C215 - Chapter 4

Question 1

What are the 3 components of Supply Chain ?

Answer 1

1. External Suppliers : suppliers providing raw materials/services and parts from suppliers.
2. Internal Functions: making the product or service (production,processing, production planning, quality control).
   👉 activities performed by final product company
3. External Distributors : transport product/service to locations for eventual sale to customers

👉 1.Suppliers → 2. Manufacturer/Producer → 3.Distributor/Retailer → Customer

Question 2

Tier Suppliers

Answer 2

• Tier 1: supplies directly to processing facility
  EX: Dairy Farm, plastic container manufacturer
• Tier 2: directly supplies to Tier 1 supplier
  EX: cardboard, paper mill, chemicals
• Tier 3: Directly supplies to Tier 2 supplier
  EX: lumbar company, chemical plant

Question 3

1. What is the bullwhip effect
2. 4 Causes of the Bullwhip Effect

Answer 3

1. small changes in customer demand cause bigger and bigger swings in orders as you move up the supply chain.

👉 In short: Bullwhip effect = small demand change at the customer end → big waves upstream in the supply chain.

2.

1.	Demand Forecasting Errors – companies overreact to small demand changes when making forecasts.

2.	Order Batching – firms place large, infrequent orders instead of steady small ones.

3.	Price Fluctuations – promotions or discounts cause customers to buy more than usual.

4.	Rationing and Shortages – when supply is tight, customers over-order to make sure they get enough.

👉 In short: Bullwhip effect is caused by bad forecasts, big batch orders, price swings, and over-ordering in shortages.

Question 4

5 Consequences of the Bullwhip Effect

Answer 4

1- excess inventory

2- poor customer service levels

3- ineffective transportation use

4- misused manufacturing capacity

5- lost revenues

Question 5

4 Ways of Counteracting the Bullwhip Effect

Answer 5

1. Stabilize pricing: reduce promotions and discounts that cause demand spikes
2. Eliminate order batching : Use smaller, more frequent orders
3. Improve communication and information sharing – share real demand data across the supply chain (not just orders)
   
   • accurate forecast
     
     • POS Terminals - share real demand information
4. Eliminate gaming : removing the practice where customers (or even retailers) inflate their orders during shortages or uncertain supply, just to make sure they get enough.

Question 6

Insourcing

• 3 benefits

Answer 6

• Doing the work inside the company using your own people, equipment, and facilities.

Why Insource:
1. Better control – keep direct oversight of quality, timing, and processes.
2. Protect core skills – don’t lose key knowledge or technology to outsiders.
3. Reliability – avoid depending too much on outside suppliers.

Question 7

Outsourcing

• 4 benefits

Answer 7

• Paying an outside company to do the work or provide the service instead.

Why Outsource:
1. Lower cost – outside firms may do it cheaper.
2. Focus on core business – company can concentrate on what it does best.
3. Access expertise – use specialists who have better technology or skills.
4. Flexibility – easier to scale up or down with demand.

Question 8

When to use outsourcing vs insourcing

Answer 8

• Insource = when the activity is core, strategic, or requires strict control.
• High Volume, special skills
  - Is it Critical / Core Competency / Must do to survive ?
• Outsource = when others can do it cheaper, better, or it’s not a core activity
• low volume

Question 9

Vertical Integration

Answer 9

• Measure of how much of the supply chain is owned/operated by the manufacturerGoal: gain more control over inputs, production, or distribution.

Question 10

Horizontal Integration

Answer 10

When a business grows by acquiring similar companies in their industry at the same point in the supply chain

Ex: adidas acquiring Nike

Question 11

Backward Integration

Answer 11

Companies acquisition of sources of raw materials and component parts

-acquires sources that were previously outside company

Question 12

Forward Integration

Answer 12

Acquisition of its channels of distributions

Question 13

Implementing Supply Chain Management (SCM) requirements (3)

Answer 13

1. Analyze whole supply chain
2. Integrate internal functions first
3. Integrate external supplier through partnerships

Question 14

What is the Supply Chain Operations Reference (SCOR)

Answer 14

• Effort to standardize measurement of supply chain performance
• measures 4 operational perspectives

Question 15

What 4 Operational Perspectives does the Supply Chain Operations Reference (SCOR) examine ?

FEAR

Answer 15

1. Reliability : on-time delivery, order fulfillment time, fill rate
2. Flexibility : supply chain response time and production flexibility
3. Expenses: supply management cost, warranty cost,
4. Assets/utilization : total inventory days of supply, net asset turns, cash-to-cash cycle time

Question 16

External distributors :
1. Logistics
A. traffic management
B. Distribution management

Answer 16

1. Logistics Managers: They oversee the movement and storage of goods in the supply chain.

A. Traffic Management 🚚 : Decide best shipping mode
• Focus: how goods move (inbound and outbound).

B. Distribution Management 📦 : Oversee warehousing, inventory, and delivery to customers or retailers.
• Focus: where goods go once produced.