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ISDS 3115 Chapter 11

True or false? Operations managers are finding online auctions a fertile area for disposing of discontinued inventory.
True
True or false? The key to effective supply chain management is to get many suppliers to compete with each other, in order to drive down prices.
False
True or false? Even though a firm may have a low cost strategy, supply chain strategy can select suppliers primarily on response of differentiation.
False
True or false? 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.
False
True or false? Supply chain management faces additional challenges, such as those related to quality production and distribution systems, when companies enter growing global markets.
True
True or false? McDonald’s was able to utilize existing plants and transportation systems in preparing the supply chain for opening its stores in Moscow.
False
True or false? When using the low-cost strategy for supply chain management, the firm should invest aggressively to reduce production lead time.
False
True or false? Savings in the supply chain exert more leverage as the firm has a lower net profit margin.
True
True or false? A reduction in inventory costs is one reason for making rather than buying.
False
True or false? Outsourcing refers to transferring a firm’s activities that have traditionally been internal to external suppliers.
True
True or false? Outsourcing is a form of specialization that allows the outsourcing firm to focus on its critical success factors.
True
True or false? Supply chain decisions are not generally strategic in nature, because purchasing is an ordinary expense to most firms.
False
True or false? The objective of the make-or-buy decision is to help identify the products and services that can be obtained externally.
True
True or false? Because service firms do not acquire goods and services externally, their supply chain management issues are insignificant.
False
True or false? Because the supply chain has become so electronic and automated, opportunities for unethical behavior have been greatly reduced.
False
True or false? With the many-suppliers strategy, the order usually goes to the supplier that offers the best quality.
False
True or false? Developing long-term, “partnering” relationships with a few suppliers is a long-standing American purchasing strategy.
False
True or false? Vertical integration, whether forward or backward, requires the firm to become more specialized.
False
True or false? A fast-food retailer that acquired a spice manufacturer would be practicing backward integration.
True
True or false? Keiretsus offer a middle ground between few suppliers and vertical integration.
True
True or false? In several industries, online exchanges have been created by buyers.
True
True or false? The bullwhip effect refers to the increasing fluctuations in orders that often occur as orders move through the supply chain.
True
True or false? Vendor Managed Inventory is a form of outsourcing.
True
True or false? In the vendor evaluation phase, most companies will use the same list of criteria and the same criteria weights.
False
True or false? One classic type of negotiation strategy is the market-based price model.
True
True or false? Drop shipping results in time and shipping cost savings.
True
True or false? The supply chain management opportunity called postponement involves delaying deliveries to avoid accumulation of inventory at the customer’s site.
False
True or false? Channel assembly, which sends components and modules to be assembled by a distributor, treats these distributors as manufacturing partners.
True
True or false? Blanket orders are a long-term purchase commitment to a supplier for items that are to be delivered against short-term releases to ship.
True
True or false? Bar code and radio frequency technology, like that used to track UPS or FedEx packages on their global journeys, can also be used to track objects within the boundaries of a warehouse or shop.
True
True or false? Waterways are an attractive distribution system when speed is more important than shipping cost.
False
True or false? Logistics management can provide a competitive advantage through improved customer service.
True
True or false? With the growth of just-in-time practices, railroads have made large gains in the share of the nation’s transport that they haul.
False
True or false? 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.
False
True or false? Benchmark firms have driven down costs of supply chain performance.
True
The three major variations of online catalogs are:
catalogs by vendors, catalogs by intermediaries, and exchanges provided by buyers.
Visibility throughout the supply chain is a requirement among supply chain members for:
mutual trust.
Which of the following is NOT a concern of the supply chain?
a. warehousing and inventory levels
b. credit and cash transfers
c. suppliers
d. distributors and banks
e. maintenance scheduling
e. maintenance scheduling
What type of negotiating strategy requires the supplier to open its books to the purchasers?
cost-based price model
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 has a lower net profit margin.
d. Supply chain leverage depends only upon the percent of sales spent in the supply chain.
e. None of the above is true.
e. None of the above is true.
One dollar saved in purchasing is:
worth even more than a dollar earned in sales revenue.
Which one of the following statements about purchasing is TRUE?
a. The cost of purchases as a percent of sales is often small.
b. Purchasing provides a major opportunity for price increases.
c. Purchasing is always more efficient than making an item.
d. Purchasing has an impact on the quality of the goods and services sold.
e. Competitive bidding is a major factor in long-term cost reductions.
d. Purchasing has an impact on the quality of the goods and services sold
In the make-or-buy decision, one of the reasons for making is:
to assure adequate supply in terms of quantity.
In the make-or-buy decision, which of the following is a reason for MAKING an item?
a. management can focus on its primary business
b. lower production cost
c. inadequate capacity
d. reduce inventory costs
e. None of the above is a reason for making an item.
b. lower production cost
In the make-or-buy decision, one of the reasons for BUYING is
inadequate capacity
In the make-or-buy decision, which of the following is NOT a reason for buying?
a. inadequate capacity
b. to obtain desired quality
c. patents or trade secrets
d. lower inventory costs
e. All of the above are reasons for buying.
b. to obtain desired quality
Outsourcing:
a. transfers traditional internal activities to outside vendors
b. utilizes the efficiency which comes with specialization
c. lets the outsourcing firm focus on its critical success factors
d. None of the above are true or outsourcing.
e. All of the above are true of outsourcing.
e. All of the above are true of outsourcing.
The transfer of some of what are traditional internal activities and resources of a firm to outside vendors is
outsourcing
The Institute for Supply Management
publishes the principles and standards for ethical supply management conduct
In supply chain management, ethical issues
a. are particularly important because of the enormous opportunities for abuse
b. may be guided by company rules and codes of conduct
c. become more complex the more global is the supply chain
d. may be guided by the principles and standards of the Institute for Supply Management
e. All of the above are true.
e. All of the above are true.
Keeping a product generic as long as possible before customizing is known as
postponement
Which one of the following is NOT a supply chain strategy?
a. negotiation with many suppliers
b. vertical integration
c. keiretsu
d. short-term relationships with few suppliers
e. virtual companies
d. short-term relationships with few suppliers
A disadvantage of the “few suppliers” strategy is
the high cost of changing partners
The purchasing approach that holds the suppliers responsible for maintaining the necessary technology, expertise, and forecasting ability plus cost, quality, and delivery competencies is
many suppliers
Which of the following is NOT an advantage of the “few suppliers” concept?
a. suppliers’ willingness to participate in JIT systems
b. trust
c. vulnerability of trade secrets
d. creation of value by allowing suppliers to have economies of scale
e. suppliers’ willingness to provide technological expertise
c. vulnerability of trade secrets
Which of the following supply chain strategies creates value by allowing suppliers to have economies of scale?
a. suppliers becoming part of a company coalition
b. vertical integration
c. long-term partnering with a few suppliers
d. negotiating with many suppliers
e. developing virtual companies
c. long-term partnering with a few suppliers
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. required demand
d. small market share
e. All of the above favor the success of vertical integration
d. small market share
Which of the following best describes vertical integration?
a. to sell products to a supplier or a distributor
b. to develop the ability to produce products which complement the original product
c. to produce goods or services previously purchased
d. to develop the ability to produce the specified good more efficiently than before
e. to build long-term partnerships with a few suppliers
c. to produce goods or services previously purchased
A fried chicken fast-food chain that acquired feed mills and poultry farms has performed
backward integration
Vertical integration appears particularly advantageous when the organization has
a large market share
A rice mill in south Louisiana purchases the trucking firm that transports packaged rice to distributors. This is an example of
forward integration
Japanese manufacturers often take a middle ground between purchasing from a few suppliers and vertical integration. This approach is
keiretsu
The Japanese concept of a company condition of supplies is
keiretsu
Which of the following is NOT a 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
b. total control over every aspect of the organization
Local optimization is a supply chain complication best described as
optimizing one’s local area without full knowledge of organizational needs
The “bullwhip” effect
a. occurs as orders are relayed from retailers to wholesalers
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
e. all of the above
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. channel assembly
d. local optimization
Which of the following is an opportunity for effective management in the supply chain?
a. random “pull” data
b. multistage control of replenishment
c. the bullwhip effect
d. customer managed inventory
e. channel assembly
e. channel assembly
Drop shipment
means the supplier will ship directly to the end consumer, rather than to the seller
A carpet manufacturer has delivered carpet directly to the end consumer rather than to the carpet dealer. The carpet manufacturer is practicing
drop shipping
Hewlett-Packard withholds customization of its laser printers as long as possible. This is an example of
postponement
All of the following are “opportunities” for supply chain management EXCEPT
a. postponement
b. drop shipment
c. blanket orders
d. channel assembly
e. line balancing
e. line balancing
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
e. reduction in inventory investment
A furniture maker has delivered a dining set directly to the end consumer rather than to the furniture store. The furniture maker is practicing
drop shipping
What is the average capacity utilization in the motor carrier (trucking) industry?
50%
What term is used to describe the outsourcing of logistics?
Third-Party Logistics
E-procurement
is the same thing as Internet purchasing
The three classic types of negotiation strategies are
cost-based price model, market-based price model, and competitive bidding
The three stages of vendor selection, in order, are
vendor evaluation, vendor development, and negotiations
Which one of the following distribution systems offers quickness and reliability when emergency supplies are needed overseas?
a. trucking
b. railroads
c. airfreight
d. waterways
e. pipelines
c. airfreight
With the growth of JIT, which of the following distribution systems has been the biggest loser?
a. trucking
b. railroads
c. airfreight
d. waterways
e. pipelines
b. railroads
By which distribution system is 90 percent of the nation’s coal shipped?
railroads
Which distribution system is the fastest growing mode of shipping?
airfreight
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
e. all of the above
Which one of the following performance measures is NOT true of a world class firm?
a. short time placing an order
b. high percentage of accepted material
c. large lead time
d. high percentage of on-time deliveries
e. low number of shortages per year
c. large lead time

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