Exam 6: Designing Global Supply Chain Networks

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,

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

Scenario 6.1 - The Big Box 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. -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.

A recently-accredited College of Business discovers it is in dire financial trouble and wants to examine demand for services and costs to provide them next year.Market conditions may become more favorable,resulting in a 10% increase in enrollment,with a probability of 0.5,stay the same,with a probability of 0.3,or become less favorable,with a probability of 0.2 and a decrease in enrollment of 10%.There is a 0.9 probability that their costs to provide services will rise by 5% and a 0.1 probability that their costs will be the same.This year,they charge each of their 2000 students $3000 to take a full course load and spend $1500 on each student. -What is the revenue for the college if it experiences an increase in enrollment and an increase in their cost to provide services?

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

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

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

A chained network configuration means that

In reality,demand and prices are

What type of network design is represented in the diagram?

A chained network with one long chain

As flexibility is increased,

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

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).

A decision tree is

When supply disruptions occur,

A recently-accredited College of Business discovers it is in dire financial trouble and wants to examine demand for services and costs to provide them next year.Market conditions may become more favorable,resulting in a 10% increase in enrollment,with a probability of 0.5,stay the same,with a probability of 0.3,or become less favorable,with a probability of 0.2 and a decrease in enrollment of 10%.There is a 0.9 probability that their costs to provide services will rise by 5% and a 0.1 probability that their costs will be the same.This year,they charge each of their 2000 students $3000 to take a full course load and spend $1500 on each student. -What is the probability that the college experiences a decrease in enrollment and an increase in their cost to provide services?

The value of flexibility increases with an increase in uncertainty.

Which of these is a disadvantage of a chained network configuration?

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