Deck 10: Supply Chain Management

Question 1

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

Answer 1

False

Question 2

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

Answer 2

A

Question 3

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

Answer 3

False

Question 4

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

Question 5

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

Question 6

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 these is true.

Question 7

Which of the following is NOT a primary supplier selection criterion for a firm pursuing a response strategy?

A) flexibility
B) cost
C) capacity
D) speed
E) All of these are primary supplier selection criteria for the firm.

Question 8

Which of the following is TRUE regarding Red Lobster and its supply channels?

A) It sources its food only from suppliers in the U.S. and Canada.
B) 92% of its supply channels require supplier qualification and have product tracking.
C) It employs just-in-time delivery.
D) A total quality team is appointed after a supplier is qualified to sell to Red Lobster.
E) Red Lobster is the world's second largest seafood restaurant company.

Question 9

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

Question 10

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

Question 11

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 12

A firm that employs a low-cost strategy should minimize inventory throughout the supply chain.

Question 13

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 14

If a business adopts a low-cost strategy, it should build a supply chain with ________.

A) product development skills
B) modular design in products
C) fast transportation
D) buffer stock
E) minimized inventory

Question 15

The supply chain for a brewery would include raw ingredients such as hops and barley as well as manufactured goods such as bottles and cans.

Question 16

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

Question 17

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).

Question 18

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 19

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 20

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 21

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 22

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 23

Long-term "partnering" relationships are one of the main goals of the "many suppliers" sourcing strategy.

Question 24

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

Question 25

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

Question 26

A company is deciding where to assign its summer intern. The manager estimates that the intern can save the company $8,000 in supply chain costs. Given the table below, what increase in sales (revenue) by the intern is required to show an equal profit?

Question 27

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

Question 28

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 these favor the success of vertical integration.

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 these are true of outsourcing.
E) None of these is true of outsourcing.

Question 30

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

Question 31

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

Question 32

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 33

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

Question 34

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 $20,000. Given the following table, where should the manager assign the intern to maximize profits?

Question 35

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 36

Which of the following best describes backward 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 37

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

Question 38

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

Question 39

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 40

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

Question 41

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

Question 42

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

Question 43

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 44

The Japanese concept of a company coalition of suppliers is:

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

Question 45

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

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

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 48

What is a keiretsu?

Question 49

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

Question 50

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 51

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 52

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

Question 53

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 54

Which of the following is NOT an advantage of virtual companies?

A) low capital investment
B) flexibility
C) respond rapidly to the market
D) no overhead expenses
E) lean performance

Question 55

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 56

Virtual companies are also known as ________.

Question 57

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

Question 58

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 59

Identify and describe briefly the six sourcing strategies.

Question 60

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 61

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 62

Identify the ten major categories of supply chain risk.

Question 63

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 64

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 65

Drop shipping results in time and shipping cost savings.

Question 66

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 67

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 68

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

Question 69

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 these are true.

Question 70

In this age of increasing specialization, low communication cost, and fast transportation, companies are making more and buying less.

Question 71

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 72

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 these

Question 73

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 74

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 75

________ 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 76

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

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

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 79

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

Question 80

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