BSIE Supply Chain Management & Logistics 1 — Questions and Answers
Question 1: What is the 'bullwhip effect' in supply chain management?
- Demand amplification as orders move upstream from retailer to manufacturer (Correct answer)
- Delays caused by long transportation routes
- Overproduction due to excess machine capacity
- Price fluctuations caused by currency exchange rates
Correct answer: Demand amplification as orders move upstream from retailer to manufacturer
The bullwhip effect describes how small variations in downstream consumer demand get increasingly amplified as orders are placed upstream through the supply chain.
Question 2: What does 'vendor-managed inventory' (VMI) mean?
- The customer manages the supplier's warehouse
- The supplier monitors and replenishes the buyer's inventory based on agreed levels (Correct answer)
- A shared warehouse operated by a third-party logistics provider
- An automated system that orders parts without human approval
Correct answer: The supplier monitors and replenishes the buyer's inventory based on agreed levels
In VMI, the supplier takes responsibility for monitoring the customer's inventory and triggering replenishments when stock falls below agreed-upon thresholds.
Question 3: Which inventory classification method categorizes items into A, B, and C groups based on annual dollar usage?
- XYZ analysis
- ABC analysis (Correct answer)
- JIT classification
- SKU segmentation
Correct answer: ABC analysis
ABC analysis ranks inventory items by annual consumption value: A items (top ~20%) represent ~80% of value and receive the tightest control.
Question 4: What is the primary purpose of a distribution requirements planning (DRP) system?
- To manage supplier payments
- To coordinate replenishment of inventory across distribution network locations (Correct answer)
- To optimize production scheduling on the shop floor
- To calculate customer creditworthiness
Correct answer: To coordinate replenishment of inventory across distribution network locations
DRP extends MRP logic into the distribution network, calculating time-phased replenishment orders for warehouses and distribution centers.
Question 5: In supply chain terms, what is 'lead time'?
- Time for a customer to pay an invoice
- The total elapsed time from order placement to receipt of goods (Correct answer)
- The time required to manufacture one unit
- The duration of a supplier contract
Correct answer: The total elapsed time from order placement to receipt of goods
Lead time encompasses all elapsed time from when an order is placed until the ordered goods are received and available for use.
Question 6: Which logistics strategy positions inventory closer to customers to reduce delivery time?
- Centralized warehousing
- Cross-docking
- Forward deployment (forward stocking locations) (Correct answer)
- Drop shipping
Correct answer: Forward deployment (forward stocking locations)
Forward deployment places inventory in regional or local stocking locations near the customer base to shorten replenishment lead times.
BSIE Supply Chain Management & Logistics 1
What is the 'bullwhip effect' in supply chain management?