G-J

Question 1

What are the three steps of network planning?

Answer 1

1. Network design
2. Inventory positioning
3. Resource allocation

Question 2

What does a increase in the number of warehouses lead to?

Answer 2

1. Improvement in service level
2. Increase in inventory costs
3. Increase in setup and overhead costs
4. Reduction in outbound transportation costs
5. Increase in inbound transportation costs

Question 3

What are Truckload and Less Than Truckload cost structures?

Answer 3

Truckload: Subdivides country into zones and provides zone-to-zone table costs

Less Than Truckload: Divides rates into three categories

1. Class: Standard rates from practically all products. The higher the class, the higher the transportation charge
2. Exception: Specialized rate that provides less expensive rates
3. Commodity: Commodity-specific rates

Question 4

What are the three main components to warehousing and distribution center costs?

Answer 4

1. Handling costs
2. Fixed costs
3. Storage costs

Question 5

What conditions must potential warehouse locations satisfy?

Answer 5

1. Infrastructure conditions
2. Labor and natural resources
3. Local industry and tax regulations
4. Public interest

Question 6

What are the four questions of model validation?

Answer 6

1. Does the model make sense?
2. Are the data consistent?
3. Can the model’s results be fully explained?
4. Has a sensitivity analysis been performed?

Question 7

What are two techniques to optimize logistics networks?

Answer 7

1. Mathematical optimization techniques
   - Heuristic algorithms: good but not optimal solutions
   - Exact algorithms: optimal, leas-cost solutions
2. Simulation models: Mechanism to evaluate specified design alternatives

Question 8

When should a mathematical or a simulation model be used?

Answer 8

Mathematical: Calculating the most optimal solution

Simulation: When you need to understand the dynamics of the system on a micro scale

Question 9

What is the two-stage approach the optimization?

Answer 9

1. Mathematical optimization model should be used to generate least-cost solutions on the macro level
2. Simulation model should be used to evaluate solutions generated in first phase

Question 10

What does stocking as much as possible close to the customer lead to?

Answer 10

1. Low inventory turnover
2. Inconsistent service levels across products and locations
3. Need for expediting shipments

Question 11

What is a supply chain master plan?

Answer 11

Shows the process of allocating and coordinating distribution and production strategies and resources to either minimize costs or maximize profit

Question 12

What are the three steps to find optimal solution in transportation model?

Answer 12

1. Obtaining an initial solution
2. Testing the solution for optimality
3. Improving sub optimal solutions

Question 13

What are three types of supply contracts for make to order supply chains?

Answer 13

1. Buy-back contracts: Seller agrees to buy back unsold goods from buyer at price higher than salvage value
2. Revenue-sharing contracts: Buyer shares some of its revenue with the seller in return for a discount on price
3. Quantity-flexibility contracts: Supplier provides full refund for returned items, not exceeding certain quantity
4. Sales rebate contract: Supplier pays a rebate for any item sold above a certain quantity

Question 14

What are two contracts for make to order/make to stock supply chains?

Answer 14

1. Pay-back contracts: Buyer agrees to pay a certain agreed upon price for any unit that is produced by the manufacturer but not purchased by the distributor
2. Cost-sharing contracts: The buyer share some of the production cost with the manufacturer in return for a discount on the whole sale price

Question 15

What are two contracts with asymmetric information?

Answer 15

1. Capacity reservation contracts: Manufacturer pays to reserve a certain level of capacity with the supplier
2. Advance purchase contracts: Supplier charges an advance purchase price for a firm’s order placed before building capacity, charge a different price for orders after demand is realized

Question 16

What are contracts for non-strategic components?

Answer 16

1. Long-term contracts: Specifying a fixed amount of supply to be delivered at some point in the future
2. Flexibility contracts: Buyer prepays a fraction of the product price upfront, in return fora commitment from the supplier to reserve capacity
3. Spot purchase: Buyers look for additional supply in the open market and pays the spot price
4. Portfolio contracts: Buyers sign multiple contracts to reduce their risk and optimize expected profit

Question 17

What are five main factors contributing to increase in variability in supply chain?

Answer 17

1. Demand forecasting
2. Lead time
3. Batch ordering
4. Price fluctuation
5. Inflated orders

Question 18

What are four techniques to reduce the bullwhip effect?

Answer 18

1. Reduce uncertainty: centralizing demand information
2. Reduce variability: Variability in customer demand reduced by everyday low pricing strategies
3. Lead-time reduction
4. Strategic partnerships

Question 19

What does a reduction in lead time lead to?

Answer 19

1. Quickly satisfying demand
2. Reduction in bullwhip effect
3. Accurate forecasts due to shorter forecast horizon
4. Reduction in finished goods inventory level

Question 20

What are the four effects that play a role in cost saving through information?

Answer 20

1. The effect of capacity: When capacity is high, the benefit is high
2. The effect of ratio of penalty to holding cost: Moderate ratios are more beneficial
3. The effect of demand distribution and STD: Information is most beneficial at moderate levels of variance
4. The effect of variance between (s-S): Moderate is more beneficial