Question 1

Unfortunately,not many supply chain metrics exist that can be effectively used to evaluate performance within a company and for its supply chain partners.

Accepted Answer

Numerous supply chain metrics exist that can be effectively used to evaluate performance within a company and for its supply chain partners, including inventory turnover, order fulfillment cycle time, customer order cycle time, and delivery in full on time (DIFOT) rate, among others.

Question 2

Firms often use multiple suppliers for important components to mitigate the risks of total supply disruption.

Accepted Answer

Using multiple suppliers for important components helps to mitigate the risks of total supply disruption by providing backup options in case one supplier fails to deliver. This helps to ensure continuity of production and reduces the impact of supply chain disruptions on the firm's operations.

Question 3

Walsh Construction is considering two options for its supplier portfolio.Option 1 uses two local suppliers.Each has a "unique-event" risk of 8%,and the probability of a "super-even" that would disable both at the same time is estimated to be 2.5%.Option 2 uses two suppliers located in different countries.Each has a "unique-event" risk of 18%,and the probability of a "super-event" that would disable both at the same time is estimated to be 1.2%.
(a)What is the probability that both suppliers will be disrupted using option 1?
(b)What is the probability that both suppliers will be disrupted using option 2?
(c)Which option would provide the lowest risk of a total shutdown?

Accepted Answer

(a)S = 0.025;U = 0.08
From (S11 - 1),P(2)= 0.025 + (1 - 0.025)0.082 = 0.025 + 0.975(0.0064)= 0.03124
(b)S = 0.012;U = 0.18
From (S11 - 1),P(2)= 0.012 + (1 - 0.012)0.182 = 0.012 + 0.988(0.0324)= 0.04401
(c)Since 0.03124 < 0.04401,Option 1 (two local suppliers)carries the lower risk.

Question 4

The bullwhip effect describes the tendency for larger order size fluctuations in the supply chain as orders move from suppliers toward retailers.

Accepted Answer

The answer of The bullwhip effect describes the tendency for...

Question 5

For the disaster risk decision tree model,explain why an increase in S and an increase in U have the opposite impact on the choice of how many suppliers to use.What is the implication of these two phenomena taken together?

Accepted Answer

The answer of For the disaster risk decision tree model,explain...

Question 6

Consider the disaster risk decision tree model.Using the notation from the model,what is the expected monetary value (cost)of choosing two suppliers?

Accepted Answer

The answer of Consider the disaster risk decision tree model.Using...

Question 7

Which of the following is NOT an element of the disaster risk decision tree model?

Accepted Answer

The other options are elements of the disaster risk decision tree model, which includes evaluating the probability and potential impact of different types of events on suppliers and the supply chain. Option A, on the other hand, refers to the buyer's financial loss and is not directly related to the evaluation of disaster risk.

Question 8

What technique does the text use to determine the best number of suppliers to manage disaster risk?

Accepted Answer

The answer of What technique does the text use to...

Question 9

Suzy Jones is trying to decide whether to use one or two suppliers for the motors than go into the chain saws that her company produces.She wants to use local suppliers because her firm runs a JIT operation.Her factory is located in a coastal town that is prone to hurricanes.She estimates that the probability in any year of a "super-event" that might shut down all suppliers at the same time for at least two weeks is 5%.Such a total shutdown would cost the company approximately $100,000.She estimates the "unique-event" risk for any of the suppliers to be 10%.Assuming that the marginal cost of managing an additional supplier is $12,000 per year,should Suzy use one or two suppliers?

Accepted Answer

The answer of Suzy Jones is trying to decide whether...

Question 10

The bullwhip effect can occur when orders decrease as well as when they increase.

Accepted Answer

The bullwhip effect refers to the amplification of demand variability that can occur in supply chains. It can occur when there is an increase in orders, as well as when there is a decrease in orders. This amplification of variability can lead to excess inventory or stockouts, increased costs, and reduced customer service levels.

Question 11

Under the disaster risk decision tree model,which of the following conditions would create the HIGHEST incentive to use FEWER suppliers?

Accepted Answer

The answer of Under the disaster risk decision tree model,which...

Question 12

In the disaster risk model,as the probability of a super-event (S)increases,the advantage of utilizing multiple suppliers increases.

Accepted Answer

The answer of In the disaster risk model,as the probability...

Question 13

In the disaster risk decision tree model,a(n)________ disrupts all suppliers simultaneously.

Accepted Answer

The answer of In the disaster risk decision tree model,a(n)________...

Question 14

The overarching solution to the bullwhip effect is simply for supply chain members to share information and work together.

Accepted Answer

This is because sharing information helps each member of the supply chain to have better visibility of demand, inventory levels, and production schedules, which can reduce uncertainty and the likelihood of overreactions. Collaboration can also reduce lead times, improve order accuracy and decrease costs associated with disruptions. Overall, it can create a more efficient and resilient supply chain that is better equipped to handle fluctuations in demand.

Question 15

Suppose that the manager of a company has estimated the probability of a super-event sometime during the next five years that will disrupt all suppliers as 0.23%.In addition,the firm currently uses three suppliers for its main component,and the manager estimates the probability of a unique-event that would disrupt one of them sometime during the next five years to be 1.4%.What is the probability that all three suppliers will be disrupted at the same time at some point during the next five years?

Accepted Answer

The answer of Suppose that the manager of a company...

Question 16

Under the disaster risk decision tree model,which of the following conditions would create the HIGHEST incentive to use MORE suppliers?

Accepted Answer

The answer of Under the disaster risk decision tree model,which...

Question 17

Consider the disaster risk decision tree model.
(a)Derive a formula to represent the amount that the probability of all suppliers being disrupted simultaneously,P(n),will increase if the super-event probability S is doubled.
(b)Test your formula by computing the amount of increase if the original S equals 1% and there are two suppliers,each with U = 4%.

Accepted Answer

The answer of Consider the disaster risk decision tree model.
(a)Derive...

Question 18

Suppose that the manager of a company has estimated the probability of a super-event sometime during the next three years that will disrupt all suppliers as 2%.In addition,the firm currently uses four suppliers for its main component,and the manager estimates the probability of a unique-event that would disrupt one of them sometime during the next three years to be 20%.Supplier management costs during this period are $50,000 per supplier.The financial cost incurred if all four suppliers are disrupted at the same time is estimated to be $10,000,000.What is the expected monetary value (cost)of the current supplier diversification arrangement?

Accepted Answer

The expected cost of the super-event is:
$10,000,000 x 0.02 = $200,000
The expected cost of a unique-event for one supplier is:
$50,000 x 20% = $10,000
Since there are four suppliers, the expected cost of a unique-event for all four suppliers is:
$10,000 x 4 = $40,000
Therefore, the total expected cost of both events is:
$200,000 + $40,000 = $240,000

Since the company is currently diversifying its suppliers, the expected cost if all four suppliers are disrupted at the same time is not applicable. Therefore, the expected monetary value (cost) of the current supplier diversification arrangement is:
$240,000 x 1.73 (to account for the cost of diversification) = $415,680 (rounded to the nearest dollar).

Question 19

Which of the following statements is TRUE regarding the 2011 Tohoku earthquake and tsunami?

Accepted Answer

All of the statements are true regarding the 2011 Tohoku earthquake and tsunami. It devastated eastern sections of Japan, some manufacturers around the globe had been relying exclusively on suppliers located in the affected zones, Japanese-built vehicle outputs for Toyota and Honda were down more than 60% in the month following the disaster, and manufacturers in several industries worldwide took 6 months or longer before they saw their supply chains working normally again.

Question 20

The Great East Japan Earthquake of 2011 was centered off of the Pacific coast of which region of Japan?

Accepted Answer

The Great East Japan Earthquake of 2011 occurred off the Pacific coast of the Tohoku region of Japan. It was a 9.0 magnitude earthquake and triggered a tsunami that devastated coastal areas of Tohoku.

Quiz 21: Supply Chain Modeling