Supply chain – Exams

QCM
1. What is the main benefit of Kanban?
 Minimise the Finished Goods inventory
 Minimise the Work-In-Progress (WIP) inventory
 Minimise the Raw material inventory

Remark: Not seen in the course

2. Which is not an ERP software?

 Microsoft dynamics
 Oracle
 SAP
 All are SAP software’s

3. What is the ecosystem of a software provider?

 The functional performance of the software
 The network of the company providing support on the implementation
 The ability of a software to be integrated with other software’s

Remark: Software = ERP ecosystem is The ERP ecosystem is three major parties: software vendors,
consulting services (including both consulting firms and independent consultants), and adopting
organizations. (all those who use the ERP). The bigger the better

4. Pricing can be used to

 Change available supply
 Reduce supply chain costs
 Influence demand if customers are price sensitive
 All of the above

Remark: Could not find this in the course, this is spontaneous answer.

5. What is the aim of the Promotion solution of Periscope?

 Assess the effectiveness of the past promotions
 Plan the future promotions
 Define the incremental sales & margin that a variation of price can lead
 All of the above

Remark: Could not find mention of Periscope in the course

6. Which mode of transportation is the least expensive?
 Air
 Truck
 Rail
 Water

7. What is not a key role of IT in the Supply Chain?

 Serve as the eyes, the ears and sometimes a part of the brain of the SC management
 Automate the processes
 Make decisions
 All of the above

Remark: “IT serves as the eyes and ears (and sometimes a portion of the brain) of management in a
supply chain, capturing & analysing the information necessary to make good decisions” + “Use IT systems
to support decision making, not to make decisions

8. Which of the following is not an ERP?

 Microsoft Dynamics
 Odoo
 SAP
 The 3 are ERPs

Remark: SAP is best selling ERP in Europe, Oracle best selling in US. ERP are Systems/applications
typically used to manage the flow of information through all the processes of the company. So, they will
connect elements like Product planning, Production processes, Warehouse management, Marketing and
sales, Shipping, Payment.

9. Which of the following cannot provide location information?

 RFID (radio frequency identification)
 WSN (wireless Sensor Network)
 Bluetooth
 They can all provide location information

Remark: I believe we have seen nothing in the course about this. But in case …
“Most RFID chips or tags are passive, meaning they contain no battery power and can transmit data only
when zapped with a reader” + “WSN main objective is to determine le localization of a target” + “f
several Bluetooth-enabled receivers are strategically placed to cover a large area, they can track the
positions of any discoverable device, recording and sending any data back to a single address”.

Remark: Not seen in the course

10. What is not an advantage of the RFID?
 It does not need a battery
 You don’t need to see the code to scan it
 It’s small and it sticks
 Cheaper than other barcodes

Remark: Not seen in the course

Remark: I believe we have seen nothing in the course about this. But in case …
From internet search it appears that RFID has no battery, does not use visual scan (you don’t need the
barcode), it is indeed small and it sticks.

11. Supply chain involves which 2 parts?

 Manufacturing costs and selling costs
 Customer value and supply chain costs
 Customer value and high-quality products
 Reliable transportation and supply chain costs

Remark: “Max (Supply Chain surplus) = Customer value – Supply Chain cost”

Remark: Not seen in the course

12. What is a typical example of decision that should be taken in design phase?
 Location of production and warehousing facilities
 Inventory policies to be followed
 Generate pick lists at warehouse
 Target production quantity, timing, size of marketing/price promotion

Remark:
Design phase decisions examples: In-house vs. outsource, Location of production & warehousing facilities,
Modes of transportation, Type of information systems to be used.
Tactic phase decisions examples: Which markets will be supplied by which locations, subcontracting of
manufacturing, Inventory policies to be followed, Target production quantity, timing & size of marketing/
price promotions
Operational phase decisions examples: Allocation of inventory or production to individual orders, allocate
a shipping mode to the order, Set a date by which an order is to be filled, Generate pick list at warehouses,
Set delivery schedules of trucks, Place replenishment orders

13. Which of the following customer’s needs will cause the implied uncertainty of demand to
increase?
 Product margin
 Lead time decreases
 Average stock out rate
 Average forced season end markdown

Remark: Could not find in the course the exact answer to this question. However, by deduction only lead
time is a customer’s need, the others are related to the company. But how does the decrease of the lead
time increase demand uncertainty?
14. A firm gain most by outsourcing to a third party if its needs are
 High, highly certain and shared by other firms
 High, highly uncertain and not shared by other firms
 Small, highly uncertain and shared by other firms
 Small, highly certain and not shared by other firms

Remark: “A firm gains the most by outsourcing to a 3 rd party if its needs are small, highly uncertain, and
shared by other firms sourcing from the same 3rd party” = When you very punctually need small
quantities of a very standardized product.

15. What is the main benefit of Kanban (=signboard)

 Minimize the finished goods inventory
 Minimize the WIP inventory
 Improves the production lead time
 Improves the quality of production

Remark: Have never seen this word in the course. But from internet researches, it appears that “Kanban is
a lean method to manage and improve work across human systems. This approach aims to manage work
by balancing demands with available capacity, and by improving the handling of system-level
bottlenecks”. The advantages of this practice are Versatility, Continuous Improvement, Responsiveness,
increased output, empowered teams, better product.” + “Kanban system is an inventory scheduling
function that enables manufacturing companies to stock only the parts needed for the production process. It
is a pull system, meaning that each stage of the production process pulls work from the previous stage.
This is the signal for the previous stage to make another, which minimizes WIP (work in progress). By
limiting the number of products that are being worked on at once, the materials needed for current
production are more easily and precisely kept on hand.” + “However, lead time is better to be measured
from the moment when a team member is committed to the new request. This way the average lead time in
a Kanban system will be much more accurate”.

Remark: Not seen in the course KANBAN??

16. What is a bottleneck in a factory?

 Inefficient production line
 The element constraining the throughput
 The costliest part of the manufacturing process
 The filling step in production

Remark: “In production and project management, a bottleneck is one process in a chain of processes, such
that its limited capacity reduces the capacity of the whole chain. The result of having a bottleneck are stalls
in production, supply overstock, pressure from customers and low employee morale.”
17. Which of the following 4As tend to be the principal concern of European Customers?
 Affordability
 Availability
 Accessibility
 Acceptability

Remark: European mostly have the concern about the safety of using the product which is a feature of
acceptability, an intrinsique and immutable characteristic of the product.

Remark: Not seen in the course (don’t remember that)

18. What is not an advantage of milk-runs compared to direct shipment?

 Decreased transportation costs for smaller lots
 Decreased coordination needed
 Decrease inventories
 All of the above.

Remark: Milk-runs advantages are Lower transportation costs for small lots Lower inventories + Lower
outbound transportation cost for small lots + Lower inventories than direct shipment.

19. An online bookstore has a distinct advantage over a traditional model in the area of:
 Product variety
 Transportation
 Product information
 All of the above

Remark: Based on amazon’s analysis of online book selling: The supply chain is shorter the range of
articles is increased, more convenient for the customer. Amazon has less inventory costs and facilities
costs but higher transportation costs and information costs. The time to market is also faster online
(product availability)

20. Seasonal demand can be met by

 Maintaining enough manufacturing capacity to meet demand at any period
 Building up inventory during the off season to meet demand during peak seasons
 Offering a price promotion during periods of low demand to shift some of the demand into a
slow period.
 All of the above

Remark: Forecast chapter, seasonality.

21. In most of the case in the decrease of number of distributions centres will
 Reduce response time
 Reduce transportation costs
 Decrease inventory costs
 None of the above

Remark: increasing DC in the network results in More responsiveness, less transport, more inventories and
more facilities costs.

22. Which forecast performance metric cannot be negative?

 BIAS
 MAPE
 Deviation
 All
Remark: Biased can be negative, MAPE as well (in this case it says you have big problems in SC),
deviation is squared thus can’t be negative.

23. Which type of stock do we use to protect against demand variation over leadtime, and daily
demand over lead time variation?
 Cycle stock
 Safety stock
 Anticipation stock
 Dead stock

Remark:
Cycle stock definition: Portion of inventory available (or planned to be available) for the normal demand
during a given period, excluding excess stock and safety stock. It is the stock formed by items arriving
infrequently but in large quantities to meet frequent but small quantity demands. Also called working stock
or lot size stock
Safety stock definition: Safety stock is an additional quantity of an item held in inventory in order to
reduce the risk that the item will be out of stock. Safety stock acts as a buffer in case the sales of an item
are greater than planned and/or the supplier is unable to deliver additional units at the expected time.
Anticipation stock: not seen in the course
Dead stock: not seen in the course and not foreseen by supply chain

24. Which cost is not part of the holding costs?

 Obsolescence
 Employees
 Chang-over
 Insurance

Remark: Holding costs are also named Carrying costs (= the costs of holding an item in stock for a period
of time) and these costs include the value of an item that is the money tied up in inventory (Capital costs),
Storage costs, Obsolescence. And to a lesser extent: Insurance cost, Tax elements linked to inventory
(country dependent), Administrative registrations

Remark: Not seen in the course

25. A Sales & Operations (S&OP) plan is not
 A formal process
 Where business and operations work together
 Where we balance demand and supply for the next 3 months
 To realize the supply chain strategic objectives of the company

Remark: SOP is a tool of the Control part of DMAIC. It is the Standard Operating Procedures, a written
document or instruction detailing all steps and activities of a process or procedure
In another QCM the answer was a formal process!!

Remark: Not seen in the course (the answer)

26. Kanban: constraints work in progress. What should we do with inventory?

 Have none, because it’s unnecessary
 Minimise inventory, because it’s costly
 Find the right balance between inventory cost & customer service level

Remark: Could not find mention of Kanban in the course but finding the balance between costs and
customer value is the essence of SC thus seems a logical answer.

Same question but without Kanban and the answer is the same!

Remark: Not seen in the course

27. Which of the following 4 AS is common sense in the western countries, but harder to obtain in
China (or other developing countries)?
 Affordability
 Availability
 Accessibility (in another this was the answer?)
 Acceptability

Remark: Same as earlier. Chinese’s products are not often verified for safety features. Only EU and US
have strict rules in safety.

Remark: Not seen in the course

28. Good quality distribution practices are focusing on having:

 The right product on time
 Avoid an out-of-stock in the markets
 Follow the cold chain rules during distribution

Remark: only the respect of cold chain rules can affect the QUALITY of the distribution. The two others
affect the distribution in itself
29. What doesn’t necessarily make you win money?
 Lower inventories
 Increase a line efficiency
 Increase the throughput of your factory
 Lower your operational expenses

30. Which type of Supply Chain Process is Lean manufacturing based on?
 Push process
 Pull Process

31. Transportation plays a key role in every supply chain because:

 Products are normally produced and consumed in the same location
 Products are rarely produced and consumed in the same location
 The cost of transportation is inconsequential
 Transportation is not a factor in determining profitability

32. As the number of facilities in a supply chain increases,

 The inventory and resulting inventory costs also increase
 The inventory and resulting inventory costs decrease
 The inventory increases and resulting inventory costs decrease
 The inventory decreases and resulting inventory costs increase

Remark: more facilities = more DC in the network = less transport, more inventories, more inventory costs,
more responseness

33. The key players in any transportation that takes place within a supply chain are?
 Shipper and carrier

34. Netflix: An online bookstore has a distinct disadvantage over a traditional model in the area of?
 Information

35. For what role a distribution centre is not designed?

 Reduction of the inventory costs

36. Total logistics costs for a supply chain network are a sum of?
 inventory, transportation and facility costs

37. What is the “architecture” approach of pricing

 Base the pricing on the margin objectives of the company
 Base the pricing on the price of the other products of the company
 Base the pricing on what a customer is ready to pay for it
 Base the pricing on the price of the competition for an equivalent product
38. Zara has ……… markdowns (reduction in price due to overstock) the completion?
 More
 Less

Remark: Due to efficient SC, small batch size, small lead time, lots of collections

39. What is the average total LeadTime of Zara?

 1 month
 3 months
 6 months
 More than a year

40. Where are most of Zara’s suppliers located?

 Close to manufacturing site (Spain Portugal)
 In Low-cost countries (Bangladesh, India)

41. Which type of supply chain process is Zara using?

 Push
 Pull

42. Which type of Supply Chain is Zara striving for

 Responsive (Short lead time, flexibility)
 Effective (Low-cost production, lg lead time)

43. Good quality distribution practices focus on

 Having the right product in a timely manner
 Avoid Out-of-tock
 Follow cold chain rules during distribution

44. What is following the Go-Live of a project?

 The Hypercare
 Testing
 Training

45. What’s included in the “analysis phase” of an IT implementation?

 Setting up the system configuration
 Compare the AS-IS systems, with the desired TO-BE structure
 Prepare the Master Data

46. What is the aim of the “Internal Supply Chain Management”?

 Arrange supply sources for various goods & services
 Generate customer demand
 Fulfil demand in a timely manner, and at the lowest cost possible
47. Which type of stock do we usually not foreseen in Supply chain?
 Safety stock
 Dead stock
 Pipeline stock
 Cycle stock

48. What type of products is most adapted for periodic replenishment?

 Post its
 Medicine: Periodic review + ROD
 Printer toner: Periodic review + ROD
 All of them

Remark: Not seen in the course

Remark: post-it because the two others are reorder point. But post-it it’s a mix of both: periodic review and
reorder point

49. …………. Typically move commodities over large distances at lower costs per unit shipped.
 Air
 Truck
 Rail
 Package carriers

50. What is not the aim of the assortment solution of Periscope?

 Assess the effectiveness of a New Product Introduction at a retail store
 Define the right price at which each of the products should be sold
 Rationalise you Stock Keeping Units (SKU)
 Negotiate the right amount of shelf space based on a product loyal revenue

Remark: Not seen in the course

51. Based on the bottleneck theory, what should not specifically be evaluated?
 Throughput
 Inventory
 Equipment efficiency
 Operating expenses
52. Which flows should be included in the process mapping?
 Financial
 Physical
 Information
 All of the above

Remark: not sure

53. Which of the following is not considered as an official waste?

 Transportation
 Money
 Motion
 Behavioral

54. In which phase of DMAIC is the SIPOC methodology used?

 Define
 Make
 Analyze
 Improve
 Control

55. Why is change management so important?

 To support the change of processes (especially in IT transformation processes)
 To overcome technical hurdles
 To off-set the risk of carving the processes in stone

56. What is not an ERP system?

 A software focusing on customer relationship management
 Enterprise Resource Planning
 An integrated software for all core business processes

57. To which part of the IT framework does “Source to pay” belong?

 Supplier Relationship Management (SRM)
 Internal Supply Chain Management (ISCM)
 Transaction Management Foundation (TMF)

58. What are some methods to mitigate the Supply Chain risk?
 Use a “Big Bang” approach
 Run duplicated systems
 Carve the “best processes” in stone

Remark: but also incremental implementation and implement only the level of complexity that we need.

59. How to mitigate the operating risk?

  Data back-up systems
 Systems working in parallel
 Security software
 Systems with the flexibility to change if required

Remark: all of the above

60. Name components of Internal SCM:

 Resources mgt
 TM
 IM/WM
 All of the above

61. Order to cash is part of which macro-IT system:

 CRM

62. Quantitative forecast model – What is the sequence of the steps to create a quantitative forecast
model? (2018/19)
 visual data analysis> model selection > fit/train model > analyse errors

63. Judgemental forecast – What can not cause a wrong judgemental forecast? (2018/19)
 Wrong data
 Cognitive bias
 Social pressure
 Budget target

64. Complexity – Which of the following forecasts tend to be the less accurate? (2018/19)
 Long-term and disaggregated forecast

65. KPI – Which of the forecasting error measurement aim to optimize a mean forecast? (2018/19)
 Bias
 Mean absolute error
 Mean absolute percentage error
 Root mean squared error
66. Recast analysis – What can be considered as an average amount of demand in a forecast analysis?
(2018/19)
 Noise (note: is sth impredictable, not business as usual)
 Seasonality
 Level
 Trend

67. MAPE – What is not true about MAPE?

 It's the sum of the absolute deviations, divided by the sum of the actuals
 It measures the accuracy of forecasting
 It can not be a negative number
 It is the best method to calculate the forecast error

68. Forecast Analysis – What is not a strategical option?

 Cost advantage
 Product leadership
 Customer intimacy
 None of them

69. What is not a short term (operational) purpose for a forecast?

 Decide how much goes to ship to a shop
 Plan the employees agenda for the week
 Decide how much we should produce for next season

70. What is not a risk for judgemental forecast?

 Social pressure
 Budget pressure
 Cognitive bias
 Anonymous answers

71. What are the steps to create a new model for quantitative forecast?
 Visual analysis; model selection; fit the model; analyse the error

72. What will not help you to improve the accuracy of your forecast?
 Shorter forecast horizon
 Forecast at global level instead of local level
 More data
 More different products
73. SC triangle – What should be based on the SC triangle?
 Cash
 Service
 EBIT
 ROCE

74. Service- What will be typical impact of an increase of service?

 Increase cost and/or cash requirement
 Decrease of cost and/or cash requirement
 Increase of cost and decrease of cash requirement
 Decrease of cost and increase of cash requirement

75. Strategy – What is NOT a strategical option?

 Cost advantage
 Product leadership
 Customer intimacy
 None of them

76. Service – What is not considered as service?

 Lead time variation
 Product portfolio
 Flexibility
 None of them

77. Investment – What would be the best investment?

 A company with high EBIT% and high inventory turnover
 Company with high EBIT% and low inventory turnover
 A company with low EBIT% and high inventory turnover
 A company with low EBIT% and low inventory turnover
Theoretical Questions
1. The supply chain management with the SCOR model, explain the different processes. (5pts)

Start with SOURCE: buying the primary materials in finished goods

MAKE: transforming primary materials in finished goods
DELIVER: how to push the finished goods to the end line
PLAN: how to coordinate all the different steps in supply chain
PRICING: ABC analysis could help
RETURN: bottles coming back (beer industry)

2. What are the lean philosophy and the six sigma concept, and which company created those
concept? (5pts)

Lean is a team-based effort of continuous improvement in identifying and eliminating “waste”. There
are 8 types of waste:
 Inventory
 Transportation (or movement)
 Motion
 Waiting
 Overproduction (and over-procurement)
 Over-processing
 Defect (or error)
 Behavioral (underutilized employees)

Six Sigma: helps companies to reduce errors

LEAN PHILOSHOPY (company): Toyota Production System (TPS) renowned for its focus on
reduction of the original Toyota seven wastes to improve overall customer value.
SIX SIGMA (company): Motorola in the early 1980th
3. Make to stock – Make to order – Engineer to order: Give a company that implement those
strategy, push or pull process, and why is it suitable to those company. (5pts)

Make-to-stock Forecasts demand to determine how much stock should be produced

(basic view)
Assemble-to-order Customer orders are produced quickly and are customizable to a
certain extent (You have an inventory of spare parts – when the
customer is ordering you put the parts together (automotive industry
– Toyota))
Make-to-order Only manufactures the end product once the customer places the
order (pull view: customer orders and then you fulfil this order)
Engineer-to-order Designs and manufactures a product based on very specific customer
requirements (Bridge: you make the plan, you build it, you work
with the customer together to do it)

Push process: initiated in anticipation of customer order based on forecast (=speculative process) 
Boundaries: uncertain environment (customer demand is not yet known) Produce as much as possible
and then store the inventory near your clients (this is still very common, but we are now using
forecasting)
 No example in the course but maybe Nokia?

Pull process: initiated in response to the customer order  Boundaries: constrained by inventories &
capacity decisions
 TOYOTA, AMAZON

4. Briefly explain the following concepts:

 Competitive strategy: A company can take three direction in competitive strategy decision:
either low cost (like Ryanair), either achieving segmentation advantage like best product
advantage (Apple, Etihad) or best total solution (Delhaize, Delta airlines). Each competitive
strategy will lead o a different trade-off between the SC and the finances of the company.
 Supply chain strategy: it consists in balancing the SC triangle of service, cost and cash.
Services involves product portfolio and management, target service level, lead time,
reliability, order flexibility, consignments stocks (stock that is located at the venue of the
customer, but he will only pay when he uses it, ex: printing paper, print toner).

 The 3 steps to achieve strategic fit

Step 1. Identify, analyse the stance of each stakeholder who has interests in the SC.
Step 2. Identify the pressure each applies on one/several on Cash, Cost and Service
Step 3. Optimize ROCE = Maximize the Return on Capital Employed = best balance of the triangle
5. Briefly explain de 8 types of waste in Lean Philosophy?

1) Behavioral waste: not al employees are fully engaged and committed, or they are underused
2) Transportation waste: excess movements of the goods in the SC
3) Motion waste: excess human movement in the manufacturing process (not ergonomic)
4) Waiting waste: too long lead time, late delivery, etc (80% of lead time is waste)
5) Inventory waste: too much inventory (Raw material, WIP, finished good, MRO and
consignment stock)
6) Overproduction/over procurement: you produce too much/buy too much
7) Over processing waste: you process your goods too much
8) Defect waste: you produce/receive too much defect goods

6. What can be the result of an increase in forecast accuracy? (3 elements)

 I could not find the precise answer to this question in the course but …
 Good forecast will be unbiased (bias = measure of the expected average error) and (precision
= measure of the forecast error spread).
 3 drivers of forecast accuracy are: Shorter horizon + More aggregation + More data
 3 issues in forecasting: underfit, overfit and outliers

7. What kind of waste of Lean methodology are applicable in the “make”/manufactories in your
country?


8. What are the steps and differences of DMAIC methodology?

Steps: Define, Measure, Analyze, Improve and Control

9. What kind of tools are used in the different steps of DMAIC?

 Define : SIPOC, Kano, VOC, … Measure: Pareto Analysis, 5W2H, … Analyse: Ishikawa
diagram, Process Capability Analysis, … Improve: Poka Yoke, 5S, … Control: SOP, OCAP, …

10. Explain how could be different the kind of supply chain according to the activity/business?

11. Explain the elements that influence the distribution network design

12. What is the ecosystem of IT system?
 See QCM

13. What is the difference of push and pull process? Describe each one. Which one the retailers used
and what are the typical problems?
 Push process: initiated in anticipation of customer order based on forecast (=speculative process)
Pull process: initiated in response to the customer order (=Just in Time)

14. What are the different parts of supply chain?



15. What add value to the customer in the Lean Sigma methodology?


16. Decision make question: what happens when you add another DC regarding the costs?


17. Beer Game: What is bullwrip effect and its causes? What are the harmful effects and strategies?


18. Inventory: know how to calculate = when to buy and how much to buy


19. Optimal quantity: know how to calculate it and the difference of the normal price and it


20. EOQ (economic order quantity) limitations, what are they?

 No demand variation, no delivery delays, no capacity constrains, no stock-out

21. Practical exercise: optimize inventory OR calculate error forecast or forecast. Explaining the logic
behind it.


22. What is MAPE?

 MAPE = Mean Absolute Percentage Error which is the average relative absolute error.

23. What can be considered as an average amount of demand in a forecast analysis?

 Solventure Speaker

24. What is the ecosystem of a software provider?

 See QCM

25. What does SRM means?

Supplier Relationship Management

26. What does CRM means?

Customer Relationship Management

27. Which company is the leader in ERP?

SAP
28. What are the steps of an IT transformation project? Describe one of them
Deloitte speaker
Exercises
1. The annual demand is 24.000 boxers, transaction cost 60€, unit price 20€, the holding cost is 20%
of the unit price.
1) Determine the optimal quantity to order (5pts)
2) What is the minimal total cost (take into account, the transaction, holding and unit cost)
(5pts)?
3) A company with fixed location, advantage disadvantage. (2,5 pts)
4) A company with random location, advantage disadvantage. (2,5 pts)

2. Exercise

Monthly demand: 500 units

Order cost: 50€/order
Sales price: 15€/6 pack
Holding cost: 20%-unit cost
Minimize the inventory cost with the Wilson formula.

3. Test – Inventory Management

Fixed reorder point

I’m looking to decrease the inventory costs for a product.
We sell a yearly amount of 10,000 units. The holding costs are approximately 15% of the unit cost.
The purchase price is 3€/unit. Our supplier is also charging us 100€ of administrative cost for each
order we make.

1) What should be the order quantity?

Answer: 2108

2) I’m currently ordering my products in 2,000 bulks. How much will I economize per year with
the optimal?

Answer: 1€

3) The supplier has a delivery time of 1 week, at which stock level should I make my orders?

Answer: 192
4. Test – Inventory

Savings
I’m looking to decrease the inventory costs for a product.
We sell a yearly amount of 10,000 units. The holding costs are approximately 15% of the unit cost.
The purchase price is 3€/unit. Our supplier is also charging us 100€ of administrative cost for each
order we make.

1) I’m currently ordering my products in bulks of 300 units. How much will I save per year with
the new optimal?

Answer: 2452

5. Test - Inventory

Order quantity
I’m looking to decrease the inventory costs for a product.
We sell a yearly amount of 12,000 units. The holding costs are approximately 20% of the unit cost.
The purchase price is 5€/unit. Our supplier is also charging us 100€ of administrative cost for each
order we make.

1) What should be the order quantity ?

Answer: 1549

6. Exam 2017

Our small brewery is selling a new beer, with an average montly demand of 500 bottles. We incur a
cost of 50$ for every lot (of hop, malt and yeast) we order to our supplier. Our delicious beer is sold at
15$ per 6 pack. The yearly cost of holding our beer represents roughly 20% of our unit cost.
We have been told you are familiar with Supply Chain Management. As we have a constant demand:
can you help us minimize our inventory cost with the help of the Wilson formula!