CHAPTER 11: SUPPLY-CHAIN MANAGEMENT TRUE/FALSE

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1 CHAPTER 11: SUPPLY-CHAIN MANAGEMENT TRUE/FALSE 1. Volkswagen's Rio de Janeiro plant is an excellent example of traditional supply chain management. 2. The key to effective supply chain management is to get many suppliers to compete with each other, in order to drive down prices. 3. Even though a firm may have a low cost strategy, supply chain strategy can select suppliers primarily on response or differentiation. 4. 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. 5. Supply chain management faces additional challenges, such as those related to quality production and distribution systems, when companies enter growing global markets. 6. McDonald's was able to utilize existing plants and transportation systems in preparing the supply chain for opening its stores in Moscow. 7. When using the low-cost strategy for supply chain management, the firm should invest aggressively to reduce production lead time. 8. Savings in the supply chain exert more leverage as the firm has a lower net profit margin. 9. A reduction in inventory costs is one reason for making rather than buying. 10. Outsourcing refers to transferring a firm s activities that have traditionally been internal to outside vendors in other countries. 11. Outsourcing is a form of specialization that allows the outsourcing firm to focus on its critical success factors. 12. Supply chain decisions are not generally strategic in nature, because purchasing is an ordinary expense to most firms. 13. The objective of the make-or-buy decision is to help identify the products and services that can be obtained externally. 14. Because service firms do not acquire goods and services externally, their supply chain management issues are insignificant. 15. Because the supply chain has become so electronic and automated, opportunities for unethical behavior have been greatly reduced. 16. With the many-suppliers strategy, the order usually goes to the supplier that offers the best quality. 17. Developing long-term, "partnering" relationships with a few suppliers is a long-standing American purchasing strategy. 18. Vertical integration, whether forward or backward, requires the firm to become more specialized. 19. A fast-food retailer that acquired a spice manufacturer would be practicing backward integration. 20. Keiretsus offer a middle ground between few suppliers and vertical integration. 21. If the purchasing firm and the supplying firm have compatible corporate cultures, substantial efficiencies related to the use of independent specialists, each with their objectives, will be lost. 22. The bullwhip effect refers to the increasing fluctuations in orders that often occur as orders move through the supply chain. 23. Vendor Managed Inventory is a form of outsourcing. 24. In the vendor evaluation phase, most companies will use the same list of criteria and the same criteria weights. 25. One classic type of negotiation strategy is the market-based price model. 26. Drop shipping results in time and shipping cost savings. 27. The supply chain management opportunity called postponement involves delaying deliveries to avoid accumulation of inventory at the customer's site. 269

2 28. Channel assembly, which sends components and modules to be assembled by a distributor, treats these distributors as manufacturing partners. 29. Blanket orders are a long-term purchase commitment to a supplier for items that are to be delivered against short-term releases to ship. 30. Internet purchasing may be part of an integrated enterprise resource planning (ERP) system. 31. Waterways are an attractive distribution system when speed is more important than shipping cost. 32. Logistics management can provide a competitive advantage through improved customer service. 33. With the growth of just-in-time practices, railroads have made large gains in the share of the nation's transport that they haul. 34. 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. 35. Benchmark firms have driven down costs of supply chain performance. MULTIPLE CHOICE 36. Volkswagen's new plant in Brazil a. produces 1000 trucks a day with 100 workers b. has no Volkswagen employees performing vehicle assembly c. has no Volkswagen employees, only those of suppliers d. uses a decentralized supply chain e. represents only a minor improvement in supply chain integration 37. Volkswagen's innovations in supply-chain management a. utilize more non-volkswagen employees than Volkswagen employees b. are expected to reduce the number of defective parts c. are expected to cut labor costs d. tightly integrate suppliers into the supply chain, even into assembly work e. All of the above are true. 38. 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 39. What type of negotiating strategy requires the supplier to open its books to the purchasers? a. cost-based price model b. market-based price model c. competitive bidding d. price-based model e. none of the above 270

3 40. 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. 41. One dollar saved in purchasing is a. equivalent to a dollar earned in sales revenue b. worth even more than a dollar earned in sales revenue c. worth slightly more than a dollar earned because of taxes d. worth from 35% in the technical instrument industry to 70% in the food products industry e. only worthwhile if you are in the 50% tax bracket and still have a low profit margin 42. 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. 43. In the make-or-buy decision, one of the reasons for making is a. to reduce inventory costs b. to obtain technical or management ability c. inadequate capacity d. reciprocity e. to assure adequate supply in terms of quantity 44. 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. 45. In the make-or-buy decision, one of the reasons for buying is a. to assure adequate supply b. to obtain desired quality c. to remove supplier collusion d. inadequate capacity e. to maintain organizational talents 46. 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. 271

4 47. 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. may include facilities, people, and equipment e. All of the above are true of outsourcing. 48. 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 49. The Institute for Supply Management a. establishes laws and regulations for supply management b. is an agency of the United Nations charged with promoting ethical conduct globally c. publishes the principles and standards for ethical supply management conduct d. prohibits backward integration into developing economies e. All of the above are true. 50. 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. 51. Which of the following ISM standards of supply management conduct most closely addresses the ethical issue "salespeople become friends with customers?" a. Enhance the stature of the supply management profession. b. Know and obey the letter and spirit of laws applicable to supply management. c. Avoid improper reciprocal agreements. d. Promote positive supplier relationships through courtesy and impartiality. e. Acquire and maintain professional competence. 52. 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 272

5 53. A disadvantage of the "few suppliers" 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. All of the above are disadvantages of the "few suppliers" strategy. 54. The purchasing approach that holds the suppliers responsible for maintaining the necessary technology, expertise, and forecasting ability plus cost, quality, and delivery competencies is a. few suppliers b. many suppliers c. Keiretsu d. vertical integration e. virtual companies 55. 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 56. 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 57. 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. 58. 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 273

6 59. A fried chicken fast-food chain that acquired feed mills and poultry farms has performed a. horizontal integration b. forward integration c. backward integration d. current transformation e. job expansion 60. 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 61. A rice mill in south Louisiana purchases the trucking firm that transports packaged rice to distributors. This is an example of a. horizontal integration b. forward integration c. backward integration d. current transformation e. keiretsu 62. Japanese manufacturers often take a middle ground between purchasing from a few suppliers and vertical integration. This approach is a. kanban b. keiretsu c. samurai d. poka-yoke e. kaizen 63. The Japanese concept of a company coalition of suppliers is a. poka-yoke b. kaizen c. keiretsu d. dim sum e. illegal 64. 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 274

7 65. Local optimization is a supply-chain complication best described as a. optimizing one's local area without full knowledge of organizational 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 66. 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 67. 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 68. 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 69. Drop shipment a. is recommended when the manufacturer also has a competitive advantage in logistics 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 70. A carpet manufacturer has delivered carpet directly to the end consumer rather than to the carpet dealer. The carpet manufacturer is practicing a. postponement b. direct shipping c. channel assembly d. drop shipping e. float reduction 275

8 71. Hewlett-Packard withholds customization of its laser printers as long as possible. This is an example of a. vendor managed inventory b. channel assembly c. backward integration d. postponement e. timely customization 72. 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 73. 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 74. A furniture maker has delivered a dining set directly to the end consumer rather than to the furniture store. The furniture maker is practicing a. postponement b. drop shipping c. channel assembly d. passing the buck e. float reduction 75. Which of the following best describes vendor managed inventory? a. There is minimal purchasing-oriented paperwork. b. The supplier maintains the inventory for the buyer. c. Small lots are delivered frequently. d. There is only one supplier for all units of a particular product. e. The supplier delivers only what the customer needs. 76. Internet purchasing can be used a. to communicate order releases to suppliers b. to replace electronic data interchange (EDI) c. to purchase commodities through online auctions d. as part of an integrated enterprise resource planning (ERP) system e. all of the above 276

9 77. E-procurement a. works best in long-term contract situations, and is not suited for auctions b. is the same thing as Internet purchasing c. represents only the auction and bidding components of Internet purchasing d. is illegal in all states except Nevada and New Jersey e. All of the above are true of e-procurement. 78. The three classic types of negotiation strategies are a. vendor evaluation, vendor development, and vendor selection b. Theory X, Theory Y, and Theory Z c. many suppliers, few suppliers, and keiretsu d. cost-based price model, market-based price model, and competitive bidding e. None of the above is correct. 79. Which of the following is not a component of negotiation strategies? a. invoiceless bidding b. cost-based price model c. market-based price model d. competitive bidding e. combination of the above negotiation techniques 80. The three stages of vendor selection, in order, are a. vendor evaluation, vendor development, and negotiations b. vendor development, vendor evaluation, and vendor acquisition c. introduction, growth, and maturity d. vendor evaluation, negotiations, and vendor development e. EDI, ERP, and ASN 81. 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 82. 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 277

10 83. By which distribution system is 90 percent of the nation's coal shipped? a. railroads b. trucks c. waterways d. pipelines e. none of the above 84. Which distribution system is the fastest growing mode of shipping? a. railroads b. trucks c. airfreight d. waterways e. pipelines 85. 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 86. Which one of the following performance measures is not true of a world class firm? a. low number of suppliers per purchasing agent b. low purchasing costs as percent of purchases c. large lead time d. high percentage of on-time deliveries e. low number of shortages per year 87. Which of the following is true regarding supply chain performance? Benchmark firms a. have more suppliers per purchasing agent b. have longer lead time c. have far fewer shortages per year d. use competitive bidding more often e. have slightly fewer shortages per year 278