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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:
Let’s get started!
Supply chain management includes:
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:
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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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:
Outbound considerations include:
Let’s look at these in more detail.
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?
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:
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.
In addition to storage costs, there are several other costs associated with holding inventory. These include:
Similarly, from a customer service level perspective, there are both inbound and outbound considerations.
Inbound considerations include:
Outbound considerations include:
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:
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.
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:
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.
There are both fixed and variable costs associated with getting a product to market that should be considered.
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 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.
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.
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.
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 out the supply chain process for Intel’s Atom chip identified several steps that had already been optimized including:
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.
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:
In drilling down on this case, the following opportunities were identified:
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.
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.
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.
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.
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.
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.
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:
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:
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2 thoughts on “How to Solve a Supply Chain Case Study Interview”
I need to do a power point for an interview. I have to do a Logistics Analyst Case Study answering questions regarding delivery data for the supply chain and I can’t seem to figure out how to go about answering the questions. I need some professional guidance to help me through the process. Thank you.
Supply chain cases are challenging.
If you’d like an overview of how to approach answering a consulting case interview, our Ultimate Guide to Case Interview Prep is your best source. If you’d like a one-on-one coach for case interviews, including learning how to case in as short as a week, you can apply here.
Good luck!