Management Coursework: Supply Chain Management Exam 2

PENN STATE UNIVERSITY ABINGTON
FALL 2020
Subject: Supply Chain Management Topic: Exam II
Instructor: Dr. Joseph JangDue Date: 10/28/2020
1. Discuss the relationship between service level, uncertainty, safety stock, and order quantity. How can trade- offs between these elements be made.
Service level, safety stock, order quantity, and uncertainty are critical concepts that facilitate an in-depth understanding of efficient supply and logistical management. The service level, also called cycle service level, refers to the expected probability of not reaching a stock-out in the next replenishment. It reflects the situation of not losing sales while adequately servicing customers’ demands— it can mean the percentage of customers that do not experience a stock-out and percentage of a section of order fulfill adequately. Service level is managerial issues that deal with the specified performance that is prescribed the organization management. In terms of inventory, service level outlines performance objectives revolving around time, line fill rate, case fill rate, and order fill rate, or aggregation of these activities. Safety stock is that a level of extra stock maintained by companies to limit the risk of stock-out. When there is uncertainty in the demand level or lead time for the product, the safety stock serves as insurance against the stock-out or inventory exhaustion. Safety stock represents inventory that provides a buffer against mismatch between forecasted and actual consumption. Safety stock aligns demand to expected and actual delivery time and unforeseen emergencies. Thus, it can be argued that safety stoke services to managed unforeseen circumstances or uncertainties. Order quantity refers to the quantity of an item that needs to be ordered in a situation where the stock available does not meet the predetermined minimum stock level. Service level is at the apex of these concepts because it acts as a function of order quantity and amount stock—the order quantity and amount of stock influences the supplier on how it services the customers. When the supplier has uncertainties regarding customers demand, there is a need for higher safety stock which is associated with higher cost. The safety stock can be reduced by enhancing the communication between supplier and customer in a bid to bridge the gap between supply and demand by reducing uncertainties. A successful supply chain and logistical management can enjoy optimal performance where there is a perfect interplay amongst service level, order quantity, safety stocks, and insurance against uncertainties.
2. Compare and contrast the transportation principles of economy scale and economy of distance. Discuss how they combine to create efficient transportation.
Transport plays a fundamental role in logistics operation by adding value to products and services. It is a critical element of logistics in providing provides two primary services, which include product movement and product storage. The economic system is often dependant on the efficiency of transport in terms of being economical and reliable. The process entails transport revolves around the mobility of the inventory across business phases. Such mobility of inventory can entail the m...