CHILCUTT OM 300 EXAM 3QUESTIONS
& ANSWERS(RATED A+)
supply chain - ANSWERthe network of activities that deliver a product or service to
the customer.
activities within the supply chain - ANSWER1. obtaining raw materials
2. transforming raw materials into basic finished goods
3. further processing of basic finished goods into customized products that are sold
supply chain echelon/tiers - ANSWER-the lower the tier level, the closer the level to
the customer
objective of supply chain management - ANSWERbuild a chain of suppliers that
focuses on maximizing value to the ultimate customer
Supply Chain Management - ANSWERThe business function that coordinates all of
the network links
-coordinates movement of goods through supply chain from suppliers to
manufacturers to distributors
-promotes information sharing in the supply chain, such as forecasts, sales data, &
promotions
The Supply Chain's Strategic Importance - ANSWERsupply chain management is
the integration of the activities that:
-procure materials and services
-transform them into intermediate goods and final products, &
-deliver them through a distribution system
activities performed as part of supply chain management - ANSWER1. suppliers
2. distributors
3. warehousing and inventory
4. transportation vendors
5. order fulfilment
6. credit and cash transfers
7. accounts payable and receivable
8. sharing customer, forecasting, and production information
Outsourcing - ANSWER-transfers traditional internal activities and resources of a
firm to outside vendors
-utilizes the efficiency that comes with specialization
-firms outsource:
information technology, accounting, legal, logistics, & production
6 sourcing strategies - ANSWER1. negotiating with many suppliers
2. long-term partnering with few suppliers
,3. vertical integration
4. joint ventures
5. Keiretsu
6. virtual companies that use suppliers on an as needed basis
Many Suppliers - ANSWER-Commonly used for commodity products
-Purchasing is typically based on price
-Suppliers compete with one another
-Supplier is responsible for maintaining necessary levels of technology, expertise,
forecasting abilities, as well as cost, quality, and delivery competencies
Few Suppliers - ANSWER-Buyer forms longer term relationships with fewer
suppliers
-Create value through economies of scale and learning curve improvements
-Suppliers more willing to participate in JIT programs and contribute design
innovations and technological expertise
-Cost of changing suppliers is huge
Trade secrets and other alliances
Vertical Integration - ANSWER-developing the ability to produce goods or services
previously purchased
-integration may be forward, towards the customers, or backwards, towards
suppliers
-can improve cost, quality, and inventory but requires capital, managerial talent, and
demand
-risky in industries with undergoing technological changes
joint venture - ANSWER-formal collaborations:
enhance skills, secure supply, & reduce costs
-cooperate without diluting the brand or conceding competitive advantage
Keiretsu Networks - ANSWER-part collaboration, part purchasing from few suppliers,
and part vertical integration
-supplier becomes part of the company coalition
-often provide financial support for suppliers through ownership or loans
-members expect long-term relationships and provide technical expertise and stable
quality production
-may extend through several tiers of the supply chain
Virtual Companies - ANSWER-Rely on a variety of good, stable relationships to
provide services on demand
-Exceptionally lean performance, specialized management expertise, low capital
investment, flexibility, and speed
supply chain risk - ANSWER-More reliance on supply chains means more risk
-customer and its suppliers are more dependent on each other as the number of
suppliers used decreases
-risk is compounded by globalization and logistical complexity
types of risk - ANSWERTraditional Concerns:
, -vender reliability
-vendor quality
Concerns Due To Globalization:
-increase shipping times =>less reliable logistics
-tariffs and quotas impacting companies ability to do business
-more complex information flows
-greater political/currency risks
Mitigation Tactic (supplier fails to deliver/supplier with quality problems) - ANSWER-
use multiple suppliers, contract with penalties, subcontractors on retainer, pre-
planning
-improver supplier selection process, require supplier certification, train and monitor
suppliers
Mitigation Tactic (logistic delays or damage/distribution) - ANSWER-have redundant
transportation modes and warehouses, improve packaging design, contracts with
penalties
- careful partner selection, contracts with penalties, monitoring of partners
Mitigation Tactic (political/economic) - ANSWER-political risk insurance, diversify
across multiple countries, use franchising and licensing agreements
-hedge to combat exchange rate risk, purchase contracts that address price
fluctuations
Mitigation Tactic (natural catastrophes/theft, vandalism, terrorism) - ANSWER-
insurance, diversify across multiple countries, alternate sourcing
-insurance, patent protection, security measures (RFID & GPS)
local optimization - ANSWERfocusing on local profit or cost minimization based on
limited knowledge
Incentives (sales incentives, quantity discounts, quotas, and promotions) -
ANSWER-push merchandise in to the system prior to occurrence of actual sales
large lots - ANSWERlow unit cost with respect to production and shipping, but
results in larger holding costs and does not reflect actual sales
bullwhip effect - ANSWER-stable demand becomes lumpy orders through the supply
chain
-describes variation in replenishment orders at different supply chain levels with no
apparent link to final demand
Bullwhip Effect Causes - ANSWER-poor demand forecasting at each level, waiting to
batch orders, price fluctuations & promotions, rationing
Counteracting the Bullwhip Effect - ANSWER-collaborate forecast at all levels, share
real demand information (POS terminals)
-order based on demand rates, not batching
-stabilize pricing
& ANSWERS(RATED A+)
supply chain - ANSWERthe network of activities that deliver a product or service to
the customer.
activities within the supply chain - ANSWER1. obtaining raw materials
2. transforming raw materials into basic finished goods
3. further processing of basic finished goods into customized products that are sold
supply chain echelon/tiers - ANSWER-the lower the tier level, the closer the level to
the customer
objective of supply chain management - ANSWERbuild a chain of suppliers that
focuses on maximizing value to the ultimate customer
Supply Chain Management - ANSWERThe business function that coordinates all of
the network links
-coordinates movement of goods through supply chain from suppliers to
manufacturers to distributors
-promotes information sharing in the supply chain, such as forecasts, sales data, &
promotions
The Supply Chain's Strategic Importance - ANSWERsupply chain management is
the integration of the activities that:
-procure materials and services
-transform them into intermediate goods and final products, &
-deliver them through a distribution system
activities performed as part of supply chain management - ANSWER1. suppliers
2. distributors
3. warehousing and inventory
4. transportation vendors
5. order fulfilment
6. credit and cash transfers
7. accounts payable and receivable
8. sharing customer, forecasting, and production information
Outsourcing - ANSWER-transfers traditional internal activities and resources of a
firm to outside vendors
-utilizes the efficiency that comes with specialization
-firms outsource:
information technology, accounting, legal, logistics, & production
6 sourcing strategies - ANSWER1. negotiating with many suppliers
2. long-term partnering with few suppliers
,3. vertical integration
4. joint ventures
5. Keiretsu
6. virtual companies that use suppliers on an as needed basis
Many Suppliers - ANSWER-Commonly used for commodity products
-Purchasing is typically based on price
-Suppliers compete with one another
-Supplier is responsible for maintaining necessary levels of technology, expertise,
forecasting abilities, as well as cost, quality, and delivery competencies
Few Suppliers - ANSWER-Buyer forms longer term relationships with fewer
suppliers
-Create value through economies of scale and learning curve improvements
-Suppliers more willing to participate in JIT programs and contribute design
innovations and technological expertise
-Cost of changing suppliers is huge
Trade secrets and other alliances
Vertical Integration - ANSWER-developing the ability to produce goods or services
previously purchased
-integration may be forward, towards the customers, or backwards, towards
suppliers
-can improve cost, quality, and inventory but requires capital, managerial talent, and
demand
-risky in industries with undergoing technological changes
joint venture - ANSWER-formal collaborations:
enhance skills, secure supply, & reduce costs
-cooperate without diluting the brand or conceding competitive advantage
Keiretsu Networks - ANSWER-part collaboration, part purchasing from few suppliers,
and part vertical integration
-supplier becomes part of the company coalition
-often provide financial support for suppliers through ownership or loans
-members expect long-term relationships and provide technical expertise and stable
quality production
-may extend through several tiers of the supply chain
Virtual Companies - ANSWER-Rely on a variety of good, stable relationships to
provide services on demand
-Exceptionally lean performance, specialized management expertise, low capital
investment, flexibility, and speed
supply chain risk - ANSWER-More reliance on supply chains means more risk
-customer and its suppliers are more dependent on each other as the number of
suppliers used decreases
-risk is compounded by globalization and logistical complexity
types of risk - ANSWERTraditional Concerns:
, -vender reliability
-vendor quality
Concerns Due To Globalization:
-increase shipping times =>less reliable logistics
-tariffs and quotas impacting companies ability to do business
-more complex information flows
-greater political/currency risks
Mitigation Tactic (supplier fails to deliver/supplier with quality problems) - ANSWER-
use multiple suppliers, contract with penalties, subcontractors on retainer, pre-
planning
-improver supplier selection process, require supplier certification, train and monitor
suppliers
Mitigation Tactic (logistic delays or damage/distribution) - ANSWER-have redundant
transportation modes and warehouses, improve packaging design, contracts with
penalties
- careful partner selection, contracts with penalties, monitoring of partners
Mitigation Tactic (political/economic) - ANSWER-political risk insurance, diversify
across multiple countries, use franchising and licensing agreements
-hedge to combat exchange rate risk, purchase contracts that address price
fluctuations
Mitigation Tactic (natural catastrophes/theft, vandalism, terrorism) - ANSWER-
insurance, diversify across multiple countries, alternate sourcing
-insurance, patent protection, security measures (RFID & GPS)
local optimization - ANSWERfocusing on local profit or cost minimization based on
limited knowledge
Incentives (sales incentives, quantity discounts, quotas, and promotions) -
ANSWER-push merchandise in to the system prior to occurrence of actual sales
large lots - ANSWERlow unit cost with respect to production and shipping, but
results in larger holding costs and does not reflect actual sales
bullwhip effect - ANSWER-stable demand becomes lumpy orders through the supply
chain
-describes variation in replenishment orders at different supply chain levels with no
apparent link to final demand
Bullwhip Effect Causes - ANSWER-poor demand forecasting at each level, waiting to
batch orders, price fluctuations & promotions, rationing
Counteracting the Bullwhip Effect - ANSWER-collaborate forecast at all levels, share
real demand information (POS terminals)
-order based on demand rates, not batching
-stabilize pricing
