CPSM Supply Chain Strategy & Design 3 — Questions and Answers
Question 1: Which supply chain design strategy is BEST suited for products with high demand uncertainty and short life cycles?
- Lean supply chain
- Agile supply chain (Correct answer)
- Efficient supply chain
- Continuous replenishment
Correct answer: Agile supply chain
Agile supply chains are designed for speed and flexibility to respond to unpredictable demand, making them ideal for volatile, short-lifecycle products.
Question 2: A company sources a critical component from a single supplier in one country. Which supply chain risk mitigation strategy should it prioritize?
- Reduce safety stock to cut costs
- Dual or multi-sourcing the component (Correct answer)
- Increase order frequency to reduce lead time
- Extend payment terms with the supplier
Correct answer: Dual or multi-sourcing the component
Dual or multi-sourcing reduces geographic and supplier concentration risk, ensuring continuity if one source is disrupted.
Question 3: What does 'postponement' in supply chain design refer to?
- Delaying supplier payments to improve cash flow
- Deferring product differentiation to as late as possible in the supply chain (Correct answer)
- Postponing new product launches until demand is established
- Delaying order placement to reduce inventory carrying costs
Correct answer: Deferring product differentiation to as late as possible in the supply chain
Postponement delays final product customization until closer to the point of customer demand, reducing finished goods inventory risk.
Question 4: In the SCOR model, which level focuses on process categories such as Plan, Source, Make, Deliver, Return, and Enable?
- Level 1 — Top Level (Correct answer)
- Level 2 — Configuration Level
- Level 3 — Process Element Level
- Level 4 — Implementation Level
Correct answer: Level 1 — Top Level
Level 1 of the SCOR model defines the top-level process types: Plan, Source, Make, Deliver, Return, and Enable.
Question 5: Which factor MOST influences the decision to use a hub-and-spoke distribution network versus a direct shipping model?
- Supplier payment terms
- Order size, frequency, and geographic dispersion of customers (Correct answer)
- Number of SKUs in the product catalog
- The company's credit rating
Correct answer: Order size, frequency, and geographic dispersion of customers
Hub-and-spoke networks consolidate shipments efficiently when customers are dispersed and orders are small and frequent, whereas direct shipping suits large, infrequent orders.
Question 6: A firm wants to reduce total supply chain cost while maintaining service levels. Which approach directly addresses the trade-off between inventory costs and transportation costs?
- Increasing the number of distribution centers
- Network optimization modeling (Correct answer)
- Outsourcing all logistics to a 3PL
- Switching all suppliers to domestic sources
Correct answer: Network optimization modeling
Network optimization modeling analyzes the cost trade-offs between transportation, inventory, and facility costs to find the optimal distribution structure.
Question 7: Which concept describes the phenomenon where small fluctuations in end-customer demand cause increasingly large swings in orders upstream in the supply chain?
- Demand sensing
- The bullwhip effect (Correct answer)
- Safety stock amplification
- Order batching variance
Correct answer: The bullwhip effect
The bullwhip effect occurs when demand variability is amplified at each upstream stage due to order batching, forecasting errors, and lead time variability.
CPSM Supply Chain Strategy & Design 3
Which supply chain design strategy is BEST suited for products with high demand uncertainty and short life cycles?