MQM Final Exam

Which of the following statements is incorrect? a. The supply chain is the set of entities and relationships that cumulatively define materials and information flows both downstream (toward the customer) and upstream (toward the suppliers). b. A large company will have one large supply chain. c. A distribution channel is a specific route from a producer forward through the various nodes to the end customer. d. Physical supply is the flow of materials from upstream suppliers into your facility.

b. A large company will have one large supply chain.

Regarding the bullwhip effect, which of the following statements is incorrect? a. There is variability in the orders received by each entity from period to period. b. As one moves farther and farther back from the end user, the lesser the variability in the orders. c. Suppliers may have to forecast demand (as compared to being shown end user market demand). d. When the forecast does not match demand, organizations have either too much or too little inventory. e. If products cannot be produced until purchased parts are received, a company may be forced to hold extra inventory (if more orders) or halt supplier parts until existing inventory goes down (if less orders).

b. As one moves farther and farther back from the end user, the lesser the variability in the orders.

Which of the following statements is incorrect? a. The service system illustrates the number of different pathways that the service system can take. b. Customer-routed services pertain to services resulting in a highly standardized experience. c. Co-routed services pertain to services in which some customer choice is available using moderately standardized processes. d. Provider-routed services pertain to highly standardized services that allow few options during service delivery with customers whose needs are very similar to one another.

b. Customer-routed services pertain to services resulting in a highly standardized experience.

Which of the following statements is not a typical shortcoming of vertical integration? a. Greater management challenges b. Excessive expertise c. Over-reliance on internal supplier d. Potential lost supplier sales to competitors

b. Excessive expertise

Which of the following statements is incorrect? a. WIP inventory uncouples the various stages of manufacturing. b. FGI uncouples a manufacturer from its suppliers. c. A primary reason for carrying inventory is to protect against uncertainties. d. A primary reason for carrying inventory is to cover anticipated changes in demand or supply.

b. FGI uncouples a manufacturer from its suppliers.

Which of the following statements is incorrect? a. The service economy accounts for more than 80% of jobs in the U.S. and in most industrialized economies in Europe and Asia today. b. Ownership of a product is transferred at the time of purchase whereas ownership of a service is generally not transferred. c. A product cannot be demonstrated before purchase while a service will exist before purchase. d. A service involves simultaneous production & consumption

c. A product cannot be demonstrated before purchase while a service will exist before purchase.

Which of the following statements is incorrect? a. Storage costs include variable space cost, insurance, and taxes b. Independent demand is influenced by market conditions outside the firm. c. Dependent demand is independent of demand for any other inventory items. d. Finished goods inventory usually have independent demand.

c. Dependent demand is independent of demand for any other inventory items.

Which of the following statements is incorrect? a. In the SCOR model, the Plan process refers to processes that transform materials into a finished product. b. In the SCOR model, the Deliverprocess is the set of activities involved in order entry, materials handling, and transporting of goods and services to meet demand. c. In the SCOR model, the Returnprocess is the set of activities for handling returns of goods. d. A key logistics decision would be the choice of transportation (i.e., mode of transportation).

In the SCOR model, the Plan process refers to processes that transform materials into a finished product.

Which of the following statements is incorrect? a. A Management Requirements System represents a pushsystem while a JIT system represents a pullsystem. b. In an MRP system, a master schedule is created that represents future forecasts/orders and that determines which components and parts are to be ordered and pushedthrough production. c. Materials in a JIT system are pulledthrough production by subsequent (using) work centers only when these work centers need the parts. d. The master schedule specifies the end items (or output) to be produced in an MRP system.

a. A Management Requirements System represents a pushsystem while a JIT system represents a pullsystem.

Which of the following statements is not considered a supply chain structural improvement? a. Buying more of the supply chain - buying customers' operations is backward integration, buying a suppliers' operations is forward integration b. Pursuing major process simplification c. Changing the configuration of factories, warehouses, and/or retail locations d. Pursuing major product redesign e. Working with third-party logistics providers

a. Buying more of the supply chain - buying customers' operations is backward integration, buying a suppliers' operations is forward integration

Which of the following statements is incorrect? a. Capacity is a form of the final product at some point in the transformation process. b. The primary purpose of inventories is to uncouple the various phases of operations and the supply chain. c. Raw materials inventory uncouples a manufacturer from its suppliers. d. Raw materials inventory allows a supplier to produce parts at a convenient time within its own schedule and the manufacturer can later use those materials at the appropriate time for its transformation process.

a. Capacity is a form of the final product at some point in the transformation process.

Which of the following statements is incorrect? a. Conformance to product specifications/drawings is a common delivery metric. b. The time it takes to increase or decrease output by a specified amount is a common flexibility metric. c. The time it takes to change the mix of products or services delivered is a common flexibility metric. d. The time it takes to get paid by the customer is a common cost metric. e. The unit cost is the total manufacturing cost divided by the number of units produced.

a. Conformance to product specifications/drawings is a common delivery metric.

Which of the following statements is incorrect? a. Finished-goods inventory is a function of the Logistics' lead time in shipping the product to the supplier. b. Finished-goods inventory is a function of the producer's lead time in refilling inventory. c. Finished-goods inventory is a function of the customer's variance in demand. d. The bullwhip effect describes the increasing variability in orders that occur as an end customer order moves upstreamthrough the supply chain.

a. Finished-goods inventory is a function of the Logistics' lead time in shipping the product to the supplier.

Which of the following statements is incorrect? a. In the SCOR model, the Make process refers to the set of activities involved in procuring materials and services to meet planned or actual demand. b. In the SCOR model, the Planprocess refers to the development of a strategy for balancing demand and supply while meeting the requirements of sourcing, production, and delivery. c. Purchasing is usually the primary contact with the supplier (to ensure that conflicting communications do not occur). d. Regarding the Logistic function, the movement of goods is ideally is oriented downstream toward the customer.

a. In the SCOR model, the Make process refers to the set of activities involved in procuring materials and services to meet planned or actual demand.

Which of the following statements is incorrect? a. MRP software "explodes" the shop-floor control module in order to create purchase orders for raw materials and shop orders for scheduling the factory. b. The process of parts explosion from the master schedule requires a detailed bill of materials that lists each of the parts needed to create any particular end item in the master schedule. c. A Type I MRP system is a minimal inventory control system that releases manufacturing and purchase orders to support the master schedule. d. A Type II MRP system includes all the elements of a Type I system as well as the capacity planning and shop-floor control modules.

a. MRP software "explodes" the shop-floor control module in order to create purchase orders for raw materials and shop orders for scheduling the factory.

Which of the following statements is incorrect? a. Output is the rate at which stock is replenished. b. Demand is the rate at which stock is depleted. c. Inventory acts as a buffer between the supply rate and the demand rate. d. Inventories in the supply chain serve the same purpose as inventories in the factory - to buffer the difference in flows between supply and demand.

a. Output is the rate at which stock is replenished.

Which of the following statements is incorrect? a. Physical distribution is the flow of materials from your facility through upstream nodes toward the end customers. b. Supply chain management is the design and management of seamless, value-added processes across organizational boundaries to meet the real needs of the end customer. c. SCM must be tightly integrated by having processes that are designed and systematically managed to allow information to flow within and across organizational boundaries. d. Good SCM is intended to reduce uncertainty across the entire supply chain.

a. Physical distribution is the flow of materials from your facility through upstream nodes toward the end customers.

Which of the following statements is incorrect? a. Safety stocks of raw materials inventories are maintained to allow for unexpected breakdowns, unreliable worker performance, and schedule changes. b. The item cost of inventory is the cost of buying or producing the individual inventory item. c. The ordering or setup cost is incurred when ordering a lot (batch) of items and generally does not depend on the lot size ordered. d. The ordering cost includes creating the purchase order, expediting the order (if necessary), transportation costs, receiving costs, inspection costs, and so on

a. Safety stocks of raw materials inventories are maintained to allow for unexpected breakdowns, unreliable worker performance, and schedule changes.

Which of the following statements is incorrect? a. Service recovery refers to the connection process when something goes wrong during the delivery. b. The service recovery must be swift and appropriate in the customer's eyes. c. Components of service guarantee involve a process of what service will be delivered as well as the payout and service recovery specifics if the promise is not fulfilled. d. Outsourcing refers to having an organization outside your own firm perform service activities. e. Offshoring refers to exporting service activities to other countries.

a. Service recovery refers to the connection process when something goes wrong during the delivery.

Which of the following items pertaining to common types of supply chain metrics is incorrect? a. Serviceability b. Quality c. Flexibility d. Cost

a. Serviceability

Which of the following statements is incorrect? a. The master schedule is driven by actual not forecasted customer demand. b. The master schedule contains the part numbers associated with finished goods inventory. c. The future demands for WIP and raw materials inventories are derived by the MRP system from the master schedule. d. Essentially all inventories have part numbers.

a. The master schedule is driven by actual not forecasted customer demand.

Which of the following statements is incorrect? a. The smaller the lot size, the relatively longer the interval between ordering. b. In a continuous review system, we are able to closely monitor inventory levels and place purchase/work orders at the almost exact time when the order needs to be made. c. In a periodic review system, we are unable to monitor inventory continuously so we check inventory levels at fixed intervals. d. When a periodic review is performed, the order quantity is set to cover demand until the next period review plus the delivery lead time. e. A supplier-managed inventory program is an approach that passes the responsibility for managing inventory stocks to suppliers.

a. The smaller the lot size, the relatively longer the interval between ordering.

Which of the following statements is incorrect? a. With a service, the customer is not in the production system while production takes place. b. In a service business, the customer may introduce uncertainty in the process by placing unexpected demands on the service provider at the time of production (or service delivery). c. While some demands are anticipated in a service business, the variability of these demands impacts the overall delivery process. d. Front office service processes require the presence of or interaction with the customer. e. The processes used to deliver services include the ambience of the service environment.

a. With a service, the customer is not in the production system while production takes place.

Which of the following statements is incorrect? a. If you have an operation that routinely uses more inventory that expected or massive amounts of "untagged" materials, periodic review systems are often used. b. Generally, as the service level approaches 10%, very large inventories are required. c. Inventory turnover is the annual cost of goods sold divided by the average inventory level. d. Inventory turnover indicates the number of times (during the year) the inventory in stock is completely renewed (symbolically not actually). e. In supplier-managed inventory programs, the supplier is given access to the customer's demand forecast and inventory information. The supplier is then contractually tasked with maintaining the correct inventory levels to meet the customer's needs.

b. Generally, as the service level approaches 10%, very large inventories are required

Which of the following statements is incorrect? a. Gross requirements is the total parts needed including what is already in inventory as well as what needs to be produced. b. Gross requirements is the total parts needed after deducting material already in inventory. c. Planned order releases reflect when the order will be released in order to meet the delivery schedule. d. If the actual lead times can be managed to meet the planned lead times, there will be no unnecessary inventory accumulations or wasted time waiting for materials in the shop. Consequently, the orders for delivery of finished goods will be shipped on time

b. Gross requirements is the total parts needed after deducting material already in inventory.

Which of the following statements is incorrect? a. In choosing a lot size, there is a trade-off between ordering frequency and inventory level. b. Large lots will lead to frequent reorders but a low average inventory level. c. If larger lots are ordered, the ordering frequency will decrease but more inventory will be carried. d. Purchased products are theoretically ordered so that they are received just as the in-house inventory reaches zero. e. Supplier-managed inventory programs help to eliminate the redundant FGI safety stock of the supplier and the raw material safety stock of the customer

b. Large lots will lead to frequent reorders but a low average inventory level.

Which of the following statements is incorrect? a. The Purchasing function buys goods and services from other organizations. b. Purchasing "inputs" range from intangible products to services. c. A key logistics decision would be the type of packaging and material handling. d. A key logistics decision would be the location and management of storage points.

b. Purchasing "inputs" range from intangible products to services.

Which of the following statements is incorrect? a. Dependent demand items have demand that is related to another item and is not independently determined by the market. b. Raw materials and work-in-process goods are independent on the demand for the final product. c. Since independent demand is subject to market forces, it often exhibits both a fixed pattern and random influences stemming from customer preferences. d. Dependent demand exhibits a lumpy on-again, off-again pattern because production is scheduled in lots.

b. Raw materials and work-in-process goods are independent on the demand for the final product.

Which of the following statements is incorrect? a. Customers may serve as labor at key points in the self-service process. b. Request variability refers to the uncertainty in when customers will arrive to consume a service. c. Effort variability refers to the willingness of customers to perform appropriate actions. d. With low-contact services, it is possible to separate a service into two segments: a service creation portion and a service consumption/delivery portion. e. In low-contact services, the customer can be removed from the service creation portion thus allowing for greater standardization of processes and better efficiency.

b. Request variability refers to the uncertainty in when customers will arrive to consume a service.

Which of the following statements is incorrect? a. A primary reason for carrying inventory is to provide for transit from the one location to the next. b. Safety capacity is inventory that is maintained to protect against these uncertainties. c. Safety stocks of finished goods are maintained to absorb changes in demand so that production can maintain a separate, more even pace. d. Safety stocks of raw materials are maintained to absorb uncertainties in acquiring purchased materials from suppliers in terms of both the quantity and the time of delivery.

b. Safety capacity is inventory that is maintained to protect against these uncertainties.

Which of the following statements is not a supply chain infrastructure improvement? a. Partnerships with suppliers and/or customers (long-term, mutually beneficial relationships) b. Setup time reduction (shortens supply chain lead times as larger lots and faster changeovers are possible) c. Integrated information systems (transparent sharing of relevant supply chain information) d. Cross-docking

b. Setup time reduction (shortens supply chain lead times as larger lots and faster changeovers are possible)

Which of the following statements is incorrect? a. Supplier chain management involves the integration of purchasing, quality, operations, marketing, and logistics. b. To purchase a product or service, Purchasing needs specifications/drawings that implicitly describe the "input" to be acquired. c. With mostsuppliers, a purchase agreement is agreed upon and a subsequent purchase order is created. d. The Logistics function is typically responsible for the actual movement and storage of goods across organizations in a supply chain.

b. To purchase a product or service, Purchasing needs specifications/drawings that implicitly describe the "input" to be acquired.

Which of the following statements is incorrect? a. Low-contact services occur when face-to-face interaction is not required. b. With low-contact services, customers are involved with the service creation. c. With high-contact services, the service delivery system must react to variable customer requests. d. Fixed constraints such as a limited posted menu helps minimize this variability in the service delivery system introduced by customer requests. e. Welcoming customer customization may prove to be a competitive advantage but may also incur a higher cost of service delivery.

b. With low-contact services, customers are involved with the service creation.

Which of the following statements is incorrect? a. In an MRP system, materials are ordered only when a need exists as directed by the bill of materials. b. If there are no manufacturing requirements for a particular part, it will not be replenished in an MRP system even though the inventory level is low. c. In MRP systems, past demand for components parts is irrelevant. The system only cares about what is now needed (based on master schedule). d. A materials plan is the plan for materials to be produced including component parts.

c. In MRP systems, past demand for components parts is irrelevant. The system only cares about what is now needed (based on master schedule).

Which of the following items is not an element of an MRP system? a. Master Scheduling b. Bill of Materials c. Inventory Planning d. Capacity Planning e. Purchasing f. Shop-Floor Control

c. Inventory Planning

Which of the following statements is incorrect? a. The setup cost (if being made internally) includes creating the work order, expediting the order through the factory (if necessary), material handling costs, paperwork processing costs, inspection costs, and so on. b. The carrying or holding cost is associated with keeping items in inventory for a period of time. c. Stock cost reflects the economic consequences of running out of stock. d. When items are carried in inventory, the capital invested in them is not available for other purposes.

c. Stock cost reflects the economic consequences of running out of stock.

Which of the following statements is incorrect? a. The shop-floor control system helps management adjust to all the day-to-day things that go wrong in a factory: absenteeism among workers, machine breakdowns, loss of materials, and so on. b. Traditionally, inventory accuracy has been ensured by an annual physical inventory count in which the plant is shut down for a day or two and everything is counted. c. Synthetic counting has been developed as a substitute for the annual physical inventory. d. With cycle counting, a small percentage of the items are counted each day by storeroom personnel. e. Cycle counting is so reliable that many auditors (e.g., CPAs) no longer require an annual physical inventory.

c. Synthetic counting has been developed as a substitute for the annual physical inventory.

Which of the following statements is incorrect? a. Back office service processes do not require customer presence/interaction. b. Elements of a service-product bundle include the explicit or actual service, the intangible or psychological benefits of the service (implicit service), and the physical goods. c. The service delivery system is synonymous with the design of the service. d. The processes used to deliver services include details such as technology used. e. The processes used to deliver services include the appearance of the employees.

c. The service delivery system is synonymous with the design of the service.

Which of the following statements is incorrect? a. Unless safety stocks are added for uncertainties or inventories are added to smooth out production levels, no inventory will be planned except WIP and raw materials inventory required for assembly or fabrication. b. By controlling the master schedule, management can control customer service, inventory levels, and manufacturing costs. c. WIP inventory is a buffer between the master schedule and final customer demand, smoothing out workloads and providing faster customer service. d. The bill of materials is a structured list of all the materials or parts needed to produce a particular finished product, assembly, sub-assembly, manufactured part, or purchased part.

c. WIP inventory is a buffer between the master schedule and final customer demand, smoothing out workloads and providing faster customer service.

Which of the following statements is incorrect? a. A common delivery metric is the percent of orders delivered complete and on the date requested by the customer. b. A common delivery metric is the percent of orders filled completely from inventory. c. A common delivery metric is the time it takes from taking an order to its delivery to customer. d. A common delivery metric is the performance of the product or service based on customer perceptions.

d. A common delivery metric is the performance of the product or service based on customer perceptions.

Which of the following statements is incorrect? a. Each company in a supply chain can determine its own performance measures as long as it does not sub-optimize the overall performance of the supply chain. b. The level of raw-materials inventory is a function of the suppliers' lead times and the safety stock needed to handle variance in lead times and demand. c. Supply chain structure is frequently long-range in nature and require considerable capital. d. Supply chain resistance is the ability to quickly respond to unexpected disruptions in supply or demand that can be either natural or manmade

d. Supply chain resistance is the ability to quickly respond to unexpected disruptions in supply or demand that can be either natural or manmade

Which of the following statements is incorrect? a. A typical inventory record contains the part number (a unique identifier), the lead time, standard cost, and other relevant information. b. The purpose of capacity planning is to aid management in checking on the validity of the master schedule. c. Finite capacity scheduling establishes a production schedule while factoring in relevant limitations of resources. d. The purpose of the BOM is to release orders to the shop floor and manage the orders on their way through the factory to ensure that they are completed on time. e. An ERP system is a souped-up MRP system that controls not only materials purchasing, manufacturing, inventory, and capacity management; it integrates the information subsystems within the firm including accounting systems, sales and marketing systems, human resource systems, and financial systems.

d. The purpose of the BOM is to release orders to the shop floor and manage the orders on their way through the factory to ensure that they are completed on time.

Which of the following statements is incorrect? a. The BOM serves the same function as a cooking recipe - it lists all the ingredients. b. If there are errors in the BOM, the proper materials will not be ordered and the final product cannot be produced. c. BOMs are constantly undergoing change as products are redesigned. d. Product designs are often modified (sometimes daily, weekly, and/or monthly). e. An express resource planning system is a companywide resource planning system used to plan and control all resources including inventory, capacity, cash, personnel, facilities, and capital.

e. An express resource planning system is a companywide resource planning system used to plan and control all resources including inventory, capacity, cash, personnel, facilities, and capital.

Which of the following statements is incorrect? a. Using the Pareto concept, some firms adopt an A-B-C classification of inventory items to ensure that the highest dollar volume inventories are watched more closely than the lowest dollar volume inventories. b. Class A inventory items typically contains about 20% of the items and 80% of the dollar value. c. Class C inventory items contains about 50% of the items and only 5% of the dollar value. d. Class B inventory items contain inventory of moderate importance (between A and C). e. Class C inventory levels are closely monitored, class A is loosely monitored, and class B is somewhere between.

e. Class C inventory levels are closely monitored, class A is loosely monitored, and class B is somewhere between.

Which of the following statements regarding global sourcing concerns is incorrect? a. Potential product quality issues b. Potential safety issues c. Potential human rights violation issues d. Potential environmental issues e. Shorter delivery lead time

e. Shorter delivery lead time