MBA Operations Management - Test Bank - Chapter 11

Operations Management, 12e (Heizer/Render/Munson)
Chapter 11  Supply Chain Management

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 Section 1   The Supply Chain's Strategic Importance

1) Even though a firm may have a low cost strategy, supply-chain strategy can select suppliers primarily on response or differentiation.
Answer:  FALSE
Diff: 2
Key Term:  Supply chain management
Objective:  LO 11.1 Explain the strategic importance of the supply chain
Learning Outcome:  Compare common approaches to supply chain design

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.
Answer:  FALSE
Diff: 2
Key Term:  Supply chain management
Objective:  LO 11.1 Explain the strategic importance of the supply chain
Learning Outcome:  Compare common approaches to supply chain design

3) When using the low-cost strategy for supply chain management, a firm should use buffer stocks to ensure speedy supply.
Answer:  FALSE
Diff: 2
Key Term:  Supply chain management
Objective:  LO 11.1 Explain the strategic importance of the supply chain
Learning Outcome:  Compare common approaches to supply chain design

4) Savings in the supply chain exert more leverage as the firm's net profit margin decreases.
Answer:  TRUE
Diff: 3
Key Term:  Supply chain management
AACSB:  Reflective thinking
Objective:  LO 11.1 Explain the strategic importance of the supply chain
Learning Outcome:  Compare common approaches to supply chain design

5) A firm that employs a response strategy should minimize inventory throughout the supply chain.
Answer:  FALSE
Diff: 2
Key Term:  Supply chain management
Objective:  LO 11.1 Explain the strategic importance of the supply chain
Learning Outcome:  Compare common approaches to supply chain design


6) Supply chain decisions are not generally strategic in nature, because purchasing is not a large expense for most firms.
Answer:  FALSE
Diff: 1

Key Term:  Supply chain management
Objective:  LO 11.1 Explain the strategic importance of the supply chain
Learning Outcome:  Compare common approaches to supply chain design
7) Because service firms do not acquire goods and services externally, their supply chain management issues are insignificant.
Answer:  FALSE
Diff: 1
Key Term:  Supply chain management
Objective:  LO 11.1 Explain the strategic importance of the supply chain
Learning Outcome:  Compare common approaches to supply chain design

8) Which of the following characteristics is NOT common to all four of Darden Restaurants' supply channels?

1. A) supplier qualification
2. B) product tracking
3. C) independent audits
4. D) refrigeration
5. E) just-in-time delivery

Answer:  D
Diff: 2
Key Term:  Supply chain management
Objective:  LO 11.1 Explain the strategic importance of the supply chain
Learning Outcome:  Compare common approaches to supply chain design

9) Which of the following would NOT typically be considered as part of a manufacturing firm's supply chain?

1. A) suppliers
2. B) distributors
3. C) wholesalers
4. D) retailers
5. E) landscaping contractors

Answer:  E
Diff: 1
Key Term:  Supply chain management
Objective:  LO 11.1 Explain the strategic importance of the supply chain
Learning Outcome:  Compare common approaches to supply chain design


10) In most manufacturing industries, which of the following would likely represent the largest cost to the firm?

1. A) transportation
2. B) purchasing
3. C) insurance
4. D) financing
5. E) advertising

Answer:  B
Diff: 3
Key Term:  Supply chain management
AACSB:  Reflective thinking
Objective:  LO 11.1 Explain the strategic importance of the supply chain
Learning Outcome:  Compare common approaches to supply chain design
11) Among which of the following industries are purchasing costs the LOWEST percentage of sales?

1. A) automobile
2. B) petroleum
3. C) restaurants
4. D) lumber
5. E) chemical

Answer:  C
Diff: 3
Key Term:  Supply chain management
Objective:  LO 11.1 Explain the strategic importance of the supply chain
Learning Outcome:  Compare common approaches to supply chain design

12) Which of the following is a primary supplier selection criterion for a firm pursuing a differentiation strategy?

1. A) product development skills
2. B) cost
3. C) capacity
4. D) speed
5. E) flexibility

Answer:  A
Diff: 2
Key Term:  Supply chain management
Objective:  LO 11.1 Explain the strategic importance of the supply chain
Learning Outcome:  Compare common approaches to supply chain design

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

1. A) low cost
2. B) response
3. C) differentiation
4. D) low cost and response
5. E) low cost and differentiation

Answer:  E
Diff: 2
Key Term:  Supply chain management
Objective:  LO 11.1 Explain the strategic importance of the supply chain
Learning Outcome:  Compare common approaches to supply chain design

14) Which of the following statements is true regarding the leverage of supply chain savings?

1. A) Supply chain leverage is about the same for all industries.
2. B) Supply chain savings exert more leverage as the firm's purchases are a smaller percent of sales.
3. C) Supply chain savings exert more leverage as the firm's net profit margin decreases.
4. D) Supply chain leverage depends only upon the percent of sales spent in the supply chain.
5. E) None of the above is true.

Answer:  C
Diff: 3
Key Term:  Supply chain management
Objective:  LO 11.1 Explain the strategic importance of the supply chain
Learning Outcome:  Compare common approaches to supply chain design
15) ________ describes the coordination of all supply chain activities, starting with raw materials and ending with a satisfied customer.
Answer:  Supply chain management
Diff: 1
Key Term:  Supply chain management
Objective:  LO 11.1 Explain the strategic importance of the supply chain
Learning Outcome:  Compare common approaches to supply chain design

16) 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?
Answer:  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.
Diff: 3
Key Term:  Supply chain management
Objective:  LO 11.1 Explain the strategic importance of the supply chain
Learning Outcome:  Compare common approaches to supply chain design

17) How does the pursuit of a response strategy impact the supply chain decisions of: (1) primary supplier selection criteria, (2) supply chain inventory, (3) distribution network, and (4) product design characteristics?
Answer:
(1)  Suppliers should be selected primarily based on capacity, speed, and flexibility.
(2)  The firm should use buffer stocks to ensure speedy supply.
(3)  The firm should use fast transportation, and it should provide premium customer service.
(4)  Products should have low setup times, and they should be poised for rapid production ramp-up.
Diff: 3
Key Term:  Supply chain management
Objective:  LO 11.1 Explain the strategic importance of the supply chain
Learning Outcome:  Compare common approaches to supply chain design


18) 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).
Answer:  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.
Diff: 3
Key Term:  Supply chain management
AACSB:  Analytical thinking
Objective:  LO 11.1 Explain the strategic importance of the supply chain
Learning Outcome:  Compare common approaches to supply chain design
19) 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	Production Costs	Profits
% of current sales (revenue)	35	25	40

Answer:  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.
Diff: 2
Key Term:  Supply chain management
AACSB:  Analytical thinking
Objective:  LO 11.1 Explain the strategic importance of the supply chain
Learning Outcome:  Compare common approaches to supply chain design


20) A company is deciding where to assign its summer intern. The manager estimates that the intern can save the company $10,000 in supply chain costs. Given the table below, what increase in sales (revenue) by the intern is required to show an equal profit?

	Supply Chain costs	Variable Costs (materials)	Profits
% of current sales (revenue)	35	25	40

Answer:  Additional sales would increase costs by (.35+.25) × Sales. Profit would therefore be X - .6X = .4X, where X is the increase in sales (revenue). Solve for when .4X = 10,000 or X = $25,000 required in increased sales to account for the same profit level.
Diff: 3
Key Term:  Supply chain management
AACSB:  Analytical thinking
Objective:  LO 11.1 Explain the strategic importance of the supply chain
Learning Outcome:  Compare common approaches to supply chain design

Section 2   Sourcing Issues: Make-or-Buy vs. Outsourcing

1) Outsourcing refers to transferring a firm's activities that have traditionally been internal to external suppliers.
Answer:  TRUE
Diff: 2
Key Term:  Outsourcing
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing
2) Outsourcing is a form of specialization that allows the outsourcing firm to focus on its key success factors.
Answer:  TRUE
Diff: 2
Key Term:  Outsourcing
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing

3) The objective of the make-or-buy decision is to help identify the products and services that can be obtained externally.
Answer:  TRUE
Diff: 2
Key Term:  Make-or-buy decision
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing


4) Outsourcing:

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

Answer:  D
Diff: 2
Key Term:  Outsourcing
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing

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

1. A) a standard use of the make-or-buy decision.
2. B) not allowed by the ethics code of the Supply Management Institute.
3. C) offshoring.
4. D) outsourcing.
5. E) keiretsu.

Answer:  D
Diff: 2
Key Term:  Outsourcing
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing

6) The ________ decision involves choosing between producing a component or a service internally and purchasing it externally.
Answer:  make-or-buy
Diff: 1
Key Term:  Make-or-buy decision
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing
7) Transferring to external vendors a firm's activities that have traditionally been internal is known as ________.
Answer:  outsourcing
Diff: 1
Key Term:  Outsourcing
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing

Section 3   Six Sourcing Strategies

1) With the "many suppliers" sourcing strategy, the order usually goes to the supplier that offers the highest quality.
Answer:  FALSE
Diff: 2
Objective:  LO 11.2 Identify six sourcing strategies
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing


2) Vertical integration, whether forward or backward, requires the firm to become more specialized.
Answer:  FALSE
Diff: 2
Key Term:  Vertical integration
Objective:  LO 11.2 Identify six sourcing strategies
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing

3) A fast-food retailer that acquired a spice manufacturer would be practicing backward integration.
Answer:  TRUE
Diff: 2
Key Term:  Vertical integration
AACSB:  Reflective thinking
Objective:  LO 11.2 Identify six sourcing strategies
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing

4) Keiretsu refers to a company coalition that is part collaboration, part purchasing from many suppliers, and part vertical integration.
Answer:  FALSE
Diff: 2
Key Term:  Keiretsu
Objective:  LO 11.2 Identify six sourcing strategies
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing
5) Which one of the following is NOT one of the six sourcing strategies?

1. A) negotiation with many suppliers
2. B) vertical integration
3. C) keiretsu
4. D) short-term relationships with few suppliers
5. E) virtual companies

Answer:  D
Diff: 2
Objective:  LO 11.2 Identify six sourcing strategies
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing

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

1. A) the risk of not being ready for technological change.
2. B) the lack of cost savings for customers and suppliers.
3. C) possible violations of the Sherman Antitrust Act.
4. D) the high cost of changing partners.
5. E) the suppliers are less likely to understand the broad objectives of the procuring firm and the end customer.

Answer:  D
Diff: 2
Objective:  LO 11.2 Identify six sourcing strategies
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing


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

1. A) few suppliers
2. B) many suppliers
3. C) keiretsu
4. D) vertical integration
5. E) virtual companies

Answer:  B
Diff: 2
Objective:  LO 11.2 Identify six sourcing strategies
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing

8) Which of the following is NOT an advantage of the "few suppliers" sourcing strategy?

1. A) suppliers have a learning curve that yields lower transaction and production costs
2. B) suppliers are more likely to understand the broad objectives of the end customer
3. C) less vulnerable trade secrets
4. D) creation of value by allowing suppliers to have economies of scale
5. E) suppliers' willingness to provide technological expertise

Answer:  C
Diff: 2
Objective:  LO 11.2 Identify six sourcing strategies
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing
9) Which of the following is NOT a condition that favors the success of vertical integration?

1. A) availability of capital
2. B) availability of managerial talent
3. C) sufficiently high demand
4. D) small market share
5. E) All of the above favor the success of vertical integration.

Answer:  D
Diff: 2
Key Term:  Vertical integration
Objective:  LO 11.2 Identify six sourcing strategies
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing

10) Which of the following best describes vertical integration?

1. A) sell products to a supplier or a distributor
2. B) develop the ability to produce products that complement the original product
3. C) produce goods or services previously purchased
4. D) develop the ability to produce the specified good more efficiently than before
5. E) build long-term partnerships with a few suppliers

Answer:  C
Diff: 2
Key Term:  Vertical integration
Objective:  LO 11.2 Identify six sourcing strategies
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing


11) A fried chicken fast-food chain that acquired feed mills and poultry farms has performed which of the following?

1. A) horizontal integration
2. B) forward integration
3. C) backward integration
4. D) current transformation
5. E) job expansion

Answer:  C
Diff: 2
Key Term:  Vertical integration
AACSB:  Reflective thinking
Objective:  LO 11.2 Identify six sourcing strategies
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing

12) Vertical integration appears particularly advantageous when the organization has:

1. A) a very specialized product.
2. B) a large market share.
3. C) a very common, undifferentiated product.
4. D) little experience operating an acquired vendor.
5. E) purchases that are a relatively small percent of sales.

Answer:  B
Diff: 2
Key Term:  Vertical integration
Objective:  LO 11.2 Identify six sourcing strategies
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing
13) 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?

1. A) horizontal integration
2. B) forward integration
3. C) backward integration
4. D) current transformation
5. E) keiretsu

Answer:  B
Diff: 2
Key Term:  Vertical integration
AACSB:  Reflective thinking
Objective:  LO 11.2 Identify six sourcing strategies
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing


14) 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?

1. A) kanban
2. B) keiretsu
3. C) samurai
4. D) poka-yoke
5. E) kaizen

Answer:  B
Diff: 2
Key Term:  Keiretsu
AACSB:  Diverse and multicultural work environments
Objective:  LO 11.2 Identify six sourcing strategies
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing

15) The Japanese concept of a company coalition of suppliers is:

1. A) poka-yoke.
2. B) kaizen.
3. C) keiretsu.
4. D) dim sum.
5. E) illegal.

Answer:  C
Diff: 2
Key Term:  Keiretsu
AACSB:  Diverse and multicultural work environments
Objective:  LO 11.2 Identify six sourcing strategies
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing
16) Which of the following is NOT an advantage of a virtual company?

1. A) speed
2. B) total control over every aspect of the organization
3. C) specialized management expertise
4. D) low capital investment
5. E) flexibility

Answer:  B
Diff: 2
Key Term:  Virtual companies
Objective:  LO 11.2 Identify six sourcing strategies
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing

17) When Daimler and BMW pooled resources to develop standardized auto components, the sourcing strategy could best be described by which of the following?

1. A) keiretsu
2. B) virtual companies
3. C) joint venture
4. D) vertical integration
5. E) few suppliers

Answer:  C
Diff: 2
Objective:  LO 11.2 Identify six sourcing strategies
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing

18) Which of the following best describes Vizio's sourcing strategy?

1. A) few suppliers
2. B) keiretsu
3. C) joint venture
4. D) vertical integration
5. E) virtual company

Answer:  E
Diff: 3
Key Term:  Virtual companies
Objective:  LO 11.2 Identify six sourcing strategies
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing

19) ________ is developing the ability to produce goods or services previously purchased or actually buying a supplier or a distributor.
Answer:  Vertical integration
Diff: 2
Key Term:  Vertical integration
Objective:  LO 11.2 Identify six sourcing strategies
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing
20) ________ is a Japanese term that describes suppliers who become part of a company coalition.
Answer:  Keiretsu
Diff: 2
Key Term:  Keiretsu
Objective:  LO 11.2 Identify six sourcing strategies
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing

21) ________ rely on a variety of supplier relationships to provide services on demand.
Answer:  Virtual companies
Diff: 2
Key Term:  Virtual companies
Objective:  LO 11.2 Identify six sourcing strategies
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing

22) Virtual companies are also known as ________ .
Answer:  hollow corporations or network companies
Diff: 3
Key Term:  Virtual companies
Objective:  LO 11.2 Identify six sourcing strategies
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing


23) 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.

Diff: 3
Objective:  LO 11.2 Identify six sourcing strategies
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing
24) 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.
Diff: 3
Objective:  LO 11.2 Identify six sourcing strategies
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing

25) What is a keiretsu?
Answer:  A keiretsu is 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.
Diff: 2
Key Term:  Keiretsu
AACSB:  Diverse and multicultural work environments
Objective:  LO 11.2 Identify six sourcing strategies
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing

26) 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.
Diff: 3
AACSB:  Reflective thinking
Objective:  LO 11.2 Identify six sourcing strategies
Learning Outcome:  Compare and contrast different sourcing strategies including outsourcing and insourcing

Section 4   Supply Chain Risk

1) Use of a diversified supply base represents one of the most common supply chain risk reduction tactics for several different supply chain risk categories.
Answer:  TRUE
Diff: 2
AACSB:  Reflective thinking
Learning Outcome:  Compare common approaches to supply chain design
2) 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.
Answer:  FALSE
Diff: 1
Learning Outcome:  Compare common approaches to supply chain design

3) Cross-sourcing describes the practice of having two suppliers provide every component.
Answer:  FALSE
Diff: 3
Key Term:  Cross-sourcing
AACSB:  Reflective thinking
Learning Outcome:  Compare common approaches to supply chain design

4) 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.
Answer:  FALSE
Diff: 1
Learning Outcome:  Compare common approaches to supply chain design

5) 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?

1. A) outsourcing
2. B) dual-sourcing
3. C) cross-sourcing
4. D) backup-sourcing
5. E) parallel-sourcing

Answer:  C
Diff: 2
Key Term:  Cross-sourcing
Learning Outcome:  Compare common approaches to supply chain design


6) With cross-sourcing, how many suppliers provide each component on a regular basis (i.e., excluding backup suppliers)?

1. A) 1
2. B) 2
3. C) 3
4. D) equal to the total number of components
5. E) equal to the number of countries to which the final product is sold

Answer:  A
Diff: 3
Key Term:  Cross-sourcing
AACSB:  Reflective thinking
Learning Outcome:  Compare common approaches to supply chain design
7) Which of the following is NOT one of the risk mitigation tactics for the supply chain risk category of suppliers failing to deliver?

1. A) use multiple suppliers
2. B) effective contracts with penalties
3. C) subcontractors on retainer
4. D) require overnight delivery
5. E) pre-planning

Answer:  D
Diff: 3
Learning Outcome:  Compare common approaches to supply chain design

8) Which of the following devices represents an opportunity for technology to improve security of container shipments?

1. A) devices that identify truck and container location
2. B) devices that sense motion
3. C) devices that measure radiation or temperature
4. D) devices that can communicate the breaking of a container lock or seal
5. E) all of the above

Answer:  E
Diff: 1
Learning Outcome:  Compare common approaches to supply chain design

9) ________ describes using one supplier for a component and a second supplier for another component, where each supplier acts as a backup for the other.
Answer:  Cross-sourcing
Diff: 2
Key Term:  Cross-sourcing
Learning Outcome:  Compare common approaches to supply chain design

10) Identify the ten major categories of supply chain risk.
Answer:  (1) supplier failure to deliver; (2) supplier quality failures; (3) outsoucing; (4) logistics delays or damage; (5) distribution; (6) information loss or distortion; (7) political; (8) economic; (9) natural catastrophes; (10) theft, vandalism, and terrorism
Diff: 3
Learning Outcome:  Compare common approaches to supply chain design

11) 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.
Diff: 3
AACSB:  Information technology
Objective:  LO 11.5 Explain major issues in logistics management
Learning Outcome:  Compare common approaches to supply chain design
Section 5   Managing the Integrated Supply Chain

1) The bullwhip effect refers to the increasing fluctuations in orders that often occur as orders move through the supply chain.
Answer:  TRUE
Diff: 2
Key Term:  Bullwhip effect
Objective:  LO 11.3 Explain issues and opportunities in the supply chain
Learning Outcome:  Compare common approaches to supply chain design

2)  Drop shipping results in time and shipping cost savings.
Answer:  TRUE
Diff: 1
Key Term:  Drop shipping
Objective:  LO 11.3 Explain issues and opportunities in the supply chain
Learning Outcome:  Compare common approaches to supply chain design

3) The supply chain management opportunity called postponement involves delaying deliveries to avoid accumulation of inventory at the customer's site.
Answer:  FALSE
Diff: 2
Key Term:  Postponement
Objective:  LO 11.3 Explain issues and opportunities in the supply chain
Learning Outcome:  Compare common approaches to supply chain design

4) 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.
Answer:  TRUE
Diff: 2
Key Term:  Blanket order
Objective:  LO 11.3 Explain issues and opportunities in the supply chain
Learning Outcome:  Compare common approaches to supply chain design


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

1. A) postponement
2. B) keiretsu
3. C) vendor-managed inventory
4. D) forward integration
5. E) backward integration

Answer:  A
Diff: 2
Key Term:  Postponement
Objective:  LO 11.3 Explain issues and opportunities in the supply chain
Learning Outcome:  Compare common approaches to supply chain design
6) Local optimization is a supply-chain complication best described as:

1. A) optimizing one's local area without full knowledge of supply chain needs.
2. B) obtaining very high production efficiency in a decentralized supply chain.
3. C) the prerequisite of global optimization.
4. D) the result of supply chains built on suppliers with compatible corporate cultures.
5. E) the opposite of the bullwhip effect.

Answer:  A
Diff: 2
Objective:  LO 11.3 Explain issues and opportunities in the supply chain
Learning Outcome:  Compare common approaches to supply chain design

7) The bullwhip effect:

1. A) occurs as orders are relayed from retailers to distributors to wholesalers to manufacturers.
2. B) results in increasing fluctuations at each step of the sequence.
3. C) increases the costs associated with inventory in the supply chain.
4. D) occurs because of distortions in information in the supply chain.
5. E) All of the above are true.

Answer:  E
Diff: 2
Key Term:  Bullwhip effect
Objective:  LO 11.3 Explain issues and opportunities in the supply chain
Learning Outcome:  Compare common approaches to supply chain design

8) 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?

1. A) double marginalization
2. B) the bullwhip effect
3. C) CPFR
4. D) postponement
5. E) vendor-managed inventory

Answer:  B
Diff: 2
Key Term:  Bullwhip effect
Objective:  LO 11.3 Explain issues and opportunities in the supply chain
Learning Outcome:  Compare common approaches to supply chain design

9) Which of the following is NOT an opportunity for effective management in the supply chain?

1. A) accurate "pull" data
2. B) vendor-managed inventory
3. C) postponement
4. D) local optimization
5. E) CPFR

Answer:  D
Diff: 2
Objective:  LO 11.3 Explain issues and opportunities in the supply chain
Learning Outcome:  Compare common approaches to supply chain design
10) Drop shipping:

1. A) is equivalent to cross-docking.
2. B) is the opposite of a blanket order.
3. C) means the supplier will ship directly to the end consumer, rather than to the seller.
4. D) is the same thing as keiretsu.
5. E) is a good reason to find a new firm to ship your products.

Answer:  C
Diff: 2
Key Term:  Drop shipping
Objective:  LO 11.3 Explain issues and opportunities in the supply chain
Learning Outcome:  Compare common approaches to supply chain design

11) 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?

1. A) postponement
2. B) cross-docking
3. C) channel assembly
4. D) drop shipping
5. E) float reduction

Answer:  D
Diff: 2
Key Term:  Drop shipping
Objective:  LO 11.3 Explain issues and opportunities in the supply chain
Learning Outcome:  Compare common approaches to supply chain design

12) Hewlett-Packard delays customization of its laser printers as long as possible. This is an example of which of the following?

1. A) vendor-managed inventory
2. B) standardization
3. C) backward integration
4. D) postponement
5. E) timely customization

Answer:  D
Diff: 2
Key Term:  Postponement
Objective:  LO 11.3 Explain issues and opportunities in the supply chain
Learning Outcome:  Compare common approaches to supply chain design


13) All EXCEPT which of the following are "opportunities" in managing the integrated supply chain?

1. A) postponement
2. B) drop shipping
3. C) blanket orders
4. D) standardization
5. E) line balancing

Answer:  E
Diff: 2
Objective:  LO 11.3 Explain issues and opportunities in the supply chain
Learning Outcome:  Compare common approaches to supply chain design
14) Which of the following is an advantage of the postponement technique?

1. A) reduction in automation
2. B) early customization of the product
3. C) better quality of the product
4. D) reduction in training costs
5. E) reduction in inventory investment

Answer:  E
Diff: 2
Key Term:  Postponement
Objective:  LO 11.3 Explain issues and opportunities in the supply chain
Learning Outcome:  Compare common approaches to supply chain design

15) 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?

1. A) postponement
2. B) drop shipping
3. C) channel assembly
4. D) passing the buck
5. E) float reduction

Answer:  B
Diff: 2
Key Term:  Drop shipping
Objective:  LO 11.3 Explain issues and opportunities in the supply chain
Learning Outcome:  Compare common approaches to supply chain design

16) TAL Apparel's management of its supply chain for Stafford shirts sold at JCPenney is an example of which of the following?

1. A) blanket orders
2. B) standardization
3. C) postponement
4. D) lot size reduction
5. E) single-stage control of replenishment

Answer:  E
Diff: 3
Key Term:  Single-stage control of replenishment
Objective:  LO 11.3 Explain issues and opportunities in the supply chain
Learning Outcome:  Compare common approaches to supply chain design

17) Local optimization, incentives, and large lots all contribute to ________ about what is really occurring in the supply chain.
Answer:  distortions of information
Diff: 3
Objective:  LO 11.3 Explain issues and opportunities in the supply chain
Learning Outcome:  Compare common approaches to supply chain design

18) ________ involves delaying any modifications or customization to the product as long as possible in the production process.
Answer:  Postponement
Diff: 2
Key Term:  Postponement
Objective:  LO 11.3 Explain issues and opportunities in the supply chain
Learning Outcome:  Compare common approaches to supply chain design
19) ________ involves reducing the number of variations in materials and components as an aid to cost management.
Answer:  Standardization
Diff: 3
Objective:  LO 11.3 Explain issues and opportunities in the supply chain
Learning Outcome:  Compare common approaches to supply chain design

20) 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
Diff: 2
Objective:  LO 11.3 Explain issues and opportunities in the supply chain
Learning Outcome:  Compare common approaches to supply chain design

21) Describe vendor-managed inventory (VMI). How is it related to outsourcing? Cite an example from your experiences as a shopper.
Answer:  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.
Diff: 2
Key Term:  Vendor-managed inventory (VMI)
AACSB:  Reflective thinking
Objective:  LO 11.3 Explain issues and opportunities in the supply chain
Learning Outcome:  Compare common approaches to supply chain design

22) 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
Diff: 2
Objective:  LO 11.3 Explain issues and opportunities in the supply chain
Learning Outcome:  Compare common approaches to supply chain design

23) Define EDI.
Answer:  Electronic data interchange is a standardized data-transmittal format for computerized communications between organizations.
Diff: 3
AACSB:  Information technology
Objective:  LO 11.3 Explain issues and opportunities in the supply chain
Learning Outcome:  Compare common approaches to supply chain design
Section 6   Building the Supply Base

1) Operations managers are finding online auctions a fertile area for disposing of discontinued inventory.
Answer:  TRUE
Diff: 2
Key Term:  E-procurement
AACSB:  Information technology
Learning Outcome:  Compare common approaches to supply chain design

2) One classic type of negotiation strategy is the market-based price model.
Answer:  TRUE
Diff: 2
Objective:  LO 11.4 Describe the steps in supplier selection
Learning Outcome:  Compare common approaches to supply chain design

3) While the prices that consumers pay are often inflexible, a significant number of final prices paid in business-to-business transactions are negotiated.
Answer:  TRUE
Diff: 2
Objective:  LO 11.4 Describe the steps in supplier selection
Learning Outcome:  Compare common approaches to supply chain design

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

1. A) cost-based price model
2. B) market-based price model
3. C) competitive bidding
4. D) price-based model
5. E) transparent negotiations

Answer:  A
Diff: 2
Objective:  LO 11.4 Describe the steps in supplier selection
Learning Outcome:  Compare common approaches to supply chain design


5) E-procurement:

1. A) works best in long-term contract situations but is not suited for auctions.
2. B) is purchasing facilitated through the Internet.
3. C) has many benefits but requires a lot of paperwork.
4. D) is illegal in all states except Nevada and New Jersey.
5. E) All of the above are true of e-procurement.

Answer:  B
Diff: 1
Key Term:  E-procurement
AACSB:  Information technology
Learning Outcome:  Compare common approaches to supply chain design
6) What are the three classic types of negotiation strategies?

1. A) supplier evaluation, supplier development, and supplier selection
2. B) Theory X, Theory Y, and Theory Z
3. C) many suppliers, few suppliers, and keiretsu
4. D) cost-based price model, market-based price model, and competitive bidding
5. E) traditional auctions, reverse auctions, and online exchanges

Answer:  D
Diff: 1
Objective:  LO 11.4 Describe the steps in supplier selection
Learning Outcome:  Compare common approaches to supply chain design

7) What are the four stages of supplier selection?

1. A) supplier evaluation, supplier development, negotiations, and contracting
2. B) supplier evaluation, negotiations, supplier acquisition, and supplier development
3. C) introduction, growth, maturity, and decline
4. D) supplier evaluation, supplier development, negotiations, and centralized purchasing
5. E) negotiations, contracting, centralized purchasing, and E-procurement

Answer:  A
Diff: 2
Objective:  LO 11.4 Describe the steps in supplier selection
Learning Outcome:  Compare common approaches to supply chain design

8) Which of the following would NOT be subject to negotiation between a buyer and supplier?

1. A) price
2. B) credit and delivery terms
3. C) quality standards
4. D) cooperative advertising agreements
5. E) All of the above could be negotiated.

Answer:  E
Diff: 3
Objective:  LO 11.4 Describe the steps in supplier selection
Learning Outcome:  Compare common approaches to supply chain design


9) Which of the following is NOT a typical benefit of centralized purchasing?

1. A) leverage purchase volume for better pricing
2. B) develop specialized staff expertise
3. C) reduce the duplication of tasks
4. D) reduce lead times
5. E) promote standardization

Answer:  D
Diff: 2
Objective:  LO 11.4 Describe the steps in supplier selection
Learning Outcome:  Compare common approaches to supply chain design
10) In what type of auction does a buyer initiate the process by submitting a description of the desired product or service?

1. A) traditional
2. B) buyer
3. C) Dutch
4. D) French
5. E) Mexican

Answer:  C
Diff: 3
Objective:  LO 11.4 Describe the steps in supplier selection
Learning Outcome:  Compare common approaches to supply chain design

11) ________ is the term describing purchasing facilitated through the Internet.
Answer:  E-Procurement
Diff: 1
Key Term:  E-procurement
AACSB:  Information technology
Objective:  LO 11.4 Describe the steps in supplier selection
Learning Outcome:  Compare common approaches to supply chain design

12) Of the four stages of supplier selection, the stage at which the factor weighting approach would be used is ________.
Answer:  supplier evaluation
Diff: 2
Objective:  LO 11.4 Describe the steps in supplier selection
Learning Outcome:  Compare common approaches to supply chain design

13) Suppliers are also known as ________.
Answer:  vendors
Diff: 2
Objective:  LO 11.4 Describe the steps in supplier selection
Learning Outcome:  Compare common approaches to supply chain design

14) What is e-procurement?
Answer:  Purchasing facilitated through the Internet.
Diff: 1
Key Term:  E-procurement
AACSB:  Information technology
Objective:  LO 11.4 Describe the steps in supplier selection
Learning Outcome:  Compare common approaches to supply chain design

15) What are the three classic negotiation strategies? Briefly describe each of them.
Answer:  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.
Diff: 3
Objective:  LO 11.4 Describe the steps in supplier selection
Learning Outcome:  Compare common approaches to supply chain design
16) Identify the four stages of supplier selection.
Answer:  (1) supplier evaluation; (2) supplier development; (3) negotiations; (4) contracting
Diff: 2
Objective:  LO 11.4 Describe the steps in supplier selection
Learning Outcome:  Compare common approaches to supply chain design

17) Identify three common features of contracts between buyers and suppliers.
Answer:  (1) quantity discounts; (2) buybacks; (3) revenue sharing
Diff: 3
Objective:  LO 11.4 Describe the steps in supplier selection
Learning Outcome:  Compare common approaches to supply chain design

18) Describe a reverse auction (also known as a Dutch auction).
Answer:  A buyer initiates the process by submitting a description of the desired product or service. Potential suppliers then submit bids, which may include price and other delivery information. Thus, price competition occurs on the selling side of the transaction—bidding the price down.
Diff: 3
Objective:  LO 11.4 Describe the steps in supplier selection
Learning Outcome:  Compare common approaches to supply chain design

Section 7   Logistics Management

1) Channel assembly, which sends components and modules to be assembled by a distributor, treats these distributors as manufacturing partners.
Answer:  TRUE
Diff: 2
Key Term:  Channel assembly
Objective:  LO 11.5 Explain major issues in logistics management
Learning Outcome:  Compare common approaches to supply chain design

2) Waterways are an attractive distribution system when speed is more important than shipping cost.
Answer:  FALSE
Diff: 2
Key Term:  Logistics management
Objective:  LO 11.5 Explain major issues in logistics management
Learning Outcome:  Compare common approaches to supply chain design


3) Logistics management can provide a competitive advantage through improved customer service.
Answer:  TRUE
Diff: 2
Key Term:  Logistics management
Objective:  LO 11.5 Explain major issues in logistics management
Learning Outcome:  Compare common approaches to supply chain design
4) What term is used to describe the outsourcing of logistics?

1. A) e-logistics
2. B) shipper-managed inventory (SMI)
3. C) hollow logistics
4. D) sub-logistics
5. E) third-party logistics (3PL)

Answer:  E
Diff: 1
Key Term:  Logistics management
Objective:  LO 11.5 Explain major issues in logistics management
Learning Outcome:  Compare common approaches to supply chain design

5) Which one of the following distribution systems offers speed and reliability when emergency supplies are needed overseas?

1. A) trucking
2. B) railroads
3. C) airfreight
4. D) waterways
5. E) pipelines

Answer:  C
Diff: 1
Key Term:  Logistics management
Objective:  LO 11.5 Explain major issues in logistics management
Learning Outcome:  Compare common approaches to supply chain design

6) By which distribution system is more than 90 percent of U.S. coal shipped?

1. A) railroads
2. B) trucks
3. C) waterways
4. D) pipelines
5. E) none of the above

Answer:  A
Diff: 1
Key Term:  Logistics management
Objective:  LO 11.5 Explain major issues in logistics management
Learning Outcome:  Compare common approaches to supply chain design


7) 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?

1. A) damage record
2. B) on-time delivery
3. C) door-to-door service
4. D) speed of shipment
5. E) consolidation capabilities

Answer:  D
Diff: 2
Key Term:  Logistics management
Objective:  LO 11.5 Explain major issues in logistics management
Learning Outcome:  Compare common approaches to supply chain design
8) Warehouses sometimes perform certain other functions besides storing goods. Which of the following is NOT typically one of those functions?

1. A) purchasing
2. B) postponement
3. C) break-bulk activities
4. D) consolidation point
5. E) cross-docking

Answer:  A
Diff: 2
Key Term:  Logistics management
Objective:  LO 11.5 Explain major issues in logistics management
Learning Outcome:  Compare common approaches to supply chain design

9) ________ postpones final assembly of a product so the distribution channel can assemble it.
Answer:  Channel assembly
Diff: 2
Key Term:  Channel assembly
Objective:  LO 11.5 Explain major issues in logistics management
Learning Outcome:  Compare common approaches to supply chain design

10) ________ is an approach that seeks efficiency of operations through the integration of all material acquisition, movement, and storage activities.
Answer:  Logistics management
Diff: 2
Key Term:  Logistics management
Objective:  LO 11.5 Explain major issues in logistics management
Learning Outcome:  Compare common approaches to supply chain design

11) What is the trucking industry doing to improve efficiency?
Answer:  Trucking firms are using computers to monitor weather, find the most effective route, reduce fuel cost, and analyze the most efficient way to unload. To improve logistics efficiency, the industry is establishing Web sites such as Schneider National's connection (www.schneider.com), which lets shippers and truckers find each other.
Diff: 3
Key Term:  Logistics management
AACSB:  Information technology
Objective:  LO 11.5 Explain major issues in logistics management
Learning Outcome:  Compare common approaches to supply chain design

12) Why is channel assembly popular in the personal computer industry?
Answer:  Channel assembly is popular in the personal computer industry because of better market response with less investment. This is possible because the late-stage assembly and customization is a natural part of a rapidly changing industry. With this strategy, finished-goods inventory is reduced because units are built to a shorter, more accurate forecast.
Diff: 3
Key Term:  Channel assembly
Objective:  LO 11.5 Explain major issues in logistics management
Learning Outcome:  Compare common approaches to supply chain design
13) Supply chain managers outsource logistics to meet what three goals?
Answer:  (1) drive down inventory investment; (2) lower delivery costs; (3) improve delivery reliability and speed
Diff: 3
Key Term:  Logistics management
Objective:  LO 11.5 Explain major issues in logistics management
Learning Outcome:  Compare common approaches to supply chain design

14) What are several advantages of shipping by truck?
Answer:  The advantages of shipping by truck include flexibility, on-time behavior, no damage, paperwork in order, and low cost.
Diff: 2
Key Term:  Logistics management
Objective:  LO 11.5 Explain major issues in logistics management
Learning Outcome:  Compare common approaches to supply chain design

Section 8   Distribution Management

1) As the number of facilities increases, total logistics costs tend to follow a curve that first rises, then declines.
Answer:  FALSE
Diff: 2
Objective:  LO 11.5 Explain major issues in logistics management
Learning Outcome:  Compare common approaches to supply chain design

2) Designing distribution networks to meet customer expectations suggests three criteria: (1) rapid response, (2) cost, and (3) service.
Answer:  FALSE
Diff: 3
Learning Outcome:  Compare common approaches to supply chain design

3) Once revenue and total logistics costs are considered together, the optimal number of facilities in a distribution network may decrease compared to the optimal number of facilities based on total logistics costs only.
Answer:  FALSE
Diff: 2
Learning Outcome:  Compare common approaches to supply chain design


4) Distribution management focuses on which of the following?

1. A) the outbound flow of products
2. B) incoming materials
3. C) allocation of demand among suppliers
4. D) setting dividend rates
5. E) balancing an assembly line

Answer:  A
Diff: 1
Learning Outcome:  Compare common approaches to supply chain design
5) Designing distribution networks to meet customer expectations suggests what three criteria?

1. A) rapid response, service, and cost
2. B) rapid response, product choice, and service
3. C) product choice, cost, and service
4. D) cost, process choice, and service
5. E) rapid response, cost, and process choice

Answer:  B
Diff: 2
Learning Outcome:  Compare common approaches to supply chain design

6) What three logistics-related costs are relevant when analyzing the choice of number of facilities in a distribution network?

1. A) inventory costs, production costs, and transportation costs
2. B) inventory costs, production costs, and facility costs
3. C) inventory costs, transportation costs, and facility costs
4. D) facility costs, production costs, and transportation costs
5. E) facility costs, inventory costs, and marketing costs

Answer:  C
Diff: 2
Learning Outcome:  Compare common approaches to supply chain design

7) As the number of facilities increases, total logistics costs tend to follow a curve that first declines, then rises. Why?

1. A) Transportation and inventory costs first decline steeply, then rise, while facility costs always rise.
2. B) Transportation costs always decline, but eventually the rise in facility and inventory costs outweigh the declining transportation costs.
3. C) Facility costs first decline steeply, then rise, while transportation and inventory costs always rise.
4. D) Transportation costs first decline steeply, then rise, while facility and inventory costs always rise.
5. E) Inventory costs first decline steeply, then rise, while transportation and facility costs always rise.

Answer:  D
Diff: 3
Objective:  LO 11.5 Explain major issues in logistics management
Learning Outcome:  Compare common approaches to supply chain design


8) Which of the following statements does NOT accurately explain what occurs when the number of facilities in a distribution network increases?

1. A) response time decreases
2. B) profit first increases, then decreases
3. C) total logistics costs first decrease, then increase
4. D) inventory costs increase
5. E) response time first decreases, then increases

Answer:  E
Diff: 2
Objective:  LO 11.5 Explain major issues in logistics management
Learning Outcome:  Compare common approaches to supply chain design
9) ________ management focuses on the outbound flow of products.
Answer:  Distribution
Diff: 2
Learning Outcome:  Compare common approaches to supply chain design

10) Explain why once revenue and total logistics costs are considered together, the optimal number of facilities in a distribution network may well increase compared to the optimal number of facilities based on total logistics costs only. Include details about the behavior of relevant cost and revenue elements.
Answer:  Total logistics costs are comprised of inventory, transportation, and facility costs. While inventory and facility costs always increase in the number of facilities, transportation costs first decline steeply, then rise. This causes the total logistics cost curve to first decline, then rise, suggesting a certain optimal number of facilities. However, on the revenue side, increasing the number of facilities always decreases response time, which should increase revenue (better customer service). Therefore, when these revenue implications are considered, the total profit (revenue - cost) may suggest more facilities than a cost analysis alone would imply.
Diff: 3
AACSB:  Reflective thinking
Learning Outcome:  Compare common approaches to supply chain design

Section 9   Ethics and Sustainable Supply Chain Management

1) Because the supply chain has become so electronic and automated, opportunities for unethical behavior have been greatly reduced.
Answer:  FALSE
Diff: 1
AACSB:  Ethical understanding and reasoning
Learning Outcome:  Compare common approaches to supply chain design

2) The Institute for Supply Management:

1. A) establishes laws and regulations for supply management.
2. B) is an agency of the United Nations charged with promoting ethical conduct globally.
3. C) publishes the principles and standards for ethical supply management conduct.
4. D) prohibits backward integration into developing economies.
5. E) grants Ph.D. degrees in purchasing.

Answer:  C
Diff: 3
AACSB:  Ethical understanding and reasoning
Learning Outcome:  Compare common approaches to supply chain design

3) In supply chain management, ethical issues:

1. A) are particularly important because of the enormous opportunities for abuse.
2. B) may be guided by company rules and codes of conduct.
3. C) become more complex the more global is the supply chain.
4. D) may be guided by the principles and standards of the Institute for Supply Management.
5. E) All of the above are true.

Answer:  E
Diff: 2
AACSB:  Ethical understanding and reasoning
Learning Outcome:  Compare common approaches to supply chain design
4) What term describes a supply chain that is designed to optimize both forward and reverse flows?

1. A) closed-loop supply chain
2. B) full-journey supply chain
3. C) circular supply chain
4. D) network supply chain
5. E) recycled supply chain

Answer:  A
Diff: 2
Key Term:  Closed-loop supply chains
AACSB:  Ethical understanding and reasoning
Learning Outcome:  Compare common approaches to supply chain design

5) Which of the following is NOT true about reverse logistics as compared to forward logistics?

1. A) Inventory management is not consistent.
2. B) Distribution costs are less directly visible.
3. C) Pricing is dependent upon many factors.
4. D) Speed is often very important.
5. E) Forecasting is more uncertain.

Answer:  D
Diff: 2
Key Term:  Reverse logistics
AACSB:  Ethical understanding and reasoning
Learning Outcome:  Compare common approaches to supply chain design

6) The ________ is an organization that has developed principles and standards for ethical supply management conduct.
Answer:  Institute for Supply Management
Diff: 2
AACSB:  Ethical understanding and reasoning
Learning Outcome:  Compare common approaches to supply chain design

7) ________ is the process of sending returned products back up the supply chain for value recovery or disposal.
Answer:  Reverse logistics
Diff: 2
Key Term:  Reverse logistics
AACSB:  Ethical understanding and reasoning
Learning Outcome:  Compare common approaches to supply chain design

8) Of all areas of the organization, why is the supply chain especially vulnerable to ethical lapses?
Answer:  The supply chain offers more opportunities for ethical issues than some other functions in the organization. Some of these opportunities arise from the large sums of money involved. Perhaps these opportunities arise because of the close and long-term personal contact between buyer and seller. Globalization adds even more complexity to the decisions made in the supply chain.
Diff: 2
AACSB:  Ethical understanding and reasoning
Learning Outcome:  Compare common approaches to supply chain design
Section 10   Measuring Supply Chain Performance

1) Benchmark firms have driven down costs of supply-chain performance.
Answer:  TRUE
Diff: 2
Objective:  LO 11.6 Compute the percentage of assets committed to inventory and inventory turnover
Learning Outcome:  Discuss options for measuring supply chain performance

2) Consider a firm with an annual 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?

12. A) 12.50
13. B) 10.00
14. C) 42.00
15. D) 4.16
16. E) 20.00

Answer:  A
Diff: 2
Key Term:  Inventory turnover
AACSB:  Analytical thinking
Objective:  LO 11.6 Compute the percentage of assets committed to inventory and inventory turnover
Learning Outcome:  Discuss options for measuring supply chain performance

3) Consider a firm with an annual 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?

12. A) 12.50
13. B) 5.20
14. C) 2.60
15. D) 0.08
16. E) 4.16

Answer:  E
Diff: 2
AACSB:  Analytical thinking
Objective:  LO 11.6 Compute the percentage of assets committed to inventory and inventory turnover
Learning Outcome:  Discuss options for measuring supply chain performance


4) Which of the following is NOT one of the five parts of the Supply Chain Operations Reference (SCOR) model?

1. A) Make
2. B) Sell
3. C) Plan
4. D) Source
5. E) Return

Answer:  B
Diff: 2
Key Term:  Supply Chain Operations Reference (SCOR) model
Objective:  LO 11.6 Compute the percentage of assets committed to inventory and inventory turnover
Learning Outcome:  Discuss options for measuring supply chain performance
5) The ________ is a set of processes, metrics, and best practices developed by the Supply Chain Council.
Answer:  Supply Chain Operations Reference model or SCOR model
Diff: 2
Key Term:  Supply Chain Operations Reference (SCOR) model
Objective:  LO 11.6 Compute the percentage of assets committed to inventory and inventory turnover
Learning Outcome:  Discuss options for measuring supply chain performance

6) Identify three specific measures that indicate how well assets are utilized. What are the formulas for each measure?
Answer:  Percent invested in inventory = (Average inventory investment/Total assets) × 100
Inventory turnover = Cost of goods sold/Average inventory investment
Weeks of supply = Average inventory investment/(Annual cost of goods sold/52 weeks)
Diff: 2
Key Term:  Inventory turnover
Objective:  LO 11.6 Compute the percentage of assets committed to inventory and inventory turnover
Learning Outcome:  Discuss options for measuring supply chain performance


7) The following data are pulled from a recent Walsh Manufacturing annual report.

Assets
Raw material inventory                             $120,000
Work-in-process inventory                         $50,000
Finished goods inventory                         $300,000
Property, plant & equipment                   $500,000
Other assets                                                 $200,000
Total assets                                               $1,170,000

Condensed Income Statement
Revenue                                                     $2,000,000
Cost of goods sold                                       $600,000
Other expenses                                         $1,000,000
Net income                                                   $400,000

Calculate: (a) Percent invested in inventory, (b) Inventory turnover, and (c) Weeks of supply.
Answer:
(a) Percent invested in inventory = (120,000 + 50,000 + 300,000)/1,170,000 = 40.17%
(b) Inventory turnover = 600,000/(120,000 + 50,000 + 300,000) = 1.28
(c) Weeks of supply = (120,000 + 50,000 + 300,000)/(600,000/52) = 40.73
Diff: 2
Key Term:  Inventory turnover
AACSB:  Analytical thinking
Objective:  LO 11.6 Compute the percentage of assets committed to inventory and inventory turnover
Learning Outcome:  Discuss options for measuring supply chain performance
8) A manufacturing plant averaged $740 of raw materials, $230 of work-in-process inventory, and $1030 of finished goods inventory during the month. If the cost of goods sold this month amounted to $10,000, what is the inventory turnover for the month?
Answer:  Monthly inventory turnover = Monthly cost of goods sold / Average inventory Investment
= $10,000 / ($740 + $230 + $1030) = 5
Diff: 2
Key Term:  Inventory turnover
AACSB:  Analytical thinking
Objective:  LO 11.6 Compute the percentage of assets committed to inventory and inventory turnover
Learning Outcome:  Discuss options for measuring supply chain performance

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OPERATIONS MANAGEMENT - 2017 - COLLECTION

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Operations Management, 2015, 12th Edition, William J. Stevenson - Free Download Link
Operations Management, Sustainability and Supply Chain Management, 11th Edition, 2014, Jay Heizer, Barry Render - Free Download Link

Operations Management: Sustainability and Supply Chain Management, 12th Edition, Jay Heizer, Barry Render, Chuck Munson, 2017
Principles of Operations Management: Sustainability and Supply Chain Management, 10th Edition, 2017
Operations Research: An Introduction, 10th Edition, Hamdy A. Taha, 2017
Introduction to Operations and Supply Chain Management, 4th Edition, Cecil B. Bozarth, Robert B. Handfield, 2016 
Operations Management: Processes and Supply Chains, 11th Edition, Lee J. Krajewski, Manoj K. Malhotra, Larry P. Ritzman, 2016

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1. Operations Management: Sustainability and SCM, 12th Edition, Jay Heizer, 2017

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3. Principles of Operations Management: Sustainability and SCM, 10th Ed, Jay Heizer, 2017

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4. Operations Management, 2017, 12th Edition, William J. Stevenson

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5. Operations Management: Processes and Supply Chains, 11th Edition, Lee J. Krajewski, 2016

6. Operations Research: An Introduction, 10th Edition, Hamdy A. Taha, 2017
7. Introduction to Operations and SCM, 4th Edition, Cecil B. Bozarth, Robert B. Handfield, 2016 

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