SCM Chapter 13

Which of the following would be a strategy to decrease the margin lost in a stockout? A) Arranging for backup sourcing B) Discarding the unused material C) Selling unsold product to an outlet store D) Reduce the level of cycle inventory

A) Arranging for backup sourcing

As lead times decrease, supply chain managers are able to A) better match supply with demand. B) better match demand with supply. C) increase supply chain cost. D) decrease product availability.

A) better match supply with demand.

There is a cost associated with postponement because the production cost using postponement is typically A) higher than the production cost without it. B) lower than the production cost without it. C) very stable. D) equal to the production cost without it.

A) higher than the production cost without it.

A high level of product availability requires ________, which raises supply chain costs. A) large inventories B) increased revenues C) reduced costs D) understocking the product

A) large inventories

A high level of product availability requires A) large inventories and tends to raise costs for the supply chain. B) large inventories and tends to reduce costs for the supply chain. C) small inventories and tends to raise costs for the supply chain. D) small inventories and tends to reduce costs for the supply chain.

A) large inventories and tends to raise costs for the supply chain.

A manager can reduce demand uncertainty via the following means EXCEPT A) lengthened forecasting window. B) quick response. C) postponement. D) tailored sourcing.

A) lengthened forecasting window.

In tailored sourcing, firms use a combination of two supply sources, A) one focusing on cost but unable to handle uncertainty well, and the other focusing on flexibility to handle uncertainty, but at a higher cost. B) one focusing on cost and able to handle uncertainty well, and the other focusing on flexibility to handle uncertainty, but at a higher cost. C) one focusing on cost but unable to handle uncertainty well, and the other focusing on flexibility to handle uncertainty at a lower cost. D) one focusing on cost and able to handle uncertainty well, and the other focusing on flexibility to handle uncertainty at a lower cost.

A) one focusing on cost but unable to handle uncertainty well, and the other focusing on flexibility to handle uncertainty, but at a higher cost.

A company that uses a more expensive short lead time supplier as a backup for a low cost, long lead time supplier is using A) tailored sourcing. B) quick response. C) postponement. D) improved forecasting.

A) tailored sourcing.

The loss incurred by a firm for each unsold unit at the end of the selling season is A) the cost of overstocking the product. B) the cost of stocking the product. C) the cost of understocking the product. D) the cost of overselling the product.

A) the cost of overstocking the product.

In volume-based tailored sourcing A) the predictable part of a product's demand is produced at an efficient facility. B) the uncertain portion is produced at an efficient facility. C) the predictable part of a product's demand is produced at a flexible facility. D) the predictable part of a product's demand is outsourced.

A) the predictable part of a product's demand is produced at an efficient facility.

________ is the set of actions a supply chain takes to reduce the replenishment lead time. A) Lengthened forecasting window B) Quick response C) Postponement D) Tailored sourcing

B) Quick response

Which of the following would be a strategy to increase the salvage value of an unsold product? A) Discarding the unused material B) Selling unsold product to an outlet store C) Keeping the product in inventory until it sells D) Reduce the level of cycle inventory

B) Selling unsold product to an outlet store

Quick response is clearly advantageous to A) a distributor in the supply chain. B) a retailer in the supply chain. C) a manufacturer in the supply chain. D) every step in the supply chain.

B) a retailer in the supply chain.

An increase in forecast accuracy A) decreases both the overstocked and understocked quantity and decreases a firm's profits. B) decreases both the overstocked and understocked quantity and increases a firm's profits. C) increases both the overstocked and understocked quantity and decreases a firm's profits. D) increases both the overstocked and understocked quantity and increases a firm's profits.

B) decreases both the overstocked and understocked quantity and increases a firm's profits.

Supply chain managers are able to A) increase their forecast accuracy as lead times increase. B) increase their forecast accuracy as lead times decrease. C) decrease their forecast accuracy as lead times decrease. D) decrease their forecast accuracy as lead times increase.

B) increase their forecast accuracy as lead times decrease.

As the total quantity for the season is broken up into multiple smaller orders, the buyer is better able to A) match supply and demand and increase cost. B) match supply and demand and increase profitability. C) match supply and demand and decrease profitability. D) match supply and demand and decrease product availability.

B) match supply and demand and increase profitability.

Postponement is A) not very effective if a large fraction of demand comes from multiple products. B) not very effective if a small fraction of demand comes from a single product. C) only effective if a large fraction of demand comes from a single product. D) effective even if a large fraction of demand comes from a single product.

B) not very effective if a small fraction of demand comes from a single product.

Postponement is valuable for a firm that A) sells a large variety of products with demand that is dependent and comparable in size. B) sells a large variety of products with demand that is independent and comparable in size. C) sells a small variety of products with demand that is dependent and comparable in size. D) sells a small variety of products with demand that is independent and comparable in size.

B) sells a large variety of products with demand that is independent and comparable in size.

The key factors that influence the optimal level of product availability do not include A) the cost of overstocking the product. B) the cost of stocking the product. C) the cost of understocking the product. D) All of the above are key factors.

B) the cost of stocking the product.

Under tailored postponement, a firm produces the amount that is very likely to sell using A) the lower cost production method with postponement and produces the portion of demand that is uncertain using postponement. B) the lower cost production method without postponement and produces the portion of demand that is uncertain using postponement. C) the higher cost production method with postponement and produces the portion of demand that is uncertain using postponement. D) the higher cost production method without postponement and produces the portion of demand that is uncertain using postponement.

B) the lower cost production method without postponement and produces the portion of demand that is uncertain using postponement.

Quick response results in A) the manufacturer making a lower profit in the long term if all else is unchanged. B) the manufacturer making a lower profit in the short term if all else is unchanged. C) the retailer making a lower profit in the short term if all else is unchanged. D) the distributor making a lower profit in the short term if all else is unchanged.

B) the manufacturer making a lower profit in the short term if all else is unchanged.

45) ________ allows a firm to increase profits and better match supply and demand if the firm produces a large variety of products whose demand is unpredictable, not positively correlated, and is of about the same size. A) Shortened forecasting window B) Quick response C) Postponement D) Tailored sourcing

C) Postponement

________ allows a firm to increase profits and better match supply and demand if the firm produces a large variety of products whose demand is unpredictable, not positively correlated, and is of about the same size. A) Shortened forecasting window B) Quick response C) Postponement D) Tailored sourcing

C) Postponement

________ may reduce overall profits for a firm if a single product contributes the majority of the demand. A) Shortened forecasting window B) Quick response C) Postponement D) Tailored sourcing

C) Postponement

The costs of overstocking and understocking have a direct impact on A) the optimal cycle service level but not profitability. B) profitability but not the optimal cycle service level. C) both the optimal cycle service level and profitability. D) neither the optimal cycle service level or profitability.

C) both the optimal cycle service level and profitability.

The level of product availability, also referred to as the ________, is one of the primary measures of a supply chain's responsiveness. A) no stock out level B) reliability level C) customer service level D) logistics measure

C) customer service level

Whether the optimal level of product availability is high or low depends on where a particular company believes they can A) minimize cost. B) maximize revenue. C) maximize profits. D) maximize product availability.

C) maximize profits.

A supply chain needs to achieve a balance between the level of availability and the cost of inventory that A) maximizes supply chain revenues. B) minimizes supply chain costs. C) maximizes supply chain profitability. D) maximizes supply chain availability.

C) maximizes supply chain profitability.

A company with multiple products, that chooses to delay product differentiation until closer to the point of sale, is using A) tailored sourcing. B) quick response. C) postponement. D) improved forecasting.

C) postponement.

If quick response allows multiple orders in the season, A) profits decrease and the overstock quantity decreases. B) profits decrease and the overstock quantity increases. C) profits increase and the overstock quantity decreases. D) profits increase and the overstock quantity increases.

C) profits increase and the overstock quantity decreases.

The margin lost by a firm for each lost sale because there is no inventory on hand is A) the cost of overstocking the product. B) the cost of stocking the product. C) the cost of understocking the product. D) the cost of overselling the product.

C) the cost of understocking the product.

The margin lost from current as well as future sales if the customer does not return should be included in A) the cost of overstocking the product. B) the cost of stocking the product. C) the cost of understocking the product. D) the cost of overselling the product.

C) the cost of understocking the product.

In product-based tailored sourcing A) low-volume products with uncertain demand are obtained from a flexible source. B) high-volume products with less demand uncertainty are obtained from an efficient source. C) high-volume products with less demand uncertainty are obtained from a flexible source. D) A and B only

D) A and B only

Which of the following is not a situation involving the trade-off between the cost of overstocking and the cost of understocking? A) Seasonal products where all leftover items must be disposed of at the end of the season B) Continuously stocked items where demand during stockout is backlogged C) Continuously stocked items where demand during stockout is lost D) Continuously stocked items where demand during stockout is redirected

D) Continuously stocked items where demand during stockout is redirected

The level of product availability A) is also referred to as the customer service level. B) is an important component of any supply chain's responsiveness. C) increases revenues for the supply chain by increasing sales. D) Only A and B are true.

D) Only A and B are true.

A supply chain can use a high level of product availability to A) improve its responsiveness and attract customers. B) reduce costs for the supply chain by reducing inventories. C) increase revenues for the supply chain by increasing sales. D) Only A and C are true.

D) Only A and C are true.

Which of the following is not a managerial lever to increase profitability? A) Increasing the salvage value of each unit B) Decreasing the margin lost from a stockout C) Reducing demand uncertainty D) Reducing the level of product availability below optimal

D) Reducing the level of product availability below optimal

Which of the following is not a consequence of being able to place a second order during the season for a seasonal product? A) The expected total quantity ordered during the season with two orders is less. B) The average overstock to be disposed of at the end of the sales season is less. C) The profits are higher. D) The average inventory level is higher.

D) The average inventory level is higher.

With reduced demand uncertainty, a supply chain manager can A) increase both overstocking and understocking. B) increase overstocking and reduce understocking. C) reduce overstocking and increase understocking. D) reduce both overstocking and understocking.

D) reduce both overstocking and understocking.

When a firm uses production with postponement to satisfy a part of its demand with the rest being satisfied without postponement, it is using A) adjustable postponement. B) flexible postponement. C) managed postponement. D) tailored postponement.

D) tailored postponement.

As the ratio of the cost of overstocking to the cost of understocking gets smaller, A) the optimal level of product availability becomes irrelevant. B) the optimal level of product availability decreases. C) the optimal level of product availability remains stable. D) the optimal level of product availability increases.

D) the optimal level of product availability increases.

A high level of product availability requires less inventory, which will keep costs down for the supply chain.

False

A managerial lever to increase profitability is to decrease the salvage value of each unit.

False

A supply chain needs to achieve a balance between the level of availability and the cost of inventory that maximizes supply chain revenues.

False

An increase in forecast accuracy increases both the overstocked and under-stocked quantity and decreases a firm's profits.

False

As the ratio of the cost of overstocking to the cost of under-stocking gets smaller, the optimal level of product availability decreases.

False

If quick response allows multiple orders in the season, profits increase and the overstock quantity increases.

False

In volume-based tailored sourcing, the predictable part of a product's demand is produced at a flexible facility, whereas the uncertain portion is produced at an efficient facility.

False

The cost of overselling is denoted by Co and is the loss incurred by a firm for each unsold unit at the end of the selling season.

False

The cost of underselling is a key factor that influences the optimal level of product availability.

False

There is a cost associated with postponement because the production cost using postponement is typically lower than the production cost without it.

False

A managerial lever to increase profitability is to increase the salvage value of each unit.

True

A supply chain can use a high level of product availability to improve its responsiveness and attract customers, thus increasing revenue for the supply chain.

True

A supply chain can use a high level of product availability to improve its responsiveness and attract customers.

True

In product-based tailored sourcing, low-volume products with uncertain demand are obtained from a flexible source, while high-volume products with less demand uncertainty are obtained from an efficient source.

True

Postponement is valuable for a firm that sells a large variety of products with demand that is independent and comparable in size.

True

Quick response results in the manufacturer making a lower profit in the short term if all else is unchanged.

True

Supply chain managers are able to increase their forecast accuracy as lead times decrease, which allows them to better match supply with demand and increase supply chain profitability.

True

Tailored postponement allows a firm to increase its profitability by only postponing the uncertain part of the demand and producing the predictable part at a lower cost without postponement.

True

Tailored sourcing may be volume-based or product-based depending on the source of uncertainty.

True

The cost of under-stocking is denoted by Cu and is the margin lost by a firm for each lost sale because there is no inventory on hand.

True

The costs of overstocking and under-stocking have a direct impact on both the optimal cycle service level and profitability.

True

The level of product availability is also referred to as the customer service level.

True

Whether the optimal level of availability is high or low depends on where a particular company believes they can maximize profits.

True

With reduced demand uncertainty, a supply chain manager can better match supply and demand by reducing both overstocking and under-stocking.

True