Deck 6: Designing Global Supply Chain Networks

Question 1

Appropriate flexibility is an effective approach for a global supply chain to deal with a variety of risks and uncertainties.Extra flexibility is always worth the cost.

Answer 1

False

Question 2

Strategic planning and financial planning should be combined during supply chain network design.

Answer 2

True

Question 3

Offshoring typically lowers labor,working capital and fixed costs but increases risk and freight costs.

Answer 3

False

Question 4

In a complex decision tree,there are thousands of possible paths that may result from the first period to the last.

Question 5

A firm may choose to build a flexible global supply chain even in the presence of little demand or supply uncertainty if certainty exists in exchange rates or prices.

Question 6

Simulation methods are very good at evaluating a decision where the path itself is decision dependent.

Question 7

Discounted cash flow (DCF)analysis evaluates the present value of any stream of future cash flows and allows management to compare two streams of cash flows in terms of their financial value.

Question 8

The present value of a stream of cash flows is what that stream is worth in today's dollars.

Question 9

The main advantage of simulation models is that they can provide low-cost evaluations of complex situations.

Question 10

When faced with uncertain conditions,it is always best to sign long-term contracts (because they are typically cheaper)and avoid all flexible capacity (because it is more expensive).

Question 11

The degree of demand and price uncertainty has a significant influence on the appropriate portfolio of long- and short-term warehousing space that a firm should carry.

Question 12

Decisions made during the supply chain design phase regarding significant investments in the supply chain,such as the number and size of plants to build,the number of trucks to purchase or lease,and whether to build or lease warehouse space,cannot be altered in the short term.

Question 13

If price and demand vary over time in a global network,flexible production capacity can be reconfigured to maximize profits in the new environment.

Question 14

The value of flexibility increases with an increase in uncertainty.

Question 15

A negative NPV for an option indicates that the option will lose money for the supply chain.

Question 16

The rate of return k is also referred to as the present value of capital.

Question 17

Financial analysis should be used as an input to decision making,not as the decision-making process.

Question 18

Long-term contracts for both warehousing and transportation requirements will be more effective if the demand and price of warehousing do not change in the future or if the price of warehousing goes up.

Question 19

In reality,demand and prices are highly uncertain and are likely to fluctuate during the life of any supply chain decision.

Question 20

During network design,managers need a methodology that allows them to estimate the certainty in their forecast of demand and price and then incorporate this certainty into the decision-making process.

Question 21

Which technique can be used to lower shipping costs if several components are being sourced globally from different locations?

A)Offshoring all components rather than a subset of them
B)Use of faster modes of transportation
C)Assembly and retail in offshored locations
D)Use of supplier hubs

Question 22

When evaluating the total cost of offshoring,the raw material costs

A)will usually increase.
B)will usually decrease.
C)could increase or decrease depending on sourcing.
D)will be eliminated.

Question 23

A global supply chain with offshoring would tend to see metrics associated with which of these performance dimensions decline in performance?

A)Inventories
B)On time delivery
C)Supply chain visibility
D)Clarity of order communication

Question 24

Decisions made during the supply chain design phase regarding significant investments in the supply chain,such as the number and size of plants to build,the number of trucks to purchase or lease,and whether to build or lease warehouse space,

A)are realigned every few weeks.
B)should be revisited quarterly.
C)only remain in place for a few weeks.
D)often remain in place for several years.

Question 25

Which of these was NOT cited as a factor contributing to decreased attractiveness of offshoring to China over the period 2003 to 2008?

A)Increase in labor costs
B)Increase in transportation costs
C)Increase in labor content
D)Strengthening of Chinese yuan against the U.S.dollar

Question 26

A labor dispute is a risk driver to be considered during network design.What category does a "labor dispute" belong to?

A)Disruptions
B)Inventory risk
C)Systems risk
D)Capacity risk

Question 27

Based on the Accenture survey on sources of risk that affect global supply chain performance,which of the following was found to have affected the lowest percentage of supply chains?

A)shortage of skilled resources
B)currency fluctuation
C)inflexible supply chain technology
D)terrorist infiltration of cargo

Question 28

Based on the Accenture survey on sources of risk that affect global supply chain performance,which of the following was found to have affected the highest percentage of supply chains?

A)shortage of skilled resources
B)volatility of fuel prices
C)inflexible supply chain technology
D)customs delays

Question 29

The tailored strategy "Focus on low-cost,decentralized capacity for predictable demand" follows which risk mitigation strategy?

A)Get redundant suppliers.
B)Increase capacity.
C)Increase responsiveness.
D)Increase inventory.

Question 30

A global supply chain with offshoring would tend to see metrics decline associated with which of these performance dimensions?

A)Working capital
B)On-time delivery
C)Stockouts
D)Product returns

Question 31

A global supply chain with offshoring would tend to see which of these performance dimensions increase?

A)Labor costs
B)On time delivery
C)Supply chain visibility
D)Minimum order quantity

Question 32

Decisions made during the supply chain design phase regarding significant investments in the supply chain,such as the number and size of plants to build,the number of trucks to purchase or lease,and whether to build or lease warehouse space,

A)define the boundaries within which the supply chain must compete.
B)have little impact on how the supply chain must compete.
C)are irrelevant regarding how the supply chain will compete.
D)are the only consideration regarding how the supply chain will compete.

Question 33

Decisions made during the supply chain design phase regarding significant investments in the supply chain,such as the number and size of plants to build,the number of trucks to purchase or lease,and whether to build or lease warehouse space,

A)can be altered in the short term.
B)cannot be altered in the short term.
C)cannot be altered in the long term.
D)can only be altered in the short term.

Question 34

The opportunities from globalization are often accompanied by

A)a lack of domestic opportunities.
B)the need to eliminate the accounting function.
C)significant additional risk.
D)the need to eliminate the logistics function.

Question 35

One way to lower transportation costs of globally sourced production is to

A)use online ordering when possible.
B)redesign components for greater transport density.
C)increase the labor content of the components.
D)decrease the labor content of the components.

Question 36

As Adam Smith put it so eloquently in the Wealth of Nations,"If a foreign country can supply us with a commodity cheaper than we ourselves can make it,...

A)...it is only right that we should learn their method of production,so that we too can master the commodity..."
B)...then we would be well-served to include them in our supply chain..."
C)...better buy it from them with some part of our own industry..."
D)...we should barter with them or take it by force if they prove to be unreasonable..."

Question 37

Offshoring to low-cost countries is most attractive for products with

A)large production volume.
B)high variety.
C)low labor content.
D)a high ratio of transportation cost to product value.

Question 38

A global supply chain with offshoring would tend to see which of these performance dimensions decrease?

A)Working capital
B)Hidden costs
C)Supply chain visibility
D)Product returns

Question 39

A global supply chain with offshoring

A)reduces the duration of the cash flow and reduces the length of the product flow.
B)increases the length of the product flow and increases the duration of the information flow.
C)increases the duration of the cash flow but reduces the duration of the information flow.
D)reduces the length of the product flow and reduces the length of the information flow.

Question 40

Crossing international borders with offshored goods is most closely linked to a change in

A)unit cost.
B)quality.
C)product returns.
D)taxes and tariffs.

Question 41

The decision with the highest NPV (net present value)will provide a supply chain with

A)the highest financial return.
B)the lowest financial return.
C)a reasonable financial return.
D)the least desirable financial return.

Question 42

The NPV (net present value)of a cash stream that is equal to $100 per period for 5 periods with a rate of return of 12% per period would be

A)$360.48.
B)$382.98.
C)$403.73.
D)$416.51.

Question 43

What rate of return results in a present value of $432 for $250 received one year from now and another $250 received two years from now?

A)9.89%
B)10.32%
C)10.94%
D)11.37%

Question 44

The net present value (NPV)of a stream of cash flows is equal to

A)the sum of all cash flows for all periods being considered.
B)the sum of all cash flows for all periods being considered divided by the number of periods.
C)the average of all cash flows for all periods being considered multiplied by the number of periods.
D)the sum of all cash flows for all periods being considered discounted by the rate of return for each period.

Question 45

The process of evaluating the present value of any stream of future cash flows so that management can compare two streams of cash flows in terms of their financial value is

A)annual cash flow (ACF)analysis.
B)discretionary cash flow (DCF)analysis.
C)discounted cash flow (DCF)analysis.
D)future cash flow (FCF)analysis.

Question 46

The discount factor used to obtain the present value of money in the next period where k represents the rate of return is

A)k.
B)1 + k.
C)1/(1 + k).
D)k /(1 + k).

Question 47

The rate of return k is also referred to as the

A)discount rate.
B)hurdle rate.
C)opportunity cost of capital.
D)all of the above

Question 48

The present value of a future stream of cash flows is what that stream

A)was worth in yesterday's dollars.
B)is worth in today's dollars.
C)will be worth in future dollars.
D)might be worth in future dollars.

Question 49

What type of network design is represented in the diagram?

A)Dedicated network
B)Fully flexible network
C)Chained network with one long chain
D)Chained network with two long chains

Question 50

As flexibility is increased,

A)the marginal benefit of additional flexibility is decreased.
B)the marginal benefit of additional flexibility is increased.
C)the total cost of flexibility is decreased.
D)the total flexibility is decreased.

Question 51

What type of network design is represented in the diagram?

A)Dedicated network
B)Fully flexible network
C)Chained network with one long chain
D)Chained network with two long chains

Question 52

When supply disruptions occur,

A)smaller chains outperform a network with one long chain.
B)one long chain outperforms a network with several smaller chains.
C)a dedicated network outperforms a network with one long chain.
D)a dedicated network outperforms a network with several smaller chains.

Question 53

The ability to produce a variety of products within a short period of time is called

A)modular flexibility.
B)chained flexibility.
C)volume flexibility.
D)mix flexibility.

Question 54

A negative NPV (net present value)for an option indicates that the option will

A)gain money for the supply chain.
B)lose money for the supply chain.
C)maximize profit for the supply chain.
D)minimize profit for the supply chain.

Question 55

What type of network design is represented in the diagram?

A)Dedicated network
B)Fully flexible network
C)Chained network with one long chain
D)Chained network with two long chains

Question 56

A chained network configuration means that

A)all plants in the network are capable of producing one product.
B)all plants in the network are capable of producing all products.
C)each plant in the network is capable of producing at least two products.
D)each plant in the network is capable of producing one product.

Question 57

Which of these is a disadvantage of a chained network configuration?

A)The fixed cost of building several small chains far exceeds the cost of building a single long chain.
B)They are effective when dealing with supply disruptions but ineffective when confronted with demand fluctuations.
C)They are incapable of producing the products they are designed for.
D)The effect of any fluctuation ripples to all facilities in the chain.

Question 58

A chained network with one long chain

A)is more flexible than a dedicated network and more costly than a fully flexible network.
B)is more flexible than a dedicated network and less costly than a fully flexible network.
C)is less flexible than a dedicated network and less costly than a fully flexible network.
D)is less flexible than a dedicated network but more costly than a fully flexible network.

Question 59

What rate of return results in a present value of $23 for $25 received one year from now?

A)7.8%
B)8.1%
C)8.4%
D)8.7%

Question 60

The present value of future cash flow is found by

A)locating the correct factor on a z-table.
B)using a discount factor.
C)plotting the function on a graph.
D)adding the total of all future cash flows.

Question 61

Uncertainty in demand and economic factors should be included in the financial evaluation of supply chain design decisions because

A)the exclusion of certainty may have a significant impact on this evaluation.
B)the exclusion of uncertainty will not have a significant impact on this evaluation.
C)the inclusion of certainty may have a significant impact on this evaluation.
D)the inclusion of uncertainty may have a significant impact on this evaluation.

Question 62

The NPV (net present value)of a cash stream that is equal to $75 per period for 5 periods with a rate of return of 15% per period would be

A)$251.41.
B)$289.12.
C)$312.74.
D)$322.44.

Question 63

Scenario 6.1 - The Big Box
Bahouth Ltd.is planning for the next two years of production and debating whether to construct a large cross-dock facility with 40 truck bays or a smaller one with 20 truck bays.The cost to build the large facility is $2 million and the cost to build the small one is $1.2 million.If they construct a large facility and demand is as high as they hope,then operating costs are $450,000 annually.If they construct a large facility and demand is low,then operating costs are $300,000.If they construct a small facility and demand is low,the operating costs are $275,000 but if they experience high demand,the operating cost of a small facility increases to $600,000.After having conducted some market research,they feel that the likelihood of high demand is 0.7 and the likelihood of small demand is 0.3.
Suppose the contractor has found some materials on Craigslist that can drop the construction cost of a large facility to $1,500,000.These materials cannot be used in the construction of the small facility,so its price remains as indicated in Scenario 6.1.Determine the likelihood of high demand that would make the decision maker indifferent between the two alternatives for a two-year time period.

A)1.0
B)0.72
C)0.92
D)0.86

Question 64

Decision tree analysis is based on Bellman's principle,which states that for any choice of strategy in a given state,

A)the optimal strategy is the one that is selected if the entire analysis is assumed to begin in the first period.
B)the optimal strategy is the one that is selected if the entire analysis is assumed to begin in the last period.
C)the optimal strategy in the next period is the one that is selected if the entire analysis is assumed to begin in the last period.
D)the optimal strategy in the next period is the one that is selected if the entire analysis is assumed to begin in the next period.

Question 65

Scenario 6.1 - The Big Box
Bahouth Ltd.is planning for the next two years of production and debating whether to construct a large cross-dock facility with 40 truck bays or a smaller one with 20 truck bays.The cost to build the large facility is $2 million and the cost to build the small one is $1.2 million.If they construct a large facility and demand is as high as they hope,then operating costs are $450,000 annually.If they construct a large facility and demand is low,then operating costs are $300,000.If they construct a small facility and demand is low,the operating costs are $275,000 but if they experience high demand,the operating cost of a small facility increases to $600,000.After having conducted some market research,they feel that the likelihood of high demand is 0.7 and the likelihood of small demand is 0.3.
Use the information from Scenario 6.1 to determine the expected cost of operating a large facility for two years.

A)$810,000
B)$450,000
C)$405,000
D)$2,810,000

Question 66

The appropriate discount rate used in decision tree methodology

A)should be risk-adjusted,and risk may vary by period and decision node.
B)should be risk-adjusted,and risk may not vary by period and decision node.
C)should not be risk-adjusted,and risk may vary by period and decision node.
D)should not be risk-adjusted,and risk may not vary by period and decision node.

Question 67

For a global supply chain,exchange rates and inflation are

A)likely to vary over time in different locations.
B)not likely to vary over time in different locations.
C)not likely to vary over time in any locations.
D)likely to be stable over time in all locations.

Question 68

Flexibility should be valued by taking into account uncertainty in demand and economic factors.In general,flexibility will tend to

A)decrease in value with a decrease in certainty.
B)increase in value with an increase in uncertainty.
C)decrease in value with an increase in uncertainty.
D)increase in value with an increase in certainty.

Question 69

The degree of demand and price uncertainty has

A)no effect on the appropriate portfolio of long- and short-term warehousing space that a firm should carry.
B)a limited influence on the appropriate portfolio of long- and short-term warehousing space that a firm should carry.
C)a minor influence on the appropriate portfolio of long- and short-term warehousing space that a firm should carry.
D)a significant influence on the appropriate portfolio of long- and short-term warehousing space that a firm should carry.

Question 70

A recently-accredited College of Business discovers it is in dire financial trouble and wants to examine demand for services and costs to provide them next year.Market conditions may become more favorable,resulting in a 10% increase in enrollment,with a probability of 0.5,stay the same,with a probability of 0.3,or become less favorable,with a probability of 0.2 and a decrease in enrollment of 10%.There is a 0.9 probability that their costs to provide services will rise by 5% and a 0.1 probability that their costs will be the same.This year,they charge each of their 2000 students $3000 to take a full course load and spend $1500 on each student.
What is the revenue for the college if it experiences an increase in enrollment and an increase in their cost to provide services?

A)$4,000,000
B)$4,400,000
C)$5,465,000
D)$6,600,000

Question 71

Short-term contracts for both warehousing and transportation requirements will be more effective

A)if the demand and price of warehousing do not change in the future.
B)if the price of warehousing goes up in the future.
C)if either demand or the price of warehousing drops in the future.
D)only if demand drops in the future.

Question 72

A decision tree is

A)a graphic device used to evaluate decisions under certainty.
B)a graphic device used to evaluate decisions under uncertainty.
C)a tabular device used to evaluate decisions under certainty.
D)a tabular device used to evaluate decisions under uncertainty.

Question 73

Scenario 6.1 - The Big Box
Bahouth Ltd.is planning for the next two years of production and debating whether to construct a large cross-dock facility with 40 truck bays or a smaller one with 20 truck bays.The cost to build the large facility is $2 million and the cost to build the small one is $1.2 million.If they construct a large facility and demand is as high as they hope,then operating costs are $450,000 annually.If they construct a large facility and demand is low,then operating costs are $300,000.If they construct a small facility and demand is low,the operating costs are $275,000 but if they experience high demand,the operating cost of a small facility increases to $600,000.After having conducted some market research,they feel that the likelihood of high demand is 0.7 and the likelihood of small demand is 0.3.
Use the information from Scenario 6.1 to determine the likelihood of high demand that would make the decision maker indifferent between the two alternatives for a two-year operating time.

A)0.86
B)0.72
C)0.28
D)0.14

Question 74

A recently-accredited College of Business discovers it is in dire financial trouble and wants to examine demand for services and costs to provide them next year.Market conditions may become more favorable,resulting in a 10% increase in enrollment,with a probability of 0.5,stay the same,with a probability of 0.3,or become less favorable,with a probability of 0.2 and a decrease in enrollment of 10%.There is a 0.9 probability that their costs to provide services will rise by 5% and a 0.1 probability that their costs will be the same.This year,they charge each of their 2000 students $3000 to take a full course load and spend $1500 on each student.
What is the probability that the college experiences a decrease in enrollment and an increase in their cost to provide services?

A)0.45
B)0.27
C)0.18
D)0.02

Question 75

Scenario 6.1 - The Big Box
Bahouth Ltd.is planning for the next two years of production and debating whether to construct a large cross-dock facility with 40 truck bays or a smaller one with 20 truck bays.The cost to build the large facility is $2 million and the cost to build the small one is $1.2 million.If they construct a large facility and demand is as high as they hope,then operating costs are $450,000 annually.If they construct a large facility and demand is low,then operating costs are $300,000.If they construct a small facility and demand is low,the operating costs are $275,000 but if they experience high demand,the operating cost of a small facility increases to $600,000.After having conducted some market research,they feel that the likelihood of high demand is 0.7 and the likelihood of small demand is 0.3.
Use the information from Scenario 6.1 to determine the expected cost of operating a small facility for a period of two years.

A)$1,102,500
B)$1,005,500
C)$502,500
D)$2,205,000

Question 76

Scenario 6.1 - The Big Box
Bahouth Ltd.is planning for the next two years of production and debating whether to construct a large cross-dock facility with 40 truck bays or a smaller one with 20 truck bays.The cost to build the large facility is $2 million and the cost to build the small one is $1.2 million.If they construct a large facility and demand is as high as they hope,then operating costs are $450,000 annually.If they construct a large facility and demand is low,then operating costs are $300,000.If they construct a small facility and demand is low,the operating costs are $275,000 but if they experience high demand,the operating cost of a small facility increases to $600,000.After having conducted some market research,they feel that the likelihood of high demand is 0.7 and the likelihood of small demand is 0.3.
Use the information from Scenario 6.1 to determine the total (operating and building)cost of the best alternative for a two year period.

A)$2,000,000
B)$1,200,000
C)$2,205,000
D)$2,810,000

Question 77

In reality,demand and prices are

A)highly certain and not likely to fluctuate during the life of any supply chain decision.
B)highly certain and likely to fluctuate during the life of any supply chain decision.
C)highly uncertain and not likely to fluctuate during the life of any supply chain decision.
D)highly uncertain and likely to fluctuate during the life of any supply chain decision.

Question 78

In a complex decision tree there are

A)only a few possible paths that may result from the first period to the last.
B)less than thirty possible paths that may result from the first period to the last.
C)thousands of possible paths that may result from the first period to the last.
D)an infinite number of possible paths that may result from the first period to the last.

Question 79

Firms should use simulation for evaluating decisions when

A)underlying decision trees are simple and explicit solutions for the underlying decision tree are difficult to obtain.
B)underlying decision trees are very complex and explicit solutions for the underlying decision tree are difficult to obtain.
C)underlying decision trees are simple and explicit solutions for the underlying decision tree are easy to obtain.
D)underlying decision trees are very complex and explicit solutions for the underlying decision tree are easy to obtain.

Question 80

Uncertainty of demand and price

A)drives the value of building flexible production capacity at a plant.
B)eliminates the value of building flexible production capacity at a plant.
C)facilitates the value of building flexible production capacity at a plant.
D)has no effect on the value of building flexible production capacity at a plant.