Supply Chain Question

1. [10 points] How does logistics add value for firms? Provide 3 examples to prove your point.

2. [10 points] How does logistics add value in the macro economy? Provide national economic
statistics on logistics sector to prove your point. Cite your sources.

3. [10 points] The text mentions four subdivisions of logistics. Pick one, explain the functions and
discuss how it differs from other three subdivisions.

4. [10 points] Provide one example each to show how logistics adds value to each of the five principle
types of economic utilities.

5. [20 points] Physical distribution has a special relationship to marketing. What is the nature of the
relationship between logistics and marketing? Is the relationship becoming more or less
important? Why? Explain in a short essay of 200-300 words.

6. [20 points] There are many factors that affect the cost and importance of logistics. Provide
numerical examples to explain the relationships between following factors.

a. Order cycle length and Order quantity (units of inventory)

b. Inventory level and Cost of lost sales

c. Transportation cost and Cost of lost sales

d. Unit cost (product dollar value) and Logistics cost

e. Weight density of product and Logistics cost

7. [20 points] A company is considering two logistics options. In option 1, the company is considering
an all-ground route from its manufacturing plant to the customers directly. In option 2, the
company would use a market-oriented warehouse to distribute to the customers. The finished
goods would be shipped from the manufacturing plant to the warehouse and then packaged and
sent to the customer in option 2. The logistics costs for 100,000 units of output is given in the
following table.
Option 1 (dollars) Option 2 (dollars)
Packaging 1000 0
Storage and handling 150 50
Inventory carrying 100 50
Administrative 250 100
Other fixed costs 5000 3000
Transportation: to warehouse 0 200
Transportation: to customer 1200 500
Warehouse: packaging 0 750
Warehouse: storage and handling 0 150
Warehouse: inventory carrying 0 150
Warehouse: administrative 0 200
Warehouse: other fixed costs 0 3000

a. Which option would you choose? Why?

b. What would be the reasons to choose the other option?

c .Do a dynamic analysis for the above company. What is the tradeoff point? (In other words,
how many units needs to be shipped to choose one option over the other?)

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