Describe direct shipment network to single destination

A

Suppliers ship to each individual buyer location

312
Q

Describe direct shipping with milk runs

A

Suppliers make stops between buyer/supplier locations. Then go from buyer location to the next in one go

313
Q

Describe all shipments via intermediate distribution center with storage

A

Suppliers deliver to distribution centre, centre delivers to buyer locations

314
Q

Describe all shipments via intermediate transit point with storage

A

Suppliers send their shipments to a central distribution center

Stored until needed by buyers

Shipped to each buyer location

315
Q

Describe all shipments via intermediate transit point with cross docking

A

Suppliers send their shipments to an intermediate transit point

They are cross-docked and sent to buyer locations without storing them

316
Q

Describe shipping via DC using milk runs

A

Suppliers deliver to distribution centre, distribution centre to buyer locations and then stop off at other locations and back to distribution centre

317
Q

What are the pros and cons of Direct shipping

A

Pros:
No intermediate warehouse

Simple to coordinate

Cons:
High inventories (due to large lot size)
318
Q

What are the pros and cons of Direct shipping with milk runs

A

Pros:
Lower transportation costs for small lots

Lower inventories

Cons:
Increased coordination complexity

319
Q

What are the pros and cons of all shipments via central DC with inventory storage

A

Pros:
Lower inbound transportation cost through consolidation

Cons:
Increased inventory cost
Increased handling at DC

320
Q

What are the pros and cons of all shipments via central DC with cross-dock

A

Pros:
Low inventory requirement

Lower transportation cost through
consolidation

Cons:
Increased coordination complexity

321
Q

What are the pros and cons of shipping via DC using milk runs

A

Pros:
Lower outbound transportation cost for small lots

Cons:
Further increase in coordination complexity

322
Q

What are criteria to consider for transportation design

A 
speed
flexibility
reliability
inventory costs
value of goods
cost of transportation
lost sales
cycle inventory
safety inventory
323
Q

How does responsiveness relate to transportation costs

A

High responsiveness; high transportation

Low responsiveness;
low transportation

324
Q

How can IT assist in transportation

A

Identification of optimal routes by minimizing costs subject to delivery constraints

Optimal fleet utilization

GPS applications

325
Q

What is the decision process for selecting transportation (4)

A
  1. Align transportation strategy with competitive strategy
  2. Consider both in-house and outsourced transportation
  3. Use technology to improve transportation performance
  4. Design flexibility into the transportation network
326
Q

How is revenue management used in the supply chain

A

The use of pricing to increase the profit generated from a limited supply of supply chain assets

327
Q

What are the 2 ways supply assets exist

A

Capacity

Inventory

328
Q

What is revenue management aka

A

differential pricing

329
Q

What is differential pricing based on

A

customer segment

time of use

product or capacity availability to increase supply chain profits

330
Q

Revenue management has a significant impact on supply chain profitability when one or more of the following four conditions exist.. what are the conditions

A
  1. The value of the product varies
  2. The product is highly perishable
  3. Demand has seasonal and other peaks
  4. The product is sold both in bulk and on the spot market
331
Q

What 2 fundamental issues must be handled for pricing & rev management for multiple customer segments

A

How can the firm differentiate between the two segments and structure its pricing to make one segment pay more than the other?

How can the firm control demand such that the lower-paying segment does not utilize the entire availability of the asset?

332
Q

Effective use of revenue management ____ and ____ for the more valuable customer segment

A

increases firm profits

improves service

333
Q

Define the risk of spoilage

A

capacity reserved for the high price buyers is wasted, and does not materialize

334
Q

Define the risk of spill

A

if high price buyers must be turned away because capacity committed to low price buyers

335
Q

Any asset that loses value over time is ____

A

perishable

336
Q

What are the 2 basic approaches to pricing and revenue management for perishable assets

A
  1. Vary price dynamically over time to maximize expected revenue, dynamic pricing
  2. Overbook sales of the asset to account for cancellations
337
Q

Charge ___ price during peak periods and a ___ price during off-peak periods

A

higher

lower

338
Q

What does charging higher price during peak periods and a lower price during off-peak periods do for profits

A

Increases profits for the owner of assets, decreases the price paid by a fraction of customers, and brings in new customers during the off-peak discount period

RMG 434 (2 decks)

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