Deck 12: Supply Chain Design

Question 1

Figure 10-1
This figure represents the impact of supply chain performance on total costs.
Refer to Figure 10-1.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.

Answer 1

D

Question 2

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.

Answer 2

A

Question 3

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

Answer 3

False

Question 4

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

Question 5

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

Question 6

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

Question 7

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

Question 8

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 9

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 10

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 11

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

Question 12

________ 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 13

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

Question 14

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

Question 15

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

Question 16

Figure 10-1
This figure represents the impact of supply chain performance on total costs.
Refer to Figure 10-1.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 17

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 18

Discuss the major differences between supply chains for services and manufacturing.Which supply chain is easier to coordinate effectively?

Question 19

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

Question 20

Compare and contrast efficient versus responsive supply chains.

Question 21

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

Question 22

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 23

Efficient supply chains work best when contribution margins are high.

Question 24

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 25

Responsive supply chains work best when frequent product introduction exists.

Question 26

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 27

Weeks of inventory and inventory turns are reflected in:

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

Question 28

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 29

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 30

Champion Cooling Company remanufactures window air conditioners during the off-season months for sales during the scorching months of June,July,and August in the Oklahoma City area.Their average inventory of air conditioners is shown in the following table.The company operates 50 weeks a year and has average weekly sales of $3,750 and expects to sell $135,000 worth of product in a year.
a.What is their average aggregate inventory value?
b.What is their total inventory (measured as weeks of supply)?
c.What is their inventory turnover?

Question 31

________,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 32

What are some financial measures of supply chain performance? Which one is the most important and why?

Question 33

Last year,RJT Enterprises had average inventories (raw materials,work-in-process,and finished goods)of $7.5 million.During this same year the cost of goods sold was $30 million.The company operates 50 weeks per year.
a.What is their total inventory (measured as weeks of supply)?
b.What is their inventory turnover?

Question 34

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 35

Rome Corporation is a supplier of ball bearings.Because of the specialized manufacturing process employed,considerable work-in-process and raw material inventories are created.The current inventory levels are $1,500,000 and $3,775,000,respectively.In addition,finished goods inventory is $3,500,000,and sales (at cost)for the current year are expected to be about $28 million.Assume they operate 50 weeks per year.
a.What is their total inventory (measured as weeks of supply)?
b.What is their inventory turnover?

Question 36

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

Question 37

Efficient supply chains use low capacity cushions.

Question 38

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 $1,500,000
Work-in-process $1,200,000
Finished goods $800,000
In addition,the cost of goods sold last year (50 weeks)was $20 million.
a.What is its total inventory (measured as weeks of supply)?
b.What is its inventory turnover?

Question 39

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 40

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 41

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 42

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 43

________ is essentially standardization in chunks.

Question 44

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

Question 45

What is mass customization and what advantages does a producer benefit from if they can realize it?

Question 46

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

Question 47

What's the difference between postponement and channel assembly? Provide examples of both.

Question 48

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 49

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

Question 50

________ 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 51

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 52

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 53

Scenario 12.1
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.

Use Scenario 12.1 to answer the question.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

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 55

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 56

________ 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 57

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 58

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 59

Scenario 12.1
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.

Use Scenario 12.1 to answer the question.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 60

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

Question 61

Scenario 12.1
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.

Use Scenario 12.1 to answer the question.For what range of output would you prefer to buy?

A)0 - 10,000 units per year
B)30,001 or more units per year
C)10,001 - 20,000 units per year
D)20,001 - 30,000 units per year

Question 62

The VP of Finance studied the printing costs at the university and knew it was time for bold,decisive action.The annual fixed cost of printing at the school was $850,000 and the per-page cost was two cents.Fortunately,his brother-in-law happened to own a company that would lease the printers to the university for only $600,000 and charge ten cents per page.At what point would the university be indifferent between owning their printers and leasing their printers?

Question 63

The VP of Finance studied the printing costs at the university and knew it was time for bold,decisive action.The annual fixed cost of printing at the school was $1,250,000 and the per-page cost was one cent.Fortunately,his brother-in-law happened to own a company that would lease the printers to the university for only $850,000 and charge three cents per page.At what point would the university be indifferent between owning their printers and leasing their printers?

Question 64

Scenario 12.1
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.

Use Scenario 12.1 to answer the question.For what range of output would you prefer to make?

A)40,001 or more units per year
B)35,001 - 40,000 units per year
C)30,001 to 35,000 units per year
D)0 - 30,000 units per year

Question 65

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 66

The VP of Finance studied the printing costs at the university and knew it was time for bold,decisive action.The annual fixed cost of printing at the school was $850,000 and the per-page cost was one cent.Fortunately,his brother-in-law happened to own a company that would lease the printers to the university for only $600,000.The only issue to be decided was what the per-page cost would be for the leased printers.On average,the university had been printing about 10,000,000 pages per year.What would a break-even per-page printing cost be given the average printing volume?

Question 67

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

Question 68

Scenario 12.1
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.

Use Scenario 12.1 to answer the question.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 69

Scenario 12.2
SAGE Inc.receives too many applications each year for the Global MBA program so they turn to their network of partners for assistance.Nothing in this world is free,of course,so their partners provide quotes that include a per student cost as well as a facilities cost that SAGE would pay regardless of the number of students they sent there.The costs in Rupees (₹)are elegantly summarized in the table below.

Use Scenario 12.2 to answer the question.How much cheaper is the Wisconsin alternative when SAGE is indifferent between Oklahoma and England?

A)about ₹3,221
B)about ₹2,967
C)about ₹4,428
D)about ₹3,967

Question 70

Scenario 12.2
SAGE Inc.receives too many applications each year for the Global MBA program so they turn to their network of partners for assistance.Nothing in this world is free,of course,so their partners provide quotes that include a per student cost as well as a facilities cost that SAGE would pay regardless of the number of students they sent there.The costs in Rupees (₹)are elegantly summarized in the table below.

Use Scenario 12.2 to answer the question.Determine the ranges for which each alternative is preferable from a total cost standpoint.

Question 71

Scenario 12.2
SAGE Inc.receives too many applications each year for the Global MBA program so they turn to their network of partners for assistance.Nothing in this world is free,of course,so their partners provide quotes that include a per student cost as well as a facilities cost that SAGE would pay regardless of the number of students they sent there.The costs in Rupees (₹)are elegantly summarized in the table below.

Use Scenario 12.2 to answer the question.At what volume of students does Wisconsin become preferred over an Oklahoma choice?

A)1000 students
B)1250 students
C)1500 students
D)1750 students

Question 72

Scenario 12.2
SAGE Inc.receives too many applications each year for the Global MBA program so they turn to their network of partners for assistance.Nothing in this world is free,of course,so their partners provide quotes that include a per student cost as well as a facilities cost that SAGE would pay regardless of the number of students they sent there.The costs in Rupees (₹)are elegantly summarized in the table below.

Use Scenario 12.2 to answer the question.Which student makes England a more attractive option than Wisconsin for SAGE?

A)the 4,334th student
B)the 2,858th student
C)the 1,751st student
D)the 44,750th student

Question 73

Scenario 12.1
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.

Use Scenario 12.1 to answer the question.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 74

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 75

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 76

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

Question 77

Scenario 12.2
SAGE Inc.receives too many applications each year for the Global MBA program so they turn to their network of partners for assistance.Nothing in this world is free,of course,so their partners provide quotes that include a per student cost as well as a facilities cost that SAGE would pay regardless of the number of students they sent there.The costs in Rupees (₹)are elegantly summarized in the table below.

Use Scenario 12.2 to answer the question.What is the lowest variable cost that causes the Wisconsin option to never be the optimal location?

A)about ₹14.91
B)about ₹14.56
C)about ₹14.83
D)about ₹14.71