Supply Chain Management Midterm Exam Questions May 2026
The Prompt: "In 2019, a major automotive manufacturer had a single source for microchips in Taiwan. In 2021, a drought, a fire at a fabrication plant, and a pandemic caused a 14-month production shutdown. Using Supply Chain Risk Management (SCRM) theory, analyze what went wrong and propose three specific structural fixes."
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This guide outlines the core concepts, common question types, and key formulas typically found on a Supply Chain Management (SCM) midterm exam. 1. Fundamental SCM Concepts
Midterm exams often start with high-level definitions to ensure you understand the "big picture."
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Supply chain management (SCM) midterm exams typically cover foundational concepts, strategic frameworks, and analytical calculations. Based on exam patterns from
, questions are generally divided into foundational definitions, operational strategies, and problem-solving exercises. Foundational Concepts & Definitions
These questions test your understanding of what SCM is and its primary goals. Definition of SCM
: Explain SCM in your own words and identify its primary goal, which is typically to improve customer satisfaction while reducing overall costs [5, 7, 30]. The "Three Flows"
: Identify and explain the three main flows in a supply chain: Information Financials/Cash [4, 9, 10]. Bullwhip Effect
: Define this phenomenon where demand variations are amplified as they move upstream (away from the customer) and discuss how collaborative planning can reduce its impact [19, 20]. Cycle View vs. Push/Pull : Explain the differences between a Push system (built on demand forecasts) and a Pull system (initiated by actual customer orders) [1, 10, 17]. Operational & Strategic Strategies
Questions in this section focus on how a firm manages its network and relationships. Network Design
: Discuss factors influencing facility location decisions, such as regional economic growth, infrastructure, and labor availability [8, 26]. Sourcing Strategies : Distinguish between Single Sourcing Multiple Sourcing
. Explain which is better suited for a Just-in-Time (JIT) model [16]. Procurement vs. Strategic Sourcing
: Differentiate between traditional transactional purchasing and a long-term strategic sourcing approach [10, 16].
: Understand responsibilities and risk transfer points for common terms like (Free on Board) and (Delivered Duty Paid) [16]. Analytical & Calculation Problems
Midterms often include quantitative problems that require applying specific formulas. Economic Order Quantity (EOQ)
: Calculate the optimal order size to minimize total inventory holding and ordering costs [3, 13]. Center-of-Gravity Method
: Use grid coordinates and population/demand data to determine the best location for a new distribution center or store [8, 10]. Forecasting Metrics : Identify and calculate error metrics like Mean Absolute Deviation (MAD) Mean Absolute Percentage Error (MAPE) to determine forecast accuracy [11]. Productivity & RPN Productivity
: Calculate total output value divided by total input cost [16]. Risk Priority Number (RPN) : In an FMEA analysis, calculate the RPN by multiplying Occurrence (O) × Severity (S) × Detection (D) Summary of SCM Pillars
When answering essay questions, referencing these standard frameworks can strengthen your response: The 5 Components
: Planning, Sourcing, Manufacturing, Distribution, and Returning (Reverse Logistics) [31, 33]. (speed of flow), Visibility (transparency), and Variability (fluctuations) [37]. The 7 C's of Logistics
: Connect, Create, Customize, Coordinate, Consolidate, Collaborate, and Contribute [35]. calculation walk-through for an EOQ or Center-of-Gravity problem? supply chain management midterm exam questions
Before diving into specific questions, you must understand the six pillars that form the foundation of almost any introductory or intermediate SCM midterm.
A well-constructed midterm will not test these in isolation. Instead, it will force you to see how a change in procurement (e.g., switching to a cheaper supplier) affects inventory (higher safety stock) and logistics (longer lead times).
Question 1 – EOQ
A company sells 10,000 units per year of a product. The ordering cost is $50 per order, and the holding cost is $4 per unit per year.
a) Calculate the Economic Order Quantity (EOQ).
b) How many orders will be placed per year?
c) What is the total annual inventory cost (ordering + holding) at EOQ?
Question 2 – Safety Stock & Reorder Point
Daily demand for an item is normally distributed with mean = 200 units and standard deviation = 30 units. Lead time is 4 days. The company wants a 95% service level (z = 1.65).
a) Compute the safety stock.
b) Compute the reorder point.
Question 3 – Forecast Accuracy
Given actual demand and forecast below, calculate the Mean Absolute Deviation (MAD) for periods 2–4.
| Period | Actual | Forecast | |--------|--------|----------| | 1 | 100 | 100 | | 2 | 110 | 105 | | 3 | 120 | 115 | | 4 | 130 | 125 |
These questions require precise language and real-world examples.
Question 6: Define the "Triple Bottom Line" (3BL) in the context of sustainable supply chains.
Model Answer: The Triple Bottom Line evaluates supply chain performance across three dimensions: Profit (economic viability – e.g., cost reduction), People (social responsibility – e.g., fair labor practices), and Planet (environmental impact – e.g., carbon footprint). A sustainable SCM strategy optimizes all three, not just profit.
Question 7: Explain the difference between cycle stock and safety stock.
Model Answer: Cycle stock is the inventory expected to be sold during a normal order cycle (e.g., the average inventory between deliveries). Safety stock is extra inventory held to protect against demand variability or supply lead time uncertainty. Cycle stock covers expected demand; safety stock covers the unexpected.
Question 8: What is the "cross-docking" strategy in warehousing?
Model Answer: Cross-docking is a logistics practice where incoming goods from suppliers are directly unloaded from inbound trucks and loaded onto outbound trucks with little to no storage in between. It reduces inventory holding costs and cycle time. It is widely used by retailers like Walmart.
Dr. Elena Vargas had a reputation for writing impossible midterm exams. Her course, SCM 401: Global Logistics & Strategy, was the final gatekeeper before graduation for every business major at Pacific Crest University. Students called her exam “The Oracle”—not because it predicted the future, but because it demanded you become the future.
The morning of the exam, 120 students filed into the cavernous lecture hall. They found no multiple-choice bubbles, no definitions, no simple “explain Just-in-Time” questions. Instead, each desk held a single sheet of paper with three prompts.
Leo Kim, a senior who’d interned at a Fortune 500 logistics firm, felt his palms sweat. He’d studied for 40 hours. But this… this was different.
Question 1: The Container Ship Anomaly
“The MV Phoenix, a 15,000-TEU container vessel, departs Shanghai on schedule. However, 72 hours into its 18-day journey to Long Beach, its transponder shows a 200-nautical-mile deviation south of the standard shipping lane. No storm warnings, no piracy alerts, no mechanical distress. Using the principles of multi-echelon inventory optimization and risk-pooling strategies, hypothesize three distinct supply chain motives for this deviation. For each, model the downstream impact on a just-in-time automotive factory in Ohio.”
Leo stared. A ship turning south for no reason? His mind raced. Most students would panic. But Leo remembered Dr. Vargas’s first lecture: “The supply chain is a living lie. Every deviation tells a truth.”
He began writing.
Hypothesis 1: Fuel arbitrage. The ship diverted to a non-union bunkering port in Ensenada, Mexico, to take on cheaper heavy fuel oil, betting that the $150,000 saved outweighs the 18-hour delay. Impact on Ohio: The JIT factory’s safety stock of wiring harnesses (held at a cross-dock in Chicago) covers exactly 18 hours. Any longer, and the line stops. Cost per minute of downtime: $12,000.
Hypothesis 2: Cargo reconfiguration. The southward route aligns with a transshipment hub in Lazaro Cardenas. The carrier is secretly splitting the load—rerouting 4,000 TEUs of lower-priority goods to a slower rail intermodal, while 11,000 TEUs of high-priority electronics get an express slot on a sister ship that left two days later. Impact: The Ohio factory receives its engine control units on time, but the auxiliary components (seat foam, bolts) arrive five days late. The factory must air-freight 2 tons of bolts at 40x the original cost. The Prompt: "In 2019, a major automotive manufacturer
Hypothesis 3: Insurance fraud. The deviation is a false flag to trigger a “constructive total loss” claim. The cargo is over-insured, and the ship’s owner is financially distressed. Impact: The automotive factory discovers its tier-3 supplier for microchips was on that vessel. With no chips, production halts for 11 days, triggering a $9.2 million loss and a force majeure declaration.
Leo put down his pen, shaken. He realized Dr. Vargas wasn’t testing memorization. She was testing paranoia—the beautiful, necessary paranoia of a supply chain manager.
Question 2: The Lemonade Stand Paradox
“A child’s lemonade stand has daily demand uniformly distributed between 10 and 30 cups. Lemons cost $0.50 each (1 lemon per cup). Sugar costs $0.02 per cup. Cups cost $0.05 each. Selling price: $2.00 per cup. Unsold lemonade must be discarded at end of day. However, the child’s mother offers a ‘distress option’: any unsold lemons can be returned at $0.25 each, but only if the child purchases a ‘salvage membership’ for $2.00 per week.
a) Calculate the optimal service level and order quantity for a single day. b) At what weekly volume does the salvage membership break even? c) Now introduce a ‘bullwhip effect’ where the child’s demand forecast is based on the previous day’s sales, plus a random error term of ±20%. Simulate three periods mentally and describe the oscillation pattern. Explain how this tiny stand mirrors the 2008 baby formula shortage.”
Leo laughed darkly. A lemonade stand as a metaphor for a multi-billion-dollar industry. He crunched the numbers: critical fractile = (2.00 - 0.57) / (2.00 - 0.25) ≈ 0.86. Optimal order: 27 cups. The membership broke even at 40 unsold lemons per week—about 8 days of overstock.
But part (c) was the trap. He sketched a mental graph: Day 1: sell 20, order 24 (20 + 20% error). Day 2: sell 24, order 29. Day 3: sell 29, order 35. Within five days, the stand was ordering 35 cups for a market that never exceeded 30. Waste exploded. Prices would rise. The mother would cancel the salvage deal. Then the child would under-order, create shortages, and—just like 2008—a tiny tremor in demand would become a national shortage of powdered formula because distributors amplified the signal.
He wrote in the margin: “The supply chain is an amplifier. The lemonade stand is the canary.”
Question 3: The Ethical Cargo (The One That Broke Everyone)
“You are the supply chain director for a medical device company. Your sole supplier of sterile surgical kits (used in emergency rooms nationwide) is a factory in a developing nation. An anonymous audit reveals that the factory has been using forced overtime—workers are locked in from 7 PM to 5 AM, three nights a week. No physical abuse, but no voluntary exit either. Under local law, this is legal. Under your company’s code of conduct, it is a violation. If you terminate the contract, the lead time to qualify a new supplier is 14 months. In that time, 30% of your hospital customers will face critical shortages. Mortality data suggests a 4% increase in post-operative infections when kits are rationed.
Do you cut the supplier? Or do you implement a ‘corrective action plan’ that will take 8 months, during which forced overtime continues? Defend your decision using three distinct ethical frameworks: utilitarian, deontological, and virtue ethics. Then, propose a structural supply chain redesign that would make this trade-off obsolete.”
Leo’s heart pounded. This wasn’t a math problem. This was a wound.
He wrote:
For the redesign: “Never have a single source for mission-critical goods. Build a ‘redundancy fund’ equal to 5% of procurement budget. And require every supplier to publish live, audited shift logs to a blockchain—no anonymity, no excuses.”
When the three hours ended, Leo’s hand was cramped, his shirt soaked through. He walked to the front and placed his exam face-down on Dr. Vargas’s podium. She glanced up.
“Mr. Kim,” she said softly. “Did you find the answer you were looking for?”
He hesitated. “No,” he admitted. “I found better questions.”
She smiled—a rare, small thing. “That’s an A. Now go redesign the world.”
As he left the hall, Leo realized the true genius of the exam: the questions didn’t have right answers. They had responsibilities. And that was the whole point of supply chain management. Not to move boxes. To move choices—each one a tiny ship deviating south, a lemonade stand amplifying chaos, a surgeon’s hand waiting for a kit that might not come.
He pulled out his phone and texted his old internship boss: “Do we have a secondary source for wiring harnesses? I’ll explain later.”
The reply came in three seconds: “No. Should we?”
Leo typed: “Yes. Starting today.”
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Mastering your Supply Chain Management (SCM) midterm requires moving beyond simple definitions to understanding how materials, information, and financials flow together to meet customer demand. Midterm Study Guide: Key Concepts & Common Questions
A standard SCM midterm typically covers foundational topics such as inventory management, forecasting, and strategic sourcing. 1. Core Definitions & Strategy
What is SCM? The integration of activities from raw material extraction to final customer delivery, connected by transportation and storage.
Primary Goal: To improve customer satisfaction while reducing operating expenses and inventory investment.
Strategic Fit: How a company aligns its supply chain capabilities (e.g., responsiveness vs. efficiency) with its competitive strategy. 2. Inventory Management
ABC Analysis: A method for categorizing inventory based on consumption value (Price × Volume) to prioritize management resources.
Economic Order Quantity (EOQ): The ideal order size that minimizes total inventory costs, including holding and ordering costs.
Safety Stock: The extra inventory held to protect against demand uncertainty or supply disruptions. 3. Demand Planning & Forecasting
The Bullwhip Effect: The phenomenon where small fluctuations in customer demand cause increasingly larger variations in orders as you move upstream toward suppliers.
Qualitative vs. Quantitative Forecasting: Midterms often ask you to distinguish between human-judgment methods (market research) and mathematical models (time-series analysis). 4. Logistics & Sourcing
Third-Party Logistics (3PL): Providers used to manage standard transportation and logistics functions.
Push vs. Pull Models: Understanding the difference between making products based on forecasts (Push) versus making them based on actual customer orders (Pull). Quick Practice: Test Your Knowledge
Multiple Choice: Which concept describes the amplification of demand fluctuations as one moves further from the customer? A) Bullwhip Effect | B) Safety Stock | C) ABC Analysis Answer: A.
True/False: Economies of scale refers to an increase in average unit cost as volume increases. Answer: False. It refers to a reduction in average cost.
Calculation Prep: Be ready to calculate "Months of Stock" by dividing total stock on hand by average monthly consumption. Pro Tips for Exam Day
Know Your Formulas: Memorize EOQ, safety stock, and reorder point calculations.
Real-World Application: Use case studies from your textbook to explain how technology (like RFID) impacts supply chain transparency.
Interactive Review: Use tools like Quizlet or Studocu for practice flashcards and past exam notes. Supply Chain Management - Midterm Review - Quizlet
This section moves from math to decision-making frameworks regarding suppliers and transportation.
Q8: Simple Moving Average Given the sales for the last 4 months: Jan (100), Feb (120), Mar (110), Apr (130). Calculate the forecast for May using a 3-month moving average.
Q9: Exponential Smoothing The forecast for June was 500 units. Actual demand in June was 550 units. Use a smoothing constant ($\alpha$) of 0.2 to calculate the forecast for July. Before diving into specific questions, you must understand