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Question 431 - CSCP discussion

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The primary reason for having supply contracts appropriate for make-to-stock (MTS) and make-to-order (MTO) business environments is consideration of:

A.
quality.
Answers
A.
quality.
B.
revenue.
Answers
B.
revenue.
C.
risk.
Answers
C.
risk.
D.
market share.
Answers
D.
market share.
Suggested answer: C

Explanation:

Supply contracts for make-to-stock (MTS) and make-to-order (MTO) business environments are primarily concerned with managing risk. In an MTS environment, products are manufactured based on forecasted demand, which carries the risk of overproduction or underproduction. Conversely, in an MTO environment, products are made only after receiving customer orders, which mitigates inventory risk but may introduce risks related to lead times and production capacity. Appropriate supply contracts help manage these risks by clearly defining terms related to delivery schedules, quantities, quality specifications, and penalties for non-compliance.

Reference: Chopra, S., & Meindl, P. (2016). Supply Chain Management: Strategy, Planning, and Operation.

asked 16/09/2024
Carlos Almeida Fernandes
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