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Exam prep short answer questions

Introduction to Logistics and Supply Chain Management (RMIT)

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Secion B - Pool of Exam quesions

Chapter 1

1. Describe the concept of an “integrated supply chain” that begins with the
supplier’s supplier and ends with the inal consumer.

Supply chain management can be viewed as an enity that manages the

f low of products, materials, services, informaion, and inancials from the supplier’s
suppliers through the various intermediate organizaions or companies out to the c
ustomer’s customers, or a system of connected networks between the original vend
ors and the ulimate inal consumer. The extended enterprise perspecive of supply
chain management represents a logical extension of the logisics concept, providing
an opportunity to view the total system of interrelated companies for increased eic
iency and efeciveness

Supply chain management can be viewed as an enity that manages the low
of products, materials, services, inancials and informaion eiciently and
efecively through other paries which connect with the end customer. This
can be manufacturing to distributors to retailers to customers as an example.
It can be seen as a network to distribute goods or services from one locaion
to another for an organisaion or business and tends to be another funcional
department the company. It assists businesses in providing a beter customer
service experience and analyses methods in cost reducions .

2. Supply chain managers should be concerned about four lows in their

organizaions. What are these four lows, and why are they important? How
are they related to each other?

Product low – important to deliver the correct product in a imely, damage

free and reliable manner, also needs to have a reverse logisics system to
allow the customer to return goods as part of providing customer service.

Cash low – details of liquid cash in an organisaion which can afect capital,
investments and inancials and allows supply chain managers to make
decisions.

Demand Flow – providing a service dependant on demand for paricular

products which inluences producion schedules, inventory levels, labour,
orders, inance hence why it is important

Informaion low – ability to communicate informaion regarding sales,

forecasing, processes, stock outs, inventory levels so supply chain managers
can be prepared in light of a situaion.

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Chapter 3

1. Discuss the ways in which logisics contributes to economic value in the

economy and in an organizaion
Logisics contributes to economy and organisaions at a micro level. It enhances the
uilisaion of economic uiliies which are principles of the supply chain, where if
further analysed, costs can be reduced because organisaions need to minimise costs
and maximise proits. These principles are known as Form, ime, place, quanity and
add value to the irm if they are efecively used. Some outcomes can as such;
reduce wastage in idle imes, sustain compeiive advantage or aiming to reduce
logisics costs but increase growth rate.

Form – emphasising the appropriate way to send parcels e.g., the correct or suitable
size for packaging

Time – having the product ready at hand for customers or if it is a service, having a
service which can be lexible around a 24 hour clock for all types of customers

Place – moving goods from one producion point to a markeing point, ensuring all
distribuion channels are designed to meet needs of customer

Quanity – this is where costs can be reduced greatly depending on products or

services provided. Detailed analysis, forecasing is essenial for cost minimising
strategies or alternaives and also include selecing the mode of transport or system.
This is beneicial to the company and the supply chain by distribuing correct
quanity to locaions and even monitoring of inventory costs.
2. Explain the relaionship between manufacturing and logisics. What are the
trade-ofs between the two area?
Manufacturing and logisics have an impact on the total cost of sales. How much to produce
is always a decision making area to a manufacturing company, determining the size of units
and has an impact on how much to produce. Long producion gives more u nits short
producions give less units.

Logisics costs can include transporing, warehousing, inventory. Inventory levels afect the
working capital and makes a company look more appealing because a higher inventory level
seems more appealing. It would also be beneicial that stock does now go into a out of stock
in order for a company to meet demand of customers and producion.

In the above situaion, it can be understood there is a connecion between manufacturing

and logisics. Efecive planning and organisaion is required to allow both departments to
operate eiciently. So at trade of – opimal size of producion + right quanity of inventory
levels means that cost will be minimised.
3. What product characterisics afect logisics costs? Discuss the efects of
these characterisics on logisics costs.
Product density, suscepibility to damage, dollar value and special
handling.

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Chapter 4

1. In what ways can the design of a irm’s logisics/supply chain network afect
its ability to create value for customers through eiciency, efeciveness, and
difereniaion?
Eicient design of a supply chain network can mean that it is a organised,
controlled and monitored environment to provide the best outcome for a
customer. This can be delivering products to customers through a transport
system in the least possible ime. When irms are organised, it allows for
smoother and hassle free transiioning from one task to another which
increases producivity levels of labour.

2. Discuss the factors that cause a company to analyse the design of a

logisics/supply chain network or to reconsider the locaion of a paricular
facility.
Labour – cost and availability of labour should be considered, skills work ethics,
labour

Transportaion services – number of carriers, accessibility lexibility

Proximity – how close it is to market

Quality of life – lexible workforce

Suppliers network – having muliple streams of suppliers of back ups in the event if
something were to occur.

Land cost - price of land, costs to set up a business

3. What are the major locaional determinants, and how does each afect the
locaion decision?
Labour climate – industries based on equipment texiles have an inluence on
cost and labour in regional and local markets

Transport – signiicant in locaion decisions for need

Supplier networks – accessibility of raw materials

Land and cost uiliies

Company preferences –

Chapter 5

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1. There are four types of products and services that are purchased with varying
degrees of importance. Name all four, and discuss them in terms of risk and value.
Generics are low-risk, low-value items and services that typically do not enter the
inal product. Items such as oice supplies and maintenance, repair, and operaing
items (MRO) are examples of generics. The administraive and acquisiion processing
costs are more signiicant than the purchase price of generics, and, for some
generics, the administraion and processing costs may exceed the price paid for the
item or service.

Commodiies are items or services that are low in risk but high in value. Basic
producion materials (bolts), basic packaging (exterior box), and transportaion
services are examples of commodiies that enhance the proitability of the company
but pose a low risk.

Disincives are high-risk, low-value items and services such as engineered items,
parts that are available from only a limited number of suppliers, or items that have a
long lead ime. The company's customers are unaware of or do not care about the
uniqueness of disincives, but these products pose a threat to coninued operaion
and/or high procurement cost.

Criicals are high-risk, high-value items that give the inal product a compeiive
advantage in the marketplace. The procurement strategy for criicals is to strengthen
their value through use of new technologies, simpliicaion, close supplier relaions,
and/or value-added alteraions
2. A key part of the procurement process is the selecion of suppliers. What
criteria are commonly used in this selecion process? Which criteria should be
given the highest priority? Why?

Quality – refers to chemical, physical and technical properies and whether

suppliers are able to provide a product or service, ideally guaranteed of
damages, risk free, dependability and ease of use.
Reliability – in this aspect, items are expected to be consistently delivered on
ime
Risk – selecing suppliers can be of uncertainty therefore there is a possibility
that prices can increase and be costly.
Capability – the competency level of suppliers, how well they can manage
their producion facility and organisaional controls. Suppliers are expected
to deliver quality and quanity on demand
Financial – need to consider the suppliers inancial posiion as this can
determine things such as performance history. A supplier with a less balance
posiion can cause an upset in the orgnaisaiton in the long run.
Locaion – distance to suppliers, whether suppleiers are in a convenient
enough locaion to deliver products to customers.

3. What is mean t by supplier “ceriicaions and registraions”? Of what

relevance are these to the supplier selecion process?

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Ceriicaion and registraions deines the suppliers quality in terms of process

management and improvements. Techniques and approaches have been developed
to address issues about the reliability of the process

Six sigma – Solving problems using arithmeic methods, to improve problems. This
involves training higher up people who pass on the knowledge to others. (green
belts and black belts)

Total quality management – it’s an approach where it focuses on process variability

and coninuous improvement

ISO 9000 – when a company has a third party which standardises processes and
ensures that organisaions are complying with standards and follow a documented
process.

In conclusion, aside from the fact that these processes are costly and ime
consuming to implement, it assists it creaing a beter work force and allows for
efecive use of resources and producivity if managed well.

4. The total procurement price is more than just the basic purchase price. There are
other components to consider. What are the components of total acquired
cost? Name these components, and discuss the primary consideraions of each.

Basic input – these are primary costs that a irm needs to purchase atained through
negoiaing or bidding.

Direct transacional – anything which revolves around movement, receiping, recording,

detecing or processing material. Area is more eicient when electronic tools were
introduced.

Supplier cost – maintaining a relaionship with a supplier which can include training,
research and development, planning and operaions, travel and educaion

Landing costs – all the costs that require geing the material into the warehouse available
for use or sale which include taxes, freight, insurance, handling.
Chapter 6

1. Compare and contrast push-based production strategies with pull-based

production strategies. What are the primary capabilities, advantages, and
disadvantages of each?
Pushed based producion is when the producion process is dependant on
demand levels and requires forecasing by the company
- Minimal cost of producion
- Useful for goods which run a steady demand
- Labour and cost

The disadvantages:

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- Not as efecive when demand luctuates

- Cant be customised
- When there is excess demand, inefecive because of inventory and
budget costs limitaions.

Pull based strategy – focuses on producion based on demand and consumpion

however it does not iniiate producion unil customer places an order.

Advantages
- Minimise wastage
- Cut costs such as inventory
- Reduce transport costs
Disadvantages:
- Producion cost is high,
- When demand is too high, lead ime can increase
- Requires markeing.
-
2. Outsourcing is a popular supply chain strategy. Discuss the reasons for and
against an organization outsourcing its production processes.

Outsourcing is the process when an organisaion or company searches for

outside paries to perform aciviies. It is considered when producion costs
are higher than output and assists in reducing producion ime and meeing
demand.

Advantages of outsourcing are:

- Costs can be reduced in terms of labour, producion and operaing costs.
- Less employees to manage which allows for manageable coordinaion
- Faster producion processes

Disadvantages
- There can be issues with quality considering if there was a high volume to
be produced in a small ime frame.
- Costly if it is not managed well.
-

Chapter 7

1. There are two types of demand. What are they, and how do they influence the
supply chain?
Independent demand – demand for the primary product or the inalised item.
Taking a bicycle for example, the inished product will the inal product
because it was created for the customer. Dependant demand will be the ires
because it is dependent on how many bicycles are produced and is secondary
to the customers demand. From another perspecive, ires can be the
independent demand and rims will be dependant because the producion of
rims relies on the amount of ires produced. With this said, forecasing relies

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heavily on independent demand and therefore inluences a company in this

way however diferent organisaions may seek diferent things.

2. What are some of the logisical problems that may arise when supply and
demand for a product are not aligned properly? What are some of the
methods used to soten the efects of this imbalance?

External – price and lead ime

Internal – producion and inventory lexibility
Producion cannot meet demand therefore results in shortages. Channel
partners over order to compensate and atempt to meet demand however
this can cause delays and orders can be cancelled. Issues which can occur
include inventory exhausion which is when inventory levels are full, delays
will occur and puts pressure on the irm in areas such as labour. Excess
producion, overcompensaing products to meet demand however this can
lead to wastage if unused. Inventory costs can also increase if there are too
many products produced. The methods used to soten the imbalance are
known as producion and inventory lexibility as an internal methods and
price and lead ime for external methods.

Internal methods are used to managed a irms supply gap, producion

lexibility allows a irm to respond to change efecively by altering their
producion lines and allows safety stock to be used which will prevent a stock
out and also smooth efects of demand and lead ime.

External balancing methods are price and lead ime which atempts to
change a customer’s buying decision if stock is unavailable. When customers
order a product with low inventory levels, lead ime is increased to
compensate, however if the customer is not saisied and willing to buy
another product, they will uilise this method.

Inventory exhausion – when inventory levels are full, producion will come
to halt and puts pressure on the organisaion in areas such as labour costs.

Transport shortage – when there is inadequate transport this can also be an

issue when it comes to
Higher inventory costs
Excess producion
Producion costs

3. What are the basic types of forecasts? What are their strengths and
weaknesses?

Simple moving average

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- Adv – simple
- Disadv – less accurate

Weighted moving average

- Simple and more accurate that simple moving average
- Disadv – not very accurate
Exponenial smoothing
- Adv – more accurate forecast and accounts for trends
- Disadv – does not account for trends and
Trend exponenial smoothing
- Adv – more accurate forecast which accounts for trends
- Cmay fail in some cases

Chapter 8

1. Compare and contrast the concepts of order-to-cash cycle ime and order
cycle ime.
Order to cash cycle ime is the staring and fulilling a customers requests
whereas order cycle ime is the period before placing another order.

It involves sub processes:

- Documents of customer order
- Scheduling
- Shipping
- Create invoice
- Record transacion

2. Customer service is oten viewed as the primary interface between logisics

and markeing. Discuss the nature of this interface and how it might be
changing.

Customer service is anything that touches the customer. It plays an important role in
logisics and markeing as customers are the inal end desinaion of any logisics
process. They have an impact on their brand image and reputaion and determines
the success, wealth and lourishment of a business. An ineicient logisics system or
service can lead to a customer dissaisfacion.

Eicient manufacturing systems would ensure the producion of good quality

products and if in the event they are faulty, this will lead to a disaisfcaion.
Therefore it is important to also include a reverse logisics system to return products
upstream, adding to the customer service experience.

Successful logisics operaions contain a high degree of organisaion control,

manufacturing and producion and reliable shipping. This can improve dependability,
eiciency and efeciveness .

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3. Explain the relaionship between customer service levels and the costs
associated with providing those service levels
Customer service acts as an interface between markeing and logisics and their
objecive is to achieve proit in the long run. Objecives of a logisics system is
generally is to provide an efecive service at minimal cost with a maximum output,
however costs can vary.

These costs include

- Warehousing
- Transport
- Labour
- Operaion
- Informaion

Chapter 9

1. Explain the differences between inventory carrying costs and ordering costs.
Ordering cost – cost of placing an order each ime
Carrying cost – cost of unused inventory stored

Fixed interval version is ordered ater a paricular ime period

Ordering costs associated with logisics and ordering, whereas carrying costs
are associated with inventory, capital cost, storage, space.

Ordering costs decrease with a larger order size, carrying costs increase per
order size increase

2. Compare and contrast the fixed quantity version of EOQ with the fixed
interval version. In which situations would each be used?
Fixed quanity version is when a ixed amount of inventory is ordered each
ime a reorder takes place. This is calculated by demand levels of products
and generally reordered at certain periods of ime. Demand can be inluence
by weather, ime of year, social needs, physical needs and many other factors
therefore this approach is suited for when demand is at a level of uncertainty
and requires close monitoring because it can be unpredictable.

Fixed interval is when replenishments are carried out at regular or ixed

intervals and dependant on how much stock is available at the ime. is used
when demand and lead ime is steady and does not require surveillance and
monitoring is less expensive. However the amount ordered each ime will
vary. For e.g. ordering milk, when there is a spike in sales such as 4000 units
sold in a week, uilising the ixed interval approach, the next replenishment
will be 6000 milk botles plus units they anicipate which will sell They both
combine push and pull approaches.

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Fixed interval version is where items are ordered ater a paricular ime
period.

3. What are push and pull systems, and explain at least one inventory
management system that is a push and one that is a pull system.
Pull system is where products are used when it is required. An approach to this can
be a JIT approach where goods or services when it is required which helps to manage
waste and lead ime but also reduce costs. It arrives exactly when the organisaion
needs and relies on short, consistent lead imes.
- High quality
- Zero defects
- Short lead ime

A push system relies on forecasing to produce and ill inventory. It is an approach

where goods and services are produced according to the forecast of sales and
performance. It includes these ‘forecasters’ to predict what will be purchased more,
less by using a range of techniques including simple moving averages, exponenial
smoothing, trend smoothing, weighted moving averages.

4. What are the beneits of classifying inventory using ABC analysis? What are
the diferent types of criteria that could be used to classify inventory?
Abc HELPS A COMPANY TO DETERMINE RAW MATERIALS
- MONITOR DEAND
- PRIOriise producion process
- Ordered at regular intervals

Chapter 10

1. How does distribuion operaion help organizaions overcome challenges,

support other processes, and take advantage of economies of scale?
2. Discuss the primary tradeofs that must be made between distribuion and
other logisics aciviies.
Space vs equipment – verical size for eiciency , larger capacity

Equipment vs people – more use for machinery instead of people, less lbour
costs

People vs space -

3. There are two opions for product low through the supply chain: direct
shipments versus movement of goods through distribuion faciliies. Discuss
advantages and disadvantages of both opions.

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Chapter 11

1. What are the primary capabiliies, advantages, and disadvantages of each of

the basic modes of transport?
Truck

Majority of goods are transported through this method and provide direct service
from start to end points.

Advantages:
- Door to door services
- Cheapest for short hauls
- Loading and unloading is quick
- Flexible with goods
- Frequent services
Disadvantages
- Costly for long haul
- Afected by weather and road condiions
- Restricions on working hours
-

Air
1% of goods are sent via air

Advantages:
- Quickest
- Transport to remote areas
- Less afected by adverse weather condiions

Disadvantages
- Most expensive
- Heavy goods cannot be transported
- Not suitable for short distance
Water
- 4.7% of goods are transported,
Advantage:
- Efecive way to transport heavy goods
- Costs are low when creaing routes
- Bulk goods can be traded easily

Disadvantages

- Time consuming therefore perishable goods are not ideal

- Weather can afect transport
- Costly to service

Pipeline

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Generates 33 billion

Advantages
- Used for oil and gas
- Supplied coninuously for customers when needed
- Services are frequent, less interrupion
- Large quaniies can be moved low cost
Disadvantages:
- Investment is high
- Damaged pipelines can afect environment
- Limits transport

Rail
14.8% of goods are transported through this, 1.9 billion tonnes a year

Advantages
- Convenient for long distances
- Ideal for transferring large quaniies over long distances
Disadvantages:
- Not available in remote areas
- Less lexible
- Accidents therefore could be loss to company

2. Discuss the primary consideraions and issues that must be factored into
modal and carrier selecion.

Accessibility -

Transit ime – assessing ime it takes to get to another desinaion

Reliability – Consistency of transit ime, afected by weather labour,

Safety of the product

Cost

Chapter 12

1. What are the basic types of supply chain relaionships, and how do they
difer?
Supply chain relaionships play a vital role in transporing the goods from one
place to another.

Verical – links between irms such as manufacturer, distributer and retailers

in the supply chain. Helps in achieving the objecives of individual irm and
supply chain.

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Horizontal – agreements between irms that have a parallel posiions in the

logisics process. (service agreement between two or more irms based on
cooperaion, trust and shared risk) e.g. manufacturing irm working with a
warehousing irm to saisfy the same customer.

2. How would you disinguish between a vendor, a partner, and a strategic

alliance? What condiions would favor the use of each?

Vendor – represents the provider of a product or service. Do not have any

collaboraion with buyers hence it is a transacional relaionship and at arms length
distance. It is applicable for one ime or muliple purchases of a standard product.

Partner – customised business relaionship that delivers results for all paries which
is beneicial than their individual results.
- Duraion
- Obligaion
- Expectaion
- Cooperaion
- Planning

Strategic alliance – Two or more business organisaions cooperate and modify their
business objecives willingly to achieve long term goal. Strategic in nature and it
helps reduc market uncertainty, improve communicaion, increase loyalty and
establishing a common vision.

3. What are the basic types of 3PL irms, and which are in most prevalent use?
Why do some irms choose not to use the services of 3PL irms? What is the
diference between 3PL and 4PL?

3PL irms showing the most prevalent use includes transport, warehouse,
distribuion or inancial service providers.

4PL was designed to undertake larger business aciviies. In a way, 4pl is its own
enity which establish their own contracts and manage, build and controls all
areas of the supply chain. They also manage the whole supply chain areas where
as 3pl only manage one funcional area.

Chapter 14

1. Idenify the four primary categories of supply chain management sotware

and discuss their primary funcions.

Supply chain planning: primary objecive is the evaluaion of market demand and
producion of an organisaion. Helps to develop sourcing, producion and resource
planning strategies.

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Supply chain execuion: helps to plan day to day operaions including procurement,
manufacturing and delivery decisions.

Supply chain event management: helps to collect data from muliple sources across
the supply chain. Helps managers to analyse the daily operaions and address any
issues in the supply chain

Business intelligence: sotware helps to collect and analyse reports involved in POLC,
helps managers with controlling the supply chain.

2. What is the role of enterprise resource planning systems in supply chain

management?

A business process management sotware that allows an organizaion to use

a system of integrated applicaions to manage the business and automate many
back oice funcions related to technology, services and human resources.
- Helps to integrate informaion and aciviies in the supply chain
- Integrate funcional departments
- Supports supplier management and customer relaionship management
- Help managers in taking crucial business decisions

Hence it is concluded that ERP helps with eiciency of a supply chain.

3. Discuss the relaive advantages of best-of-breed sotware versus supply chain

suites.

- Designed to meet paricular business requirements of companies, helps to

perform jobs eiciently and efecively
- More useful and cheaper for customers who use it for a speciic funcion
-

4. Why would companies choose to use on-demand sotware versus licensed

sotware?
- High capital investment required where as on demand does not
- Use this sotware over internet, payment is done on a “per use” basis so it
reduces costs. Not on company system
- On demand sotware does not require upgrades therefore it saves ime and
costs.
- On demand sotware is easy to use and does not require high capital
investments and provides higher return on investments

Chapter 15

1. Compare and contrast the so-called R’s of sustainability

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Reuse, remanufacturing, recondiioning, recycling

Reuse – disassembly of a product into materials then reassembling

Remanufacturing – product returned to the market ater a renewal

Recondiioning – back to the market ater repairs

Recycling –

Hence all these have an impact on opimal uilisaion of resources

2. Disinguish between a value and a waste stream for reverse lows. Give
examples of each.
Value stream – forward movement of materials, inance and informaion from
suppliers to customers

Waste stream – reverse movement of these aciviies from customers to

manufacturer is known as waste stream

Materials are part of value stream because they low down stream. Product returns
are considered waste stream because it doesn’t provide value

Value stream helps to provide beneits to customers in terms of product oferings

and other informaion. Whereas waste stream ofers no beneit.

3. Compare and contrast reverse logisics systems and closed loop supply chains
and give examples of each.

Reverse logisics system is the process of transporing goods from end customers to
capture value upstream back to suppliers.

Close loop supply chains include forward and reverse movement of good, cash,
informaion and demand.

Reverse logisics is the movement of new or used products from inal desinaion to
a central locaion for repair, resale or recycle whereas in a closed loop everything is
recycled.

Objecives of reverse logisics is to improve eiciency whereas for a closed loop

system, it is to reduce costs and capture value at each step.

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