Deck 21: Supply Chain Modeling

Question 1

Unfortunately,not many supply chain metrics exist that can be effectively used to evaluate performance within a company and for its supply chain partners.

Answer 1

False

Question 2

Firms often use multiple suppliers for important components to mitigate the risks of total supply disruption.

Answer 2

True

Question 3

Walsh Construction is considering two options for its supplier portfolio.Option 1 uses two local suppliers.Each has a "unique-event" risk of 8%,and the probability of a "super-even" that would disable both at the same time is estimated to be 2.5%.Option 2 uses two suppliers located in different countries.Each has a "unique-event" risk of 18%,and the probability of a "super-event" that would disable both at the same time is estimated to be 1.2%.
(a)What is the probability that both suppliers will be disrupted using option 1?
(b)What is the probability that both suppliers will be disrupted using option 2?
(c)Which option would provide the lowest risk of a total shutdown?

Answer 3

(a)S = 0.025;U = 0.08
From (S11 - 1),P(2)= 0.025 + (1 - 0.025)0.082 = 0.025 + 0.975(0.0064)= 0.03124
(b)S = 0.012;U = 0.18
From (S11 - 1),P(2)= 0.012 + (1 - 0.012)0.182 = 0.012 + 0.988(0.0324)= 0.04401
(c)Since 0.03124 < 0.04401,Option 1 (two local suppliers)carries the lower risk.

Question 4

The bullwhip effect describes the tendency for larger order size fluctuations in the supply chain as orders move from suppliers toward retailers.

Question 5

For the disaster risk decision tree model,explain why an increase in S and an increase in U have the opposite impact on the choice of how many suppliers to use.What is the implication of these two phenomena taken together?

Question 6

Consider the disaster risk decision tree model.Using the notation from the model,what is the expected monetary value (cost)of choosing two suppliers?

A)2C
B)[1-P(2)] × 2C + P(2)× (L + 2C)
C)2C + SL
D)P(2)× 2C + [1-P(2)] × (L + 2C)
E)2C + (S+U2)L

Question 7

Which of the following is NOT an element of the disaster risk decision tree model?

A)the buyer's financial loss incurred in a supply cycle if supplier i were disrupted
B)the marginal cost of managing a supplier
C)the buyer's financial loss incurred in a supply cycle if all suppliers were disrupted
D)the probability of a "super-event" that would disrupt all suppliers simultaneously
E)the probability of a "unique-event" that would disrupt only one supplier

Question 8

What technique does the text use to determine the best number of suppliers to manage disaster risk?

A)linear programming
B)factor weighting technique
C)transportation model
D)decision tree
E)simulation

Question 9

Suzy Jones is trying to decide whether to use one or two suppliers for the motors than go into the chain saws that her company produces.She wants to use local suppliers because her firm runs a JIT operation.Her factory is located in a coastal town that is prone to hurricanes.She estimates that the probability in any year of a "super-event" that might shut down all suppliers at the same time for at least two weeks is 5%.Such a total shutdown would cost the company approximately $100,000.She estimates the "unique-event" risk for any of the suppliers to be 10%.Assuming that the marginal cost of managing an additional supplier is $12,000 per year,should Suzy use one or two suppliers?

Question 10

The bullwhip effect can occur when orders decrease as well as when they increase.

Question 11

Under the disaster risk decision tree model,which of the following conditions would create the HIGHEST incentive to use FEWER suppliers?

A)lower L,lower C
B)lower L,higher C
C)higher L,lower C
D)higher L,higher C
E)lower L,higher C,lower S

Question 12

In the disaster risk model,as the probability of a super-event (S)increases,the advantage of utilizing multiple suppliers increases.

Question 13

In the disaster risk decision tree model,a(n)________ disrupts all suppliers simultaneously.

Question 14

The overarching solution to the bullwhip effect is simply for supply chain members to share information and work together.

Question 15

Suppose that the manager of a company has estimated the probability of a super-event sometime during the next five years that will disrupt all suppliers as 0.23%.In addition,the firm currently uses three suppliers for its main component,and the manager estimates the probability of a unique-event that would disrupt one of them sometime during the next five years to be 1.4%.What is the probability that all three suppliers will be disrupted at the same time at some point during the next five years?

A)4.4203%
B)0.2300%
C)4.4300%
D)0.2297%
E)0.2303%

Question 16

Under the disaster risk decision tree model,which of the following conditions would create the HIGHEST incentive to use MORE suppliers?

A)lower S,lower U
B)lower S,higher U
C)higher S,lower U
D)higher S,higher U
E)higher S,higher U,higher C

Question 17

Consider the disaster risk decision tree model.
(a)Derive a formula to represent the amount that the probability of all suppliers being disrupted simultaneously,P(n),will increase if the super-event probability S is doubled.
(b)Test your formula by computing the amount of increase if the original S equals 1% and there are two suppliers,each with U = 4%.

Question 18

Suppose that the manager of a company has estimated the probability of a super-event sometime during the next three years that will disrupt all suppliers as 2%.In addition,the firm currently uses four suppliers for its main component,and the manager estimates the probability of a unique-event that would disrupt one of them sometime during the next three years to be 20%.Supplier management costs during this period are $50,000 per supplier.The financial cost incurred if all four suppliers are disrupted at the same time is estimated to be $10,000,000.What is the expected monetary value (cost)of the current supplier diversification arrangement?

A)$412,800
B)$415,680
C)$10,200,000
D)$215,680
E)$8,240,000

Question 19

Which of the following statements is TRUE regarding the 2011 Tohoku earthquake and tsunami?

A)It devastated eastern sections of Japan.
B)Some manufacturers around the globe had been relying exclusively on suppliers located in the affected zones.
C)Japanese-built vehicle outputs for Toyota and Honda were down more than 60% in the month following the disaster.
D)Manufacturers in several industries worldwide took 6 months or longer before they saw their supply chains working normally again.
E)All of the above are true.

Question 20

The Great East Japan Earthquake of 2011 was centered off of the Pacific coast of which region of Japan?

A)Kanto
B)Chubu
C)Tohoku
D)Kansai
E)Chugoku

Question 21

Choosing suppliers simply based on the lowest bid has become a somewhat rare approach.

Question 22

Suppose that a firm incurs a demand variance of 400 units per week,and the variance of orders that it places equals 750 per week.What is the value of the bullwhip measure for this company?

Question 23

Describe how the U.S.Cash for Clunkers program unintentionally contributed to the bullwhip effect in the automobile industry.

Question 24

Over the past six months,Wholesale Foods of Fresno has experienced a standard deviation of demand of 600 units.Standard deviation of its orders during that period was 800 units.
(a)What is the bullwhip measure for Wholesale Foods of Fresno?
(b)If Wholesale Foods of Fresno had made a perfect forecast of demand over the past 6 months and had decided to order 1/6 of that demand each month,what would its bullwhip measure have been?

Question 25

What is the value of the bullwhip measure for a company with a standard deviation of demand equal to 20,and a variance of orders equal to 450?

A)0.889
B)22.5
C)1.125
D)0.044
E)50

Question 26

What value of the bullwhip measure would indicate that a dampening scenario exists?

A)greater than 1
B)greater than 0
C)less than 0
D)less than 1
E)0

Question 27

What is the formula for the bullwhip measure?

A)variance of orders / variance of demand
B)variance of orders - variance of demand
C)variance of demand / variance of orders
D)variance of orders2 / variance of demand2
E)variance of demand - variance of orders

Question 28

Which of the following is the prescribed remedy when the bullwhip effect is caused by shortage gaming?

A)share demand information
B)channel coordination
C)increase capacity
D)price stabilization
E)allocate orders based on past demand

Question 29

The factor weighting model is an attempt to add subjectivity to decision making when selecting among suppliers.

Question 30

The U.S.________ program,designed to stimulate the economy and improve fuel efficiency,produced an unintended bullwhip effect in the automobile industry.

Question 31

Which of the following is NOT a remedy for the bullwhip effect?

A)share demand information
B)channel coordination
C)order batching
D)price stabilization
E)allocate orders based on past demand

Question 32

Identify the four primary causes of the bullwhip effect and the remedy for each.

Question 33

A grocery store is trying to find a new supplier for carrots.Its three most important supplier criteria are freshness,lot size,and cost,with factor weights of 0.6,0.1,and 0.3,respectively.What would a supplier with ratings of 6,8,and 10 in the three respective categories score as a weighted total?

A)24
B)1
C)7.4
D)9.8
E)8

Question 34

A bullwhip measure value greater than zero indicates that the bullwhip effect exists.

Question 35

When using the factor weighting approach,most companies will use the same list of criteria and the same criteria weights.

Question 36

What value of the bullwhip measure would indicate that the bullwhip effect exists?

A)greater than 1
B)greater than 0
C)less than 0
D)less than 1
E)1

Question 37

Consider a supply chain where a manufacturer sells to a distributor who sells to a wholesaler who sells to a retailer.Last year,the retailer's weekly variance of demand was 4000 units.The weekly variance of orders was 5000;8000;12,000;and 17,000 units for the retailer,wholesaler,distributor,and manufacturer,respectively.(Note that the variance of orders equals the variance of demand for that firm's supplier. )
(a)Calculate the bullwhip measure for the retailer.
(b)Calculate the bullwhip measure for the wholesaler.
(c)Calculate the bullwhip measure for the distributor.
(d)Calculate the bullwhip measure for the manufacturer.
(e)Which firm appears to be contributing the most to the bullwhip effect in this supply chain?

Question 38

If the variance of orders of a manufacturer equals 800,and the variance of orders of its supplier equals 750,what is happening at this part of the supply chain?

A)The bullwhip effect is present.
B)The supplier is providing a dampening (anti-bullwhip)effect.
C)The bullwhip measure for the supplier equals 1.067
D)Neither amplification nor smoothing is present.
E)Both amplification and smoothing are present.

Question 39

Suppose that in month 1,both the retailer and the wholesaler in a supply chain ordered 20,000 units.Then in month 2,the retailer decreases its order size by 1000 units.If the wholesaler then decreases its order size in month 2 by 700 units,which of the following is TRUE?

A)The wholesaler is contributing to the bullwhip effect.
B)The wholesaler is providing a dampening (anti-bullwhip)effect.
C)The bullwhip measure for the wholesaler equals 0.70.
D)Neither amplification nor smoothing is present.
E)The wholesaler is providing both amplification and smoothing.

Question 40

Which of the following is NOT a potential cause of the bullwhip effect?

A)shortage gaming
B)channel coordination
C)order batching
D)demand forecast errors
E)price fluctuations

Question 41

Which of the following would NOT be considered (in addition to delivery speed)when choosing a mode of transportation?

A)on-time delivery
B)coordinating shipments to maintain a schedule
C)getting new products to market
D)keeping a customer happy
E)All of the above may be considered.

Question 42

A company is about to select a vendor for the outsourcing of all of its engineering,environmental,and CAD requirements.It has identified four criteria critical to the selection.These criteria,and their importance weights,appear below.Three firms,A,C,and E,have indicated that they are interested in this position.The company has scored each of the three candidates on these criteria,using a 1-10 scale,where 10 is best.Candidate A scored 7,7,7,and 5,respectively,on the four criteria.Candidate C scored 9,4,8,and 6.Candidate E scored 5,10,10,and 7.Which vendor has the highest composite score?

Question 43

The ________ model adds objectivity to decision making when selecting suppliers.

Question 44

Tommy's Family Furniture is looking for a new supplier for its armchairs.Tommy is primarily interested in only two criterion: price and name brand value.He considers the value of the name brand to be three times more important than price.Tommy has narrowed his choices to two suppliers.On a 10-point scale,he has assigned Amy's Armchairs a score of 8 on price and 5 on name brand value.He has assigned Annie's Armchairs a score of 3 on price and 6 on name brand value.Apply the factor weighting technique to help Tommy choose a new armchair supplier.

Question 45

Identify at least four factors in addition to delivery speed (and its impact on holding cost)that may need to be considered when choosing the best mode of shipment.

Question 46

Which of the following elements of the factor weighting technique in supplier selection analysis does NOT contain a certain degree of subjectivity?

A)the formula used to calculate the total weighted score for each supplier
B)the weights applied to each supplier criterion
C)the scores for each potential supplier on each criterion
D)the set of supplier criteria
E)the numerical scale used to rate suppliers

Question 47

Which of the following is NOT REQUIRED information to obtain to conduct the factor weighting technique in supplier selection analysis?

A)a set of supplier criteria
B)a weight for each supplier criterion
C)a score for each potential supplier on each criterion
D)a qualitative scale on which to rate suppliers
E)a numerical scale on which to rate suppliers

Question 48

An industrial producer is searching for a supplier for ball bearings.Its three most important supplier criteria are price,quality,and delivery reliability.The firm has decided that quality and delivery reliability should carry the same weight,and that each of them are twice as important as price.If the weights sum to 100%,what would a supplier with ratings of 40,90,and 75 in the three respective categories score as a weighted total?

A)37
B)370
C)49
D)205
E)74

Question 49

Suppose that a product's value is $1000.The manufacturer experiences a holding cost of 2.5% per month.The firm ships the product across country by truck,and it arrives six days later.The shipping cost is $80 per unit.What is the holding cost on each unit shipped? (Assume 30 days per month. )

A)$0.83
B)$5.00
C)$0.07
D)$0.40
E)$150.00

Question 50

Briefly describe how to conduct the factor weighting approach to supplier evaluation.

Question 51

Typically,a more expensive shipping option is:

A)slower with a lower holding cost.
B)slower with a higher holding cost.
C)faster with a lower holding cost.
D)faster with a higher holding cost.
E)faster,but holding cost is unaffected by delivery speed.

Question 52

The primary trade-off in transportation mode analysis involves evaluating ________ against the cost of shipping.

Question 53

A container of ball-bearings valued at $25,000,currently located in Houston,TX,needs to be delivered to the Morton,IL,plant.The standard shipment method takes two days.However,for an additional charge of $500,the container can be sent overnight to arrive one day later.The annual holding cost rate for this type of item has been estimated at 28%.Which option is more economical?

Question 54

A shipment of parts valued at $75,000 needs to be shipped from Tampa,FL,to Chicago,IL.They could be shipped by rail,taking 15 days at a cost of $1,575,or by truck,taking 4 days at a cost of $2,640.The annual holding cost rate for this type of item has been estimated at 22%.What option is more economical?

Question 55

The primary trade-off in transportation mode analysis involves evaluating holding cost against the cost of shipping.