SCMA 331 Final Exam CHAPTER 11
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 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.
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.
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) keiretsu D) short-term relationships with few suppliers E) virtual companies
D.
Define EDI. Answer: Electronic data interchange is a standardized data-transmittal format for computerized communications between organizations.
Define EDI. Answer: Electronic data interchange is a standardized data-transmittal format for computerized communications between organizations.
) 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 EXCEPT which of the following are "opportunities" in managing the integrated supply chain? A) postponement B) drop shipping C) blanket orders D) standardization E) line balancing
E
For which corporate strategy(ies) should supply chain inventory be minimized? A) low cost B) response C) differentiation D) low cost and response E) low cost and differentiation
E
TAL Apparel's management of its supply chain for Stafford shirts sold in JCPenney in an example of which of the following? A) blanket orders B) standardization C) postponement D) lot size reduction E) single-stage control of replenishment
E
Which of the following best describes Vizio's sourcing strategy? A) few suppliers B) keiretsu C) joint venture D) vertical integration E) virtual company
E
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
Which of the following would NOT be subject to negotiation between a buyer and supplier? A) price B) credit and delivery terms C) quality standards D) cooperative advertising agreements E) All of the above could be negotiated.
E
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
________ is the term describing purchasing facilitated through the Internet.
E-Procurement
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.
A firm that employs a response strategy should minimize inventory throughout the supply chain.
False
Because service firms do not acquire goods and services externally, their supply chain management issues are insignificant.
False
Cross-sourcing describes the practice of having two suppliers provide every component.
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
Keiretsu refers to a company coalition that is part collaboration, part purchasing from many suppliers, and part vertical integration.
False
Supply chain decisions are not generally strategic in nature, because purchasing is not a large expense for most firms.
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
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
When using the low-cost strategy for supply chain management, a firm should use buffer stocks to ensure speedy supply.
False
With the "many suppliers" sourcing strategy, the order usually goes to the supplier that offers the highest quality.
False
How are outsourcing and vertical integration related? Can a single firm successfully do both? Answer: Outsourcing transfers what were traditional internal activities to outside vendors. It is a way of increasing specialization which allows the firm to focus on its core strengths, and not try to do all possible tasks. Vertical integration is much the opposite, decreasing a firm's specialization so that it can perform additional functions along its supply chain. Vertical integration has become increasingly difficult in the face of increasing specialization. It seems unlikely that firms that make significant use of outsourcing would do much vertical integration, but it is possible that a firm's set of competitive advantages would support outsourcing in some functions and vertical integration in others.
How are outsourcing and vertical integration related? Can a single firm successfully do both? Answer: Outsourcing transfers what were traditional internal activities to outside vendors. It is a way of increasing specialization which allows the firm to focus on its core strengths, and not try to do all possible tasks. Vertical integration is much the opposite, decreasing a firm's specialization so that it can perform additional functions along its supply chain. Vertical integration has become increasingly difficult in the face of increasing specialization. It seems unlikely that firms that make significant use of outsourcing would do much vertical integration, but it is possible that a firm's set of competitive advantages would support outsourcing in some functions and vertical integration in others.
The ________ decision involves choosing between producing a component or a service internally and purchasing it externally.
Make-or-buy
What is e-procurement?
Purchasing facilitated through the Internet.
________ involves reducing the number of variations in materials and components as an aid to cost management.
Standardization
________ describes the coordination of all supply chain activities, starting with raw materials and ending with a satisfied customer.
Supply Chain Management
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 profit would be increased by revenue - costs = X - (.73X). Therefore .27X(profit % ∗ sales) = 1(profit req) and solving gives X = $3.70 of increased sales yields an additional $1 of profit.
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, where should the manager assign the intern to maximize profits? Supply Chain Costs = 35 Production Costs =25 Profits = 40 % of current sales (revenue)
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.
The objective of the make-or-buy decision is to help identify the products and services that can be obtained externally.
True
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
While the prices that consumers pay are often inflexible, a significant number of final prices paid in business-to-business transactions are negotiated.
True
________ 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
What is a keiretsu?
a network of suppliers who become part of a company coalition. It is part collaboration, part purchasing from a few suppliers, and part vertical integration. Usually the suppliers are partially owned or debtors to the purchasing organization. This structure is quite common in Japan.
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
d.
Local optimization, incentives, and large lots all contribute to ________ about what is really occurring in the supply chain.
distortions of information
Virtual companies are also known as ________ .
hollow corporations or network companies
With cross-sourcing, how many suppliers provide each component on a regular basis (i.e., excluding backup suppliers)? A) 1 B) 2 C) 3 D) equal to the total number of components E) equal to the number of countries to which the final product is sold
A
A furniture maker has delivered a dining set directly to the end consumer rather than to the furniture store. The furniture maker is practicing which of the following? A) postponement B) drop shipping C) channel assembly D) passing the buck E) float reduction
B
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
E-procurement: A) works best in long-term contract situations but is not suited for auctions. B) is the same thing as Internet purchasing. 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
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
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
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.
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.
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.
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.
) The Japanese concept of a company coalition of suppliers is: A) poka-yoke. B) kaizen. C) keiretsu. D) dim sum. E) illegal.
C
Transferring to external vendors a firm's activities that have traditionally been internal is known as ________.
outsourcing
________ involves delaying any modifications or customization to the product as long as possible in the production process.
postponement
Of the four stages of supplier selection, the stage at which the factor weighting approach would be used is ________.
supplier evaluation
A carpet manufacturer has delivered carpet directly to the end consumer rather than to the carpet dealer. The carpet manufacturer is practicing which of the following? A) postponement B) cross-docking C) channel assembly D) drop shipping E) float reduction
D
What are the three classic types of negotiation strategies? A) supplier evaluation, supplier development, and supplier 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) traditional auctions, reverse auctions, and online exchanges
D
Which of the following characteristics is NOT common to all four of Darden Restaurants' supply channels? A) supplier qualification B) product tracking C) independent audits D) refrigeration E) just-in-time delivery
D
Which of the following is NOT a typical benefit of centralized purchasing? A) leverage purchase volume for better pricing B) develop specialized staff expertise C) reduce the duplication of tasks D) reduce lead times E) promote standardization
D
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
Suppliers are also known as ________.
vendors
________ is a Japanese term that describes suppliers who become part of a company coalition.
Keiretsu
Identify three common features of contracts between buyers and suppliers.
(1) quantity discounts; (2) buybacks; (3) revenue sharing
Identify the four stages of supplier selection.
(1) supplier evaluation; (2) supplier development; (3) negotiations; (4) contracting
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
What are the four stages of supplier selection? A) supplier evaluation, supplier development, negotiations, and contracting B) supplier evaluation, negotiations, supplier acquisition, and supplier development C) introduction, growth, maturity, and decline D) supplier evaluation, supplier development, negotiations, and centralized purchasing E) negotiations, contracting, centralized purchasing, and E-procurement
A
What is the practice of keeping a product generic as long as possible before customizing? A) postponement B) keiretsu C) vendor-managed inventory D) forward integration E) backward integration
A
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) transparent negotiations
A
Which of the following is a primary supplier selection criterion for a firm pursuing a differentiation strategy? A) product development skills B) cost C) capacity D) speed E) flexibility
A
Among which of the following industries are purchasing costs the LOWEST percentage of sales? A) automobiles B) petroleum C) restaurants D) lumber E) chemicals
C
Drop shipping: 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
In what type of auction does a buyer initiate the process by submitting a description of the desired product or service? A) traditional B) buyer C) Dutch D) French E) Mexican
C
Which of the following describes using one supplier for a component and a second supplier for another component, where each supplier acts as a backup for the other? A) outsourcing B) dual-sourcing C) cross-sourcing D) backup-sourcing E) parallel-sourcing
C
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.
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.
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.
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.
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.
________ 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
12) Hewlett-Packard withholds customization of its laser printers as long as possible. This is an example of which of the following? A) vendor-managed inventory B) standardization C) backward integration D) postponement E) timely customization
D
Identify and describe briefly the six sourcing strategies. Answer: 1. With the many suppliers strategy, a supplier responds to the demands and specifications of a "request for quotation," with the order usually going to the low bidder. 2. 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. 3. Vertical integration is developing the ability to produce goods or services previously purchased or actually buying a supplier or a distributor. 4. Joint ventures represent a formal collaboration between firms, without implying any change of ownership. 5. Suppliers become part of a company coalition in the keiretsu strategy. 6. With the virtual companies strategy, firms rely on a variety of supplier relationships to provide services on demand.
Identify and describe briefly the six sourcing strategies. Answer: 1. With the many suppliers strategy, a supplier responds to the demands and specifications of a "request for quotation," with the order usually going to the low bidder. 2. 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. 3. Vertical integration is developing the ability to produce goods or services previously purchased or actually buying a supplier or a distributor. 4. Joint ventures represent a formal collaboration between firms, without implying any change of ownership. 5. Suppliers become part of a company coalition in the keiretsu strategy. 6. With the virtual companies strategy, firms rely on a variety of supplier relationships to provide services on demand.
Identify some technological advances that can serve to improve logistics management and also improve shipping security. Answer: They include devices that can detect a broken seal on a shipping container; devices that can detect whether a container is in motion; devices that sense and transmit temperature and radioactivity; and devices that can transmit truck or container location, content, and condition.
Identify some technological advances that can serve to improve logistics management and also improve shipping security. Answer: They include devices that can detect a broken seal on a shipping container; devices that can detect whether a container is in motion; devices that sense and transmit temperature and radioactivity; and devices that can transmit truck or container location, content, and condition.
Identify the advantages and disadvantages of using the "few suppliers" sourcing strategy. Answer: Advantages: 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; and the strategy also encourages those suppliers to provide design innovations and technological expertise. Disadvantages: concern about trade secrets and suppliers venturing out on their own; the high cost of changing partners; and risk of poor supplier performance.
Identify the advantages and disadvantages of using the "few suppliers" sourcing strategy. Answer: Advantages: 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; and the strategy also encourages those suppliers to provide design innovations and technological expertise. Disadvantages: concern about trade secrets and suppliers venturing out on their own; the high cost of changing partners; and risk of poor supplier performance.
Identify the nine major categories of supply chain risk. Answer: (1) supplier failure to deliver; (2) supplier quality failures; (3) logistics delays or damage; (4) distribution; (5) information loss or distortion; (6) political; (7) economic; (8) natural catastrophes; (9) theft, vandalism, and terrorism
Identify the nine major categories of supply chain risk. Answer: (1) supplier failure to deliver; (2) supplier quality failures; (3) logistics delays or damage; (4) distribution; (5) information loss or distortion; (6) political; (7) economic; (8) natural catastrophes; (9) theft, vandalism, and terrorism
Identify the ten opportunities in managing the integrated supply chain. Answer: (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 the ten opportunities in managing the integrated supply chain. Answer: (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. Answer: (1) local optimization; (2) incentives (sales incentives, quantity discounts, quotas, and promotions); (3) large lots
Identify three common occurrences that contribute to distortions of information about what is really occurring in the supply chain. Answer: (1) local optimization; (2) incentives (sales incentives, quantity discounts, quotas, and promotions); (3) large lots
Describe vendor-managed inventory (VMI). How is it related to outsourcing? Cite an example from your experiences as a shopper.
In vendor-managed inventory, the supplier maintains material for the buyer, often delivering directly to the buyer's using department. It is a form of outsourcing, because the buying firm has transferred the shipping, stocking, and receiving tasks to an external vendor. There are many instances of VMI in today's retail model, e.g., shelves of snack foods and soft drinks are routinely managed by the distributor, not the retailer.
What are the three classic negotiation strategies? Briefly describe each of them.
The three classic strategies for negotiating with suppliers are the cost-based model, the market-based price model, and competitive bidding. In the cost-based model, contract price is a function of supplier costs, such as those for time and materials. In the market-based price model, price is set by some form of published, auction, or index price. Competitive bidding may be used when vendors are not open to the cost-based model, or where information is not perfect enough for market-based pricing. Bidding policies usually require that the purchasing agent has several potential suppliers and quotations from each.
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
A fast-food retailer that acquired a spice manufacturer would be practicing backward integration.
True
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 key 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's net profit margin decreases.
True
The bullwhip effect refers to the increasing fluctuations in orders that often occur as orders move through the supply chain.
True