BSE Bachelor of Science in Engineering Management: Operations and Supply Chain 2 — Questions and Answers
Question 1: A manufacturer uses the Economic Order Quantity (EOQ) model. If annual demand doubles while holding cost remains the same, the optimal order quantity changes by a factor of:
- √2 (increases by about 41%) (Correct answer)
- 2 (doubles)
- 0.5 (halves)
- √0.5 (decreases by about 29%)
Correct answer: √2 (increases by about 41%)
EOQ = √(2DS/H), so doubling D multiplies EOQ by √2 ≈ 1.414.
Question 2: Which supply chain risk mitigation strategy involves holding extra inventory beyond average demand to buffer against uncertainty?
- Safety stock (Correct answer)
- Cross-docking
- Vendor-managed inventory
- Drop shipping
Correct answer: Safety stock
Safety stock is buffer inventory held to protect against demand variability and supply lead-time uncertainty.
Question 3: In a pull-based supply chain system, production is triggered by:
- A sales forecast prepared months in advance
- Actual customer demand or downstream consumption (Correct answer)
- A master production schedule issued centrally
- A supplier's available capacity
Correct answer: Actual customer demand or downstream consumption
Pull systems (e.g., Kanban) initiate production only when real demand signals arrive from downstream stages.
Question 4: The bullwhip effect in supply chains describes:
- The amplification of demand variability as orders move upstream (Correct answer)
- The reduction of lead times through lean practices
- Excess capacity that builds up at bottleneck stations
- The tendency for transportation costs to spike during peak season
Correct answer: The amplification of demand variability as orders move upstream
Small fluctuations in end-customer demand get progressively amplified at each upstream supply chain tier, resembling a bullwhip's motion.
Question 5: A company's Days Sales of Inventory (DSI) is 45 days. This metric primarily indicates:
- How quickly the company collects receivables
- How many days of inventory the company carries on average (Correct answer)
- The average payment terms offered to customers
- The number of days to fulfill a customer order
Correct answer: How many days of inventory the company carries on average
DSI = (Inventory / COGS) × 365, measuring how many days on average inventory is held before being sold.
Question 6: Which queuing model assumption is violated when a hospital emergency room prioritizes critical patients over less urgent ones?
- First-In, First-Out (FIFO) discipline (Correct answer)
- Poisson arrival distribution
- Exponential service times
- Single-server assumption
Correct answer: First-In, First-Out (FIFO) discipline
FIFO assumes customers are served in arrival order; priority queuing overrides this by serving higher-priority arrivals first.
Question 7: Postponement strategy in supply chain management involves:
- Delaying product differentiation until closer to the point of customer demand (Correct answer)
- Paying suppliers later to improve working capital
- Deferring capital expenditures on warehouse automation
- Scheduling production runs at the end of each quarter
Correct answer: Delaying product differentiation until closer to the point of customer demand
Postponement delays customization so that generic components are held until actual demand patterns become clearer, reducing variety-driven inventory risk.
BSE Bachelor of Science in Engineering Management: Operations and Supply Chain 2
A manufacturer uses the Economic Order Quantity (EOQ) model.
If annual demand doubles while holding cost remains the same, the optimal order quantity changes by a factor of: