CHAPTER 11

________ is a Japanese term that describes suppliers who become part of a company coalition.

Keiretsu

15) ________ describes the coordination of all supply chain activities, starting with raw materials and ending with a satisfied customer.

Supply chain management

A fast-food retailer that acquired a spice manufacturer would be practicing backward integration.

TRUE

Logistics management can provide a competitive advantage through improved customer service.

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

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

Local optimization, incentives, and large lots all contribute to ________ about what is really occurring in the supply chain.

distortions of information

The ________ decision involves choosing between producing a component or a service internally and purchasing it externally.

make-or-buy

________ rely on a variety of supplier relationships to provide services on demand.

Virtual Companies

What term describes a supply chain that is designed to optimize both forward and reverse flows? A) closed-loop supply chain B) full-journey supply chain C) circular supply chain D) network supply chain E) recycled supply chain

A) closed-loop supply chain

Local optimization is a supply-chain complication best described as: A) optimizing one's local area without full knowledge of supply chain 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 supply chain needs

By which distribution system is more than 90 percent of U.S. coal shipped? A) railroads B) trucks C) waterways D) pipelines E) none of the above

A) railroads

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 rice mill in south Louisiana purchases the trucking firm that transports packaged rice to distributors. This is an example of which of the following? 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 but is not suited for auctions. B) is purchasing facilitated through the Internet. C) has many benefits but requires a lot of paperwork. D) is illegal in all states except Nevada and New Jersey. E) All of the above are true of e-procurement.

B) is purchasing facilitated through the Internet.

Japanese manufacturers often pursue a strategy that is part collaboration, part purchasing from a few suppliers, and part vertical integration. What is this approach called? A) kanban B) keiretsu C) samurai D) poka-yoke E) kaizen

B) keiretsu

Which sourcing strategy is particularly common when the products being sourced are commodities? A) few suppliers B) many suppliers C) keiretsu D) vertical integration E) virtual companies

B) many suppliers

10) In most manufacturing industries, which of the following would likely represent the largest cost to the firm? A) transportation B) purchasing C) insurance D) financing E) advertising

B) purchasing

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 distributor, the distributor assumes the large size is a trend, not a one-time event. The distributor therefore places an even larger order with the lobsterman. This behavior is the result of which of the following? A) double marginalization B) the bullwhip effect C) CPFR D) postponement 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

14) 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's net profit margin decreases. 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's net profit margin decreases.

Which one of the following distribution systems offers speed 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 which of the following? 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 sourcing strategy could best be described by which of the following? 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 of the following is NOT an advantage of the "few suppliers" sourcing strategy? A) suppliers have a learning curve that yields lower transaction and production costs B) suppliers are more likely to understand the broad objectives of the end customer C) less vulnerable trade secrets D) creation of value by allowing suppliers to have economies of scale E) suppliers' willingness to provide technological expertise

C) less vulnerable trade secrets

Which of the following best describes vertical integration? A) sell products to a supplier or a distributor B) develop the ability to produce products that complement the original product C) produce goods or services previously purchased D) develop the ability to produce the specified good more efficiently than before E) build long-term partnerships with a few suppliers

C) produce goods or services previously purchased

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) grants Ph.D. degrees in purchasing.

C) publishes the principles and standards for ethical supply management conduct.

11) Among which of the following industries are purchasing costs the LOWEST percentage of sales? A) automobile B) petroleum C) restaurants D) lumber E) chemical

C) restaurants

Outsourcing: A) transfers traditional internal activities to outside vendors. B) utilizes the efficiency that comes with specialization. C) allows the outsourcing firm to focus on its key success factors. D) All of the above are true of outsourcing. E) None of the above is true of outsourcing.

D) All of the above are true of outsourcing.

Which of the following is NOT true about reverse logistics as compared to forward logistics? A) Inventory management is not consistent. B) Distribution costs are less directly visible. C) Pricing is dependent upon many factors. D) Speed is often very important. E) Forecasting is more uncertain.

D) Speed is often very important.

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) CPFR

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.

Which one of the following is NOT one of the six sourcing strategies? 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) sufficiently high demand D) small market share E) All of the above favor the success of vertical integration.

D) small market share

While freight rates are often based on very complicated pricing systems, in general, the primary freight price factor is based on which of the following attributes? A) damage record B) on-time delivery C) door-to-door service D) speed of shipment E) consolidation capabilities

D) speed of shipment

A disadvantage of the "few suppliers" sourcing 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) the suppliers are less likely to understand the broad objectives of the procuring firm and the end customer.

D) the high cost of changing partners.

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.

The bullwhip effect: A) occurs as orders are relayed from retailers to distributors to wholesalers to manufacturers. 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 are true.

E) All of the above are true.

9) Which of the following would NOT typically be considered as part of a manufacturing firm's supply chain? A) suppliers B) distributors C) wholesalers D) retailers E) landscaping contractors

E) landscaping contractors

1) Even though a firm may have a low cost strategy, supply-chain strategy can select suppliers primarily on response or differentiation.

FALSE

2) 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

6) Supply chain decisions are not generally strategic in nature, because purchasing is not a large expense for most firms.

FALSE

7) 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

Keiretsu refers to a company coalition that is part collaboration, part purchasing from many suppliers, and part vertical integration.

FALSE

The new model of a tight, fast, low-inventory supply chain, operating across political and cultural boundaries, has reduced the overall level of supply chain risk.

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

With the "many suppliers" sourcing strategy, the order usually goes to the supplier that offers the highest quality

FALSE

________ is developing the ability to produce goods or services previously purchased or actually buying a supplier or a distributor.

Vertical Integration

Use of a diversified supply base represents one of the most common supply chain risk reduction tactics for several different supply chain risk categories.

TRUE

Virtual companies are also known as ________ .

hollow corporations or network companies

Transferring to external vendors a firm's activities that have traditionally been internal is known as ________.

outsourcing