1.A Ch 3. Supply Chain Management Strategy

What is a good way to brand the supply chain management function within an organization's overall revenue model? A. As a value-added service B. As a profit center C. As a cost center D. As a target for cost cutting

A. A supply chain doesn't directly produce revenues unless the sales channels are included in what is defined as the supply chain. In the past, a supply chain was perceived as a cost center. This mentality led to cost-cutting measures that often destroyed value. More modern supply chain revenue models treat a supply chain as a value-added service that earns the organization a share of the revenue it is producing. Module 1, Section A, Chapter 3, Topic 2

What tool can help a supply chain director visually show the value provided by the supply chain, including all of the process steps as well as the value-added and non-value-added time for each step? A. Value stream map B. Process flowchart C. Value stream D. Value chain

A. A value stream map is generated as part of value stream mapping, and it visually shows the flow of materials from supplier to customer that includes the current process and flow as well as the value-added and non-value-added time of all the process steps. It is used to reduce waste, decrease flow time, and make the process flow more efficient and effective. Module 1, Section A, Chapter 3, Topic 2

Which of the following illustrates an emphasis on the affordability aspect of customer value? A. Luxury boat priced lower than other luxury boats of similar size and features B. No-hassle, no-negotiation sales prices on new cars at a dealership C. Same-day delivery of goods via courier D. Cement-mixing tub of greater durability and flexibility than similar offerings

A. Affordability does not refer solely to discount goods but to goods that have a price at the lower end of an appropriate price level for the value received. Module 1, Section A, Chapter 3, Topic 2

Which supply chain strategy could provide the dual benefits of better sustainability and faster delivery to customers? A. Locating final assembly closer to key customers B. Using container ships that prioritize fuel savings C. Centralizing manufacturing at an air shipping hub D. Vertically integrating the supply chain

A. Choosing optimal plant locations can be a sustainable practice when the final products will be as near to the largest base of consumers as possible. Nearness to customers has the additional benefit of faster delivery. Module 1, Section A, Chapter 3, Topic 2

What is the biggest risk of signing a long-term supply contract to buy regular amounts of a sub-component to get a significant price reduction? A. The inventory of obsolete items could increase. B. The supplier could reduce quality but not price. C. The supplier could go out of business. D. The chance of efficiency improvements could decrease.

A. Different supply chain strategies will be needed as products are introduced, as they grow in demand, as they mature or plateau in demand, and as they decline in popularity and other products start taking their place. Locking into an agreement results in cost efficiency but inhibits flexibility. This may lead to an increase in obsolete items over time. Module 1, Section A, Chapter 3, Topic 3

If a company looks internally to determine how a supply chain process can be done less expensively and in less time and use fewer resources, it is: A. efficient. B. sustainable. C. effective. D. profitable.

A. If a company looks internally to determine how a supply chain process can be done less expensively and in less time and use fewer resources, it is efficient. Module 1, Section A, Chapter 3, Topic 2

How can a supply chain best demonstrate social value? A. By avoiding or reducing negative environmental effects B. By distributing all gains equally through the supply chain C. By producing quality products or services D. By cutting costs to yield net gains at the bottom line

A. One of the main ways that a supply chain can contribute to society and demonstrate social value is to avoid or reduce negative environmental side effects from extraction, processing, and construction. In the past several decades, there has been growing attention to the impact of business on the natural environment. This applies to supply chain activities all the way from extraction of raw materials through manufacturing processes, logistics, and distribution. The other options deliver value to customers or create financial value first and foremost. Module 1, Section A, Chapter 3, Topic 2

Other than competitive priorities, what does the organizational strategy feed to the supply chain strategy to ensure alignment? A. Future direction, such as new products B. Specific metrics to use C. Strategies for other functional areas, such as finance D. Capabilities, including gaps that need to be corrected

A. Organizational strategy drives the future direction and competitive priorities, which then help determine the appropriate strategies of the various functional areas like finance, marketing, other departments, and, of course, the supply chain. Module 1, Section A, Chapter 3, Topic 2

Reducing the time in which inventory is not moving by using Just-in-Time (JIT) delivery and lean manufacturing is an example of an effort aimed at: A. increasing velocity. B. eliminating product damage. C. increasing transportation costs. D. reducing the variability of products.

A. Reducing the time in which inventory is not moving by using JIT delivery and lean manufacturing is a method for increasing the velocity of transactions. The less time inventory spends at rest, the less likely it is to suffer damage or spoilage. Increased velocity reduces the expenses involved in warehousing inventory. Module 1, Section A, Chapter 3, Topic 1

Fatima Alano is the new CEO of a company, and she's known for the sustainability initiatives she spearheaded at her last company. Which of the following would she be most likely to focus on first? A. Triple bottom line B. Total revenue C. Profit margin D. Net profit

A. The term "triple bottom line," coined by author and sustainability expert John Elkington in 1994, refers to the concept that corporate success should be measured in three dimensions—economic, social, and environmental—reinforcing that it is not only the traditional bottom line of relative profitability that's important to organizational leaders. Module 1, Section A, Chapter 3, Topic 2

How can a company best introduce a brand-new product type that has no sales history and ensure its availability? A. It can send product directly from production to central distribution centers that ship only per actual customer orders. B. It can change its production schedules and stock inventory at all warehouses. C. It can design the new product for minimum supply chain flexibility to increase assembly efficiencies. D. It can relocate its production facilities to locations where high demand is forecasted.

A. Toyota Motor Corporation faced this issue when it brought out the Prius, its first hybrid car, which used a combination of gasoline-powered internal combustion energy and electricity. There was no demand history to use in forecasting sales and no data to use in setting its production schedules. So it focused on changing its logistics network so that the new cars were sent directly from production to central distribution centers for shipping to dealers only when actual customer orders had been submitted. Module 1, Section A, Chapter 3, Topic 3

When considering options for developing or buying enterprise resources planning (ERP) software, a firm should be most concerned to select software that provides which of the following benefits? A. Alignment between the firm's strategy and operations B. Least expensive retraining of management C. Most advanced available software technology D. Best-practices business model incorporated into the software

A. While all the answers identify legitimate considerations, the primary function of ERP is to align the firm's strategy and operations. ERP incorporating the most advanced technology or a best-practices business model inconsistent with the firm's strategy or operations may prove to be detrimental rather than beneficial, in part because it will certainly require extensive retraining. Module 1, Section A, Chapter 3, Topic 2

Understanding process inter-dependencies and responsibility for each sub-step and identifying bottlenecks will provide which supply chain ability? A. Ability to offer more variety than the customer requires B. Ability to streamline operations C. Ability to partner successfully with competitors D. Ability to eliminate supply chain risk

B. As supply chains evolve, their ability to streamline key operational processes and flows also increases. Each of the competencies listed in the question relate to the ability to successfully streamline operations. Module 1, Section A, Chapter 3, Topic 1

Which of the following statements is true about changing market conditions such as those in the fashion industry? A. Many companies offer a variety of products to appeal to the masses. B. Some companies manage this by starting their seasonal product design process early. C. Creating safety stock will help companies better deal with changing market conditions. D. Some companies focus on non-fluctuating product orders from their high-volume customers.

B. In the market for fashionable apparel, change is a given rather than a surprise. Every season can bring a shift in taste that makes all processes, designs, and materials outmoded. So fashion-conscious clothing companies have found ways to begin the seasonal design process early. By paying careful attention to trends on the street, they can get a head start in ordering materials and developing prototypes of designs that seem likely to appeal to their target customers in the upcoming season. They delay final design decisions and the start of manufacturing until real data come in. Module 1, Section A, Chapter 3, Topic 3

You are the supply chain manager, and, based on recent research, you are anticipating changes in the market. Which of the following would be most important to develop? A. Agility B. Innovation C. Flexibility D. Visibility

B. Innovation clearly plays a major role in keeping supply chains flexible enough to respond to rapid changes in demand and to the more gradual evolution of markets and technologies. Innovation is the key to strategic flexibility—not just innovation in product design but in organizational design and supply chain processes as well. Module 1, Section A, Chapter 3, Topic 3

Which is a key reason to take a hard look at organizational and supply chain strategy even if it is currently very profitable? A. Incremental improvement B. Disruptive technology C. Supply chain that emphasizes resilience at a cost D. Demand that continues to be on a steady upward trend

B. New, disruptive technologies can change the rules of the game and allow new competitors to quickly take market share from an organization if it doesn't recognize the implications of the technology quickly and also adopt it. Module 1, Section A, Chapter 3, Topic 3

You're the supply chain manager responsible for the overall performance of the chain. Which of the following is the most desirable? A. Increased variety, reduced variability, increased velocity B. Increased velocity, reduced variability, increased visibility C. Increased variety, reduced variability, increased volume D. Increased volume, reduced variability, increased visibility

B. No matter what the specific competitive priority of a supply chain is, the goal of supply chain management is to increase visibility and velocity while reducing variability. The success of supply chain management lies in continued pursuit of that goal. Module 1, Section A, Chapter 3, Topic 1

Which of the following does not describe product design for maximum supply chain flexibility? A. Complete product assembly as close to receipt of actual orders as possible. B. Create many product variations. C. Reengineer products to use the same components. D. Create an increased number of modular products with fewer components.

B. To design products for maximum supply chain flexibility; put suppliers on the design team to offer help in creating modular designs, allowing fewer components to be assembled into more products. Time the assembly to happen as close to actual orders as possible. Module 1, Section A, Chapter 3, Topic 3

If there are no sales data for a new type of car with an innovative technology to use to anticipate regional sales, which is the best method of satisfying demand? A. Delay production of units until firm orders come in. B. Ship most units to distribution centers instead of retail locations. C. Keep units at production facilities until firm orders for them come in. D. Use sales of the most similar product to allocate inventory to retail locations.

B. One reason to modify a supply chain strategy arises when a company comes to market in a new way. It may be entering uncharted territory with no real data to use in making decisions and little ability to forecast demand and set production schedules. A new product line may require complete recasting of the supply chain—new raw material supplier, new manufacturing processes, logistics changes to reach new markets, and new strategies for reaching the end customer. This may include using distribution centers to buffer against the risk of stockouts and to create the ability for differentiation closer to the consumer, based on actual orders instead of projections. Module 1, Section A, Chapter 3, Topic 3

A nucleus firm in the banking industry uses independent brokers to market new stock issues and has been successful in this channel. After investing some profits in the firm itself, they choose to reward their stockholders by distributing all remaining profits in a special dividend, even though independent brokers are prohibited from owning these shares. Which of the following has this firm forgotten to account for in its creation of financial value? A. Trade-offs must not be self-defeating. B. Gains must be fairly distributed among stakeholders. C. It takes money to make money. D. Independent brokers should be rewarded through social incentives and reminded that shareholders must come first.

B. Possibly the most common mistake in this regard is to send all the cost savings all the way to the consumers' end of the chain, which, in this case, is the stakeholders. And perhaps most challenging of all in a lateral supply chain is the need for productive sharing of any financial gains. A powerful nucleus firm can gather in the benefits of an alteration in the placement of inventory (or any other process change) at the expense of other stakeholders such as the independent brokers. Module 1, Section A, Chapter 3, Topic 2

You work in the supply chain as a finance manager, and your supervisor has told you that he wants you to become more familiar with spend management. This means that you will likely be spending more time: A. focused on the balance sheet. B. focused on outsourcing processes. C. identifying wasted resources. D. focused on identifying large retailers that pay manufacturers in cash.

B. Relative to financial performance, spend management is managing the purchase of goods and services in a supply chain, including outsourcing and procurement activities. It often deals with consolidating internal demand across business functions, divisions, or extended partners and/or consolidating suppliers to find areas for purchasing and transportation quantity rate discounts. Module 1, Section A, Chapter 3, Topic 2

Revenues, profit margin, market share, expenses, image, and reputation are values for which stakeholder group? A. Lenders B. Firms in the supply chain C. Investors D. End customers

B. Revenues, profit margin, market share, expenses, image, and reputation are values of supply chain firms. Module 1, Section A, Chapter 3, Topic 2

Supply chain efficiency can be risky if a firm: A. has good quality products. B. has eliminated stock buffers and relies on Just-in-Time (JIT) delivery. C. has excess capacity that is being used by another partner in the chain. D. operates with high visibility.

B. Supply chain efficiency can be a strength as well as a serious liability if a firm loses its flexibility from having removed all the buffer from inventories and having pared process times down to the JIT delivery velocity. A supply chain that has become so fast and so lean may just keep right on running in a given direction until it starves to death for lack of a market. This was nearly the fate of Cisco Systems in the early 21st century. Module 1, Section A, Chapter 3, Topic 3

Supply chain management works to reduce: A. demand variability. B. demand and supply variability. C. last-minute variations requested by the customer. D. cost variations between suppliers.

B. Supply chain management works to reduce variability in both demand and supply as much as possible. Module 1, Section A, Chapter 3, Topic 1

What group is the primary stakeholder in any business activity? A. Customers B. The business itself C. Communities and local governments D. Investors and lenders

B. The primary stakeholder in any business activity is the business itself. A business must be profitable to survive and create value for any other stakeholder group. Module 1, Section A, Chapter 3, Topic 2

The purpose of supply chains is to be globally competitive. What are the basic elements in a supply chain that can impact its ability to respond competitively to changes in the global marketplace? A. Time, innovation, collaboration B. Collaboration, time, distance C. Responsiveness, flexibility, financial strength D. Distance, innovation, agility

B. Time, distance, and collaboration are basic elements in modern supply chains that impact a supply chain's ability to respond to competitive changes in the global marketplace. The relationships of time, distance, and collaboration weave like three bright threads through the fabric of any supply chain on the globe. Module 1, Section A, Chapter 3, Topic 2

In response to increasing consumer economic and environmental concerns, auto industries have developed new products such as hybrids and electric-powered vehicles. This is an example of which of the Vs of supply chain management? A. Variability B. Variety C. Velocity D. Volume

B. Variety is the ability to alter the mix of products offered in response to changes in market demand. (It might also have been an increase in volume, but the strategy focuses on a new variety of products, not a new amount of existing products.) Module 1, Section A, Chapter 3, Topic 1

Which would be the fastest way for a fashion clothing company to get to market while also minimizing demand mismatch risks? A. Look at street trends and manufacture popular items before the runway season. B. Look at street trends and buy appropriate fabrics before the runway season. C. Go to runway shows and make very similar designs. D. Go to runway shows and make final design decisions.

B. Zara, Mango, and other fashion-conscious clothing companies and brands have found ways to begin the seasonal design process early. By paying careful attention to trends on the street, they can get a head start in ordering materials and developing prototypes of designs that seem likely to appeal to their target customers in the upcoming season. But they delay final design decisions and the start of manufacturing until real data come in. Module 1, Section A, Chapter 3, Topic 3

A partnership in a supply chain is a relationship that must be based on: A. shared risks, the rewards of achieving a competitive advantage, and increased revenues. B. each party's willingness to share information, risks, and increased revenues. C. trust, shared risks, and the rewards of achieving a competitive advantage. D. trust, maximizing market share, and decreased supply chain costs.

C. A partnership in a supply chain is a relationship that must be based on trust, shared risks, and the rewards of achieving a competitive advantage. Module 1, Section A, Chapter 3, Topic 2

Which of the following could be an example of ineffective cost cutting? A. Making a supply chain leaner while delivering the same customer satisfaction B. Reusing recycled components that come via the reverse supply chain C. Eliminating one or more storage facilities to save warehousing costs without reviewing the impact on transportation costs D. Reducing energy expenses by using biofuels instead of petroleum-based products

C. Cost cutting needs to aim for net gains in the bottom line. If the warehouse manager eliminates one or more storage facilities to save warehousing costs without consulting the traffic manager, it may actually result in changes in transportation costs that exceed the warehouse savings. Module 1, Section A, Chapter 3, Topic 2

A company is effective if it: A. demonstrates its vision and values via decisions made by top management. B. uses one or more quality philosophies and the related measurement tools. C. focuses on and meets its customers' needs and wants while still meeting its cost objectives. D. focuses on improving its operational processes and key performance indicators.

C. Effectiveness is being outward-focused—on the customers' needs and wants while still meeting the company's cost objectives. Module 1, Section A, Chapter 3, Topic 2

Which of the following is not a benefit of effective supply chain management? A. Increased visibility of flows B. Streamlined operations C. Reduced government regulations D. Reduced variability of flows

C. There are numerous benefits of supply chain management, but a reduction in government regulations is not one of them. The other items listed are benefits. Module 1, Section A, Chapter 3, Topic 1

A company wants to improve its customer service. Which of the following should it focus on to achieve that goal? A. Efficiency B. Effectiveness C. Sustainability D. Availability

D. Availability is the capacity to have inventory when it is wanted by a customer. Module 1, Section A, Chapter 3, Topic 2

An organization makes several adjustments to the supply chain to be more sustainable and use fewer natural resources from the area. The financial impacts of these changes are negligible. From a values perspective, which supply chain stakeholders would these changes best align with? A. Investors B. Lenders C. Companies in the supply chain D. Communities

D. Communities are likely to value these environmental changes the most, given that the changes do not have an appreciable financial impact (which aligns more closely with investors and lenders). If the changes result in a significant increase in image and reputation, other companies in the supply chain may also find that the changes align with their values. However, not all sustainable changes will result in an increase in image and reputation. Module 1, Section A, Chapter 3, Topic 2

How should organizations balance sustainability customer requirements against product cost? A. Promise local communities that the companies involved follow local laws. B. Convince consumers that sustainability efforts don't add to the product cost. C. Source ethically and maximize sustainable investment regardless of the cost. D. Limit sustainability costs to allow still meeting a price customers will pay.

D. For individual consumers and advocacy groups, sustainability is typically a matter of what is important to them and what they are willing to pay. Module 1, Section A, Chapter 3, Topic 2

The supply chain manager has recently been told that he must increase the supply chain value to the external stakeholders. Which stakeholders should he focus on, and what should be done? A. Local government; increase interest payments. B. Federal government; increase rate of capital growth. C. Suppliers; increase their profitability. D. Shareholders; increase dividend income.

D. Stakeholders external to the supply chain's business partners and end customers include public or private investors, lenders, and communities and governments. To investors and lenders, supply chain value may be defined as interest payments, capital growth, or dividend income and eventual return of invested capital. Module 1, Section A, Chapter 3, Topic 2

Which is the best supply chain for an organization that has some small expensive items and some bulky inexpensive items? A. Owned ground-based delivery fleet B. Third-party ground-based delivery fleet C. Third-party public shipping service with air and ground options they select D. Multiple supply chains

D. To achieve full truckload shipments, some companies will mix products. While that's a good strategy for speeding up delivery of some products in the mix, it may be highly inefficient for others. The high-dollar, lightweight items could be flown to their destination rather than staying in the truck, train, or container with larger, inexpensive items. One can customize suppliers to provide whatever each product line needs—speed to market, quality at a higher price, or ability to change rapidly. Module 1, Section A, Chapter 3, Topic 3

A value stream map is usually used in conjunction with which of the following improvement methods? A. Six sigma B. Job redesign C. Focus groups D. Lean

D. Value stream maps are paper-and-pencil sketches of the steps in a process overlaid with supporting information flows. They are used in lean projects to identify non-value-adding steps for elimination. (The first map shows all steps; a second map shows the process with all non-value-adding steps eliminated.) Module 1, Section A, Chapter 3, Topic 2

What are the proactive benefits of risk planning for an organization? A. Employees and supply chain partners are prepared. B. There is increased flexibility in the supply chain. C. Risk is shared among supply chain partners. D. All of the above

D. With a risk strategy and plan in place, supply chains improve their chance of keeping material, information, and payments flowing through the network even if a risk event occurs. Risk planning prepares employees and supply chain partners with valuable and actionable information based on substantiated risk data, it allows for risks to be shared among partners who are prepared to play their parts responsibly, and it keeps the supply chain flexible through contingency planning. Module 1, Section A, Chapter 3, Topic 1

If a major consumer electronics company wants to optimize its knowledge of its marketplace, it should do which of the following? A. Share distribution point information with its partners. B. Integrate its operations. C. Decrease its velocity of information flows. D. Hire more service representatives.

Supply chain partners can share information about distribution points (e.g., retailers, the internet, or self-serve kiosks) that includes customer values, purchasing habits, and preferences. This information can be valuable in understanding the values of customers in different channel segments. Module 1, Section A, Chapter 3, Topic 1

Which of the following is true of sustainable supply chain management? A. It increases regulatory pressures and government constraints favored by the public. B. It increases long-term costs associated with environmental cleanup. C. It dramatically increases customer sales due to an improved company reputation. D. It makes good business sense, because it is viewed favorably by market analysts.

Without forward-looking environmental and social policies and supply chain practices, an organization's reputation may suffer among investment analysts. Sustainable supply chain management adds important stakeholder value. Module 1, Section A, Chapter 3, Topic 2