Chap15 Supply chain management PDF

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Chapter 10 • Supply Chain Strategy

Chapter

Part 3: Managing Value Chains

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Supply Chain Strategy

TRUE/FALSE

1. Supply chain management is the strategy of organizing, motivating and controlling a firm’s processes and those of its suppliers to match the flow of materials, services, and information with customer demand. Answer: True Reference: Introduction Difficulty: Moderate Keywords: supply, chain, management, supplier, customer 2. Work-in-process inventory is considered an input to the transformation processes of the firm. Answer: False Reference: Supply Chains for Services and Manufacturing Difficulty: Moderate Keywords: WIP, work, process, input 3. The finished goods of one firm may actually be the raw materials for another firm. Answer: True Reference: Supply Chains for Services and Manufacturing Difficulty: Moderate Keywords: finished, good, raw, material 4. Inventory turnover is obtained by dividing the average aggregate inventory value by sales per week at cost. Answer: False Reference: Measures of Supply Chain Performance Difficulty: Moderate Keywords: inventory, turnover 5. Increasing the percentage of on-time deliveries to customers actually reduces the total revenue of a firm. Answer: False Reference: Measures of Supply Chain Performance Difficulty: Moderate Keywords: on-time, delivery, revenue 25

Chapter 10 • Supply Chain Strategy

6. The bullwhip effect says that in any supply chain, the ordering patterns experience increasing variance as you move closer to the end customer. Answer: False Reference: Supply Chain Dynamics Difficulty: Moderate Keywords: bullwhip, variance 7. A common disruption of the external supply chain is product and service mix changes. Answer: True Reference: Supply Chain Dynamics Difficulty: Moderate Keywords: disruption, external, supply, chain, mix 8. A common disruption of the external supply chain is engineering changes. Answer: False Reference: Supply Chain Dynamics Difficulty: Moderate Keywords: external, supply, chain, engineering, change 9. Distribution is the management of the transformation process devoted to producing the product or service. Answer: False Reference: Supply Chain Dynamics Difficulty: Moderate Keywords: distribution, transformation, management 10. One of the concerns of material management deals with staffing patterns. Answer: True Reference: Supply Chain Dynamics Difficulty: Moderate Keywords: material, management, staffing 11. One of the concerns of material management deals with production levels. Answer: True Reference: Supply Chain Dynamics Difficulty: Moderate Keywords: material, management, production, level 12. The order-fulfillment process involves the activities to deliver a product or service to the customer. Answer: True Reference: The Order Fulfillment Process Difficulty: Moderate Keywords: order, fulfillment, deliver, customer

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Chapter 10 • Supply Chain Strategy

13. Forward placement is a reduction in inventory and safety stock because of the merging of variable demands from customers. Answer: False Reference: The Order Fulfillment Process Difficulty: Moderate Keywords: forward, placement, inventory 14. Vendor-managed inventories are an example of the forward-placement tactic. Answer: True Reference: The Order Fulfillment Process Difficulty: Moderate Keywords: vendor, managed, inventories, forward, placement 15. Drop shipping occurs when a retailer passes customer orders directly to a wholesaler or manufacturer, which then ships the order directly to the customer with the retailer’s label on it. Answer: True Reference: Supply Chain Strategies Difficulty: Moderate Keywords: drop, shipping 16. Channel assembly is the process of using members of the distribution channel as if they were assembly stations in the factory. Answer: True Reference: Supply Chain Strategies Difficulty: Moderate Keywords: channel, assembly, distribution 17. Virtual supply chains tend to have lower costs due to economies of scale. Answer: True Reference: Supply Chain Strategies Difficulty: Moderate Keywords: virtual, supply, chain 18. It is better to keep the order fulfillment process in-house than to use a virtual supply chain when sales volumes are high. Answer: True Reference: : Supply Chain Strategies Difficulty: Moderate Keywords: virtual, supply, chain, traditional 19. When high service or product variety is important, the traditional order fulfillment method is preferable to a virtual supply-chain approach. Answer: False Reference: : Supply Chain Strategies Difficulty: Moderate Keywords: virtual, supply, chain, traditional

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Chapter 10 • Supply Chain Strategy

20. A collaborative planning, forecasting, and replenishment program is an iterative process between the supplier and customer to develop replenishment quantities jointly. Answer: True Reference: The Order Fulfillment Process Difficulty: Moderate Keywords: collaborative, planning, forecasting, replenishment, CPFR 21. A cross-docking warehouse holds inventory from manufacturers until retailers are prepared to sell the items. Answer: False Reference: The Order Fulfillment Process Difficulty: Easy Keywords: cross-docking, warehouse 22. The negotiation process executes the actual procurement of the service or material from the supplier. Answer: False Reference: Supplier Relationship Process Difficulty: Moderate Keywords: negotiation, procurement, supplier 23. Green purchasing involves identifying, assessing, and managing the flow of environmental waste and finding ways to reduce it and minimize its impact on the environment. Answer: True Reference: Supplier Relationship Process Difficulty: Moderate Keywords: green, purchasing, environment 24. The competitive orientation to supplier relations is that the buyer and supplier are partners. Answer: False Reference: Supplier Relationship Process Difficulty: Moderate Keywords: competitive, orientation, supplier, buyer 25. The most used form of e-purchasing today is electronic data interchange. Answer: True Reference: Supplier Relationship Process Difficulty: Moderate Keywords: electronic, data, interchange, EDI 26. A catalog hub is a central distribution point where buyers may purchase items directly from manufacturers before the items are shipped to retailers. Answer: False Reference: Supplier Relationship Process Difficulty: Easy Keywords: catalog. hub

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Chapter 10 • Supply Chain Strategy

27. An electronic market that brings together textbook sellers, office supply companies, apparel vendors, and students is an example of an exchange. Answer: True Reference: Supplier Relationship Process Difficulty: Easy Keywords: exchange, electronic, buyer, seller 28. Reducing the number of suppliers for an item carries an increased risk of interruption in supply. Answer: True Reference: Supplier Relationship Process Difficulty: Moderate Keywords: sourcing, risk, supply 29. Value analysis is a systematic effort to reduce the cost or improve the performance of products or services. Answer: True Reference: Supplier Relationship Process Difficulty: Moderate Keywords: value, analysis, improve 30. Early supplier involvement is a program that allows suppliers to fill orders prior to the customer placing them. Answer: False Reference: Supplier Relationship Process Difficulty: Moderate Keywords: early, supplier, involvement 31. In presourcing, suppliers are selected early in the concept-development stage. Answer: True Reference: Supplier Relationship Process Difficulty: moderate Keywords: presourcing, development 32. Responsive supply chains work best when frequent product introduction exists. Answer: True Reference: Supply Chain Strategies Difficulty: Moderate Keywords: responsive, product, introduction

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Chapter 10 • Supply Chain Strategy

33. Efficient supply chains work best when contribution margins are high. Answer: False Reference: Supply Chain Strategies Difficulty: Moderate Keywords: efficient, supply, chain, contribution 34. Efficient supply chains use low capacity cushions. Answer: True Reference: Supply Chain Strategies Difficulty: Moderate Keywords: efficient, chain, cushion, supply 35. Responsive supply chains work best when firms offer a low variety of services or products and demand predictability is high. Answer: False Reference: Supply Chain Strategies Difficulty: Moderate Keywords: responsive, supply, chains, variety, predictability 36. Dell, a wildly successful computer company, can configure exactly the computer you want thanks to their mass production system. Answer: False Reference: Supply Chain Strategies Difficulty: Easy Keywords: mass, customization 37. Postponement is an organizational concept whereby members of the distribution channel are used as if they were assembly stations in the factory. Answer: False Reference: Supply Chain Strategies Difficulty: Moderate Keywords: postponement, delay 38. Backward integration is a firm’s erroneous movement towards having suppliers and distributors perform processes and provide material and services. Answer: False Reference: Supply Chain Strategies Difficulty: Moderate Keywords: backward, vertical, integration 39. Offshoring is a supply chain strategy that involves moving processes to another country. Answer: True Reference: Supply Chain Strategies Difficulty: Moderate Keywords: offshoring

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Chapter 10 • Supply Chain Strategy

40. A virtual supply chain allows for greater product variety and lower costs due to economies of scale. Answer: True Reference: Supply Chain Strategies Difficulty: Moderate Keywords: virtual, supply, chain

MULTIPLE CHOICE 41. The basic purpose of supply chain management is to: a. create an exclusive set of suppliers who will not supply your competitors. b. link your customers together so that the flow of materials remains under control. c. synchronize the operations of all suppliers with those of purchasing, production, distribution, and customers. d. reduce the inventory by proper selection of customers and transportation modes. Answer: c Reference: Introduction Difficulty: Easy Keywords: supply, chain 42. Which of the following is NOT a component of the supply chain? a. Order fulfillment b. Materials c. Customer relationship d. Competitors Answer: d Reference: Introduction Difficulty: Easy Keywords: supply, chain, component 43. Which one of the following is TRUE for supply chain management? a. Supply chain applies to both manufacturing and service organizations. b. Supply chain applies only to manufacturing because it deals with flow of materials. c. Supply chain is about suppliers and does not include distributors or customers. d. Supply chain includes any operation that deals with materials. Answer: a Reference: Introduction Difficulty: Easy Keywords: supply, chain, service, manufacturing

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Chapter 10 • Supply Chain Strategy

44. The supply chain for a service provider must account for retail stores, delivery centers, points-of-sale equipment, and employees. These elements of the service package are part of the: a. supporting facilities. b. facilitating goods. c. explicit services. d. implicit services. Answer: a Reference: Supply Chains for Services and Manufacturing Difficulty: Moderate Keywords: supply, chain, service, supporting, facilities, package 45. The bullwhip effect is characterized by: a. ordering patterns that experience increasing variance as you proceed downstream in the chain. b. ordering patterns that experience increasing variance as you proceed upstream in the chain. c. purchasing patterns that experience increasing variance downstream in the chain. d. purchasing patterns that experience decreasing variance as you proceed upstream in the chain. Answer: b Reference: Supply Chain Dynamics Difficulty: Moderate Keywords: bullwhip, effect, variation 46. Which of the following changes would decrease the likelihood of the bullwhip effect? a. Changing the mix of items in an order b. Sending partial shipments of an order c. Instituting a policy of no discounts or promotions d. Sending late deliveries of an order Answer: c Reference: Supply Chain Dynamics Difficulty: Moderate Keywords: bullwhip, effect, variation 47. Which of the following changes would increase the likelihood of a supply chain experiencing the bullwhip effect? a. Engineering changes to the design of a product b. Instituting a more accurate materials management information system c. Closely coordinating promotions with the internal marketing department and suppliers d. Using a more reliable delivery company Answer: a Reference: Supply Chain Dynamics Difficulty: Easy Keywords: bullwhip, effect, variation

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Chapter 10 • Supply Chain Strategy

48. Which one of the following statements is TRUE about purchasing? a. Purchasing’s primary role is to satisfy the firm’s long-term supply needs. b. Purchasing’s primary role should be placing and tracking orders. c. Purchasing’s primary role is to negotiate lower prices. d. Purchasing’s primary role is to negotiate prices and delivery dates. Answer: a Reference: Supplier Relationship Process text p. 390 Difficulty: Moderate Keywords: purchasing, supply 49. One source of disruption caused by the internal supply chain is: a. forecast error. b. underfilled shipments. c. volume changes. d. late deliveries. Answer: a Reference: Supply Chain Dynamics Difficulty: moderate Keywords: internal, supply, chain, disruption 50. One source of disruption caused by the external supply chain is: a. product or sales promotions. b. new product or service introduction. c. late deliveries. d. engineering changes. Answer: c Reference: Supply Chain Dynamics Difficulty: Moderate Keywords: external, supply, chain, disruption 51. Possible causes of disruption due to internal supply chain problems are: a. late deliveries. b. machine breakdowns or inexperienced workers. c. product and service mix changes. d. underfilled shipments. Answer: b Reference: Supply Chain Dynamics Difficulty: Moderate Keywords: disruption, internal, supply, chain 52. A firm may choose to use members of the distribution channel as if they were assembly stations in the factory. Such an approach is known as: a. backward integration. b. postponement. c. channel assembly. d. deferred delay. Answer: c Reference: Supply Chain Strategies ( Difficulty: Easy Keywords: channel, assembly 33

Chapter 10 • Supply Chain Strategy

53. The technique of drop shipping requires: a. a retailer dropping the shipping fee from the total order cost. b. a customer picking up the goods directly from the point of production. c. a retailer contacting the customer regarding shipping preference. d. a wholesaler/manufacturer to ship a product directly to a customer. Answer: d Reference: Supply Chain Strategies Difficulty: Easy Keywords: drop, shipping 54. Which of the following is typically LOWER in a traditional supply chain than in a virtual supply chain? a. Investment in inventories b. Transportation cost c. Service or product variety d. Investment in order fulfillment infrastructure Answer: c Reference: Supply Chain Strategies Difficulty: Easy Keywords: traditional, virtual, supply, chain 55. Which of the following is typically HIGHER in a virtual supply chain than in a traditional supply chain? a. Investment in order fulfillment infrastructure b. Product or service variety c. Investment in inventories d. Transportation costs Answer: b Reference: Supply Chain Strategies Difficulty: Easy Keywords: virtual, supply, chain, traditional 56. The practice whereby a manufacturer has inventories of materials on consignment from its suppliers falls under the scope of: a. inventory pooling control. b. virtual distribution. c. electronic inventory control. d. vendor-managed inventories. Answer: d Reference: The Order Fulfillment Process Difficulty: Easy Keywords: virtual, supply, chain, traditional

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Chapter 10 • Supply Chain Strategy

57. Which one of the following statements on inventory placement of finished goods is best? a. Forward placement might help reduce transportation cost. b. Forward placement is consistent with a competitive priority that calls for customization. c. Inventory pooling should be avoided when demand in various regions fluctuates month to month. d. Backward placement is consistent with a competitive priority that calls for fast delivery times. Answer: a Reference: The Order Fulfillment Process Difficulty: Moderate Keywords: inventory, placement, forward 58. Which location shift would qualify as forward placement? a. From the manufacturer to a distribution center b. From the retailer to the wholesaler c. From the wholesaler to the manufacturer d. From the retailer to the manufacturer Answer: a Reference: The Order Fulfillment Process Difficulty: Moderate Keywords: forward, placement 59. Which one of the following statements is TRUE about a cooperative orientation in supplier relationships? a. It cannot be implemented in Western countries because competitive bidding is more effective in that culture. b. It cannot be implemented in the Western countries because it always benefits the supplier. c. It requires all parts and subassemblies to be purchased from the same supplier. d. It requires few suppliers for each item or service. Answer: d Reference: Supplier Relationship Process Difficulty: Moderate Keywords: cooperative, orientation, supplier 60. One of the benefits of a cooperative orientation in supplier relationships is: a. the buyer sometimes suggests ways to improve the supplier’s operations. b. the supplier implements its own quality standards. c. the buyer does not have to share much information with the supplier. d. the supplier has complete freedom in choosing the delivery time. Answer: a Reference: Supplier Relationship Process Difficulty: Moderate Keywords: cooperative, orientation, supplier, relationship

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Chapter 10 • Supply Chain Strategy

61. Which one of the following statements correctly represents a benefit of centralized buying? a. Local managers have more control over their business. b. Purchases and production schedules are meshed more easily. c. Purchasing lead times may be shorter. d. Increased buying power can result in significant savings in purchasing costs. Answer: d Reference: Supplier Relationship Process Difficulty: Moderate Keywords: centralized, buying, purchasing 62. Padco averages $15 million worth of inventory in all of its worldwide locations. They operate 51 weeks a year and each week average $3 million in sales (at cost). Their inventory turnover is: a. 1.13 turns. b. 5 turns. c. 10.2 turns. d. 17 turns. Answer: c Reference: Measures of Supply Chain Performance Difficulty: Moderate Keywords: inventory, turnover 63. Some manufacturers and service providers want to measure the performance of the supply chain by the percentage of on-time deliveries. The main reason for this measure is: a. it will discourage the competitors from entering the market. b. it measures the satisfaction levels of suppliers. c. increased on-time delivery increases revenue by inducing customers to buy more products from the firm. d. It helps accounting to debit customers’ accounts promptly. Answer: c Reference: Measures of Supply Chain Performance Difficulty: Moderate Keywords: measure, performance, on-time, delivery 64. Which one of the following statements about the relation between financial and supply-chain performance measures is TRUE? a. Longer delivery times require higher levels of working capital. b. Shorter new product development time decreases revenue. c. Higher inventory turns call for higher working capital requirements. d. Lower aggregate inventory value means higher current assets. Answer: a Reference: Measures of Supply Chain Performance Difficulty: Moderate Keywords: financial, measure, supply, chain, working, capital

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Chapter 10 • Supply Chain Strategy

65. Henderson Corporation is a supplier of alloy ball bearings to auto manufacturers in Detroit. Because of the specialized manufacturing process employed, considerable work-in-process and raw material inve...