Supply Chain and Logistics Management
Supply Chain and Logistics Management tests your understanding of how goods, information, and cash flow from suppliers to customers. Expect questions on lead time, inventory, transport modes, Incoterms 2020, warehousing, total landed cost, visibility, and resilience.
Core rules and concepts
- Lead time includes order processing, supplier production, transit, receipt, and quality clearance. Reducing variance is often more valuable than reducing average lead time.
- Inventory exists as cycle stock, safety stock, in-transit stock, and obsolete stock. Safety stock protects against demand and supply variability but ties up working capital.
- The bullwhip effect occurs when small demand changes cause larger upstream order swings; causes include forecast updating, batch ordering, price promotions, and rationing.
- Incoterms 2020 define delivery, risk transfer, cost allocation, and customs responsibilities. They do not transfer title or replace the sale contract. Common rules include EXW, FCA, FOB, CIF, DAP, and DDP.
- Total landed cost includes purchase price, freight, insurance, duties, handling, inventory carrying cost, and quality or delay costs.
Worked example
A buyer compares FOB Shanghai at USD 100 per unit with CIF Rotterdam at USD 108. Under FOB, the buyer arranges freight and insurance, estimated at USD 9, and bears risk once goods are on board. Under CIF, the seller pays freight and insurance to Rotterdam, but risk still transfers on shipment. The CIF offer looks cheaper at USD 108 versus USD 109, but the buyer must check insurance cover, port charges, and delay exposure. Reasoning: compare total landed cost and risk, not the invoice price alone.
Traps that cost marks
Treating Incoterms as title transfer or as a complete contract is wrong. Assuming DDP is always best ignores seller capability and customs risk. Comparing only freight quotes ignores duties, inventory, and service failure. Ignoring demand variance leads to excessive safety stock. Confusing logistics cost reduction with supply chain value can damage service.
Exam technique
Map the flow, calculate landed cost, state the Incoterm’s risk point, and identify the inventory or service trade-off. Use lead-time variability and total cost evidence in recommendations.