MGT 8803 SUPPLY CHAIN COMPRHENSIVE EXAM
2026/2027 QUESTIONS AND SOLUTIONS RATED A+
✔✔Inventory - ✔✔raw material, component parts, work in process, or finished goods
that are held at a location in the supply chain.
✔✔What is one of a company's biggest assets? - ✔✔inventory
✔✔Benefits of inventory - ✔✔•Hedge against uncertain demand
•Hedge against uncertain supply
•Economies of Scale; economize on ordering costs
•Workload Smoothing
✔✔Costs of inventory - ✔✔-holding costs
-obsolescence
-spoilage
-rework
-shrinkage
-opportunity costs
✔✔Key Inventory Management Decisions - ✔✔How much should we order?
When should we order more?
✔✔How to calculate how much to order? - ✔✔Economic Order Quantity (EOQ)
EOQ = sqrt( 2*S*D / H)
✔✔How to calculate when to order? - ✔✔Reorder Point (ROP)
ROP = d avg * L
✔✔short term decisions - ✔✔Operating decisions and scheduling
✔✔throughput time - ✔✔the amount of time required to turn raw materials into
completed products; Lean Metric used to describe the elapsed time from process start
to process end
✔✔economies of scale - ✔✔cost reductions that occur when companies increase
production
✔✔When to use pull system - ✔✔- uncertain demand
- quick production and delivery chance
- flexible supply in dynamic market
✔✔When to use push system - ✔✔- stable demand
- long time required for manufacturing process
, - targeting cost reduction
✔✔Ordering cost - ✔✔Number of Orders per Year x Cost of Placing an Order
(D/Q) * S
✔✔Inventory Cost - ✔✔Average inventory x Holding cost per year
(Q/2) * H
✔✔Fill rate - ✔✔the percentage of demand filled by the stock on hand; sometimes
referred to as type 2 service level
✔✔Mean Forecast Error (MFE) - ✔✔Measures the bias of a forecast model, or the
propensity of a model to under - or over-forecast.
Running sums of forecast / number of observations
This tells you on average if you are high or too low.
Negative # is OVER forecasting
Positive # is UNDER forecasting
✔✔Running Sum of Forecast Errors (RSFE) - ✔✔indicates bias in the forecasts or the
tendency of a forecast to be consistently higher or lower than actual demand.
✔✔Mean Absolute Deviation (MAD) - ✔✔the average distance between each data
value and the mean
✔✔ Responsive Supply Chain - ✔✔focus on flexibility and responsive service and are
able to react quickly to changing market demand and requirements; focus on flexible
production
and meeting changing needs of customers
✔✔Efficient Supply chain - ✔✔utilize strategies aimed at creating the highest cost
efficiency; all about keeping costs as low as possible through high utilization, high
repetition, and a high level of standardization.
✔✔Efficient vs. Responsive Supply Chains - ✔✔Responsive supply chain is defined by
its reaction speed to react, start new routes, scale up and down quickly. Used for
innovative products and getting new product to new market quickly. High cost and not
"efficient".
ex: train is efficient (time table, runs on time, goes from pt A to pt B), car is responsive
(fast, more expensive, available to use when needed)
✔✔What are product characteristics that are more conducive to a Responsive Supply
chain? - ✔✔- high demand uncertainty
- high profit margins
2026/2027 QUESTIONS AND SOLUTIONS RATED A+
✔✔Inventory - ✔✔raw material, component parts, work in process, or finished goods
that are held at a location in the supply chain.
✔✔What is one of a company's biggest assets? - ✔✔inventory
✔✔Benefits of inventory - ✔✔•Hedge against uncertain demand
•Hedge against uncertain supply
•Economies of Scale; economize on ordering costs
•Workload Smoothing
✔✔Costs of inventory - ✔✔-holding costs
-obsolescence
-spoilage
-rework
-shrinkage
-opportunity costs
✔✔Key Inventory Management Decisions - ✔✔How much should we order?
When should we order more?
✔✔How to calculate how much to order? - ✔✔Economic Order Quantity (EOQ)
EOQ = sqrt( 2*S*D / H)
✔✔How to calculate when to order? - ✔✔Reorder Point (ROP)
ROP = d avg * L
✔✔short term decisions - ✔✔Operating decisions and scheduling
✔✔throughput time - ✔✔the amount of time required to turn raw materials into
completed products; Lean Metric used to describe the elapsed time from process start
to process end
✔✔economies of scale - ✔✔cost reductions that occur when companies increase
production
✔✔When to use pull system - ✔✔- uncertain demand
- quick production and delivery chance
- flexible supply in dynamic market
✔✔When to use push system - ✔✔- stable demand
- long time required for manufacturing process
, - targeting cost reduction
✔✔Ordering cost - ✔✔Number of Orders per Year x Cost of Placing an Order
(D/Q) * S
✔✔Inventory Cost - ✔✔Average inventory x Holding cost per year
(Q/2) * H
✔✔Fill rate - ✔✔the percentage of demand filled by the stock on hand; sometimes
referred to as type 2 service level
✔✔Mean Forecast Error (MFE) - ✔✔Measures the bias of a forecast model, or the
propensity of a model to under - or over-forecast.
Running sums of forecast / number of observations
This tells you on average if you are high or too low.
Negative # is OVER forecasting
Positive # is UNDER forecasting
✔✔Running Sum of Forecast Errors (RSFE) - ✔✔indicates bias in the forecasts or the
tendency of a forecast to be consistently higher or lower than actual demand.
✔✔Mean Absolute Deviation (MAD) - ✔✔the average distance between each data
value and the mean
✔✔ Responsive Supply Chain - ✔✔focus on flexibility and responsive service and are
able to react quickly to changing market demand and requirements; focus on flexible
production
and meeting changing needs of customers
✔✔Efficient Supply chain - ✔✔utilize strategies aimed at creating the highest cost
efficiency; all about keeping costs as low as possible through high utilization, high
repetition, and a high level of standardization.
✔✔Efficient vs. Responsive Supply Chains - ✔✔Responsive supply chain is defined by
its reaction speed to react, start new routes, scale up and down quickly. Used for
innovative products and getting new product to new market quickly. High cost and not
"efficient".
ex: train is efficient (time table, runs on time, goes from pt A to pt B), car is responsive
(fast, more expensive, available to use when needed)
✔✔What are product characteristics that are more conducive to a Responsive Supply
chain? - ✔✔- high demand uncertainty
- high profit margins
