Reference no: EM131086221

Question 1: Supply chain managers should be concerned about three types of flows in their supply chains.  What are these three flows, and why are they important?  How are they related to each other? (one  page)

Question 2: The weekly requirement of a part is 5910 units.  The order cost is $260 per order.  The holding cost is $10 per unit per year, and the part cost is $850 per unit.  The firm operates fifty-two weeks per year.  

1. Calculate the following  - Economic order quantity, annual holding cost, annual order cost and the annual purchase cost, and inventory turns per year

2. Suppose the firm is currently ordering once every six weeks.  How much can the company save per year by using economic order quantity instead of ordering once every six weeks?

Question 3: Letni Corporation buys computers from Taiwan.  Shipments are made by ocean carrier.  It takes eight weeks for a shipment to travel from Taiwan to New York.  Letni sells 510,000 computers per year.  Letni buys the computers at a price of $254 per unit.  Answer the following questions-

1. Determine the value of in transit (also known as pipeline) inventory value.

2. Suppose Letni Corporation decides to use air shipments instead of ocean shipping.  What are the cost consequences?  Describe which costs will be affected, and whether they increase or decrease  (about half page)

Question 4: Read the article titled "Apple goes Vertical" (I have listed the article to the end of this question paper).  Provide a one page summary of why Apple is vertically integrating its supply chain.  

Going Vertical With the iPad, Apple returns to an old-and potentially lucrative-way of doing business.

Apple's iPad may be the latest and greatest tech gadget, but oddly enough, it also represents a return to a model that most tech companies long ago abandoned-vertical integration.

Apple has designed its own processor, called A4, to power the iPad. That's a big deal because until now Apple has used chips made by others, like Intel (for the iMac and MacBook Pro) and Samsung (for the iPhone). In addition to the processor, Apple also makes its own operating-system software for the iPad.

Moreover, the only way to get apps for an iPad will be to buy them from Apple. Same goes for content. To get movies, TV shows, books, music-or anything, really-you'll have to buy them from Apple's online store, and the iPad itself will be sold only in Apple stores. From top to bottom this is a closed device, completely controlled by Apple.

Is that a good thing? Vertical integration was the norm back in the 1970s with minicomputer manufacturers like Digital Equipment Corp. and Data General, and later on with workstation makers like Sun Microsystems. But pretty much everyone in tech decided long ago that vertical integration was an unworkable model. Why make your own processors and operating system when you can buy chips from Intel and Windows from Microsoft? It was ironic that on the same day that Apple was announcing the iPad, Sun was holding an event to announce the completion of its takeover by Oracle-ironic because Sun's pricey vertical-integration model was a big reason for the company's decline.

Why is Apple defying the conventional wisdom and going vertical? For one thing, its CEO, Steve Jobs, is a control freak and hates relying on others. Also, Jobs has been around long enough to remember the advantages of a vertically integrated company. If the A4 is as good a processor as people seem to think, Apple's iPad will have a big performance advantage over all the other tablet computers that are about to hit the market.

Apple can get an added performance boost by designing its processor and its operating system in tandem so that they are optimized for each other. The company says the A4 runs at 1GHz, which is slow compared to the 3GHz Intel processors used in most personal computers, including Apple's iMac. Yet the iPad appears to be really fast on some tasks, like zooming on a map and then clicking to pull up a "street view" of that location. After Wednesday's event, Apple's demo people said the iPad is so speedy because its software has been optimized for the processor. That also helps explain how the iPad can run for 10 hours on a single battery charge. Either Apple has designed the processor in such a way that it draws very little power, or it has optimized its video software to do the same thing, or both.

Apple's top-to-bottom control over the iPad is already freaking some people out. Free-software advocates, who believe even regular Macs and Windows PCs are too locked down, were picketing like crazy outside the Apple iPad event in San Francisco. They think it's wrong for computer makers to put copy restrictions on movies and music so that those files can only be played one kind of computer and can't be copied and shared freely; and they claim devices like the iPad are just a trap, a way to draw you into a closed world where you can be exploited by Apple. Will regular folks be spooked? I doubt it. Most people are happy to trade some freedom for the convenience of a device that works seamlessly, like the iPhone.

And what of Apple's risky bet on vertical integration? Won't the high cost of going it alone put Apple at a disadvantage compared to makers that buy chips and software from others? Won't those other guys be able to charge less than Apple? The answer is, probably yes. But again, most people, myself included, are happy to pay more for what Apple makes. My take is that Apple's bet on vertical integration, which seems anachronistic, is actually a stroke of genius.