A/B: Introduction, Inventory Management and Risk Pooling

Question 1

What are three aspects to the definition of a supply chain?

Answer 1

1. A systems approach
2. Every facility is taken into consideration
3. There are the strategic, tactical and operational level

Question 2

Three difficulties with supply chain

Answer 2

1. Affected by development chain
2. Global optimization
3. Uncertainty and risk

Question 3

What are the four components to the development chain?

Answer 3

1. Product design phase
2. Associated knowledge and capabilities
3. Sourcing decisions
4. Production plans

Question 4

Why is it difficult to find a global optimal?

Answer 4

1. Complex network of supply chains
2. Conflicting objectives
3. Supply chain evolves over time
4. Demand and cost parameters vary over seasons

Question 5

What are firms doing now to balance cost reduction and risk management?

Answer 5

1. Using information to sense disruptive events
2. Building redundancy into the supply chain
3. Including risk assessment measures
4. Incorporating flexibility not supply contracts

Question 6

What are three critical abilities to improve supply chain performance?

Answer 6

1. Matching supply chain strategies with product characteristics
2. Ability to replace traditional supply chain strategies
3. Ability to manage risk and uncertainty

Question 7

What are the three levels of firm activities?

Answer 7

1. Strategic: Long lasting decisions i.e. product design, supplier selection
2. Tactical: Decisions updated every quarter/year i.e. inventory policies, production decisions
3. Operational level: Day to day decisions such as truck loading and scheduling

Question 8

What is the economic lot size model?

Answer 8

1. Illustrates the trade-off between storage costs and ordering costs
2. Model has a zero inventory ordering property, meaning orders should be received when inventory level reaches zero

Question 9

What is the min max or (s,S) policy?

Answer 9

1. s is the reorder point or the min inventory

2. S is the order up to level or the max

Question 10

What is risk pooling?

Answer 10

It says that aggregating demand across locations leads to a reduction in demand variability

Question 11

What are the three points risk pooling?

Answer 11

1. Safety stock and average inventory are reduced by centralizing inventory
2. The higher the coefficient of variation, the greater the benefit obtained from having a centralized system
3. Risk pooling benefits depend on the behavior of demand from one market relative to demand from another

Question 12

What is the echelon inventory policy?

Answer 12

The inventory level at any stage in the system is equal to the inventory on hand at that specific echelon plus all downstream inventory

Each stage in the distribution system is an echelon

Question 13

What are the three rules of forecasting?

Answer 13

1. The forecast is always wrong
2. The longer the time horizon, the worse the forecast
3. Aggregated forecasts are more accurate

Question 14

What are three judgement methods?

Answer 14

1. Sales force composite: Using each salesperson’s sales estimate in logical way
2. Panel of experts
3. Delphi method

Question 15

What are four time series methods?

Answer 15

1. Moving averages
2. Exponential smoothing
3. Data with trends: Holt’s method, regression analysis
4. Seasonal data: Winter’s method, seasonal decomposition

Question 16

What forecast techniques are appropriate for each stage in product life cycle?

Answer 16

1. Product development phase: market research methods
2. Testing and introduction phase: Market research and judgment methods
3. Growth phase: Time-series data
4. Maturity phase: Time-series and causal methods