OM Chapter 11

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

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

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 critical 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

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

True

A reduction in inventory costs is one reason for making rather than buying.

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

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

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

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

Keeping a product generic as long as possible before customizing is known as a. postponement b. keiretsu c. channel assembly d. forward integration e. backward integration

a. postponement

By which distribution system is 90 percent of the nation's coal shipped? a. railroads b. trucks c. waterways d. pipelines e. none of the above

a. railroads

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

In the make-or-buy decision, which of the following is a reason for making an item? a. management can focus on its primary business b. lower production cost c. inadequate capacity d. reduce inventory costs e. None of the above is a reason for making an item.

b. lower production cost

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

In the make-or-buy decision, which of the following is not a reason for buying? a. inadequate capacity b. to obtain desired quality c. patents or trade secrets d. lower inventory costs e. All of the above are reasons for buying.

b. to obtain desired quality

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

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

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

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

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.

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

In the make-or-buy decision, one of the reasons for buying is a. to assure adequate supply b. to obtain desired quality c. to remove supplier collusion d. inadequate capacity e. to maintain organizational talents

d. inadequate capacity

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

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

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 critical 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 the make-or-buy decision, one of the reasons for making is a. to reduce inventory costs b. to obtain technical or management ability c. inadequate capacity d. reciprocity e. to assure adequate supply in terms of quantity

e. to assure adequate supply in terms of quantity

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

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

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