Supply Chain Management Flashcards

Question 1

What is the basic definition of a supply chain in business operations?

Accepted Answer

A supply chain is the network of organizations, people, activities, information, and resources involved in moving a product or service from its origin to the end customer. It includes suppliers, manufacturers, warehouses, distributors, and retailers. Its purpose is to deliver the right product, in the right quantity, at the right place and time.

Question 2

What are the three main flows that move through a supply chain?

Accepted Answer

The three main flows are product, information, and money. Product flow moves goods and materials forward from suppliers toward customers and sometimes returns them backward. Information flow carries orders, forecasts, inventory levels, and shipment status in both directions. Financial flow moves payments and credit from customers back toward suppliers. Managing all three well matters.

Question 3

What is the difference between a supply chain and a logistics network?

Accepted Answer

Logistics is the physical side of the supply chain, covering transportation, warehousing, order fulfillment, and materials handling. Supply chain management is broader, covering planning, sourcing, production, and the coordination of information and money across all partners. Logistics is therefore one component within the wider supply chain discipline, focused on moving and storing goods efficiently.

Question 4

Why do supply chain managers focus on the bullwhip effect?

Accepted Answer

The bullwhip effect is the tendency for order variability to grow as orders move upstream from customers toward suppliers. Small shifts in demand can trigger large swings in upstream orders, because each stage reacts to the orders it receives rather than to end demand. Managers reduce it through information sharing and shorter lead times.

Question 5

What role does lead time play in supply chain performance?

Accepted Answer

Lead time is the total elapsed time from placing an order to receiving the goods. It includes order processing, production, transit, and receiving or inspection. Longer lead times require more safety stock, increase forecast error, and slow responses to demand changes. Reducing lead time often improves customer service and lowers total inventory costs.

Question 6

What does the term order fulfillment cycle describe in a supply chain?

Accepted Answer

The order fulfillment cycle describes every step between a customer placing an order and the customer receiving the product. Typical steps include order entry, credit checking, picking, packing, shipping, delivery, and invoicing. Each step adds time and cost, so managers measure the cycle to find bottlenecks and improve reliability.

Question 7

What is the purpose of a supply chain map or process diagram?

Accepted Answer

A supply chain map is a visual representation of the organizations, locations, and flows that connect a product to its market. It shows tiers of suppliers, key facilities, transport links, and information exchanges. Mapping helps teams spot single points of failure, unnecessary handoffs, and dependencies that are not visible in internal reports.

Question 8

What is value stream mapping and why do lean practitioners use it?

Accepted Answer

Value stream mapping is a technique for drawing every step, along with its time and information flow, needed to deliver a product to a customer. Lean practitioners use it to separate value-adding activities from waste such as waiting, rework, excess inventory, and unnecessary movement. The map then guides improvements that shorten the overall flow.

Question 9

What is demand planning within supply chain management?

Accepted Answer

Demand planning is the process of estimating future customer demand and translating those estimates into plans for production, purchasing, and inventory. It combines statistical forecasts with input from sales, marketing, and finance. Effective demand planning aligns the organization around one agreed number, so that supply decisions reflect the same expectation of what customers will buy.

Question 10

What is the difference between a forecast and a plan?

Accepted Answer

A forecast is an estimate of what demand is likely to be under stated assumptions, usually expressed as a number for a future period. A plan is a decision about what the organization will do in response, such as how much to produce, buy, or stock. Forecasts predict, while plans commit resources and money.

Question 11

Why is historical sales data important for demand forecasting?

Accepted Answer

Historical sales data reveals patterns such as trends, seasonality, and cycles that tend to repeat. Analysts use these patterns to build baseline forecasts before adjusting for known events. Past data is not a guarantee of future results, so forecasters also examine promotions, pricing changes, and market conditions that could alter the pattern.

Question 12

What is a moving average forecast and when is it used?

Accepted Answer

A moving average forecast predicts the next period as the average of a fixed number of the most recent periods. For example, a three-period moving average averages the latest three months of sales. It works best for stable demand without strong trend or seasonality, because it smooths random noise but lags behind genuine changes.

Question 13

What is exponential smoothing and how does its smoothing constant work?

Accepted Answer

Exponential smoothing forecasts future demand by weighting recent observations more heavily than older ones. The smoothing constant, alpha between zero and one, sets how quickly the forecast reacts. A higher alpha gives recent data more influence and responds faster, while a lower alpha produces a steadier forecast that adjusts more slowly.

Question 14

What does forecast accuracy measure, and why track it?

Accepted Answer

Forecast accuracy measures how closely forecasts match actual demand. Tracking it reveals whether forecasts are improving, which products are hard to predict, and where bias pushes estimates consistently too high or too low. Teams use these insights to choose better methods and to set realistic safety stock levels.

Question 15

What is seasonality in demand data and how is it handled?

Accepted Answer

Seasonality is a repeating demand pattern that recurs at regular intervals, such as a holiday peak or a summer slowdown. Forecasters handle it by estimating seasonal indexes from historical data and multiplying a baseline forecast by those factors. Removing seasonality before modeling trend helps reveal the underlying direction of demand.

Question 16

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

Accepted Answer

Collaborative planning, forecasting, and replenishment is a process in which trading partners share data, forecasts, and plans to reach a joint forecast. Traditional forecasting is done within one company using only its own sales history. Sharing point-of-sale and promotion data across partners reduces surprises, lowers inventory, and helps everyone respond to the same demand signal.

Question 17

What is inventory and why do organizations hold it?

Accepted Answer

Inventory is the stock of raw materials, work in process, and finished goods held by an organization. Companies hold it to buffer against demand uncertainty, supply variability, and the time needed to move goods. It also supports production efficiency, quantity discounts, and smooth customer service, though it ties up cash and carries storage costs.

Question 18

What are the three main types of inventory in manufacturing?

Accepted Answer

The three main types are raw materials, work in process, and finished goods. Raw materials are inputs waiting to be transformed. Work in process consists of partly completed items moving through production. Finished goods are completed products waiting to be sold or shipped. Each type carries different costs and risks, so managers track them.

Question 19

What is a stockout and what problems does it create?

Accepted Answer

A stockout occurs when demand for an item exceeds the quantity available, so the item cannot be delivered when the customer wants it. Stockouts can lead to lost sales, customer dissatisfaction, expedited shipping costs, and lasting damage to loyalty. Many firms track stockout rates alongside inventory investment to balance service against cost.

Question 20

What is safety stock and how is it determined?

Accepted Answer

Safety stock is extra inventory kept above expected demand during lead time to protect against variability in demand or supply. Its size depends on the desired service level, the variability of demand, the variability of lead time, and the average demand over the replenishment period. Higher target service levels generally require more safety stock.

Question 21

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, because fewer orders are placed, while holding costs rise as more stock sits in storage. The classic formula finds that balance point using annual demand and cost inputs.

Question 22

What is ABC analysis and how do managers use it?

Accepted Answer

ABC analysis ranks inventory items by their annual value, based on unit cost times annual usage. A items are few high-value items accounting for most total value, B items are moderate, and C items are numerous low-value items. Managers give A items tighter control and frequent review, and C items simpler controls.

Question 23

What is the difference between a periodic and a continuous review inventory system?

Accepted Answer

A continuous review system monitors inventory constantly and places a fixed-quantity order when stock falls to a reorder point. A periodic review system checks stock at fixed intervals and orders enough to bring inventory up to a target level. Continuous review carries less safety stock but demands more tracking, while periodic review is simpler.

Question 24

How does vendor-managed inventory change who is responsible for replenishment?

Accepted Answer

In vendor-managed inventory, the supplier monitors the customer's stock levels and decides when and how much to ship, instead of waiting for the customer to place orders. It uses shared sales or consumption data and agreed minimum and maximum levels. Buyers gain less administrative work, while suppliers gain visibility that smooths production and shipments.

Question 25

What are the main transportation modes used in freight movement?

Accepted Answer

The main modes are truck, rail, ocean, air, and pipeline, with intermodal shipping combining two or more of them. Trucks offer door-to-door flexibility over short and medium distances. Rail suits heavy bulk cargo over long distances. Ocean carriers move the largest volumes at low cost but slowly, while air freight is fast and expensive.

Question 26

What is the difference between full truckload and less-than-truckload shipping?

Accepted Answer

Full truckload shipping means one shipper occupies an entire trailer, so the load moves from origin to destination. Less-than-truckload shipping combines smaller shipments from several customers in one trailer, with the carrier consolidating freight at terminals. LTL usually costs more per unit of weight but suits shipments too small to fill a trailer.

Question 27

What is cross-docking and when is it beneficial?

Accepted Answer

Cross-docking moves inbound goods directly to outbound transport with little or no storage in between. Products are unloaded, sorted by destination, and reloaded onto outgoing vehicles, often within hours. It is beneficial when demand is predictable, products need little storage, and rapid consolidation can reduce handling and warehousing costs.

Question 28

What is the role of a third-party logistics provider?

Accepted Answer

A third-party logistics provider, often called a 3PL, is an outside company that performs some or all logistics functions for a shipper. Services may include transportation, warehousing, freight forwarding, customs brokerage, and order fulfillment. Companies use 3PLs to access capacity, expertise, and geographic reach without owning the assets themselves.

Question 29

How does a warehouse management system support daily operations?

Accepted Answer

A warehouse management system is software that tracks inventory locations, directs picking and putaway tasks, and records receipts and shipments in real time. It improves accuracy by assigning storage bins, scanning items, and validating each movement against stored data. Many systems integrate with order management and transportation systems so information moves with the product.

Question 30

What is the purpose of a bill of lading?

Accepted Answer

A bill of lading is a legal document issued by a carrier that acknowledges receipt of goods, describes them, and states the terms of carriage. It serves as a receipt for the shipper, a contract of carriage, and a document of title that can transfer ownership of goods in transit.

Question 31

What are Incoterms and why do they matter in international trade?

Accepted Answer

Incoterms are standard trade terms published by the International Chamber of Commerce that define buyer and seller responsibilities for shipping costs, risk, and delivery. Terms such as FOB and CIF signal when risk passes from seller to buyer and who pays for each leg of the journey.

Question 32

What is last-mile delivery and why is it costly?

Accepted Answer

Last-mile delivery is the final stage of moving a product from a local hub to the customer's door. It is costly because it involves small, scattered drop-offs, frequent failed attempts, and time-sensitive appointments, which limit route density and efficiency. Companies reduce it with consolidated pickup points and route optimization.

Question 33

What is supplier relationship management and why does it matter?

Accepted Answer

Supplier relationship management is the structured approach to planning, selecting, developing, and monitoring interactions with key suppliers. It aims to balance cost savings with reliability, quality, innovation, and long-term partnership value. It matters because most products depend on external suppliers, and weak relationships can quickly turn into shortages or quality failures.

Question 34

What is supplier segmentation and how do buyers use it?

Accepted Answer

Supplier segmentation groups suppliers by factors such as spend, criticality, substitutability, and risk, so that each group receives an appropriate management approach. Strategic suppliers may warrant collaborative development, while commodity suppliers may be managed mainly through competitive bidding. Segmentation lets buyers focus scarce management attention where it has the greatest impact.

Question 35

What is single sourcing, and what are its advantages and risks?

Accepted Answer

Single sourcing means buying a particular item or service from only one supplier, even when alternatives exist. Its advantages include volume leverage, deeper collaboration, consistent quality, and simpler administration. Its key risk is dependence: a disruption at that one supplier can halt production, and the buyer has little negotiating power if the supplier raises prices.

Question 36

What is dual sourcing and how does it reduce supply risk?

Accepted Answer

Dual sourcing means qualifying two suppliers for the same item so that volume can shift if one fails or underperforms. It reduces supply risk by providing a backup source and encouraging competitive pricing. The tradeoff is that splitting volume may reduce each supplier's scale benefits and increase management effort.

Question 37

What is a supply chain risk assessment and what does it involve?

Accepted Answer

A supply chain risk assessment identifies events that could disrupt supply, estimates how likely they are, and measures their potential impact on operations and customers. It involves mapping critical suppliers and their sub-suppliers, reviewing financial health, geographic exposure, and single points of failure, and ranking risks by likelihood and severity.

Question 38

What is the difference between a disruption and a chronic supply risk?

Accepted Answer

A disruption is a sudden, unexpected event, such as a factory fire, port closure, or natural disaster, that interrupts supply. Chronic supply risk is a persistent weakness, such as limited capacity, quality variability, or weak financial health, that gradually makes supply less reliable. Disruptions call for contingency response, while chronic risks need structural fixes.

Question 39

What is a business continuity plan in the context of supply chains?

Accepted Answer

A business continuity plan is a documented set of procedures that helps an organization keep critical operations running during and after a disruption. In supply chain settings, it identifies critical suppliers, alternate sources, inventory buffers, communication roles, and recovery priorities. Plans are tested through drills and updated as suppliers, products, and risks change.

Question 40

How can buyers and suppliers build trust and collaboration over time?

Accepted Answer

Buyers and suppliers build trust by sharing forecasts and cost data openly, keeping commitments consistently, and resolving disputes fairly. Buyers can support collaboration by offering longer-term volume visibility, timely payment, and joint improvement projects. Regular performance reviews based on agreed metrics, rather than blame, help both sides learn and adjust.

Supply Chain Management Flashcards

1Supply Chain Fundamentals

2Demand Planning and Forecasting

3Inventory Management Principles

4Logistics and Transportation Basics

5Supplier Relationships and Risk

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