CHAPTER 4: GLOBAL SUPPLY CHAIN
MANAGEMENT
Multiple Choice
1. An organization’s supply chain is facilitated by:
a) dedicated people
b) an information system
c) specific vendors
d) specific customers
e) government regulations
2. Which of the following typically represent the beginning of a
supply chain:
a) Wholesalers
b) Retailers
c) Manufacturers
d) External suppliers
e) Inspectors
3. Supply chain management is the vital business function which
does NOT coordinate and manage:
a) linking suppliers
b) transporters
c) human resource interviews
d) internal departments
e) third-party companies
4. Typically a manufacturer will have more direct contact with which
type of supplier?
a) Tier one supplier
b) Tier two supplier
c) Tier three supplier
d) Tier four supplier
e) Tier five supplier
5. Consider a packaged milk products supply chain. A lumber
company provides wood to a paper mill, who supplies cardboard to a
container manufacturer, who supplies containers to the milk products
manufacturer. The lumber company is:
a) a tier one supplier.
b) a tier two supplier.
c) a tier three supplier.
d) a tier four supplier.
e) not in the supply chain.
6. Which of the following is not a typical result of the bullwhip
effect?
a) Absenteeism
b) Lost revenues
c) Ineffective transportation use
d) Poor customer service levels
e) Misused manufacturing capacity
7. Which term refers to inaccurate or distorted demand information
created in the supply chain?
a) Battle axe effect
b) Cobra effect
c) Bullwhip effect
d) Lasso effect
e) Whirlpool effect
8. Which of the following is not a remedy for the bullwhip effect?
a) Allocate units based on past demand
b) Price stabilization
c) Base forecasts on demand coming from the immediate downstream
customer
d) Eliminate order batching
e) Information sharing
9. Which of the following is not one of the four major causes of the
bullwhip effect?
a) Demand forecast updating
b) Order batching
c) Price fluctuations
d) The business cycle
e) Rationing and shortage gaming
10 Which of the following is not one of the four major causes of the
bullwhip effect?
a) Demand forecast updating
b) Order batching
c) Price fluctuations
d) Government regulations
e) Rationing and shortage gaming
11. Which of the following is not a remedy for the bullwhip effect?
a) Allocate units based on past demand
b) Price stabilization
c) Fill orders based on a set percentage
d) Eliminate order batching
e) Information sharing
12. Price fluctuations follow all but which of the following marketing
promotions?
a) Advertising
b) Price discounts
c) Quantity discounts
d) Coupons
e) Rebates
13. When do rationing and shortage gaming occur?
a) Supply exceeds demand.
b) Demand exceeds supply.
c) Government contracts are awarded.
d) Transportation workers go on strike.
e) Marginal revenue exceeds marginal cost.
14. Collection of point-of-sale (POS) information is most useful for
which bullwhip effect remedy?
a) Allocate units based on past demand
b) Price stabilization
c) Fill orders based on a set percentage
d) Eliminate order batching
e) Information sharing
15. The time between order placement and the receipt of goods is
called______.
a) receipt time
b) lead time
c) allowance time
d) processing time
e) waiting time
16. Service organization supply chains are:
a) similar to manufacturing organizations.
b) NOT similar to service organizations.
c) very unique.
d) not a consideration when planning a service organization.
e) universally government regulated.
17. What is a network internal to an organization called?
a) supernet
b) internet
c) intranet
d) supranet
e) internalnet
18. What is an extension of an intranet to include suppliers and
customers called?
a) supply chain net
b) supernet
c) supranet
d) extranet
e) intranet++
19. Net marketplaces are designed to:
a) bring together only internal resources.
b) bring together limited external resources.
c) bring together significant number of purchasing firms.
d) limit the number of daily transactions.
e) limit cyber security risks.
20. Which of the following is open to the most users?
a) an intranet
b) an extranet
c) a LAN
d) a WAN
e) the Internet
21. Online retailing, or B2C, has shifted:
a) the cost of doing business.
b) the power from the suppliers to the consumers.
c) the way the internet works.
d) internal corporate power to the IT department.
e) corporate funding levels to the IT department.
22. Due to globalization, which of the following are NOT some
commonly shared ocean shipping logistical characteristics?
a) goods arrive in larger quantities
b) greater break-bulk activity is required
c) crossdocking is required
d) typically have higher inventories
e) longer port times occur
23. A recent change in supply chain management has been the:
a) need for faster computers.
b) green supply chain management requirement.
c) requirement for advanced educational degrees.
d) increased government regulation.
e) need for smaller ocean transportation methods.
24. Purchasing is typically responsible for:
a) initiating purchasing requests.
b) physically inventorying all received materials.
c) developing the engineering specifications.
d) analyzing the make-buy decision.
e) monitoring supplier performance.
25. Which activity appears to be most frequently outsourced by large
companies?
a) Purchasing
b) Marketing
c) Finance
d) Accounting
e) Manufacturing
26. What refers to owning or controlling sources of raw materials and
components?
a) Backward integration
b) Horizontal integration
c) Encapsulating integration
d) Forward integration
e) Subsuming integration
27. What term refers to processes or activities that are completed inhouse?
a) Ownsource
b) Insource
c) Homesource
d) Outsource
e) Supplysource
28. What term refers to processes or activities that are completed by
suppliers?
a) Vendorsource
b) Insource
c) Homesource
d) Outsource
e) Supplysource
29. A higher level of vertical integration implies:
a) more outsourcing.
b) less outsourcing.
c) more insourcing.
d) less insourcing.
e) b and c.
30. The quantity that equates the cost of making a product to the cost
of buying the product is generally called what?
a) Neutrality point
b) Point of equality
c) Indifference point
d) Point of optimality
e) No such point can exist.
31. According to the financial calculations of the make-or-buy
decision, if we need fewer units than the indifference point, then
which option should we definitely choose?
a) Make
b) Buy
c) The option with the lower variable costs
d) The option with the higher variable costs
e) It is not profitable to choose either option.
32. To perform the financial calculations of the make-or-buy
decision, which costs are needed?
a) Fixed and variable
b) Fixed and average
c) Variable and average
d) Variable only
e) Average only
33. Which of the following is NOT a positive attribute of Multiple
Suppliers?
a) provides a greater flexibility of volume
b) eliminates a supplier’s dependence on the purchaser
c) probability of assured supply is better
d) deliveries can be schedule more easily
e) allows for testing of new suppliers without jeopardizing the flow
of materials
34. In general, what comprises the bulk of the cost of goods sold?
a) Overhead
b) Materials
c) Electricity
d) Depreciation
e) Labor
35. A constant concern within purchasing departments is the issue of
ethics in managing_____.
a) customers
b) web sites
c) inventory
d) suppliers
e) entry-level employees
36. What are the Institute for Supply Management’s principles of
ethical supply chain management conduct?
a) objectivity always, loyalty to your organization, and faith in your
profession
b) objectivity always, justice to those with whom you deal, and faith
in your profession
c) objectivity always, justice to those with whom you deal, and
loyalty to your organization
d) objectivity always, know the law, and justice to those with whom
you deal
e) loyalty to your organization, justice to those with whom you deal,
and faith in your profession
37. According to several studies, what are the three most important
criteria for selecting suppliers?
a) Price, quality, fast delivery
b) Quality, fast delivery, on-time delivery
c) Price, flexibility, on-time delivery
d) Quality, flexibility, fast delivery
e) Price, quality, on-time delivery
38. What is the common term for a process of developing a long-term
relationship with a supplier based on mutual trust, shared vision,
shared information, and shared risks?
a) Marrying
b) Cohabitating
c) Sharing
d) Partnering
e) Diversifying
39. Going beyond a basic partnership, an expanded partnership
between a firm and its supplier implies:
a) mutual respect.
b) honesty.
c) trust.
d) open and frequent communications.
e) a commitment to helping each other succeed.
40. According to the textbook, the two kinds of partnerships are basic
and what?
a) Expanded
b) Enhanced
c) Enlarged
d) Elaborated
e) Evolved
41. What does the textbook define as the three most critical factors in
successful partnering?
a) Impact, mission, vision
b) Impact, intimacy, vision
c) Contracting, mission, vision
d) Contracting, intimacy, mission
e) Contracting, impact, intimacy
e) Proximity
44. What term refers to the mission or objectives of a partnership?
a) Impact
b) Intimacy
c) Dream
d) Conception
e) Vision
45. What do studies suggest are the three sources of impact?
a) Reduce waste, leverage core competence, create new opportunities
b) Provide quantity discounts, reduce waste, create new opportunities
c) Create detailed contracts, reduce waste, create new opportunities
d) Create detailed contracts, leverage core competence, reduce waste
e) Create detailed contracts, leverage core competence, create new
opportunities
46. Leveraging core competence is about sharing:
a) workers.
b) knowledge.
c) machines.
d) expenses.
e) financial hedges.
47. Which of the following is not considered to be a characteristic of
partnership relations?
a) Have a long-term orientation
b) Are strategic in nature
c) Are “arms-length” in nature
d) Share a common vision
e) Share short- and long-term plans
48. What does ESI stand for?
a) Easy supplier integration
b) Early stage initiation
c) Every supplier’s important
d) Early supplier involvement
e) Engaged supply initiative
49. Early supplier involvement refers to the involvement of critical
suppliers for what?
a) Strategic planning
b) Assembly line design
c) Speedy delivery planning
d) Selection of new suppliers
e) New product design
50. According to a 1996 study by the Council for Logistics
Management of the third-party logistics industry, which companies
are particularly likely to use third-party logistics services to handle
most of their logistics needs?
a) Companies engaged in international business
b) Transportation companies
c) Warehousing companies
d) Hospital equipment manufacturers
e) Large retailers
42. What term refers to attaining levels of productivity and
competitiveness that are not possible through normal supplier
relationships?
a) Intimacy
b) Vision
c) Impact
d) Power
e) Collusion
51. Which of the following is least likely to be a benefit of
implementing barcode scanners at retail store checkout registers?
a) Improved forecasting
b) More efficient packaging of customer orders
c) Improved inventory control
d) Faster checkout for customers
e) More accurate checkout for customers
43. What term refers to the working relationship between partners?
a) Impact
b) Vision
c) Familiarity
d) Intimacy
52. The discussion in the textbook implies that information sharing
has shifted power in the supply chain the most to which group?
a) Suppliers
b) Manufacturers
c) Distributors
d) Retailers
e) Individual consumers
53. Which type of technology provides “point-of-sale information?”
a) Automatic guided vehicles (AGV)
b) Automatic storage and retrieval systems (ASRS)
c) Barcode scanners
d) Flexible manufacturing systems (FMS)
e) Computer aided design/computer aided manufacturing
(CAD/CAM)
54. What does EDI stand for?
a) Easy data interchange
b) Electronic door interface
c) Electronic detachable interface
d) Elementary data integration
e) Electronic data interchange
55. Which of the following is not considered to be a benefit of EDI?
a) Increased human interaction
b) Reduced paperwork
c) Improved data accuracy
d) Improved tracking capability
e) Reduced clerical costs
56. Some warehouses provide product mixing. This is referred to as:
a) reduced value-added service for customers.
b) value-added service for customers.
c) mix and match capability.
d) correcting earlier mistakes in shipping.
e) storage warehouse functions.
57. What is the throughput of Fingerhut’s warehouse in St. Cloud,
MN?
a) 30,000 items per minute
b) 30,000 items per hour
c) 30,000 items per day
d) 30,000 items per week
e) 30,000 items per month
58. What type of warehouse is used for long-term storage?
a) Customized
b) Strategic
c) General
d) Distribution
e) Tactical
59. What type of warehouse is used for short-term storage,
consolidation, and product mixing?
a) Customized
b) Strategic
c) General
d) Distribution
e) Tactical
60. What does TL stand for?
a) Transportation lead time
b) Transportation logistics
c) Trucking line
d) Trucking life
e) Truckload (quantity)
61. What is the process whereby shipments are transferred directly
from inbound trailers to outbound trailers?
a) crossdocking
b) directdocking
c) nodocking
d) simuldocking
e) transferdocking
62. Crossdocking _____.
a) eliminates the receiving and shipping functions of a distribution
warehouse while still performing its storage and order picking
functions
b) eliminates the receiving and storage functions of a distribution
warehouse while still performing its shipping and order picking
functions
c) eliminates the storage and shipping functions of a distribution
warehouse while still performing its order picking and receiving
functions
d) eliminates the receiving and order picking functions of a
distribution warehouse while still performing its storage and
shipping functions
e) eliminates the storage and order picking functions of a
distribution warehouse while still performing its receiving and
shipping functions
63. Crossdocking allows the retailer to replace ______________ with
information and coordination.
a) trucks
b) buildings
c) inventory
d) truck loaders
e) conveyor belts
64. _________________ crossdocking is the receiving and
consolidating of inbound supplies to support just-in-time
manufacturing.
a) Warehouse
b) Manufacturing
c) Distributor
d) Transportation
e) Retail
65. _________________ crossdocking is the consolidating of
shipments from LTL and small package industries to gain economies
of scale.
a) Warehouse
b) Manufacturing
c) Distributor
d) Transportation
e) Retail
66. What is a virtual organization?
a) A company that provides core functions and outsources everything
else
b) An e-commerce company
c) A web server developer
d) A computer manufacturer
e) A company with no vertical levels of management
67. Benetton is well known for the practice of assembling all white
sweaters and waiting to dye them much closer to the time of sale.
This is an example of what?
a) Stupidity
b) Postponement
c) Fractionalization
d) Partitioning
e) Genericness
68. Which of the following is not an argument in favor of having a
single supplier?
a) Quantity discounts may be achieved.
b) Partnering becomes more possible.
c) Consistency of input materials is achieved.
d) Probability of assured supply is better.
e) Deliveries can be scheduled more easily.
69. Which of the following is not an argument in favor of having
multiple suppliers?
a) The Just-in-time philosophy can be better utilized.
b) Supplier capacity is less important.
c) Volume flexibility is obtained.
d) Risks may be spread.
e) New suppliers may more easily be tested.
70. Insourcing incurs an annual fixed cost of $500,000 and a variable
cost of $60 per unit. Outsourcing incurs an annual fixed cost of
$750,000 and a variable cost of $20 per unit. What is the
indifference point between the two alternatives?
a)
0 units
b) 6250 units
c) 6250 units
d)
40 units
e) 12,500 units
71. What is the electronic marketplace for the auto industry?
a) Carnet
b) Autoexchange
c) Covisint
d) Citroen
e) Motorint
72. In January 2003, how many suppliers were members of Covisint?
a)
76
b)
760
c) 7,600
d) 76,000
e) 760,000
73. Which of the following is a “buyer-side,” typically industryspecific solution?
a) automated order entry systems
b) electronic data interchange
c) electronic storefronts
d) net marketplaces
e) advertising revenue model
74. Which B2C model does MyPoints.com utilize?
a) advertising revenue model
b) subscription revenue model
c) transaction fee model
d) sales revenue model
e) affiliate revenue model
75. Companies want a supply chain that makes it possible to:
a) manage all suppliers’ development costs.
b) manage and adapt to all of the business dynamics.
c) manage distribution display.
d) manage distribution outlet retail prices.
e) manage customer demands.
76. Which of the following is NOT one of the supply chain wastes
the text book identifies?
a) over production
b) delay between activities
c) procurement/purchasing delay
d) unnecessary transport or conveyance of product
e) unnecessary movement by people
77. Supply chain velocity refers to
a) how fast the transportation vendor is
b) how fast the company pays the supply chain vendors
c) how fast the purchasing department responds to a request
d) the speed at which a product moves through a pipeline from the
manufacturer to the customer
e) the speed at which the warehouse is able to crossdock a shipment
True/False
1. Supply chain management provides the company with a sustainable, competitive advantage. T
2. Manufacturers typically represent the beginning of a supply chain. F
3. A tier one supplier is always more important than a tier two supplier. F
4. The tier one, tier two, and tier three supplier designations are based upon whom the suppliers are providing materials or services to. T
5. Like “ABC inventory analysis,” the tier one, tier two, and tier three supplier designations are based upon the annual level of purchases made with
the suppliers. F
6. Location managers are typically responsible for managing the movement of products between locations. F
7. If supply chain A has more levels than supply chain B, then the bullwhip effect will likely impact supply chain B more than supply chain A. F
8. A possible remedy for the bullwhip effect is to base forecasts on demand coming from the immediate downstream customer. F
9. Order batching replaces lumpy demand with constant product demand. F
10. Rationing and shortage gaming occur when supply exceeds demand. F
11. The time between order placement and the receipt of goods is called lead time. T
12. Internet-based B2B commerce results in higher costs to the global suppliers F
13. The Internet has created greater competition between suppliers. T
14. A firm can hedge exchange rate risk by establishing links with suppliers in a variety of countries. T
15. Service organizations can also benefit from supply chain management. T
16. Global competition forces organizations to decrease their amount of product proliferation. F
17. Supply chain globalization is not impacted by security requirements. F
18. Recent research suggests that most large companies have not increased their level of outsourcing. T
19. The amount of outsourcing in industry is increasing. T
20. The greater the level of vertical integration, the higher is the level of outsourcing. F
21. One of the Institute for Supply Management’s principles of ethical supply chain management conduct is “loyalty to your organization.” T
22. Shipments should spend less than 24 hours in a crossdock. T
23. Crossdocking eliminates the receiving and shipping functions of a distribution warehouse while still performing its storage and order picking
functions. F
24. A company can use traditional financial measures such as return on investment to measure supply chain performance. T
25. Warehouses are sometimes used as part of their postponement in their product design process. T
Essay
1. What are the three “components” of a supply chain?
Ans: (1) external suppliers, (2) internal functions of the company, (3) external distributors
2. Explain how a supply chain supports the organization to be sustainable and provide a competitive advantage.
Ans: It provides the ability to provide quick response times, low cost, state-of-the-art quality design, and operational flexibility.
3. Logistics includes what two major management functions?
Ans: traffic management and distribution management
4. What are the four causes of the bullwhip effect?
Ans: (1) demand forecast updating, (2) order batching, (3) price fluctuations, (4) rationing and shortage gaming
5. Describe how consumers can use the Internet to shop in new ways.
Ans: They can comparison shop for suppliers around the world, view color pictures in an on-line catalog, and find all the information needed about
an item. They can use a credit card or electronic funds transfer to buy items on-line. They can participate in auctions, specify the options and
learn the cost of a brand new car, book a trip, or buy a diamond ring.
6. List some benefits derived from E-commerce.
Ans: reduced transaction costs, fewer intermediaries, reduced lead times, greater visibility for the company, more choices and information for
customers, improved customer service, virtual companies that distribute through the Web, customer preference data collection, and global
market access
7. Compare the access differences among the Internet, an intranet, and an extranet.
Ans: The Internet is wide open, the intranet is limited to internal users, and the extranet is expanded to include suppliers and customers.
8. List five major factors that become important for the management of global supply chains.
Ans: substantial geographical distances, forecasting accuracy, exchange rates, infrastructure issues, and product proliferation
9. What are some examples of infrastructure issues that firms managing global supply chains may encounter?
Ans: inadequate transportation networks, limited telecommunication capabilities, uncertain power continuity, low worker skill, and poor supply
availability and quality
10. Provide some examples of “greening” requirements that an organization may impose on their supply chain members.
Ans: Examples may include carbon emission footprint reduction, reduced energy consumption, reduced inventory levels, reduced transportation
costs, the use of sustainable farming methods, use of specified material and application of greening supporting technologies.
11. What is the big difference between crossdocking and traditional distribution warehousing?
Ans: In a traditional setting, the warehouse holds stock until a customer places an order, then the item is picked, packed and shipped. The customer
typically is not known before the items arrive at the warehouse. With crossdocking, the customer is known before the items arrive at the
warehouse and there is no reason to move the items into storage.
12. What are the two major advantages or crossdocking?
Ans: First, the retailer reduces inventory holding costs by replacing inventory with information and coordination. Second, crossdocking can
consolidate shipments to achieve truck-load quantities and significantly reduce a company’s inbound transportation costs.
Problems
1. Derive the formula for the indifference point Q* in the make-or-buy decision.
Ans: Q* = (FCMake  FCBuy) / (VCBuy  VCMake)
2. Will’s omelet factory produces 2,500 omelets a day. They’ve determined that their daily fixed costs are $4,000 with a variable cost of fifteen cents
per omelet. (a) What is the total cost to make a day’s omelettes, and (b) what should Will charge for each omelet to make a 10% profit, rounded to
the next whole dollar?
Ans: (a) $4,375 TC = F +(VC*Q) = $4,000+(2,500*$0.15) = $,4,375
(b) $2.00 ($1.925) Cost/omelet = TC make/Q=$4375/2500=$1.75: Sales price @ 10% profit = Cost/omelet*1.1= $1.925 (round to $2.00)
3. Insourcing incurs a fixed cost of $1000 and a $5 variable cost. Outsourcing incurs a fixed cost of $2000 and a $2 variable cost. What is the
indifference point?
Ans: 333 units (Q* = (FCMake  FCBuy) / (VCBuy  VCMake) = ($2000 - $1000)/($5 - $2) = 333)
4. Logo, Inc., can transport its own goods for a $140,000 annual cost and $25 per unit. A logistics supplier offers a contract for a $100,000 annual
cost at $30 per unit. What is the indifference point?
Ans: 8000 units (Q* = (FCMake  FCBuy) / (VCBuy  VCMake) = ($140,000 - $100,000)/($30 - $25) = 8,000)
5. Simuelson Industries can produce its own motors for a $60,000 fixed monthly cost and a $50 variable cost per unit. Alternatively, Simuelson
Industries can purchase the motors from an outside supplier for $50,000 per month and $58 per unit.
a) What is the indifference point?
b) What option should be chosen if monthly demand is 1200 units?
Ans: a) 1250 units, (Q* = (FCMake  FCBuy) / (VCBuy  VCMake) = ($60,000 - $50,000)/($58 - $50) = 1,250)
b) outsourcing
6. Yannis Corporation is trying to decide whether to produce its own subassemblies or outsource them. In-house production costs would include an
annual fixed cost of $250,000, materials costs per unit of $7, and labor costs per unit of $5. Teshtown, Inc. has agreed to provide the subassemblies
for an annual cost of $400,000 and a unit cost of $8 per subassembly. Over what ranges of demand is each option best?
Ans: insourcing is optimal between 1 and 37,500 units, outsourcing is optimal for annual demand  37,500 units
(Q* = (FCMake  FCBuy) / (VCBuy  VCMake) = ($250,000 - $400,000)/($8 - $12) = 37,500)
7. Insourcing incurs a periodic fixed cost of $10,000 and a $0.50 variable cost. Outsourcing incurs a periodic cost of $6000 and a $0.90 variable cost.
Over what ranges of demand is each option best?
Ans: outsourcing is optimal between 1 and 10,000 units. Insourcing is optimal for demand  10,000 units
(Q* = (FCMake  FCBuy) / (VCBuy  VCMake) = ($10,000 - $6,000)/($0.90 - $0.50) = 10,000)
8. Boys `R Us sells suits to young men. Management is considering vertical integration. It is determined that the company can produce its own suits
for a fixed annual cost of $2,000,000 and a production cost of $100 per suit. The current supplier charges a $2,500,000 fixed annual cost and $120
per suit. Over what ranges of demand is each option best?
Ans: insourcing is always preferable (Q* = (FCMake  FCBuy) / (VCBuy  VCMake) = ($2,000,000 - $2,500,000)/($120 - $100) = - 25,000)
9. Annual fixed costs are $900,000 and $800,000 for outsourcing and insourcing, respectively, and variable costs are $28 and $32 for outsourcing and
insourcing, respectively. If current annual demand is 22,000 units, by how much must demand increase in order for outsourcing to become cheaper?
Ans: 3000 units (Q* = (FCMake  FCBuy) / (VCBuy  VCMake) = ($800,000 - $900,000)/($28 - $32) = 25,000; 2500 – 22000 = 3,000)
10. Global Metalworks can produce its own hinges for a weekly cost of $96,400 and a cost per hinge of $0.10. Currently an outside supplier is used
for a weekly cost of $82,500 and a cost per hinge of $0.24. Current weekly demand is 98,000 units. How much larger must weekly demand grow in
order to make insourcing economical?
Ans: 1286 units (Q* = (FCMake  FCBuy) / (VCBuy  VCMake) = ($96,400 - $82,500)/($0.24 - $0.10) = 99,286; 99,286 – 98000 = 1,286)
11. Sportsworld, Inc. currently incurs $100,000 in annual purchasing costs, and each purchase order costs the firm approximately $3. Third-Party
Logistics, Inc. is willing to perform purchasing services for Sportsworld at a $50,000 annual fixed retainer plus $7 per purchase order. Sportsworld
currently places 10,000 orders per year.
a) What is the current total cost of purchasing for Sportsworld?
b) What would the cost of purchasing be if Third-Party Logistics were used?
c) What is the indifference point for the two alternatives?
Ans: a) $130,000, (TC = F +(VC*Q) = $100,000 +($3 * 10,000) = $130,000)
b) $120,000, (TC = F +(VC*Q) = $50,000 +($7 * 10,000) = $120,000)
c) 12,500 (Q* = (FCMake  FCBuy) / (VCBuy  VCMake) = ($100,000 - $50,000)/($7 - $3) = 12,500)
12. Big Oil Refinery is losing money every month. They cannot shut down the refinery. What quantity of product should they make in an effort to
break even? Their primary product sale price is $1.50 per gallon. The production fixed cost is $36,000/day. The variable cost per gallon is $1.20.
Ans: 180,000 gal: Sales price * Quantity = F +(VC*Q); Q = FC/(Sales price – VC) = 36,000/($1.50 - $1.20) = 180,000
Short Answer
1. A firm whose variable cost of providing a function is $10 while a potential supplier will outsource the function if ________________________
_________________________________________________________________________
2. Name three kinds of B2B e-commerce: ________________________________________________________________
3. Name three benefits of B2B e-commerce: _______________________________________________________________
4. Growth in shipments from _______________________ to the U.S. have grown particularly quickly in recent years.
5. Taxation is a particularly challenging e-commerce problem because of ________________________
6. Global competition forces firms to offer ________________________ products.
7. Several studies report that the top three criteria for selecting suppliers are ____, ____, and ____.
8. _____, _____, _____are critical factors in successful partnering.
9. Name three functions of a purchasing department: __________________________________________________________
10. Name three things purchasing agents should avoid as they balance loyalty their own organization and those with whom they deal:
__________________________________________________________________________________________________
11. Partnerships between supplier and purchaser are easier to develop when there is (are) ______________________supplier(s).
12. Successful supply chain partnerships have impact when they reduce: ______________________________ and ________________________
while _____________________________ and _______________________________