Supply Chain Management Chapter 6 – Flashcards

Decisions made during the supply chain design phase regarding significant investments in the supply chain, such as the number and size of plants to build, the number of trucks to purchase or lease, and whether to build or lease warehouse space, cannot be altered in the short term

The degree of demand and price uncertainty has a significant influence on the appropriate portfolio of long- and short-term warehousing space that a firm should carry

If price and demand vary over time in a global network, flexible production capacity can be reconfigured to maximize profits in the new environment

A firm may choose to build a flexible global supply chain even in the presence of little demand or supply uncertainty if certainty exists in exchange rates or prices

Offshoring typically lowers labor, working capital and fixed costs but increases risk and freight costs

Appropriate flexibility is an effective approach for a global supply chain to deal with a variety of risks and uncertainties. Extra flexibility is always worth the cost.

The present value of a stream of cash flows is what that stream is worth in today's dollars

The rate of return k is also referred to as the present value of capital

A negative NPV for an option indicates that the option will lose money for the supply chain

Discounted cash flow (DCF) analysis evaluates the present value of any stream of future cash flows and allows management to compare two streams of cash flows in terms of their financial value.

When faced with uncertain conditions it is always best to sign long-term contracts (because they are typically cheaper) and avoid all flexible capacity (because it is more expensive).

The value of flexibility increases with an increase in uncertainty.

In reality, demand and prices are highly uncertain and are likely to fluctuate during the life of any supply chain decision.

Long-term contracts for both warehousing and transportation requirements will be more effective if the demand and price of warehousing do not change in the future or if the price of warehousing goes up.

During network design, managers need a methodology that allows them to estimate the certainty in their forecast of demand and price and then incorporate this certainty into the decision-making process.

In a complex decision tree, there are thousands of possible paths that may result from the first period to the last.

Simulation methods are very good at evaluating a decision where the path itself is decision dependent.

The main advantage of simulation models is that they can provide low-cost evaluations of complex situations.

Strategic planning and financial planning should be combined during supply chain network design.

Financial analysis should be used as an input to decision making, not as the decision-making process.

Decisions made during the supply chain design phase regarding significant investments in the supply chain, such as the number and size of plants to build, the number of trucks to purchase or lease, and whether to build or lease warehouse space,

Decisions made during the supply chain design phase regarding significant investments in the supply chain, such as the number and size of plants to build, the number of trucks to purchase or lease, and whether to build or lease warehouse space,

Decisions made during the supply chain design phase regarding significant investments in the supply chain, such as the number and size of plants to build, the number of trucks to purchase or lease, and whether to build or lease warehouse space,

The opportunities from globalization are often accompanied by

Among the sources of risk identified in global supply chains, the lowest among these four is

Among the sources of risk identified in global supply chains, the highest among these four is

As Adam Smith put it so eloquently in the Wealth of Nations, "If a foreign country can supply us with a commodity cheaper than we ourselves can make it,...

A global supply chain with offshoring

A global supply chain with offshoring would tend to see which of these performance dimensions decrease?

A global supply chain with offshoring would tend to see which of these performance dimensions increase?

Offshoring to low-cost countries is most attractive for products with

The tailored strategy "Focus on low-cost, decentralized capacity for predictable demand" follows which risk mitigation strategy?

A labor dispute is a risk driver to be considered during network design. What category does a "labor dispute" belong to?

What is the type of this network design? (Couldn't paste the picture but 8 circlers and lot of interconnecting arrows)

The present value of a future stream of cash flows is what that stream

The process of evaluating the present value of any stream of future cash flows so that management can compare two streams of cash flows in terms of their financial value is

The present value of future cash flow is found by

The discount factor used to obtain the present value of money in the next period where k represents the rate of return is

The rate of return k is also referred to as the

The net present value (NPV) of a stream of cash flows is equal to

A negative NPV (net present value) for an option indicates that the option will

The decision with the highest NPV (net present value) will provide a supply chain with

What rate of return results in a present value of $23 for $25 received one year from now?

What rate of return results in a present value of $432 for $250 received one year from now and another $250 received two years from now?

The NPV (net present value) of a cash stream that is equal to $100 per period for 5 periods with a rate of return of 12% per period would be

The NPV (net present value) of a cash stream that is equal to $75 per period for 5 periods with a rate of return of 15% per period would be

In reality, demand and prices are

For a global supply chain, exchange rates and inflation are

A decision tree is

Decision tree analysis is based on Bellman's principle, which states that for any choice of strategy in a given state,

Uncertainty in demand and economic factors should be included in the financial evaluation of supply chain design decisions, because

Flexibility should be valued by taking into account uncertainty in demand and economic factors. In general, flexibility will tend to

The appropriate discount rate used in decision tree methodology

Firms should use simulation for evaluating decisions when

In a complex decision tree there are

Short-term contracts for both warehousing and transportation requirements will be more effective

The degree of demand and price uncertainty has

Uncertainty of demand and price

Bahouth Ltd. is planning for the next two years of production and debating whether to construct a large cross-dock facility with 40 truck bays or a smaller one with 20 truck bays. The cost to build the large facility is $2 million and the cost to build the small one is $1.2 million. If they construct a large facility and demand is as high as they hope, then operating costs are $450,000 annually. If they construct a large facility and demand is low, then operating costs are $300,000. If they construct a small facility and demand is low, the operating costs are $275,000 but if they experience high demand, the operating cost of a small facility increases to $600,000. After having conducted some market research, they feel that the likelihood of high demand is 0.7 and the likelihood of small demand is 0.3. A- Use the information from Scenario 6.1 to determine the expected cost of operating a large facility for two years. B- Use the information from Scenario 6.1 to determine the expected cost of operating a small facility for a period of two years. C- Use the information from Scenario 6.1 to determine the cost of the best alternative for a two year period. D- Use the information from Scenario 6.1 to determine the likelihood of high demand that would make the decision maker indifferent between the two alternatives for a two year operating time. E - Suppose the contractor has found some materials on Craigslist that can drop the construction cost of a large facility to $1,500,000. These materials cannot be used in the construction of the small facility, so its price remains as indicated in Scenario 6.1. Determine the likelihood of high demand that would make the decision maker indifferent between the two alternatives for a two year time period.

If price and demand do vary over time in a global network,

A firm may choose to build a flexible global supply chain even in the presence of little demand or supply uncertainty if

Simulation models

Simulation methods are very good at evaluating decisions when

Strategic planning and financial planning

The evaluation of supply chain networks

One of the best ways to speed up the process of financial analysis and arrive at a good decision is to