PART 1: NOTE FROM BOOK

CHAPTER 1:
A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer request
A supply chain is dynamic and involves the constant flow of information, product, and funds among different stages.
the customer is an integral part of the supply chain. In fact, the primary purpose of any supply chain is to satisfy customer
needs and, in the process, generate profit for itself.
A typical supply chain may involve a variety of stages, including the following:
• Customers
• Retailers
• Wholesalers/distributors
• Manufacturers
• Component/raw material suppliers
Each stage in a supply chain is connected through the flow of products, information, and funds.
The objective of every supply chain should be to maximize the overall value generated. The value (also known as supply
chain surplus) a supply chain generates is the difference between what the value of the final product is to the customer
and the costs the entire supply chain incurs in filling the customer’s request
Supply chain success should be measured in terms of supply chain surplus and not in terms of the profits at an individual
stage.
A focus on growing the supply chain surplus pushes all members of the supply chain toward growing the size of the
overall pie
All flows of information, product, or funds generate costs within the supply chain. Thus, the appropriate management of
these flows is a key to supply chain success.
A growth in supply chain surplus increases the size of the total pie
There is a close connection between the design and management of supply chain flows (product, information, and funds)
and the success of a supply chain
From its beginning, the company invested heavily in transportation and information infrastructure to facilitate the
effective flow of goods and information. Frequent replenishment allows stores to match supply and demand more
effectively than the competition
Supply chain design, planning, and operation decisions play a significant role in the success or failure of a firm. To stay
competitive, supply chains must adapt to changing technology and customer expectations

PART 2: Q&A
CHAPTER 1
1. Discuss the goal of a supply chain and explain the impact of supply chain decisions on the success of a firm.
The goal of a supply chain should be to grow overall supply chain surplus. Supply chain surplus is the difference
between the value generated for the customer and the total cost incurred across all stages of the supply chain. A
focus on the supply chain surplus increases the size of the overall pie for all members of the supply chain. Supply chain
decisions have a large impact on the success or failure of each firm because they significantly influence both the revenue
generated and the cost incurred. Successful supply chains manage flows of product, information, and funds to
provide a high level of product availability to the customer while keeping costs low
2. Identify the three key supply chain decision phases and explain the significance of each one.
Supply chain decisions may be characterized as strategic (design), planning, or operational, depending on the time
period during which they apply. Strategic decisions relate to supply chain configuration. These decisions have a long-
term impact that lasts for several years. Planning decisions cover a period of a few months to a year and include
decisions regarding production plans, subcontracting, and promotions over that period. Operational decisions span
from minutes to days and include sequencing production and filling specific orders. Strategic decisions define the
constraints for planning decisions, and planning decisions define the constraints for operational decisions.
3. Describe the cycle and push/pull views of a supply chain.
The cycle view divides processes into cycles, each performed at the interface between two successive stages of a
supply chain. Each cycle starts with an order placed by one stage of the supply chain and ends when the order is received
from the supplier stage.
A push/pull view of a supply chain characterizes processes based on their timing relative to that of a customer order.
Pull processes are performed in response to a customer order, whereas push processes are performed in
anticipation of customer orders
4. What is supply chain management? Will a supply chain always look like a chain?
Supply chain management refers to managing the flow of products and services including all the procedures that help in
transforming raw materials into finished products. It consists of the storage and movement of the raw material, work-
in-progress goods, and final goods
A chain is a series that is presented in a linear form. However, a supply chain consists of various intersectional points
heading in different directions. There are multiple points of intersection in a supply chain. Accordingly, it can be stated
that a supply chain does not always seem like a linear chain.
5. Should members of a supply chain maximize individual profits to raise the overall supply chain surplus?
For the purpose of raising the overall surplus of the supply chain, the participants of a supply are required to focus on the
overall profit maximization instead of individual profits. Apart from this, the efficiency of a supply chain relies on some
other prominent factors. These factors include:
Aggregation of capacity Procurement Outsourcing requirement
Inbound and outbound Warehousing Inventory management
transportation
Flow of information

6. What are some strategic, planning, and operational decisions that must be made by an apparel retailer
such as Gap?
Designing:
 Conceptualizing the clothing items  Making sketches of new designs
 Tracking the recent fashion trends  Selecting fabrics and patterns

Operational:
 Receiving customer orders  Scheduling equipment use for manufacturing
 Selecting suppliers for raw material and  Managing inventory
components
Planning:
 Evaluating current stage of business  Assessing the available business strategies
 Formulating a business plan  Implementing the selected strategies
7. Consider the supply chain involved when a customer purchases a book at a bookstore. Identify the cycles in
this supply chain and the location of the push/pull boundary.
manufacturing, distribution, purchase, replenishment, and customer satisfaction. All these elements took place when a
book is ordered by a customer from a book store.
the location of the pull/push boundary would be the middle point between the placing of the order by the customer and
the procurement, replenishment of the order. In each supply chain, the pull processes are bifurcated (rẽ làm 2) from
push processes with the help of the push/pull boundary.
8. Consider the supply chain involved when a customer orders a book from Amazon. Identify the push/pull
boundary and two processes each in the push and pull phases.
holding inventory in push strategy and shipping the orders in a pull strategy. Pull strategy is used for items that are not
stocked by Amazon.
The multi-tier inventory system uses aggregation in the distribution centres wherein fewer inventories are held and
demands are responded in a dynamic way.
9. Explain why achieving strategic fit is critical to a company’s overall success.
A lack of strategic fit between the competitive and supply chain strategies can result in the supply chain taking actions
that are not consistent with customer needs, leading to a reduction in supply chain surplus and decreasing supply chain
profitability. Strategic fit requires that all functions within a firm and stages in the supply chain target the same
goal—one that is consistent with customer needs.
10. Describe how a company achieves strategic fit between its supply chain strategy and its competitive
strategy.
To achieve strategic fit, a company must first understand the needs of the customers being served, understand the
uncertainty of the supply chain, and identify the implied uncertainty. The second step is to understand the supply
chain’s capabilities in terms of efficiency and responsiveness. The key to strategic fit is ensuring that supply chain
responsiveness is consistent with customer needs, supply capabilities, and the resulting implied uncertainty. Tailoring the
supply chain is essential to achieving strategic fit when supplying a wide variety of customers with many products
through different channels.
11. Describe the major challenges that must be overcome to manage a supply chain successfully.
Globalization, increasing product variety, decreasing product life cycles, fragmentation of supply chains, changing
technologies, and an increased focus on sustainability represent significant challenges to achieving strategic fit. They also
represent great opportunities for firms that can successfully address these challenges with their supply chain strategies.
12. It is important to have strategic fit between the supply chain and its competitive strategy. Given that
creating strategic fit requires designing a supply chain whose responsiveness aligns with the implied
uncertainty, list the supply chain’s abilities with regard to responsiveness
Respond to wide range of quantities demanded
- Meet short lead times - Meet a high service level
- Handle a large variety of products - Handle supply uncertainty
- Build highly innovative products
Responsiveness: how fast is the company able to respond to a customer when he wants to buy a product.
13. A successful company needs to strike a balance between responsiveness and efficiency. Discuss how
companies should prepare for globalization in terms of responsiveness.
Efficiency: cost-based, you can always responsive by increasing costs. But balance: keeping costs low but
responsiveness high. For example bol.com wants to expand to Australia, less responsive. But new warehouse, more
costs, higher responsiveness - balance.
Globalization has increased both the opportunities and risks for supply chains. Firms must account for global risks and
uncertainties if they want to maintain strategic fit. So firms must maintain a higher responsiveness. Globalization means
if you want to keep high level of responsiveness you have to increase costs, by more warehouses.
 CHAPTER 2
14. Understand the role of network design in a supply chain.
Network design decisions include identifying facility roles, locations, and capacities and allocating markets to be
served by different facilities. These decisions define the physical constraints within which the network must be
operated as market conditions change. Good network design decisions increase supply chain profits.
15. Identify factors influencing supply chain network design decisions.
network design decisions are influenced by strategic, technological, macroeconomic, political, infrastructure, competitive,
and operational factors.
16. Develop a framework for making network design decisions.
The goal of network design is to maximize the supply chain’s long-term profitability. The process starts by defining the
supply chain strategy, which must be aligned with the competitive strategy of the firm. The supply chain strategy,
regional demand, costs, infrastructure, and competitive environment are used to define a regional facility
configuration. For regions where facilities are to be located, potentially attractive sites are then selected based on
available infrastructure. The optimal configuration is determined from the potential sites using demand, logistics cost,
factor costs, taxes, and margins in different markets.
17. Use optimization for facility location and capacity allocation decisions.
Gravity location models identify a location that minimizes inbound and outbound transportation costs. They are simple to
implement but do not account for other important costs. Network optimization models can include contribution margins,
taxes, tariffs, production, transportation, and inventory costs and are used to maximize profitability. These models are
useful when locating facilities, allocating capacity to facilities, and allocating markets to facilities.
18. How do import duties and exchange rates affect the location decision in a supply chain?
Tariffs refer to any duties that must be paid when products are moved across the international, state or city boundaries. If a
tariff is excessive, it provides a strong disincentive to do business across borders with entities in that area. The classic
workaround to a high tariff is adding a location inside the area. Some regions have developed trade agreements that limit
or eliminate the tariff on goods.
Exchange rates specify how much one currency is worth in terms of another. As one currency gains against another, it
may be beneficial to add shift production to the area using the devalued currency. This makes the goods more
affordable for the population. Companies with flexible production capabilities can shift some production from area to
area depending on the buying power of local markets.
19. Do you think that a significant reduction in fuel costs will affect the global supply chain networks?
As oil is considered to be a major component of supply chain, its changing price can have an impact on onshore as well as
offshore production activities. Hence retaining the profits during fluctuating oil prices requires a balancing act
between static and flexible supply chain management strategies. lower oil prices and fuel costs can add income to the
consumers. This can create demand for the products which can strain supply chain management systems. When there are
fluctuating oil prices and prices are volatile, supply chain managers look for a flexibility supply chain. When oil
prices are less, there may be political and environmental factors can quickly lead to back up of prices which may
create headaches to global supply chain management. Hence supply chain managers would like to create flexibility by
segmenting their supply chains and embracing green initiatives. This can be done by choosing alternative fuel for vehicles
that reduces the cost and also creating a good name in the eyes of the public
20. DryIce, Inc., is a manufacturer of air conditioners that has seen its demand grow significantly. The company
anticipates nationwide demand for the next year to be 180,000 units in the South, 120,000 units in the Midwest,
110,000 units in the East, and 100,000 units in the West. Managers at DryIce are designing the manufacturing
network and have selected four potential sites—New York, Atlanta, Chicago, and San Diego. Plants could have a
capacity of either 200,000 or 400,000 units. The annual fixed costs at the four locations are shown in Table 5-6,
along with the cost of producing and shipping an air conditioner to each of the four markets. Where should DryIce
build its factories and how large should they be?
21. Sunchem, a manufacturer of printing inks, has five manufacturing plants worldwide. Their locations and
capacities are shown in Table 5-7 along with the cost of producing 1 ton of ink at each facility. The production
costs are in the local currency of the country where the plant is located. The major markets for the inks are North
America, South America, Europe, Japan, and the rest of Asia. Demand at each market is shown in Table 5-7.
Transportation costs from each plant to each market in U.S. dollars are shown in Table 5-7. Management must
come up with a production plan for the next year.
a. If exchange rates are expected as in Table 5-8, and no plant can run below 50 percent of capacity,
how much should each plant produce and which markets should each plant supply?
b. If there are no limits on the amount produced in a plant, how much should each plant produce?
c. Can adding 10 tons of capacity in any plant reduce costs?
d. How should Sunchem account for the fact that exchange rates fluctuate over time?
CHAPTER 3
22. Harley Davidson has its engine assembly plant in Milwaukee and its motorcycle assembly plant in Pennsylvania.
Engines are transported between the two plants using trucks. Each truck trip costs $1,500. The motorcycle plant
assembles and sells 300 motorcycles each day. Each engine costs $450 and Harley incurs a holding cost of 20
percent per year. How many engines should Harley load onto each truck? What is the cycle inventory of engines
at Harley?
23. Harley has decided to implement just-in-time (JIT) at the motorcycle assembly plant. As part of this initiative it
has reduced the number of engines loaded on each truck to 100. If each truck trip still costs $1,500, how does this
decision impact annual costs at Harley? What should the cost of each truck be if a load of 100 engines is to be
optimal for Harley?
24. Target purchases home goods made by a supplier in China. Target’s stores in the United States sell 200,000 units
of home goods each month. Each unit costs $10 and the company has an annual holding cost of 20 percent.
Placing a replenishment order incurs clerical costs of $500/order. The shipping company charges $5,000 as a
fixed cost per shipment along with a variable cost of $0.10 per unit shipped. What is the optimal order size for
Target? What is the annual holding cost of the optimal policy? How many orders per year does Target place?
What is the annual fixed transportation cost? What is the annual variable transportation cost? What is the annual
clerical cost?
CHAPTER 5
- One outcome of the lack of supply chain coordination is the bullwhip effect, in which fluctuations in orders
increase as they move up the supply chain from retailers to wholesalers to manufacturers to suppliers
- The fluctuation in orders increases as one moves upstream in the supply chain from retail to manufacturing.
- The lack of coordination hurts both responsiveness and cost in a supply chain by making it more expensive to
provide a given level of product availability
-
25. The bullwhip effect is characterized by....
- Oscillation of orders
- increasing variations from retailer to manufacturer (= amplification)
- changing peaks of orders along the supply chain (=phase lag)
26. The bullwhip effect increases manufacturing cost...
- inventory is necessary in case demand peaks cannot be produced timely.
- higher order variations leads to higher safety stock requirements
27. The bullwhip effect increases transportation cost, because
 - higher order variations leads to higher shipment variations.
- higher shipments variations leads to less shipment fleet utilization.
- because there are times where the shipment capacity is fully utilized, and other times where there is poor
utilization.
28. Demand forecasting leads to higher order variations, because
- demand estimates vary from period to period.
- changing demand estimates lead to changing order up to levels.
- because order sizes are larger than demand when the order up to level increases.
29. Select the correct statement for the analysis presented in 5.2 ("Demand Forecasting")
- Higher lead-times lead to a stronger bullwhip effect.
- One may quantify the bullwhip effect by the ratio of the variance of the order size and the variance of demand.
30. The negative bullwhip effects of demand forecasting can be limited by....
- Reducing demand uncertainty
- Enhancing communication
- Centralized demand forecasting
- Reduce lead times
31. Select the correct statements about order batching and the bullwhip effect.
- The lower the fixed cost, the lower the discrepancy between demand and order size.
- The higher the holding cost, the lower the discrepancy between order size and demand.
- The bullwhip effect occurs because periods of orders are followed by periods of zero orders.
- Coordination of orders is useful if this levels the supplier's demand (= incoming orders).
- Uncoordinated orders may lead to an even stronger bullwhip effect.
32. Select the correct statements concerning rationing
- Demand information are useful if the supplier can detect overordering behavior.
- Rationing is particularly a problem when actual deliveries depend on actual orders.
33. Select the correct statements concerning price variations:
- demand information is distorted if buyers engage in forward buying.
- Promotions may lower profits if the additionally created demand meets too many forward buyers.
- Price reductions that are coupled to annual targets may lower the bullwhip effect.
- Under every day low pricing, forward buying is less of a problem.

CHAPTER 6
34. Manage supply to improve synchronization in a supply chain in the face of predictable variability.
To manage supply with the goal of maximizing profit, companies can reduce the capacity required through the use of
workforce flexibility, subcontracting, dual facilities, and product flexibility. Companies can reduce the inventory
required by emphasizing common parts and building and holding products with predictable demand ahead of time. These
methodologies, combined with aggregate planning, enable a company to manage supply effectively.
35. Manage demand to improve synchronization in a supply chain in the face of predictable variability.
To manage demand with the goal of maximizing profit, companies must use pricing and promotion decisions in concert
with supply planning. The timing of promotions can have a tremendous impact on demand. Therefore, using pricing to
shape demand can help synchronize the supply chain.
36. Use sales and operations planning to maximize profitability when faced with predictable variability in a supply
chain.
To handle predictable variability in a profit-maximizing manner, supply chains must coordinate the management of both
supply and demand. This requires coordinated planning across all stages of the supply chain to select pricing and
promotion plans and aggregate plans that maximize supply chain profit.
37. Generic aggregate planning
- Has a planning horizon of several months
- Tries to maximize profits while eventually not satisfying all demands
- Is based on forecasted demand
38. Aggregate planning manages both supply side and demand side => Yes
39. Trade-offs in SCM
- Lower inventories may be compensated by larger capacities or allowing for backlogs
- If capacities in a period are insufficient to satisfy demand directly, inventories may be build-up or backlogs must
be accepted
- If a company wants lower backlogs, they may consider to hold more inventories or install higher capacity
40. basic planning strategies
- The chase strategy means that we are "chasing demand" and try to avoid building inventories.
- The case strategy means that we are rather adapting capacities than producing in advance.
- The level strategy fixes the capacities in the planning horizon
- The flexibility strategy and the chase strategy are quite similar in nature.
41. Price promotions should be run in ... => it depends, can run in high or low demand
42. Price promotions in low-demand seasons lead to more steady demand in the planning horizon. => yes
43. More steady demand is good, because....?
- More steady demand allows both inventories and capacity decreasing
44. Price promotions in high-demand seasons have the advantage that they have a huge demand effect. => yes
45. The problem of promotions in high-demand seasons is....?
- Promotions in high demand seasons leads to the increase in inventories and capacities
46. The supplier is typically not impacted by price promotions of the retailer? => no
47. Collaborative Planning, Forecasting, and Replenishment (CPFR) considers....
- that aggregate plans are made jointly by suppliers and retailers
48. Sales and Operations planning helps to
- account for the fact that supply may be restricted by operations.
- find good types and durations of promotions.
- considers the effect of promotions in all other functional areas (purchasing, operations, finance...)
49. Promotions in high demand seasons are likely to be beneficial if...
- Holding costs are low