ISM Supply Management Integration Exam Questions

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)

Standardization ensures that products meet uniform quality standards, reducing variability and enhancing customer satisfaction. This advantage is vital in maintaining brand reputation and streamlining production processes.

To calculate the Mean Absolute Percentage Error (MAPE), we follow these steps:

1. Find the absolute error for each month.

2. Convert the absolute error to a percentage of the actual demand for each month.

3. Find the average of these percentage errors over the six-month period.

Here's the calculation:

* January: 100,00080,000100,000100=20%\left| \frac{100,000 - 80,000}{100,000} \right| \times 100 = 20\%100,000100,00080,000100=20%

* February: 105,00090,000105,000100=14.29%\left| \frac{105,000 - 90,000}{105,000} \right| \times 100 = 14.29\%105,000105,00090,000100=14.29%

* March: 110,000100,000110,000100=9.09%\left| \frac{110,000 - 100,000}{110,000} \right| \times 100 = 9.09\%110,000110,000100,000100=9.09%

* April: 70,000100,00070,000100=42.86%\left| \frac{70,000 - 100,000}{70,000} \right| \times 100 = 42.86\%70,00070,000100,000100=42.86%

* May: 90,000110,00090,000100=22.22%\left| \frac{90,000 - 110,000}{90,000} \right| \times 100 = 22.22\%90,00090,000110,000100=22.22%

* June: 100,00090,000100,000100=10%\left| \frac{100,000 - 90,000}{100,000} \right| \times 100 = 10\%100,000100,00090,000100=10%

MAPE=(20+14.29+9.09+42.86+22.22+10)6=19.41%20%MAPE = \frac{(20 + 14.29 + 9.09 + 42.86 + 22.22 + 10)}{6} = 19.41\% \approx 20\%MAPE=6(20+14.29+9.09+42.86+22.22+10)=19.41%20%

Thus, the MAPE for the six months of data is approximately 20%. Reference:

* Chase, R. B., Jacobs, F. R., & Aquilano, N. J. (2006). Operations Management for Compet-itive Advantage. McGraw-Hill/Irwin.

* Hyndman, R. J., & Athanasopoulos, G. (2018). Forecasting: principles and practice. OTexts.

In a highly competitive market like office supplies, the most critical cost associated with shortag-es is typically lost sales. If PQR, Inc. experiences shipping delays and cannot maintain continuous inventory, customers are likely to turn to competitors to meet their needs. This can result in im-mediate lost sales and potentially long-term loss of customer loyalty. The cost of lost sales often outweighs other costs like idle workers or production downtime because it directly affects revenue and market share. Reference:

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

* Christopher, M. (2016). Logistics & Supply Chain Management. Pearson UK.

A decision tree is an effective tool for evaluating potential costs and benefits under conditions of uncertainty, such as varying forecasts for future sales. It allows the supply manager to visually map out different decision paths and their associated costs, probabilities, and outcomes. This helps in comparing different scenarios and making informed decisions about the raw materials needed for a new product launch. Decision trees are particularly useful in situations with multiple possible outcomes and complex decisions. Reference:

* Clemen, R. T., & Reilly, T. (2013). Making Hard Decisions with DecisionTools. Cengage Learning.

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