Chapter 11

The Japanese concept of a company coalition of supplies is:

Keiretsu

What best describes Vizio's sourcing strategy?

virtual company

True or False A firm that employs a response strategy should minimize inventory throughout the supply chain.

False

True or False Because service firms do not acquire goods and services externally, their supply chain management issues are insignificant.

False

True or False Cross-sourcing describes the practice of having two suppliers provide every component.

False

True or False When using the low-cost strategy for supply chain management, a firm should use buffer stocks to ensure speedy supply.

False

A rice mill in south Louisiana purchases the trucking firm that transports packaged rice to distributors. This is an example of ?

Forward integration

E-procurement

Is purchasing facilitated through the internet

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

Supply chain management

True or False Outsourcing is a form of specialization that allows the outsourcing firm to focus on its key success factors.

True

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

True or False Even though a firm may have a low cost strategy, supply-chain strategy can select supplies primarily on response or differentiation.

False

True or False Improvements in security, especially regarding the millions of shipping containers that enter the US each year, are being held back by the lack of technological advances.

False

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

False

True or False Supply chain leverage depends only upon the percent of sales spent in the supply chain.

False

True or False Supply chain leverage is about the same for all industries.

False

True or False Supply chain savings exert more leverage as the firm's purchases are a smaller percent of sales.

False

True or 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

True or 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

True or False The supply chain management opportunity called postponement involves delaying deliveries to avoid accumulation of inventory at the customer's site.

False

True or False Vertical integration, whether forward or backward, requires the firm to become more specialized.

False

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

False

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

False

With the virtual companies strategy, _____.

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

Virtual companies are also known as ____.

Hollow corporations or network companies

A company is deciding where to assign its summer intern. The manager estimates that the intern can save $10,000 in the supply chain or increase sales (revenue) by $25,000. If sales (revenue) is divided into the three categories shown in the table below, where should the manager assign the intern to maximize profit? Supply chain costs. Production Costs. Profits % of current sales. 35. 25. 40

The intern would save $10,000 in the supply chain, or show a profit of $10k. Profit from the increase in sales would be equal to revenue-costs. If revenue is X, then costs would be (.35 + .25)X. Thus profit would be X - .6X or simply .4X. $25,000(.4)=$10,000 so the manager is neutral on where to assign the intern.

What is an advantage of few suppliers sourcing strategy?

Long-term suppliers are more likely to understand the broad objectives of the procuring firm and the end customer. Using few suppliers can create value by allowing suppliers to have economies of scale and a learning curve that yields both lower transaction costs and lower production costs. Encourages those suppliers to provide design innovations and technological expertise.

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

Make-or-buy

Which sourcing strategy is particularly common when the products being sourced are commodities?

Many suppliers

Drop shipping:

Means the supplier will ship directly to the end consumer, rather than the seller

Local optimization is supply-chain complication best described as:

Optimizing one's local area without full knowledge of supply chain needs.

The transfer of some of what are traditional internal activities and resources of a firm to outside a vendor is:

Outsourcing

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

Outsourcing

Hewlett-Packard-Packers delays customization of its laser printers as long as possible. This is an example of ____.

Postponement

What is the practice of keeping a product generic as long as possible before customizing?

Postponement

______ involves delaying any modifications or customization to the product as long as possible in the production process.

Postponement

What best describes vertical integration?

Produce goods or services previously purchased

What is a primary supplier selection criterion for a firm pursuing a differentiation strategy?

Product development skills

How does the pursuit of response strategy impact the supply chain decision of product design characteristics?

Products should have low setup times, and they should be poised for rapid production ramp-up.

In most manufacturing industries, what would be the largest cost to the firm when considering transportation, purchasing, insurance, financing, and advertising?

Purchasing

What is an advantage of the postponement technique?

Reduction in inventory investment

What industry are purchasing costs the lowest percentage of sales?

Restaurants

TAL Apparel's management of its supply chain for Stanford shirts sold at JCPenny is an exampl of _______.

Single-stage control of replenishment

_____ involves reducing the number of variations in materials and components as an aid to cost management.

Standardization

What are the four stages of supplier selection?

Supplier evaluation Supplier development Negotiations Contracting

How does the pursuit of a response strategy impact the supply chain decision of primary supplier selection criteria?

Suppliers should be selected primarily on capacity, speed, and flexibility

A grocery chain is interested in exploring the impact effective supply chain management would have. Suppose that for every $1 of sales, 4% is profit, 50% is spent in the supply chain, and the remaining 46% is evenly divided between fixed and production costs. If the chain can save $1 in the supply chain it would take how many dollars of increased sales to have the same increase in profit? Assume that fixed costs are fixed so that the portion of increased sales allocated to fixed costs is instead profit (27% profit margin combined now).

Suppose initially the firm sells $100 of merchandise. $50 is spent in the supply chain, $23 in fixed costs, $23 in variable costs, and $4 is profit. An increase in sales of $X would increase revenue by X but increase costs by X*(.5+.23). Therefore .27X(profit % * sales) = 1(profit req) and solving gives X=$3.70 of increased sales yields an additional $1 of profit.

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 ____.

The bullwhip effect

How does the pursuit of response strategy impact the supply chain decision of supply chain inventory?

The firm should use buffer stocks to ensure speedy supply.

How does the pursuit of response strategy impact the supply chain decision of distribution network?

The firm should use fast transportation, and it should provide premium customer service.

A disadvantage of the "few suppliers" sourcing strategy is:

The high cost of changing partners

True or False A blanket order is a long-term purchase commitment to a supplier for items that are to be delivered against short-term releases to ship.

True

True or False Drop shipping results in time and shipping cost savings.

True

True or False One classic type of negotiation strategy is the market-based price model.

True

True or False Operations managers are finding online auctions a fertile are for disposing of discontinued inventory.

True

True or False Outsourcing refers to transferring a firm's activities that have traditionally been internal to external suppliers.

True

True or False Supply chain savings exert more leverage as the firm's net profit margin decreases.

True

True or False The Bullwhip effect refers to the increasing fluctuations in orders that often occurs as orders move through the supply chain

True

True or False The objective of the make-or-buy decision is to help identify the products and services that can be obtained externally.

True

True or False 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

True or False While the prices that consumers pay are often inflexible, a significant number of final prices paid in business-to-business transactions are negotiated.

True

True or false Savings in the supply chain exert more leverage as the firm's net profit margin decreases.

True

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

Vertical integration

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

Vertical integration

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

Virtual companies

For which corporate strategy(s) should supply chain inventory be minimized?

low cost and differentiation

Which of the following characteristics is NOT common to all four of Darden Restaurant' supply channels? A) supplier qualification B) product trafficking C) independent adults D) refrigeration E) just-in-time delivery

D

Which of the following is NOT a condition that favors the success fo 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

Which of the following is NOT one of the risk mitigation tactics for the supply chain risk category of suppliers failing to deliver? A) use multiple suppliers B) effective contracts with penalties C) subcontractors on retainer D) require overnight delivery E) pre-planning

D

Which one of the following is NOT one of the six sourcing strategies? A) negotiation with many suppliers B) vertical integration C) keirtsu D) short-term relationships with few suppliers E) virtual companies

D

What are some disadvantages of few suppliers sourcing strategy?

- Concern about trade secrets and suppliers venturing out on their own - the high cost of changing partners - risk of poor supplier performance

The bullwhip effect:

- occurs as orders are relayed from retailers to distributors to wholesalers to manufacturers - results in increasing fluctuations at each step of the sequence - increases the costs associated with inventory in the supply chain - occurs because of distortions in information in the supply chain

Outsourcing

- transfers traditional internal activities to outside vendors. - utilizes the efficiency that comes with specialization. - allows the outsourcing firm to focus on its key success factors.

Which cross-sourcing, how many suppliers provide each component on a regular basis (excluding backup suppliers)?

1

Identify the ten opportunities in managing the integrated supply chain.

1. Accurate "pull" data 2. Lot size reduction 3. Single-stage control of replenishment 4. Vendor-managed inventory 5. Collaborative planning, forecasting, and replenishment (CPFR) 6. Blanket orders 7. Standardization 8. Postponement 9. Electronic ordering and funds transfer 10. Drop shipping and special packaging

Identify three common occurrences that contribute to distortions of information about what is really occurring in the supply chain.

1. Local optimization 2. Incentives (sales incentives, quality discounts, quotas, and promotions) 3. Large lots

What are the six sourcing strategies?

1. Many suppliers 2. Few Suppliers 3. Vertical integration 4. Joint venture 5. Keiretsu 6. Virtual companies

Identify the ten major categories of the supply chain risk.

1. Supplier failure to deliver 2. Supplier quality failures 3. Outsourcing 4. Logistics delays or damage 5. Distribution 6. Information loss or distortion 7. Political 8. Economic 9. Natural catastrophes 10. Theft, vandalism, and terrosism

Vertical integration appears particularly advantageous when the organization has:

A large market share

With the many supplies strategy ____.

A supplier responds to the demands and specifications of a "request for quotation," with the order usually going to the low bidder.

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

A fried chicken fast-food chain that acquired feed mills and poultry farms has performed what?

Backward integration

Which of the following is NOT an advantage of the "few supplier" 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 scales E) suppliers' willingness to provide technological expertise

C

What type of negotiating strategy requires the supplier to open its books to the purchasers?

Cost-based price model

What are the three classic types of negotiation strategies?

Cost-based price model, market-based price model, and competitive bidding

Describes using one supplier for a component and a second supplier for another component, where each supplier acts as a backup for the other.

Cross-sourcing

_____ describes using one supplier for a component and a second supplier for another component, where each supplier acts as a backup for the other.

Cross-sourcing

The strategy of few suppliers _____.

Develops long-term "partnering" relationships with a few dedicated suppliers who will work with the purchaser in satisfying the end customer.

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

Distortions of information

A carpenter manufacturer has delivered carpet directly to the end consumer rather than to the carpet dealer. The carpet manufacturer is practicing what?

Drop shipping

A furniture maker has delivered a dining set directly to the end consumer rather than to the furniture store. The furniture maker is practicing ____.

Drop shipping

In what type of auction does a buyer initiate the process by submitting a description of the desired product or service?

Dutch

______ is the term describing purchasing facilitated through the internet.

E-procurement

Define EDI

Electronic data interterchange is a standardized data-transmittal format for computerized communications between organizations.

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

True

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

Suppliers become part of a company coalition in the ______ strategy.

Keiretse

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?

Keiretsu

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

Keiretsu

As the corporate and operations management strategies vary from low cost to response to differentiation, how does this impact the criteria used for selecting suppliers?

The supply chain must support the operations management strategy. For a firm using the low-cost strategy, supplier selection should be based primarily on cost. When using the response strategy, the selection criteria are capacity, speed, and flexibility. For the differentiation strategy, the supplier is selected based on product development skills, the degree to which it is willing to share information, and the degree to which it can jointly and rapidly develop new products.