Chat with AIExam 13: Determining the Optimal Level of Product Availability
When a firm uses production with postponement to satisfy a part of its demand with the rest being satisfied without postponement, it is using
(43) 
VerifiedD
Tailored postponement allows a firm to increase its profitability by only postponing the uncertain part of the demand and producing the predictable part at a lower cost without postponement.
(33) VerifiedTrue
Explain how tailored sourcing can be used to improve profitability.
(40) VerifiedIn tailored sourcing, firms use a combination of two supply sources, one focusing on cost but unable to handle uncertainty well, and the other focusing on flexibility to handle uncertainty, but at a higher cost. For tailored sourcing to be effective, having supply sources where one serves as the backup to the other is not sufficient. The two sources must focus on different capabilities. The low-cost source must focus on being efficient and should only be required to supply the predictable portion of the demand. The flexible source should focus on being responsive and be required to supply the uncertain portion of the demand. As a result, tailored sourcing allows a firm to increase its profits and better match supply and demand. The value of tailored sourcing depends on the reduction in cost that can be achieved as a result of one source facing no variability. If this benefit is small, tailored sourcing may not be ideal because of the added complexity of implementation. Tailored sourcing may be volume-based or product-based depending on the source of uncertainty.
In volume-based tailored sourcing, the predictable part of a product's demand is produced at an efficient facility, whereas the uncertain portion is produced at a flexible facility.
In product-based tailored sourcing, low-volume products with uncertain demand are obtained from a flexible source, while high-volume products with less demand uncertainty are obtained from an efficient source. Product-based tailored sourcing may be implemented with a flexible facility focusing on new products, and efficient facilities focusing on the well-established products.
A company with multiple products that chooses to delay product differentiation until closer to the point of sale is using
(35) As the ratio of the cost of overstocking to the cost of understocking gets smaller, the optimal level of product availability decreases.
(35) The level of product availability, also referred to as the ________, is one of the primary measures of a supply chain's responsiveness.
(37) In product-based tailored sourcing, low-volume products with uncertain demand are obtained from a flexible source, while high-volume products with less demand uncertainty are obtained from an efficient source.
(35) As the total quantity for the season is broken up into multiple smaller orders, the buyer is better able to
(39) There is a cost associated with postponement because the production cost using postponement is typically
(32) Tailored sourcing may be volume-based or product-based depending on the source of uncertainty.
(45) Which of the following would be a strategy to decrease the margin lost in a stockout?
(25) A managerial lever to increase profitability is to decrease the salvage value of each unit.
(38) Under tailored postponement, a firm produces the amount that is very likely to sell using
(36) Scenario 13.2 - Fish or Chicken
The taco stand in the atrium of the new College of Business building carried two items, fish tacos and chicken tacos. The fish tacos sell for $15 and are made out of $5 of ingredients and the chicken tacos sell for $10 and are made out of $4 of ingredients. Some days the taco stand owner has only chicken at his disposal, so he makes nothing but chicken tacos, and some days the opposite is true and he makes only fish tacos. Thus, he is able to estimate demand for chicken tacos at 2500 per day with a standard deviation of 600 and the demand for fish tacos at 2000 per day with a standard deviation of 500. Any fish or chicken tacos that do not sell at the end of the day can be sold for $1 each as bait. On days when both proteins are available, the taco stand manager prefers to make a few of each kind. All tacos are made in his home kitchen and then transported to campus. Due to time constraints and the capacity of his pickup truck bed, he is limited to beginning each day with only 3000 tacos.
-Suppose the taco stand manager could wake up a little earlier and borrow his buddy's full size pickup to transport tacos to campus. If time and capacity were not an issue, what would the expected profit be per day?
(32) In tailored sourcing, firms use a combination of two supply sources,
(36) Describe the approaches a manager can use to reduce demand uncertainty.
(39) Describe managerial levers to increase profitability within a supply chain.
(25) Scenario 13.1 - Nefarious
The tenured professor routinely led student groups on factory tours in exotic locales, and one popular destination was an island south of Miami. The students enjoyed this happy little island and the professor liked it because he could supplement his income by bringing back a few boxes souvenirs he could sell to his friends. The souvenirs cost the professor $125 a box and he sells them for $290 a box. Souvenirs that dry out due to age can be sold for $80. Experience has shown that the demand for boxes of these souvenirs has a mean of 80 with a standard deviation of 20.
-Naturally, the professor will purchase the optimal number of boxes. (He's had a course or two in supply chain management and knows this model well.) What is the expected number of boxes that he doesn't sell?
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