Chapter 15 Answers

Chapter 11 - Supply Chain Management

Chapter 11Supply Chain Management

True / False Questions

1. A company's supply chain involves the flow of materials and information from suppliers, through production, to the end users. TRUE

Difficulty: EasyTLO: 1Taxonomy: Knowledge

2. In supply chain organizations, functions must operate independently of each other. FALSE


3. CPFR is the use of e-mail between vendors and purchasing to place orders. FALSE


4. Distribution requirements planning (DRP) is an expanded concept of MRP which incorporates multinational inventory management. FALSE

Difficulty: MediumTLO: 11Taxonomy: Knowledge

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5. Every business organization is part of at least one supply chain. TRUE


6. JIT delivery, i.e. frequent deliveries of small shipments, actually results in an increase in the transportation cost per unit. TRUE


7. The materials in the supply chain flow toward the end of the chain, while the information and the dollars move toward the beginning of the chain. FALSE


8. Supply chains are sometimes referred to as value chains because they reflect the concept that value is added as goods and services progress through the chain. TRUE


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9. The goal of supply chain management is to synchronize supply and demand of all of the organizations that are part of the chain. TRUE


10. The need for supply chain management increases as globalization increases. TRUE


11. The design of the supply chain and establishing partnerships with vendors and distributors are examples of operating issues in a supply chain. FALSE


12. Traffic management refers to truck movement within our parking areas. FALSE

Difficulty: HardTLO: 11Taxonomy: Knowledge

13. One of the major reasons for a company to adopt third party logistics is to concentrate on one's core business. TRUE


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14. E-commerce refers to the use of electronic technology to facilitate business transactions. TRUE

AACSB: ITDifficulty: EasyTLO: 4Taxonomy: Knowledge

15. E-commerce involves business-to-business (B2B) interaction only. FALSE


16. Disintermediation refers to the phenomenon that the traditional retailer or service provider is reduced or eliminated in a supply chain. TRUE


17. Most people working for a business organization are somehow involved with the supply chain of that business. TRUE


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18. Strategic partnering is encouraged when two or more business organizations have complementary products or services that would benefit the others. TRUE


19. Forming strategic partnerships is beneficial for two or more business organizations that have the same products or services. FALSE


20. Inventory velocity refers to the average speed (in miles/hour) of material handling equipment in a warehouse. FALSE


21. Global supply chains make purchasing easier because of more options. FALSE


22. Centralized or decentralized purchasing is directly related to the size of an organization. FALSE


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23. The optimization of the supply chain uses a mathematical model to determine the optimal number of business organizations to be included in the chain. FALSE


24. Information technology is the key to success of global supply chains. TRUE


25. Bullwhip effect refers to a phenomenon that demand variations that exist at the customer end of the supply chain are magnified as orders are generated back through the supply chain. TRUE


26. Starting with the final customer and moving backward through the supply chain, batch sizes and the level of safety stock tend to decrease. FALSE


27. Scheduling and maintaining equipment are operational decisions. TRUE


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28. To prevent temporary storage in a warehouse, cross docking can be used. TRUE


29. Delayed differentiation is a means of increasing product variety without building the customized product from scratch or keeping large inventories of custom products. TRUE


30. Returned goods are part of reverse logistics. TRUE


31. A 30% reduction in product and service variety won't really affect the efficiency of a supply chain. FALSE


32. The service function of purchasing interfaces with many area including legal, accounting, and engineering functions. TRUE


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33. Gate keeping manages the cost of shipping returned goods. FALSE


34. Outsourcing logistics gives a company less flexibility because it forces them to focus more on core businesses. FALSE


35. Vendor analysis examines the function of purchased parts and materials with a view towards improvement or cost reduction. FALSE


36. Using third party fulfillment means losing control of fulfillment. TRUE


37. Price is the primary determining factor in choosing a vendor since most products are essentially the same. FALSE


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38. RFID eliminates the need for counting and bar-code scanning. TRUE


39. The importance of purchasing relates only to the cost of parts and materials purchased, which is often 60% or more of the cost of finished goods. FALSE


40. The importance of purchasing is the cost of goods purchased, the quality of goods and services, and the timing of deliveries of goods or services. TRUE


41. Vendor analysis is the process that evaluates the source of supply in terms of price, quality, reputation, and service. TRUE


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42. In e-commerce, the front-end design is significantly more important than the back-end design. FALSE

AACSB: ITDifficulty: MediumTLO: 8Taxonomy: Knowledge

43. One disadvantage to RFID's is that they require a ‘line of sight' for reading. FALSE


44. Decentralized purchasing can usually offer quicker response than centralized purchasing. TRUE


45. Some firms have structured their procurement function to include both centralized and decentralized purchasing. TRUE


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46. Creating an effective supply chain requires linking the marketing, distribution, and supplier channels. TRUE


47. An advantage of decentralized purchasing is the attention given to local needs. TRUE


48. Event management is the advanced planning required for major performances such as concerts or conferences. FALSE


49. Supplier certification is the first step required in a supplier audit program. FALSE


50. Design and purchasing people should work closely because changes in design, specifications, or materials can impact future purchase requirements. TRUE


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51. The purchasing cycle ends when the purchasing department is notified that the supplier has shipped the items. FALSE


52. Producing and shipping in large lots may reduce costs but increase lead times. TRUE


53. Variations create uncertainty, thereby causing inefficiencies in a supply chain. TRUE


54. Disintermediation is the refusal of one party to use mediators for price negotiation. FALSE


Multiple Choice Questions

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55. Which of the following is not a goal of supply chain management? A. fewer suppliers and long-term relationshipB. small lot sizesC. on time deliveriesD. lowest possible transportation costsE. delivery often to the place of use


56. Logistics includes all of these except: A. the movement of materials within a production facilityB. incoming shipments of goods or materialsC. outgoing shipments of goods or materialsD. customer selectionE. returned goods processing


57. Small changes in consumer demand can result in large variations in orders placed because of the A. Supply chainB. Safety stock requirementC. Lead time effectD. Bullwhip effectE. FCFS scheduling


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58. RFID chips: (I) are used to track goods in distribution(II) are used to track job progress in production(III) may provide special instructions to operators(IV) can be used in inventory record keeping A. II and III onlyB. I and II onlyC. II, III, and IVD. I, II, and IVE. IV only


59. Which of the following is not a benefit of RFID? A. increased productivityB. elimination of paper workC. frequent deliveries of smaller shipmentsD. reduction in clerical laborE. increased accuracy


60. A factor that makes it desirable for business organizations to actively manage their supply chains is: A. more potential vendorsB. increasing globalizationC. downsizingD. the internetE. RFID's


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61. Which of the following is not a benefit of effective supply chain management? A. lower inventory costsB. higher productivityC. shorter lead timesD. greater customer loyaltyE. larger number of suppliers


62. Which of the following is not a measure of the reliability of the supply chain? A. supply chain response timeB. on-time deliveryC. fill rateD. lead time variabilityE. improving e-fulfillment statistics


63. The automatic identification of material is part of: A. holding costsB. RFIDC. working capital reductionD. net present value calculationsE. vendor analysis


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64. Which of the following is not an application of E-business? A. internet buying and sellingB. e-mailC. order and shipment trackingD. electronic data interchange (EDI)E. universal product codes


65. Which of the following is an advantage of e-business? (I) reduction of transaction costs(II) shortened supply chain response time(III) greater customer loyalty A. IB. IIC. I and IID. II and IIIE. I, II, and III


66. Which of the following is a barrier to integration of separate organizations in the supply chain? (I) conflicting objectives of the companies in the chain.(II) different level of capacity of the companies in the chain.(III) reluctance of the organizations in the chain to allow other organizations access to their data. A. I onlyB. I and IIC. II and IIID. I and IIIE. I, II and III


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67. _________ has helped business concentrate on their core business. A. Supply ChainsB. SchedulingC. OutsourcingD. ERPE. Lean Production


68. Outsourcing followed by __________ is not simple. A. IntegrationB. UnionizationC. BacksourcingD. ComputerizationE. Just-in-time


69. The interface between the firm and its suppliers is: A. purchasingB. productionC. distributionD. engineeringE. accounting


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70. The two types of decisions that are relevant to supply chain management are: A. Short, long termB. Domestic, internationalC. Location, layoutD. In-source, out-sourceE. Strategic, operational


71. One important objective of purchasing is to: A. set quality standards for purchased itemsB. be knowledgeable about new productsC. maintain numerous sources of supplyD. obtain the lowest prices on all purchased itemsE. determine the processes that should be used


72. The purchasing cycle begins with: A. selecting a supplierB. placing an orderC. evaluating potential vendorsD. conducting a value analysisE. receiving a requisition


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73. Examination of the sources of supply for purchased parts or materials in order to improve performance is called: A. vendor analysisB. value analysisC. negotiated purchasingD. reverse engineeringE. disintegration


74. Vendor analysis has the greatest potential for savings for items which have: A. low cost per unitB. low annual cost-volumeC. high cost per unitD. high annual usageE. high annual cost-volume


75. Which of the following is not true of vendor analysis? A. It involves an examination of the function of purchased parts or raw materials.B. Its purpose is to reduce costs and/or improve performance of purchased goods or services.C. It is usually performed only periodically.D. Representatives from design and operations may work with purchasing.E. If improvements are identified, purchasing implements those that purchasing agrees are justified.


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76. Which of the following is not a performance driver? A. QualityB. CostC. StabilityD. VelocityE. Flexibility


77. Which of the following would not usually be a main factor in selecting a vendor? A. locationB. priceC. qualityD. inventory turnoverE. vendor services


78. Which of the following is part of the purchasing cycle? (I) Purchasing selects a supplier.(II) Orders from vendors are received.(III) Purchasing receives a requisition. A. II and IIIB. I, II, and IIIC. I onlyD. I and IIE. I and III


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79. Which of the following is not a key consideration when a company chooses a supplier? A. lead time and on-time deliveryB. reputation and financial stabilityC. value analysisD. quality and Quality assuranceE. flexibility of design change


80. Which of the following is not a benefit of centralized purchasing? A. potential for quantity discountsB. better service from suppliersC. quick response to local needsD. potential for use of purchasing specialistsE. supplier research


81. The purchasing perspective of the supplier as a partner is characterized by: A. an emphasis on low pricesB. one or a few suppliersC. low flexibilityD. 100% inspection for qualityE. low volume


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82. Vendor Analysis is the examination of the _________ of purchased materials. A. FunctionB. SourceC. QualityD. CycleE. Quantity.


83. A system for inventory management involving multi-echelon warehouses is called: A. MRPB. EOQC. CRPD. JITE. DRP


84. Which of the following is a principle required for ethical behavior in purchasing? A. loyalty to employer.B. justice to those you deal with.C. faith in your profession.D. all of the above.E. none of the above.

AACSB: EUDifficulty: EasyTLO: 6Taxonomy: Knowledge

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85. The activity which begins with a request from within the organization is: A. Outsourcing searchB. Purchasing cycleC. Supplier selectionD. Order receiptE. Supply chain management


86. Our organization can obtain visibility to potential trading partners on the internet by using: A. C2CB. B2CC. B2BD. C2BE. None of the above

AACSB: ITDifficulty: MediumTLO: 9Taxonomy: Knowledge

87. Real time information about product movement on store shelves could benefit from the use of: A. batch processingB. economic order quantitiesC. statistical process controlD. radio frequency identification tagsE. infrared remote scanners


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88. The website and order fulfillment are essential features of: A. delayed differentiationB. e-commerceC. internet service providersD. inventory balancingE. market segmentation


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Chapter 15 Answers