D471 Global Supply Chain Management - Set 1 - Part 1

Correct Answer: They involve decisions about the location of manufacturing, storage, and transportation-related facilities.

Supply chain network design decisions determine the location of facilities, the allocation of capacity, and the roles assigned to each facility. These decisions impact the entire supply chain and influence production, inventory, and transportation costs.

Correct Answer: They have long-term impacts and are expensive to reverse.

Facility location decisions are significant because they impact the long-term performance of the supply chain. Moving or shutting down a facility is costly and affects logistics, responsiveness, and production efficiency.

Correct Answer: Role assignment of each facility

The role assigned to each facility in a supply chain determines the flexibility with which the supply chain can adjust to changes in demand. Facilities may focus on production, storage, or distribution, and these roles affect the supply chain's adaptability.

Correct Answer: They set constraints within which inventory, transportation, and information can be used to reduce costs or increase responsiveness.

Network design decisions define the structure of the supply chain, setting constraints on how inventory, transportation, and information flows are managed to optimize performance and responsiveness.

Correct Answer: High fixed costs favor the consolidation of production in fewer, larger facilities.

When fixed costs are high, it is more cost-effective to consolidate production in fewer large facilities, as this helps to spread the fixed costs across a larger volume of production, reducing per-unit costs.

Correct Answer: In the lowest-cost location, often far from the markets they serve.

Firms pursuing cost leadership seek to minimize production costs, which often means locating manufacturing facilities in low-cost regions, even if they are far from their customer markets.

Correct Answer: Consolidate production into fewer, larger facilities.

When economies of scale are present, consolidating production in fewer, larger facilities helps reduce per-unit production costs, making it more efficient than building many smaller facilities.

Correct Answer: They favor many local facilities to reduce transportation costs.

When fixed costs are low, it becomes feasible to build many smaller, local facilities, which helps reduce transportation costs by being closer to customers.

Correct Answer: Increase the number of production locations.

High tariffs encourage companies to establish local production facilities within the regions imposing tariffs to avoid paying import duties, leading to more distributed production.

Correct Answer: Exchange rate fluctuations can impact production and sourcing costs across different countries.

Exchange rate fluctuations can affect the costs of sourcing and production in different countries, making it essential for companies to build flexibility into their supply chain to adjust to these changes.

Correct Answer: Both inventory and facility costs increase.

As the number of facilities in a supply chain increases, the associated inventory and facility costs also rise due to higher storage requirements and the need to manage more locations.

Correct Answer: Increase as the number of facilities increases.

Transportation costs increase as the number of facilities rises because goods must be moved between more locations, leading to higher overall transportation expenses.

Correct Answer: Improve response time to customers.

Increasing the number of facilities beyond the point that minimizes total logistics cost can improve response times to customers by positioning inventory closer to the end consumer, even though it may increase costs.

Correct Answer: Maximize total profit while meeting customer demand and responsiveness.

The primary goal of supply chain network design is to maximize profits by optimizing production, inventory, transportation, and location decisions to meet customer needs effectively and efficiently.

Correct Answer: Maximize profits while balancing demand and capacity across markets.

Supply chain network design aims to maximize total profits by balancing capacity, demand, and cost factors, ensuring that the network is aligned with the company's strategic objectives.

Correct Answer: Assigning what processes are performed at each facility

Facility role decisions are about assigning specific processes, such as production or storage, to each facility in the supply chain.

Correct Answer: Deciding how much capacity each facility should have

Capacity allocation decisions focus on determining how much production or storage capacity should be allocated to each facility in the supply chain.

Correct Answer: Deciding which markets each facility should serve and which supply sources should feed each facility

Market and supply allocation decisions involve assigning specific markets to facilities and deciding which supply sources should supply those facilities.

Correct Answer: Poor utilization and higher costs

Allocating too much capacity can result in underutilized resources, leading to higher costs without improving efficiency.

Correct Answer: Poor responsiveness or high costs due to reliance on distant facilities

If too little capacity is allocated to a facility, it may not be able to meet demand, leading to delays or high costs if products have to be supplied from other, more distant facilities.