How to Solve a Supply Chain Case Study Interview

Last Updated January, 2022

Rachael Troughton

Former Accenture

People can be nervous about approaching a supply chain case study interview.

Everyone has some level of experience with marketing and sales because they see these functions in stores and advertisements every day.

The supply chain that gets the product on a store shelf (whether it’s a physical one or digital) can be more opaque.

Supply chain management is the optimization of the process of designing and creating a good or service and getting it to the customer in the most efficient way possible.

Breaking the supply chain down into its component steps will allow you to look at essential parts of the process and uncover which steps may have problems that need to be addressed to better meet customer needs.

In this article, we’ll discuss:

The types of business problems that fall under supply chain management,
Why supply chain matters,
Key factors to consider in a supply chain case,
A supply chain case example, and
Our 7 tips on answering a supply chain case interview question.

Let’s get started!

What Types of Business Problems Fall into Supply Chain Management?

Supply chain management includes:

Product development,
Sourcing parts and materials,
Production,
Logistics, and
Information systems that support this process.

Each consulting firm breaks down the group of consultants who work on supply chain problems differently. Some firms put the entire process under supply chain.

In others, “production” problems are managed by an operations practice or service line. The supply chain practice is responsible for issues like:

How does a company get the necessary components that go into making its product in a cost-effective and timely fashion?
And how does the company deliver that product to the end-customer efficiently and at the required service level?

For example, before a company can manufacture a bike, it needs tires, steel, or aluminum for the frame, the bike chain, etc. To get the finished bike to market, they need transportation to retail stores or a chain’s distribution warehouse.

For the purpose of this article, we’ll look at the broader definition of supply chain, the entire process from getting components parts, to manufacturing the product and delivering finished goods as cheaply and efficiently as possible while meeting or exceeding service level expectations.

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Why Does the Movement of Goods To & From a Factory Matter So Much?

Moving goods to and from a factory might not seem to be the most exciting thing in the world but it’s fundamental to business success. If you can’t get your innovative new product to market so your customers can buy it, it can’t add value to your bottom line.

From a financial perspective, there are both inbound and outbound considerations.

Inbound considerations include:

Transportation costs from supplier to factory/warehouse
Warehousing cost
Carrying cost of inventory

Outbound considerations include:

Transportation costs from factory to customer or store

Let’s look at these in more detail.

Transportation Cost

Transportation costs include both receiving goods from suppliers and distributing them to the customer. There are several factors to be considered when calculating transportation costs, and they may have to be weighed against other factors.

For example, is it more beneficial to use a cheaper supplier that has higher inbound transportation costs? Is it better to use a more expensive carrier service that results in a lower rate of damaged goods or quicker transit time?

Warehousing Cost

The cost of storing inventory, whether component parts or finished products, needs to be considered in effective supply chain management. Warehousing costs can be significant and can be optimized in a number of ways:

Only renting the storage space you need and using it efficiently.
Optimizing product packaging to reduce the storage space required.
Researching less expensive potential warehousing locations.
Using a multi-client facility where several businesses share the cost (if not a lot of space is required.)

It’s worth bearing in mind that, like many things in supply chain management, there may be tradeoffs. Cheaper warehousing that’s poorly connected to a company’s distribution network could end up costing you more time and money than more expensive storage that’s well connected. It’s important to optimize total supply chain costs, not each individual cost in the supply chain.

Inventory Carrying Cost

In addition to storage costs, there are several other costs associated with holding inventory. These include:

Capital cost. Money that’s been invested in inventory cannot be used elsewhere.
Insurance. Storing inventory requires insurance to cover the risk of theft or damage.
Risk. Products may decrease in value or become obsolete during the time they’re stored.

Similarly, from a customer service level perspective, there are both inbound and outbound considerations.

Inbound considerations include:

Factory/production cell downtime due to lack of component parts.

Outbound considerations include:

Missed sales due to stockout at retail stores.
Failure to meet customer service-level expectations.

In short, inventory levels are about managing supply vs. demand. If there is a problem with inbound supply, production will slow or cease. This is highly inefficient and reduces potential product profitability.

For example, the blockage of the Suez Canal in early 2021 due to a container ship that ran aground was expected to delay shipment of $9.6 billion in goods a day on the 150+ vessels waiting to travel through the canal according to a BBC article. These delays are expected to cost companies substantial sums due to:

Lost sales as customers look to competitors to purchase out-of-stock goods,
Production downtime at manufacturers resulting from parts shortages,
Higher shipping costs on ships detoured to longer, more expensive sea routes to avoid the canal, and
Higher shipping costs due to a worldwide shortage of shipping containers that was exacerbated by this accident.

Key Factors to Consider in a Supply Chain Case Study Interview

A Supply Chain Process Map

When analyzing a supply chain case, the best place to start is by mapping out the steps parts go through as they come into the factory, go through the manufacturing and quality control processes, and then are finally shipped to the customer. A process map like the one above will help you identify key steps.

Imagine yourself walking the production floor following the process the parts and end-product go through. In a supply chain case with an actual client, you’ll do this.

An effective supply chain moves the various elements seamlessly in the most efficient manner, minimizing waste and maximizing profitability. The flow of information between supplier and buyer, production, and the market should also move freely. This means it can be used to improve supply chain decisions. For example, an increase in orders at Manufacturer A will be communicated to their supplier, Company B, so that they know that they expect a larger than normal parts order and are prepared to fulfill it.

Imagine How Raw Materials Arrive at a Factory and Move Through It

What steps are required to get parts into inventory?
Where are they stored?
How are they moved around the factory?
How are they changed to outputs – single step or multiple?
Is there an assembly step? A quality control step?
How are they packaged and stored?
Where and how are they prepared and loaded for delivery to market?

Tip! Look for steps in the process where inventory is piling up. This may be because parts supply or production is unbalanced, reducing efficiency. Find ways to improve these bottlenecks.

Tip! Look for areas where there are significant problems with quality control. Parts or products that need to be sent back to suppliers or go through production rework are opportunities to improve efficiency and quality and, by doing so, save money.

After you have a clear understanding of the company’s supply chain, there are 4 factors you’ll want to dive deeper into to find opportunities to improve efficiency:

Operational considerations,
Financial considerations,
Service levels, and
Matching supply and demand.

Operational Considerations

The best supply chains are highly efficient, which means they have low to minimal waste and consistently operate at optimum levels. This means that labor capacity is well-matched to production requirements.

They are also reliable with robust supplier relationships and an effective transportation solution.

Questions to Ask about Operational Efficiency

Product development

- - How well do we understand customer needs and use that insight to develop next-generation products?
  - How efficient are we at designing new products to meet these customer needs?
  - Is there a good split of engineering resources allocated to incremental product improvements versus next-generation product design?

Sourcing

- - Do we regularly review contracts for cost-savings opportunities (both for direct spend on components that go into our end-products and indirect spend on things such as travel and office supplies)?
  - Do we optimize total cost of ownership rather than individual component costs?

Production

- - Is the production process optimized or does work-in-process accumulate behind bottlenecked resources (equipment or employees)?
  - Does the factory experience production shut-downs due to a lack of raw materials?
  - Does the factory experience unexpected equipment downtime?
  - Are employees cross-trained to minimize rework?

Logistics

- - How efficient is the inbound transportation network? Are raw materials received on a just-in-time basis? How often are there stock-outs?
  - How efficient is the outbound transportation network? Are end products received by customers on time?
  - Are there product defects or quality issues caused by transport?

Information systems that support this process

- Do information systems support the exchange of data up and down the supply chain to optimize decision-making?

Financial Considerations

There are both fixed and variable costs associated with getting a product to market that should be considered.

Fixed Production Costs

Fixed costs are costs that are independent of production volume (at least over the short term) — for example, factory leasing costs.

Let’s assume a factory can produce a maximum of 10,000 units of a product a year. To lease the factory is the same price whether you produce 1 unit or 10,000 units a year.

Fixed costs can depend on production volume only when it exceeds a threshold volume.

For example, if sales increase and the business needed to produce 15,000 units a year, the company would need to lease another factory to deal with the increased production. In this case, volume does affect a fixed cost.

Fixed costs do directly influence the cost per unit, however. The higher the utilization of the fixed production volume, the lower the cost per unit.

For example, if the factory mentioned above costs $10,000 to lease and the factory is producing at its full capacity of 10,000 units, then the fixed cost/unit of output is $1. If the factory is only running at 50% capacity, the fixed costs/unit of output would double to $2.

Variable Production Costs

Variable costs change in proportion to production volume. For every additional unit produced, an additional $x of variable cost is incurred. Examples of variable cost items include raw materials and hourly labor costs.

There are times when rebalancing fixed and variable costs can be an opportunity for savings. For example, is it beneficial to invest in machinery or automation (fixed cost) if it reduces high labor costs? Be sure to look for opportunities like this as well as optimizing fixed and variable costs on their own.

Questions To Ask About Financial Optimization

How do increases and decreases in production impact fixed and variable costs?
Are there variable costs that fixed costs could replace? (Example: new machinery that could reduce labor costs as well as total costs of production?)
Are there fixed costs that could be reduced through outsourcing? (Example: costs of leasing and managing a warehouse that could be reduced by outsourcing?)
Where are the biggest opportunities for financial savings?
How could reducing or increasing costs affect other considerations such as operational efficiency?

Service Levels

In supply chain management, the term service level has a specific meaning. It relates to how well inventory levels fulfill customer orders. A good service level is one that can fulfill customer orders without incurring a delay.

This is important because customer loyalty may decrease if products are consistently out of stock.

Questions To Ask About Service Levels

What are the clients’ service level expectations?
How often are customer orders fulfilled successfully?
How would changing service levels affect buyer behavior or customer retention?
How would changing service levels increase or decrease costs?

Supply and Demand

Effective supply chain management is about ensuring demand for the product is equaled by supply, at the lowest cost to the business.

If demand is higher than supply, customers could turn to a competitor.

If supply is higher than demand, inventory costs can reduce profit margins. Storing inventory also increases business risk as the product may decrease in value or become obsolete as it waits to reach the market.

Questions To Ask About Supply And Demand

What factors influence supply?
What factors influence demand?
How good is the organization at forecasting demand?
How flexible is the organization at changing output (e.g., are workers cross-trained for different production cells?)
How well are supply and demand currently balanced?
If they are imbalanced, what factors are contributing to this and how can those issues be fixed?

Supply Chain Case Study Interview – A Sample Question

Problem: Intel is the world’s largest manufacturer of computer chips. In 2008, Intel launched its low-cost “Atom” chip. The supply chain costs of Intel’s chips were about $5.50 a chip, which were acceptable for chips that sold for $100 each. For the Atom chips, priced at $20, these costs were too high to generate a profit.

What factors should Intel consider in order to reduce its supply chain costs, and what actions would you recommend as a priority?

Mapping the Supply Chain

Mapping out the supply chain process for Intel’s Atom chip identified several steps that had already been optimized including:

Raw material costs,
Packaging costs, and
Duty payments.

It also identified that customers required a 2-week service level for receiving orders after a purchase order was submitted.

However, the order cycle for the Atom chip was 9 weeks. Order-cycle time is the time between when a customer order is received and when the goods are shipped. High levels of inventory were required to ensure that customer service levels could be met despite the long production cycle time.

Because of this, production time/inventory was identified as the key step that had opportunities for improvement.

Identifying Opportunities to Reduce Production Time and Inventory

The process for reducing inventory required reducing the order cycle time to meet the customer’s 2-week required service level. Getting to a 2-week cycle time from a 9-week cycle time was a considerable challenge. To meet this challenge, opportunities to improve order cycle time were addressed throughout the supply chain process.

As described above, for a supply chain case, there are 4 main factors to consider:

Financial considerations,
Operational considerations,
Service levels, and
Supply and demand.

In drilling down on this case, the following opportunities were identified:

Financial: Intel moved to a vendor-managed inventory model where possible to save inventory carrying costs. Vendor-managed inventory is the process of having a parts manufacturer take responsibility for holding the required amount of inventory at the customer location.
Operational: The team was able to identify multiple production process improvements to reduce order cycle time, such as cutting the chip assembly test from 5 days to 2 days.
Service levels: As mentioned, the 2-week required service level was not flexible, providing no opportunities in this area.
Balancing supply and demand: Intel introduced a formal sales and operation planning process to provide better demand forecasts and time production to better meet demand.

Our 7 Tips on Answering a Supply Chain Case Interview Question

Tip 1: Walk Through the Supply Chain Process

Start by mapping out the step-by-step supply chain process.

Understanding how materials arrive from suppliers, the steps to turn them into outputs, and what’s needed to get them to market is an important first step. Once you’ve done this, look for bottlenecks or inefficiencies in the system.

Tip 2: Clarify Your Understanding of the Case

At the start of any case study, it’s important to make sure you understand the question. This includes any information you’ve received about the case and also what you think you need to do to solve it.

A simple way to do this is to repeat back to the interviewer what you know about the case and what you believe the task to be. This gives them an early opportunity to guide your thinking if you look to be going off track.

Tip 3: Ask Questions

If you don’t understand anything, ask! Even if you feel you should know something, there’s no point wasting time worrying about it. Just ask the question and move on.

Similarly, if there are gaps in the data provided, or you need more information in order to form a hypothesis or conclusion, ask your interviewer for more detail. They may provide further information that helps you choose an approach or strengthens your analysis.

Tip 4: Take Time to Structure your Thinking

Don’t be afraid to take your time when structuring your approach to the case.

Moments of silence can feel endless in an interview situation, but it’s better to use some extra thinking time and respond clearly and logically than answer immediately in a rushed or haphazard manner.

If you need more time to think, it’s perfectly ok to signpost that to your interviewer by asking for a little more time to organize your thoughts.

Tip 5: Use A Framework

Frameworks are popular with both candidates and interviewers alike as they bring structure to your analysis.

Case interviews can be daunting, and anxiety can make it tricky to think things through logically. Using a framework provides an anchor to organize your thoughts around and makes it less likely you’ll leave anything out.

In supply chain cases, the supply chain process itself can often be used as your framework.

Tip 6: Share Your Analysis

Speaking of analysis, don’t be afraid to share your thoughts aloud. A case interview should be more of a conversation than an interrogation!

Remember your math teacher always telling you to show your work? The same is true in case interviews.

Explaining your thought process helps the interviewer see how you process and make connections between pieces of information. They may also point out small mistakes in your arithmetic so that they don’t mess up your conclusion.

Tip 7: Provide a Recommendation

At the end of the interview, briefly summarize the information you’ve uncovered about the case and how it’s influenced your thinking. Then clearly state your recommendation for the client’s next steps.

Make sure you also share any other important details, such as any risks associated with your recommendation and how they might be overcome.

In this article, we’ve covered:

Which business problems supply chain management covers,
The reasons supply chain management is important,
The essential considerations of a supply chain case,
An example of a supply chain case, and
Our top 7 tips for acing the supply chain case interview.

Still have questions?

If you have more questions about supply chain case study interview questions, leave them in the comments below. One of My Consulting Offer’s case coaches will answer them.
Other people prepping for supply chain case interviews found the following pages helpful:

Our Complete Guide to Case Interview Prep,
Case Interview Types, and
Case Interview Examples.

Help with Consulting Interview Prep

Thanks for turning to My Consulting Offer for advice on supply chain case study interview questions. My Consulting Offer has helped almost 85% of the people we’ve worked with to get a job in management consulting. We want you to be successful in your consulting interviews too. For example, here is how Tanya was able to get her offer from McKinsey.