Exam 6: Designing Global Supply Chain Networks

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.

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

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.

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

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

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,

Simulation methods are very good at evaluating decisions when

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

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

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

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.

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,...

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

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

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

The appropriate discount rate used in decision tree methodology

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

Pretzle Wagon is evaluating the possibility of offshoring part of his operation and developing a spreadsheet to help assess the total cost of the decision. What elements should be included in the evaluation?

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.

A decision tree is