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SCM 373 > Exam 3 > Flashcards

Exam 3 Flashcards

1
Q

Service related factors affecting logistics costs?

A

Speed, reliability, customization, and additional services.

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2
Q

What does faster service in transportation, order picking, and shipping generally incur?

A

Increased fee.

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3
Q

Another name for rush orders?

A

Expedite orders.

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4
Q

What may rush orders require?

A

Worker overtime and/or faster modes of transportation.

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5
Q

What do time guarantees or more reliable service quality cause you to incur?

A

Additional or higher base rates.

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6
Q

What does customization generally incur?

A

Higher cost.

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7
Q

What do more customization options on logistics tend to reduce?

A

Economies of scale.

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8
Q

Examples of additional service related factors affecting logistics costs?

A

Specialized tracking, extra packaging or crating, customs documentation, etc.

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9
Q

What do additional services generally incur?

A

Added fees in warehousing and transportation costs.

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10
Q

Product related factors affecting logistics costs?

A

Weight, density, dollar value, susceptibility to damage, and special handling requirements.

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11
Q

What specific costs does weight affect?

A

Transportation costs and to a lesser extent, warehousing costs.

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12
Q

As weight increases, what happens to logistics costs?

A

Typically increase.

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12
Q

What specific costs does density affect?

A

Transportation and warehousing costs.

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13
Q

What specific costs does dollar value affect?

A

Warehousing, inventory, transportation, packaging, and materials-handling.

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13
Q

As density increases, what happens to transportation and warehousing costs?

A

Tend to decrease.

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14
Q

What happens to transportation and warehousing costs as the risk of damage to a product increases?

A

The higher these costs will be.

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15
Q

What costs does a need for special handling usually increase?

A

Warehousing, transportation, and packaging.

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16
Q

Do origin and destination affect transportation pricing?

A

Yes

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17
Q

What may operational needs of the carrier do to prices?

A

Lower them.

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18
Q

What do nearly all transportation contracts have?

A

Fuel surcharge component.

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19
Q

What does FSC stand for?

A

Fuel surcharge.

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20
Q

What does the fuel surcharge vary to protect against?

A

Fluctuations in fuel prices.

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21
Q

What type of fuel mode is most affected by FSC’s?

A

High-intensive fuel modes.

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22
Q

What are FSC typically adjusted by?

A

National averages of fuel prices.

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23
Q

What is economy of distance?

A

The cost per unit weight decreases as the distance increases.

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24
Q

What is economy of distance also referred to as?

A

Tapering principle.

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25
Q

Why does economy of distance happen?

A

Longer distances allow fixed cost of the carrier to be spread over more miles, lowering the per mile charge.

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26
Q

What is economy of weight?

A

Transportation cost per unit of weight decreases as load size increases since the fixed cost are spread over incremental weight.

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27
Q

What does the tapering principle look like graphically?

A
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28
Q

What does the economy of weight look like graphically?

A
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29
Q

What is economy of density?

A

Higher shipment density products allow for more weight to fit on transportation vehicle and tend to be easier to handle.

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30
Q

What does economy of density look like graphically?

A
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31
Q

What is cost-of-service pricing?

A

Price based on the cost to the carrier.

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32
Q

What does the cost-of-service pricing generally set?

A

The pricing floor or minimum charge.

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33
Q

What is the average-cost approach?

A

Rates are based on average costs.

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34
Q

What is the marginal/variable cost approach?

A

Rates are based on the cost of producing one or more unit of an output.

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35
Q

What is the value-of-service pricing?

A

Price based on what the customer is willing to pay.

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36
Q

What does the value-of-service pricing generally set?

A

The price ceiling or maximum charge.

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37
Q

What happens to the charge of logistics services for higher value products?

A

Tend to be charged more.

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38
Q

Why are logistics services charged more for higher value products?

A

There is more risk but the commodities can bear higher prices as logistics costs would be a smaller percentage of the final sale.

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39
Q

What are short-term pricing schemes?

A

Spot-market rates

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40
Q

What are spot market rates?

A

Negotiated on the spot generally for a single instance.

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41
Q

What are spot-market rates common for?

A

Expedited logistics or extra service.

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42
Q

What do spot-market rates consider?

A

Current balance of supply and demand.

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43
Q

What are long-term pricing schemes?

A

Benchmarking, cost-plus pricing, discounts on published rates, and revenue splits.

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44
Q

Where are published rates common?

A

In LTL and small parcel.

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45
Q

How to increase discounts on published rates?

A

Committing greater volume.

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46
Q

Where are revenue splits more common?

A

In brokerage.

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47
Q

What are revenue splits usually coupled with?

A

Benchmarking.

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48
Q

Where do you split revenues?

A

Below target rates.

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49
Q

What is the class rate system?

A

System to simplify the potential complexity of trillions of possible shipments.

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50
Q

Where is the class rate system common?

A

LTL shipments.

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51
Q

How does the class rate system simplify pricing complexities?

A

By grouping geographic points and distances into rate basis, and commodities into a freight class.

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52
Q

Steps for simplifying geographic points and distances?

A

Group points from similar origins and find the rate basis.

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53
Q

How to simplify commodity types?

A

Find freight class.

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54
Q

What does the NMFC stand for?

A

National Motor Freight Classification.

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55
Q

What is the NMFC?

A

A classification scheme to cluster product types based on cost to transport.

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56
Q

What does a higher freight class represent in the NMFC?

A

A higher price that will be charged for a given weight.

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57
Q

What is the NMFC based on?

A

Density, liability, and handling characteristics.

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58
Q

Why do base rates vary slightly among different carriers?

A

Carriers publish their own tariffs.

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59
Q

What is the rate basis similar to?

A

Number of miles.

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60
Q

What can we think of logistics performance as nowadays?

A

The overall ability of the firm and its supply chain partners to efficiently and effectively fulfill products and services to customers while meeting customer service, cost, quality, and sustainability objectives.

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61
Q

How do you measure logistics performance cost?

A

Customer service, cost, quality, and sustainability.

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62
Q

What is the total landed cost?

A

All of direct costs associated with making and delivering/acquiring products.

63
Q

What is the total cost of ownership?

A

All of the direct and indirect costs associated with obtaining a product.

64
Q

What is inventory metrics efficiency determined by?

A

Inventory turnover ratio.

65
Q

What is inventory turnover ratio?

A

It reflects how much inventory is held relative to the firm’s scale of operations (demand).

66
Q

What is the inventory turnover ratio put into simpler terms?

A

The number of times that average firm inventories would be completely depleted and restocked within a given year.

67
Q

Why did inventory holdings drop substantially in the US in the 80s and 90s?

A

Toyota’s lean manufacturing.

68
Q

How has lean manufacturing affected inventory management?

A

Inventory can be a targeted form of waste and excess inventory can be an indicator of inefficiency.

69
Q

What is lean inventory typically considered and indicator of?

A

Operational excellence and financial viability.

70
Q

When is lean inventory criticized?

A

When firms face unpredictable disruptions.

71
Q

What has happened to aggregate inventory levels in the past two decades?

A

They have been more stable and risen in manufacturing.

72
Q

What do more flexible, agile, and resilient supply chains focus on?

A

Customization and customer responsiveness.

73
Q

What does a more flexible, agile, and resilient supply chain often require?

A

More inventory holdings.

74
Q

What type of tactics are employed for more flexible, agile, and resilient supply chains?

A

Shorter supply chains and postponement.

75
Q

What type of orders can fulfillment measures be applied to?

A

Both inbound orders from suppliers and outbound orders to customers.

76
Q

What is order cycle time?

A

The average time consistently achieved from the point of a customer order being placed to the delivery to the customer.

77
Q

What is the cash-to-cash cycle time?

A

The time required to convert a dollar spent to acquire raw materials into a dollar collected for finished product.

78
Q

What can be used as a measure of product flow speed?

A

Order cycle time and cash-to-cash cycle time.

79
Q

What lead time does order cycle time tell you?

A

Lead time to receive a product.

80
Q

What lead time does cash-to-cash cycle time tell you?

A

Lead time to convert expense to revenue.

81
Q

What can be used as a measure of financial flow speed?

A

Cash-to-cash cycle time.

82
Q

What is sales outstanding?

A

Time before recieving payment from a customer.

83
Q

What is payables outstanding?

A

Time before needing to pay suppliers.

84
Q

What is logistics network design?

A

The process of planning and configuring the network of parties and facilities involved in the physical distribution of a product.

85
Q

What can network design decisions center around?

A

Internal distribution network and/or external supply chain partners.

86
Q

Key internal questions for supply chain design?

A

Where do you place you facilities and how many facilities.

87
Q

Key external questions for supply chain design?

A

Who do you partner with and where are they located, and how many partners for each function.

88
Q

Examples of things that drive logistics network (re)design?

A

Cost pressures, changes in global trade patterns, shifts in customer or supply market locations, changes in business strategy, etc.

89
Q

The external logistics network involves decisions about…

A

Suppliers, customers, and other partners.

90
Q

Who you buy from/sell to and where your suppliers are located decisions can be based on…

A

Costs, regulation and taxes, distance and access, risk, and security.

91
Q

What is supply chain concentration?

A

The extent at which purchases or sales are concentrated among few suppliers or customers.

92
Q

When is supply base concentration higher?

A

When you allocate a larger volume of purchases from fewer suppliers.

93
Q

When is customer base concentration higher?

A

When you allocate a greater portion of sales to fewer customers.

94
Q

Does a more concentrated external logistics network have more or less suppliers and customers than a less concentrated external logistics network?

A

A more concentrated external logistics network has less suppliers and customers than a less concentrated external logistics network.

95
Q

Advantages of supply chain concentration?

A

Leverage purchase dollars to increase negotiating power, increased ability to interact frequently and monitor supply chain partners, and an opportunity to build trust, commitment, and joint solutions with partners.

96
Q

Disadvantages on supply chain concnetration?

A

Encourage supplier/customer competition, increased supply disruption risk, and greater reliance on one or a few major customers.

97
Q

What do internal logistics networks involve decisions about?

A

Facilities owned, leased, or operated by the firm.

98
Q

What does an internal logistics network structure look like?

A
99
Q

For facilities that handle goods, what is facility location often based on?

A

Balancing the distance and access to supply (upstream) and demand (downstream).

100
Q

What does facility location affect?

A

Transportation costs/risks, warehousing, inventory management, customer service planning, and coordination costs.

101
Q

What happens to total transportation cost if a facility is located near either the supply source or the demand market?

A

Total transportation cost tends to be minimized.

102
Q

Global/national/regional determinants of facility location?

A

Proximity to customers and suppliers, labor climate, land costs, risks, company preference, quality of life, etc.

103
Q

Site-specific determinants for facility location?

A

Transportation access, inside/outside metropolitan area, facility and land costs, and congestion.

104
Q

Quantitative approache to minimize distances?

A

Grid approaches.

105
Q

What data is needed for a grid approach?

A

Location and grid location.

106
Q

Key tradeoffs in logistics?

A

Inventory holding cost and transportation cost, cost of lost sales (customer service) and transportation cost, cost of lost sales (customer service) and inventory cost, and warehousing costs and transportation costs.

107
Q

What does increasing the speed or frequency of shipments do to transportation costs and amount of inventory that must be held?

A

Increases transportation costs and reduces amount of inventory that must be held because lead time is shorter.

108
Q

What does increasing the speed of shipments do to the cost of lost sales?

A

Reduces the lost cost of sales because customers need not wait as long for products.

109
Q

What is often the cause of expedite expedite shipments?

A

Attempt to retain customers.

110
Q

What do increased inventory levels (safety stocks) do to inventory holding costs and cost of lost sales?

A

Increases inventory holding costs while reducing the cost of lost sales because stockouts and backorders become less frequent.

111
Q

Adding warehouses does what to warehousing costs and transportation costs?

A

Increases warehousing costs and reduces transportation costs.

112
Q

What happens to costs as the number of warehouses increases?

A

Transportation costs and lost sales go down, however inventory costs and warehousing costs go up.

113
Q

What does an increased number of warehouses tend to do to customer service?

A

Improves customer service.

114
Q

What can centralizing stocking locations do for you?

A

Reduce variability of demand, and the level of safety stocks needed to hit the same customer service rate decreases.

115
Q

What happens to the benefit of centralizing stocking locations when more demand is negatively correlated in stocking locations?

A

The greater the benefit of centralizing stocking locations.

116
Q

Drawbacks to centralizing stocking locations?

A

Longer transportation routes and can a centralized location handle the volume.

117
Q

What is outsourcing?

A

The contracting out of a business process to another party.

118
Q

How is outsourcing different than procurement of a service?

A

Rather than buying a service, you are having another party managing and controlling the process for your firm.

119
Q

Why do firms outsource?

A

To cut costs, access to more skilled employees or applied information systems, focus on core competencies, and operate more flexibly.

120
Q

What does 3PL stand for?

A

Third party logistics.

121
Q

What are third party logistics?

A

An external service provider that manages all or part of a company’s logistics functions.

122
Q

Most commonly outsourced function to 3PLs?

A

Transportation management.

123
Q

Second most commonly outsourced function to 3PLs?

A

Warehousing.

124
Q

What are 3PLs being relabeled as?

A

Supply chain solutions.

125
Q

Reasons to utilize 3PL?

A

Opportunity to reduce costs, opportunity to improve customer service, focus on core competency, access to emerging technology, expansion to new or unfamiliar markets, and ability to free capital for other areas.

126
Q

Reasons to utilize in-house logistics?

A

Lack of opportunity to reduce costs, lack of opportunity to improve customer service, logistics is a core competency of the firm, 3PL capabilities do not match the firm’s needs, diminished control, and high security requirements.

127
Q

Types of 3PLs?

A

Resource ownership and primary service.

128
Q

Resource ownership 3PLs?

A

Asset based and non-asset based.

129
Q

Primary service 3PLs?

A

Transportation-based, warehouse/distribution-based, financial-based, and information-based.

130
Q

Examples of asset-based 3PLs?

A

Truck fleet, ocean vessels, aircraft, terminals and warehouses, material handling equipment, etc.

131
Q

What do asset-based 3PLs do?

A

Owns assets and hires labor force needed to run logistics activities.

132
Q

What type of resource ownership 3PLs have tangible equipment and facilities?

A

Asset-based.

133
Q

What typer of resource ownership 3PLs leverage resources of other companies?

A

Non-asset based.

134
Q

What do non asset-based 3PLs do?

A

Contracts/brokers with other firms to provide services rather than owning required assets.

135
Q

How do non-asset based 3PLs gain capacity and negotiating power?

A

Leverages relationships and volume commitments from multiple customers.

136
Q

Potential advantages of asset-based 3PLs?

A

Readily available capacity, permanent employees, and direct control of the customers’ freight.

137
Q

Potential disadvantages of asset-based 3PLs?

A

Potential for bias toward 3PL owned resources in developing solutions for customers.

138
Q

Potential disadvantages of non asset-based 3PLs?

A

Lack of internal capacity to provide service, require strong technology support and high visibility.

139
Q

Potential advantages of non asset-based 3PLs?

A

Less biased in decision making (no preference toward internal option).

140
Q

What is the business focus of the transportation-based 3PL?

A

Focus on the transportation of freight or people.

141
Q

Are transportation-based 3PLs asset-based or non-asset based?

A

Can be either.

142
Q

Examples of transportation-based 3PL services?

A

Transportation management and transportation documentation.

143
Q

What is the business focus of the warehouse/distribution-based 3PL?

A

Focus on public or contract warehousing and distribution services.

144
Q

Examples of warehouse/distribution-based 3PL services?

A

Inventory management, warehousing, order fulfillment, and may also provide transportation services.

145
Q

Examples of financial-based 3PL services?

A

Rating and bill auditing, payment processing, and insurance claims.

146
Q

What is the business focus of the financial-based 3PL?

A

Focus on the monetary issues and financial flows in the supply chain.

147
Q

What is the business focus of the information-based 3PL?

A

Focus on digitized activities that were previously performed manually or required the use of licensed software.

148
Q

What do information-based services do?

A

Sell the software platform more than the service.

149
Q

Examples of information-based 3PL services?

A

Transportation management software, warehouse management software, tracking, and performance management tools.

150
Q

How many users and 3PLs state that they are satisfied with the 3PL relationships and that the collaborations are successful?

A

The majority.

151
Q

What percentage of users indicate that their use of a 3PL has led to year-over-year incremental benefits in order fill rate and accuracy?

A

55%

152
Q

Average 3PL contract length?

A

2 years.

153
Q

What is the goal of a middle point in a grid approach?

A

To minimize total distance.

154
Q

What is the goal of the center of gravity in a grid approach?

A

Minimize total weighted distance based on volume.

155
Q

When is using the center of gravity better than the middle point in a grid approach?

A

When you have volume figures because then you can minimize the weighted distance and the total cost of transportation.

156
Q

What do you build a DC off of based on a grid approach?

A

The center of gravity.

SCM 373 (1 decks)

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