Supply chain management Exam 2

why is building the right relationships with the right supplier a complex and difficult task

-You must select and manage suppliers for every SKU your firm purchases. -you source from hundreds, if not thousands, of suppliers. -You buy the same SKU from multiple suppliers in multiple geographies. -Your company may believe that you get the best price by pitting suppliers against each other in a bidding process that undermines value co-creation.

which of the following is a relationship goal of a transactional relationship?

-assure availability -minimize costs

trust is built by which of the following

-being empathetic -developing interpersonal relationships

Honda's BP program includes which of the following

-best position -best price -best product -best performance

in its relationship with Gordon Foods, Bob Evans did which of the following

-consolidated to a single source -gave the drivers access to the restaurants at night for delivery when no one else was there

which of the following is true regarding the pressure to make the numbers

-drives opportunism -creates social dilemma -is driven by short-term operating and financial mindsets -hinders value co-creation

"People"are what part of the process?

-inputs -resources

To make or buy decision analysis tells us

-it is not that important to the company's success to outsource items that are not strategic to our success -before outsourcing a strategic item, we should seriously consider our own ability to successfully make that tiem

When it comes to negotiations, it is important to know that:

-knowledge is power -contracts are always very complex and time consuming

under which circumstances do you need to search for a new supplier

-new product or service intro -new suppliers have entered the market -your current employer overpromised and is underperforming -testing the market

The lean principle of an organized workplace is directly supported by which of the following?

-poka-yokes -stanard work

Defining clear key selection criteria help you to collect consistent and comparable data. Which of the following criteria are important to consider and compare?

-price -reach/scalability -management strength -cultural fit

Potential supplier contributions from ESI include

-providing feedback on feasibility of materials and processes -suggesting alternatives -improve costs -improve lead time

which of the following is true regarding strategic suppliers?

-represents 5-10% of you supply relationships -account for a disproportionate amount of spend -account for almost all value co-creation opportunities -are partners in profit

Which of the following are lenses for strategic cost management

-strategic positioning analysis -value chain analysis -cost driver analysis

reasons for early supplier involvement is

-to utilize the supplier's innovative idea -because the most cost and functionality is determined during design

when considering outsourcing, you should evaluate which of the following factors?

-whether the item is strategically important to you -how good you are at making the item versus how good suppliers are at making it -the total cost of ownership of the item compared to the cost to make the item internally

as part of supplier integration

-you share information on your plans with the supplier -you communicate seamlessly

Which of the following occurs as the order placement cost (K) increases? (Assume that nothing else changes.)

The EOQ increases

In the context of DRP, what is the minimum planning horizon?

The cumulative lead time of the critical path in a distribution system

For a given store, demand in Week 5 is 375, and on-hand inventory at the end of Week 4 is 450. If the manufacturing lead time for this particular item is two weeks, which of the following statements will be true?

The order release for Week 3 will be 0

In the context of the EOQ model, the term "sawtooth" refers to which of the following?

The pattern of inventory consumption and replenishment over time

What does the EOQ model help managers determine?

The size of an individual order

If the in-stock rate is 95%, which of the following is true?

There will be no stockout occurrences in 95 out of 100 order cycles

What are stockout costs?

They are difficult to estimate precisely

Which of the following emphasizes throughput accounting metrics?

Throughput, Inventory, Operating Expense

When should distribution requirements planning be used?

To determine total requirements in a distribution system

How do total landed costs differ from total cost of ownership

Total Costs of Ownership consider the net present value of money whereas total landed costs do not

which of the following is true about critical buys

You use a cross-functional category team

Honda follows Deming's PDCA model. Which of the following is a process step in that model

Act

manufacturing overhead is calculated as

a percent of labor

For a given store, demand in Week 4 is 45, and on-hand inventory at the end of Week 3 is 25. If the manufacturing lead time for this particular item is one week, then which of the following is true?

An order of 20 units will need to be placed in Week 3.

Which of the following is true if annual demand for a given product is 1,800 units, and the EOQ is 300 units?

An order will be placed every two months.

Which of the following is Step 1 of the three-step proven path to employing the Process Improvement Trio?

Apply The theory of constraints to identify where you will get the biggest bang for your buck

A poka-yoke is

a. A visual cue to avoid errors b. A system that helps you identify specific improvement opportunities c. Mistake proofing

Value stream mapping should include:

a. An accurate depiction of a process b. Quality performance statistics c. Total time in process d. The amount of time that value is added

Which of the following lean logistics practices has Coca-Cola implemented?

a. Expanded capacity of delivery trucks b. Cross docking c. Increased inventory capacity without adding floor space

Which of the following statements about inventory are true?

a. Inventory is a buffer b. Inventory helps you avoid dealing with problems c. Inventory may prevent you from understanding the true cause of problems d. Customers want you to have adequate inventory readily available for their needs

Reverse Engineering

a. Is a common practice among manufacturers b. It involves buying a product, taking it apart to see how it is made. c. Involves an understanding of which suppliers are making key parts d. Helps you to better negotiate with suppliers

The first step in the 5S process is important because

a. It allows you to understand the resources available for the job b. It allows you to free up space by eliminating things that are not used on the job

Which of the following are value-added processes?

a. New product development b. Engineering change orders c. Scheduling production d. Managing freight shipments

Inventory holding costs include which of the following?

a. Physical warehousing charges b. Financial carrying charges

Which of the following do Total Landed Costs and Total Costs of Ownership both consider?

a. Price b. Transportation c. Documentation

given an increase in manufacturing labor

a. Price will potentially increase b. Factory cost will increase c. Manufacturing overhead will increase d. SGA will increase

The 5S process helps support:

a. Standard work b. A multi-functional workforce c. Minimized set-ups d. Continuous improvement

which of the following are true regarding cost driver

a. They are activities or decisions that create costs. b. They can be just about anything and vary across industry. c. Understanding cost drivers helps you make better decisions. d. Can help you reduce costs tactically and strategically.

Why do you need to put process mapping into your decision-making toolkit?

a. To give everyone a better understanding of the process b. To ask questions c. To share ideas that help solve problems d. To get better solution

Why do you perform Target Costing?

a. To manage the costs of a product over its entire life cycle. b. To determine how to make sure a product can achieve a positive net present value. c. To change the cost equation if a product is not profitable. d. To sell product at a profit.

The benefits of a cross-functional workforce include which of the following?

a.Substitution when a worker is out b. Improved understanding of more processes by the workforce c. A sense of achievement by the multi-skilled workers d. A broader knowledge base for participating in Kaizen events

What do inventory holding costs typically amount to?

about 15%-40% of the unit value per year

Which of the following information is needed to complete a DRP table? I. Store-level demand forecast II. Economic order quantities III. Current inventory levels IV. Lead time information

all four types of information are needed

critical items (on the strategic sourcing matrix) are:

also called strategic items

Supplier segmentation using the strategic sourcing matrix occurs during which step of the strategic sourcing process?

analyze

Bottleneck buys:

are difficult to manage because there are few options

Lean and quality go hand-in-hand. What does this mean?

b. Eliminating waste requires that you improve quality c. Quality is needed for lean to work properly, and lean process quickly reveal any quality problems

The core questions to be addressed as part of a Kaizen event are:

b. How can the process be improved? c. How will changes we make affect elated processes?

Once the process has been mapped, what might be part of your analysis?

b. Use tools like 5S and eight waste to identify improvement opportunities c. Look for wasted efforts and time

the producer price index is

benchmarking data for various commodities

Many factors influence the decision of whether to sole source or multiple source. Which of the following is not one of those factors?

buyer capabilities

What is the maximum output your process can consistently produce over a period of time under normal operating conditions.

capacity

which of the following is not one of the four reasons to include a multi-criteria analysis in you toolkit

comprehensiveness

A buyer can potentially achieve a price reduction in three primary ways. Which of the following does not represent one of those three?

continue with the status quo and existing supply base

a strategic alliance is most likely in which spend category?

critical

The notion of an optimal inventory level implies that

d. there is a right amount of inventory for every product.

The Maximum output rate that a process can achieve under ideal conditions is what?

design capacity

In the strategic profit model, inventory-related storage and handling costs are captured as

direct expenses

In process mapping, the following denotes arrival into the process.

double arrow

The output rate of a process during normal conditions is what?

effective capacity

An item that is purchased that has many suppliers available and is of low importance to your organization should have the following selection process characteristics . . .?

efficient

which is not a benefit of trust in a buyer/supplier relationship

emerges by chance in a relationship

There are many potential cost drivers. Which of the following should you exclude from your analysis?

emotion

which step in the process asks you to fill in your comparison matrix?

evaluate options

The eighth waste is:

excess processing

A good definition of lean is eliminating waste.

false

According to the square root law of cycle stocks, an increase in sales should result in an increase in inventory-to-sales ratios.

false

Honda and Toyota have been mapping processes for 50 years to understand how a process works so that they can fix problems as they arise.

false

If the order placement cost (K) decreases, the optimal order quantity will increase.

false

Supply base rationalization means reducing the overall (i.e., total) number of suppliers to the least amount needed to meet your demand.

false

The Toyota Production System was a copy of an older version of another Japanese car manufacturer production system.

false

There is a standard amount of inventory turns that is considered good, regardless of industry.

false

as an exploitable customer of routine buys you are confident in the supplier's pricing strategy

false

caveat emptor means let the seller beware

false

outsourcing just means that you are buying something instead of making it

false

what type of costs might still remain after you outsource an item

fixed overhead costs

a customer that is exploitable

has to pay premium pricing

In setting a target sales price there are a number of criteria to consider, which of the following is not one of those?

how much profit you want

value chain analysis can help you understand

how you can or should work with your supply chain partners

Which of the following is the most difficult—and most important—step in performing a total landed cost or total cost of ownership analysis?

identifying the relevant costs

_________ is a measure of how often inventories are depleted and replenished over the course of a given time period (e.g., year).

inventory turnover

which of the following is NOT true regarding with supplier development?

it focuses on price and profit for your organization

Every lean journey begins with:

keeping the customer in mind

A purchase where there are a large number of competitive suppliers and you buy a fairly large amount relative to the market would most likely be classified as:

leverage

You are responsible for buying an item that has many capable and competent suppliers available and your spend is quite large for your company. How would this item be classified on the strategic sourcing matrix?

leverage

strategic cost management's most important role is to help you

manage you firm's value-creation capabilities

During WWII, (blank) increased the emphasis on purchasing

materials shortages

which of the following is not one of the four steps in the supplier selection process

negotiation

What does the distribution requirements planning tool do?

none of the above

Which of the following is not a step in the strategic sourcing process?

plan

What are the five activities of the SCOR model?

plan, source, make, deliver, return

During which step of the strategic sourcing process do you actually purchase items you have contracted for?

procure

During execution of the target costing decision the primary objective is to . . .?

reduce costs

which step in the process helps you determine how important each criterion is

set weights

During which step of the strategic sourcing process would you identify potential suppliers

source

A relationship where you cultivate close working relationships to improve processes or develop innovative products is known as which of the following?

strategic alliance

During which era did outsourcing make purchasing strategic

strategic era

In process mapping, each symbol denotes the following:

that something has changed

which of the following is false about transactional suppliers?

they have sufficient resources to waste with good customers

Strategic positioning analysis is important

to understand which costs are important and relevant to your firm

According to the square root law of cycle stocks, as the throughput volume in a warehouse quadruples (all else equal), its average inventory levels will double.

true

Better inventory management can contribute to increased sales.

true

Purchasing savings can have a huge impact on the firm's profit leverage

true

The supply base rationalization process is a strategic review of your supply base and follows the supplier selection template.

true

To calculate results you multiply the score for each criterion by the associated weight and add up the results.

true

To collaborate effectively with alliance partners you have to share resources and be willing to accept inter-dependencies.

true

Uber's initial business model is a good application of lean thinking.

true

as a core customer you and a highly capable/desirable supplier are a good match

true

intent and behavior are the building blocks of trust-related capabilities

true

multi-criteria analysis is a tool that helps you compare "distinctly different" options

true

purchasing consortiums are a good way to aggregate buys and gain industry intelligence

true

selecting the right suppliers is your most important job?

true

which of the following characterizes how you should manage routine buys?

use P-cards and catalogs to outsource to the end user

Which of the following are two likely outcomes of building the wrong relationship with the right supplier?

wasted resources and lost opportunity

A sensitivity analysis allows you to perform a "What if . . ." analysis on a product or component cost. Which of the following is a typical "What if" scenario you should consider?

what if supplier quality decreases

Which one of the following is NOT a process design?

Bulk process

Which of the following is NOT one of the steps in price analysis?

Call your supplier and discuss changes in costs

Cost Modeling ... ?

Can be used by any functional areas to understand the costs of a product or process.

What does the square root law of cycle stocks suggest?

Cycle stocks increase as the square root of demand

which of the follow are a good match for strategic buys

Development and core

A value stream map should be created before the Kaizen event begins.

False

In any given time period, total usage at the DC level is equal to the sum of store-level demands.

False

Most companies possess pricing power

False

Value stream mapping is a very formal process that requires a great deal of training.

False

cost analysis is used to

Gain insight into individual cost elements that make up a product

TAKT time tells us:

How frequently a finished unit need to come off the line to meet our demand

The strategic profit model is useful to illustrate which of the following?

How inventory management affects overall firm profitability

Bottlenecks can usually be easily spotted. They are always busy, with no idle time. Work typically piles up in front of them. Subsequent activates are usually waiting on output from the bottleneck. This describes which of the five focusing steps of Theory of Constraints?

Identify

Which of the following are among the five steps of the lean journey?

Identify customer value, Map the value stream, Flow the processes

The square root law of cycle stocks is rooted in the recognition of what?

In the EOQ formula, demand (D) is under the square root

Often the price a supplier requests because of increases in individual cost elements:

Is higher than calculated based on the cost element change

the goal of price analysis is

Is to understand if you are managing well the prices you are paying in terms of market volatility.

Which of the following is true about the company New Balance?

It implemented lean in conjunction with keeping some manufacturing in the U.S.

Which of the Process Improvement Trio should be employed first?

Lean Six sigma Theory of Constraints

Compared to a larger warehouse, a smaller warehouse should have __________ inventory turns. (assume all else is equal.)

Lower

Which of the following is a critical step in using cost modeling to estimate a product or component cost?

Map the process used to product/procure the component

What is the difference between design capacity and effective capacity?

Maximum output rate that a process can achieve under ideal conditions vs. output rate of a process during normal conditions

In a given scenario, the EOQ is 60 and the associated total cost is G(Q)=$4,200. What will be the total cost if an order quantity of 40 (rather than the EOQ) is used?

More than $4,200

A manager of a major retailer finds that its best-selling diamond ring turns much slower than its best-selling yogurt. The manager concludes that the yogurt is managed more efficiently. Do you agree?

No, this is like comparing apples and oranges.

Which of the three processes involves carrying out the visions of the business?

Operational processes

Managers making decisions that help them achieve their short-term functional goals without taking into account other functions is called?

Silo mentality

The customer rules focuses on the idea that

Stay up to date with the customer's changing tastes and demand patterns

Which of the following are parts of the classifications of processes?

Strategic Processes b. Operational Processes c. Enabler Processes

when might a supplier legitimately determine you are NOT a customer of choice

-If suppliers' capacity is exceeded by market demand and you buy a relatively low volume but require delivery in frequent, small quantities. -if your service requirements are so high that you are causing the supplier to lose money. -if your negotiations are so fierce that the supplier makes unprofitable concessions.

Honda has seen excellent results from supplier development efforts, including which of the following?

-Improved quality -improved labor productivity -continuous improvements in process capabilities -upstream improvements for the supplier's supplier

Which of the following is something an organization might DO during the PDCA process

-Improved quality -improved labor productivity -continuous improvements in process capabilities -upstream improvements for the supplier's supplier

What does process mapping do for you?

-It helps you to confront the brutal facts -It makes the brutal facts visible -It helps you hold fact-based conversations -It helps you to conduct a blameless autopsy

which of the following statements is correct?

-TCO includes landed costs -you should use landed cost analysis for all purchase decisions

Given the following information, what is the sum of both duties and customs fees for one container? -Price paid to supplier: $630 per reel (500 foot of hose per reel) -4 reels of hose fit on each pallet -Pallets per container: 10 -Shipping costs: $4,600 per container to the Los Angeles Port -Duties: 5.3% the value of the container Customs Fees: 2.3% the value of the container -Rail transportation from LA port to Intermodal rail hub in St. Louis: $1150 (per container) -Transportation from Rail hub to your company's warehouse: $900 (per container) -Internal warehouse charges (receiving, stocking): $220 per pallet -Quality control (pressure testing, inspections): $110 per pallet Calculate the sum of both duty and customs fees for one container.

$1915.20

Leveraging purchases:

- A buyer's dream - your best opportunity to really save money

Which of the following expresses the relationships that are essential to calculating target cost?

- Target Profit = Target Price - Target Cost - Target Cost = Target Price - Target Profit

The Strategic sourcing matrix

- is used to segment purchases -is widely used in practice -considers the importance of the category and the complexity of the market to classify purchases

Which of the following is a "right" in the less formal definition of purchasing?

- obtaining the right material -in the right quantity -at the right time -for delivery to the right place

Which of the following are part of the Process-Improvement Trio?

- theory of constraints -six sigma -lean management

As demand for a given product increases nine fold from one year to the next, all else equal, cycle stocks for this particular product should grow by what factor?

3

A supplier sells a spare part for $99 per unit. The net profit and selling, general, and administrative expense are a total of 15% of the selling price. Direct material costs are 20% of the selling price. The ratio of direct material costs to direct labor costs is 1.25 (for every dollar of materials, it is 1.25 dollars in labor). How much manufacturing overhead is the supplier including in the selling price?

40%

If, in a given scenario, the EOQ is 100, then what will be the average amount of cycle stock?

50

The 5S process is:

A continuous improvement approach for getting organized and staying organized

What does the term "Kaizen" mean?

A short, focused, continuous improvement project that takes place on the production line.