Determining The Optimal Level Of Product Availability

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Questions Bank

Understanding the Supply Chain
Supply Chain Performance: Achieving Strategic Fit and Scope
Supply Chain Drivers and Metrics
Designing Distribution Networks and Applications to e-Business
Network Design in the Supply Chain
Designing Global Supply Chain Networks
Demand Forecasting in a Supply Chain
Aggregate Planning in a Supply Chain
Sales and Operations Planning: Planning Supply and Demand in a Supply Chain
Coordination in a Supply Chain
Managing Economies of Scale in the Supply Chain: Cycle Inventory
Managing Uncertainty in a Supply Chain: Safety Inventory
Determining the Optimal Level of Product Availability
Transportation in a Supply Chain
Sourcing Decisions in a Supply Chain
Pricing and Revenue Management in a Supply Chain
Sustainability and the Supply Chain

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Question 1

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A supply chain can use a high level of product availability to improve its responsiveness and attract customers.

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Question 2

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A high level of product availability requires less inventory, which will keep costs down for the supply chain.

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Question 3

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A supply chain needs to achieve a balance between the level of availability and the cost of inventory that maximizes supply chain revenues.

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Question 4

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Whether the optimal level of availability is high or low depends on where a particular company believes they can maximize profits.

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Question 5

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The cost of overselling is denoted by C? and is the loss incurred by a firm for each unsold unit at the end of the selling season.

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Question 6

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The cost of understocking is denoted by C? and is the margin lost by a firm for each lost sale because there is no inventory on hand.

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Question 7

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The cost of underselling is a key factor that influences the optimal level of product availability.

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Question 8

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The costs of overstocking and understocking have a direct impact on both the optimal cycle service level and profitability.

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Question 9

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As the ratio of the cost of overstocking to the cost of understocking gets smaller, the optimal level of product availability decreases.

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Question 10

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With reduced demand uncertainty, a supply chain manager can better match supply and demand by reducing both overstocking and understocking.

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Question 11

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An increase in forecast accuracy increases both the overstocked and understocked quantity and decreases a firm's profits.

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Question 12

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If quick response allows multiple orders in the season, profits increase and the overstock quantity increases.

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Question 13

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Quick response results in the manufacturer making a lower profit in the short term if all else is unchanged.

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Question 14

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Postponement is valuable for a firm that sells a large variety of products with demand that is independent and comparable in size.

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Question 15

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Tailored postponement allows a firm to increase its profitability by only postponing the uncertain part of the demand and producing the predictable part at a lower cost without postponement.

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Question 16

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Tailored sourcing may be volume-based or product-based depending on the source of uncertainty.

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Question 17

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In volume-based tailored sourcing, the predictable part of a product's demand is produced at a flexible facility, whereas the uncertain portion is produced at an efficient facility.

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Question 18

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In product-based tailored sourcing, low-volume products with uncertain demand are obtained from a flexible source, while high-volume products with less demand uncertainty are obtained from an efficient source.

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Question 19

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A supply chain can use a high level of product availability to improve its responsiveness and attract customers, thus increasing revenue for the supply chain.

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Question 20

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A managerial lever to increase profitability is to decrease the salvage value of each unit.

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