Scm 4301 Exam #2

Front 1

What are the 4 classifications of network design decisions?

Back 1

1) Facility Role: What role should each facility play? What processes are performed at each facility?

2)Facility Location: where should facilities be located?

3) Capacity Allocation: How much capacity should be allocated to each facility?

4) Market and Supply Allocation: What markets should each facility serve? Which supply sources should feed each facility?

Front 2

What are the 6 facility strategic roles?

Back 2

1) Offshore Facility: low-cost facility for export production
2) Source Facility: low-cost facility for global production
3) Server Facility: regional production facility
4) Contributor Facility: regional production facility with developmental skills.
5) Outpost Facility: regional production facility built to gain local skills
6) Lead Facility: facility that leads in development and process technologies.

Front 3

What are the 8 factors influencing network design decisions?

Back 3

1) Strategic Factors
2) Technological Factors
3) Macroeconomic Factors: Tariffs and Tax Incentives, Exchange Rate and Demand Risk
4) Political Factors
5) Infrastructure Factors
6) Competitive Factors: Positive Externalities between firms, Locating to Split the Market
7) Customer Response Time and Local Presence
8) Logistics and Facility Costs

Front 4

What are positive externalities?

Back 4

Positive Externalities are instances where the collocation of multiple firms benefits all of them. Positive externalities lead to competitors locating close to each other or the presence of a competitor leads to the development of appropriate infrastructure in the developing area.

Front 5

What is Aggregate Planning?

Back 5

Aggregate planning is a process by which a company determines ideal levels of capacity, production, subcontracting, inventory, stockouts, and even pricing over a specified time horizon. As the name suggests, it solves problems involving decisions rather than stock-keeping unit (SKU) level decisions.

Front 6

What are the operational parameters that are the aggregate planner's main objective to identify over the specified time horizon?

Back 6

1) Production Rate: the number of units to be completed per unit time (such as per week or per month)
2) Workforce: the number of workers/units of capacity needed for production
3) Overtime: the amount of overtime production planned
4) Machine Capacity Level: the number of units of machine capacity needed for production
5) Subcontracting: the subcontracted capacity required over the planning horizon
6) Backlog: demand not satisfied in the period in which it arises but carried over to future periods
7) Inventory on Hand: the planned inventory carried over the various periods in the planning horizon

Front 7

What are the three Aggregate Planning Strategies?

Back 7

1) Chase strategy - using capacity as a lever
2) Time flexibility from workforce or capacity strategy- using utilization as the lever
3) Level strategy- using inventory as the lever

Front 8

What is predictable variability?

Back 8

Predictable variability is change in demand that can be forecasted.

Front 9

What are two broad combinations to handle predictable variability?

Back 9

1. Manage supply using capacity, inventory, subcontracting, and backlogs.
2. Manage demand using short-term price discounts and trade promotions.

Front 10

What combination of two factors can let a firm vary the supply of product?

Back 10

1. Production capacity
2. Inventory

Front 11

In managing capacity to meet predictable variability, firms use a combination of the following approaches:

Back 11

1) Time flexibility from workforce
2) Use of seasonal workforce
3) Use of subcontracting
4) Use of dual facilities-specialized and flexible
5) Designing product flexibility into the production process

Front 12

When managing inventory to meet predictable variability, firms use a combination of what approaches?

Back 12

1) Using common components across multiple products:
2) Build inventory of high-demand or predictable demand products

Front 13

When a promotion is offered during a period, that period's demand tends to go up. This increase in demand results from a combination of what three factors?

Back 13

1) Market growth - An increase in consumption of the product either from new or existing customers
2) Stealing share - Customers substitute the firm's product for a competitor's product.
3) Forward buying - Customers move up future purchases to the present.

Front 14

What are the conclusions regarding the impact of promotions?

Back 14

1) Average inventory increases if a promotion is run during the peak period and decreases if the promotion is run during the off-peak period.
2) Promoting during a peak-demand month may decrease overall profitability if a significant fraction of the demand increase results from a forward buy.
3) As forward buying becomes a smaller fraction of the demand increase from a promotion, it is more profitable to promote during the peak period.
4) As the product margin declines, promoting the peak-demand period becomes less profitable.

Front 15

What are the factors influencing inventory holding cost?

Back 15

1) Cost of capital (dominant component of holding cost for products that do not become obsolete quickly)
2) Obsolescence (or spoilage) cost (the rate at which the value of the stored product drops because its market value or quality falls)
3) Handling cost (incremental receiving and storage costs that vary with the quantity of product received)
4) Occupancy cost (incremental change in space cost due to changing cycle inventory)
5) Miscellaneous costs (theft, security, damage, tax and additional insurance charges that are incurred.

Front 16

What are the factors that influence ordering cost?

Back 16

1) Buyer Time (incremental time of the buyer placing the extra order)
2) Transportation costs (A fixed transportation cost is often incurred regardless of the size of the order)
3) Receiving costs (administration work such as purchase order matching and any effort associated with updating inventory records. receiving costs that are quantity dependent should not be included here)
4) Other costs (each situation can have unique costs that should be considered if they are incurred for each order regardless of the quantity of that order)