Global SCM Quiz 2 (CH 9-12)
26) Average inventory decreases if a promotion is run during the peak period and increases if the promotion is run during the off-peak period.
FALSE
26) Quantity discounts lead to a minor buildup of cycle inventory in the supply chain.
FALSE
20) Which approach to capacity management makes use of spare plant capacity that exists in the form of hours when the plant is not operational? A) Time flexibility from workforce B) Use of seasonal workforce C) Use of subcontracting D) Use of dual facilities-dedicated and flexible E) Designing product flexibility into the production processes
A
23) Which approach to capacity management would use a parttime workforce to increase capacity flexibility by enabling the firm to have more people at work during peak periods? A) Time flexibility from workforce B) Use of seasonal workforce C) Use of subcontracting D) Use of dual facilities(dedicated and flexible) E) Designing product flexibility into the production processes
A
24) Pricing schedules with all unit quantity discounts encourage retailers to A) decrease the size of their lots. B) increase the size of their lots. C) decrease the size of their inventory. D) increase the price of their products.
A
28) In a supply chain where each stage of the supply chain independently makes its pricing decisions with the objective of maximizing its own profit, A) supply chain profit is lower than a coordinated solution. B) supply chain profit is higher than a coordinated solution. C) supply chain profit is about the same as a coordinated solution. D) supply chain profit will be maximized.
A
33) Pricing decisions based only on revenue considerations often result in A) a decrease in overall profitability. B) an increase in overall profitability. C) a decrease in overall revenue. D) a decrease in supply chain revenue. E) an increase in supply chain profitability.
A
41) Continuous review policies for inventory replenishment require safety inventory to cover demand during A) lead time only. B) the review interval only. C) both lead time and the review interval. D) neither lead time or the review interval.
A
45) A firm can vary supply of product by controlling A) inventory. B) pricing. C) demand. D) revenue.
A
49) Both ________ and ________ increase as the safety inventory is increased. A) fill rate, cycle service level B) lead time, cycle service level C) fill rate, lead time D) reorder point, lead time
A
9) Lead time is the gap between A) when an order is placed and when it is received. B) when an order is received and when it is put away. C) when an order is received and when it is used. D) when an order is acknowledged and when it is received.
A
1) Predictable variability is A) change in demand that can be forecasted. B) change in demand that cannot be forecasted. C) change in demand that has been planned. D) change in demand that has been scheduled. E) all of the above
A
10) Companies typically divide the task of supply and demand so that A) Marketing manages demand and Operations manages supply. B) Marketing manages supply and Operations manages demand. C) Marketing manages demand and supply. D) Operations manages demand and supply. E) none of the above
A
10) Economies of scale in purchasing and ordering motivate a manager to A) increase the lot size and cycle inventory. B) decrease the lot size and cycle inventory. C) eliminate inventory. D) increase the lot size and reduce cycle inventory.
A
10) The bullwhip effect moves a supply chain A) away from the efficient frontier by increasing cost and decreasing responsiveness. B) away from the efficient frontier by decreasing cost and increasing responsiveness. C) toward the efficient frontier by increasing cost and decreasing responsiveness. D) toward the efficient frontier by increasing cost and increasing responsiveness. E) none of the above
A
11) Situations where incentives offered to different stages or participants in a supply chain lead to actions that increase variability and reduce total supply chain profits are referred to as A) incentive obstacles. B) information processing obstacles. C) operational obstacles. D) pricing obstacles. E) behavioral obstacles.
A
11) The price paid per unit is referred to as A) the material cost and is denoted by C. B) the fixed ordering cost and is denoted by S. C) the holding cost and is denoted by H. D) the purchase price and is denoted by P.
A
11) Which of the following is not a measure of product availability? A) Customer fill rate B) Product fill rate C) Order fill rate D) Cycle service level (CSL)
A
12) A firm can vary supply of product by controlling A) production capacity and inventory. B) production capacity and price promotions. C) price promotions and inventory. D) production capacity and inventory promotions. E) none of the above
A
12) Incentives that focus only on the local impact of an action result in decisions that A) do not maximize total supply chain profits. B) maximize total supply chain profits. C) minimize total supply chain profits. D) minimize total supply chain cost. E) none of the above
A
14) The capacity management approach that uses flexible work hours from the workforce to manage capacity to better meet demand is A) time flexibility from workforce. B) use of seasonal workforce. C) use of subcontracting. D) use of dual facilities-dedicated and flexible. E) designing product flexibility into the production processes.
A
16) The distinction between product fill rate and order fill rate is A) not significant in a single product situation. B) significant in a single product situation. C) not significant when a firm is selling multiple products. D) significant when a firm is selling multiple products.
A
18) A company that tracks inventory and places an order for a lot size Q when the inventory declines to the reorder point (ROP) is using A) continuous review. B) daily review. C) occasional review. D) periodic review.
A
20) Which of the following is correct? A) Average inventory = cycle inventory + safety inventory B) Average inventory = cycle inventory - safety inventory C) Average inventory = cycle inventory × safety inventory D) Average inventory = cycle inventory / safety inventory
A
21) Which approach to capacity management makes use of overtime, which is varied to match the variation in demand? A) Time flexibility from workforce B) Use of seasonal workforce C) Use of subcontracting D) Use of dual facilities-dedicated and flexible E) Designing product flexibility into the production processes
A
22) Which approach to capacity management would schedule the workforce so that the available capacity better matches demand? A) Time flexibility from workforce B) Use of seasonal workforce C) Use of subcontracting D) Use of dual facilities-dedicated and flexible E) Designing product flexibility into the production processes
A
23) A shortage occurs in a replenishment cycle A) only if the demand during the lead time exceeds the ROP. B) only if the demand during the lead time is less than the ROP. C) only if the demand during the lead time exceeds the average demand. D) only if the demand during the lead time is less than the average demand.
A
26) Quantity discounts lead to A) a significant buildup of cycle inventory in the supply chain. B) a slight buildup of cycle inventory in the supply chain. C) a decrease in cycle inventory in the supply chain. D) minor fluctuations of cycle inventory in the supply chain.
A
29) For products where the firm has market power, coordination in the supply chain can be achieved and supply chain profits maximized through the use of A) two part tariffs or volume based quantity discounts. B) marginal unit quantity discounts. C) all unit quantity discounts. D) basic quantity discounts.
A
31) Discounts related to price discrimination will be A) volume based. B) unit based. C) marginally based. D) lot size based.
A
31) The pricing and promotion decisions are often made by A) marketing and sales. B) marketing and operations. C) operations and sales. D) marketing, operations, and sales. E) marketing and operations without sales.
A
32) When a single stage controls replenishment decisions for the entire chain, coordination is achieved because A) the problem of multiple forecasts is eliminated. B) each stage views its role as one of replenishing orders placed by the next stage. C) the manufacturer is aware of the retailer's promotion plans to achieve coordination. D) all of the above E) A and B only
A
32) Which of the following is not a major disadvantage of aggregating all inventory in one location? A) Increase in forecast accuracy of customer demand. B) Increase in response time to customer order. C) Increase in transportation cost to customer. D) All of the above are disadvantages.
A
33) Reducing the replenishment lead time can help dampen the bullwhip effect because A) it will decrease the uncertainty of demand during the lead time. B) the manufacturer is aware of the retailer's promotion plans to achieve coordination. C) it discourages retailers from artificially inflating their orders in the case of a shortage. D) all of the above E) none of the above
A
34) Which approach to aggregation requires an information system that allows access to current inventory records from each location? A) Information centralization B) Specialization C) Product substitution D) Component commonality
A
36) An increase in consumption of the product either from new or existing customers is A) market growth. B) stealing share. C) forward selling. D) forward buying. E) none of the above
A
37) Which use of common components in a variety of products has been a very effective supply chain strategy to exploit aggregation and reduce component inventories? A) Information centralization B) Specialization C) Product substitution D) Component commonality
A
38) Which of the following is not a key step in designing effective supply chain partnerships? A) Devoting resources to coordination B) Assessing the value of the relationship C) Identifying operational roles and decision rights for each party D) Creating effective contracts E) Designing effective conflict resolution mechanisms
A
39) In general, as the fraction of increased demand coming from forward buying grows, offering the promotion during the peak demand period becomes A) less attractive. B) more attractive. C) more profitable. D) less significant. E) none of the above
A
4) Information distortion is exaggerated by the fact that A) supply chains today produce a large amount of product variety. B) supply chains today produce a small amount of product variety. C) the telephone effect is extreme in situations where technology is in use. D) different stages of supply chains send excessive data. E) none of the above
A
41) Which cost takes into account the return demanded on the firm's equity and the amount the firm must pay on its debt? A) Cost of capital B) Obsolescence (spoilage) cost C) Handling cost D) Occupancy cost
A
42) Periodic review policies require A) more safety inventory than continuous review policies for the same level of product availability. B) less safety inventory than continuous review policies for the same level of product availability. C) the same safety inventory as continuous review policies for the same level of product availability. D) no more safety inventory than continuous review policies for the same level of product availability.
A
43) As the product margin declines, promoting during the peak demand period becomes A) less profitable. B) more profitable. C) less of a risk. D) more desirable. E) none of the above
A
44) A distributor should decide his safety inventory levels based on A) the level of safety inventory carried by all retailers supplied by him. B) the level of safety inventory carried by other distributors. C) the level of safety inventory carried by manufacturers supplying him. D) the level of cycle inventory carried by all retailers supplied by him.
A
46) As the uncertainty of supply or demand ________, the required level of safety inventories ________. A) grows, increases B) increases, decreases C) decreases, grows D) decreases, increases
A
46) Cycle inventory exists in a supply chain because different stages exploit economies of scale to A) lower total cost. B) raise quality. C) improve reliability. D) synchronize the supply chain.
A
46) Which of the following managerial actions does not necessarily increase total supply chain profits and moderate information distortion? A) Assigning blame for demand fluctuations B) Building strategic partnerships and trust C) Aligning of goals and incentives D) Improving information visibility and accuracy
A
47) In this approach to managing capacity, a firm uses flexible work hours by the workforce to manage capacity to better meet demand. A) Time flexibility from workforce B) Use of seasonal workforce C) Use of subcontracting D) Use of dual facilities-specialized and flexible
A
47) Product availability reflects a firm's ability to fill a customer order out of available inventory. Which of the following is not a measure of product availability? A) Lead time B) Order fill rate C) Cycle service level D) Product fill rate
A
53) Which factor favors promotion during lowdemand periods? A) High forward buying B) High ability to steal market share C) High ability to increase overall market D) High margin
A
6) The disadvantage of maintaining enough manufacturing capacity to meet demand in any period is A) much of the expensive capacity would go unused during most months when demand was lower. B) the expensive capacity would be used consistently throughout the year. C) most of the expensive capacity would still be used during most months when demand was lower. D) very low inventory costs because no inventory needs to be carried from period to period. E) None of the above are true.
A
9) The advantage of offering a price promotion during periods of low demand to shift some of the demand into a slow period is A) a demand pattern that is less expensive to supply. B) very high inventory costs because inventory needs to be carried from period to period. C) in the fact that a firm could get by with a smaller, more expensive factory. D) much of the expensive capacity would go unused during most months when demand was lower. E) all of the above
A
The tradeoff that a supply chain manager must consider when planning safety inventory is A) increasing product availability versus increasing inventory holding costs. B) decreasing product availability versus decreasing inventory holding costs. C) increasing product availability versus raising the level of safety inventory. D) decreasing product availability versus decreasing the level of safety inventory.
A
37) Customers substituting the firm's product for a competitor's product is A) market growth. B) stealing share. C) forward selling. D) forward buying. E) none of the above
B
12) All costs that do not vary with the size of the order but are incurred each time an order is placed are referred to as A) the material cost and is denoted by C. B) the fixed ordering cost and is denoted by S. C) the holding cost and is denoted by H. D) the purchase price and is denoted by P.
B
13) The fraction of product demand that is satisfied from product in inventory is the A) customer fill rate. B) product fill rate. C) order fill rate. D) cycle service level (CSL).
B
16) Total ordering and holding costs A) are relatively stable. B) are relatively stable around the economic order quantity. C) are relatively unstable around the economic order quantity. D) are unstable.
B
28) Which of the following is not an approach to improve coordination within the supply chain by aligning goals and incentives? A) Aligning incentives across functions B) Sharing point of sales (POS) data C) Pricing for coordination D) Altering sales force incentives from sell in to sell through E) none of the above
B
32) The goal of trade promotions is to A) influence retailers to act in a way that helps the retailer achieve its objectives. B) influence retailers to act in a way that helps the manufacturer achieve its objectives. C) influence retailers to act in a way that will maximize supply chain profit. D) influence retailers to act in a way minimize supply chain cost.
B
34) Operational improvements that reduce lot sizes can dampen the bullwhip effect by A) decreasing the uncertainty of demand during the lead time. B) decreasing the amount of fluctuation that can accumulate between any pair of stages of a supply chain. C) discouraging retailers from artificially inflating their orders in the case of a shortage. D) allocating the available supply based on past retailer sales. E) none of the above
B
45) As retailers decrease the level of safety inventory they carry, the distributor will have to A) decrease his or her safety inventory. B) increase his or her safety inventory. C) keep his or her safety inventory at the same level. D) increase his or her cycle inventory.
B
47) Sellers and buyers in a supply chain often collaborate. Which of the following is not listed as a common activity of collaboration? A) Demand and supply management B) Shared engineering C) Analysis D) Execution
B
48) Ordering costs would include which of the following? A) Cost from theft B) Transportation cost C) Security cost D) Damage cost
B
49) In this approach to managing capacity, a firm subcontracts peak production so that internal production remains level and can be done cheaply. A) Time flexibility from workforce B) Use of subcontracting C) Use of dual facilities-specialized and flexible D) Use of seasonal workforce
B
1) Cycle inventory exists because producing or purchasing in large lots allows a stage of the supply chain to A) exploit economies of scale and raise cost. B) exploit economies of scale and lower cost. C) exploit customers and lower cost. D) exploit customers and raise cost. E) none of the above
B
10) The coefficient of variation measures A) the accuracy of the demand forecast. B) the size of the uncertainty relative to demand. C) the relevance of cycle inventory to demand. D) the relative certainty of the forecast.
B
11) With supply and demand management decisions being made independently, A) it is increasingly difficult to coordinate the supply chain, thereby increasing profit. B) it is increasingly difficult to coordinate the supply chain, thereby decreasing profit. C) it is easier to coordinate the supply chain, thereby decreasing profit. D) it is easier to coordinate the supply chain, thereby increasing profit. E) none of the above
B
14) The sales typically measured by a manufacturer are A) the quantity sold to final customers (sell through). B) the quantity sold to distributors or retailers (sell in). C) the quantity reported by the salesperson. D) all of the above E) none of the above
B
15) Situations where demand information is distorted as it moves between different stages of the supply chain, leading to increased variability in orders within the supply chain are referred to as A) incentive obstacles. B) information processing obstacles. C) operational obstacles. D) pricing obstacles. E) behavioral obstacles.
B
15) The capacity management approach that uses a temporary workforce during the peak season to increase capacity to match demand is A) time flexibility from workforce. B) the use of seasonal workforce. C) the use of subcontracting. D) the use of dual facilities-dedicated and flexible. E) designing product flexibility into the production processes.
B
19) When a firm places orders in lot sizes that are much larger than the lot sizes in which demand arises, A) variability of orders is minimized up the supply chain. B) variability of orders is magnified up the supply chain. C) suppliers gain better visibility of consumer demand. D) suppliers gain a more stable demand pattern. E) none of the above
B
19) Which approach to capacity management may be hard to sustain if the labor market is tight? A) Time flexibility from workforce B) Use of seasonal workforce C) Use of subcontracting D) Use of dual facilities-dedicated and flexible E) Designing product flexibility into the production processes
B
2) Safety inventory is carried because A) demand forecasts are accurate. B) demand forecasts are uncertain. C) adequate supplies are available. D) excess product was manufactured.
B
21) A key to reducing lot size without increasing costs is to A) reduce the holding cost associated with each lot. B) reduce the fixed cost associated with each lot. C) reduce the material cost associated with each lot. D) reduce the manufacturing cost associated with each lot. E) increase the holding cost associated with each lot.
B
22) A price discount where the pricing schedule offers discounts based on the quantity ordered in a single lot is A) customer based. B) lot size based. C) supplier based. D) volume based.
B
26) The required safety inventory A) grows rapidly with a decrease in the desired product availability. B) grows rapidly with an increase in the desired product availability. C) decreases with an increase in the desired product availability. D) remains stable with an increase in the desired product availability.
B
26) Which of the following managerial actions in the supply chain will not increase total supply chain profits and moderate the bullwhip effect? A) Aligning of goals and incentives B) Increasing information inaccuracy C) Improving operational performance D) Designing pricing strategies to stabilize orders E) Building partnerships and trust
B
30) Often, safety inventory calculations in practice A) do not include any measure of supply uncertainty, resulting in levels that may be higher than required. B) do not include any measure of supply uncertainty, resulting in levels that may be lower than required. C) include measures of supply uncertainty, resulting in levels that may be higher than required. D) include any measures of supply uncertainty, resulting in levels that may be lower than required.
B
30) Supply chains can influence demand by using A) production capacity and inventory. B) pricing and other promotions. C) price promotions and inventory. D) production capacity and inventory promotions. E) production capacity and other promotions.
B
31) Aggregation reduces the standard deviation of demand A) only if demand across the regions being aggregated is perfectly positively correlated. B) only if demand across the regions being aggregated is not perfectly positively correlated. C) even if demand across the regions being aggregated is not perfectly positively correlated. D) whenever demand across the regions being aggregated is not perfectly positively correlated.
B
34) When planning, the goal of all firms in the supply chain should be to maximize supply chain profits because A) this leaves them less profit to divide among themselves. B) this leaves them more profit to divide among themselves. C) this outcome leaves them more profit to pay tax on. D) this outcome will increase their charitable giving. E) none of the above
B
35) One key to successful collaboration when the supply chain is performing aggregate planning is A) determining how losses will be allocated to different members of the supply chain. B) determining how profits will be allocated to different members of the supply chain. C) determining how labor will be allocated to different members of the supply chain. D) determining how customers will be allocated to different members of the supply chain. E) none of the above
B
35) Which approach to aggregation would stock the fast moving items at decentralized locations close to the customer and slow moving items at a centralized location? A) Information centralization B) Specialization C) Product substitution D) Component commonality
B
4) The issue of product availability and the level of safety inventory is particularly significant in industries where A) product life cycles are short and demand is stable. B) product life cycles are short and demand is very volatile. C) product life cycles are long and demand is stable. D) product life cycles are long and demand is very volatile.
B
40) When developing estimates for holding and ordering costs, it is important to A) estimate these costs to a high level of precision. B) get a good approximation quickly. C) develop estimates that will not be changed. D) both A and C
B
42) Which cost estimates the rate at which the value of the product being stored drops either because the market value of that product drops or because the product quality deteriorates? A) Cost of capital B) Obsolescence (spoilage) cost C) Handling cost D) Occupancy cost
B
43) The impact of the lack of coordination on supply chain processes decreases for the following measure A) manufacturing cost. B) level of product availability. C) transportation cost. D) replenishment lead time.
B
44) There are 5 major obstacles listed in the text to coordination in a supply chain. Which of the following is NOT one of these major obstacles? A) Incentive obstacles B) Quality obstacles C) Pricing obstacles D) Behavioral obstacles
B
44) ________ variability is change in demand that can be forecasted. A) Capacity B) Predictable C) Inventory D) Backlog
B
48) A fundamental aspect of successful collaboration is A) sharing product designs. B) identification and resolution of exceptions. C) no stock outs. D) complete information sharing.
B
48) The ________ is the average units of demand that are not satisfied from inventory in stock per replenishment cycle. A) ROP B) ESC C) EOQ D) CSL
B
5) The advantage of maintaining enough manufacturing capacity to meet demand in any period is A) very low inventory costs because inventory needs to be carried from period to period. B) very low inventory costs because no inventory needs to be carried from period to period. C) very high inventory costs because no inventory needs to be carried from period to period. D) very high inventory costs because expensive capacity would go unused during most months when demand was lower. E) none of the above
B
51) Which of the following is not a key factor influencing the timing of a product promotion? A) Cost of holding inventory B) Customer perceptions C) Cost of changing the level of capacity D) Product margins
B
53) Trade promotions lead to a significant ________ in lot size and cycle inventory because of forward buying by the ________. A) decrease, retailer B) increase, retailer C) decrease, supplier D) increase, supplier
B
6) Average flow time resulting from cycle inventory is equal to A) Cycle Inventory/Demand = Q/2. B) Cycle Inventory/Demand = Q/2D. C) Cycle Inventory = Q/2. D) Cycle Inventory = Lot Size = Q.
B
8) As the uncertainty of supply or demand grows, the required level of safety inventories A) decreases. B) increases. C) remains stable. D) both A and B
B
8) The disadvantage of building up inventory during the off season to meet demand during peak seasons and keep production stable year round is A) very low inventory costs because no inventory needs to be carried from period to period. B) very high inventory costs because inventory needs to be carried from period to period. C) in the fact that a firm could get by with a smaller, less expensive factory. D) in the fact that a firm could get by with a larger, more expensive factory. E) None of the above are true.
B
9) The bullwhip effect A) positively impacts performance at every stage. B) hurts the relationships between different stages of the supply chain. C) enhances the relationships between different stages of the supply chain. D) none of the above E) both A and C
B
9) The primary role of cycle inventory is to allow different stages in the supply chain to A) purchase product in lot sizes that maximize the sum of the material, ordering, and holding cost. B) purchase product in lot sizes that minimize the sum of the material, ordering, and holding cost. C) sell product in lot sizes that maximize the sum of the material, ordering, and holding cost. D) sell product in lot sizes that minimize the sum of the material, ordering, and holding cost.
B
20) A key to reducing cycle inventory is A) the reduction of holding cost. B) the reduction of manufacturing cost. C) the reduction of lot size. D) the reduction of warehouse space.
C
21) The expected shortage per replenishment cycle (ESC) is A) the units of demand that are not satisfied from inventory in stock in a given replenishment cycle. B) the units of demand that are satisfied from inventory in stock in a given replenishment cycle. C) the average units of demand that are not satisfied from inventory in stock per replenishment cycle. D) the average units of demand that are satisfied from inventory in stock per replenishment cycle.
C
29) When most of the products a firm produces have the same peak demand season, in order to meet predictable variability with inventory, it must A) use common components across multiple products. B) use a seasonal workforce. C) build inventory of high demand or predictable demand products. D) use subcontracting. E) use dual facilities-dedicated and flexible.
C
29) Which of the following is not an approach to reduce the level of safety inventory required in a way that does not adversely affect product availability? A) Reduce the supplier lead time. B) Reduce the underlying uncertainty of demand. C) Reduce the cost of material coming from suppliers. D) All of the above are approaches.
C
40) When identifying operational roles and decision rights for different parties in a supply chain relationship, managers must A) divide the tasks in a way that makes one party more dependent on the other. B) divide the tasks in a way that neither party is dependent on the other. C) consider the resulting interdependence between the parties. D) all of the above E) B and C only
C
52) A(n) ________ occurs when a retailer purchases in the promotional period for sales in future periods. A) Backward buy B) Pricing incentive C) Forward buy D) Inventory shift
C
7) The advantage of building up inventory during the off season to meet demand during peak seasons and keep production stable year round is A) very low inventory costs because no inventory needs to be carried from period to period. B) much of the expensive capacity would go unused during most months when demand was lower. C) in the fact that a firm could get by with a smaller, less expensive factory. D) in the fact that a firm could get by with a larger, more expensive factory. E) None of the above are true.
C
1) Inventory carried for the purpose of satisfying demand that exceeds the amount forecasted for a given period is A) cycle inventory. B) demand inventory. C) safety inventory. D) security inventory.
C
12) The fraction of orders that are filled from available inventory is the A) customer fill rate. B) product fill rate. C) order fill rate. D) cycle service level (CSL).
C
13) Improperly structured sales force incentives A) help create stable demand. B) have very little effect on the timing of customer orders. C) tend to create spikes in customer orders. D) ensure that orders are quickly and accurately entered and communicated to other affected supply chain processes. E) none of the above
C
13) The cost of carrying one unit in inventory for a specified period of time, usually one year, is referred to as A) the material cost and is denoted by C. B) the fixed ordering cost and is denoted by S. C) the holding cost and is denoted by H. D) the purchase price and is denoted by P.
C
15) If a customer order arrives when product is not available A) a sale results. B) the retailer allocates product to the customer. C) a stockout results. D) the order is filled from safety inventory.
C
15) Which of the following would not be included in holding cost? A) Cost of capital B) Cost of physically storing the inventory C) Cost of manufacturing D) Cost that results from the product becoming obsolete
C
16) The capacity management approach where a firm purchases peak production from another firm so that internal production remains level and can be done cheaply is A) time flexibility from workforce. B) the use of seasonal workforce. C) the use of subcontracting. D) the use of dual facilities-dedicated and flexible. E) designing product flexibility into the production processes.
C
16) The fact that each stage in a supply chain forecasts demand based on the stream of orders received from the downstream stage results in A) forecasts based on actual consumer demand patterns. B) a reduction in demand as we move up the supply chain from the retailer to the manufacturer. C) a magnification of fluctuations in demand as we move up the supply chain from the retailer to the manufacturer. D) an increase in forecast accuracy. E) none of the above
C
18) Actions taken in the course of placing and filling orders that lead to an increase in variability are referred to as A) incentive obstacles. B) information processing obstacles. C) operational obstacles. D) pricing obstacles. E) behavioral obstacles.
C
19) Aggregating across products, retailers, or suppliers in a single order allows for a reduction in lot size for individual products because A) fixed ordering and transportation costs are now charged to retailers. B) fixed ordering and transportation costs are now charged to suppliers. C) fixed ordering and transportation costs are now spread across multiple products, retailers, or suppliers. D) holding costs are now charged to retailers or suppliers.
C
2) Which of the following is not a problem caused by products experiencing predictable variability of demand? A) High levels of stockouts during peak demand B) High levels of excess inventory during periods of low demand C) Increased responsiveness of the supply chain D) Increased costs in the supply chain E) Decreased responsiveness of the supply chain
C
22) Given a lot size of Q (which is also the average demand in a replenishment cycle) A) the fraction of demand lost is thus ESC + Q. B) the fraction of demand lost is thus ESC - Q. C) the fraction of demand lost is thus ESC/Q. D) the fraction of demand lost is thus ESC × Q.
C
24) As the safety inventory is increased A) fill rate increases and cycle service level decreases. B) fill rate decreases and cycle service level increases. C) both fill rate and cycle service level increase. D) both fill rate and cycle service level decrease.
C
24) The key to which capacity management approach would involve having both volume (fluctuating demand from a manufacturer) and variety flexibility (demand from several manufacturers) to be sustainable? A) Time flexibility from workforce B) Use of seasonal workforce C) Use of subcontracting D) Use of dual facilities-dedicated and flexible E) Designing product flexibility into the production processes
C
25) For the same safety inventory, an increase in lot size A) decreases the fill rate but not the cycle service level. B) increases the fill rate but not the cycle service level. C) decreases both the fill rate and the cycle service level. D) increases both the fill rate and the cycle service level.
C
25) In the pricing schedule for marginal unit quantity discounts A) the average cost of a unit decreases at a breakpoint. B) the average cost of a unit increases at a breakpoint. C) the marginal cost of a unit decreases at a breakpoint. D) the marginal cost of a unit increases at a breakpoint.
C
3) The average inventory in the supply chain due to either production or purchases in lot sizes that are larger than those demanded by the customer is A) annual inventory. B) distribution inventory. C) cycle inventory. D) physical inventory. E) B and C only
C
33) Which of the following is not a key goal (from the manufacturer's perspective) of a trade promotion? A) Induce retailers to use price discounts, displays, or advertising to spur sales. B) Shift inventory from the manufacturer to the retailer and the customer. C) Shift inventory from the retailer to the customer. D) Defend a brand against competition.
C
36) The use of one product to satisfy demand for a different product is A) information centralization. B) specialization. C) product substitution. D) component commonality.
C
36) When the retailer decides to pass through very little of the promotion to customers but purchase in greater quantity during the promotion period to exploit the temporary reduction in price, the result is A) a lowering of the price of the product for the end customer. B) increased purchases and thus increased sales for the entire supply chain. C) an increase in the amount of inventory held at the retailer. D) all of the above
C
38) The retailer can justify the forward buying when A) they have inadvertently built up a lot of excess inventory. B) the forward buy allows the manufacturer to smooth demand by shifting it from peak to lowdemand periods. C) it decreases his total cost. D) A and C only
C
39) Replenishment orders in multiechelon supply chains should be A) synchronized to increase cycle inventory and order costs. B) synchronized to facilitate supplier evaluation and selection. C) synchronized to keep cycle inventory and order costs low. D) separated to increase cycle inventory and order costs.
C
40) Offering a promotion during a peak period that has significant forward buying A) creates a desirable demand pattern. B) creates a demand pattern less costly to serve. C) creates a demand pattern even more costly to serve. D) shifts demand from the peak period to the slow period. E) shifts demand to a more desirable period.
C
40) Periodic review policies for inventory replenishment require safety inventory to cover demand during A) lead time only. B) the review interval only. C) both lead time and the review interval. D) neither lead time or the review interval.
C
41) The lack of supply chain coordination on various measures of performance has costs associated with it. Which of the following is one of these costs? A) Quality B) Reliability C) Manufacturing D) Pricing
C
42) Promoting during a peak demand month may decrease overall profitability if A) a small fraction of the demand increase results from a forward buy. B) any of the demand increase results from a forward buy. C) a significant fraction of the demand increase results from a forward buy. D) none of the above E) all of the above
C
43) All inventory between a given stage in the supply chain and the final customer is called the A) cycle inventory. B) demand inventory. C) echelon inventory. D) safety inventory.
C
43) Which cost should only include receiving and storage costs that vary with the quantity of product received? A) Cost of capital B) Obsolescence (spoilage) cost C) Handling cost D) Occupancy cost
C
45) Which of the following managerial actions does not necessarily increase total supply chain profits and moderate information distortion? A) Designing pricing strategies to stabilize orders B) Building strategic partnerships and trust C) Purchasing from the lowest cost supplier D) Improving information visibility and accuracy
C
45) Which of the following would not be a component of order cost? A) Buyer time B) Transportation cost C) Handling cost D) Receiving cost
C
47) Inventory holding cost does not include which of the following? A) Cost of capital B) Handling cost C) Ordering cost D) Occupancy cost
C
49) Inventory holding costs would include which of the following? A) Transportation cost B) Buyer time C) Obsolescence cost D) Receiving cost
C
5) A key to success at which company has been its ability to provide a high level of product availability to customers while carrying very low levels of safety inventory in its supply chain? A) Compaq B) HewlettPackard C) Dell D) PackardBell
C
5) The situation in which fluctuations in orders increase as they move up the supply chain from retailers to wholesalers to manufacturers to suppliers is known as A) market fluctuations. B) the whiplash effect. C) the bullwhip effect. D) lack of visibility. E) none of the above
C
5) When demand is steady, cycle inventory and lot size are related as A) Cycle Inventory = Lot Size × 2. B) Cycle Inventory = Q*2. C) Cycle Inventory = Q/2. D) Cycle Inventory = Lot Size = Q. E) none of the above
C
50) A(n) ________ in supply uncertainty can help ________ safety inventory required without hurting product availability. A) reduction, increase B) increase, reduce C) reduction, reduce D) reduction, cancel
C
50) In this approach to managing capacity, a firm has flexible production lines whose production rate can easily be varied. A) Time flexibility from workforce B) Use of subcontracting C) Designing product flexibility into the production processes D) Use of seasonal workforce
C
51) ________ is the ability of a supply chain to delay product differentiation or customization until closer to the time the product is sold. A) Specialization B) Centralization C) Postponement D) Aggregation
C
52) When a promotion is offered during a period, that period's demand tends to go up. This increase in demand results from a combination of three factors. Which of the following is not one of these three factors? A) Forward buying B) Stealing share C) Backward buying D) Market growth
C
52) Which of the following is not a suggested method for estimating and managing safety inventory in practice? A) Adjust inventory policies if demand is seasonal B) Monitor service levels C) Focus on increasing safety inventories D) Use simulation to test inventory policies
C
55) Which factor favors promotion during peak demand periods? A) High margin B) Low ability to steal market share C) High ability to increase overall market D) Low margin
C
8) The lack of coordination within a supply chain will result in an increase in A) profitability. B) inventory accuracy. C) replenishment lead time. D) level of product availability. E) transportation cost.
C
26) A reduction of lot sizes increases the amount of fluctuation that can accumulate between any pair of stages of a supply chain, thus increasing the bullwhip effect.
FALSE
17) A replenishment policy A) consists of decisions regarding when to reorder and how much to reorder. B) determines the cycle and safety inventories along with the fr and the CSL. C) may take several forms. D) All of the above are true.
D
17) The capacity management approach where a firm builds facilities to produce a relatively stable output of products over time in a very efficient manner and facilities to produce a widely varying volume and variety of products, but at a higher unit cost is A) time flexibility from workforce. B) the use of seasonal workforce. C) the use of subcontracting. D) the use of dual facilities-dedicated and flexible. E) designing product flexibility into the production processes.
D
31) Different stages of the supply chain must forecast and plan jointly if complete coordination is to be achieved, because A) just the sharing of POS data does not guarantee coordination. B) the manufacturer must be aware of the retailer's promotion plans to achieve coordination. C) successful coordination requires that the entire supply chain is operating to a common forecast. D) all of the above E) A and B only
D
37) Which of the following is not a reason cooperation and trust within the supply chain help improve performance? A) A more natural aligning of incentives and objectives is achieved. B) Action-oriented managerial levers to achieve coordination become easier to implement. C) An increase in supply chain productivity results, either by elimination of duplicated effort or by allocating effort to the appropriate stage. D) Appropriate pricing schemes are harder to achieve if both parties are aiming for the common good. E) A greater sharing of detailed sales and production information results.
D
8) Which of the following is not a cost that must be considered in any lot sizing decision? A) Average price per unit purchased, $C/unit B) Fixed ordering cost incurred per lot, $S/lot C) Holding cost incurred per unit per year, $H/unit/year = hC D) Manufacturing cost per unit, $M/unit
D
14) The fraction of replenishment cycles that end with all the customer demand being met is the A) customer fill rate. B) product fill rate. C) order fill rate. D) cycle service level (CSL).
D
14) Which of the following would not be an example of a fixed ordering cost? A) Administrative cost incurred to place an order B) Trucking cost incurred to transport an order C) Labor cost incurred to receive an order D) Labor cost incurred to manufacture a part
D
18) Aggregating across products, retailers, or suppliers in a single order allows for A) an increase in lot size for individual products. B) an increase in customer demand. C) a reduction in holding cost per unit. D) a reduction in lot size for individual products. E) a reduction in purchase price per unit.
D
19) A company that checks inventory status at regular periodic intervals and places an order to raise the inventory level to a specified threshold is using A) continuous review. B) daily review. C) occasional review. D) periodic review.
D
2) The quantity of inventory that a stage of the supply chain either produces or purchases at a given time is A) an order. B) a job. C) a shipment. D) a lot or batch. E) none of the above
D
20) Rationing schemes that allocate limited production in proportion to the orders placed by retailers A) result in a game in which retailers try to increase the size of their orders to increase the amount supplied to them. B) lead to a magnification of the bullwhip effect. C) lead to the manufacturer being left with a surplus of product and capacity. D) all of the above E) B and C only
D
21) Situations in which the pricing policies for a product lead to an increase in variability of orders placed are referred to as A) incentive obstacles. B) information processing obstacles. C) operational obstacles. D) pricing obstacles. E) behavioral obstacles.
D
23) A price discount where the discount is based on the total quantity purchased over a given period, regardless of the number of lots purchased over that period is A) customer based. B) lot size based. C) supplier based. D) volume based.
D
23) Forward buying results in A) a stabilized buying pattern. B) small orders during the promotion period followed by very small orders after that. C) small orders during the promotion period followed by large orders after that. D) large orders during the promotion period followed by very small orders after that. E) none of the above
D
27) For commodity products where price is set by the market, manufacturers can use lot size based quantity discounts to A) achieve coordination in the supply chain and increase supply chain cost. B) relax coordination in the supply chain and increase supply chain cost. C) relax coordination in the supply chain and decrease supply chain cost. D) achieve coordination in the supply chain and decrease supply chain cost.
D
27) The required safety inventory A) increases with an increase in the lead time and the standard deviation of periodic demand. B) decreases with an increase in the lead time and the standard deviation of periodic demand. C) remains stable with an increase in the lead time and the standard deviation of periodic demand. D) increases with a decrease in the lead time and the standard deviation of periodic demand.
D
28) A goal of any supply chain manager is to A) increase the level of safety inventory required in a way that does not adversely affect product availability. B) increase the level of safety inventory required regardless of the effect on product availability. C) reduce the level of safety inventory required regardless of the effect on product availability. D) reduce the level of safety inventory required in a way that does not adversely affect product availability.
D
29) Which of the following is not an approach to achieve coordination by improving the accuracy of information available to different stages in the supply chain? A) Sharing point of sales (POS) data B) Implementing collaborative forecasting and planning C) Designing single stage control of replenishment D) Pricing for coordination E) none of the above
D
30) Sharing point of sales (POS) data across the supply chain can help reduce the bullwhip effect because A) each stage of the supply chain uses orders from the previous stage to forecast future demand. B) all supply chain stages can forecast future demand based on final customer demand. C) all stages can respond to the same change in customer demand. D) all of the above E) B and C only
D
30) The practice where a firm charges differential prices to maximize profits is A) lot pricing. B) marginal pricing. C) price incrimination. D) price discrimination.
D
32) The promotion and pricing decisions made by marketing and sales typically have the objective of A) maximizing profitability. B) minimizing profitability. C) minimizing revenue. D) maximizing revenue. E) maximizing profitability across the supply chain.
D
33) Which of the following is not a method by which a supply chain can extract the benefits of aggregation without having to physically centralize all inventories in one location? A) Information centralization B) Specialization C) Product substitution D) Component differentiation
D
34) Which of the following is a possible response that a retailer could make to a trade promotion? A) Pass through some or all of the promotion to customers to spur sales. B) Pass through very little of the promotion to customers but purchase in greater quantity during the promotion period to exploit the temporary reduction in price. C) Shift inventory from the retailer to the customer. D) A and B only
D
35) When the retailer decides to pass through some or all of the promotion to customers to spur sales, the result is A) a lowering of the price of the product for the end customer. B) increased purchases and thus increased sales for the entire supply chain. C) an increase in the amount of inventory held at the retailer. D) A and B only
D
36) Pricing strategies that dampen the bullwhip effect include A) offering volume-based quantity discounts instead of lot-based quantity discounts. B) elimination of promotions that encourage forward buying by retailers. C) promotion dollars paid to the retailer based on the amount of sell through rather than the amount purchased by the retailer. D) all of the above E) A and B only
D
37) The manufacturer can justify offering trade promotions resulting in forward buying by retailers when A) they have inadvertently built up a lot of excess inventory. B) the forward buy allows the manufacturer to smooth demand by shifting it from peak to lowdemand periods. C) the retailer decreases his total cost. D) A and B only
D
38) Customers moving up future purchases to the present is A) market growth. B) stealing share. C) forward selling. D) forward buying. E) none of the above
D
38) The ability of a supply chain to delay product differentiation or customization until closer to the time the product is sold is A) information centralization. B) specialization. C) product substitution. D) postponement.
D
39) Which approach to aggregation has the goal of moving product differentiation as close to the pull phase of the supply chain as possible? A) Information centralization B) Specialization C) Product substitution D) Postponement
D
39) Which of the following activities occur during the step in design of a supply chain partnership where the parties assess the value of the relationship? A) Clearly identifying the mutual benefit that the relationship provides B) Determining how the total profits will be divided between the parties C) Clarifying the contribution of each party D) all of the above E) B and C only
D
4) A graphical plot depicting the level of inventory over time is A) an inventory graph. B) a distribution inventory. C) an inventory drawing. D) an inventory profile. E) an inventory picture.
D
4) Seasonal demand can be met by A) maintaining enough manufacturing capacity to meet demand in any period. B) building up inventory during the off season to meet demand during peak seasons. C) offering a price promotion during periods of low demand to shift some of the demand into a slow period. D) all of the above E) A and B only
D
42) The lack of supply chain coordination on various measures of performance has costs associated with it. Which of the following is one of these costs? A) Inventory B) Reliability C) Transportation D) Quality
D
44) Which cost should reflect the incremental change in space cost due to changing cycle inventory? A) Cost of capital B) Obsolescence (spoilage) cost C) Handling cost D) Occupancy cost
D
46) A firm can vary supply of product by controlling A) revenue. B) pricing. C) demand. D) capacity.
D
48) In this approach to managing capacity, a firm uses a temporary workforce during the peak season to increase capacity to match demand. A) Time flexibility from workforce B) Use of subcontracting C) Use of dual facilities-specialized and flexible D) Use of seasonal workforce
D
50) Which of the following is not an input for Lot Sizing for a Single Product? A) Annual demand B) Cost per unit C) Fixed cost incurred per order D) Order size
D
51) ________ is the practice whereby a firm charges differential prices to maximize profits. A) Optimal lot sizing B) Fixed pricing C) Nonperishable pricing D) Price discrimination
D
6) The bullwhip effect causes A) a loss of supply chain coordination. B) distortion of demand information within the supply chain. C) different stages of the supply chain to have a very different estimate of what demand looks like. D) all of the above E) A and B only
D
6) What key question(s) need(s) to be considered when planning safety inventory for any supply chain? A) What is the appropriate lead time to establish? B) What is the appropriate level of safety inventory to carry? C) What actions can be taken to improve product availability while reducing safety inventory? D) B and C only
D
7) Cycle inventory is primarily held to A) take advantage of diseconomies of scale and increase cost within the supply chain. B) take advantage of diseconomies of scale and reduce cost within the supply chain. C) take advantage of economies of scale and increase cost within the supply chain. D) take advantage of economies of scale and reduce cost within the supply chain.
D
7) The appropriate level of safety inventory is determined by A) the uncertainty of both demand and supply. B) the desired level of product availability. C) the processes in a supply chain are divided into 2 categories depending on all of the above D) A and B only
D
7) The lack of coordination within a supply chain will result in a decrease in A) manufacturing cost. B) inventory cost. C) replenishment lead time. D) level of product availability. E) transportation cost.
D
Which factor favors promotion during low demand periods? A) High margin B) High ability to steal market share C) High ability to increase overall market D) Low margin
D
26) Which approach to capacity management would use production machinery that can be changed easily from producing one product to another? A) Time flexibility from workforce B) Use of seasonal workforce C) Use of subcontracting D) Use of dual facilities-dedicated and flexible E) Designing product flexibility into the production processes
E
1) Supply chain coordination A) improves if all stages of the chain take actions that together increase total supply chain profits. B) requires each stage of the supply chain to take into account the impact its actions have on other stages. C) cannot be achieved in real world applications. D) all of the above E) A and B only
E
13) Which of the following is not an approach that firms can use when managing capacity to meet predictable demand variability? A) Time flexibility from workforce B) Use of seasonal workforce C) Use of subcontracting D) Use of dual facilities-dedicated and flexible E) Using common components across multiple products
E
17) If demand increases by a factor of k, the optimal lot size increases by a factor of A) k. B) k/2. C) k + 2. D) ksquared. E) the square root of k.
E
17) The lack of information sharing between the retailer and manufacturer A) magnifies the bullwhip effect. B) minimizes the fluctuation in manufacturer orders. C) leads to a large fluctuation in manufacturer orders. D) all of the above E) A and C only
E
18) The capacity management approach where a firm has production lines whose production rate can easily be varied to match demand is A) time flexibility from workforce. B) the use of seasonal workforce. C) the use of subcontracting. D) the use of dual facilities-dedicated and flexible. E) designing product flexibility into the production processes.
E
2) A lack of coordination occurs either because A) different stages of the supply chain have objectives that conflict. B) the policies of most firms are contrary to cooperation. C) information moving between stages gets delayed and distorted. D) all of the above E) A and C only
E
22) Lot size based quantity discounts A) decrease the lot size of orders placed within the supply chain. B) increase the lot size of orders placed within the supply chain. C) magnify the bullwhip effect. D) A and C only E) B and C only
E
24) Problems in learning within organizations that contribute to the bullwhip effect are referred to as A) incentive obstacles. B) information processing obstacles. C) operational obstacles. D) pricing obstacles. E) behavioral obstacles.
E
25) Behavioral obstacles to supply chain coordination are often related to A) the communication between different stages. B) pricing and operational decisions. C) the way the supply chain is structured. D) all of the above E) A and C only
E
27) Aligning goals and incentives within the supply chain will A) improve coordination within the supply chain. B) encourage every participant in supply chain activities to maximize total supply chain profits. C) reduce demand uncertainty. D) all of the above E) A and B only
E
27) Which approach to capacity management would only be effective if the overall demand across all the products is relatively constant? A) Time flexibility from workforce B) Use of seasonal workforce C) Use of subcontracting D) Use of dual facilities-dedicated and flexible E) Designing product flexibility into the production processes
E
28) Which of the following is an approach that firms can use when managing inventory to meet predictable demand variability? A) Time flexibility from workforce B) Use of seasonal workforce C) Use of subcontracting D) Use of dual facilities-dedicated and flexible E) Using common components across multiple products
E
3) A firm can handle predictable variability by managing A) supply using capacity, inventory, trade promotions, and backlogs. B) supply using capacity, inventory, subcontracting, and backlogs. C) demand using short term price discounts and trade promotions. D) A and C only E) B and C only
E
3) Information is distorted as it moves within the supply chain because A) complete information is shared between stages. B) complete information is not shared between stages. C) firms try to be too accurate. D) all of the above E) B and C only
E
35) To diminish the bullwhip effect, managers can design rationing schemes that A) decrease the uncertainty of demand during the lead time. B) discourage retailers from artificially inflating their orders in the case of a shortage. C) allocate the available supply based on past retailer sales. D) all of the above E) B and C only
E
Which approach to capacity management would require that the workforce be multiskilled and easily adapt to being moved from line to line? A) Time flexibility from workforce B) Use of seasonal workforce C) Use of subcontracting D) Use of dual facilities-dedicated and flexible E) Designing product flexibility into the production processes
E
12) The use of a part-time workforce to increase the capacity flexibility by enabling the firm to have more people at work during peak periods is designing product flexibility into the production processes.
FALSE
1) Cycle inventory exists because producing or purchasing in large lots allows a stage of the supply chain to exploit economies of scale and increase cost.
FALSE
1) Predictable variability is change in demand that cannot be forecasted.
FALSE
10) A firm that uses flexible work hours from the workforce to manage capacity to better meet demand is using a seasonal workforce.
FALSE
10) The coefficient of variation measures the size of the relative certainty of cycle inventory.
FALSE
11) Incentives that focus only on the local impact of an action result in decisions that minimize total supply chain profits.
FALSE
11) The costs considered in lot sizing decisions include material cost, fixed ordering cost, and manufacturing cost.
FALSE
12) Order fill rate is the fraction of product demand that is satisfied from product in inventory.
FALSE
13) Measuring performance based on sell through is often justified on the grounds that the manufacturer's sales force does not control sell in.
FALSE
14) The distinction between product fill rate and order fill rate is significant in a single product situation.
FALSE
14) The use of dual facilities to manage capacity may be hard to sustain if the labor market is tight.
FALSE
14) Total ordering and holding costs are unstable around the economic order quantity.
FALSE
16) A firm that builds dedicated facilities to produce a relatively stable output of products over time in a very efficient manner and purchases peak production capability from other companies is using subcontracting.
FALSE
16) If demand increases by a factor of k, the optimal lot size decreases by a factor of k.
FALSE
16) Information processing obstacles refer to actions taken in the course of placing and filling orders that lead to an increase in variability.
FALSE
17) The expected shortage per replenishment cycle (ESC) is the average units of demand that are satisfied from inventory in stock per replenishment cycle.
FALSE
17) To reduce the optimal lot size by a factor of k, the fixed order cost S must be reduced by a factor of k.
FALSE
18) Lot size based quantity discounts reduce the bullwhip effect within the supply chain.
FALSE
19) Operations usually make the promotion and pricing decisions.
FALSE
19) The fill rate increases and the cycle service level decreases as the safety inventory is increased.
FALSE
2) Safety inventory is carried because demand forecasts are accurate and a product shortage may result if the forecast demand exceeds the actual demand.
FALSE
20) A key to reducing lot size without increasing costs is to reduce the holding cost associated with each lot.
FALSE
20) Behavioral obstacles are often related to the way the supply chain is structured and reduce the bullwhip effect.
FALSE
21) Pricing decisions based only on revenue considerations often result in an increase in overall profitability.
FALSE
21) The required safety inventory grows rapidly with a decrease in the desired product availability.
FALSE
22) Sharing of POS data helps reduce the bullwhip effect because it allows each stage of the supply chain to use orders from the previous stage to forecast future demand.
FALSE
22) When performing aggregate planning, the goal of all firms in the supply chain should be to maximize individual firm profits.
FALSE
23) A goal of any supply chain manager is to reduce the level of safety inventory required regardless of the affect product availability.
FALSE
24) In general, as the fraction of increased demand coming from forward buying grows, offering the promotion during the peak demand period becomes more attractive.
FALSE
24) Pricing schedules with all unit quantity discounts encourage retailers to increase the size of their lots, which reduces the average inventory and flow time in a supply chain.
FALSE
24) When a single stage controls replenishment decisions for the entire chain, the problem of multiple forecasts is magnified and coordination within the supply chain follows.
FALSE
25) A reduction in supply can help dramatically reduce safety inventory required without hurting product availability.
FALSE
27) In case demand in different geographical regions is about the same size and independent, aggregation increases safety inventory by the square root of the number of areas aggregated.
FALSE
28) As forward buying becomes a smaller fraction of the demand increase from a promotion, it is less profitable to promote during the peak period.
FALSE
28) Managers can encourage the bullwhip effect by devising pricing strategies that encourage retailers to order in smaller lots and reduce forward buying.
FALSE
28) The supply chain profit is higher if each stage of the supply chain independently makes its pricing decisions with the objective of maximizing its own profit.
FALSE
29) The lower the coefficient of variation of an item, the greater the reduction in safety inventories as a result of centralization.
FALSE
30) Discounts related to price discrimination will be lot size based.
FALSE
31) Postponement allows the supply chain to delay product differentiation, which results in disaggregating most of the inventories in the supply chain.
FALSE
31) Supply chain coordination improves if all stages of the chain take actions that are aligned and together decrease total supply chain surplus.
FALSE
32) The goal of trade promotions is to influence retailers to act in a way that helps the retailer achieve its objectives.
FALSE
33) When using a continuous review policy, a manager has to account for the uncertainty of demand during the lead time and the review interval.
FALSE
34) Cycle inventory is inventory carried to satisfy demand that exceeds the amount forecasted for a given period.
FALSE
4) The bullwhip effect enables different stages of the supply chain to have a consistent estimate of what demand looks like.
FALSE
5) Carrying excessive inventory can help counter demand volatility when new products come on the market.
FALSE
5) The advantage of building up inventory during the off season to keep production stable year round lies in the fact that a firm could get by with a smaller, more expensive factory.
FALSE
5) The bullwhip effect results in improved supply chain coordination.
FALSE
5) When demand is steady, cycle inventory and lot size are related as follows: Cycle Inventory = Lot Size × 2 = Q*2.
FALSE
6) Lot sizes and cycle inventory do not affect the flow time of material within the supply chain.
FALSE
6) The appropriate level of safety inventory is determined by the uncertainty of both demand and supply and the desired level of cycle inventory.
FALSE
6) The disadvantage of building up inventory during the off season to keep production stable year round is the expensive capacity that would go unused during most months when demand was lower.
FALSE
7) The bullwhip effect leads to increased trust between different stages of the supply chain and enhances any potential coordination efforts.
FALSE
8) As the desired level of product availability increases, the required level of safety inventory decreases.
FALSE
8) Cycle inventory is primarily held to take advantage of economies of scale and reduce profit within the supply chain.
FALSE
8) With supply and demand management decisions being made independently, it is easier to coordinate the supply chain, thereby increasing profit.
FALSE
9) The bullwhip effect reduces the profitability of a supply chain by making it simpler to provide a given level of product availability.
FALSE
based if the pricing schedule offers discounts based on the quantity ordered in a single lot.
FALSE
13) The optimal lot size is referred to as the economic order quantity (EOQ). It is denoted by Q * and is given by the equation: Q* = 2DS/hC.
TRUE
19) A key to reducing cycle inventory is the reduction of lot size.
TRUE
25) Marginal unit quantity discounts have also been referred to as multiblock tariffs.
TRUE
31) Price discrimination is the practice where a firm charges differential prices to maximize profits.
TRUE
1) Safety inventory is inventory carried for the purpose of satisfying demand that exceeds the amount forecasted for a given period.
TRUE
1) Supply chain coordination requires each stage of the supply chain to take into account the impact its actions have on other stages.
TRUE
10) Cycle inventory exists in a supply chain because different stages exploit economies of scale to lower total cost.
TRUE
10) Incentive obstacles refer to situations where incentives offered to different stages or participants in a supply chain lead to actions that increase variability and reduce total supply chain profits.
TRUE
11) Product availability reflects a firm's ability to fill a customer order out of available inventory.
TRUE
11) Scheduling the workforce so that the available capacity better matches demand is using time flexibility from the workforce.
TRUE
12) Improperly structured sales force incentives are a significant obstacle to coordination in the supply chain.
TRUE
12) The total annual cost is the sum of annual material cost, annual order cost, and annual holding cost, and is given as TC = CD + (D/Q)S + (Q/2)hC.
TRUE
13) A firm that uses a temporary workforce during the peak season to increase capacity to match demand is using a seasonal workforce.
TRUE
13) Product fill rate is the fraction of product demand that is satisfied from product in inventory.
TRUE
14) Information processing obstacles refer to situations where demand information is distorted as it moves between different stages of the supply chain, leading to increased variability in orders within the supply chain.
TRUE
15) A firm is often better served by ordering a convenient lot size close to the economic order quantity rather than the precise EOQ.
TRUE
15) A firm that purchases peak production capability from other companies so that internal production remains level and can be done cheaply is using subcontracting.
TRUE
15) The lack of information sharing between the retailer and manufacturer leads to a large fluctuation in manufacturer orders.
TRUE
15) Tracking order fill rates is important when customers place a high value on the entire order being filled simultaneously.
TRUE
16) With periodic review, inventory status is checked at regular intervals and an order is placed to raise the inventory level to a specified threshold.
TRUE
17) A firm that has production lines whose production rate can easily be varied to match demand has designed product flexibility into the production processes.
TRUE
17) Pricing obstacles refer to situations in which the pricing policies for a product lead to an increase in variability of orders placed.
TRUE
18) Aggregating across products, retailers, or suppliers in a single order allows for a reduction in lot size for individual products because fixed ordering and transportation costs are now spread across multiple products, retailers, or suppliers.
TRUE
18) Shortage occurs in a replenishment cycle only if the demand during the lead time exceeds the ROP.
TRUE
18) The use of a seasonal workforce requires that the workforce be multi-skilled and easily adapt to being moved from line to line.
TRUE
19) Trade promotions and other short term discounts offered by a manufacturer result in large orders during the promotion period followed by very small orders after that.
TRUE
2) A lack of coordination occurs either because different stages of the supply chain have objectives that conflict or because information moving between stages gets delayed and distorted.
TRUE
2) A lot or batch size is the quantity that a stage of the supply chain either produces or purchases at a given time.
TRUE
2) Faced with predictable variability of demand, a company's goal is to respond in a manner that maximizes profitability.
TRUE
20) For the same safety inventory, an increase in lot size increases the fill rate but not the cycle service level.
TRUE
20) Maximizing revenue is typically the objective when marketing and sales make the promotion and pricing decisions.
TRUE
21) Managers can improve coordination within the supply chain by aligning goals and incentives such that every participant in supply chain activities works to maximize total supply chain profits.
TRUE
21) Reduction of fixed cost may be achieved by aggregating lots across multiple products, customers, or suppliers.
TRUE
22) The required safety inventory increases with an increase in the lead time and the standard deviation of periodic demand.
TRUE
23) Determining how profits will be allocated to different members of the supply chain is a key to successful collaboration.
TRUE
23) Without collaborative planning, sharing of POS data does not guarantee coordination.
TRUE
24) In most supply chains, the key to reducing the underlying forecast uncertainty is to link all forecasts throughout the supply chain to customer demand data.
TRUE
25) A reduction in replenishment lead time helps dampen the bullwhip effect by reducing the underlying uncertainty of demand.
TRUE
25) Offering a promotion during a peak period that has significant forward buying creates even more variable demand than before the promotion.
TRUE
26) Aggregation reduces the standard deviation of demand only if demand across the regions being aggregated is not perfectly positively correlated.
TRUE
27) For commodity products where price is set by the market, manufacturers can use lot size based quantity discounts to achieve coordination in the supply chain and decrease supply chain cost.
TRUE
27) Promoting during a peak demand month may decrease overall profitability if a significant fraction of the demand increase results from a forward buy.
TRUE
27) Tying allocation to past sales removes any incentive a retailer may have to inflate orders, as a result dampening the bullwhip effect.
TRUE
28) If aggregation reduces the required safety inventory for a product by a small amount, it may be best to carry the product in multiple decentralized locations to reduce response time and transportation cost.
TRUE
29) As the product margin declines, promoting during the peak demand period becomes less profitable.
TRUE
29) Cooperation and trust within the supply chain help improve performance for a variety of reasons.
TRUE
29) For products where the firm has market power, two part tariffs can be used to achieve coordination in the supply chain and maximize supply chain profits.
TRUE
3) Cycle inventory is the physical inventory in the supply chain due to either production or purchases demanded by the customer.
TRUE
3) Information is distorted as it moves within the supply chain because complete information is not shared between stages.
TRUE
3) Raising the level of safety inventory increases product availability and thus the margin captured from customer purchases.
TRUE
3) The advantage of carrying enough manufacturing capacity to meet demand in any period is very low inventory costs, because no inventory needs to be carried from period to period.
TRUE
30) Manufacturer-driven substitution increases overall profitability for the manufacturer by allowing some aggregation of demand, which reduces the inventory requirements for the same level of availability.
TRUE
30) Supply chain coordination improves if all stages of the chain take actions that are aligned and together increase total supply chain surplus.
TRUE
30) When faced with seasonal demand, a firm should use a combination of pricing (to manage demand) and production and inventory (to manage supply) to improve profitability.
TRUE
32) Periodic review policies require more safety inventory than continuous review policies for the same level of product availability.
TRUE
32) With an uncoordinated supply chain each stage tries to maximize its own profits, resulting in actions that often diminish total supply chain profits.
TRUE
33) Although a forward buy is often the retailer's appropriate response and increases their own profits, it usually increases demand variability with a resulting increase in inventory and flow times within the supply chain.
TRUE
34) Trade promotions lead to a significant increase in lot size and cycle inventory because of forward buying by the retailer.
TRUE
35) A key to the success of any supply chain is to figure out ways to decrease the level of safety inventory carried without hurting the level of product availability.
TRUE
35) The fixed ordering cost includes all costs that do not vary with the size of the order but are incurred each time an order is placed.
TRUE
36) Given the product variety and high demand uncertainty in most high-tech supply chains, a significant fraction of the inventory carried is safety inventory.
TRUE
36) Holding cost is the cost of carrying one unit in inventory for a specified period of time, usually one year.
TRUE
4) Raising the level of safety inventory increases inventory holding costs.
TRUE
4) The disadvantage of carrying enough manufacturing capacity to meet demand in any period is that much of the expensive capacity would go unused during most months when demand was lower.
TRUE
4) The inventory profile is a plot depicting the level of inventory over time.
TRUE
6) The bullwhip effect negatively impacts performance at every stage and thus hurts the relationships between different stages of the supply chain.
TRUE
7) An approach where a firm works with their retail partners in the supply chain to offer a price promotion during periods of low demand would shift some of the demand into a slow period, thereby spreading demand more evenly throughout the year and reducing the seasonal surge.
TRUE
7) As the uncertainty of supply or demand grows, the required level of safety inventories increases.
TRUE
7) Average flow time resulting from cycle inventory = Cycle Inventory/Demand = Q/2D.
TRUE
8) The bullwhip effect moves a supply chain away from the efficient frontier by increasing cost and decreasing responsiveness.
TRUE
9) A firm can vary supply of product by controlling production capacity and inventory.
TRUE
9) Increasing the lot size or cycle inventory often decreases the cost incurred by different stages of a supply chain.
TRUE
9) Lead time is the gap between when an order is placed and when it is received.
TRUE
based if the discount is based on the total quantity purchased over a given period, regardless of the number of lots purchased over that period.
TRUE
41) Average inventory A) increases if a promotion is run during the peak period. B) increases if a promotion is run during the offpeak period. C) decreases if a promotion is run during the peak period. D) decreases if a promotion is run during the offpeak period. E) both A and D
b