OPMA 317 FINAL EXAM QUESTIONS WITH VERIFIED
ANSWERS
Purchase vs Product Order Flow - Answers - Upstream vs. Downstream
What happens to fluctuations and why? - Answers - Fluctuations are amplified due to a
time lag
Beer Game: What caused people to act the way they did - Answers - Lack of
communication/cooperation and long lead times
Bullwhip Effect - Answers - Information going back through the supply chain is distorted
and then amplified. Members of the supply chain overreact to changes in demand.
How does a long lead time affect decision making? - Answers - Panic - when inventory
does not instantly arrive and solve your growing backlog, you panic and order even
more
Business Implications of Supply Chain - Answers - Stockouts, excess inventory,
overtime costs, layoffs/re-hiring costs, expediting
Bullwhip Effect Measure - Answers - Bullwhip effect is present if variance of
orders/variance of demand is greater than 1
Stanley - Power Tools - Answers - Accurately predicted jump in demand pre-Covid and
kept their factories open in Mexico
How to incentivize cooperation/communication? - Answers - Provide incentives to share
information. Use vendor managed inventory.
Mattel - Answers - Collected their own daily demand data in real time by visiting stores
Collaborative Planning Forecasting & Replenishment example - Answers - Canadian
Tire has a 26-week planned order stream that is updated weekly
How to shorten lead times - Answers - Administrative lead = improve information
technology
Physical manufacturing lead = just in time production
Transportation lead = have suppliers geographically close by (on-shoring)
What to do if you cannot change the supply chain structure (ex. SMEs) - Answers -
Adapt and manage: The Aspirin Rule - once demand changes, don't panic, just correct
once
, Beer Game Learning (3) - Answers - Change the supply chain structure (communication
& cooperation, shorter lead times). If you can't change the structure, adapt and wait.
Choose capable suppliers/the best teammate.
Keep a smooth supply chain - Answers - Don't offer significant sales/discounts, if you
have to, limit the quantity of items that can be bought at discounted prices. Don't do
lumpsum orders, order evenly.
What is a supply chain? - Answers - A network of facilities that procure raw materials
(purchasing) and distribute them. Managing inbound procurement and outbound
logistics.
Supply Chain Network - Answers - Suppliers -> Manufacturing -> Distribution ->
Customers
Why did supply chains extend globally? - Answers - To reduce labour costs (now the
lowest labour cost is in Ethiopia)
Vertical Integration - Answers - The proportion of the supply chain that the company
owns (make vs. buy)
Why would an organization not want to outsource? - Answers - Control (strategic
process, intellectual property, "messy" coordination). Example, Tesla manufactures their
car batteries.
Procurement/Purchasing - Answers - Are a high % of sales. Involves buying materials
not internally developed.
Vendor Selection - Answers - Based on criteria such as location, quality, sustainability,
price, on-time delivery (among others)
Vendor Development - Answers - Some companies offer free consulting to their vendors
to accomplish cost reductions, improved quality etc. Improving suppliers operations
improve the entire supply chain.
Types of purchasing: (3) - Answers - 1. Centralized - HQ orders for everyone
2. Stockless - Supplied delivers material directly to the production area rather than to a
stock room
3. Blanket Purchase Orders - Commits to an order amount for a year, then draws down
this amount overtime (usually to receive unit discount)
Benefits of Blanket Purchase Orders - Answers - For retailer: Unit cost savings, lower
holding costs (smaller deliveries), lower order costs (things already set up), less supply
uncertainty.
For manufacturer: Known demand = efficient planning
ANSWERS
Purchase vs Product Order Flow - Answers - Upstream vs. Downstream
What happens to fluctuations and why? - Answers - Fluctuations are amplified due to a
time lag
Beer Game: What caused people to act the way they did - Answers - Lack of
communication/cooperation and long lead times
Bullwhip Effect - Answers - Information going back through the supply chain is distorted
and then amplified. Members of the supply chain overreact to changes in demand.
How does a long lead time affect decision making? - Answers - Panic - when inventory
does not instantly arrive and solve your growing backlog, you panic and order even
more
Business Implications of Supply Chain - Answers - Stockouts, excess inventory,
overtime costs, layoffs/re-hiring costs, expediting
Bullwhip Effect Measure - Answers - Bullwhip effect is present if variance of
orders/variance of demand is greater than 1
Stanley - Power Tools - Answers - Accurately predicted jump in demand pre-Covid and
kept their factories open in Mexico
How to incentivize cooperation/communication? - Answers - Provide incentives to share
information. Use vendor managed inventory.
Mattel - Answers - Collected their own daily demand data in real time by visiting stores
Collaborative Planning Forecasting & Replenishment example - Answers - Canadian
Tire has a 26-week planned order stream that is updated weekly
How to shorten lead times - Answers - Administrative lead = improve information
technology
Physical manufacturing lead = just in time production
Transportation lead = have suppliers geographically close by (on-shoring)
What to do if you cannot change the supply chain structure (ex. SMEs) - Answers -
Adapt and manage: The Aspirin Rule - once demand changes, don't panic, just correct
once
, Beer Game Learning (3) - Answers - Change the supply chain structure (communication
& cooperation, shorter lead times). If you can't change the structure, adapt and wait.
Choose capable suppliers/the best teammate.
Keep a smooth supply chain - Answers - Don't offer significant sales/discounts, if you
have to, limit the quantity of items that can be bought at discounted prices. Don't do
lumpsum orders, order evenly.
What is a supply chain? - Answers - A network of facilities that procure raw materials
(purchasing) and distribute them. Managing inbound procurement and outbound
logistics.
Supply Chain Network - Answers - Suppliers -> Manufacturing -> Distribution ->
Customers
Why did supply chains extend globally? - Answers - To reduce labour costs (now the
lowest labour cost is in Ethiopia)
Vertical Integration - Answers - The proportion of the supply chain that the company
owns (make vs. buy)
Why would an organization not want to outsource? - Answers - Control (strategic
process, intellectual property, "messy" coordination). Example, Tesla manufactures their
car batteries.
Procurement/Purchasing - Answers - Are a high % of sales. Involves buying materials
not internally developed.
Vendor Selection - Answers - Based on criteria such as location, quality, sustainability,
price, on-time delivery (among others)
Vendor Development - Answers - Some companies offer free consulting to their vendors
to accomplish cost reductions, improved quality etc. Improving suppliers operations
improve the entire supply chain.
Types of purchasing: (3) - Answers - 1. Centralized - HQ orders for everyone
2. Stockless - Supplied delivers material directly to the production area rather than to a
stock room
3. Blanket Purchase Orders - Commits to an order amount for a year, then draws down
this amount overtime (usually to receive unit discount)
Benefits of Blanket Purchase Orders - Answers - For retailer: Unit cost savings, lower
holding costs (smaller deliveries), lower order costs (things already set up), less supply
uncertainty.
For manufacturer: Known demand = efficient planning
