Deck 2: Supply Chain Management

Question 1

Backward integration describes the practice of gaining control over supplies by acquiring a controlling interest in one or more of a company's major suppliers .

Answer 1

True

Question 2

Forward placement means locating stock closer to the manufacturing facility.

Answer 2

False

Question 3

The order-fulfillment process involves the activities to deliver a product or service to the customer.

Answer 3

True

Question 4

The finished goods of one firm may actually be the raw materials for another firm.

Question 5

Forward placement is a reduction in inventory and safety stock because of the merging of variable demands from customers.

Question 6

In presourcing,suppliers are selected early in the concept development stage.

Question 7

Green purchasing involves identifying,assessing,and managing the flow of environmental waste and finding ways to reduce it and minimize its impact on the environment.

Question 8

The competitive orientation to supplier relations is that the buyer and supplier are partners.

Question 9

An electronic marketplace where buying and selling firms come together to do business is called a catalog hub.

Question 10

Postponement is a tactic used by mass-customization firms to delay the customization of a product or service until the last possible moment.

Question 11

Make-to-stock firms tend to use the postponement tactic.

Question 12

Sole sourcing is the awarding of a contract for an item or service to only one supplier.

Question 13

Value analysis is a systematic effort to reduce the cost or improve the performance of products or services.

Question 14

Sole sourcing of an item is never a good tactic.

Question 15

The most used form of e-purchasing today is electronic data interchange.

Question 16

Vendor-managed inventories are an example of the forward placement tactic.

Question 17

Supply-chain management is the synchronization of firm's processes and those of its suppliers to match the flow of materials,services,and information with customer demand.

Question 18

Inventory is a stock of material used to satisfy customer demand or support the production of goods and services.

Question 19

Work-in-process inventory is considered an input to the transformation processes of the firm.

Question 20

Manufacturing firms typically enter into contracts with Tier 2 suppliers with the expectation that these suppliers will then incorporate the guidelines of these contracts into the agreements they in turn enter into with Tier 1 suppliers.

Question 21

Efficient supply chains work best when product variety is low.

Question 22

A common disruption of the external supply chain is product and service mix changes.

Question 23

Relative to centralized buying,localized buying has the advantage of increasing purchasing clout.

Question 24

Centralized purchasing is more likely to be followed for commodity-based purchases than for specialized parts and services.

Question 25

The extreme situation of a cooperative orientation to supplier relations is sole sourcing.

Question 26

Because of the bull-whip effect,ordering patterns in supply chains typically show less variance the further upstream you move in the supply chain.

Question 27

Efficient supply chains aggressively try to shorten lead time.

Question 28

The percentage of incomplete orders shipped is a performance measure for the purchasing process of supply chain management.

Question 29

Offshoring is a supply chain strategy that involves moving processes to another country.

Question 30

Efficient supply chains use low capacity cushions.

Question 31

Efficient supply chains work best when contribution margins are high.

Question 32

The bull-whip effect is the general tendency toward increasing variation in demand and inventory levels as you move further away from the end customer in the supply chain.

Question 33

Internal and external disruptions in the supply chain typically result in higher variability as you move upstream in the supply chain.

Question 34

A cooperative orientation to supplier relations views negotiations between buyer and seller as a zero-sum game.

Question 35

A common disruption of the external supply chain is engineering changes.

Question 36

Responsive supply chains work best with predictable demand.

Question 37

A common disruption of the internal supply chain is information errors.

Question 38

Responsive supply chains work best when frequent product introduction exists.

Question 39

Postponement is an organizational concept whereby members of the distribution channel are used as if they were assembly stations in the factory.

Question 40

Inventory turnover is obtained by dividing the average aggregate inventory value by sales per week at cost.

Question 41

The performance of a logistics process is indirectly linked to its capacity and variability of demand.

Question 42

The new service or product development process is a core process that fundamentally shapes the supply chain.

Question 43

The order fulfillment process produces and delivers the service or product to the firm's customers.

Question 44

Which one of the following statements is TRUE about purchasing?

A) Purchasing must satisfy the firm's long-term supply needs.
B) Purchasing's primary role should be placing and tracking orders.
C) Purchasing's primary role is to negotiate lower prices.
D) Purchasing's primary role is to negotiate prices and delivery dates.

Question 45

Which one of the following statements on inventory placement of finished goods is best?

A) Forward placement might help reduce transportation cost.
B) Forward placement is consistent with a competitive priority that calls for customization.
C) Inventory pooling should be avoided when demand in various regions fluctuates month to month.
D) Backward placement is consistent with a competitive priority that calls for fast delivery times.

Question 46

The new service/product development process begins with the old item and ends with the launch of the new offering.

Question 47

Customer service is an important point of contact between the firm and its customers.

Question 48

A cross-docking warehouse holds inventory from manufacturers until retailers are prepared to sell the items.

Question 49

For improving the efficiency and productivity of a complex supply chain,a company should do which of the following?

A) Never adopt backward vertical integration.
B) Enter into agreements with first-tier suppliers, and let them manage their suppliers.
C) Adopt backward vertical integration or enter into agreements with first-tier suppliers.
D) Adopt backward vertical integration, but avoid writing agreements with first-tier suppliers.

Question 50

Purchasing power determines the clout that a firm has.

Question 51

The supplier relationship process focuses on the interaction of the firm and upstream suppliers.

Question 52

Which one of the following statements regarding supplier selection criteria is TRUE?

A) Suppliers should be selected on the basis of price only because the cost of materials is a significant portion of total product cost.
B) Suppliers should be selected on the basis of quality, price, and delivery.
C) Suppliers should be selected primarily on the basis of the shortest lead time because higher lead time increases the cost of inventory.
D) Suppliers should be selected on the basis of quality because quality is always the most important characteristic of a product.

Question 53

The practice of locating stock closer to customers at a warehouse,distribution centre,wholesaler,or retailer is referred to as

A) inventory pooling.
B) vendor managed inventories.
C) forward placement.
D) channel assembly.

Question 54

A catalog hub is a central distribution point where buyers may purchase items directly from manufacturers before the items are shipped to retailers.

Question 55

The customer relationship process addresses the interface between the supplier and its customers downstream in the supply chain.

Question 56

In presourcing,suppliers are selected early in the concept-development stage.

Question 57

Which one of the following is TRUE for supply chain management?

A) Supply chain concept applies to both manufacturing and service organizations.
B) Supply chain applies only to manufacturing because it deals with flow of materials.
C) Supply chain is about suppliers and does not include distributors or customers.
D) Supply chain includes any operation that deals with materials.

Question 58

The practice of having the supplier monitor inventory levels at its customer and replenishing the stock as needed to avoid shortages is referred to as

A) continuous replenishment vendor-managed inventory.
B) inventory pooling.
C) channel assembly of vendor-managed inventory.
D) forward placement.

Question 59

The basic purpose of supply chain management is to

A) create an exclusive set of suppliers who will not supply your competitors.
B) link your customers together so that the flow of materials remains under control.
C) synchronize the operations of all suppliers with those of purchasing, production, distribution, and customers.
D) reduce the inventory by proper selection of customers and transportation modes.

Question 60

Green purchasing involves identifying,assessing,and managing the flow of environmental waste and finding ways to reduce it and minimize its impact on the environment.

Question 61

Responsive supply chains would be preferred when

A) product variety is low.
B) demand is predictable.
C) contribution margins are low.
D) product variety is high.

Question 62

Some manufacturers and service providers want to measure the performance of supply chain by the percentage of on-time deliveries.The main reason for this measure is

A) it will discourage the competitors to enter the market.
B) it measures the satisfaction levels of suppliers.
C) increased on-time delivery increases revenue by inducing customers to buy more products from the firm.
D) it helps accounting to debit customer's accounts promptly.

Question 63

It is recommended that a firm in the higher echelon of an efficient supply chain have

A) delivery by air.
B) high-capacity cushions.
C) low inventory investments.
D) low-capacity utilization.

Question 64

The type of goods for which a responsive supply chain is appropriate are

A) fashion goods.
B) products with a long shelf life.
C) expensive products.
D) those with infrequent design changes.

Question 65

Which one of the following statements is TRUE?

A) A buying firm should always adopt a competitive orientation for a standard item with high demand.
B) Single sourcing is always desirable for high demand items.
C) Long-term contracts are consistent with a cooperative orientation to supplier relationships.
D) The buyer always wins in a competitive orientation to supplier relationships.

Question 66

Which one of the following statements about the relation between financial and supply chain performance measures is TRUE?

A) Longer delivery times require higher levels of working capital.
B) Shorter new product development time decreases revenue.
C) Higher inventory turns call for higher working capital requirement.
D) Lower aggregate inventory value means higher current assets.

Question 67

Henderson Corporation is a supplier of alloy ball bearings to auto manufacturers in Windsor.Because of the specialized manufacturing process employed,considerable work-in-process and raw material inventories are created.The current inventory levels are $1,152,000 and $2,725,000,respectively.In addition,finished goods inventory is $3,225,000,and sales (at cost)for the current year are expected to be about $24 million.The inventory turnover that Henderson Corporation is currently expecting is

A) less than 2.0.
B) greater than or equal to 2.0 but less than 2.5.
C) greater than or equal to 2.5 but less than 3.0.
D) greater than or equal to 3.0.

Question 68

A firm in the higher echelon of an efficient supply chain is likely to have

A) high-capacity utilization.
B) low inventory turns.
C) high-capacity cushions.
D) a flexible flow process.

Question 69

The average inventory at Hamilton Industries,comprising raw materials,work-in-process,and finished goods,was found to be $17.2 million last year.If the cost of goods sold per week averaged $1.32 million,what was the inventory turnover experienced by Hamilton Industries? Assume the company had 50 working weeks per year.

A) less than or equal to 3.50
B) greater than or equal to 3.50 but less than 3.75
C) greater than or equal to 3.75 but less than 4.00
D) greater than or equal to 4.00

Question 70

Which one of the following statements correctly represents a benefit of centralized buying?

A) Local managers have more control over their business.
B) Purchases and production schedules are meshed more easily.
C) Purchasing lead times may be shorter.
D) Increased buying power can result in significant savings in purchasing costs.

Question 71

Which of the following statements does NOT represent a positive link between supply chain performance and the financial status of a firm?

A) Lowering the cost of purchased materials reduces the level of working capital required and has a positive impact on the contribution margin.
B) Reduced inventory levels result in an increase in the percentage of partial orders shipped and an increased inventory turnover ratio.
C) Percentage of orders shipped on time reduces the level of working capital required and supports increased sales.
D) Reducing supplier lead times reduces the level of working capital required.

Question 72

Which one of the following statements is TRUE about a cooperative orientation in supplier relationships?

A) It cannot be implemented in Western countries because competitive bidding is more effective in that culture.
B) It cannot be implemented in the Western countries because it always benefits the supplier.
C) It requires all parts and subassemblies to be purchased from the same supplier.
D) It requires few suppliers for each item or service.

Question 73

The type of goods for which efficient supply chain is appropriate is

A) high product cost.
B) frequent design changes.
C) high contribution margin.
D) standardized products.

Question 74

Maple Leaf,Inc.,a television manufacturer,would like to reduce its inventory.To this end,you are asked by the operations manager to assess its inventory level.You have the following information on inventories from last year's financial statement:
Raw materials $2,500,000
Work-in-process $1,000,000
Finished goods $ 800,000
In addition,the cost of goods sold last year (50 weeks)was $15 million.What was the inventory turnover?

A) less than or equal to 2
B) greater than or equal to 2 but less than 3
C) greater than or equal to 3 but less than 4
D) greater than or equal to 4

Question 75

It is desirable for a firm in the higher echelon of an efficient supply chain to have

A) high-capacity cushions.
B) delivery by air.
C) a line flow process.
D) high inventory investment.

Question 76

Which one of the following statements is TRUE about a competitive orientation in supplier relationships?

A) It tends to emphasize short-term advantages over long-term commitments.
B) The supplier gains repeatability and can move toward a line flow process.
C) The supplier is obliged to offer the lowest possible price every time.
D) The supplier is obliged to deliver the material in the shortest possible time, every time.

Question 77

One of the benefits of a cooperative orientation in supplier relationships is

A) the buyer sometimes suggests ways to improve the supplier's operations.
B) the supplier implements its own quality standards.
C) the buyer does not have to share much information with the supplier.
D) the supplier has complete freedom in choosing the delivery time.

Question 78

Efficient supply chain would be preferred when

A) product variety is high.
B) competitive priority is customization.
C) demand is highly predictable.
D) demand is unpredictable.

Question 79

Of the following measures of supply chain performance,which is likely to have the most direct and measurable impact on a company's financial performance based on the reduction in the level of working capital required?

A) percentage of suppliers' deliveries received on time
B) percentage of incomplete orders shipped
C) customer satisfaction with the order-fulfillment process
D) time required to fulfill orders

Question 80

Last year,CMS Enterprises had total inventories (raw materials,work-in-process,and finished goods)of $5.5 million.During this same year the cost of goods sold was $22 million.The company operates 52 weeks per year.What is the total inventory (measured as weeks of supply)held by CMS Enterprises last year?

A) less than or equal to 10 weeks of supply
B) greater than 10 but less than or equal to 12 weeks of supply
C) greater than 12 but less than or equal to 14 weeks of supply
D) greater than 14 weeks of supply