Deck 11: Supply Chain Management

Question 1

Savings in the supply chain exert more leverage as the firm's net profit margin decreases.

Answer 1

True

Question 2

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 2

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.

Question 3

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

A)low cost
B)response
C)differentiation
D)low cost and response
E)low cost and differentiation

Answer 3

E

Question 4

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?

Question 5

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

A)suppliers
B)distributors
C)wholesalers
D)retailers
E)landscaping contractors

Question 6

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

A)product development skills
B)cost
C)capacity
D)speed
E)flexibility

Question 7

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?

Question 8

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.

Question 9

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?

Question 10

Supply chain decisions are not generally strategic in nature,because purchasing is not a large expense for most firms.

Question 11

A firm that employs a response strategy should minimize inventory throughout the supply chain.

Question 12

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

A)supplier qualification
B)product tracking
C)independent audits
D)refrigeration
E)just-in-time delivery

Question 13

When using the low-cost strategy for supply chain management,a firm should use buffer stocks to ensure speedy supply.

Question 14

Even though a firm may have a low cost strategy,supply-chain strategy can select suppliers primarily on response or differentiation.

Question 15

Among which of the following industries are purchasing costs the LOWEST percentage of sales?

A)automobile
B)petroleum
C)restaurants
D)lumber
E)chemical

Question 16

Because service firms do not acquire goods and services externally,their supply chain management issues are insignificant.

Question 17

________ describes the coordination of all supply chain activities,starting with raw materials and ending with a satisfied customer.

Question 18

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?

Question 19

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

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

Question 20

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

A)transportation
B)purchasing
C)insurance
D)financing
E)advertising

Question 21

A fast-food retailer that acquired a spice manufacturer would be practicing backward integration.

Question 22

The objective of the make-or-buy decision is to help identify the products and services that can be obtained externally.

Question 23

Keiretsu refers to a company coalition that is part collaboration,part purchasing from many suppliers,and part vertical integration.

Question 24

The ________ decision involves choosing between producing a component or a service internally and purchasing it externally.

Question 25

Which of the following best describes vertical integration?

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

Question 26

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

A)horizontal integration
B)forward integration
C)backward integration
D)current transformation
E)job expansion

Question 27

Vertical integration appears particularly advantageous when the organization has:

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

Question 28

Which one of the following is NOT one of the six sourcing strategies?

A)negotiation with many suppliers
B)vertical integration
C)keiretsu
D)short-term relationships with few suppliers
E)virtual companies

Question 29

Outsourcing:

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

Question 30

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

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

Question 31

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

A)few suppliers
B)many suppliers
C)keiretsu
D)vertical integration
E)virtual companies

Question 32

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

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

Question 33

With the "many suppliers" sourcing strategy,the order usually goes to the supplier that offers the highest quality.

Question 34

Transferring to external vendors a firm's activities that have traditionally been internal is known as ________.

Question 35

Which of the following is NOT a condition that favors the success of vertical integration?

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

Question 36

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

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

Question 37

Outsourcing refers to transferring a firm's activities that have traditionally been internal to external suppliers.

Question 38

Outsourcing is a form of specialization that allows the outsourcing firm to focus on its key success factors.

Question 39

A rice mill in south Louisiana purchases the trucking firm that transports packaged rice to distributors.This is an example of which of the following?

A)horizontal integration
B)forward integration
C)backward integration
D)current transformation
E)keiretsu

Question 40

Vertical integration,whether forward or backward,requires the firm to become more specialized.

Question 41

Use of a diversified supply base represents one of the most common supply chain risk reduction tactics for several different supply chain risk categories.

Question 42

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.

Question 43

How are outsourcing and vertical integration related? Can a single firm successfully do both?

Question 44

________ is developing the ability to produce goods or services previously purchased or actually buying a supplier or a distributor.

Question 45

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.

Question 46

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

A)keiretsu
B)virtual companies
C)joint venture
D)vertical integration
E)few suppliers

Question 47

Identify the advantages and disadvantages of using the "few suppliers" sourcing strategy.

Question 48

Cross-sourcing describes the practice of having two suppliers provide every component.

Question 49

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

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

Question 50

Virtual companies are also known as ________ .

Question 51

The Japanese concept of a company coalition of suppliers is:

A)poka-yoke.
B)kaizen.
C)keiretsu.
D)dim sum.
E)illegal.

Question 52

Identify and describe briefly the six sourcing strategies.

Question 53

________ is a Japanese term that describes suppliers who become part of a company coalition.

Question 54

Which of the following is NOT one of the risk mitigation tactics for the supply chain risk category of suppliers failing to deliver?

A)use multiple suppliers
B)effective contracts with penalties
C)subcontractors on retainer
D)require overnight delivery
E)pre-planning

Question 55

Which of the following describes using one supplier for a component and a second supplier for another component,where each supplier acts as a backup for the other?

A)outsourcing
B)dual-sourcing
C)cross-sourcing
D)backup-sourcing
E)parallel-sourcing

Question 56

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

A)few suppliers
B)keiretsu
C)joint venture
D)vertical integration
E)virtual company

Question 57

Japanese manufacturers often pursue a strategy that is part collaboration,part purchasing from a few suppliers,and part vertical integration.What is this approach called?

A)kanban
B)keiretsu
C)samurai
D)poka-yoke
E)kaizen

Question 58

Which of the following is NOT an advantage of a virtual company?

A)speed
B)total control over every aspect of the organization
C)specialized management expertise
D)low capital investment
E)flexibility

Question 59

What is a keiretsu?

Question 60

________ rely on a variety of supplier relationships to provide services on demand.

Question 61

A restaurant runs a special promotion on lobster and plans to sell twice as many lobsters as usual.When this large order is sent to the distributor,the distributor assumes the large size is a trend,not a one-time event.The distributor therefore places an even larger order with the lobsterman.This behavior is the result of which of the following?

A)double marginalization
B)the bullwhip effect
C)CPFR
D)postponement
E)vendor-managed inventory

Question 62

Identify some technological advances that can serve to improve logistics management and also improve shipping security.

Question 63

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

A)postponement
B)drop shipping
C)blanket orders
D)standardization
E)line balancing

Question 64

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

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

Question 65

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

A)postponement
B)keiretsu
C)vendor-managed inventory
D)forward integration
E)backward integration

Question 66

The bullwhip effect refers to the increasing fluctuations in orders that often occur as orders move through the supply chain.

Question 67

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

A)blanket orders
B)standardization
C)postponement
D)lot size reduction
E)single-stage control of replenishment

Question 68

Identify the ten major categories of supply chain risk.

Question 69

Drop shipping:

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

Question 70

The supply chain management opportunity called postponement involves delaying deliveries to avoid accumulation of inventory at the customer's site.

Question 71

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

A)accurate "pull" data
B)vendor-managed inventory
C)postponement
D)local optimization
E)CPFR

Question 72

Drop shipping results in time and shipping cost savings.

Question 73

Which of the following is an advantage of the postponement technique?

A)reduction in automation
B)early customization of the product
C)better quality of the product
D)reduction in training costs
E)reduction in inventory investment

Question 74

The bullwhip effect:

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

Question 75

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.

Question 76

A carpet manufacturer has delivered carpet directly to the end consumer rather than to the carpet dealer.The carpet manufacturer is practicing which of the following?

A)postponement
B)cross-docking
C)channel assembly
D)drop shipping
E)float reduction

Question 77

Local optimization is a supply-chain complication best described as:

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

Question 78

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

A)vendor-managed inventory
B)standardization
C)backward integration
D)postponement
E)timely customization

Question 79

________ describes using one supplier for a component and a second supplier for another component,where each supplier acts as a backup for the other.

Question 80

A furniture maker has delivered a dining set directly to the end consumer rather than to the furniture store.The furniture maker is practicing which of the following?

A)postponement
B)drop shipping
C)channel assembly
D)passing the buck
E)float reduction