Chapter 11: Supply Chain Management

What are the four stages of supplier selection?

!) Supplier Evaluation 2) Supplier Development 3) Negotiations 4) Contracting

What are the three classic types of negotiation strategies?

!) The Cost-Based Price Model 2) The Market-Based Price Model 3) Competitive Bidding

Prior to embarking on supply chain​ design, operations managers must first consider: A) How to select suppliers. B) ​"Make-or-buy" and outsourcing decisions. C) How to manage supply chain inventory. D) What kind of distribution network to have.

"Make-or-buy" and outsourcing decisions.

Baker Mfg Inc. wishes to compare its inventory turnover to those of industry​ leaders, who have turnover of about 13 times per year and 8​% of their assets invested in inventory. Baker Mfg. Inc. Net Revenue​ $27,500 Cost of sales $21,890 Inventory $1,280 Total assets $17,540 ​A) What is​ Baker's inventory​ turnover? ___ times per year ​(round your response to two decimal​ places). ​B) What is​ Baker's percentage of assets committed to​ inventory? ____ ​(enter your response as a percentage rounded to two decimal​ places). ​C) How does​ Baker's performance compare to the industry​ leaders? ___

17.10; 7.30​%; Better

How many days of​ raw-material inventory does Regal Marine​ maintain? A) 10 days B) 75 days C) 1 day D) ​22 days

22 days

Arnold Palmer Hospital utilizes a 3 tiered supply chain for some medical needs. How many tiers are involved for their surgical​ packs? Part 2 A) 1 B) 7 C) 15 D) 3

3

How many unique supply chains does Darden​ use? A) 9 B) 1 C) 4 D) 19

4

Keiretsu

A Japanese term that describes suppliers who become part of a company coalition.

Make-or-Buy Decision

A choice between producing a component or service within the firm or purchasing it from an outside source.

Blanket Order

A long-term purchase commitment to a supplier for items that are to be delivered against short-term releases to ship.

A supply chain ends with: A) Distributors. B) Manufacturers. C) Suppliers. D) A satisfied customer.

A satisfied customer.

Supply Chain Operations Reference (SCOR) Model

A set of processes, metrics, and best practices developed by the Supply Chain Council.

Closed-Loop Supply Chain

A supply chain designed to optimize all forward and reverse flows.

Vendor-Managed Inventory (VMI)

A system in which a supplier maintains material for the buyer, often delivering directly to the buyer's using department.

Collaborative Planning, Forecasting, and Replenishment (CPFR)

A system in which members of a supply chain share information in a joint effort to reduce supply chain costs.

Channel Assembly

A system that postpones final assembly of a product so the distribution channel can assemble it.

Pull Data

Accurate sales data that initiate transactions to "pull" product through the supply chain.

Disney left Bangladesh: A) After a​ phase-out period. B) Immediately after the collapse. C) A few months after the fire. D) None of the above—it never left.

After a​ phase-out period.

Which of the following mitigation tactics is NOT designed to reduce the risk of information loss or​ distortion? A) Alternate sourcing B) Redundant databases C) Secure IT systems D) Training of supply chain partners on the proper interpretations and use of information

Alternate sourcing

Logistics Management

An approach that seeks efficiency of operations through the integration of all material acquisition, movement, and storage activities.

What is the equation to calculate weeks of supply?

Average Inventory Investment/(Annual Cost of Goods Sold/52 Weeks)

Which of the following statements is NOT​ true? A) ​"Closed-loop supply​ chain" is sometimes used as a synonym for​ "reverse logistics." B) A​ closed-loop supply chain is a designed to optimize only reverse flows. C) A​ closed-loop supply chain prepares for returns prior to product introduction. D Reverse logistics involves the processes of sending returned products back up the supply chain for​ resale, repair,​ reuse, remanufacture,​ recycling, or disposal.

A​ closed-loop supply chain is a designed to optimize only reverse flows.

What does supply chain integration success begin with?

Begins with mutual agreement on goals, followed by mutual trust, and continues with compatible organizational cultures.

What is a​ long-term purchase commitment to a supplier for items that are to be delivered against​ short-term releases to​ ship? A) Postponement B) Advanced shipping notice C) Blanket order D) Drop shipping

Blanket order

Regal​ Marine's supply chain strategy might best be described as: A) A series of joint ventures with major suppliers. B) A version of vertical integration. C) An effort at​ long-term partnering relationships with suppliers. D) Effective direct negotiating with many suppliers to obtain the best price.

C) An effort at​ long-term partnering relationships with suppliers.

Major companies can protect their reputations when global supply chains are so complex by: A) Phasing out all foreign production. B) Carefully examining each and every supplier. C) Rebuilding all the factories with higher safety codes. D) Refusing to do business with companies that use South Asian workers.

Carefully examining each and every supplier.

Which of the following could reduce distribution​ risk? A) Use multiple suppliers B) Secure IT systems C) Cross-country diversification D) Careful​ selection, monitoring and effective contracts with penalties

Careful​ selection, monitoring and effective contracts with penalties

What is a supply chain designed to optimize both forward and reverse​ flows? A) Bullwhip-loop supply chain B) Closed-loop supply chain C) Reverse-loop supply chain D) Open-loop supply chain

Closed-loop supply chain

Virtual Companies

Companies that rely on a variety of supplier relationships to provide services on demand. Also known as hollow corporations or network companies.

What is the equation for inventory turnover?

Cost of Goods Sold/Average Inventory Investment

Inventory Turnover

Cost of goods sold divided by average inventory.

The cost to produce the goods or services sold for a given period is referred to as: A) Weeks of supply. B) Inventory investment. C) Cost of goods sold. D) Inventory turnover.

Cost of goods sold.

Inventory turnover is equal to: A) Inventory investment​ / (annual cost of goods sold​ / 52​ weeks). B) Cost of goods sold​ / inventory investment. C) ​(total inventory investment​ / total ​assets)×100. D) ​(total assets​ / total inventory ​investment)×100.

Cost of goods sold​ / inventory investment.

Which of the following statements about Darden restaurants is​ true? A) Darden serves more than 500 million meals annually in over​ 2,450 locations across the U.S. and Canada. B) ​Darden's two flagship brands each generate sales in the​ $3.4 billion range each year. C) The two flagship brands for Darden are Olive Garden and Outback Steakhouse. D) Darden is the​ world's largest publicly traded casual dining restaurant company based on market share and​ company-owned restaurant revenues. E) All of the above statements are true.

Darden is the​ world's largest publicly traded casual dining restaurant company based on market share and​ company-owned restaurant revenues.

Which of the following statements is NOT generally an implication stemming from an increase in the number of​ facilities? A) Decreased total logistics cost B) Quicker response C) Increased facility costs D) Increased customer satisfaction

Decreased total logistics cost

Bullwhip Effect

Increasing fluctuation in orders or cancellations that often occurs as orders move through the supply chain.

What does typical supply chain benchmark metrics include?

Lead time, time spent placing an order, percent of late deliveries, percent of rejected material, and number of shortages per year.

What are the three issues that complicate the development of an efficient, integrated supply chain?

Local optimization, incentives, and large lots.

Supply Chain Management

Management of activities related to producing materials and services, transforming them into intermediate goods and final products, and delivering them through a distribution system.

How many babies are delivered annually at Arnold Palmer​ Hospital? A) Under​ 9,000 B) Over​ 10,000 C) Over​ 100,000 D) Under​ 7,000

Over​ 10,000

What types of ethics do we consider?

Personal ethics, ethics within the supply chain, and ethical behavior regarding the environment.

What are the five parts of the SCOR model?

Plan, Source, Make, Deliver, and Return.

Disney's decision to leave these 5 countries vs. staying and trying to improve conditions: A) Is based strictly on profits and losses. B) Reflects an​ anti-third world bias. C) Relied on a third party evaluation. D) All of the above.

Relied on a third party evaluation.

Arnold Palmer​ Hospital's approach to supply chains is: A) Developing a series of joint ventures with major suppliers. B) Pursuing a long term partnering relationships with suppliers. C) Serving as a member of a long term regional purchasing organization. D) Effectively direct negotiating with many suppliers to obtain the best price.

Serving as a member of a long term regional purchasing organization.

Drop Shipping

Shipping directly from the supplier to the end consumer rather than from the seller, saving both time and reshipping costs.

Which of the following is NOT true about reverse logistics as compared to forward​ logistics? A) Distribution costs are less directly visible. B) Forecasting is more uncertain. C) Pricing is dependent on many factors. D) Speed is often very important.

Speed is often very important.

Which of the following is the first stage of supplier​ selection? A) Negotiations B) Supplier evaluation C) Supplier development D) Contracting

Supplier evaluation

Why will some production never return to​ Thailand? A) Because China and the Philippines can produce more efficiently and cheaply. B) To protect from earthquakes. C) Thailand lacks the skill to produce relay switches. D) To protect from flooding.

To protect from flooding.

Disk drive makers are heading to Malaysia: A) To avoid inflation in Thailand. B) To counter competition from China. C) Because U.S. customers are demanding the move. D) To spread the risk of placing all their manufacturing in one country.

To spread the risk of placing all their manufacturing in one country.

Regal​ Marine's purchases are what percent of its​ sales? A) ​5% B) ​15% C) ​60% D) ​10%

​60%

What is the equation for the percentage invested in inventory?

(Average Inventory Investment/Total Assets) x 100

What are six supply chain strategies for goods and services to be obtained from outside sources?

1) Negotiating with many suppliers and playing one supplier against another. 2) Developing long-term partnering relationships with a few suppliers. 3) Vertical integration. 4) Joint ventures. 5) Developing keiretsu networks. 6) Developing virtual companies that use suppliers on an as-needed basis.

What are the six major means of distribution?

1) Trucking 2) Railroads 3) Airfreight 4) Waterways 5) Pipelines 6) Multimodal.

The grocery industry has an annual inventory turnover of about 16 times. Organic​ Grocers, Inc., had a cost of goods sold last year of ​$11,280,000​; its average inventory was ​$989,610. What was Organic​ Grocers' inventory​ turnover, and how does that performance compare with that of the​ industry? ​A) What was Organic​ Grocers' inventory​ turnover? ___ times per year ​(round your response to two decimal​ places). ​B) How does Organic​ Grocers' performance compare with that of the​ industry? It ___ than the industry.

11.40; worse than

Arrow Distributing Corp. likes to track inventory by using weeks of supply as well as by inventory turnover. Arrow Distributing Corp. Net Revenue $17,910 Cost of sales $12,030 Inventory $990 Total assets ​$9,400 ​S) What is its weeks of​ supply? ____ weeks ​(round your response to two decimal​ places). ​B) What percentage of​ Arrow's assets are committed to​ inventory? ____​% ​(enter your response as a percentage rounded to two decimal​ places). ​C) What is​ Arrow's inventory​ turnover? ____ times per year ​(round your response to two decimal​ places). ​D) Suppose a manufacturer has an inventory turnover of 13.5 times per year.​ Arrow's supply chain performance relative to the​ manufacturer's, as measured by inventory​ turnover, is ___.

4.28; 10.53%; 12.15; worse

Which of the following statements is NOT​ true? A) The objective of supply chain management is to coordinate activities within the supply chain to maximize the supply​ chain's competitive advantage and benefits to the ultimate consumer. B) Supply chain management describes the coordination of all supply chain​ activities, starting with raw​ materials, and ending with a satisfied customer. C) An increased sales effort may help a firm reach its profit goals more easily than would effective cost cutting. D) A supply chain includes​ suppliers; manufacturers​ and/or service​ providers; and​ distributors, wholesalers,​ and/or retailers who deliver the product​ and/or service to the final customer.

An increased sales effort may help a firm reach its profit goals more easily than would effective cost cutting.

Which of the following statements about Darden restaurants is​ true? A) ​Darden's two flagship brands each generate sales in the​ $3.4 billion range each year. B) Darden is the​ world's largest publicly traded casual dining restaurant company based on market share and​ company-owned restaurant revenues. C) Darden serves more than 500 million meals annually in over​ 2,450 locations across the U.S. and Canada. D) The two flagship brands for Darden are Olive Garden and Outback Steakhouse. E) All of the above statements are true.

Darden is the​ world's largest publicly traded casual dining restaurant company based on market share and​ company-owned restaurant revenues.

Postponement

Delaying any modifications or customization to a product as long as possible in the production process. It strives to minimize internal variety while maximizing external variety.

Vertical Integration

Developing the ability to produce goods or services previously purchased or actually buying a supplier or a distributor.

Supply chain managers outsource logistics to meet three​ goals: A) Drive down inventory​ investment, lower delivery​ costs, and improve delivery reliability and speed. B) Lower delivery​ costs, improve delivery reliability and​ speed, and provide better market response. C) Drive down inventory​ investment, improve delivery reliability and​ speed, and provide better market response. D) Drive down inventory​ investment, lower delivery​ costs, and provide better market response.

Drive down inventory​ investment, lower delivery​ costs, and improve delivery reliability and speed.

Which of the following statements is NOT​ true? A) Finding the optimal number of facilities represents a critical and static decision. B) An effective supplier management program and an effective distribution management program may make the difference between supply chain success and failure. C) ​Top-notch supply chain performance requires good downstream​ management, just as it does good upstream management. D) Packaging and logistics are important distribution​ decisions, because the manufacturer is usually held responsible for breakages and serviceability.

Finding the optimal number of facilities represents a critical and static decision.

Single-Stage Control of Replenishment

Fixing responsibility for monitoring and managing inventory for the retailer.

The advantage of having few suppliers is to: A) Pursue low cost. B) Look for​ short-term attributes. C) Take advantage of diseconomies of scale. D) Form a​ long-term relationship.

Form a​ long-term relationship.

Which of the following statements is NOT one of the response strategy​ decisions? A) Use buffer stocks to ensure speedy supply B) )Fast transportation C) Low setup time D) Gather and communicate market research data

Gather and communicate market research data

What is the name of the alliance formed by Arnold Palmer Hospital and seven other hospitals to improve supply chain​ performance? A) Health Care Supply Association B) Liberty Medical C) Health Care Purchasing Alliance D) Quality Medical

Health Care Purchasing Alliance

Which of the following is NOT one of the benefits accrued from a centralized purchasing​ function? A) Devote more resources to the supplier selection and negotiation process. B) Leverage purchase volume for better pricing. C) Maintain professional control over the purchasing process. D) Increase the duplication of tasks.

Increase the duplication of tasks.

How is​ cash-to-cash cycle time​ computed? A) Inventory days of supply​ + days of payables outstanding − days of receivables outstanding B) Days of receivables outstanding​ + days of payables outstanding − inventory days of supply C) Inventory days of supply​ + days of receivables outstanding − days of payables outstanding D) Inventory days of supply​ + days of receivables outstanding​ + days of payables outstanding

Inventory days of supply​ + days of receivables outstanding − days of payables outstanding

Negotiations

Involve approaches taken by supply chain personnel to set prices.

Supplier Evaluation

Involves finding potential vendors and determining the likelihood of their becoming good suppliers.

Third-Party Logistics

Involves the outsourcing of the logistics function.

Airfreight: A) Is the best way to transport natural gas. B) Is the oldest means of freight transportation. C) Represents about​ 10% of the tonnage shipped in the United States. D) Is a​ fast-growing mode of shipping.

Is a​ fast-growing mode of shipping.

Trucking: A) Is increasingly using computers to manage its operations. B) Does not play a role in multimodal shipping. C) Is the least used transportation mode for manufacturing goods. D) Is one of the least flexible transportation modes.

Is increasingly using computers to manage its operations.

Which negotiation strategy bases price on a​ published, auction, or index​ price? A) Cost-based price model B) Competitive bidding C) Supply-based price model D) Market-based price model

Market-based price model

Supplier Development

May include everything from training, to engineering and production help, to procedures for information transfer.

The building collapse in Bangladesh was: A) Not the first safety violation Disney observed. B) ​Disney's fault. C) Not of concern to Disney and other buyers. D) A rare breakdown that caused many deaths.

Not the first safety violation Disney observed.

The advantage of having many potential suppliers is their willingness to: A) Provide innovations. B) Offer lower prices in the short term. C) Participate in JIT. D) Provide technical expertise.

Offer lower prices in the short term.

What is transferring a​ firm's activities that have traditionally been internal to external​ suppliers? A) Outsourcing B) Keiretsu network C) Make-or-buy D) Vertical integration

Outsourcing

Three common measures of supply chain performance​ are: A) Percentage invested in​ inventory, inventory​ turnover, and​ debt/equity ratio. B) Percentage invested in​ inventory, debt/equity​ ratio, and weeks of supply. C) Debt/equity ratio, inventory​ turnover, and weeks of supply. D) Percentage invested in​ inventory, inventory​ turnover, and weeks of supply.

Percentage invested in​ inventory, inventory​ turnover, and weeks of supply.

Which of the following industries has the highest supply chain cost as a percentage of​ sales? A) Petroleum B) Metals C) Restaurants D) Automobile

Petroleum

The​ do-it-yourselfer plucked a gallon can of base paint from the shelf of the local hardware store and handed it to​ Keith, the cheerful clerk at the paint counter. Their eyes met briefly and the​ do-it-yourselfer silently handed over sample​ 150C-1, Musical​ Mist, to the clerk. It was impractical to keep several gallons of every possible color on the shelves at the hardware​ store, so the paint manufacturer had created clever workaround. The workaround was a​ computer-based system that added predetermined quantities of pigments to a gallon can of base paint depending on the desired​ shade, in this​ case, Musical Mist. The hardware store now needed to stock only the base​ paint, this​ machine, and a small supply of paint pigments in order to create the thousands of colors in its catalog. This scenario is a prime example of: A) The bullwhip effect. B) Postponement. C) Drop shipping. D) Vendor-managed inventory.

Postponement.

With regard to the​ cost-based price model negotiation​ strategy, which of the following is​ true? A) Prices are based in some way upon market standards agreed to by both supplier and purchaser. B) Potential suppliers each submit quotations as to​ price, delivery, and so on. C) Prices float based on what the customer is willing to pay. D) Prices are based upon supplier costs.

Prices are based upon supplier costs.

What do firms spend a huge portion of their sales dollars on?

Purchases.

When determining the optimal number of​ facilities, logistics-related costs do NOT usually include which of the following​ costs? A) Transportation B) Purchasing C) Facility D) Inventory

Purchasing

Which of the following mitigation tactics could reduce economic​ risk? A) Purchasing contracts that address price fluctuations B) Franchising and licensing C) Subcontractors on retainer D) Multiple transportation modes and warehouses

Purchasing contracts that address price fluctuations

E-Procurement

Purchasing facilitated through the Internet.

Three criteria for designing distribution networks to meet customer expectations​ are: A) Rapid​ response, low​ cost, and service. B) Rapid​ response, product​ choice, and service. C) Low​ cost, rapid response and product choice. D) Low​ cost, product choice and service.

Rapid​ response, product​ choice, and service.

Which of the following statements is NOT true regarding the bullwhip​ effect? A) Inaccurate information results in distortions and​ fluctuations, causing what is known as the bullwhip effect. B) Bullwhip fluctuations in the supply chain decrease customer service and profitability. C) The bullwhip effect occurs as order are relayed from​ retails, to​ distributors, to​ wholesalers, to​ manufacturers, with fluctuations decreasing at each step in the sequence. D) Bullwhip fluctuations in the supply chain increase the costs associated with​ inventory, transportation, shipping and receiving.

The bullwhip effect occurs as order are relayed from​ retails, to​ distributors, to​ wholesalers, to​ manufacturers, with fluctuations decreasing at each step in the sequence.

What is the objective of supply chain management?

The objective is to build a chain of suppliers that focuses on maximizing value to the ultimate customer.

What does distribution management focus on?

The outbound flow of final products.

Reverse Logistics

The process of sending returned products back up the supply chain for value recovery or disposal.

What are total logistic costs?

The sum of facility costs, inventory costs, and transportation costs.

What major​ events, discussed in the above​ article, have disrupted global supply​ chains? A) The Indonesian earthquake and flooding in Asia. B) The tsunami in Japan and floods in Thailand. C) The rebels war in the Congo. D) The Chinese wage increases. E) All of the above.

The tsunami in Japan and floods in Thailand.

What is the purpose/design of contracts?

These share risks, share benefits, and create incentives as to optimize the whole supply chain.

How can firms avoid supply chain​ disruptions? A) They can invest more heavily in technology. B) They can have alternative sites or countries to provide backup. C) They can move all of their manufacturing to the U.S. or Mexico D) They can pressure their suppliers to quadruple inventory.

They can have alternative sites or countries to provide backup.

Outsourcing

Transferring to external suppliers a firm's activities that have traditionally been internal.

Which of the following statements is NOT one of the differentiation strategy​ decisions? A) Use buffer stocks to ensure speedy supply. B) Minimize inventory to avoid product obsolescence. C) Gather and communicate market research data. D) Modular design to aid product differentiation.

Use buffer stocks to ensure speedy supply.

Cross-Sourcing

Using one supplier for a component and a second supplier for another component, where each supplier acts as a backup for the other.

A lawnmower assembly plant uses a variety of​ nuts, bolts,​ screws, and other fasteners in its operation. Its supplier delivers these items directly to the point of use on the assembly line and ensures that there are always sufficient quantities of fasteners to maintain the production schedule. This is an example of: A) Vendor-managed inventory. B) Postponement. C) E-procurement. D) Single stage control of replenishment.

Vendor-managed inventory.

What is developing the ability to produce goods or services previously purchased or actually buying a supplier or a​ distributor? A) Virtual companies B) Horizontal integration C) Outsourcing D) Vertical integration

Vertical integration

A response strategy requires suppliers be selected based primarily on: A) Cost. B) Being willing to share information. C) Product development skills. D) Capacity, speed, and flexibility.

​Capacity, speed, and flexibility.

Which of the following statements is true regarding​ cross-sourcing? A) ​Cross-sourcing describes suppliers who become part of a company coalition. B) ​Cross-sourcing enhances technological skills. C) ​Cross-sourcing uses one supplier for a component and a second supplier for another​ component, where each supplier acts as a backup for the other. D) ​Cross-sourcing develops the ability to produce goods or services previously purchased or actually buying a supplier or distributor.

​Cross-sourcing uses one supplier for a component and a second supplier for another​ component, where each supplier acts as a backup for the other.