Retail Supply Chain & Replenishment Flashcards

A retailer implements a 'drop-ship' fulfillment model for certain SKUs. What is the main operational implication?

Answer: Products ship directly from the supplier to the customer, bypassing the retailer's DC

In drop-ship, the supplier ships directly to the end customer on the retailer's behalf, eliminating DC handling and reducing capital tied up in inventory.

Which supply chain document formally authorizes a supplier to begin production or ship goods, and is legally binding upon acceptance?

Answer: Purchase order (PO)

A purchase order is the retailer's legal offer to buy specific goods at agreed terms; once accepted by the supplier it forms a binding contract.

A retailer uses collaborative planning, forecasting, and replenishment (CPFR). What distinguishes CPFR from basic VMI?

Answer: CPFR involves joint forecasting and shared planning between retailer and supplier

CPFR goes beyond VMI by having both parties collaboratively develop demand forecasts and replenishment plans, sharing accountability for outcomes.

In omnichannel fulfillment, 'ship-from-store' increases complexity primarily because:

Answer: Store inventory records are often less accurate than DC inventory records

Store inventory accuracy is typically lower than a DC due to shoplifting, mis-stocking, and delayed scanning, making it harder to reliably promise available stock to online shoppers.

A retailer's safety stock formula accounts for demand variability and lead time variability. Increasing which factor would require the MOST additional safety stock?

Answer: Lead time variability (standard deviation of lead time)

Lead time variability has a compounding effect on safety stock because unpredictable delivery windows create uncertainty over many demand periods, requiring larger buffers.

A retailer's new private-label product has no sales history. Which demand forecasting method is most appropriate for its initial order?

Answer: Analogous forecasting based on a similar existing SKU

Analogous (or proxy) forecasting uses the demand history of a comparable existing product to estimate initial demand when no history exists for the new item.

Which term describes the difference between the on-hand inventory shown in the system and the actual physical inventory count?

Answer: Stock variance / inventory record inaccuracy

Inventory record inaccuracy (or stock variance) is the gap between the system-reported on-hand quantity and the true physical count, often caused by shrink, misscans, or receiving errors.