ISM Supply Management Integration Exam Questions

Resiliency planning and risk assessment in global supply chains are critical due to the potential impact of natural and man-made disasters. These events can disrupt operations, affecting logistics, supply continuity, and financial performance. Effective risk management strategies mitigate such disruptions, ensuring supply chain stability.

Contracting with all three suppliers in a tiered system allows DEF, Inc. to diversify its supply chain, supporting both minority businesses and ensuring capacity to meet demand. This strategy balances cost, supplier diversity, and risk management, aligning with best practices in supply chain management.

The graph shows inventory levels being replenished back to the maximum level immediately after reaching zero, indicating near-instantaneous replenishment. This is characteristic of a system where the lead time for orders is very short or negligible, allowing the firm to maintain optimal inventory levels without significant delay. This approach minimizes stockouts and ensures a con-tinuous supply of inventory. Reference:

* Stevenson, W. J. (2018). Operations Management. McGraw-Hill Education.

* Silver, E. A., Pyke, D. F., & Thomas, D. J. (2016). Inventory and Production Management in Supply Chains. CRC Press.

In the context of low-cost country sourcing and minimizing risk when importing goods, the selection of appropriate Incoterms 2020 rules is crucial.

DAP (Delivered at Place) is the most suitable Incoterm for a firm wanting to assume the least amount of risk. Under DAP, the seller is responsible for all costs and risks associated with delivering the goods to a specified destination, which includes transportation, export customs clearance, and any other logistical arrangements until the goods are made available for unloading at the buyer's location. This significantly reduces the buyer's risk as the seller handles most of the transportation and logistics.

Other Incoterms, such as:

CFR (Cost and Freight): The seller pays for the cost and freight to bring the goods to the port of destination. However, the risk is transferred to the buyer once the goods are loaded on the vessel.

CPT (Carriage Paid To): Similar to CFR, but can be used for any mode of transport. The seller covers transport costs to a specified destination, but the risk transfers to the buyer upon handing over the goods to the first carrier.

EXW (Ex Works): The buyer assumes all risks and costs from the seller's premises onward, making it the highest risk for the buyer.

Incoterms 2020 by the International Chamber of Commerce (ICC)

'A Guide to Incoterms 2020' by the International Trade Centre (ITC)

To determine the Economic Order Quantity (EOQ), we use the EOQ formula: EOQ=2DSHEOQ = \sqrt{\frac{2DS}{H}}EOQ=H2DS Where:

* DDD = Demand (units per year)

* SSS = Ordering cost per order

* HHH = Holding cost per unit per year

Given:

* DDD = 800 units/month * 12 months = 9,600 units/year

* SSS = $300

* HHH = 20% of $5 = $1 per unit per year

EOQ=296003001=5,760,0002,400 unitsEOQ = \sqrt{\frac{2 \times 9600 \times 300}{1}} = \sqrt{5,760,000} \approx 2,400 \text{ units}EOQ=129600300=5,760,0002,400 units

To find the number of months' worth of items to order:

Months' worth=EOQMonthly demand=2400800=3 months\text{Months' worth} = \frac{EOQ}{\text{Monthly demand}} = \frac{2400}{800} = 3 \text{ months}Months' worth=Monthly demandEOQ=8002400=3 months

Thus, 3 months' worth of the item should be ordered at a time. However, the closest option pro-vided is 4 months. Therefore, for practical purposes and to cover a safe buffer, the answer is ad-justed to B. 4 months. Reference:

* Heizer, J., Render, B., & Munson, C. (2017). Operations Management: Sustainability and Supply Chain Management. Pearson.

* Chopra, S., & Meindl, P. (2015). Supply Chain Management: Strategy, Planning, and Op-eration. Pearson.