exam 3 - GERE4046

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.

Identify and describe briefly the six sourcing strategies.

(1) A supplier responds to the demands and specifications of a "request for quotation," with the order usually going to the low bidder. (2) Few suppliers develop long-term "partnering" relationships with a few dedicated suppliers who will work with the purchaser in satisfying the end customer. (3) Vertical integration is developing the ability to produce goods or services previously purchased or actually buying a supplier or a distributor. (4) Joint ventures represent a formal collaboration between firms, without implying any change of ownership. (5) Suppliers become part of a company coalition in the keiretsu strategy. (6) With the virtual companies strategy, firms rely on a variety of supplier relationships to provide services on demand.

Identify the ten opportunities in managing the integrated supply chain.

(1) Accurate "pull" data. (2) Lot size reduction. (3) Single-stage control of replenishment. (4) Vendor-managed inventory. (5) Collaborative planning, forecasting, and replenishment (CPFR). (6) Blanket orders. (7) Standardization. (8) Postponement. (9) Electronic ordering and funds transfer. (10) Drop shipping and special packaging.

Identify three common occurrences that contribute to distortions of information about what is really occurring in the supply chain.

(1) Local optimization. (2) Incentives (sales incentives, quantity discounts, quotas, and promotions). (3) Large lots.

Identify the ten major categories of supply chain risk.

(1) Supplier failure to deliver. (2) Supplier quality failures. (3) Outsourcing. (4) Logistics delays or damage. (5) Distribution. (6) Information loss or distortion. (7) Political. (8) Economic. (9) Natural catastrophes. (10) Theft, vandalism, and terrorism.

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

1

Vertical integration appears particularly advantageous when the organization has:

A large market share.

What is a keiretsu?

A network of suppliers who become part of a company coalition. It is part collaboration, part purchasing from a few suppliers, and part vertical integration. Usually the suppliers are partially owned or debtors to the purchasing organization. This structure is quite common in Japan.

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

Backward integration.

Identify the disadvantages of using the "few suppliers" sourcing strategy.

Concern about trade secrets and suppliers venturing out on their own; the high cost of changing partners; and risk of poor supplier performance.

What are the three classic types of negotiation strategies?

Cost-based price model, market-based price model, and competitive bidding.

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

Cost-based price model.

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.

________ 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.

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?

Drop shipping.

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.

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

Dutch.

________ is the term describing purchasing facilitated through the Internet.

E-Procurement.

Define EDI.

Electronic data interchange is a standardized data-transmittal format for computerized communications between organizations.

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

FALSE

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

FALSE

Cross-sourcing describes the practice of having two suppliers provide every component.

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

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

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

Virtual companies are also known as ________.

Hollow corporations or network companies.

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.

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.

The Japanese concept of a company coalition of suppliers is:

Keiretsu.

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

Keiretsu.

Which of the following would NOT typically be considered as part of a manufacturing firm's supply chain?

Landscaping contractors.

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.

Identify the advantages of using the "few suppliers" sourcing strategy.

Long-term suppliers are more likely to understand the broad objectives of the procuring firm and the end customer; using few suppliers can create value by allowing suppliers to have economies of scale and a learning curve that yields both lower transaction costs and lower production costs; and the strategy also encourages those suppliers to provide design innovations and technological expertise.

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.

How are outsourcing and vertical integration related? Can a single firm successfully do both?

Outsourcing transfers what were traditional internal activities to outside vendors. It is a way of increasing specialization which allows the firm to focus on its core strengths, and not try to do all possible tasks. Vertical integration is much the opposite, decreasing a firm's specialization so that it can perform additional functions along its supply chain. Vertical integration has become increasingly difficult in the face of increasing specialization. It seems unlikely that firms that make significant use of outsourcing would do much vertical integration, but it is possible that a firm's set of competitive advantages would support outsourcing in some functions and vertical integration in others.

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.

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

Postponement.

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

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.

How does the pursuit of a response strategy impact the supply chain decisions of product design characteristics?

Products should have low setup times, and they should be poised for rapid production ramp-up.

E-procurement:

Purchasing facilitated through the Internet.

What is e-procurement?

Purchasing facilitated through the Internet.

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

Purchasing.

Which of the following is NOT a typical benefit of centralized purchasing?

Reduce lead times.

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

Reduction in inventory investment.

Which of the following characteristics is NOT common to all four of Darden Restaurants' supply channels?

Refrigeration.

Which of the following is NOT one of the risk mitigation tactics for the supply chain risk category of suppliers failing to deliver?

Require overnight delivery.

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

Restaurants.

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

Short-term relationships with few suppliers.

How does the pursuit of a response strategy impact the supply chain decisions of primary supplier selection criteria?

Should be selected primarily based on capacity, speed, and flexibility.

TAL Apparel's management of its supply chain for Stafford shirts sold at JCPenney is 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?

Small market share.

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

Standardization.

Identify the four stages of supplier selection.

Supplier evaluation, supplier development, negotiations, and contracting.

What are the four stages of supplier selection?

Supplier evaluation, supplier development, negotiations, and contracting.

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

Supplier evaluation.

As the corporate and operations management strategies vary from low cost to response to differentiation, how does this impact the criteria used for selecting suppliers?

The supply chain must support the operations management strategy. For a firm using the low-cost strategy, supplier selection should be based primarily on cost. When using the response strategy, the selection criteria are capacity, speed, and flexibility. For the differentiation strategy, the supplier is selected based on product development skills, the degree to which it is willing to share information, and the degree to which it can jointly and rapidly develop new products.

________ 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

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

TRUE

Drop shipping results in time and shipping cost savings.

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 statements is true regarding the leverage of supply chain savings?

They exert more leverage as the firm's net profit margin decreases.

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.

What are the three classic negotiation strategies? Briefly describe each of them.

The cost-based model, the market-based price model, and competitive bidding. In the cost-based model, contract price is a function of supplier costs, such as those for time and materials. In the market-based price model, price is set by some form of published, auction, or index price. Competitive bidding may be used when vendors are not open to the cost-based model, or where information is not perfect enough for market-based pricing. Bidding policies usually require that the purchasing agent has several potential suppliers and quotations from each.

How does the pursuit of a response strategy impact the supply chain decisions of supply chain inventory?

The firm should use buffer stocks to ensure speedy supply.

How does the pursuit of a response strategy impact the supply chain decisions of distribution network?

The firm should use fast transportation, and it should provide premium customer service.

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

The high cost of changing partners.

Describe vendor-managed inventory (VMI). How is it related to outsourcing? Cite an example from your experiences as a shopper.

The supplier maintains material for the buyer, often delivering directly to the buyer's using department. It is a form of outsourcing, because the buying firm has transferred the shipping, stocking, and receiving tasks to an external vendor. There are many instances of VMI in today's retail model, e.g., shelves of snack foods and soft drinks are routinely managed by the distributor, not the retailer.

Identify some technological advances that can serve to improve logistics management and also improve shipping security.

They include devices that can detect a broken seal on a shipping container; devices that can detect whether a container is in motion; devices that sense and transmit temperature and radioactivity; and devices that can transmit truck or container location, content, and condition.

Which of the following is NOT an advantage of a virtual company?

Total control over every aspect of the organization.

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 of the following best describes Vizio's sourcing strategy?

Virtual company.