CIM Global Supply Chain Coordination 3 — Questions and Answers
Question 1: A company sources components from Asia with a 45-day lead time and sells to US customers expecting 3-day delivery. Which strategy BEST addresses this lead time gap?
- Increase order frequency to reduce batch sizes
- Maintain domestic safety stock buffer to cover demand during replenishment lead time (Correct answer)
- Switch to air freight for all shipments
- Eliminate all safety stock to reduce carrying costs
Correct answer: Maintain domestic safety stock buffer to cover demand during replenishment lead time
Maintaining domestic safety stock bridges the gap between long international lead times and short customer delivery expectations.
Question 2: What is the role of an 'Incoterm' such as FOB (Free on Board) in international trade?
- It specifies the currency in which international transactions must be settled
- It defines the point at which risk and cost transfer from seller to buyer during international shipment (Correct answer)
- It establishes the tariff rate applied to imported goods
- It sets the payment terms between importer and exporter
Correct answer: It defines the point at which risk and cost transfer from seller to buyer during international shipment
Incoterms define the responsibilities, costs, and risks associated with the delivery of goods from seller to buyer in international trade.
Question 3: Which global supply chain disruption factor is associated with the 'China Plus One' sourcing strategy?
- Currency fluctuation risk
- Over-reliance on a single country for manufacturing (Correct answer)
- Customs documentation complexity
- Time zone differences in communication
Correct answer: Over-reliance on a single country for manufacturing
China Plus One strategy diversifies sourcing by adding a second manufacturing country to reduce dependence on China alone.
Question 4: In multi-echelon global supply chains, what does 'echelon inventory' refer to?
- Inventory held only at retail locations
- The total inventory in a supply chain stage plus all inventory downstream of that stage (Correct answer)
- Expired inventory that must be written off
- Inventory reserved for the highest-priority customers
Correct answer: The total inventory in a supply chain stage plus all inventory downstream of that stage
Echelon inventory includes all stock at a given level plus everything downstream, enabling coordinated inventory optimization across the supply chain.
Question 5: A global retailer wants to reduce the 'bullwhip effect' across its international supply chain. Which action is MOST effective?
- Increase safety stock at every tier
- Share real-time point-of-sale data with all upstream suppliers (Correct answer)
- Reduce the number of international suppliers
- Switch from pull to push replenishment globally
Correct answer: Share real-time point-of-sale data with all upstream suppliers
Sharing real-time demand data with upstream partners reduces demand signal distortion that amplifies order variability across supply chain tiers.
Question 6: Which metric measures the effectiveness of a global supply chain in delivering the right product at the right time?
- Cash-to-cash cycle time
- Perfect Order Rate (Correct answer)
- Gross Margin Return on Inventory Investment (GMROI)
- Economic Order Quantity (EOQ)
Correct answer: Perfect Order Rate
Perfect Order Rate measures the percentage of orders delivered on time, complete, undamaged, and with accurate documentation.
Question 7: What is 'vendor-managed inventory' (VMI) in a global supply chain context?
- The buyer sets all replenishment triggers and quantities for the supplier
- The supplier takes responsibility for monitoring and replenishing the buyer's inventory (Correct answer)
- A third-party logistics provider manages all inventory decisions
- Inventory owned by the vendor but stored at the buyer's warehouse without payment obligation
Correct answer: The supplier takes responsibility for monitoring and replenishing the buyer's inventory
In VMI, the supplier monitors the buyer's inventory levels and initiates replenishment orders, improving supply chain efficiency.
CIM Global Supply Chain Coordination 3
A company sources components from Asia with a 45-day lead time and sells to US customers expecting 3-day delivery.
Which strategy BEST addresses this lead time gap?