Supply Chain Management Chapter 5

________ costs increase as the number of facilities in a supply chain increases

Inventory

A firm may increase the number of facilities beyond the point that minimizes total logistics cost to improve the response time to its customers.

TRUE

Capacity allocation decisions have a significant impact on supply chain performance because they tend to stay in place for several years.

TRUE

Decisions concerning the role of each facility are significant because they determine the amount of flexibility the supply chain has in changing the way it meets demand.

TRUE

High tariffs lead to more production locations within a supply chain network, with each location having a lower allocated capacity.

TRUE

If facilities have lower fixed costs, many local facilities are preferred because this helps lower transportation costs.

TRUE

Inventory and facility costs increase as the number of facilities in a supply chain increase.

TRUE

Network design decisions have a significant impact on performance because they determine the supply chain configuration and set constraints within which inventory, transportation, and information can be used to either decrease supply chain cost or increase responsiveness.

TRUE

Network design decisions have a significant impact on performance because they determine the supply chain configuration and set constraints within which the other supply chain drivers can be used either to decrease supply chain cost or to increase responsiveness.

TRUE

Supply chain network design decisions include the location of manufacturing, storage, or transportation-related facilities and the allocation of capacity and roles to each facility.

TRUE

The allocation of supply sources and markets to facilities has a significant impact on performance because it affects total production, inventory, and transportation costs incurred by the supply chain to satisfy customer demand.

TRUE

The supply chain network is designed to maximize total profits, taking into account the expected margin and demand in each market, various logistics and facility costs, and the taxes and tariffs at each location.

TRUE

A facility that serves the market where it is located but also assumes responsibility for product customization, process improvements, product modifications, or product development is

a contributor facility.

A facility that creates new products, processes, and technologies for the entire network is

a lead facility

A facility built because of tax incentives, local content requirement, tariff barriers, or high logistics cost to supply the region from elsewhere with the objective to supply the market where it is located is

a server facility

Which of the following is the first phase in the design of a global supply chain network?

Define a supply chain strategy

Decisions concerning the role of each facility are significant because they determine the amount of rigidity the supply chain has in changing the way it meets demand.

FALSE

Facility location decisions have a long-term impact on a supply chain's performance because it is cost effective to shut down a facility or move it to a different location.

FALSE

Firms focusing on cost leadership tend to find the lowest cost location for their manufacturing facilities, but only if that means locating very far from the markets they serve.

FALSE

If facilities have higher fixed costs, many local facilities are preferred because this helps lower transportation costs.

FALSE

If production technology displays significant economies of scale, many local locations are the most effective.

FALSE

If the technology is flexible, it becomes more difficult to consolidate manufacturing in a few large facilities.

FALSE

Transportation costs increase as the number of facilities is increased.

FALSE

When faced with a network design decision, the goal of a manager is to design a network that minimizes the firm's costs while satisfying customer needs in terms of demand and responsiveness.

FALSE

Capital, growth strategy, existing networks and global competition mostly affect which of the four Global Network Design Decisions?

Phase I - Supply Chain Strategy

Tariffs, economies of scale and aggregate factor costs mostly affect which of the four Global Network Design Decisions?

Phase II - Regional Facility Configuration

Available infrastructure, skill needs and response time mostly affect which of the four Global Network Design Decisions?

Phase III - Desirable Sites

The availability of suppliers, transportation services, communication, utilities, and warehousing infrastructure mostly affect which of the four Global Network Design Decisions?

Phase III - Desirable Sites

When designing supply chain networks, companies must build appropriate flexibility to help counter fluctuations in exchange rates and demand across different countries.

TRUE

A facility that also has low cost as its primary objective, but its strategic role is broader than that of an offshore facility is

a source facility

A facility that serves the role of being a low-cost supply source for markets located outside the country where the facility is located is

an offshore facility

A facility located primarily to obtain access to knowledge or skills that may exist within a certain region is

an outpost facility

The facilities in a supply chain network must

at least equal the number that minimizes total logistics cost

Supply chain network design decisions include:

both the location of manufacturing, storage, or transportation-related facilities and the allocation of capacity and roles to each facility.

Capacity allocation decisions have a significant impact on supply chain performance because

capacity decisions tend to stay in place for several years.

If a country has very high tariffs

companies either do not serve the local market or set up manufacturing plants within the country to save on duties

Developing countries often create free trade zones where

duties and tariffs are relaxed as long as production is used primarily for export

It is very important that long-term consequences be thought through when making facility decisions, because

facilities last a long time and have an enduring impact on a firm's performance

If the production technology is very inflexible and product requirements vary from one country to another, a firm has to set up

local facilities to serve the market in each country

Firms focusing on cost leadership tend to

find the lowest cost location for their manufacturing facilities.

Supply chain network design decisions classified as capacity allocation are concerned with

how much capacity should be allocated to each facility.

The objective of the second phase of network design is to

identify regions where facilities will be located, their potential roles, and their approximate capacity.

Total logistics costs are a sum of the

inventory, transportation, and facility costs

The allocation of supply sources and markets to facilities has a significant impact on performance because

it affects total production, inventory, and transportation costs incurred by the supply chain to satisfy customer demand.

If the technology is flexible

it becomes easier to consolidate manufacturing in a few large facilities

Facility location decisions have a long-term impact on a supply chain's performance because

it is very expensive to shut down a facility or move it to a different location.

Firms focusing on responsiveness tend to

locate facilities close to the market they serve.

Firms that focus on cost leadership tend to find the lowest-cost location might

locate far from their customers

If facilities have lower fixed costs

many local facilities are preferred because this helps lower transportation costs.

When faced with a network design decision, the goal of a manager is to design a network that

maximizes the firm's profits while satisfying customer needs in terms of demand and responsiveness

Allocating too little capacity results in

poor responsiveness if demand is not satisfied or high cost if demand is filled from a distant facility.

Allocating too much capacity to a location results in

poor utilization, and as a result, higher costs

Building some over-capacity in the supply chain network and making the capacity flexible allows a firm to alter production flows within the supply chain to

produce more in facilities that have a lower cost based on current exchange rates

The objective of the third phase of network design is to

select a set of desirable sites within each region where facilities are to be located

Network design decisions have a significant impact on performance because they

set constraints within which inventory, transportation, and information can be used to either decrease supply chain cost or increase responsiveness.

The objective of the first phase of network design is to

specify what capabilities the supply chain network must have to support a firm's competitive strategy.

Duties that must be paid when products and/or equipment are moved across international, state, or city boundaries are referred to as

tariffs

The allocation of supply sources and markets to facilities should be reconsidered on a regular basis so that

the allocation can be changed as market conditions or plant capacities change.

Customer order entry is

the customer informing the retailer of what they want to purchase and the retailer allocating product to the customer.

Decisions concerning the role of each facility are significant because

they determine the amount of flexibility the supply chain has in changing the way it meets demand.

Supply chain network design decisions classified as market and supply allocation are concerned with

what markets each facility should serve and which supply sources should feed each facility.

Supply chain network design decisions classified as facility role are concerned with

what processes are performed at each facility.

Supply chain network design decisions classified as facility location are concerned with

where facilities should be located.