Management Notes

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The major decision areas in supply chain management are

The major decision areas in supply chain management are

A) location, production, distribution, inventory
B) planning, production, distribution, inventory
C) location, production, scheduling, inventory
D) location, production, distribution, marketing

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The Correct Answer for the given question is option A) location, production, distribution, inventory


The major decision areas in supply chain management are

Answer Explanation for Question: The major decision areas in supply chain management are

Supply Chain Management

Supply chain management involves managing the flow of goods and services, as well as processes involved in transforming raw materials into final products. In order to gain a competitive advantage in the marketplace, supply-side management involves actively streamlining a business’s activities. Typically, supply chain management is viewed as a hybrid between vertically integrated firms, whereby the entire material flow is owned by a single firm, and those where each channel member operates independently. Therefore, coordination between the various players in the chain is crucial for its successful operation.

Supply chain management decisions can be divided into two broad categories:

  • Strategic Decisions and
  • Operational Decisions

Strategic Decisions are typically made over a longer period of time, as their name implies. They are closely tied to the corporate strategy (sometimes they are the corporate strategy), and guide supply chain policies from a design perspective. Operations Decisions, on the other hand, are short-term and focused on day-to-day activities. The goal of these types of decisions is to manage the product flow effectively and efficiently in a “strategic” planned supply chain.

Four Major Decision Areas of Supply Chain Management

In supply chain management, there are Four Major Decision Areas: Location, production, inventory, and distribution, and each of these areas has both strategic and operational components.

  • Location Decision

The location of production facilities, stocking points, and sourcing points is the first step in creating a supply chain. A facility’s location requires a commitment of resources for the long term. The size, number, and location of these components will lead to an understanding of the possible routes that the product can take to reach its final customer. Firms must make these decisions carefully since they determine the basic strategy for accessing customer markets, and will impact revenue, cost, and service levels.

  • Production Decision

A strategic decision involves choosing what products to produce and which plants to produce them in, as well as allocating suppliers to plants, plants to distribution centers, and distribution centers to market segments. These decisions impact the company’s revenue, costs, and level of customer service as before. The decisions assume that facilities exist, but determine the exact route through which products flow to and from these facilities.

The size of manufacturing facilities is also a critical issue–and this is largely determined by the degree of vertical integration within the firm. Detailed production scheduling plays a significant role in operational decisions. Production scheduling, machine maintenance, and construction of master production schedules fall under this category. A production facility needs to balance its workload and implement quality control measures.

  • Inventory Decision

Inventory management refers to how inventories are managed. Raw materials, semi-finished goods, and finished goods, as well as in-process goods, form the basis of inventories at all stages of the supply chain. Their primary purpose is to buffer against any uncertainty that may occur in the supply chain. It is strategic in the sense that top management sets goals.

  • Distribution Decision

It is the mode choice part of these decisions that is more strategic. The optimum mode of transport is often determined by trading-off the direct and indirect costs associated with the mode of transport with the indirect costs of inventory associated with that mode. It may be faster, more reliable, and require less safety stocks, but air shipments are expensive. While shipping by sea or rail is much cheaper, it also requires holding large amounts of inventory to guard against the inherent uncertainties that come with them.


I hope after going through this post you might have clearly understood the Question: The major decision areas in supply chain management are

Which of the following fosters specialization and worldwide supply chains?


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