CH 11 SCMA

A firm that employs a response strategy should minimize inventory throughout the supply chain.

FALSE

As the number of facilities increases, total logistics costs tend to follow a curve that first rises, then declines.

FALSE

Because service firms do not acquire goods and services externally, their supply chain management issues are insignificant.

FALSE

Designing distribution networks to meet customer expectations suggests three criteria: (1) rapid response, (2) cost, and (3) service.

FALSE

Even though a firm may have a low cost strategy, supply-chain strategy can select suppliers primarily on response or differentiation.

FALSE

Improvements in security, especially regarding the millions of shipping containers that enter the U.S. each year, are being held back by the lack of technological advances.

FALSE

Once revenue and total logistics costs are considered together, the optimal number of facilities in a distribution network may decrease compared to the optimal number of facilities based on total logistics costs only.

FALSE

Supply chain decisions are not generally strategic in nature, because purchasing is not a large expense for most firms.

FALSE

The new model of a tight, fast, low-inventory supply chain, operating across political and cultural boundaries, has reduced the overall level of supply chain risk.

FALSE

The supply chain for a brewery would include raw ingredients such as hops and barley but not the manufactured goods such as bottles and cans.

FALSE

The supply chain management opportunity called postponement involves delaying deliveries to avoid accumulation of inventory at the customer's site.

FALSE

Vertical integration, whether forward or backward, requires the firm to become more specialized.

FALSE

When using the low-cost strategy for supply chain management, a firm should use buffer stocks to ensure speedy supply.

FALSE

With the "many suppliers" sourcing strategy, the order usually goes to the supplier that offers the highest quality.

FALSE

________ describes the coordination of all supply chain activities, starting with raw materials and ending with a satisfied customer.

Supply chain management

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

TRUE

Channel assembly, which sends components and modules to be assembled by a distributor, treats these distributors as manufacturing partners.

TRUE

Drop shipping results in time and shipping cost savings.

TRUE

Logistics management can provide a competitive advantage through improved customer service.

TRUE

One classic type of negotiation strategy is the market-based price model.

TRUE

Operations managers are finding online auctions a fertile area for disposing of discontinued inventory

TRUE

Outsourcing is a form of specialization that allows the outsourcing firm to focus on its key success factors.

TRUE

Outsourcing refers to transferring a firm's activities that have traditionally been internal to external suppliers.

TRUE

Savings in the supply chain exert more leverage as the firm's net profit margin decreases.

TRUE

The bullwhip effect refers to the increasing fluctuations in orders that often occur as orders move through the supply chain.

TRUE

The objective of the make-or-buy decision is to help identify the products and services that can be obtained externally

TRUE

Use of a diversified supply base represents one of the most common supply chain risk reduction tactics for several different supply chain risk categories.

TRUE

While the prices that consumers pay are often inflexible, a significant number of final prices paid in business-to-business transactions are negotiated.

TRUE

Which of the following describes using one supplier for a component and a second supplier for another component, where each supplier acts as a backup for the other?

cross-sourcing

A furniture maker has delivered a dining set directly to the end consumer rather than to the furniture store. The furniture maker is practicing which of the following?

drop shipping

A rice mill in south Louisiana purchases the trucking firm that transports packaged rice to distributors. This is an example of which of the following?

forward integration

Virtual companies are also known as ________

hollow corporations or network companies

With cross-sourcing, how many suppliers provide each component on a regular basis (i.e., excluding backup suppliers)?

1

Hewlett-Packard withholds customization of its laser printers as long as possible. This is an example of which of the following?

postponement

________ involves delaying any modifications or customization to the product as long as possible in the production process.

postponement

Which of the following best describes vertical integration?

produce goods or services previously purchased

Which of the following is a primary supplier selection criterion for a firm pursuing a differentiation strategy?

product development skills

In most manufacturing industries, which of the following would likely represent the largest cost to the firm?

purchasing

By which distribution system is more than 90 percent of U.S. coal shipped?

railroads

Designing distribution networks to meet customer expectations suggests what three criteria?

rapid response, product choice, and service

Outsourcing

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

Which of the following characteristics is NOT common to all four of Darden Restaurants' supply channels? A) supplier qualification B) product tracking C) independent audits D) refrigeration E) just-in-time delivery

refrigeration

Among which of the following industries are purchasing costs the LOWEST percentage of sales?

restaurants

TAL Apparel's management of its supply chain for Stafford shirts sold in JCPenney in an example of which of the following?

single-stage control of replenishment

Which of the following is NOT a condition that favors the success of vertical integration? A) availability of capital B) availability of managerial talent C) sufficiently high demand D) small market share

small market share

While freight rates are often based on very complicated pricing systems, in general, the primary freight price factor is based on which of the following attributes?

speed of shipment

Of the four stages of supplier selection, the stage at which the factor weighting approach would be used is ________.

supplier evaluation

What are the four stages of supplier selection?

supplier evaluation, supplier development, negotiations, and contracting

) A restaurant runs a special promotion on lobster and plans to sell twice as many lobsters as usual. When this large order is sent to the distributor, the distributor assumes the large size is a trend, not a one-time event. The distributor therefore places an even larger order with the lobsterman. This behavior is the result of which of the following?

the bullwhip effect

A disadvantage of the "few suppliers" sourcing strategy is:

the high cost of changing partners

Distribution management focuses on which of the following?

the outbound flow of products

What term is used to describe the outsourcing of logistics?

third-party logistics (3PL)

Which of the following is NOT an advantage of a virtual company? A) speed B) total control over every aspect of the organization C) specialized management expertise

total control over every aspect of the organization

Which of the following best describes Vizio's sourcing strategy?

virtual company

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

Logistics management

A manufacturing plant averaged $740 of raw materials, $230 of work-in-process inventory, and $1030 of finished goods inventory during the month. If the cost of goods sold this month amounted to $10,000, what is the inventory turnover for the month?

Monthly inventory turnover = Monthly cost of goods sold / Inventory Investment = $10,000 / ($740 + $230 + $1030) = 5

Which of the following would NOT be subject to negotiation between a buyer and supplier?

A) price B) credit and delivery terms C) quality standards D) cooperative advertising agreements

Warehouses sometimes perform certain other functions besides storing goods. Which of the following is NOT typically one of those functions? A) purchasing B) postponement C) break-bulk activities D) consolidation point E) cross-docking

A) purchasing

Outsourcing:

A) transfers traditional internal activities to outside vendors. B) utilizes the efficiency that comes with specialization. C) allows the outsourcing firm to focus on its key success factors.

________ postpones final assembly of a product so the distribution channel can assemble it.

Channel assembly

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

Cross-sourcing

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

D) Speed is often very important.

Which of the following is NOT a typical benefit of centralized purchasing? A) leverage purchase volume for better pricing B) develop specialized staff expertise C) reduce the duplication of tasks D) reduce lead times E) promote standardization

D) reduce lead times

Which of the following is NOT one of the risk mitigation tactics for the supply chain risk category of suppliers failing to deliver? A) use multiple suppliers B) effective contracts with penalties C) subcontractors on retainer D) require overnight delivery E) pre-planning

D) require overnight delivery

________ management focuses on the outbound flow of products.

Distribution

In what type of auction does a buyer initiate the process by submitting a description of the desired product or service?

Dutch

Which of the following would NOT typically be considered as part of a manufacturing firm's supply chain? A) suppliers B) distributors C) wholesalers D) retailers E) landscaping contractors

E) landscaping contractors

Which of the following is an advantage of the postponement technique?

E) reduction in inventory investment

Which of the following statements does NOT accurately explain what occurs when the number of facilities in a distribution network increases? A) response time decreases B) profit first increases, then decreases C) total logistics costs first decrease, then increase D) inventory costs increase E) response time first decreases, then increases

E) response time first decreases, then increases

________ is the term describing purchasing facilitated through the Internet.

E-Procurement

Because the supply chain has become so electronic and automated, opportunities for unethical behavior have been greatly reduced.

FALSE

Keiretsu refers to a company coalition that is part collaboration, part purchasing from many suppliers, and part vertical integration.

FALSE

Waterways are an attractive distribution system when speed is more important than shipping cost.

False

The ________ is an organization that has developed principles and standards for ethical supply management conduct.

Institute for Supply Management

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

Reverse logistics

Which of the following is NOT one of the five parts of the Supply Chain Operations Reference (SCOR) model?

Sell

________ involves reducing the number of variations in materials and components as an aid to cost management.

Standardization

The ________ is a set of processes, metrics, and best practices developed by the Supply Chain Council.

Supply Chain Operations Reference model or SCOR model

Which of the following statements is true regarding the leverage of supply chain savings?

Supply chain savings exert more leverage as the firm's net profit margin decreases.

A fast-food retailer that acquired a spice manufacturer would be practicing backward integration.

TRUE

Benchmark firms have driven down costs of supply-chain performance.

TRUE

Suppliers are also known as ________.

Vendors

________ is developing the ability to produce goods or services previously purchased or actually buying a supplier or a distributor.

Vertical integration

________ rely on a variety of supplier relationships to provide services on demand.

Virtual companies

Which one of the following distribution systems offers speed and reliability when emergency supplies are needed overseas?

airfreight

A fried chicken fast-food chain that acquired feed mills and poultry farms has performed which of the following?

backward integration

Local optimization, incentives, and large lots all contribute to ________ about what is really occurring in the supply chain.

distortions of information

A carpet manufacturer has delivered carpet directly to the end consumer rather than to the carpet dealer. The carpet manufacturer is practicing which of the following? A) postponement

drop shipping

What three logistics-related costs are relevant when analyzing the choice of number of facilities in a distribution network?

inventory costs, transportation costs, and facility costs

E-procurement:

is the same thing as Internet purchasing.

When Daimler and BMW pooled resources to develop standardized auto components, the sourcing strategy could best be described by which of the following?

joint venture

The Japanese concept of a company coalition of suppliers is:

keiretsu

Japanese manufacturers often pursue a strategy that is part collaboration, part purchasing from a few suppliers, and part vertical integration. What is this approach called?

keiretsu (in italics)

Which of the following is NOT an advantage of the "few suppliers" sourcing strategy?

less vulnerable trade secrets

All EXCEPT which of the following are "opportunities" in managing the integrated supply chain?

line balancing

Which of the following is NOT an opportunity for effective management in the supply chain?

local optimization

For which corporate strategy(ies) should supply chain inventory be minimized?

low cost and differentiation

The ________ decision involves choosing between producing a component or a service internally and purchasing it externally.

make-or-buy

Which sourcing strategy is particularly common when the products being sourced are commodities?

many suppliers

Drop shipping:

means the supplier will ship directly to the end consumer, rather than to the seller.

Local optimization is a supply-chain complication best described as:

optimizing one's local area without full knowledge of supply chain needs.

The transfer of some of what are traditional internal activities and resources of a firm to outside vendors is:

outsourcing

Transferring to external vendors a firm's activities that have traditionally been internal is known as ________.

outsourcing

What is the practice of keeping a product generic as long as possible before customizing?

postponement

The Institute for Supply Management:

publishes the principles and standards for ethical supply management conduct.

Which one of the following is NOT one of the six sourcing strategies?

short-term relationships with few suppliers

Consider a firm with an annual net income of $20 million, revenue of $60 million and cost of goods sold of $25 million. If the balance sheet amounts show $2 million of inventory and $500,000 of property, plant & equipment, what is the inventory turnover?

$12.50

Consider a firm with an annual net income of $20 million, revenue of $60 million and cost of goods sold of $25 million. If the balance sheet amounts show $2 million of inventory and $500,000 of property, plant & equipment, how many weeks of supply does the firm hold?

4.16

In supply chain management, ethical issues:

A) are particularly important because of the enormous opportunities for abuse. B) may be guided by company rules and codes of conduct. C) become more complex the more global is the supply chain. D) may be guided by the principles and standards of the Institute for Supply Management.

Which of the following devices represents an opportunity for technology to improve security of container shipments?

A) devices that identify truck and container location B) devices that sense motion C) devices that measure radiation or temperature D) devices that can communicate the breaking of a container lock or seal

) The bullwhip effect:

A) occurs as orders are relayed from retailers to distributors to wholesalers to manufacturers. B) results in increasing fluctuations at each step of the sequence. C) increases the costs associated with inventory in the supply chain. D) occurs because of distortions in information in the supply chain.

As the number of facilities increases, total logistics costs tend to follow a curve that first declines, then rises. Why?

Transportation costs first decline steeply, then rise, while facility and inventory costs always rise.

Vertical integration appears particularly advantageous when the organization has:

a large market share.

What term describes a supply chain that is designed to optimize both forward and reverse flows?

closed-loop supply chain

What type of negotiating strategy requires the supplier to open its books to the purchasers?

cost-based price model

What are the three classic types of negotiation strategies?

cost-based price model, market-based price model, and competitive bidding