SCMA Chapter 11
Which one of the following statements about purchasing is true? A) The cost of purchases as a percent of sales is often small. B) Purchasing provides a major opportunity for price increases. C) Purchasing is always more efficient than making an item. D) Purchasing has an impact on the quality of the goods and services sold. E) Competitive bidding is a major factor in long-term cost reductions.
D) Purchasing has an impact on the quality of the goods and services sold.
All of the following are "opportunities" for supply-chain management except A) postponement B) drop shipment C) blanket orders D) channel assembly E) line balancing
E) line balancing
Which of the following is not a concern of the supply chain? A) warehousing and inventory levels B) credit and cash transfers C) suppliers D) distributors and banks E) maintenance scheduling
E) maintenance scheduling
Consider a firm with a 2007 net income of $20 million, revenue of $60 million and cost of goods sold of $25 million. If the balance sheet amounts show $2 million of inventory and $500,000 of property, plant & equipment, what is the inventory turnover? A) 12.50 B) 10.00 C) 42.00 D) 4.16 E) 20.00
A) 12.50
Toyota's policy of having two suppliers per component after its experience with fire and earthquakes is similar to Hark Rock Café's franchising in societies that have significant cultural or environmental barriers because A) both companies are coping with environmental supply-chain risks B) both companies are coping with process supply-chain risks C) both companies are coping with control supply-chain risks D) both companies are addressing outsourcing E) None of the above accurately reflect the main similarity
A) both companies are coping with environmental supply-chain risks
The three major variations of online catalogs are A) catalogs by vendors, catalogs by intermediaries, and exchanges provided by buyers B) EDI, ERP, and ASN C) cost-based, market-based, and competitive bidding D) drop shipping, channel assembly, and postponement E) all auction-based
A) catalogs by vendors, catalogs by intermediaries, and exchanges provided by buyers
What type of negotiating strategy requires the supplier to open its books to the purchasers? A) cost-based price model B) market-based price model C) competitive bidding D) price-based model E) none of the above
A) cost-based price model
Local optimization is a supply-chain complication best described as A) optimizing one's local area without full knowledge of organizational needs B) obtaining very high production efficiency in a decentralized supply chain C) the prerequisite of global optimization D) the result of supply chains built on suppliers with compatible corporate cultures E) the opposite of the bullwhip effect
A) optimizing one's local area without full knowledge of organizational needs
Which of the following is an aspect of environmental risk in supply-chain management? A) political issues B) management metrics C) secure financial transactions D) raw material availability E) All of the above are environmental risks.
A) political issues
Keeping a product generic as long as possible before customizing is known as A) postponement B) keiretsu C) vendor-managed inventory D) forward integration E) backward integration
A) postponement
McDonald's Russian "food town" is to __________ risk as Hard Rock Café's franchising in diverse political and cultural environments to overcome barriers is to __________ risk. A) process, environmental B) control, environmental C) control, process D) process, control E) environmental, control
A) process, environmental
By which distribution system is 90 percent of U.S. coal shipped? A) railroads B) trucks C) waterways D) pipelines E) none of the above
A) railroads
An advantage of a joint venture over vertical integration is A) reduced risk B) reduced costs C) compromised competitive advantages D) globalization E) flexibility
A) reduced risk
The three stages of vendor selection, in order, are A) vendor evaluation, vendor development, and negotiations B) vendor development, vendor evaluation, and vendor acquisition C) introduction, growth, and maturity D) vendor evaluation, negotiations, and vendor development E) EDI, ERP, and ASN
A) vendor evaluation, vendor development, and negotiations
What is the average capacity utilization in the motor carrier (trucking) industry? A) 25% B) 50% C) 75% D) 95% E) 99%
B) 50%
Vertical integration appears particularly advantageous when the organization has A) a very specialized product B) a large market share C) a very common, undifferentiated product D) little experience operating an acquired vendor E) purchases that are a relatively small percent of sales
B) a large market share
A furniture maker has delivered a dining set directly to the end consumer rather than to the furniture store. The furniture maker is practicing A) postponement B) drop shipping C) channel assembly D) passing the buck E) float reduction
B) drop shipping
A rice mill in south Louisiana purchases the trucking firm that transports packaged rice to distributors. This is an example of A) horizontal integration B) forward integration C) backward integration D) current transformation E) keiretsu
B) forward integration
E-procurement A) works best in long-term contract situations, and is not suited for auctions B) is the same thing as Internet purchasing C) represents only the auction and bidding components of Internet purchasing D) is illegal in all states except Nevada and New Jersey E) All of the above are true of e-procurement.
B) is the same thing as Internet purchasing
Japanese manufacturers often take a middle ground between purchasing from a few suppliers and vertical integration. This approach is A) kanban B) keiretsu C) samurai D) poka-yoke E) kaizen
B) keiretsu
The purchasing approach that holds the suppliers responsible for maintaining the necessary technology, expertise, and forecasting ability plus cost, quality, and delivery competencies is A) few suppliers B) many suppliers C) Keiretsu D) vertical integration E) virtual companies
B) many suppliers
Visibility throughout the supply chain is a requirement among supply-chain members for A) mutual agreement on goals B) mutual trust C) compatible organizational cultures D) local optimization E) the bullwhip effect
B) mutual trust
With the growth of JIT, which of the following distribution systems has been the biggest loser? A) trucking B) railroads C) airfreight D) waterways E) pipelines
B) railroads
A restaurant runs a special promotion on lobster and plans to sell twice as many lobsters as usual. When this large order is sent to the distributer, the distributer assumes the large size is a trend, not a one-time event. The distributer therefore places an even larger order with the lobsterman. This is the result of A) double marginalization B) the bullwhip effect C) CPFR D) a pass-through facility E) vendor-managed inventory
B) the bullwhip effect
Which of the following is not an advantage of a virtual company? A) speed B) total control over every aspect of the organization C) specialized management expertise D) low capital investment E) flexibility
B) total control over every aspect of the organization
One dollar saved in purchasing is A) equivalent to a dollar earned in sales revenue B) worth even more than a dollar earned in sales revenue C) worth slightly more than a dollar earned because of taxes D) worth from 35% in the technical instrument industry to 70% in the food products industry E) only worthwhile if you are in the 50% tax bracket and still have a low profit margin
B) worth even more than a dollar earned in sales revenue
A grocery store is trying to find a new vendor for carrots. Its three criteria are 1. Freshness, 2. Lot Size, and 3. Cost with factor weights of .6, .1, and .3 respectively. What would a vendor with ratings of 6, 8, and 10 in the three respective categories score as a weighted total? A) 24 B) 1 C) 7.4 D) 9.8 E) none of the above
C) 7.4
Which of the following statements is true regarding the leverage of supply-chain savings? A) Supply chain leverage is about the same for all industries. B) Supply chain savings exert more leverage as the firm's purchases are a smaller percent of sales. C) Supply chain savings exert more leverage as the firm has a lower net profit margin. D) Supply chain leverage depends only upon the percent of sales spent in the supply chain. E) None of the above is true.
C) Supply chain savings exert more leverage as the firm has a lower net profit margin.
Which distribution system is the fastest growing mode of shipping? A) railroads B) trucks C) airfreight D) waterways E) pipelines
C) airfreight
Which one of the following distribution systems offers quickness and reliability when emergency supplies are needed overseas? A) trucking B) railroads C) airfreight D) waterways E) pipelines
C) airfreight
A fried chicken fast-food chain that acquired feed mills and poultry farms has performed A) horizontal integration B) forward integration C) backward integration D) current transformation E) job expansion
C) backward integration
When Daimler and BMW pooled resources to develop standardized auto components the supply-chain strategy could best be described by A) keiretsu B) virtual companies C) joint venture D) vertical integration E) few suppliers
C) joint venture
The Japanese concept of a company coalition of suppliers is A) poka-yoke B) kaizen C) keiretsu D) dim sum E) illegal
C) keiretsu
Which one of the following performance measures is not true of a world class firm? A) short time placing an order B) high percentage of accepted material C) large lead time D) high percentage of on-time deliveries E) low number of shortages per year
C) large lead time
Which of the following supply-chain strategies creates value by allowing suppliers to have economies of scale? A) suppliers becoming part of a company coalition B) vertical integration C) long-term partnering with a few suppliers D) negotiating with many suppliers E) developing virtual companies
C) long-term partnering with a few suppliers
Drop shipment A) is equivalent to cross-docking B) is the opposite of a blanket order C) means the supplier will ship directly to the end consumer, rather than to the seller D) is the same thing as keiretsu E) is a good reason to find a new firm to ship your products
C) means the supplier will ship directly to the end consumer, rather than to the seller
The Institute for Supply Management A) establishes laws and regulations for supply management B) is an agency of the United Nations charged with promoting ethical conduct globally C) publishes the principles and standards for ethical supply management conduct D) prohibits backward integration into developing economies E) All of the above are true.
C) publishes the principles and standards for ethical supply management conduct
Giving quantity discounts based on annual volume instead of single order size helps to control which supply-chain issue? A) control risk B) environmental risk C) the bullwhip effect D) unethical supplier behavior E) vendor-managed inventory
C) the bullwhip effect
Which of the following best describes vertical integration? A) to sell products to a supplier or a distributor B) to develop the ability to produce products which complement the original product C) to produce goods or services previously purchased D) to develop the ability to produce the specified good more efficiently than before E) to build long-term partnerships with a few suppliers
C) to produce goods or services previously purchased
Which of the following is not an advantage of the "few suppliers" concept? A) suppliers' willingness to participate in JIT systems B) trust C) vulnerability of trade secrets D) creation of value by allowing suppliers to have economies of scale E) suppliers' willingness to provide technological expertise
C) vulnerability of trade secrets
The three classic types of negotiation strategies are A) vendor evaluation, vendor development, and vendor selection B) Theory X, Theory Y, and Theory Z C) many suppliers, few suppliers, and keiretsu D) cost-based price model, market-based price model, and competitive bidding E) None of the above is correct.
D) cost-based price model, market-based price model, and competitive bidding
A carpet manufacturer has delivered carpet directly to the end consumer rather than to the carpet dealer. The carpet manufacturer is practicing A) postponement B) cross-docking C) channel assembly D) drop shipping E) float reduction
D) drop shipping
Which of the following is not an opportunity for effective management in the supply chain? A) accurate "pull" data B) vendor-managed inventory C) postponement D) local optimization E) channel assembly
D) local optimization
The transfer of some of what are traditional internal activities and resources of a firm to outside vendors is A) a standard use of the make or buy decision B) not allowed by the ethics code of the Supply Management Institute C) offshoring D) outsourcing E) keiretsu
D) outsourcing
Hewlett-Packard withholds customization of its laser printers as long as possible. This is an example of A) vendor-managed inventory B) standardization C) backward integration D) postponement E) timely customization
D) postponement
Which one of the following is not a supply-chain strategy? A) negotiation with many suppliers B) vertical integration C) keiretsu D) short-term relationships with few suppliers E) virtual companies
D) short-term relationships with few suppliers
Which of the following is not a condition that favors the success of vertical integration? A) availability of capital B) availability of managerial talent C) required demand D) small market share E) All of the above favor the success of vertical integration.
D) small market share
A disadvantage of the "few suppliers" strategy is A) the risk of not being ready for technological change B) the lack of cost savings for customers and suppliers C) possible violations of the Sherman Antitrust Act D) the high cost of changing partners E) All of the above are disadvantages of the "few suppliers" strategy.
D) the high cost of changing partners
Consider a firm with a 2007 net income of $20 million, revenue of $60 million and cost of goods sold of $25 million. If the balance sheet amounts show $2 million of inventory and $500,000 of property, plant & equipment, how many weeks of supply does the firm hold? A) 12.50 B) 5.20 C) 2.60 D) 0.08 E) 4.16
E) 4.16
Outsourcing A) transfers traditional internal activities to outside vendors B) utilizes the efficiency which comes with specialization C) lets the outsourcing firm focus on its key success factors D) None of the above are true of outsourcing. E) All of the above are true of outsourcing.
E) All of the above are true of outsourcing.
In supply-chain management, ethical issues A) are particularly important because of the enormous opportunities for abuse B) may be guided by company rules and codes of conduct C) become more complex the more global is the supply chain D) may be guided by the principles and standards of the Institute for Supply Management E) All of the above are true.
E) All of the above are true.
What term is used to describe the outsourcing of logistics? A) E-Logistics B) Shipper Managed Inventory (SMI) C) Hollow Logistics D) Sub-Logistics E) Third-Party Logistics
E) Third-Party Logistics
The "bullwhip" effect A) occurs as orders are relayed from retailers to wholesalers B) results in increasing fluctuations at each step of the sequence C) increases the costs associated with inventory in the supply chain D) occurs because of distortions in information in the supply chain E) all of the above
E) all of the above
Which of the following devices represents an opportunity for technology to improve security of container shipments? A) devices that identify truck and container location B) devices that sense motion C) devices that measure radiation or temperature D) devices that can communicate the breaking of a container lock or seal E) all of the above
E) all of the above
Which of the following is an opportunity for effective management in the supply chain? A) random "pull" data B) multistage control of replenishment C) the bullwhip effect D) customer managed inventory E) channel assembly
E) channel assembly
Which of the following is an advantage of the postponement technique? A) reduction in automation B) early customization of the product C) better quality of the product D) reduction in training costs E) reduction in inventory investment
E) reduction in inventory investment
TAL Apparel's management of its supply chain for Stafford shirts sold in JCPenney in an example of A) blanket orders B) standardization C) postponement D) lot size reduction E) single stage control of replenishment
E) single stage control of replenishment
Which of the following best describes Vizio's supply chain A) few suppliers B) keiretsu C) joint venture D) vertical integration E) virtual company
E) virtual company
A firm that employs a "response strategy" should minimize inventory throughout the supply chain.
FALSE
Because service firms do not acquire goods and services externally, their supply-chain management issues are insignificant.
FALSE
Because the supply chain has become so electronic and automated, opportunities for unethical behavior have been greatly reduced.
FALSE
Developing long-term, "partnering" relationships with a few suppliers is a long-standing American purchasing strategy.
FALSE
Even though a firm may have a low cost strategy, supply-chain strategy can select suppliers primarily on response or differentiation.
FALSE
Improvements in security, especially regarding the millions of shipping containers that enter the U.S. each year, are being held back by the lack of technological advances.
FALSE
In the vendor evaluation phase, most companies will use the same list of criteria and the same criteria weights.
FALSE
McDonald's was able to utilize existing plants and transportation systems in preparing the supply chain for opening its stores in Moscow.
FALSE
Supply-chain decisions are not generally strategic in nature, because purchasing is an ordinary expense to most firms.
FALSE
The key to effective supply-chain management is to get many suppliers to compete with each other, in order to drive down prices.
FALSE
The supply chain for a brewery would include raw ingredients such as hops and barley but not the manufactured goods such as bottles and cans.
FALSE
The supply-chain management opportunity called postponement involves delaying deliveries to avoid accumulation of inventory at the customer's site.
FALSE
Vertical integration, whether forward or backward, requires the firm to become more specialized.
FALSE
Waterways are an attractive distribution system when speed is more important than shipping cost.
FALSE
When using the low-cost strategy for supply chain-management, the firm should invest aggressively to reduce production lead time.
FALSE
With the growth of just-in-time practices, railroads have made large gains in the share of the nation's transport that they haul.
FALSE
With the many-suppliers strategy, the order usually goes to the supplier that offers the best quality.
FALSE
A fast-food retailer that acquired a spice manufacturer would be practicing backward integration.
TRUE
Bar code and radio frequency technology, like that used to track UPS or FedEx packages on their global journeys, can also be used to track objects within the boundaries of a warehouse or shop.
TRUE
Benchmark firms have driven down costs of supply-chain performance.
TRUE
Blanket orders are a long-term purchase commitment to a supplier for items that are to be delivered against short-term releases to ship.
TRUE
Channel assembly, which sends components and modules to be assembled by a distributor, treats these distributors as manufacturing partners.
TRUE
Drop shipping results in time and shipping cost savings.
TRUE
In several industries, online exchanges have been created by buyers.
TRUE
Keiretsus offer a middle ground between few suppliers and vertical integration.
TRUE
Logistics management can provide a competitive advantage through improved customer service.
TRUE
One classic type of negotiation strategy is the market-based price model.
TRUE
Operations managers are finding online auctions a fertile area for disposing of discontinued inventory
TRUE
Outsourcing is a form of specialization that allows the outsourcing firm to focus on its key success factors.
TRUE
Outsourcing refers to transferring a firm's activities that have traditionally been internal to external suppliers.
TRUE
Savings in the supply chain exert more leverage as the firm has a lower net profit margin.
TRUE
Supply-chain management faces additional challenges, such as those related to quality production and distribution systems, when companies enter growing global markets.
TRUE
The bullwhip effect refers to the increasing fluctuations in orders that often occur as orders move through the supply chain.
TRUE
The objective of the make-or-buy decision is to help identify the products and services that can be obtained externally.
TRUE
Vendor-Managed Inventory is a form of outsourcing.
TRUE
