Supply Chain Consulting Flashcards

Question 1

What is a supply chain, and what activities does it include?

Accepted Answer

A supply chain is the network of organizations, people, activities, information, and resources involved in moving a product or service from its original supplier to the final customer. It includes sourcing raw materials, manufacturing, warehousing, transportation, and delivery, along with the planning and flows of information and payments that connect these steps.

Question 2

What is the difference between supply chain management and logistics?

Accepted Answer

Logistics is the part of supply chain management that plans and controls the efficient movement and storage of goods, services, and related information. Supply chain management is broader, coordinating all firms and processes across the chain, including sourcing, production, and relationships with suppliers and customers. Logistics is therefore one component within the larger discipline.

Question 3

What is the bullwhip effect, and why does it matter?

Accepted Answer

The bullwhip effect describes how small changes in customer demand can produce large swings in orders as they move upstream toward suppliers. Each stage reacts to the orders it receives and adds safety stock or batches orders, which amplifies variability. It matters because it drives excess inventory, unstable production, and higher costs across the network.

Question 4

What types of flows move through every supply chain, and what does each carry?

Accepted Answer

The three core flows are material, information, and financial. Material flow moves physical goods forward from suppliers to customers and returns goods backward. Information flow carries orders, forecasts, and status updates in both directions. Financial flow moves payments and credit terms, typically in the opposite direction to goods.

Question 5

What is the difference between push and pull supply chain strategies?

Accepted Answer

A push strategy produces and distributes products based on forecasts, so inventory is positioned ahead of actual customer demand. A pull strategy responds to real orders, with production triggered by customer consumption. Push systems tend to offer economies of scale but risk excess stock, while pull systems reduce inventory but need shorter, responsive lead times.

Question 6

What do supply chain consultants mean by a key performance indicator, and why use one?

Accepted Answer

A key performance indicator is a measurable value that shows how well a process meets its goals. In supply chains, consultants use indicators such as order fill rate, on-time delivery, inventory turnover, and perfect order rate to track performance. Good indicators are specific, measurable, and linked to a decision someone can act on.

Question 7

Why do supply chains need coordination among independent companies?

Accepted Answer

Supply chains need coordination because most span several legally separate firms, each with its own goals, systems, and incentives. Without coordination, local choices, such as a supplier batching orders, can raise total cost or hurt service. Shared data, agreements, and joint planning help the whole chain perform better than any one member alone.

Question 8

What is the order-to-cash cycle, and which steps does it include?

Accepted Answer

The order-to-cash cycle is the end-to-end process that starts when a customer places an order and finishes when payment is received and recorded. Typical steps include order entry, credit checking, inventory allocation, picking and shipping, invoicing, and collecting payment. Consultants examine this cycle because delays at any step slow cash flow and frustrate customers.

Question 9

What is demand planning in a supply chain, and what does it aim to achieve?

Accepted Answer

Demand planning is the process of estimating future customer demand and translating those estimates into plans for production, purchasing, and inventory. Its aim is to match supply with expected demand so customers are served without tying up cash in unneeded stock. It usually combines statistical forecasts, sales input, and market knowledge into one agreed plan.

Question 10

What is the difference between a qualitative and a quantitative forecast?

Accepted Answer

A quantitative forecast uses historical data and mathematical models, such as moving averages or regression, to project future values. A qualitative forecast relies on expert judgment, market research, or customer input, which is useful when history is limited or when new products are introduced. Most planners combine both approaches to balance objectivity with market insight.

Question 11

What is a moving average forecast, and how is it calculated?

Accepted Answer

A moving average forecast predicts the next period by averaging the most recent actual values over a fixed number of periods. For example, a three-period version adds the last three demand figures and divides by three. This smooths random noise but lags behind real trends.

Question 12

What is forecast bias, and why is it a concern?

Accepted Answer

Forecast bias is the tendency of forecasts to consistently overshoot or undershoot actual demand. A positive bias means forecasts run too high, which builds excess inventory, while a negative bias means they run too low, which causes stockouts. It is a concern because it persists unnoticed unless planners track forecast error over time.

Question 13

What does forecast accuracy measure, and what is one common metric for it?

Accepted Answer

Forecast accuracy measures how closely forecasts match actual results over a given period. One common metric is mean absolute percentage error, which averages the absolute difference between forecast and actual values, expressed as a percentage of actual values. Lower error generally means a more reliable forecast, though comparisons work best across similar products.

Question 14

How does collaborative planning, forecasting, and replenishment differ from traditional forecasting?

Accepted Answer

Collaborative planning, forecasting, and replenishment is a framework in which trading partners share forecasts, promotions, and inventory data, then agree on a joint plan. Traditional forecasting is usually done separately by each company using only its own sales history. Sharing information reduces surprises, lowers the bullwhip effect, and improves availability for both partners.

Question 15

Why does forecasting at an aggregate level often produce more accurate results than forecasting each item separately?

Accepted Answer

Aggregate forecasts combine demand across many products or locations, so random ups and downs in individual items tend to offset one another. The total is therefore more stable and easier to predict. Planners often forecast at a family or regional level and then disaggregate the result using historical shares to plan individual items.

Question 16

What is a demand signal, and where can consultants find useful ones?

Accepted Answer

A demand signal is any observable information that indicates current or future customer demand, such as point-of-sale data, orders, warehouse withdrawals, or promotional calendars. Useful sources include retailer scanner data, distributor inventory reports, customer service logs, and marketing plans. Closer signals to actual consumption generally give more reliable forecasts than distant order patterns.

Question 17

What is inventory, and why do supply chains hold it?

Accepted Answer

Inventory is the stock of raw materials, work in process, and finished goods held at points in the supply chain. Companies hold it to buffer against demand variability, supply delays, and production timing differences. Holding inventory also carries costs, including capital, storage, insurance, and obsolescence, so the aim is balance.

Question 18

What is safety stock, and what determines how much is needed?

Accepted Answer

Safety stock is extra inventory held to protect against uncertainty in demand or supply during replenishment. The amount needed depends on demand variability, lead time length and variability, and the target service level. Higher variability or a higher desired service level increases the buffer required.

Question 19

What is the economic order quantity, and what does it balance?

Accepted Answer

The economic order quantity is the order size that minimizes the combined annual cost of ordering and holding inventory. Ordering costs fall as order size grows, since fewer orders are placed, while holding costs rise because more stock sits in storage. The classic formula assumes steady demand, fixed ordering costs, and constant unit prices.

Question 20

What is the reorder point, and how is it calculated for steady demand?

Accepted Answer

The reorder point is the inventory level at which a new order should be placed so that stock arrives before it runs out. For steady demand, it equals average daily demand multiplied by lead time in days, plus any safety stock. For example, 20 units a day over a five-day lead time gives 100 units.

Question 21

What is ABC analysis, and how do planners use it?

Accepted Answer

ABC analysis ranks inventory items by annual value and divides them into groups. A items are a small share of products with a large share of value and receive the tightest control, while C items are numerous but low value and need simple rules. B items fall between the two.

Question 22

How does a periodic review system differ from a continuous review system?

Accepted Answer

A continuous review system monitors inventory levels constantly and places an order whenever stock falls to the reorder point, so order timing varies. A periodic review system checks stock at fixed intervals, such as every week, and orders enough to reach a target level. Periodic systems are simpler to administer, while continuous systems usually hold less safety stock.

Question 23

How do consultants use inventory turnover ratio to evaluate performance?

Accepted Answer

Inventory turnover is the number of times inventory is sold and replaced over a period, usually calculated as cost of goods sold divided by average inventory. Higher turnover generally means capital is working harder, though very high turnover can signal stockouts. Consultants compare turnover with peers and track trends to find slow-moving stock.

Question 24

What is cycle stock, and how does it differ from safety stock?

Accepted Answer

Cycle stock is the inventory that results from ordering in batches, so it is depleted and replenished regularly. Safety stock, by contrast, is a buffer against variability, drawn down only when demand or supply deviates from plan. Cut cycle stock with smaller, more frequent orders, and safety stock with less variability.

Question 25

What is supply chain network design, and what decisions does it involve?

Accepted Answer

Supply chain network design determines the locations, capacities, and roles of facilities, along with which markets each one serves. Key decisions include how many facilities to open, where to place them, which suppliers to use, and how products flow between sites. These choices are strategic because they are costly to reverse.

Question 26

What is a cross-docking operation, and when is it useful?

Accepted Answer

Cross-docking moves inbound goods directly from receiving to outbound shipping with little or no storage in between. Products are sorted and consolidated by destination, often within hours. It is useful when demand is predictable, products have short shelf lives, or the goal is to reduce handling and inventory costs at a distribution point.

Question 27

What are the main transportation modes, and how do they trade off cost and speed?

Accepted Answer

The main freight modes are road, rail, ocean, air, and pipeline, with intermodal shipments combining two or more. Ocean shipping is usually the cheapest per unit but slowest, while air freight is fastest and most expensive. Road transport offers flexibility and door-to-door service, and rail often falls between them for long distances with heavy loads.

Question 28

What is a hub-and-spoke network, and what are its advantages?

Accepted Answer

A hub-and-spoke network routes shipments from many origins to a central hub, where they are consolidated and sent on to their destinations. Its advantage is economies of scale, since fewer, fuller shipments travel longer lanes at lower unit cost. The drawbacks include added handling, longer transit for some routes, and reliance on one hub.

Question 29

How do distribution centers differ from simple storage warehouses?

Accepted Answer

Distribution centers focus on moving goods quickly, so they typically hold inventory for shorter periods and handle high volumes of picking, sorting, and shipping. Storage warehouses emphasize holding stock for longer periods, with less emphasis on throughput. In practice the line is blurry, and many facilities perform both roles.

Question 30

What is the purpose of a total landed cost analysis?

Accepted Answer

Total landed cost analysis adds all costs of getting a product to its destination, not just the purchase price. These include freight, duties and tariffs, insurance, handling, inventory carrying costs, and delay or quality costs. It helps companies compare sourcing options fairly, since a cheaper supplier can be more expensive once all costs are counted.

Question 31

What is a milk run, and when might a company use one?

Accepted Answer

A milk run is a fixed pickup route in which one vehicle collects shipments from several suppliers in sequence before delivering them together to a plant or warehouse. Companies use it for smaller, frequent loads when keeping inventory low matters more than minimizing transport cost per trip. It suits just-in-time operations with nearby suppliers.

Question 32

How do consultants use a network optimization model to evaluate design options?

Accepted Answer

Consultants build a model that represents facilities, transport lanes, costs, capacities, and demand, then use optimization software to find the configuration with the lowest total cost that meets service requirements. They test scenarios like adding a warehouse or raising fuel prices to see how the recommended network changes. Results are checked against practical constraints.

Question 33

What are the typical phases of a supply chain consulting engagement?

Accepted Answer

A typical engagement moves through diagnosis, design, implementation, and handover. Diagnosis gathers data and interviews to define the current state and pinpoint problems. Design develops and tests improvement options, implementation puts approved changes into practice, and handover transfers ownership and skills to the client team. Many also begin with scoping.

Question 34

What is a current-state assessment, and what should it include?

Accepted Answer

A current-state assessment is a structured picture of how the supply chain operates today, including processes, systems, performance, and pain points. It should include process maps, inventory and service data, cost baselines, supplier and customer feedback, and a list of key constraints. A clear baseline makes later improvements measurable.

Question 35

What is a stakeholder map, and why do consultants build one?

Accepted Answer

A stakeholder map lists the people and groups affected by a supply chain change, and rates their influence and level of support. Consultants build one early to anticipate resistance and identify who must be involved in decisions. Engaging the right people early tends to make recommendations easier to adopt.

Question 36

What is a pilot project, and why do consultants test changes before scaling them?

Accepted Answer

A pilot project applies a proposed change to a limited area, such as one product line, region, or site. Consultants test first because it reveals hidden problems, provides real performance data, and limits risk if the idea fails. Lessons from the pilot are used to refine the design before a wider rollout.

Question 37

How do consultants measure the financial impact of a supply chain improvement?

Accepted Answer

Consultants typically build a benefits case that compares baseline costs and performance with projected results after the change. Benefits may include lower inventory carrying costs, freight savings, reduced expediting, and higher revenue from better service. Savings are usually tracked against the baseline over time, and one-time implementation costs are subtracted to estimate net value.

Question 38

What is change management, and why does it matter in supply chain projects?

Accepted Answer

Change management is the structured approach to helping people adopt new processes, roles, systems, and behaviors. It matters because even sound recommendations stall without clear ownership, training, or support from planners and operators. Good change management includes communication, training, and tracking adoption after go-live.

Question 39

What is a service level, and how does it trade off against cost?

Accepted Answer

Service level is the share of customer demand or orders fulfilled on time and in full, often expressed as a percentage. Raising it generally requires more inventory, faster transport, or more capacity, which increases cost. Consultants help clients find the point where the added service value justifies the added expense.

Question 40

Why do consultants recommend a closing review or handover after an engagement?

Accepted Answer

A closing review confirms which results were achieved, documents lessons learned, and checks that the client team can sustain the changes without outside help. Handover transfers dashboards, models, procedures, and open issues to named owners. Without these steps, improvements tend to decay as the consultants leave and attention shifts elsewhere.

Supply Chain Consulting Flashcards

1Core Supply Chain Concepts

2Demand Planning and Forecasting

3Inventory Control Methods

4Network Design and Logistics

5Consulting Process and Results

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