COM Supply Chain & Logistics Management 3 — Questions and Answers
Question 1: Which transportation mode offers the LOWEST cost per ton-mile for bulk commodities over long distances?
- Truckload (TL) freight
- Less-than-truckload (LTL)
- Rail freight (Correct answer)
- Air freight
Correct answer: Rail freight
Rail freight provides the lowest cost per ton-mile for bulk commodities over long distances due to high capacity and fuel efficiency.
Question 2: In supply chain management, 'postponement' strategy involves:
- Delaying supplier payments to improve cash flow
- Deferring product customization to as late as possible in the supply chain (Correct answer)
- Postponing new product launches until demand is confirmed
- Delaying warehouse construction until volume justifies it
Correct answer: Deferring product customization to as late as possible in the supply chain
Postponement defers final product differentiation (assembly, labeling, packaging) until actual customer orders are received, reducing finished goods inventory risk.
Question 3: A vendor-managed inventory (VMI) arrangement means the:
- Customer monitors and replenishes the supplier's raw materials
- Supplier monitors customer inventory levels and triggers replenishment (Correct answer)
- Third-party audits both parties' inventory records quarterly
- Customer assumes ownership of goods at the supplier's facility
Correct answer: Supplier monitors customer inventory levels and triggers replenishment
In VMI, the supplier takes responsibility for monitoring the customer's inventory and initiating replenishment orders when stock falls to agreed levels.
Question 4: Which term describes the total cost of a product over its entire life, including purchase price, operating, maintenance, and disposal costs?
- Total cost of ownership (TCO) (Correct answer)
- Landed cost
- Activity-based costing
- Net present value
Correct answer: Total cost of ownership (TCO)
Total Cost of Ownership (TCO) captures all costs associated with acquiring and using a product or service throughout its entire lifecycle.
Question 5: In incoterms, DDP (Delivered Duty Paid) means the seller is responsible for:
- Delivering goods to the port of export only
- All costs and risks until goods are delivered to the buyer's location (Correct answer)
- Only the ocean freight portion of the journey
- Customs clearance at the country of origin only
Correct answer: All costs and risks until goods are delivered to the buyer's location
DDP places maximum obligation on the seller, who bears all costs and risks — including import duties, taxes, and last-mile delivery — to the named destination.
Question 6: The Economic Order Quantity (EOQ) model minimizes total inventory costs by balancing:
- Holding costs and stockout costs
- Ordering costs and holding costs (Correct answer)
- Transportation costs and ordering costs
- Lead time variability and safety stock
Correct answer: Ordering costs and holding costs
EOQ finds the optimal order quantity that minimizes the sum of ordering costs (per order placed) and holding costs (per unit stored over time).
Question 7: A company implements a Kanban system primarily to:
- Forecast demand using historical data and statistical models
- Signal replenishment needs and limit work-in-process inventory (Correct answer)
- Track shipment status across international borders
- Evaluate supplier quality and on-time delivery performance
Correct answer: Signal replenishment needs and limit work-in-process inventory
Kanban is a pull-based visual signaling system that triggers replenishment only when inventory is consumed, limiting WIP and reducing overproduction.
COM Supply Chain & Logistics Management 3
Which transportation mode offers the LOWEST cost per ton-mile for bulk commodities over long distances?