COM Supply Chain & Logistics Management 2 — Questions and Answers
Question 1: A company experiences a sudden supplier bankruptcy. Which risk mitigation strategy would BEST address single-source dependency?
- Increase safety stock levels
- Dual-source or multi-source critical components (Correct answer)
- Negotiate longer payment terms
- Switch to just-in-time ordering
Correct answer: Dual-source or multi-source critical components
Dual- or multi-sourcing critical components eliminates single-supplier dependency and ensures supply continuity if one source fails.
Question 2: Which metric measures the percentage of customer orders fulfilled completely from available stock without backorders?
- Order cycle time
- Fill rate (Correct answer)
- Inventory turnover
- Perfect order rate
Correct answer: Fill rate
Fill rate measures the proportion of customer demand satisfied immediately from on-hand inventory without stockouts or backorders.
Question 3: In a cross-docking operation, inbound shipments are:
- Stored in reserve locations for later picking
- Transferred directly to outbound vehicles with minimal storage (Correct answer)
- Inspected and returned to suppliers if defective
- Consolidated into larger lots before shipping
Correct answer: Transferred directly to outbound vehicles with minimal storage
Cross-docking transfers goods from inbound to outbound docks with little or no warehousing, reducing handling time and storage costs.
Question 4: The Bullwhip Effect in supply chains refers to:
- Seasonal demand peaks overwhelming warehouse capacity
- Demand variability amplification as orders move upstream (Correct answer)
- Price fluctuations caused by commodity shortages
- Delivery lead times lengthening during peak seasons
Correct answer: Demand variability amplification as orders move upstream
The Bullwhip Effect describes how small fluctuations in end-consumer demand get amplified into larger order swings as they travel upstream through the supply chain.
Question 5: A 3PL provider differs from a 4PL provider primarily because a 4PL:
- Owns more warehouses and transportation assets
- Manages the entire supply chain including multiple 3PLs (Correct answer)
- Focuses exclusively on international freight forwarding
- Provides only customs brokerage services
Correct answer: Manages the entire supply chain including multiple 3PLs
A 4PL (fourth-party logistics) provider acts as a supply chain integrator, managing a company's entire logistics network including oversight of multiple 3PLs.
Question 6: Which inventory valuation method assumes the most recently purchased goods are sold first, resulting in higher COGS during inflation?
- FIFO
- LIFO (Correct answer)
- Weighted average
- Specific identification
Correct answer: LIFO
LIFO (Last-In, First-Out) assumes the newest inventory is sold first, which increases cost of goods sold and reduces taxable income during inflationary periods.
Question 7: A company's Days Inventory Outstanding (DIO) decreased from 45 to 30 days. This change indicates:
- The company is holding more inventory relative to sales
- Inventory is being converted to sales more quickly (Correct answer)
- Supplier lead times have increased significantly
- The company has reduced its product variety
Correct answer: Inventory is being converted to sales more quickly
A lower DIO means inventory is turning over faster, indicating the company is converting stock into sales more efficiently.
COM Supply Chain & Logistics Management 2
A company experiences a sudden supplier bankruptcy.
Which risk mitigation strategy would BEST address single-source dependency?