Deck 10: Supply Chain Design

Question 1

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

Answer 1

False

Question 2

Responsive supply chains work best when frequent product introduction exists.

Answer 2

True

Question 3

Increasing the percentage of on-time deliveries to customers actually reduces the total revenue of a firm.

Answer 3

False

Question 4

Efficient supply chains work best when contribution margins are high.

Question 5

Responsive supply chains work best when firms offer a low variety of services or products and demand predictability is high.

Question 6

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

Question 7

While it is important to manufacturing firms,little can be done to improve supply chain strategy in most service organizations.

Question 8

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

Question 9

The fundamental purpose of supply chain design for a manufacturer is to control inventories by managing the flow of materials.

Question 10

The purpose of supply chain design is to shape a firm's supply chain to meet the competitive priorities of its operations strategies.

Question 11

Channel assembly is the process of using members of the distribution channel as if they were assembly stations in the factory.

Question 12

One disadvantage of centralized placement is increased shipping costs from the distribution center to the customer.

Question 13

Supply chain management tries to match the flow of materials,services and information with demand.

Question 14

Supply chain design for a service provider is driven primarily by the need to control the materials it consumes as it delivers its various services.

Question 15

The purpose of supply chain management is to synchronize a firm's processes with those of its suppliers and customers.

Question 16

The weeks of supply measure will improve if the weekly sales decrease.

Question 17

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

A)Supply chain 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 18

Selling expenses,fixed expenses and depreciation are all considered operating expenses.

Question 19

Efficient supply chains use low capacity cushions.

Question 20

The best inventory level,when expressed as a turnover,is 52 per year.

Question 21

A somewhat successful computer manufacturer makes a generic computer in five exciting colors.Once orders are received,the computer guts are encased in the customer's choice of colored case at the factory.This approach to production is known as:

A)channel assembly.
B)postponement.
C)strategic sourcing.
D)strategic production.

Question 22

The supply chain management department of a major manufacturer pondered a particularly weighty make or buy decision for weeks,ultimately deciding to make,rather than buy.This decision resulted in increased:

A)outsourcing.
B)offshoring.
C)postponement.
D)backward integration.

Question 23

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 24

Shipments of Product Q from a plant to a wholesaler are made in lots of 400.The wholesaler's average demand for Q is 150 units per week.Lead time from plant to wholesaler is 5 weeks.The wholesaler pays for the shipments when they leave the plant.The plant has proposed several new lead time and lot size options to the wholesaler (see table below).If the wholesaler's goal is to minimize total cycle plus pipeline inventories,which option should the wholesaler select?

A)option #1
B)option #2
C)option #3
D)remain with the current option

Question 25

Some discount stores are able to sell items before they have to pay their suppliers,resulting in a negative:

A)net profit.
B)return on assets.
C)number of inventory turns.
D)cash-to-cash measure.

Question 26

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 average 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 two
B)greater than two but less than three
C)greater than three but less than four
D)greater than four

Question 27

This figure represents the impact of supply chain performance on total costs.Use it to answer the next two questions.
Refer to the figure above.Which is the best statement if a company simultaneously moves from point A to point B and from point D to point C?

A)The new supply chain efficiency curve is superior to the old one.
B)The new costs are higher,but the performance is better.
C)The new supply chain is still inferior to the supply chain efficiency curve.
D)The new performance is worse,but the costs are lower.

Question 28

Padco averages $15 million worth of inventory in all of its worldwide locations.They operate 51 weeks a year and each week average $3 million in sales (at cost).Their inventory turnover is:

A)1.13 turns.
B)5 turns.
C)10.2 turns.
D)17 turns.

Question 29

A firm may choose to use members of the distribution channel as if they were assembly stations in the factory.Such an approach is known as:

A)backward integration.
B)postponement.
C)channel assembly.
D)deferred delay.

Question 30

This figure represents the impact of supply chain performance on total costs.Use it to answer the next two questions.
Refer to the figure above.The movement from point A to point B indicates the:

A)increase in time it takes for your firm to deliver goods and services.
B)decrease in time it takes for your firm to deliver goods and services.
C)increase in cost.
D)decrease in cost.

Question 31

A typical manufacturer spends:

A)about 25% of its total income from sales on purchased services and materials.
B)about 45% of its total income from sales on purchased services and materials.
C)more than 60% of its total income from sales on purchased services and materials.
D)almost 80% of its total income from sales on purchased services and materials.

Question 32

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 requirements.
D)Lower aggregate inventory value means higher current assets.

Question 33

Henderson Corporation is a supplier of alloy ball bearings to auto manufacturers in Detroit.Because of the specialized manufacturing process employed,considerable work-in-process and raw material inventories are created.The average 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 2.0 but less than 2.5.
C)greater than 2.5 but less than 3.0.
D)greater than 3.0.

Question 34

A producer of medical devices makes a single model that can be customized to talk in and display any of 47 different languages.This customization is performed in one of their five regional distribution centers as firm orders are received,providing an elegant example of:

A)backward integration
B)forward integration
C)channel assembly.
D)offshoring.

Question 35

Which of the following is NOT identified in the text as a competitive advantage of a mass customization strategy?

A)improvement of the quality of parts produced
B)management of customer relationships
C)elimination of finished goods inventory
D)an increase in perceived value of services or products

Question 36

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 3.50 but less than 3.75
C)greater than 3.75 but less than 4.00
D)greater than 4.00

Question 37

Which location shift would qualify as forward placement?

A)from the manufacturer to a distribution center
B)from the retailer to the wholesaler
C)from the wholesaler to the manufacturer
D)from the retailer to the manufacturer

Question 38

________ uses a firm's flexible processes to generate a wide variety of personalized services or products at reasonably low costs.

A)Mass customization.
B)Channel assembly
C)Postponement
D)Forward integration

Question 39

Use the following scenario to answer the questions below.
A company must decide if it will make or buy an item it needs.The company can make the item for $10 / unit,but must spend $15,000 per year in tooling to do so.An outside firm has quoted a total price of $12 / unit to supply the quantity required.
Refer to the instruction above.What is the break-even point in this situation?

A)6,500 units
B)7,250 units
C)7,500 units
D)8,000 units

Question 40

Weeks of inventory and inventory turns are reflected in:

A)working capital.
B)operating expenses.
C)cost of goods sold.
D)cash flow.

Question 41

Use the following scenario to answer the questions below.
You currently make a part on old equipment at a cost of $50,000 per year and a variable cost of $20 / unit.You have found an outside supplier who will make the part for $15 / unit if you will pay their annual fixed costs of $200,000 / year.The following table summarizes the details of this make versus buy decision.

Refer to the instruction above.What are total costs to buy an annual quantity of 40,000 units?

A)$400,000
B)$500,000
C)$800,000
D)$850,000

Question 42

The objective of a firm in a responsive supply chain is likely to be realized if it has a:

A)standardized product.
B)short lead time.
C)low-capacity cushion.
D)line-flow process.

Question 43

Use the following scenario to answer the questions below.
You currently make a part on old equipment at a cost of $50,000 per year and a variable cost of $20 / unit.You have found an outside supplier who will make the part for $15 / unit if you will pay their annual fixed costs of $200,000 / year.The following table summarizes the details of this make versus buy decision.

Refer to the instruction above.For what range of output would you prefer to buy?

A)0 - 30,000 units per year
B)30,000 or more units per year
C)40,000 or more units per year
D)0 - 40,000 units per year

Question 44

Use the following scenario to answer the questions below.
A company is considering making versus buying a part needed for manufacturing.Particulars are as follows:

Refer to the instruction above.What does the company save for the year by selecting this low-cost option (for annual requirements of 3,000 units)?

A)$5,000
B)$1,000
C)$3,000
D)Can't be determined with information given

Question 45

Use the following scenario to answer the questions below.
You currently make a part on old equipment at a cost of $50,000 per year and a variable cost of $20 / unit.You have found an outside supplier who will make the part for $15 / unit if you will pay their annual fixed costs of $200,000 / year.The following table summarizes the details of this make versus buy decision.

Refer to the instruction above.What are total costs to make a quantity of 40,000 units per year?

A)$400,000
B)$450,000
C)$800,000
D)$850,000

Question 46

An efficient supply chain should be preferred when:

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

Question 47

A U.S.company faced with spiraling costs in their customer care center recreated that service in Luxembourg at a fraction of the cost.This is an example of:

A)offshoring.
B)forward integration.
C)backward integration.
D)postponement.

Question 48

Use the following scenario to answer the questions below.
You currently make a part on old equipment at a cost of $50,000 per year and a variable cost of $20 / unit.You have found an outside supplier who will make the part for $15 / unit if you will pay their annual fixed costs of $200,000 / year.The following table summarizes the details of this make versus buy decision.

Refer to the instruction above.For what range of output would you prefer to make?

A)40,000 or more units per year
B)0 - 40,000 units per year
C)30,000 or more units per year
D)0 - 30,000 units per year

Question 49

A responsive supply chain typically has:

A)a low capacity cushion.
B)high inventory turns.
C)supply chain partners that emphasize low prices.
D)supply chain partners that emphasize volume flexibility.

Question 50

Use the following scenario to answer the questions below.
A company is considering making versus buying a part needed for manufacturing.Particulars are as follows:

Refer to the instruction above.What is the annual break-even quantity for choosing between making and buying in this situation?

A)1,000 units
B)2,000 units
C)6,000 units
D)3,000 units

Question 51

Which of the following is not a benefit of outsourcing?

A)comparative labor costs
B)lower logistics costs
C)reduction of transaction costs through use of the Internet
D)technology transfer to another country or company

Question 52

An efficient supply chain typically has:

A)a high capacity cushion.
B)high inventory turns.
C)supply chain partners that emphasize fast delivery time.
D)supply chain partners that emphasize volume flexibility.

Question 53

Use the following scenario to answer the questions below.
You currently make a part on old equipment at a cost of $50,000 per year and a variable cost of $20 / unit.You have found an outside supplier who will make the part for $15 / unit if you will pay their annual fixed costs of $200,000 / year.The following table summarizes the details of this make versus buy decision.

Refer to the instruction above.What is the break even quantity between buying and making?

A)30,000 units per year
B)40,000 units per year
C)50,000 units per year
D)60,000 units per year

Question 54

Use the following scenario to answer the questions below.
A company must decide if it will make or buy an item it needs.The company can make the item for $10 / unit,but must spend $15,000 per year in tooling to do so.An outside firm has quoted a total price of $12 / unit to supply the quantity required.
Refer to the instruction above.What does the company save for the year by selecting this low-cost option (for annual requirements of 5,000 units)?

A)$5,000
B)$15,000
C)$65,000
D)can't be determined with information given

Question 55

Responsive supply chains should be preferred when:

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

Question 56

Use the following scenario to answer the questions below.
A company must decide if it will make or buy an item it needs.The company can make the item for $10 / unit,but must spend $15,000 per year in tooling to do so.An outside firm has quoted a total price of $12 / unit to supply the quantity required.
Refer to the instruction above.Which alternative should be selected if annual requirements are 5,000 units?

A)Make
B)Buy
C)Either make or buy;costs are the same for either option at 5,000 units
D)Can't be determined with information given

Question 57

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 58

Use the following scenario to answer the questions below.
A company is considering making versus buying a part needed for manufacturing.Particulars are as follows:

Refer to the instruction above.For an annual volume of 3,000 units,which supplier should be chosen?

A)Make
B)Buy
C)Either Make or Buy;costs are the same for either option at 3,000 units
D)Can't be determined with information given

Question 59

It is desirable for a firm in a responsive supply chain to have:

A)low-capacity cushions.
B)delivery by railroad.
C)high-capacity utilization consistent with high-volume delivery.
D)inventory investments as needed to enable fast delivery times.

Question 60

Use the following scenario to answer the questions below.
You currently make a part on old equipment at a cost of $50,000 per year and a variable cost of $20 / unit.You have found an outside supplier who will make the part for $15 / unit if you will pay their annual fixed costs of $200,000 / year.The following table summarizes the details of this make versus buy decision.

Refer to the instruction above.What does the company save for the year by selecting the low-cost option at an annual requirement of 40,000 units?

A)$150,000
B)$300,000
C)$50,000
D)$40,000

Question 61

________ seeks to develop a firm's supply chain to meet the competitive priorities of the firm's operations strategy.

Question 62

________ is the money used to finance ongoing operations.

Question 63

________ is the process of using members of the distribution channel as if they were assembly stations in the factory.

Question 64

One way to gain control over suppliers in a chain is to buy a controlling interest in them,known as ________.

Question 65

The clever wine shop owner held a tasting,accepted customer orders and payments,and then placed an order with the vineyard.Since he paid the vineyard after he received the shipment (and well after he charged his customers),his ________ time was negative.

Question 66

________ is a concept whereby some of the final activities in the provision of a service or product are delayed until the orders are received.

Question 67

________,the annual sales at cost divided by the average aggregate inventory value,is the number of times a year that a firm completely replenishes its inventory.

Question 68

When a company acquires more channels of distribution,such as its own distribution centers and retail stores,it is using ________.

Question 69

When a customer orders an item that is a completely new and different product,the company's supply chain must be able to deliver an item that is ________-to-order.

Question 70

________ is essentially standardization in chunks.

Question 71

________ involves locating the stock closer to customers at a warehouse,distribution center,or retailer.

Question 72

________ is an inventory measure obtained by dividing the average aggregate inventory value by sales per week at cost.

Question 73

Cornelius Controlfreak insisted that his manufacturing plant also be the sole location for all finished goods inventory.If any customer placed an order,they knew it would come from the only place on Earth that had a ready supply,Cornelius' plant warehouse.________ was alive and well thanks to this approach.

Question 74

Customer clothing and the Boeing 787 Dreamliner aircraft are based on standard designs but component production and manufacture of the final product is ________.

Question 75

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

Question 76

________ is the synchronization of a firm's process with those of its suppliers and customers to match flow of materials,services and information with demand.

Question 77

There was no reason to build a new call center and hire hundreds of customer service representatives when there were perfectly viable options thousands of miles away.Hence,the company decided to ________ this process.

Question 78

When a company uses ________ ,it does not perform some processes itself,but instead pays suppliers or distributors to perform those processes and provide needed services and materials.

Question 79

In ________,the product is built to customer specifications from a stock of existing components.

Question 80

When a company uses ________ ,it is moving upstream in the supply chain toward the source of raw materials.