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Supply Chain Management Chapter 1 Test Questions
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lOMoARcPSD|18015231 5e Chapter 1 Test Questions Supply Chain Management (Trường Đại học Ngoại thương) Scan to open on Studocu Studocu is not sponsored or endorsed by any college or university Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 Chapter 1—Introduction to Supply Chain Management TRUE/FALSE 1. According to the textbook, the keys to successful supply chain management include trust, cooperation, collaboration and honest, accurate communications between supply chain partners. ANS: T BUSPROG: Analytic PTS: 1 LO: 1-1 Bloom’s: Knowledge Difficulty: Easy 2. Supply chain management is concerned about how suppliers’ products are designed, produced, and transported. ANS: T BUSPROG: Analytic PTS: 1 LO: 1-1 Bloom’s: Knowledge Difficulty: Easy 3. One definition of supply chain management is " Coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers." ANS: T BUSPROG: Analytic PTS: 1 LO: 1-1 Bloom’s: Knowledge Difficulty: Easy 4. The universally accepted definition of supply chain management is "the management and integration of the parties involved in producing the end items coveted by consumers." ANS: F BUSPROG: Analytic PTS: 1 LO: 1-1 Bloom’s: Comprehension Difficulty: Easy 5. The assembly or production of finished products, producing the right amount of product, and ensuring that finished products meet specific quality, cost, and customer service requirements can all be considered elements of operations. ANS: T BUSPROG: Analytic PTS: 1 LO: 1-2 Bloom’s: Comprehension Difficulty: Easy 6. According to the textbook, supply chains include raw material suppliers, intermediate component manufacturers, end-product manufacturers, wholesale distributors, retailers and end-product consumers. ANS: T BUSPROG: Analytic PTS: 1 LO: 1-2 Bloom’s: Knowledge Difficulty: Easy 7. Trucking companies, airfreight shipping companies, and information system providers can all be considered service providers to the supply chain. ANS: T BUSPROG: Analytic PTS: 1 LO: 1-2 Bloom’s: Knowledge Difficulty: Easy 8. According to the textbook, a supply chain's end customers are the only true source of income for all supply chain organizations. ANS: T PTS: 1 Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 BUSPROG: Analytic LO: 1-2 Bloom’s: Knowledge Difficulty: Easy 9. The foundation elements of supply chain management are Supply. Operations, Customer Service, Logistics. ANS: F BUSPROG: Analytic PTS: 1 LO: 1-2 Bloom’s: Comprehension Difficulty: Easy 10. Supply chain management activity includes managing the various compensation and benefit programs within an organization. ANS: F BUSPROG: Analytic PTS: 1 LO: 1-3 Bloom’s: Comprehension Difficulty: Easy 11. Highly valued customers with large purchasing budgets who achieve moderate supply chain management success have been known to lower purchasing and inventory carrying costs, and create better quality products with higher levels of customer service. ANS: T BUSPROG: Analytic PTS: 1 LO: 1-3 Bloom’s: Knowledge Difficulty: Easy 12. Many large firms are moving to in-house vertically integrated structures where they have more control over each business unit. ANS: F BUSPROG: Analytic PTS: 1 LO: 1-4 Bloom’s: Comprehension Difficulty: Easy 13. Supply chain analytics can be used along the supply chain to schedule production according to expected supplier deliveries ANS: T PTS: 1 BUSPROG: Analytic LO: 1-4 Bloom’s: Analysis Difficulty: Easy 14. According to the textbook, in the 1950's and 1960's, mass production techniques focused on creating supplier partnerships, improving process design and flexibility, and improving product quality. ANS: F BUSPROG: Analytic PTS: 1 LO: 1-4 Bloom’s: Knowledge Difficulty: Easy 15. According to the textbook, third-party logistics providers (3LPs) do not offer assistance with helping products clear customs. ANS: F BUSPROG: Analytic PTS: 1 LO: 1-4 Bloom’s: Knowledge Difficulty: Easy 16. According to the textbook, environmental and social impacts are considered outside of supply chain management. ANS: F BUSPROG: Diversity PTS: 1 LO: 1-4 REF: Bloom’s: Knowledge Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Easy lOMoARcPSD|18015231 17. Trends in supply chain management include expansion of the supply chain and decreasing supply chain visibility. ANS: F BUSPROG: Analytic PTS: 1 LO: 1-4 Bloom’s: Knowledge Difficulty: Easy 18. According to the text, supply chain management will involve cultural change among most or all of the participants. ANS: T BUSPROG: Analytic PTS: 1 LO: 1-4 Bloom’s: Knowledge Difficulty: Easy 19. The bullwhip effect causes an amplification of the variation in the demand pattern along the supply chain. ANS: T BUSPROG: Analytic PTS: 1 LO: 1-5 Bloom’s: Knowledge Difficulty: Easy 20. The bullwhip effect is the result of companies producing excessive defective products; defective items are whipped back from the end customer toward the manufacturer of the defect. ANS: F BUSPROG: Technology PTS: 1 LO: 1-5 Bloom’s: Analysis Difficulty: Easy MULTIPLE CHOICE 1. When a particular item is in short supply accompanied by rising prices, a firm might find it beneficial to: a. Discontinue buying the product and focus more on cheaper products. b. Align itself with one of the suppliers to ensure a continued supply of the scarce item. c. Purchase the item from a manufacturer who cuts corners and provides a product below market price. d. All of these ANS: B BUSPROG: Analytic PTS: 1 LO: 1-1 Bloom’s: Comprehension Difficulty: Easy 2. Supply chain management includes the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. It also includes: a. Human resources and job design b. Selling and marketing products c. Coordination and collaboration with channel partners d. Program evaluation and review techniques. ANS: C BUSPROG: Analytic PTS: 1 LO: 1-1 Bloom’s: Knowledge Difficulty: Easy 3. Which company is experimenting with the management of the final mile of delivery in some markets, using small aerial drones to deliver shoebox-size packages from fulfillment centers? a. FedEx b. UPS c. Zappos d. Amazon Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 ANS: D BUSPROG: Analytic PTS: 1 LO: 1-1 Bloom’s: Knowledge Difficulty: Easy 4. According to the textbook, conditions which must be present for successful supply chain management include: a. Cooperation among firms b. Corporate contracts regarding performance expectations c. Short-term company focused performance d. Vertical Integration ANS: A BUSPROG: Analytic PTS: 1 LO: 1-2 Bloom’s: Knowledge Difficulty: Easy 5. According to the text, the FOUR important elements of the supply chain are: a. Purchasing, manufacturing, transportation, retail stores b. Supply, operations, logistics, integration c. Purchasing, manufacturing, logistics, transportation d. Supply, operations, manufacturing, distribution ANS: B BUSPROG: Analytic PTS: 1 LO: 1-2 Bloom’s: Knowledge Difficulty: Easy 6. Encouraging or helping a firm's suppliers to perform in a desired fashion can be referred to as: a. Progressive procurement b. Supplier management c. Right-shoring d. Supply chain performance management ANS: B BUSPROG: Analytic PTS: 1 LO: 1-2 Bloom’s: Knowledge Difficulty: Easy 7. Which of the following activities would fall under the foundational element of operation? a. Distribution network b. Supplier management c. Demand management d. Third-party logistics services ANS: C BUSPROG: Analytic PTS: 1 LO: 1-2 Bloom’s: Knowledge Difficulty: Easy 8. One operational method for managing inventory is the implementation of a software system which can be referred to as: a. Material requirements planning (MRP) b. Demand capacity tracking (DCT) c. Inventory sourcing (IS) d. Demand process reengineering (DPR) ANS: A BUSPROG: Technology PTS: 1 LO: 1-3 Bloom’s: Comprehension Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Easy lOMoARcPSD|18015231 9. Which of the following activities allows buyers to assume the supplier will meet certain product quality and service requirements? a. Business process reengineering b. Right-shoring c. Supplier certification d. Distribution network ANS: C BUSPROG: Technology PTS: 1 LO: 1-3 Bloom’s: Knowledge Difficulty: Easy 10. According to the textbook, the order of product & service flow is as follows: a. Raw material supplier, retailer, component manufacturer, wholesale distributor, end product manufacturer, end-product consumer b. Raw material supplier, component manufacturer, retailer, wholesale distributor, end product manufacturer, end-product consumer c. Component manufacturer, raw material supplier, retailer, wholesale distributor, end product manufacturer, end-product consumer d. Raw material supplier, component manufacturer, end product manufacturer, wholesale distributor, retailer, end-product consumer ANS: D BUSPROG: Analytic PTS: 1 LO: 1-3 Bloom’s: Knowledge Difficulty: Easy 11. Which of the following is a reverse logistics activity: a. Delivering finished goods to your customer b. Recycling products and components c. Developing a collaborative relationship with your supplier d. Managing the quality of products ANS: B BUSPROG: Analytic PTS: 1 LO: 1-3 Bloom’s: Comprehension Difficulty: Easy 12. Which of the following would be considered a third party provider? a. A Raw materials supplier b. An intermediate component manufacturer c. A firm that leases storage warehousing d. An end product manufacturer ANS: C BUSPROG: Analytic PTS: 1 LO: 1-3 Bloom’s: Comprehension Difficulty: Easy 13. Which of the following statements is TRUE? a. Supply chain management was invented by the auto manufacturing industry b. Strategic partnerships are seen as one of the foundations of supply chain management c. Purchasing is seen as the final and most difficult step in the supply chain d. Service response logistics is the digital distribution of services ANS: B BUSPROG: Analytic PTS: 1 LO: 1-3 Bloom’s: Comprehension Difficulty: Easy 14. Which of the following acronyms is NOT paired with its correct "translation?" a. TQM Total Quality Management b. JIT Just-in-Time c. TLS Third-party Logistics Services d. ERP Enterprise Resource Planning Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 ANS: C BUSPROG: Analytic PTS: 1 LO: 1-3 Bloom’s: Knowledge Difficulty: Easy 15. Lean production is typically associated with which of the following company's production systems? a. Proctor and Gamble b. Kraft c. Samsung d. Toyota ANS: D BUSPROG: Analytic PTS: 1 LO: 1-4 Bloom’s: Knowledge Difficulty: Easy 16. Customer relationship management, distribution network, transportation management, and service response logistics are all important issues that are most closely related to: a. Purchasing b. Logistics c. Integration d. Manufacturing ANS: B BUSPROG: Analytic PTS: 1 LO: 1-3 Bloom’s: Comprehension Difficulty: Easy 17. The following strategy is usually employed by lean organizations in an effort to ensure continued quality compliance among suppliers and with internal production facilities: a. Six Sigma b. MRP II c. 3PL d. CAPS ANS: A BUSPROG: Analytic PTS: 1 LO: 1-3 Bloom’s: Knowledge Difficulty: Easy 18. Which of the following can be defined as “The ability to meet the needs of current supply chain members without hindering the ability to meet the needs of future generations”. a. Reverse logistics b. Enterprise resource planning c. Sustainability d. Strategic partnerships ANS: C BUSPROG: Analytic PTS: 1 LO: 1-4 Bloom’s: Comprehension Difficulty: Easy 19. According to the text, which of the following is considered a current trend in supply chain management? a. Using supply chain analytics b. Increasing supply chain visibility c. Both A and B d. None of these ANS: C BUSPROG: Analytic PTS: 1 LO: 1-4 Bloom’s: Comprehension Difficulty: Easy 20. Developed in the 1990’s as a popular way of developing radically new business processes in an effort to reduce waste and increase performance is referred to as: Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 a. b. c. d. Process integration Benchmarking Business process reengineering Vertical integration ANS: C BUSPROG: Analytic PTS: 1 LO: 1-4 Bloom’s: Knowledge Difficulty: Easy 21. The term Supply Chain Management and the field of study it represents today seems to have emerged in the: a. 1960's b. 1970's c. 1980's d. 1990's ANS: C BUSPROG: Analytic PTS: 1 LO: 1-4 Bloom’s: Knowledge Difficulty: Easy 22. An internal or external event that causes a disruption or failure of supply chain operations is an example of a. Bull-whip effect b. Back-shoring c. Supply chain risk d. Six Sigma quality management ANS: C BUSPROG: Analytic PTS: 1 LO: 1-4 Bloom’s: Comprehension Difficulty: Easy 23. Which of the following can happen as a result of the bullwhip effect? a. Increase in defective products b. Excess costs for each firm in a supply chain c. Decreased levels of safety stock d. Quicker distribution to warehouses ANS: B BUSPROG: Analytic PTS: 1 LO: 1-5 Bloom’s: Comprehension Difficulty: Easy 24. The continuing cycle of erratic demand causing forecasts to include safety stock which in turn magnify supplier forecasts and cause production planning problems is known as: a. Supply chain management b. Process integration c. Back-shoring d. Bullwhip effect ANS: D BUSPROG: Analytic PTS: 1 LO: 1-5 Bloom’s: Comprehension Difficulty: Easy 25. The following is an example of the bullwhip effect: a. Barkley's produces a defective product and thus realizes an excessive increase in consumer returns b. Barkley's products are so successful that it adds a new retailer for distribution c. Barkley's incorrectly anticipates consumer demand resulting in stockouts at several popular retailers d. Barkley's is unhappy with the performance of a distributor which causes a chain-reaction of replacements to companies involved in its supply chain Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 ANS: C BUSPROG: Analytic PTS: 1 LO: 1-5 Bloom’s: Application Difficulty: Easy SHORT ANSWER 1. There are many definitions for supply chain management. a. Define supply chain management in your own words. b. What is the goal of supply chain management? ANS: a. b. Supply chain management is managing the activities involved in sourcing, production, and distribution of products. It is also involved in coordinating or integrating a number of goods- and services-related activities among supply chain participants. The goal of supply chain management typically involves improving operating efficiencies, increasing quality of products and strengthening customer service among the collaborating organizations. PTS: 5 BUSPROG: Communication LO: 1-1 Bloom’s: Comprehension Difficulty: Moderate 2. Explain the concept of 'value-enhancing benefits' by giving THREE examples of benefits that may be realized by a firm that successfully manages its supply chain. ANS: a. b. c. d. Benefits from successfully managing the supply chain Lower purchasing and inventory carrying costs Better product quality Higher levels of customer service Increase in sales. PTS: 5 BUSPROG: Communication LO: 1-2 Bloom’s: Comprehension Difficulty: Moderate 3. Briefly explain how technology has impacted supply chain management? Give three examples. ANS: a. b. c. d. How technology has impacted supply chain management Shipments can be tracked and monitored using technology and alerts sent to shippers about items that are in transit and delivered. Technology can be used to help a facility make more economic use of their utilities such as automated controls for lighting and air conditioning. RFID and automated storage and retrieval systems can be used to move product through a warehouse Inventory visibility is made easier by technology and the use of MRP and ERP systems. PTS: 5 BUSPROG: Technology LO: 1-4 Bloom’s: Knowledge Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Moderate lOMoARcPSD|18015231 4. List three concepts used by supply chain managers in an attempt to make a firm more flexible and responsive to customers' changing needs: ANS: a. b. c. d. e. Agile manufacturing JIT Mass customization Lean manufacturing Quick response PTS: 5 BUSPROG: Analytic LO: 1-3 Bloom’s: Knowledge Difficulty: Easy ESSAY 1. Discuss the differences between supply chain partnerships of the past and those that have developed today. ANS: In the past, supply chain partnerships did not really exist. Supply chains were seen as a series of independent organizations that were looked on, to perform their core competency for the sake of their downstream "partner." Firms in the past did not seek to share information. Buyers of supplies and services instead usually were reduced to bargain hunters. Low cost was valued over quality. Traditional relationships were also characterized by a large number of partners and short-term contracts. This put an emphasis on low cost that would provide short-term profits versus sustainable profits that might come along with consistently high quality goods and services. In some cases, conglomerates were formed by firms seeking more supply chain control. Modern supply chain partnerships are much different. Partnerships of today encourage sharing and collaboration from the design phase to the delivery phase. Partners, nowadays, see each other as a chain of customers connected by their goal of pleasing the final end customer. While cost is still an important aspect of creating value for the customer, today supply chains also focus on the importance of higher quality, more customization, and swift delivery service. It is for this reason that modern partnerships focus on collaboration from the moment they begin to design a product until the product's lifecycle has run its course. Modern partnerships often include a small number of partners who understand the value of long-term contracts that value quality, speed, and flexibility as much, if not more, than cost. PTS: 10 BUSPROG: Communication LO: 1-4 Bloom’s: Application Difficulty: Difficult 2. List the four elements of supply chain management and provide a brief explanation of each of the four elements. What types of failures might each of those elements create within the supply chain? Why might those results be linked to errors in a particular element? ANS: Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 Note: While the descriptions of each of the four elements are relatively general and accurate, the types of failures each of the elements may be responsible for, are rather long lists. Therefore, in many cases it is important for the student to explain why one element may ultimately be responsible for a certain problem with a list. a. Supply Elements Supply management professionals most often perform the purchasing function. Effective supply management has resulted in smaller supply bases and the development of more long-term supplier relationships to achieve the competitive benefits. Supply management is one of the foundations of supply chain management, since incoming material quality, delivery timing, purchase price, product safety, and purchasing’s impact on the environment are all affected by the buyer-supplier relationship and the capabilities of suppliers. Some of the mistakes in purchasing can cause low-quality end-items, high inventories, stockouts, excessive cost of goods sold, interruptions in production, or excessive operational costs. b. Operations Elements The operations elements of the supply chain take into account the assembly or processing of materials and components into finished products or services. Operations is also responsible for creating the right amount of product within an appropriate period of time that will meet the demand needs of the customer while still satisfying their specific needs in terms of quality, cost, customization, and timely delivery. Mistakes in operations can cause shortages, stockouts, high inventories, low inventories, excessive operational costs, late deliveries, low-quality end-items, defects, or dangerous end-items. c. Logistics Elements the distribution elements of the supply chain are focused on delivering products to customers at the right time, quality, and volume. The distribution elements include transportation, warehousing, break-bulking, packaging, containerization, and any services related to developing and keeping a distribution itinerary. Mistakes in distribution can cause shortages, stockouts, excessive operational costs, damaged end-items, high pilferage rates, customer complaints, delivery errors (wrong item to the wrong destination), and lost inventory. d. Integration Elements The integration elements involve the planning and coordination required to create a seamless supply chain. Supply chain integration requires management to inform all supply chain parties of how important it is for them to share information, articulate their needs, and develop relationships. Poor supply chain integration will cause conflicts between supply chain partners, late deliveries, tardy production, overproduction, under production, poor forecasting, over purchasing, material shortages, long lead times, high operational costs, excessive waiting times, and excessive inventories. PTS: 10 BUSPROG: Communication LO: 1-2 Bloom’s: Comprehension Difficulty: Difficult 3. Explain the bullwhip effect? What can be done to reduce the bullwhip effect? Give an example of how the bullwhip effect results in excess costs in the supply chain. Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 ANS: a. b. c. The bullwhip effect is a build-up of safety stocks due to poor forecasting and communication that cause order quantities to be increased throughout the supply chain. The increases become amplified as the product continues farther down the supply chain. This will likely cause overstock and excess costs for each firm in a supply chain. Better communication between each link in the supply chain and sharing of upcoming demand forecasts makes it easier for companies to feel confident about their order quantity. Trading partners feel more comfortable with manufacturers who consistently produce high quality products. Firms feel more confident and have better working relationships with manufactures that have better products and better services. Better working relationships lead to single source for supplies and this helps the manufacturer plan for demand. Example of the bullwhip effect – Company A sells widgets to customers. Actual demand from customers is 20 widgets. Company A orders 25 widgets from the distributor B; an extra 5 units are to ensure they don’t run out of floor stock. Distributor B wants to order in bulk to save costs so they order 30 widgets from supplier C. Supplier C always keeps safety 20% stock on hand so it orders 36 widgets from Manufacturer D. At Manufacturer D’s factory, they must produce in runs of 50. Now 50 units have been produced for a demand of only 20 units causing each firm in the supply chain excess costs. PTS: 10 BUSPROG: Communication LO: 1-5 Bloom’s: Application Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Difficult lOMoARcPSD|18015231 Chapter 2—Purchasing Management TRUE/FALSE 1. Purchasing can be broadly classified into two categories: merchants and industrial buyers. ANS: T BUSPROG: Analytic PTS: 1 LO: 2-1 Bloom’s: Knowledge Difficulty: Easy 2. Merchants primary task is to purchase raw materials for conversion purposes. ANS: F BUSPROG: Analytic PTS: 1 LO: 2-1 Bloom’s: Knowledge Difficulty: Easy 3. A low ROA suggests that management is capable of generating large profits with relativiely small investments. ANS: F BUSPROG: Analytic PTS: 1 LO: 2-1 Bloom’s: Comprehension Difficulty: Easy 4. The procedures for public procurement differ from the private sector. ANS: T BUSPROG: Analytic PTS: 1 LO: 2-2 Bloom’s: Comprehension Difficulty: Easy 5. Cost savings is an advantage of using an e-procurement system. ANS: T BUSPROG: Analytic PTS: 1 LO: 2-2 Bloom’s: Knowledge Difficulty: Easy 6. The goal of a good purchasing system is to ensure efficient information transitions between the materials users, the purchasing personnel, and the suppliers. ANS: T BUSPROG: Analytic PTS: 1 LO: 2-2 Bloom’s: Knowledge Difficulty: Easy 7. The purchase order is NOT a legally binding contract until it is accepted by the supplier. ANS: T BUSPROG: Analytic PTS: 1 LO: 2-2 Bloom’s: Knowledge Difficulty: Easy 8. A material requisition and a purchase requisition are the same thing. ANS: T BUSPROG: Analytic PTS: 1 LO: 2-2 Bloom’s: Knowledge Difficulty: Easy 9. A follow-up is considered a reactive approach to speed up an overdue shipment. ANS: F BUSPROG: Analytic PTS: 1 LO: 2-2 Bloom’s: Knowledge Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Easy lOMoARcPSD|18015231 10. Procurement credit cards can be used for small purchases including meals, lodging, and travel expenses. ANS: T BUSPROG: Analytic PTS: 1 LO: 2-3 Bloom’s: Knowledge Difficulty: Easy 12. Blank check purchase orders, Corporate purchasing cards, Petty cash, and Open-end purchase orders are all possible alternatives to dealing with small value purchases such as those for office supplies. ANS: T BUSPROG: Analytic PTS: 1 LO: 2-3 Bloom’s: Knowledge Difficulty: Easy 13. Generally, firms outsource noncore activities while focusing on core competencies. ANS: T BUSPROG: Analytic PTS: 1 LO: 2-4 Bloom’s: Comprehension Difficulty: Easy 14. If the break-even point in a typical make-buy scenario is 19,000 units and 10,000 units are required by the firm, then the firm should choose to make the units. ANS: F PTS: 1 BUSPROG: Reflective Thinking LO: 2-4 Bloom’s: Analysis Difficulty: Easy 15. A reason for making items instead of buying them would include better quality control. ANS: T BUSPROG: Analytic PTS: 1 LO: 2-4 Bloom’s: Comprehension Difficulty: Easy 16. The Total Cost of Ownership Concept does NOT include quantitative factors. ANS: F BUSPROG: Analytic PTS: 1 LO: 2-5 Bloom’s: Analysis Difficulty: Easy 17. The total cost analysis demonstrates how other costs besides the unit cost can affect purchase decisions. ANS: T BUSPROG: Analytic PTS: 1 LO: 2-5 Bloom’s: Knowledge Difficulty: Easy 18. The possibility of events like strikes, assembly line breakdowns, and natural disasters are all reasons a company should favor using a single supplier. ANS: F BUSPROG: Analytic PTS: 1 LO: 2-6 Bloom’s: Knowledge Difficulty: Easy 19. Decentralized purchasing is the practice where individual, local purchasing departments throughout a single corporation make their own, individual purchasing decisions to fulfill their individual local needs. ANS: T BUSPROG: Analytic PTS: 1 LO: 2-7 Bloom’s: Comprehension Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Easy lOMoARcPSD|18015231 19. NAFTA and the WTO are trade organizations seeking to reduce tariff and non-tariff barriers among its member countries. ANS: T BUSPROG: Diversity PTS: 1 LO: 2-8 Bloom’s: Comprehension Difficulty: Easy 20. Foreign suppliers located farther away may be able to deliver goods faster than domestic suppliers due to more efficient transportation and logistical systems. ANS: T BUSPROG: Diversity PTS: 1 LO: 2-8 Bloom’s: Comprehension Difficulty: Easy MULTIPLE CHOICE 1. The primary goals of purchasing include all EXCEPT: a. Secure materials at the lowest cost b. Maximize customer satisfaction c. Improve the quality of finished goods produced d. Ensure the highest quality raw materials are purchased ANS: D BUSPROG: Analytic PTS: 1 LO: 2-1 Bloom’s: Knowledge Difficulty: Easy 2. Which of the following refers to the measurement of the impact of change in purchase spend on a firm’s profit before taxes, assuming gross sales and other expenses remain unchanged? a. Break-Even Analysis b. Profit-Leverage Effect c. Direct Offset d. Leveraging Purchase Volume ANS: B BUSPROG: Analytic PTS: 1 LO: 2-1 Bloom’s: Knowledge Difficulty: Easy 3. When calculating Return on Investment, current assets include: a. Cash, Accounts Receivable, and Inventory b. Cash, Accounts Receivable, and Equipment c. Accounts Receivable, Equipment, and Real Estate d. Equipment, Buildings, and Real Estate ANS: A BUSPROG: Analytic PTS: 1 LO: 2-1 Bloom’s: Comprehension Difficulty: Easy 4. Inventory Turnover can be calculated by: a. Ratio of cost of goods sold over average inventory cost b. Ratio of average inventory cost over cost of goods sold c. Ratio of inventory days in stock over average inventory cost d. Ratio of average inventory cost over inventory days in stock ANS: A BUSPROG: Analytic PTS: 1 LO: 2-1 Bloom’s: Knowledge Difficulty: Easy 5. Which type of requisition is used for materials and standard parts that are requested on a recurring basis? a. Open requisition Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 b. Blanket requisition c. Traveling requisition d. Recyclable requisition (Cyc-Rec) ANS: C BUSPROG: Analytic PTS: 1 LO: 2-2 Bloom’s: Knowledge Difficulty: Easy 6. A form of purchasing that is placed directly to the supplier and suitable when firms use the same components to make standard goods over a relatively long period of time is referred to as: a. Material requisition b. Purchase requisition c. Planned order release d. Traveling requisition ANS: C BUSPROG: Analytic PTS: 1 LO: 2-2 Bloom’s: Knowledge Difficulty: Easy 7. When a product is purchased which is complicated or highly technical a ______________may be issued instead of a request for quotation. a. Request for proposal b. Purchase order c. Contract for sale d. Sales order ANS: A BUSPROG: Analytic PTS: 1 LO: 2-2 Bloom’s: Knowledge Difficulty: Easy 8. Benefits derived from implementing e-procurement systems include all of the following EXCEPT: a. Allows buyers to submit bids and suppliers to respond to those bids in real time b. Increases the accuracy in communication between buyers and suppliers c. Creates numerous additional job opportunities in the purchasing department d. Tracking bids and transactions is easier and faster ANS: C BUSPROG: Analytic PTS: 1 LO: 2-2 Bloom’s: Comprehension Difficulty: Easy 9. While most public procurement is focused on goals like those of purchasing departments in the private sector, U.S. federal government purchases must comply with the: a. Services and Materials Acquisition Act b. Fair Standards and Equitable Purchases Act c. Federal Code of Conduct for Procurement d. Federal Acquisition Regulation ANS: D BUSPROG: Analytic PTS: 1 LO: 2-2 Bloom’s: Knowledge Difficulty: Easy Bloom’s: Knowledge Difficulty: Easy 10. Petty cash is being phased out in favor of: a. Hard cash b. A blank check c. P-card d. Score-carding ANS: C BUSPROG: Analytic PTS: 1 LO: 2-3 11. Blanket or open-end purchase orders are suitable for buying Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 a. b. c. d. Computers Heavy equipment Custom built components Office supplies ANS: D BUSPROG: Analytic PTS: 1 LO: 2-3 Bloom’s: Knowledge Difficulty: Easy 12. Which of the following is a reason small value purchases are handled differently? a. To give the buyer additional supplier choices b. To obtain a higher quality product c. To have better tracking of material usage d. To control unnecessary administrative costs ANS: D BUSPROG: Analytic PTS: 1 LO: 2-3 Bloom’s: Comprehension Difficulty: Easy 13. Which of the following illustrates Forward Vertical Integration? a. Microsoft starting a new division that designs and manufactures clothing b. Ford automotive buying additional machines for production c. Subway sandwich company buying a bakery to make the bread for their sandwiches. d. Sony buying trucks to deliver their finished goods inventories to their customers' warehouses ANS: D BUSPROG: Analytic PTS: 1 LO: 2-4 Bloom’s: Comprehension Difficulty: Easy 14. Which of the following would be a good reason to outsource (buy) versus making? a. To utilize existing capacity within a company's own firm b. A firm lacks the technology or expertise to produce an item c. To have more direct control over the design and production of an end item d. No competent supplier presently produces the needed item ANS: B BUSPROG: Analytic PTS: 1 LO: 2-4 Bloom’s: Knowledge Difficulty: Easy 15. Given the following make-buy information, what would be the break-even point? Make Option $5500 $ 4 Fixed Costs Variable Costs a. b. c. d. Buy Option $1500 $ 9 1200 units 1708 units 800 units 460 units ANS: C BUSPROG: Analytic PTS: 1 LO: 2-4 Bloom’s: Application Difficulty: Moderate 16. Given the following make-buy information, what would be the break-even point? Fixed Costs Variable Costs Make Option $16000 $ 6 Buy Option $1400 $ 10 Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 a. b. c. d. 9170 units 3650 units 1040 units 2750 units ANS: B BUSPROG: Analytic PTS: 1 LO: 2-4 Bloom’s: Application Difficulty: Moderate 17. As firms seek to improve the products they offer to the market, companies are seeking help from their suppliers in new product design and development through: a. Supplier certification programs b. Manufacturer certification programs c. Early supplier involvement d. Total Cost of Ownership initiatives ANS: C BUSPROG: Analytic PTS: 1 LO: 2-4 Bloom’s: Knowledge Difficulty: Easy 18. Firms can use total cost analysis to: a. See how efficiently management is using its total assets to generate profits b. Select the most cost-effective supplier c. Show how many times a firm’s inventory is utilized and replaced over an accounting period d. Brainstorm and isolate the causes of a problem ANS: B BUSPROG: Analytic PTS: 1 LO: 2-5 Bloom’s: Comprehension Difficulty: Easy 19. Total Cost of Ownership does NOT consider which of the following factors? a. Purchase order costs b. Freight costs c. Payment terms d. Tooling costs ANS: A BUSPROG: Analytic PTS: 1 LO: 2-5 Bloom’s: Comprehension Difficulty: Easy 20. The total cost of ownership for Supplier A is $2,670,000. The total cost of ownership for Supplier B is $1,750,000. The total cost of ownership for Supplier C is $2,990,000. Using Total Cost Analysis, it will be more cost-effective to use a. Supplier A b. Supplier B c. Supplier C d. Cannot be determined ANS: B BUSPROG: Analytic PTS: 1 LO: 2-5 Bloom’s: Comprehension 21. Which of the following is a reason for favoring single sourcing? a. Encourages competition among suppliers b. Spreads the risk of supply interruption c. Reduces variabilities in quality levels d. Reduces information about new processing technologies Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Easy lOMoARcPSD|18015231 ANS: C BUSPROG: Analytic PTS: 1 LO: 2-6 Bloom’s: Knowledge Difficulty: Easy 22. Which of the following is a reason that single sourcing is considered risky/bad? a. There could be supplier interruptions due to political instability b. It could establish close relationships with the supplier c. Larger orders make quantity discounts more likely d. Decreases the item to item quality variability of items purchased ANS: A BUSPROG: Analytic PTS: 1 LO: 2-6 Bloom’s: Comprehension Difficulty: Easy 23. Which of the following is an advantage of a centralized purchasing department? a. Less bureaucracy b. More frequent shipments c. Specialization d. Closer contact between buyer and user ANS: C BUSPROG: Analytic PTS: 1 LO: 2-7 Bloom’s: Knowledge Difficulty: Easy 24. Which of the following statements is FALSE? a. Centralized purchasing is where individual, local purchasing departments, such as at the plant level, make their own purchasing decisions. b. Electronic procurement systems can aid a company in saving both time and money. c. More than 50% of each sales dollar typically goes towards covering supply chain costs. d. If a firm lacks the technology to make a required component they will need to consider buying/outsourcing. ANS: A BUSPROG: Analytic PTS: 1 LO: 2-7 Bloom’s: Bloom’s: Comprehension Difficulty: Easy 25. Which of the following is NOT a potential challenge for global sourcing? a. Long delivery lead times b. Costs involved in selecting foreign suppliers c. Relaxed trade barriers d. Labor and legal problems ANS: C BUSPROG: Analytic PTS: 1 LO: 2-8 Bloom’s: Comprehension Difficulty: Easy 26. Which of the following is NOT a form of countertrade? a. Barter b. Kaizen blitz c. Offset d. Counterpurchase ANS: B BUSPROG: Diversity PTS: 1 LO: 2-8 Bloom’s: Knowledge Difficulty: Easy 27. Which of the following NOT a reason firms are expanding their supply bases to include foreign suppliers? a. Lower shipping rates due to lower tariffs b. Lower product cost c. Better product quality Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 d. Overseas supplier holding the patent to the product ANS: A BUSPROG: Analytic PTS: 1 LO: 2-8 Bloom’s: Comprehension Difficulty: Easy SHORT ANSWER 1. When using the Total Cost of Ownership concept, explain how a supplier with a higher unit price and higher tooling cost can end up being more cost effective than another supplier with a lower unit price and tooling cost. ANS: When calculating the Total Cost of Ownership, unit price and tooling cost are not the only criterion used in supplier selection. Other qualitative and quantitative factors, including freight and inventory costs, tariffs and duties, currency exchange fees, payment terms, maintenance and nonperformance costs should be considered. After calculating these other factors, the Total Cost of Ownership may have been lower with the second supplier. PTS: 5 BUSPROG: Communication LO: 2-5 Bloom’s: Application Difficulty: Moderate 2. Use what you understand about the outsourcing decision (Make vs. Buy) to answer this question. List and explain three reasons a restaurant might decide to buy pre-made desserts from a supplier rather than making the goods from scratch. ANS: Reasons a person might buy a restaurant might decide to buy pre-made desserts from a supplier. a. Cost – Creating a high-quality dessert might require unusual, as well as, a large number of ingredients. They may not be able to take advantage of economies of scale, if they do not sell a lot of desserts. It also may be quite costly to hire a specialist to make the desserts. b. Insufficient Capacity A restaurant may not have the capacity to make fresh desserts daily to fulfill the demand. They might not be able to offer a large selection of desserts. c. Lack of expertise The restaurant personnel may not know how to make specialized desserts. Or perhaps it is difficult to hire a dessert specialist. d. Quality While they may have the time, money, and skill to make desserts, they may not be able to make them as well as a place which specializes in desserts. Similar answers with slightly different rationale may also be acceptable. PTS: 5 BUSPROG: Communication LO: 2-4 Bloom’s: Application 3. Answer the questions that follow, based on the diagram provided below Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Moderate lOMoARcPSD|18015231 $6,000 $5,000 Cost $4,000 $3,000 $2,000 $1,000 $0 0 100 200 300 400 500 600 Quantity Buy Option a. b. c. d. What are the fixed costs for the buy decision? What is the breakeven quantity for the two options illustrated? At Q = 300, would you choose the make or buy option? Why? At Q = 200, what will be the total cost associated with the best decision at this quantity? ANS: a. What are the fixed costs for the buy decision? $500 b. What is the breakeven quantity for the two options illustrated? The Break-even quantity seems to be near 250 units. Using this chart, anything within 230 and 270 would probably deemed acceptable. c. At Q = 300, would you choose the make or buy option? Why? The make option is better since the total costs for making are about $3900 versus about $4400 for buying. d. At Q = 200, what will be the total cost associated with the best decision at this quantity? The best decision is to buy, and the total cost is slightly over $3000. PTS: 5 BUSPROG: Analytic LO: 2-4 Bloom’s: Analysis Difficulty: Moderate 4. Global sourcing has become commonplace. Many companies now consider expanding their supply base to include foreign suppliers. List three reasons why companies choose to source globally. ANS: Lower price of materials (and services) Overseas products may be of higher quality Faster delivery times Better array of services offered by the material supplier Favorable exchange rates Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 Support local economies Countertrade contracts PTS: 5 BUSPROG: Diversity LO: 2-4 Bloom’s: Comprehension Difficulty: Moderate ESSAY 1. The BOEHM Cell Phone Company has developed a new series of phones that it plans to bring to the market in the next 18 months. Management is considering whether to produce the product in-house or to contract out the purchasing and manufacturing of their new cell phones. Provide FOUR conditions that would favor outsourcing and FOUR conditions that would favor making the cell phones in-house. ANS: Conditions that favor outsourcing: a. If other firms are offering cost advantages. b. If Boehm Cell Phone does not have sufficient capacity to meet the expected demand for the new line of cell phones. c. Perhaps Boehm is largely a design company that does not have expertise in purchasing and manufacturing. An outside firm might be better qualified to deliver a high quality product at a lower price. d. Outside companies may offer higher quality due to advantages in areas of skill, technology, and business processes. Conditions that favor making the cell phones in-house: a. If the technology associated with the new lines of phones is proprietary, it may be easier to maintain secrecy in both manufacturing and in first-to-market marketing. b. Perhaps no one is capable of producing this product or a necessary component. c. If the firm feels that its quality programs are superior to any potential business partner, they may prefer to do it themselves to preserve the integrity of the brand. d. The company expects manufacturing capacity to be available once the product goes into production. e. If the company prefers to have more control over distribution related activities. f. If the company has the capability to produce the product at a lower cost if advantages in supply chain capabilities and/or economies of scale exist. PTS: 10 BUSPROG: Communication LO: 2-4 Bloom’s: Application Difficulty: Difficult 2. Under which conditions would you most likely utilize a centralized purchasing system? List two advantages that would be gained by utilizing a centralized purchasing system. Under which conditions would you most likely utilize a decentralized purchasing system? List two advantages that would be gained by utilizing a decentralized purchasing system. ANS: Under which conditions would you most likely utilize a centralized purchasing system? Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 A centralized purchasing system would be favored by a company that is looking to reduce safety stocks, increase control in purchasing, centralize decision making, avoid duplicate purchases, centrally manage supplier relationships, and maximize available quantity discounts. List two advantages that would be gained by utilizing a centralized purchasing system. a. Concentration of purchasing leading to lower purchase costs b. Avoiding duplication of job functions c. Buyer specialization d. Lower transportation costs e. Easier to negotiate contracts and manage relationships with a common supplier base f. No competition between units when purchasing the same material Under which conditions would you most likely utilize a decentralized purchasing system? A decentralized purchasing system would be favored by a company that is looking to make quicker decisions, maintain stocks that are closer to their customers, and identify and respond to changing customer needs at the local level. List two advantages that would be gained by utilizing a decentralized purchasing system. a. Individual and decentralized buyers often have a greater knowledge of the exact needs for each individual unit utilized by organization. b. Decentralization is more conducive to local sourcing. Local sourcing offers an organization the opportunity to obtain faster delivery times, more frequent deliveries, while still maintaining very close supplier ties. c. Decentralization allows quicker response because the decentralized purchasing allows for faster decisions because of decreased bureaucracy. PTS: 10 BUSPROG: Communication LO: 2-7 Bloom’s: Comprehension Difficulty: Moderate 3. The term Supply Management is used to describe responsibilities above and beyond those of traditional purchasing. What are three of these key activities and why are they considered important to Supply Management? ANS: Other answers are possible. a. Supply Management is responsible for the uninterrupted flow of raw materials b. Supply Management is responsible for the acquisition of materials at lowest total cost c. Supply Management is responsible for improving the quality of finished goods through the purchase of high-quality components and/or raw materials. d. Modern supply chains require close partnerships with suppliers; Supply Management departments are very often responsible for maintaining those relationships e. Pushing suppliers to improve the quality of their raw materials and/or components f. Supply Management departments are often responsible for assisting in collapsing design-to-production cycle time g. Supply Management departments are often seen as a conduit between external suppliers and internal design and/or operations people. PTS: 10 BUSPROG: Communication LO: 2-1 Bloom’s: Comprehension Difficulty: Moderate 4. Use the following information to determine which supplier for steering wheels is more cost-effective using total cost analysis. Late delivery of the component results in 50% lost sales and 50% back orders of finished goods. Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 Table 1 Order lot size Annual Requirements Weight per steering wheel Order processing cost Inventory carrying rate Cost of working capital Profit margin Price of finished golf cart Back order cost 400 4,800 units 20 pounds $125 20% per year 10% per year 20% $5,000 $15 per unit Table 2 Unit Price 1 to 999 units/order 1000 to 2,999 units/order Tooling cost Terms Distance Supplier Quality Rating (defects) Supplier Delivery Rating (late) Supplier A $48 $47 $1000 2/10 net 30 120 miles 3% 1% Supplier B $47 $46 $1000 1/10, net 30 100 miles 2% 2% Here is the freight rates for Truckload (TL ≥ 40,000 lbs): $0.90 per ton-mile Truckload Less-than-truckload (LTL): $1.10 per ton-mile Note: per ton-mile = 2,000 lbs. per mile; number of days per year = 365 Answer: Total cost of ownership = Total steering wheel cost - Cash Discount + Tooling cost + Transportation cost + Ordering cost + Carrying Cost + Quality cost + Delivery rating (Back Order Cost and Lost Sales). Supplier A Total steering wheel cost = 4800 x 48 = $230,400 - Cash Discount A = 230,400 x (10% x 30/365) = $1894 - Cash Discount B = 230,400 x (10% x 10/365 + 2%) = $5239 use this for biggest savings + Tooling cost = 1000 + Transportation cost = (400 x 20) = 80000 so must use LTL shipment at $1.10 per ton-mile 120 x 4800 x 20 x 1.10/2000) = 6336 + Ordering cost = (4800/400) x 125 = $1500 + Carrying Cost = (400/2) x 48 x 20%= $1920 + Quality cost = 230,400 x 3% = $6912 + Delivery rating - Back order cost (50%) = 4800 x 1% x 50% x 15 = $360 Lost Sales (50%) = 4800 x 1% x 50% x 5000 x 20% = $24,000 Total cost of ownership = 230,400 - 5239 + 1000 + 6336 +1500 + 1920 + 6912 + 360 + 24000 = $267,189 Supplier B Total steering wheel cost = 4800 x 47 = $225,600 - Cash Discount A = 225,600 x (10% x 30/365) = $1854 - Cash Discount B = 225,600 x (10% x 10/365 + 2%) = $5130 use this for biggest savings + Tooling cost = 1000 + Transportation cost = (400 x 20) = 80000 so must use LTL shipment at $1.10 per ton-mile Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 100 x 4800 x 20 x 1.10/2000) = 5280 + Ordering cost = (4800/400) x 125 = $1500 + Carrying Cost = (400/2) x 47 x 20%= $1880 + Quality cost = 225,600 x 2% = $4512 + Delivery rating - Back order cost (50%) = 4800 x 2% x 50% x 15 = $720 Lost Sales (50%) = 4800 x 2% x 50% x 5000 x 20% = $48,000 Total cost of ownership = 225,600 - 5130 + 1000 + 5280 +1500 + 1880 + 4512 + 720 + 48000 = $283,362 The total cost analysis shows that Supplier A is more cost-effective, even though the unit price is higher than Supplier B. Supplier A has a better cash discount rate, and better delivery performance rating. PTS: 10 BUSPROG: Communication LO: 2-5 Bloom’s: Application Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Difficult lOMoARcPSD|18015231 Chapter 3—Creating and Managing Supplier Relationships TRUE/FALSE 1. If a company is effectively focusing on its core competencies, its level of outsourcing is likely to decrease. ANS: F BUSPROG: Analytic PTS: 1 LO: 3-1 Bloom’s: Knowledge Difficulty: Easy 2. When developing successful partnerships, it is best to avoid inter-personal business relationships between buyers and suppliers. ANS: F BUSPROG: Analytic PTS: 1 LO: 3-1 Bloom’s: Knowledge Difficulty: Easy 3. As companies outsource more and more parts, it becomes easier to achieve cost savings internally. ANS: F BUSPROG: Analytic PTS: 1 LO: 3-1 Bloom’s: Comprehension Difficulty: Easy 4. Building Trust, Shared Vision and Objectives, Personal Business Relationships, Mutual Benefits and Needs are key factors that contribute to a lasting supplier partnership. ANS: T BUSPROG: Analytic PTS: 1 LO: 3-1 Bloom’s: Knowledge Difficulty: Easy 5. It is critical that buyers and suppliers develop stronger relationships and partnerships based on a tactical rather than a strategic perspective. ANS: F BUSPROG: Analytic PTS: 1 LO: 3-2 Bloom’s: Comprehension Difficulty: Easy 6. Successful supplier relationships involve equal decision-making control. ANS: T BUSPROG: Analytic PTS: 1 LO: 3-2 Bloom’s: Comprehension Difficulty: Easy 7. The development of relationships with suppliers brings about changes that must be managed for a company to stay focused on their core businesses. ANS: T BUSPROG: Analytic PTS: 1 LO: 3-2 Bloom’s: Comprehension Difficulty: Easy 8. A seven-step approach to supplier development might include identifying critical suppliers not meeting performance requirements. ANS: T BUSPROG: Analytic PTS: 1 LO: 3-2 Bloom’s: Knowledge Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Easy lOMoARcPSD|18015231 9. Unless an organization has a firm grasp of the key issues surrounding supplier relationships, it cannot reap the benefits of such relationships. ANS: T BUSPROG: Analytic PTS: 1 LO: 3-3 Bloom’s: Knowledge Difficulty: Easy 10. In a Total Cost of Ownership system, certification and training of suppliers would be considered posttransaction costs. ANS: F BUSPROG: Analytic PTS: 1 LO: 3-3 Bloom’s: Knowledge Difficulty: Easy 11. In a weighted-criteria evaluation system the weights of all the performance dimensions must add up to more than 1.00 and less than 100. ANS: F BUSPROG: Analytic PTS: 1 LO: 3-3 Bloom’s: Knowledge Difficulty: Easy 12. ISO 14000 is a family of international standards for environmental management. ANS: T BUSPROG: Analytic PTS: 1 LO: 3-3 Bloom’s: Knowledge Difficulty: Easy 13. China, which has the largest number of ISO 9001 certificates, issued over 292,000 as of 2017, representing 28.3 percent of the total certificates issued worldwide. ANS: T BUSPROG: Analytic PTS: 1 LO: 3-3 Bloom’s: Knowledge Difficulty: Easy 14. It is illegal for corporations to provide their suppliers appreciation banquets to award performance. ANS: F BUSPROG: Analytic PTS: 1 LO: 3-4 Bloom’s: Comprehension Difficulty: Easy 15. Offering an awards program to suppliers both motivates the suppliers to commit to a program of continuous improvement as well as provides role models for other suppliers to follow. ANS: T BUSPROG: Analytic PTS: 1 LO: 3-4 Bloom’s: Comprehension Difficulty: Easy 16. According to the text, only about half of companies recognize excellent performance with supplier awards and appreciation banquets. ANS: T BUSPROG: Analytic PTS: 1 LO: 3-4 Bloom’s: Comprehension Difficulty: Easy 17. Transactional SRM, allows the company to analyze the complete supplier base. ANS: F BUSPROG: Analytic PTS: 1 LO: 3-5 Bloom’s: Comprehension Difficulty: Easy 18. A SRM strategy refers to a situation wherein a supplier’s employee is permanently housed in the purchasing department of the buyer’s organization. Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 ANS: F BUSPROG: Analytic PTS: 1 LO: 3-5 Bloom’s: Comprehension Difficulty: Easy 19. Smoother processes, faster cycle times, reduced new product development, and improved time-tomarket are possible benefits from the increased visibility that is offered by SRM software. ANS: T BUSPROG: Analytic PTS: 1 LO: 3-6 Bloom’s: Comprehension Difficulty: Easy 20. Automating procurement activities can lead to significant cost savings as buyers move toward managing processes by exception. ANS: T BUSPROG: Analytic PTS: 1 LO: 3-6 Bloom’s: Comprehension Difficulty: Easy MULTIPLE CHOICE 1. According to the SCM profile Honda ___________ based on a supplier relations index developed by Planning Perspectives. a. Ranked lower in 2015 than 2014 b. Ranked near the bottom in 2015 c. Ranked near the top in 2015 d. Ranked fifth in 2015 ANS: C BUSPROG: Analytic PTS: 1 LO: 3-1 Bloom’s: Knowledge Difficulty: Easy 2. Which of the following is important in developing successful relationships in a partnership? a. Commitment by top management b. Interpersonal business relationships between employees of the companies c. Mutual/compatible needs that result in a win-win situation for the partners d. All of these ANS: D BUSPROG: Analytic PTS: 1 LO: 3-1 Bloom’s: Comprehension Difficulty: Easy 3. Which of the following is NOT important in developing a successful strategic alliance? a. Developing performance metrics b. Developing cross-functional team capabilities externally and within the company c. Developing efficient processes that will remain unchanged for the duration of the partnership d. Open lines of communication that both promote sharing and secure confidentiality ANS: C BUSPROG: Analytic PTS: 1 LO: 3-1 Bloom’s: Comprehension Difficulty: Easy 4. According to the text, key ingredients for developing successful supply partnerships include all of the following EXCEPT: a. Personal relationships b. Performance metrics c. Mutual benefits and needs d. Individualized objectives Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 ANS: D BUSPROG: Analytic PTS: 1 LO: 3-2 Bloom’s: Knowledge Difficulty: Easy 5. According to the text, one of the most basic and successful approaches to protecting trade secrets is: a. Threat of litigation b. Working with law makers to increase fines and sentences for those that steal trade secrets c. Requiring employees and vendors to sign non-disclosure agreements d. Requiring employees and partners to get ISO 9000 certified ANS: C BUSPROG: Analytic PTS: 1 LO: 3-2 Bloom’s: Knowledge Difficulty: Easy 6. Costs associated with investigating alternative suppliers and investigating alternative delivery options can be classified as: a. Pre-transaction costs b. Post-transaction costs c. Transaction costs d. All of these ANS: A BUSPROG: Analytic PTS: 1 LO: 3-2 Bloom’s: Knowledge Difficulty: Easy 7. What type of major cost category is considered in the cost associated with placing and receiving the order? a. Turnover Cost b. Supplier-Development Cost c. Transaction Cost d. Pre-transaction Cost ANS: C BUSPROG: Analytic PTS: 1 LO: 3-2 Bloom’s: Knowledge Difficulty: Easy 8. Field failures, loss of goodwill, a decreased reputation, and warranty costs can all be classified as: a. Pre-transaction costs b. Post-transaction costs c. Transaction costs d. All of these ANS: B BUSPROG: Analytic PTS: 1 LO: 3-2 Bloom’s: Knowledge Difficulty: Easy 9. Which of the following is TRUE? a. Performance metrics and personal business relationships are both keys to building successful partnerships. b. ISO 75000 is the supplier award given to the highest rated supplier in Japan. c. The key to successful partnerships is developing performance measures with weights greater than 3.50. d. SRM software modules are very affordable (less than $50,000) and can be implemented with a week. ANS: A BUSPROG: Analytic PTS: 1 LO: 3-2 Bloom’s: Comprehension Difficulty: Easy 10. According to the text, the goal of a good performance evaluation system is to provide metrics that are: a. Understandable, easy to measure, focused on value-added results Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 b. Understandable, quantitative, focused of cost-related results c. Understandable, qualitative, focused on short-term results d. Understandable, quantitative, focused on quality-related results ANS: A BUSPROG: Analytic PTS: 1 LO: 3-3 Bloom’s: Knowledge Difficulty: Easy 11. An organization's process for evaluating the quality systems of key suppliers in an effort to eliminate incoming inspections can be referred to as: a. Quality Systems Certification b. Supply Management c. Supplier Inspection d. Supplier Certification ANS: D BUSPROG: Analytic PTS: 1 LO: 3-3 Bloom’s: Knowledge Difficulty: Easy 12. The benefits of implementing an effective supplier certification program include all of the following EXCEPT: a. Building long-term beneficial relationships b. Increasing supplier base c. Improving responsiveness d. Recognizing excellence ANS: B BUSPROG: Analytic PTS: 1 LO: 3-3 Bloom’s: Comprehension Difficulty: Easy 13. When using a Weighted Criteria Evaluation System to evaluate suppliers, all of the following are true EXCEPT: a. Select the key dimensions of performance based on what is important to the end consumer b. The weights for all dimensions must sum to 1 or 100% c. Evaluate each of the performance measures on a rating between zero and one-hundred d. Multiply the dimension ratings by their respective important weights and then sum to get an overall weighted score ANS: A BUSPROG: Analytic PTS: 1 LO: 3-3 Bloom’s: Comprehension Difficulty: Easy 14. A company using a weighted-criteria evaluation system has established these 3 categories and the appropriate weight in parentheses: Quality(0.30), Delivery(0.40), Cost(0.30). The scores for each category are shown below. Which of the following companies has the highest total score? a. Company A: Quality(90), Delivery(80), Cost(60) b. Company C: Quality(70), Delivery(95), Cost(60) c. Company B: Quality(70), Delivery(80), Cost(80) d. All companies scored the same. ANS: B BUSPROG: Analytic PTS: 1 LO: 3-3 Bloom’s: Application Difficulty: Easy 15. A company using a weighted-criteria evaluation system has established these 5 categories and the appropriate weight in parentheses: Quality (0.25) Responsiveness (0.10) Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 Delivery (0.15) Cost (0.15) Technology (0.30) Company X received the following ratings in each of the five categories: Quality(90), Responsiveness(90), Delivery(80), Cost(80), Technology(85). What is its total score? a. 81.0 b. 82.5 c. 83.0 d. 84.5 ANS: A BUSPROG: Analytic PTS: 1 LO: 3-3 Bloom’s: Application Difficulty: Easy Bloom’s: Application Difficulty: Easy 16. Direct benefits of ISO 14000 include: a. Reduced defect rates b. Improved on-time delivery rates c. Reduction of pollution emissions d. All of these ANS: C BUSPROG: Ethics PTS: 1 LO: 3-3 17. In general, European companies prefer suppliers: a. Who employ the most people b. Whose headquarters are in a developing county c. Who are in the United States d. Who have ISO 9001 certifications ANS: D BUSPROG: Analytic PTS: 1 LO: 3-3 Bloom’s: Comprehension Difficulty: Easy 18. Which of the following is NOT a reason for supplier recognition programs? a. To help suppliers’ reputation in the marketplace b. To select the best suppliers c. To encourage suppliers to be more innovative d. To reward suppliers for excellent performance ANS: B BUSPROG: Analytic PTS: 1 LO: 3-4 Bloom’s: Comprehension Difficulty: Easy 19. According to the textbook, Supplier Recognition Programs: a. Are generally not very effective b. Are used by 90% of companies c. Encourage suppliers to keep their performance high d. Are difficult to implement ANS: C BUSPROG: Analytic PTS: 1 LO: 3-4 Bloom’s: Knowledge Difficulty: Easy 20. The Hormel company awards their Hormel Food Corporation's No. 1 Award to their top supplier. How often do they give this award? a. Every year b. Every 6 months c. Every 5 years Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 d. Every 10 years ANS: C BUSPROG: Analytic PTS: 1 LO: 3-4 Bloom’s: Knowledge Difficulty: Easy 21. Before supplier relationship management (SRM), buyers typically spent 40% of their time on expediting orders. After SRM implementation buyers spent about: a. 10% of their time on expediting orders b. 20% of their time on expediting orders c. 30% of their time on expediting orders d. None of the these ANS: A BUSPROG: Analytic PTS: 1 LO: 3-5 Bloom’s: Comprehension Difficulty: Easy 22. Streamlining the processes and communications between the buyer and supplier using software applications that enable these processes to be managed more efficiently and effectively can be referred to as: a. CRM b. SRM c. ISO 9000 d. SCSS ANS: B BUSPROG: Technology PTS: 1 LO: 3-5 Bloom’s: Knowledge Difficulty: Easy 23. SRM software should be capable of: a. Automating transactional processes b. Making information flow between partners more visible c. Integration of the supply chain making it possible to monitor multiple departments and processes both internally and externally d. All of these ANS: D BUSPROG: Technology PTS: 1 LO: 3-5 Bloom’s: Knowledge Difficulty: Easy 24. Summers, Inc. needs to generate a list of good/services purchased per supplier. Which type software program can the manager consult to obtain this information? a. ISO 9000 b. MRP c. SRM d. SCSS ANS: C BUSPROG: Analytic PTS: 1 LO: 3-6 Bloom’s: Knowledge Difficulty: Easy 25. Which of the following is NOT a key tenant of an SRM system? a. Automation b. Lean operations c. Visibility d. Integration ANS: B BUSPROG: Analytic PTS: 1 LO: 3-6 Bloom’s: Knowledge Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Easy lOMoARcPSD|18015231 26. SRM software can automate procurement activities that lead to significant cost savings as purchasing professionals move toward: a. Collaborative planning b. Diversifying their hiring c. Improving capacity d. Expediting each order ANS: A BUSPROG: Analytic PTS: 1 LO: 3-6 Bloom’s: Knowledge Difficulty: Easy SHORT ANSWER 1. Provide a list of four ways companies can motivate their suppliers to improve. ANS: a. b. c. d. e. f. Develop supplier recognition/awards programs Create supplier development programs Create an internal certification program Motivate suppliers to get a quality certification like ISO 9000 Utilize Supplier Relationship Management software Utilize a performance metrics system PTS: 5 BUSPROG: Reflective Thinking LO: 3-2 Bloom’s: Analysis Difficulty: Moderate 2. What are the two external certification programs discussed in the text? What does each certification attempt to certify? ANS: a. ISO 9000 - ISO 9000 certifies an organization's management structure and practices and their quality output in the areas of design, development, production, installation, and service. b. ISO 14000 - ISO 14000 certifies an organization's environmental management. ISO 14000 maintains standards in energy consumption, resource consumption, environmental liability and risk, waste and pollution generation, and community goodwill. PTS: 5 BUSPROG: Communication LO: 3-3 Bloom’s: Comprehension Difficulty: Moderate 3. A company using a weighted-criteria evaluation system has established these 4 categories and the appropriate weight in parentheses: Technology(0.25), Quality(0.30), Environmental (0.20), Cost(0.25). Currently they use supplier ABC that presently has a supplier score of 85. Calculate supplier XYZ’s total score and decide (based on supplier score) if the company should change suppliers. The scores for supplier XYZ are shown below for each category. Performance Measure Score Technology 80 ANS: Quality 75 SCORE for Company XYZ: (0.25 x 80) + (0.30 x Environmental 90 75) + (0.20 x 90) + (0.25 x 85) Cost 85 20 + 22.5 + 18 + 21.25 = 81.75 Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 Based on supplier score they should continue to purchase supplies from Company ABC since they have a higher supplier score. It should be noted that quality performance is most important to this company and supplier XYZ scored lowest in that category. PTS: 5 BUSPROG: Analytic LO: 3-3 Bloom’s: Application Difficulty: Moderate 4. According to the textbook, SRM software varies based on capabilities offered. AMR research has identified 5 areas of distinction for an SRM system. Provide three of these key tenets of SRM and explain how it is used. ANS: The key tenents of supplier relationship management software are: Automation of transactional processes between an organization and its suppliers. Integration that provides a view of the supply chain that spans multiple departments, processes, and software applications for internal users and external partners. Visibility of information and process flows in and between organizations. Views are customized by role and aggregated via a single portal. Collaboration through information sharing and suppliers’ ability to input information directly into an organization’s supply chain information system. Optimization of processes and decision-making through enhanced analytical tools such as data warehouse and Online Analytical Processing (OLAP) tools with the migration towards more dynamic optimization tools in the future. PTS: 5 BUSPROG: Communication LO:3-6 Bloom’s: Comprehension Difficulty: Difficult ESSAY 1. Suppose your organization is attempting to set up a new strategic alliance with a supplier. You are considered the key manager from your organization to manage this alliance. What would be your goals for the planning stages of this proposed alliance? What would be your goals for the first few months of the alliance? What would be your long-term goals for the alliance? ANS: What would be your goals for the planning stages of this proposed alliance? One of the most important goals in developing this type of relationship is to ensure that the vision and objectives of the proposed alliance can be agreed upon by those parties involved. Also, it is important to create interpersonal business relationships in the buyer-supplier partnerships since it is the people who communicate and make things happen. Make sure that both organization's needs will be met and the benefits will be shared as this will keep the relationship productive and long-lasting. Be sure to get support and commitment from top management so you can dedicate your time, best people and resources to make the partnership succeed. It is also important that all parties communicate the constant need to share information and support programs of continuous improvement. While not all of these things will be accomplished during the planning stages it is vital that they are all discussed into certain degree agreed upon before the alliance gets off the ground. What would be your goals for the first few months of the alliance? The goals for the first few months of the alliance would center around the partnering organizations communicating to their employees their support for the alliance. In addition it would be important for management to communicate the objectives, the benefits, and the changes that are sought via the alliance. This would also include communicating the goal of continuous improvement to all the parties involved Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 Also during these first few months personal relationships and trust must continue to be nurtured. In terms of physical changes, the organizations would need to make the required changes to their rules and regulations, their information systems, and their processes that would facilitate the success of the alliance. What would be your long-term goals for the alliance? The long-term goals of the alliance would be to serve the customer by offering them high quality products in the most effective and efficient manner possible. This would be achieved by the organization’s long-term commitment to building trust, sharing information, teaching each other, measuring progress, reevaluating the vision and objectives of the alliance from time to time, and continuing the support of continuous improvement programs. PTS: 10 BUSPROG: Communication LO:3-2 Bloom’s: Application Difficulty: Difficult 2. The TCO as defined in the textbook adds "all costs associated with the acquisition, use, and maintenance of a good or service." The TCO is then broken up into three major cost categories. List the three cost categories, provide a definition of each, and then provide two examples of each of the three types of costs. ANS: a. Pre-transaction Costs - Costs incurred before the order and receipt of the purchased goods. Examples: supplier certification, supplier training, investigating delivery options for new suppliers, cost associated with finding a new supplier, costs associated with comparing suppliers and their supplies... b. Transaction Costs - Costs of goods/services and cost associated with placing and receiving the order. Examples: purchase price of the product, order preparation, delivery costs, insurance, packaging, costs associated with requesting the order... c. Post-Transaction Costs - Costs incurred after goods are in possession of the company. Examples: Field failures, defective items delivered to the customer, damage to the company’s reputation, costs with maintaining broken items, warranty costs, legal costs, fines, and logistical costs associated with retrieving damaged or defective items in the field. PTS: 10 BUSPROG: Communication LO:3-2 Bloom’s: Application Difficulty: Difficult 3. Blaize Manufacturing Company is using a weighted criteria evaluation system to certify suppliers. a. Determine the total weighted score for the supplier shown below. b. Based on the evaluation system and weights used by this firm, what is their purchasing objective? c. Give an example of a real company that might be using this type of strategy. d. If Blaize Mfg. classifies their vendors based on the following scores, how well is this supplier doing? Unacceptable (less than 50) Conditional (between 50 and 70) Certified (between 70 and 90) Preferred (greater than 90) Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 Performance Criteria Technology Quality Environmental Responsibility Price On-time deliveries Flexibility Customer Service ANS: a. Weight 25% 20% 15% Score (0-100) 85 90 84 15% 10% 5% 10% 77 86 84 83 Total weighted score = (.25) x 85 + (.20) x 90 + (.15) x 84 + (.15) x 77 + (.10) x 86 + (.05) x 84 + (.10) x 83 = 21.25 + 18 + 12.6 + 11.55 + 8.6 + 4.2 + 8.3 = 84.5 b. Their purchasing objective seems to value Technology and Quality very high. Environmental responsibility is also relatively important to this company as well as product price. c. Answers will vary, but some examples might include tech companies like Honeywell, Intel and Apple. d. With a score of 84.5 this supplier meets the firms intended purpose. Blaize would certify this supplier since the score is between 70 and 90. They might not consider this supplier for new product development or opportunities for more business unless it can raise its score above 90. PTS: 10 BUSPROG: Communication 4. LO:3-3 Bloom’s: Application Difficulty: Difficult For each of the following programs, processes, certifications, etc. explain how they can be useful in improving supplier relationships and motivating business partners to provide the best possible products and services. a. ISO 9000 b. TCO c. Supplier development programs d. Supplier recognition programs ANS: a. ISO 9000 - ISO 9000 is a certification that proves an organization is committed to quality and has a quality management system in place that is dedicated to monitoring and improving quality. Companies that are ISO 9000 certified are more likely to experience a reduction in production cost due to an improvement in quality made. b. TCO - TCO is a performance metric system designed to isolate the total cost of purchases, which can include costs that are incurred before, during and after a transaction. This then allows companies to identify inefficiencies and key cost drivers. c. Supplier development programs - These programs allow buyers to share programs, ideas, and recommendations in an effort to not only improve the output purchased by the buyer, but it ultimately also helps the supplier improve in ways that will make it more competitive in the eyes of other potential buyers. This strengthens relationships and facilitates in fostering open communication lines between these companies. d. Supplier recognition programs - People like to be recognized and awarded for their accomplishments. Supplier recognition programs help communicate what buyers value Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 and they also communicate whether or not a supplier's efforts are being appreciated. Winners know they should continue on their present path, those who do not win may be motivated to change in positive ways. PTS: 10 BUSPROG: Communication LO:3-4 Bloom’s: Comprehension Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Difficult lOMoARcPSD|18015231 Chapter 5—Demand Forecasting TRUE/FALSE 1. The goal of a good forecasting technique is to minimize the deviation between actual demand and the forecast. ANS: T BUSPROG: Analytic PTS: 1 LO: 5-1 Bloom’s: Comprehension Difficulty: Easy 2. It is possible to expect 100 percent forecast accuracy most of the time. ANS: F BUSPROG: Analytic PTS: 1 LO: 5-1 Bloom’s: Comprehension Difficulty: Easy 3. Toymaker Spin Master, did not properly forecast demands for their new product, Hatchimals, in 2016. This caused stockouts for their distributors. ANS: T BUSPROG: Analytic PTS: 1 LO: 5-1 Bloom’s: Comprehension Difficulty: Easy 4. Minimizing the negative impacts of the bullwhip effect on supply chains is one of the goals of an effective CPFR system. ANS: T BUSPROG: Analytic PTS: 1 LO: 5-1 Bloom’s: Comprehension Difficulty: Easy 5. Random variations represent either increasing or decreasing movements over many years due to factors such as population growth, population shifts, cultural changes and income shifts. ANS: F BUSPROG: Analytic PTS: 1 LO: 5-2 Bloom’s: Knowledge Difficulty: Easy 6. Cyclical variations are longer than a year and are influenced by macroeconomic and political factors. ANS: T BUSPROG: Analytic PTS: 1 LO: 5-2 Bloom’s: Comprehension Difficulty: Easy 7. Trend variations are wavelike movements that are shorter than a year. ANS: F BUSPROG: Analytic PTS: 1 LO: 5-2 Bloom’s: Knowledge Difficulty: Easy 8. The Delphi forecasting approach is applicable for high-risk technology forecasting; large, expensive projects; or major new product introductions ANS: T BUSPROG: Analytic PTS: 1 LO: 5-3 Bloom’s: Knowledge Difficulty: Easy 9. Quantitative forecasting methods are based on opinions and intuition, whereas qualitative forecasting methods use mathematical models and relevant historical data to generate forecasts. Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 ANS: F BUSPROG: Analytic PTS: 1 LO: 5-3 Bloom’s: Knowledge Difficulty: Easy 10. Individual biases could negatively impact the effectiveness of the Sales Force Composite forecasting approach, due to the proximity of the sales personnel to the consumers. ANS: T BUSPROG: Analytic PTS: 1 LO: 5-3 Bloom’s: Knowledge Difficulty: Easy 11. If you felt that recent demand trends were more significant, and thus should be emphasized more in formulating a forecast, then in forecasting demand for the upcoming demand period, you would probably favor using a simple moving average over the conventional weighted moving average. ANS: F BUSPROG: Analytic PTS: 1 LO: 5-3 Bloom’s: Knowledge Difficulty: Easy 12. Regression analysis is commonly used in the cause-and-effect forecasting model. ANS: T BUSPROG: Analytic PTS: 1 LO: 5-3 Bloom’s: Knowledge Difficulty: Easy 13. Given the following information, the forecast for period two using exponential smoothing and = 0.3 is 60.5. Period Demand Forecast 1 64 59 2 70 ANS: T BUSPROG: Analytic PTS: 1 LO: 5-4 Bloom’s: Application Difficulty: Moderate 14. The calculated forecast for May is 46, using the actual demand shown in the table below, and a 3month weighted moving average with weights 0.1, 0.4, 0.5 (the heaviest weight applied to the most recent period). Nov. 39 Dec. 36 ANS: T BUSPROG: Analytic Jan. 40 PTS: 1 LO: 5-4 Feb. 38 Mar. 48 Bloom’s: Application Apr. 46 Difficulty: Moderate 15. The Naïve forecast, Mean Profit Leverage, and Mean Square Error are examples of forecasting accuracy measures. ANS: F BUSPROG: Analytic PTS: 1 LO: 5-4 Bloom’s: Knowledge Difficulty: Easy 16. As tighter control limits are instituted for the tracking signal, there is a greater probability of finding exceptions that require no action, but it also means catching changes in demand earlier. ANS: T BUSPROG: Analytic PTS: 1 LO: 5-4 Bloom’s: Comprehension 17. Forecast error is the actual quantity minus the forecast. Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Easy lOMoARcPSD|18015231 ANS: T BUSPROG: Analytic PTS: 1 LO: 5-4 Bloom’s: Knowledge Difficulty: Easy 18. The true value of CPFR comes from the sophisticated forecasting algorithms that provide companies with highly accurate forecasts, not from the exchange of forecasting information. ANS: F BUSPROG: Analytic PTS: 1 LO: 5-6 Bloom’s: Comprehension Difficulty: Easy 19. One of the benefits of CPFR include integration of planning, forecasting, and logistics activities. ANS: T BUSPROG: Analytic PTS: 1 LO: 5-6 Bloom’s: Knowledge Difficulty: Easy 20. Without supply chain trading partners collaborating and exchanging information, the supply chain will always be suboptimal and contain excess inventories, resulting in less-than-maximum supply chain profits. ANS: T BUSPROG: Analytic PTS: 1 LO: 5-6 Bloom’s: Knowledge Difficulty: Easy 21. CPFR is more likely to succeed if companies educate their employees on the benefits of the process changes and the disadvantages of maintaining the status quo. ANS: T BUSPROG: Analytic PTS: 1 LO: 5-6 Bloom’s: Comprehension Difficulty: Easy MULTIPLE CHOICE 1. All of the following may influence demand and should be considered when developing a forecast EXCEPT a. New competition b. Supplier quality c. Ergonomic conditions d. Emerging markets ANS: C BUSPROG: Analytic PTS: 1 LO: 5-1 Bloom’s: Knowledge Difficulty: Easy 2. The impact of poor communication and inaccurate forecasts resonates along the supply chain and results in the: a. Bullwhip effect b. Delphi method c. CPFR effect d. Mean deviation ANS: A BUSPROG: Analytic PTS: 1 LO: 5-1 Bloom’s: Comprehension 3. Inaccurate forecasts can result in negative outcomes like: a. High inventory costs and increased profits b. Imbalances in supply and demand c. Material shortages and decreased costs of obsolescence Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Easy lOMoARcPSD|18015231 d. Low inventory costs and stockouts ANS: B BUSPROG: Analytic PTS: 1 LO: 5-1 Bloom’s: Comprehension Difficulty: Easy 4. In 2016, Spin Master, did not properly forecast demand for their new product, Hatchimals, causing ___________ for their distributors. a. Excess stock b. The bullwhip effect c. Stockouts d. Price reductions ANS: C BUSPROG: Analytic PTS: 1 LO: 5-1 Bloom’s: Comprehension Difficulty: Easy 5. What component of a time series has variations in demand which show peaks and valleys that repeat over a consistent interval such as hours, days, weeks, months, or years? a. Trend Variations b. Cyclical Variations c. Random Variations d. Seasonal Variations ANS: D BUSPROG: Analytic PTS: 1 LO: 5-2 Bloom’s: Comprehension Difficulty: Easy 6. Your company is conducting forecasting that revolves around population growth in large cities. This type of forecasting can be referred to as what component of a time series? a. Cyclical Variations b. Trend Variations c. Seasonal Variations d. Random Variations ANS: B BUSPROG: Analytic PTS: 1 LO: 5-2 Bloom’s: Knowledge Difficulty: Easy 7. Cyclical variations are longer than a year and can be influenced by: a. Events such as natural disasters b. Imbalances in supply and demand c. Political factors d. Population growth ANS: C BUSPROG: Analytic PTS: 1 LO: 5-2 Bloom’s: Comprehension Difficulty: Easy 8. Random variations in a Time Series component are due to: a. Population growth b. Unpredictable events c. Using a large value for the exponential smoothing constant d. Inaccurate responses of the expert participants ANS: B BUSPROG: Analytic PTS: 1 LO: 5-2 Bloom’s: Comprehension Difficulty: Easy 9. When there is not a lot of currently relevant data available it is generally best to use: a. Qualitative forecasting b. Time series forecasting Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 c. Naive forecasting d. Simple moving average forecasting ANS: A BUSPROG: Analytic PTS: 1 LO: 5-3 Bloom’s: Comprehension Difficulty: Easy 10. Which one of the following is NOT a type of qualitative forecasting? a. Sales force composite b. Consumer survey c. Jury of executive opinion d. Simple moving average ANS: D BUSPROG: Analytic PTS: 1 LO: 5-3 Bloom’s: Knowledge Difficulty: Easy 11. Quantitative forecasts use mathematical techniques that are based on: a. Expert opinions b. Surveys c. Historical data d. Sales force knowledge of the market ANS: C BUSPROG: Analytic PTS: 1 LO: 5-3 Bloom’s: Knowledge Difficulty: Easy 12. When linear trend forecasts are developed, demand would typically be: a. The independent variable b. The dependent variable c. The lead variable d. The passive variable ANS: B BUSPROG: Analytic PTS: 1 LO: 5-3 Bloom’s: Knowledge Difficulty: Easy 13. The following time-series approach to forecasting uses historical data to generate a forecast and works well when demand is fairly stable over time: a. Naïve Forecast b. Weighted Moving Average c. Simple Moving Average d. Exponential Smoothing ANS: C BUSPROG: Analytic PTS: 1 LO: 5-3 Bloom’s: Knowledge Difficulty: Easy 14. Using the data set below, what would be the forecast for period 4 using a three period moving average: (Choose the closest answer.) Period 1 2 3 4 5 6 Actual Demand 10000 12400 13250 15750 20500 18500 a. 11500 Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 b. 11883 c. 12244 d. 14008 ANS: B BUSPROG: Analytic PTS: 1 LO: 5-4 Bloom’s: Application Difficulty: Moderate 15. Using the data set below, what would be the forecast for period 5 using a four period weighted moving average? The weights for each period are 0.05, 0.15, 0.30, and 0.50 from the oldest period to the most recent period, respectively. (Choose the closest answer.) Period 1 2 3 4 5 6 a. b. c. d. Actual Demand 10000 12400 13250 14750 15220 18500 12820 13105 13710 14610 ANS: C BUSPROG: Analytic PTS: 1 LO: 5-4 Bloom’s: Application Difficulty: Moderate 16. Using the data set below, what would be the forecast for period 5 using the exponential smoothing method? Assume the forecast for period 4 is 14000. Use a smoothing constant of = 0.4 (Choose the closest answer.) Period 1 2 3 4 5 6 a. b. c. d. Actual Demand 10000 12400 13250 14750 15220 18500 12660 13190 14030 15220 ANS: C BUSPROG: Analytic PTS: 1 LO: 5-4 Bloom’s: Application Difficulty: Moderate 17. Using the actual demand shown in the table below, what is the forecast for May (accurate to 1 decimal) using a 3-month weighted moving average and the weights 0.20, 0.35, 0.45 (with the heaviest weight applied to the most recent period. Round to nearest whole number)? Nov. 39 Dec. 36 Jan. 40 Feb. 38 Mar. 48 Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Apr. 58 lOMoARcPSD|18015231 a. b. c. d. 51 56 62 68 ANS: A BUSPROG: Analytic PTS: 1 LO: 5-4 Bloom’s: Application Difficulty: Moderate 18. Given the following information, calculate the forecast (round to nearest whole number) for period three using exponential smoothing and = 0.4. Period 1 2 a. b. c. d. Demand 64 70 Forecast 59 60 65 68 71 ANS: B BUSPROG: Analytic PTS: 1 LO: 5-4 Bloom’s: Application Difficulty: Difficult 19. The smoothing constant for exponential smoothing must be? a. Positive b. Negative c. Between 0 and 1 d. Greater than 1 ANS: C BUSPROG: Analytic PTS: 1 LO: 5-4 Bloom’s: Knowledge Difficulty: Moderate 20. A positive error implies that a forecast was? a. Too low b. Too high c. Neither too high or too low d. The sign of an error gives no information as to the direction of the error ANS: A BUSPROG: Analytic PTS: 1 LO: 5-4 Bloom’s: Knowledge Difficulty: Easy 21. A forecast tracking signal is used to determine: a. b. c. d. If the product has shipped on time The location of the current shipment The price to charge for the product If the forecast bias is within the acceptable control limits ANS: D BUSPROG: Analytic PTS: 1 LO: 5-4 Bloom’s: Application Difficulty: Moderate 22. The formula for the forecast error, is calculated by using the equation: a. Actual demand for period t minus the forecasted demand for period t b. Actual demand for period t divided by the forecasted demand for period t c. Actual demand for period t plus the forecasted demand for period t Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 d. The average of Actual demand for period t and forecasted demand for period t ANS: A BUSPROG: Analytic PTS: 1 LO: 5-4 Bloom’s: Knowledge Difficulty: Easy 23. What is considered an acceptable range for a tracking signal? a. ±1 b. ±2 c. ±3 d. ±10 ANS: C BUSPROG: Analytic PTS: 1 LO: 5-4 Bloom’s: Comprehension Difficulty: Easy 24. A forecasting method has produced the following data over the past 5 months shown in the data set. What is the mean absolute deviation (accurate to 1 decimals)? Month 1 2 3 4 5 a. b. c. d. Actual 12 13 10 11 9 Forecast 11 10 8 6 8 PTS: 1 LO: 5-4 Bloom’s: Application 1.2 2.0 2.4 ANS: D BUSPROG: Analytic Difficulty: Moderate 25. Based on the information in the data set below, what is the mean squared error (accurate to 1 decimal)? Month 1 2 3 4 5 a. b. c. d. Actual 12 13 10 11 9 Forecast 11 10 8 6 8 PTS: 1 LO: 5-4 Bloom’s: Application 8.0 10.0 1.00 0.8 ANS: A BUSPROG: Analytic Difficulty: Easy 26. The real value of Collaborative Planning, Forecasting and Replenishment (CPFR) comes from: a. Sophisticated forecasting algorithms b. Exchange of forecasting information c. Both A and B d. None of the above Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 ANS: B BUSPROG: Analytic PTS: 1 LO: 5-5 Bloom’s: Knowledge Difficulty: Easy 27. What does the acronym CPFR represent? a. Coordinated planning and forecasting relationships b. Collaborative planning, forecasting, and replenishment c. Centralized purchasing and forecasting relationships d. Collaborative purchasing, forecasting, and receivables ANS: B BUSPROG: Analytic PTS: 1 LO: 5-5 Bloom’s: Knowledge Difficulty: Easy 28. According to the textbook, the top three challenges for CPFR implementation include all of the following EXCEPT: a. Making organizational and procedural changes b. Trust between supply chain partners c. Cost d. Supplier lead times ANS: D BUSPROG: Analytic PTS: 1 LO: 5-5 Bloom’s: Knowledge Difficulty: Easy 29. Which of the following is a benefit of CPFR? a. Provides an analysis of key performance metrics b. Integrates planning, forecasting and logistics activities c. Uses joint planning and promotions management d. All of the above ANS: D BUSPROG: Analytic PTS: 1 LO: 5-5 Bloom’s: Knowledge Difficulty: Easy 30. Which of the following is a major cultural issue and big hurdle for widespread implementation of CPFR? a. There is no software available to use b. Global economic changes c. Trust d. All of the above ANS: C BUSPROG: Analytic PTS: 1 LO: 5-6 Bloom’s: Knowledge Difficulty: Easy SHORT ANSWER 1. List and Explain two types of qualitative forecasting methods. ANS: a. Jury of Executive Opinion: This type of qualitative forecasting is usually used for longrange forecasting. An experienced group of senior management executives knowledgeable about the market, competitors, and the business environment develop a forecast in the hopes that their experience will provide them with a competitive advantage. b. Delphi Method: Internal and external experts are surveyed about future events and longterm forecasts of demand. Following the survey, the answers are summarized, and this Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 summary is sent back out to the experts. Experts are then able to modify their responses based on the summary. The process continues until a consensus is reached. Experts in this process never physically need to meet; they communicate only through their survey responses and their subsequent responses to the summaries. c. Sales Force Composite: This qualitative forecasting method utilizes the knowledge of the sales force. The sales force is seen to have recent and accurate information concerning the market and the needs of the customer. Based on this knowledge the sales force is asked to create a forecast to estimate the needs of the customer. d. Consumer Survey: Surveys are administered to customers via phone, mail, Internet, or personal interviews. Customers are surveyed about issues such as future buying habits, new product ideas, and opinions about existing products. Using statistical tools and managerial judgment, a forecast is devised. PTS: 10 BUSPROG: Communication LO: 5-3 Bloom’s: Comprehension Difficulty: Moderate 2. Given the following information, calculate the forecast (round to nearest whole number) for period four using exponential smoothing and = 0.3. Use a tracking signal to determine if there is a bias problem with the forecasting method. (Assume the control limit for the tracking signal is ± 3. Period 1 2 3 4 Demand 1620 1680 1720 1770 Forecast 1590 ANS: Since you do not have the forecast for periods 2 and 3, you must calculate those first in order to use them in calculating the forecast for period four. F2 = 1590 + .3(1620 – 1590) = 1599 F3 = 1599 + .3(1680 – 1599) = 1623 F4 = 1623 + .3(1720 – 1623) = 1652 RSFE = (1620 – 1590) + (1680 - 1599) + (1720 - 1623) + (1770 – 1652) = 326 MAD = 81.5 Tracking signal = 326/81.5 = 4 The results indicate a bias in the forecasts as the tracking signal is not within the control limits of ± 3. PTS: 5 BUSPROG: AnalyticLO: 5-4 Bloom’s: Application Difficulty: Moderate 3. What is a tracking signal? How can managers use the information provided by the tracking signal to improve the quality of forecasts? ANS: Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 Tracking signal is used to determine if a forecasting model is stable over time. If the tracking signal falls outside the pre-set control limits, there is a bias problem with the forecasting method and an evaluation of the way forecasts are generated is warranted. The tacking signal provides an indication of whether the forecasts are consistently over or under actual demand. A biased forecast will lead to excessive inventories or stock-outs. Adjustments to the forecasts can be made accordingly. Some inventory experts suggest using 4 for high-volume items and 8 for lower-volume items while others prefer a lower limit. For example, a company may start off with a control limit for their tracking signal of 4. Over time, the quality of forecasts improved and the control limits were reduced to 3. As tighter limits are instituted there is a greater probability of finding exceptions that require no action, but it also means catching changes in demand earlier. PTS: 5 BUSPROG: Communication LO: 5-4 Bloom’s: Application Difficulty: Moderate 4. Explain the key challenges of CPFR implementation. ANS: The key challenges are the difficulty of making internal changes, total implementation cost, and trust. Resistance to change should be addressed by top management. A project will be more likely to succeed if top management commits time and resources to the project. It is important that companies educate their employees on the benefits of the process changes. Companies need to budget for the cost of using this technique as demands for employee time and resources will be a factor. Trust is challenge because many retailers are reluctant to share the type of proprietary information required by CPFR. PTS: 5 BUSPROG: Communication LO: 5-5 Bloom’s: Comprehension Difficulty: Moderate 5. List FOUR benefits that can be achieved by implementing a successful CPFR program. ANS: a. Strengthens partner relationships b. Provides analyses of sales and order forecasts c. Uses point-of-sale data, seasonal activity, promotions, new product introductions and store openings or closings to improve forecast accuracy d. Manages the demand chain and proactively eliminates problems before they appear e. Allows collaboration on future requirements and plans f. Uses joint planning and promotions management g. Integrates planning, forecasting and logistics activities h. Provides efficient category management and understanding of consumer purchasing patterns i. Provides analysis of key performance metrics Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 PTS: 5 BUSPROG: Communication LO: 5-5 Bloom’s: Comprehension Difficulty: Moderate ESSAY 1. The four components of time series data are: trend variations, cyclical variations, seasonal variations, and random variations. Briefly describe each type of variation. ANS: a. Trend variations: Trend variations can either be increasing or decreasing demand movements over a number of years. These variations can be due to factors such as population growth, population shifts, cultural change, and income shifts. b. Cyclical variations: This type of variation is typified by wave-like movements where demand fluctuates up-and-down. These fluctuations must be sustained for leased one year. Variation is usually influenced by macroeconomic and/or political factors. c. Seasonal variations: variation is seasonal; demand becomes somewhat predictable on certain days, weeks, months, years, or seasons. In the United States the most common form of seasonal variation is seen in many retail industries during the Christmas season when demand usually spikes. d. Random variations: Unexpected or unpredictable events such as natural disasters, strikes, and wars will cause random variations in demand. The threat of hurricane will usually cause a tremendous spike in demand for items like batteries, bottled water, and wood products. PTS: 10 BUSPROG: Communication LO: 5-2 Bloom’s: Comprehension Difficulty: Difficult 2. Answer the following questions regarding quantitative and qualitative forecasting: a. Define quantitative forecasting. b. Explain the naïve forecasting method and give an example. c. What are the benefits of using the naïve forecasting method? d. Under which circumstances would one utilize a combination of both quantitative and qualitative forecasting? ANS: a. Define quantitative forecasting. Quantitative forecasts use various mathematical models which use historical data and/or associative variables to forecast demand. b. c. d. Explain the naïve forecasting method and give an example of this technique. The naïve method uses the forecast for the next period to be the same as the actual demand in the last period. For example if actual demand for January was 150 units, then forecast the demand for February to be 150 units. What are the benefits of using the naïve forecasting method? The naïve method is easy to understand, and is inexpensive to develop, store data and operate. Under which circumstances would one utilize a combination of both quantitative and qualitative forecasting? When there is a long-time horizon, it is generally recommended to utilize a combination of both quantitative and qualitative techniques. Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 PTS: 10 BUSPROG: Communication LO: 5-3 Bloom’s: Comprehension Difficulty: Difficult 3. Use the data set below to answer the questions that follow. Period 1 2 3 4 5 6 a. b. c. d. Demand Sales Volume 1000 1200 1450 1650 1700 1850 Find the four-period simple moving average forecasts for Periods 5 and 6. Find the four-period weighted moving average forecasts for Periods 5 and 6 using weights of 0.05, 0.25, 0.30, and 0.40 from the earliest period to the latest period, respectively. Which set of forecasts is more accurate, the simple moving average forecasts or the weighted moving average forecasts? Why is that set of forecasts more accurate in this particular case (using Data Set E4)? Will that type of forecast always be more accurate? Why or why not? ANS: a. Find the four period simple moving average forecasts for Periods 5 and 6. Forecast for Period 5 = (1000 + 1200 + 1450 + 1650)/4 = 1350 Forecast for Period 6 = (1200 + 1450 + 1650 + 1700)/4 = 1500 b. Find the four period weighted moving average forecasts for Periods 5 and 6 using weights of 0.05, 0.25, 0.30, and 0.40 from the earliest period to the latest period, respectively. Forecast for Period 5 = .05(1000) + .25(1200) + .3(1450) + .4(1650) = 1445 Forecast for Period 6 = .05(1200) + .25(1450) + .3(1650) + .4(1700) = 1598 c. Which set of forecasts is more accurate, the simple moving average forecasts or the weighted moving average forecasts? In this case the weighted moving average forecasts are more accurate, using the mean absolute deviation (MAD) to compare forecast accuracy. For the Simple moving average, the MAD for the 2 periods is 350. For the Weighted moving average forecast, the MAD is 254 for the 2 periods. Why is that set of forecasts more accurate in this particular case? Because demand is increasing in every period and the weighted moving average forecast, which weighs more heavily recent periods of demand in calculating the forecast versus early periods of demand, is more capable of reflecting recent changes in demand patterns. d. Will that type of forecast always be more accurate? Why or why not? While the weighted moving average forecast works very well with this particular data set, it might not be as effective if demand were more stable from period to period. When there's a greater degree of stability in demand from period to period, a simple moving average forecast would likely be more effective. Nonetheless, if demand patterns were Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 very random it is uncertain which forecasting model would be more accurate. It is for this reason the textbook describes a number of different forecasting methods that when used together can help an organization see a more complete picture of what the future may hold. Use of the MAD is necessary to compare forecast accuracy. The student may also note that while the weighted moving average forecast was more accurate, neither forecasting model would have aptly prepared the organization for the increasing demands that were experienced during periods five and six. The student might even mention some of the other models from the textbook. The exponential smoothing forecasting model and trend adjusted exponential smoothing forecasting model may be more effective for this particular data set. PTS: 10 BUSPROG: Communication LO: 5-4 Bloom’s: Application Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Difficult lOMoARcPSD|18015231 Chapter 7—Inventory Management TRUE/FALSE 1. Steering wheels purchased by Ford are an example of dependent demand. ANS: T BUSPROG: Analytic PTS: 1 LO: 7-1 Bloom’s: Application Difficulty: Easy 2. Dependent demand must be forecasted to be accurate. ANS: F BUSPROG: Analytic PTS: 1 LO: 7-1 Bloom’s: Knowledge Difficulty: Easy 3. The four categories of inventory are raw materials, intermediate assemblies, work-in-progress and finished goods. ANS: F BUSPROG: Analytic PTS: 1 LO: 7-2 Bloom’s: Knowledge Difficulty: Easy 4. MRO supplies are a type of work-in-progress. ANS: F BUSPROG: Analytic PTS: 1 LO: 7-2 Bloom’s: Knowledge Difficulty: Easy 5. The inventory turnover ratio shows how efficiently a firm is using its inventory to generate revenue. ANS: T BUSPROG: Analytic PTS: 1 LO: 7-3 Bloom’s: Comprehension Difficulty: Easy Bloom’s: Knowledge Difficulty: Easy 6. MRO supplies are a type of indirect costs. ANS: T BUSPROG: Analytic PTS: 1 LO: 7-3 7. Cycle counting means to physically count inventory on a periodic basis. ANS: T BUSPROG: Analytic PTS: 1 LO: 7-4 Bloom’s: Knowledge Difficulty: Easy 8. The ABC inventory control prioritizes dependent demand inventory items into three groups, A, B, and C. A items receive the smallest amount of safety stock, while C items typically have the most safety stock. ANS: F BUSPROG: Analytic PTS: 1 LO: 7-4 Bloom’s: Comprehension Difficulty: Easy 9. Pareto Analysis means that 20 percent of the items get about 80 percent of the safety stock. ANS: F BUSPROG: Analytic PTS: 1 LO: 7-4 Bloom’s: Comprehension Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Easy lOMoARcPSD|18015231 10. The ABC inventory matrix combines two ABC analyses—one is based on current inventory valuation and the other is based on annual inventory dollar usage.. ANS: T BUSPROG: Analytic PTS: 1 LO: 7-4 Bloom’s: Comprehension Difficulty: Easy 11. Radio Frequency Identification (RFID) is beginning to replace bar code inventory tracking, however a weakness is that it requires a direct line of sight for RFID tags to be read. ANS: F BUSPROG: Analytic PTS: 1 LO: 7-5 Bloom’s: Knowledge Difficulty: Easy 12. The economic order quantity model (EOQ) is the optimal independent demand order quantity that minimizes total annual inventory costs. ANS: T BUSPROG: Analytic PTS: 1 LO: 7-6 Bloom’s: Knowledge Difficulty: Easy 13. One of the assumptions of the economic order quantity model (EOQ) is that purchase price must remain constant. ANS: T BUSPROG: Analytic PTS: 1 LO: 7-6 Bloom’s: Knowledge Difficulty: Easy 14. The EOQ equation is derived by setting the annual purchase cost equal to the annual holding cost. ANS: F BUSPROG: Analytic PTS: 1 LO: 7-6 Bloom’s: Knowledge Difficulty: Easy 15. The optimal order quantity for the quantity discount model is always at one of the price breakpoints. ANS: F BUSPROG: Analytic PTS: 1 LO: 7-7 Bloom’s: Knowledge Difficulty: Easy 16. In the economic manufacturing quantity model (EMQ), the annual consumption rate must be less than the annual production rate. ANS: T BUSPROG: Analytic PTS: 1 LO: 7-7 Bloom’s: Comprehension Difficulty: Easy 17. When demand and lead time are constant, the reorder point (ROP) is less than the demand during lead time. ANS: F BUSPROG: Analytic PTS: 1 LO: 7-8 Bloom’s: Knowledge Difficulty: Easy 18. When both the demand and lead time of a product are variable, firms must keep a higher safety stock level compared to variations in just demand, to offer the same service level. ANS: T BUSPROG: Analytic PTS: 1 LO: 7-8 Bloom’s: Knowledge Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Easy lOMoARcPSD|18015231 19. The statistical reorder point is calculated as the average demand during the delivery lead time plus the desired safety stock. ANS: T BUSPROG: Analytic PTS: 1 LO: 7-8 Bloom’s: Knowledge Difficulty: Easy 20. The (s, S) continuous review policy is to order the same quantity, Q, when physical inventory reaches the reorder point. ANS: F BUSPROG: Analytic PTS: 1 LO: 7-9 Bloom’s: Knowledge Difficulty: Easy MULTIPLE CHOICE 1. Independent demand is the: a. Internal demand for all end-item parts and materials. b. Demand for a firm’s end products. c. Forecasted demand for purchased items. d. Absolute demand for all items. ANS: B BUSPROG: Analytic PTS: 1 LO: 7-1 Bloom’s: Comprehension Difficulty: Easy 2. Which of the following would be considered a dependent demand item? a. Bicycle tires used to assemble a bicycle b. Televisions c. Furniture d. Retail customers ANS: A BUSPROG: Analytic PTS: 1 LO: 7-1 Bloom’s: Comprehension Difficulty: Easy 3. Lubricants for production equipment which are not parts of the final products are called: a. Raw materials b. Work-in-process c. Maintenance, repair and operating supplies d. Finished goods e. Cycle stock ANS: C BUSPROG: Analytic PTS: 1 LO: 7-2 Bloom’s: Knowledge Difficulty: Easy 4. Which one of the following is NOT a reason for firms to carry inventory? a. To meet variations in product demand b. To increase production change/setup costs c. To allow for production scheduling flexibility d. To take advantage of quantity discounts e. To maintain independence of operations ANS: B BUSPROG: Analytic PTS: 1 LO: 7-2 Bloom’s: Comprehension Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Easy lOMoARcPSD|18015231 5. Which of the following is a disadvantage of carrying too much inventory? a. it creates an unnecessary waste of scarce resources. b. it leads to higher annual inventory ordering costs. c. it leads to lower average finished goods inventories. d. it increases the need to purchase items. e. it reduces the need to conduct cycle counts. ANS: A BUSPROG: Analytic PTS: 1 LO: 7-3 Bloom’s: Comprehension Difficulty: Easy 6. If at the end of the year, the cost of revenue = $2,500, total revenue = $12,000 and inventory value = $2,000, the inventory turnover ratio would be: a. 0.208 b. 0.375 c. 2.667 d. 0.800 e. 1.250 ANS: E BUSPROG: Analytic PTS: 1 LO: 7-3 Bloom’s: Comprehension Difficulty: Moderate 7. In the ABC Inventory Matrix shown, inventory in area Y suggests: a. b. c. d. e. under-stocked A and B items. under-stocked B and C items. overstocked A and B items. over-stocked B and C items. inventory that matches sales. ANS: E BUSPROG: Analytic PTS: 1 LO: 7-4 Bloom’s: Analysis Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Easy lOMoARcPSD|18015231 8. Classify the following inventory items as either A, B, or C items using the ABC inventory control system: Item # Annual Sales Unit Cost 1 130 units $ 4.00 item 1 (C), item 2 (A), item 3 (C), item 4 (B), item 5 (C) item 1 (B), item 2 (A), item 3 (A), item 4 (C), item 5 (C) item 1 (C), item 2 (B), item2 3 (C), item 4 (A),400 itemunits 5 (C) 15.30 item 1 (A), item 2 (B), item 3 (C), item 4 (A), item 5 (B) item 1 (B), item 2 (C), item 3 (B), item 4 (C), item 5 (A) 3 25 units 17.00 ANS: A PTS: 1 BUSPROG: Analytic LO: 7-4 Bloom’s: Application Difficulty: Moderate 4 1320 units 1.25 a. b. c. d. e. 9. Which of the following would refer to the 80/20 rule when applied to the ABC inventory control 5 90 units 2.10 system? a. 80 percent of the items account for 20 percent of the groups. b. 20 percent of the items account for 80 percent of the tasks. c. 80 percent of the unit cost accounts for 20 percent of the items. d. 80 percent of the total annual $ usage is accounted for, by 20 percent of the items. e. None of these. ANS: D BUSPROG: Analytic PTS: 1 LO: 7-4 Bloom’s: Comprehension Difficulty: Easy 10. Which of the following describes a global RFID challenge? a. Foreign firms will not use global RFID since the field communication standards tend to vary from country to country. b. Globally, the RFID industry does not have its own UHF spectrum allocation. c. RFID tags are passive in undeveloped countries. d. RFID can track outbound shipments only. e. All of the above. ANS: B BUSPROG: Diversity PTS: 1 LO: 7-5 Bloom’s: Comprehension Difficulty: Easy 11. The primary purpose of the basic economic order quantity (EOQ) model is to: a. Calculate the reorder point, so that replenishments take place at the proper time b. Minimize the sum of purchase cost and holding cost c. Maximize the customer service level d. Calculate the optimum safety stock level e. None of the above ANS: E BUSPROG: Analytic PTS: 1 LO: 7-6 Bloom’s: Comprehension 12. Which of the following is TRUE regarding the EOQ figure below? Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Easy lOMoARcPSD|18015231 a. Curve J represents the annual ordering cost, and curve L represents the annual holding cost. b. A lot size of G has an annual total cost of about C. c. At lot size H both holding costs and ordering costs exceed the annual total cost. d. The EOQ is at lot size G, and curve K is the annual holding cost curve. ANS: D BUSPROG: Analytic PTS: 1 LO: 7-6 Bloom’s: Application Difficulty: Easy 13. If an item is ordered using its economic order quantity, the annual carrying cost should be: a. slightly less than the annual ordering cost. b. equal to the annual ordering cost. c. twice the annual purchase price. d. the square root of the annual ordering cost. e. none of the above. ANS: B BUSPROG: Analytic PTS: 1 LO: 7-6 Bloom’s: Comprehension Difficulty: Easy 14. What inventory factor may be omitted from the basic EOQ derivation because it is a constant? a. Annual order-processing cost b. Annual purchase cost of goods c. Annual capital cost d. Annual setup costs e. Annual total costs ANS: B BUSPROG: Analytic PTS: 1 LO: 7-6 Bloom’s: Comprehension Difficulty: Easy 15. Which of the following is NOT an assumption of the economic order quantity (EOQ) model? a. Demand is known, constant, and independent. b. Lead time is known and constant. c. Quantity discounts are not possible. d. Production and use occur simultaneously. e. The only variable costs are setup cost and holding cost. ANS: D BUSPROG: Analytic PTS: 1 LO: 7-6 Bloom’s: Comprehension Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Easy lOMoARcPSD|18015231 16. The cost of a product is $5, and the carrying cost rate is 20%; the cost of processing an order is $45 and the annual demand is 1000. What is the economic order quantity (EOQ)? a. 5 b. 20 c. 25 d. 200 e. 300 ANS: E BUSPROG: Analytic PTS: 1 LO: 7-6 Bloom’s: Application Difficulty: Easy 17. Which one of the following statements regarding the economic order quantity (EOQ) is true? a. The EOQ model combines several different item orders to the same supplier. b. If an order quantity is larger than the EOQ, then the annual holding cost will exceed the annual ordering cost. c. The EOQ model assumes a variable demand pattern. d. When the holding cost rate drops, both the annual holding cost and the EOQ decrease. e. The EOQ is frequently used to determine the optimum shipping quantity. ANS: B BUSPROG: Analytic PTS: 1 LO: 7-6 Bloom’s: Comprehension Difficulty: Easy 18. Use the information below to calculate the number of orders per year when using the EOQ: Annual demand for an item is 43,000 units The cost to place an order is $200 The per unit cost of the item is $50.00 The annual holding rate is 35% Choose the closest answer. a. 49 b. 81 c. 123 d. 202 ANS: A PTS: 1 BUSPROG: AnalyticLO: 7-6 Bloom’s: Application Difficulty: Moderate 19. If your company had an annual purchase cost of items equal to $2,000,000, an annual holding cost of $150,000 and an annual ordering cost of $50,000 this scenario would reveal that: a. Your order size was lower than the EOQ b. Your order lot size was equal to the EOQ c. Your order lot size was higher than the EOQ d. Nothing because there is insufficient information to discern where the EOQ would be. ANS: C BUSPROG: Analytic PTS: 1 LO: 7-6 Bloom’s: Application Difficulty: Easy 20. The EOQ model with quantity discounts attempts to determine: a. the lowest purchasing price. b. whether to use a fixed-quantity or fixed-period order policy. c. how many units should be ordered. d. the shortest lead time to use. e. the lowest amount of inventory necessary to satisfy a certain service level. Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 ANS: C BUSPROG: Analytic PTS: 1 LO: 7-7 Bloom’s: Comprehension Difficulty: Easy 21. When demand and delivery lead time are known and constant, daily demand = 8, purchase lead time = 5 days, and the purchase price = $20/unit, then the reorder point is: a. 2 b. 13 c. 32. d. 40. e. 56. ANS: D BUSPROG: Analytic PTS: 1 LO: 7-8 Bloom’s: Application Difficulty: Easy 22. When demand and delivery lead time are known and constant, the reorder point is the ____. a. demand during the delivery lead time b. safety stock c. demand during lead time + safety stock d. economic order quantity e. average inventory ANS: A BUSPROG: Analytic PTS: 1 LO: 7-8 Bloom’s: Comprehension Difficulty: Easy 23. The College Bookstore sells a unique calculator to college students. The demand for this calculator has a normal distribution with an average daily demand of 20 units and a standard deviation of 4 units per day. The lead time for this calculator is 9 days. Compute the statistical reorder point that results in a 95 percent in-stock probability. Choose the closest answer. a. 20 units b. 80 units c. 180 units d. 200 units e. 420 units ANS: D BUSPROG: Analytic PTS: 1 LO: 7-8 Bloom’s: Application Difficulty: Moderate 24. The College Bookstore sells a unique calculator to college students. The demand for this calculator is constant at 20 units per day. The lead time for this calculator is variable at an average of 9 days with a standard deviation of 2 days. Compute the statistical reorder point that results in a 95 percent in-stock probability. Choose the closest answer. a. 26 units b. 46 units c. 182 units d. 226 units e. 246 units ANS: E BUSPROG: Analytic PTS: 1 LO: 7-8 Bloom’s: Application 25. Which of the following is true under the Periodic Review System? Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Moderate lOMoARcPSD|18015231 a. a lower level of safety stock is needed to buffer against uncertainty in demand over a longer planning horizon, compared to the EOQ system b. a higher level of safety stock is needed to buffer against uncertainty in demand over a longer planning horizon, compared to the EOQ system c. it is more expensive to administer compared to the Continuous Review System d. the only uncertainty is the magnitude of demand during the delivery lead time e. there are no discrepancies between physical inventory and the stock record ANS: B BUSPROG: Analytic PTS: 1 LO: 7-9 Bloom’s: Comprehension Difficulty: Easy SHORT ANSWER 1. Briefly describe the differences between dependent and independent demand. Provide examples of dependent and independent demand items for each of the following industries: automotive, personal computer, bicycle ANS: a. Dependent demand items are those parts whose demand is based on the demand of the final product in which the parts are used. Independent demand items are the demand for end items, and whose demand is affected by trends, seasonal patterns, and general market conditions. b. Automotive Industry: 1. Independent demand item car/truck and service parts purchased by customers. 2. Dependent demand item tires, axles, steering wheel, and battery used to assemble the automobiles. c. Personal Computer Industry: 1. Independent demand item computer/laptop computer and hardware sold directly to consumers. 2. Dependent demand item monitor, CPU, and keyboard used to assemble the PC. d. Bicycle Industry: 1. Independent demand item bicycle and service oparts 2. Dependent demand item tires, handlebars, chain, and seats used to assemble the bicycles. PTS: 5 BUSPROG: Communication LO: 7-1 Bloom’s: Application Difficulty: Moderate 2. Name and briefly explain the four basic types of inventory. ANS: a. Raw materials unprocessed, purchased inventories. b. Work-in-process partially processed inventories. c. Finished goods inventory or materials that have been completely processed or assembled, ready for sales or shipping to customers. d. Maintenance, repair and operating (MRO) supplies (e.g., lubrication) goods used to maintain, repair, or operate the manufacturing equipment, but do not become part of the finished goods. PTS: 5 BUSPROG: Communication LO: 7-2 Bloom’s: Comprehension Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Moderate lOMoARcPSD|18015231 3. List five of the assumptions of the EOQ model. ANS: a. b. c. d. e. f. g. Demand must be known and constant Delivery time must be known and constant Replenishment is instantaneous Price is constant/quantity discounts are not allowed Holding cost is known and constant Ordering cost is known and constant Stockouts are not allowed PTS: 5 BUSPROG: Communication LO: 7-6 Bloom’s: Knowledge Difficulty: Moderate 4. The manager at Robert’s Cigars wants to determine the lowest cost order policy given the following purchase discounts offered: cigar costs are $4 each for orders less than 500; $3.50 each for orders of 500 – 1000; and $3.25 each for orders greater than 1000. The order cost = $75, annual demand forecast = 5500 cigars, inventory carrying cost = 30% per year. ANS: Step 1 Determine the 3 EOQ’s— √ 2(75)(5500) = 829 (infeasible, since EOQ > 500. 0.3 (4) 2(75)(5500) For $3.50 cigars, EOQ = = 886 (feasible range, since EOQ > 500 0.3(3.50) For $4 cigars, EOQ = but < 1000. For $3.25 cigars, EOQ = √ √ 2(75)(5500) = 920 (infeasible, since EOQ < 1000, so 0.3(3.25) must order 1001 to get the discount. Step 2 Calculate the total annual inventory costs for the $3.50 and the $3.25 cigars: TIC3.50 = O+I+P = 5500 886 (75) + (.3)(3.50) + 5500(3.50) = $465.58 + 886 2 $465.15 + $19,250 = $20,180.73 TIC3.25 = O+I+P = 5500 1001 (75) + (.3)(3.25) + 5500(3.25) = $412.09 + 1001 2 $487.99 + $17,875 = $18,775.08 So, the lowest cost order policy is to order 1001 cigars at a time, pay $3.25 per cigar, for a total inventory cost of $18,775.08 PTS: 5 BUSPROG: Communication LO: 7-7 Bloom’s: Analysis Difficulty: Difficult ESSAY 1. Describe the ABC inventory matrix, and how is it used to manage inventory. ANS: Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 An ABC inventory matrix is used to assist in identifying obsolete stocks and to analyze whether a company is stocking the correct inventories by comparing two ABC analyses. The vertical axis of the ABC inventory matrix shows the firm's inventory classification based on inventory usage whereas the horizontal axis shows the firm's inventory classification based on physical inventory. Items appearing along the diagonal of the matrix suggest inventory matches sales. Items in the top left triangle indicate under-stocked A and B items, whereas items in the lower right triangle suggest overstocked B and C items, or obsolete stocks. PTS: 10 BUSPROG: Communication LO: 7-4 Bloom’s: Application Difficulty: Difficult 2. What is Radio Frequency Identification (RFID)? Provide four examples or scenarios of how RFID can be used to aid in supply chain management. ANS: RFID aids in inventory management by making it easier to track inventories in the supply chains. It can synchronize information and physical flow of goods along supply chains from manufacturers to retail outlets and to the consumers. Moreover, it is also very useful for tracking returned goods through supply chains and to prevent counterfeits. For example, a. Materials management: As a supply vehicle enters the warehouse, the fixed-portal RFID reader positioned at the entrance reads the tags on the pallets or individual items to provide handling, routing, and storage information of the incoming goods, and inventory status can be updated automatically. b. Manufacturing: An RFID tag can be placed on the unit being produced so that specific customer configurations can be incorporated automatically during the production process. This is invaluable in a make-to-order environment. c. Distribution center: As the logistics vehicle arrives at the loading dock, the fixed-portal RFID reader communicates with the tag on the vehicle to confirm that it is approved to pick up goods. When the loaded vehicle leaves the dock and crosses the portal, the reader picks up the signals from the tags to alert the RFID software and ERP system to update the inventory automatically and initiate an advanced shipping notice (ASN), proof of pickup, and invoices. d. Retail store: As a delivery vehicle enters the unloading dock, the fixed-portal reader picks up the signals from the tags, and the RFID software application processes the signals to provide specific handling instructions and initiates automatic routing of the goods. An RFID reader can also be placed on the store shelf to trigger automatic replenishments when an item reaches its reorder point. Moreover, inventory status can be updated automatically in real time at any stage of the supply chain, and handheld readers can be used to assist in cycle counting. PTS: 10 BUSPROG: Communication LO: 7-5 Bloom’s: Application 3. Use the graph below to answer the questions that follow. Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Difficult lOMoARcPSD|18015231 a. b. c. d. Identify the Annual Holding Cost curve. Provide a brief description of what the Annual Holding Cost curve represents. Identify the Annual Ordering Cost curve. Provide a brief description of what the Annual Ordering Cost curve represents. Identify the Annual Total Cost Curve. Provide a brief description of what the Annual Total Cost curve represents. Identify the Economic Order Quantity. Provide a brief description of what the Economic Order Quantity represents. ANS: a. Identify the Annual Holding Cost curve. Provide a brief description of what the Annual Holding Cost curve represents. Curve K. Curve K represents the cost to a firm for holding inventory for an entire year. The larger the order size, the more inventory a firm holds, thus the higher the annual cost of holding inventory. b. Identify the Annual Ordering Cost curve. Provide a brief description of what the Annual Ordering Cost curve represents. Curve L. Curve L represents the cost to a firm for ordering inventory for an entire year. The larger the order size, the fewer the orders required to accumulate a year's worth of inventory, thus the lower the annual cost of ordering, and the higher the annual holding cost. c. Identify the Annual Total Cost Curve. Provide a brief description of what the Annual Total Cost curve represents. Curve J. Curve J is the sum of Curve K and Curve L. It begins very high as ordering costs are very high when order quantities are small, but as curve L and curve K near an intersection, the annual costs decrease. The intersection of K and L represents the lowest annual total cost, and thus reveals the EOQ. After K and L intersect, the annual total cost again begins to increase as order quantities increase causing holding costs to increase. d. Identify the Economic Order Quantity. Provide a brief description of what the Economic Order Quantity represents. The EOQ is the order size at which annual holding cost and annual ordering cost are equal, and where annual total cost is at its minimum. On this chart the EOQ is point G. Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 PTS: 10 BUSPROG: Communication LO: 7-6 Bloom’s: Analysis Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Difficult lOMoARcPSD|18015231 Chapter 13—Supply Chain Process Integration TRUE/FALSE 1. According to the text, IBM had made sizeable investments in India growth markets and created a new procurement center in New Delhi. ANS: F BUSPROG: Analytic . PTS: 1 LO: 13-1 Bloom’s: Comprehension Difficulty: Easy 2. An important initial step in the supply chain integration model is for a firm to extend process integration to 2nd tier supply chain partners and beyond ANS: F BUSPROG: Analytic PTS: 1 LO: 13-1 Bloom’s: Comprehension Difficulty: Easy 3. The ultimate goal in supply chain management is to create value for the services and products provided to end customers, which, in turn, will benefit the firms in the supply chain network. ANS: T PTS: 1 BUSPROG: Analytic LO: 13-1 Bloom’s: Comprehension Difficulty: Easy 4. Lack of internal or external collaboration will create quality, cost, delivery timing, and other customer service problems that are detrimental to supply chains. ANS: T BUSPROG: Analytic PTS: 1 LO: 13-2 Bloom’s: Knowledge Difficulty: Easy 5. Holding on to old-fashioned company practices and purchasing habits will help to made the firm run efficient and smooth. ANS: F BUSPROG: Analytic PTS: 1 LO: 13-2 Bloom’s: Comprehension Difficulty: Easy 6. The development of functional silos within an organization is considered a key component to achieving successful supply chain process integration. ANS: F BUSPROG: Analytic PTS: 1 LO: 13-2 Bloom’s: Comprehension Difficulty: Easy 7. External process integration can be an extremely challenging task because it can potentially cause a change in one or more organizational cultures. ANS: T BUSPROG: Analytic PTS: 1 LO: 13-3 Bloom’s: Comprehension Difficulty: Easy 8. The order fulfillment process relies on forecasting and techniques used to smooth demand variabilities when disparities exist between demand and supply. ANS: F BUSPROG: Analytic PTS: 1 LO: 13-3 Bloom’s: Comprehension Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Easy lOMoARcPSD|18015231 9. iBOTs, are robotic delivery vehicles which can access every storage location within their aisle-both horizontally and vertically. ANS: T BUSPROG: Analytic PTS: 1 LO: 13-3 Bloom’s: Comprehension Difficulty: Easy 10. Passive RFID Tags are more expensive than active RFID tags, which have been used for healthcare and military applications. ANS: F BUSPROG: Analytic PTS: 1 LO: 13-4 Bloom’s: Knowledge Difficulty: Easy 11. In 2014, supply chain process integration was found to be the most significant predictor of firm's competitive position. ANS: T BUSPROG: Analytic PTS: 1 LO: 13-4 Bloom’s: Comprehension Difficulty: Easy 12. Cloud systems provide less visibility for global supply chains. ANS: F BUSPROG: Analytic PTS: 1 LO: 13-4 Bloom’s: Comprehension Difficulty: Easy 13. Information visibility is critical for importers, shippers, and logistics providers. ANS: T BUSPROG: Analytic PTS: 1 LO: 13-4 Bloom’s: Comprehension Difficulty: Easy 14. According to the textbook, there are four key supply chain business processes: Purchasing, Manufacturing, Distribution, and Returns. ANS: F BUSPROG: Analytic PTS: 1 LO: 13-5 Bloom’s: Knowledge Difficulty: Easy 15. Manufacturing flow management is the key process that helps balance customer demand and the firm's output capabilities. ANS: F BUSPROG: Analytic PTS: 1 LO: 13-5 Bloom’s: Comprehension Difficulty: Easy 16. One of the key supply chain business processes is order fulfillment, which seeks to forecast demand and coordinate purchasing and distribution in an effort to balance customer demand with the firm's manufacturing capacity. ANS: F BUSPROG: Analytic PTS: 1 LO: 13-5 Bloom’s: Comprehension Difficulty: Easy 17. The batching of orders is unlikely to increase the likelihood of the bullwhip effect occurring. ANS: F BUSPROG: Analytic PTS: 1 LO: 13-6 Bloom’s: Comprehension Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Easy lOMoARcPSD|18015231 18. When demand exceeds a supplier's finished goods available, a supplier may allocate product in proportion to what buyers ordered. This rationing often results in shortage gaming by the suppliers’ customers. ANS: T BUSPROG: Analytic PTS: 1 LO: 13-6 Bloom’s: Comprehension Difficulty: Easy 19. Two methods for managing supply chain risk include utilizing a supply chain IT system and identifying backup suppliers. ANS: T BUSPROG: Analytic PTS: 1 LO: 13-7 Bloom’s: Knowledge Difficulty: Easy 20. The most basic security system should include procedures and policies for securing offices, manufacturing plants, warehouses and other physical facilities. ANS: T BUSPROG: Analytic PTS: 1 LO: 13-7 Bloom’s: Knowledge Difficulty: Easy MULTIPLE CHOICE 1. The global process integration software market is expected to: a. Double by the end of 2018 b. Grow by about $100 billion from 2017 to 2021 c. Remain constant through 2018 d. Decrease slightly by the end of 2017 ANS: B BUSPROG: Analytic PTS: 1 LO: 13-1 Bloom’s: Comprehension Difficulty: Easy 2. Which of the following is important for external process integration to be successful? a. Successful internal process integration b. Willing and competent trading partners c. Both A & B d. None of these ANS: C BUSPROG: Analytic PTS: 1 LO: 13-1 Bloom’s: Comprehension Difficulty: Easy 3. The coordination and sharing of information and resources to jointly manage a process is referred to as: a. Differentiation b. Process integration c. Simplification d. Reverse logistics ANS: B BUSPROG: Analytic PTS: 1 LO: 13-1 Bloom’s: Knowledge Difficulty: Easy 4. Which of the following has made external integration more difficult to achieve? a. Problems with internal integration efforts b. Identifying key trading partners c. Lack of software applications to coordinate the effort d. Increased number of franchise operators Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 ANS: A BUSPROG: Analytic PTS: 1 LO: 13-1 Bloom’s: Knowledge Difficulty: Easy 5. Failing to see the big picture and acting only in regard to single firm in the supply chain can be referred to as: a. Silo mentality b. Balking c. Shortage gaming d. Cross-selling ANS: A BUSPROG: Analytic PTS: 1 LO: 13-2 Bloom’s: Knowledge Difficulty: Easy 6. Influencing and increasing the capabilities of a firms own employees, as well as those of their trading partners, will help to eliminate which of the following obstacles to process integration? a. Risk Pooling b. Lack of trust c. Shortage Gaming d. Lack of Knowledge ANS: C BUSPROG: Analytic PTS: 1 LO: 13-2 Bloom’s: Comprehension Difficulty: Easy 7. Which of the following is an obstacle to successful process integration? a. Passive integration b. Stockpiling c. Lack of trust d. Transaction costs ANS: C BUSPROG: Analytic PTS: 1 LO: 13-2 Bloom’s: Comprehension Difficulty: Easy 8. Which of the following is NOT one of the Eight Key Supply Chain Business Processes? a. Order Fulfillment b. Customer Relationship Management c. Returns Management d. Warehouse Management ANS: D BUSPROG: Analytic PTS: 1 LO: 13-3 Bloom’s: Knowledge Difficulty: Easy 9. Building, maintaining and strengthening beneficial relationships with suppliers and customers is accomplished through the use of: a. Data warehouses b. External process integration c. Expediting d. All of the above ANS: B BUSPROG: Analytic PTS: 1 LO: 13-3 Bloom’s: Comprehension Difficulty: Easy 10. Which of the following is a vital element in developing a strong supply chain through the practice of process integration? a. Developing and implementing a strong information technology system that allows for fast and easy information exchanges between supply chain partners Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 b. Partner collaborations on methods to improve processes within the supply chain c. Partnerships, which value information sharing and partner collaborations d. All of the above ANS: D BUSPROG: Analytic PTS: 1 LO: 13-3 Bloom’s: Comprehension Difficulty: Easy 11. Mapping the network of primary trading partners is something that should be done to: a. Review and establish supply chain strategies b. Obtain point-of-sale information from customers c. Help the firm decide which businesses to include in its supply chain management efforts d. Assess and improve internal integration of key supply chain processes ANS: C BUSPROG: Analytic PTS: 1 LO: 13-3 Bloom’s: Knowledge Difficulty: Easy 12. Decisions regarding the types of parts purchased, suppliers used and the manufacturing process employed, should be decided in which phase of the supply chain integration model: a. Review and establish supply chain strategies b. Identify critical supply chain trading partners c. Align supply chain strategies with key supply chain process objectives d. Assess and improve internal integration of key supply chain processes ANS: A BUSPROG: Analytic PTS: 1 LO: 13-3 Bloom’s: Comprehension Difficulty: Easy 13. Which of the following identifies the key customers, determines their needs, and then develops products and/or services to meet those needs? a. Collaborative Management b. Customer Relationship Management c. Product Development and Commercialization d. Demand Management ANS: B BUSPROG: Analytic PTS: 1 LO: 13-3 Bloom’s: Comprehension Difficulty: Easy 14. The phase of the supply chain integration model concerned with identifying the important processes linking each of the supply chain partners is: a. Review and establish supply chain strategies b. Identify critical supply chain trading partners c. Align supply chain strategies with key supply chain process objectives d. Assess and improve internal integration of key supply chain processes ANS: C BUSPROG: Analytic PTS: 1 LO: 13-3 Bloom’s: Comprehension Difficulty: Easy 15. Supply relationship management personnel routinely communicate with: a. Production personnel to obtain feedback on supplier and purchased item performance b. Marketing personnel for customer feedback c. Suppliers for new product development and performance feedback d. All of the above ANS: D BUSPROG: Analytic PTS: 1 LO: 13-4 Bloom’s: Comprehension Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Easy lOMoARcPSD|18015231 16. ____________________ tends to reduce safety stocks among supply chain members, generating even less variability in supply chain orders? a. Information visibility b. Internal quality standards c. Forward Integration d. All of the above ANS: A BUSPROG: Analytic PTS: 1 LO: 13-4 Bloom’s: Comprehension Difficulty: Easy 17. Having connectivity and visibility to all partners in a firm’s supply chain can be accomplished through the use of: a. Legacy MRP systems b. Score-carding systems c. Cloud-based communication systems d. Mobile Marketing ANS: C BUSPROG: Analytic PTS: 1 LO: 13-4 Bloom’s: Comprehension Difficulty: Easy 21. Higher inventories, higher costs, longer response times, and lost customers can result from? a. Lack of trust between trading partners b. Lack of supply chain visibility c. Lack of vendor managed inventories d. Reactive initiatives ANS: B BUSPROG: Analytic PTS: 1 LO: 13-4 Bloom’s: Knowledge Difficulty: Easy 19. Which of the key supply chain business processes refers to meeting customer requirements by synchronizing the firm's marketing, production and distribution plans: a. Customer relationship management process b. Order fulfillment process c. Customer demand organization process d. Supply chain synchronization process ANS: B BUSPROG: Analytic PTS: 1 LO: 13-5 Bloom’s: Comprehension Difficulty: Easy 20. A customer approaches a firm with a question regarding her order status and shipping date; the information the firm provides is an example of which of the eight key supply chain business processes: a. Supply management process b. Demand management process c. Customer service management process d. Order fulfillment process ANS: C BUSPROG: Analytic PTS: 1 LO: 13-5 Bloom’s: Comprehension Difficulty: Easy 21. According to the text, all of the following are considered key supply chain business processes EXCEPT: a. Manufacturing flow management process b. Knowledge management process c. Supplier relationship management process d. Product development and commercialization Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 ANS: B BUSPROG: Analytic PTS: 1 LO: 13-5 Bloom’s: Knowledge Difficulty: Easy 22. Substance disposal and recycling are part of which supply chain business process: a. Customer relationship management process b. Returns management c. Customer service management process d. Product development and commercialization process ANS: B BUSPROG: Analytic PTS: 1 LO: 13-5 Bloom’s: Knowledge Difficulty: Easy 23. Which of the following is a contributor to the bullwhip effect? a. Smaller order sizes b. Using actual demand data c. Forward buying d. Vendor managed inventory ANS: C BUSPROG: Analytic PTS: 1 LO: 13-6 Bloom’s: Comprehension Difficulty: Easy 24. When salespeople need to fill end-of-quarter or end-of-year sales quotas they might use ___________, which creates greater use of safety stock causing the bullwhip effect. a. Stockpiling b. Bullwhip ordering c. Order fulfillment d. Order batching ANS: D BUSPROG: Analytic PTS: 1 LO: 13-6 Bloom’s: Comprehension Difficulty: Easy 25. Price fluctuations that are the result of special product promotions, quantity discounts, and other special pricing discounts by suppliers’ result in: a. Shortage Gaming b. Quantity Batching c. Buy-Back Gaming d. Forward Buying ANS: D BUSPROG: Analytic PTS: 1 LO: 13-6 Bloom’s: Comprehension Difficulty: Easy 26. Information technology advances, for example, have made cyber attacks: a. Less common b. More common c. Nearly impossible d. Limited to franchises ANS: B BUSPROG: Analytic PTS: 1 LO: 13-7 Bloom’s: Knowledge Difficulty: Easy 27. Which of the following would be considered a Supply Chain Risk Management activity? a. Increasing safety stock b. Diversify the supply base c. Develop a formal risk management program d. All of the above Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 ANS: D BUSPROG: Analytic PTS: 1 LO: 13-7 Bloom’s: Knowledge Difficulty: Easy 28. Security activities such as; Use of security badges and guards, conducting background check on applicants and using antivirus software and passwords, would be classified as: a. Basic Initiatives b. Reactive Initiatives c. Proactive Initiatives d. Advanced Initiatives ANS: A BUSPROG: Analytic PTS: 1 LO: 13-7 Bloom’s: Knowledge Difficulty: Easy SHORT ANSWER 1. List and describe THREE obstacles to process integration along the supply chain. ANS: a. Silo Mentality the inability to see the supply chain from a big picture perspective. Single departments act alone without regard for the firm, or partner firms within the supply chain. b. Lack of supply chain visibility the inability to easily share or retrieve trading partner information in real-time as desired by the supply chain participants. c. Lack of trust Supply chain partners may be unwilling to work together or share information due to the fear that their partners will either take advantage of them, share the information with competitors, or use the information unethically. d. Lack of knowledge Lack of skills in working with the process and information system. Also, a lack of knowledge regarding the benefits of supply chain management among both management and the other employees. This lack of knowledge and/or skill is problematic when either the firm or its partners suffer from it. The following activities, which cause the bullwhip effect, can also be considered obstacles to supply chain integration: e. Demand Forecast Updating Using varying customer orders to create an updated forecasts, production schedules, and purchased requirements f. Order Batching Ordering in large amounts in order to decrease order and transportation costs g. Price fluctuations Price incentives may cause erratic buying patterns when buyers attempt to stock up on inventory in order to take advantage of low costs, even though demand remains low/constant h. Rationing and Shortage Gaming shorting buyer orders when demand exceeds supply. This may cause buyers to over-inflate order sizes in an attempt to meet their demand during these times of short supply. PTS: 5 BUSPROG: Communication LO: 13-2 Bloom’s: Comprehension Difficulty: Moderate 2. What is RFID technology and how will it aid in management of the supply chain? ANS: Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 RFID stands for radio-frequency identification. These microchip devices can be attached to pallets or cases to relay information on the products’ whereabouts as they move through a supply chain. Using RFID tags, a firm can access real-time inventory information and allow companies to immediately replenish inventories when they are running low. This type of technology will allow supply chain managers to track inventory throughout the supply chain, collect information concerning demand, aid in keeping store shelves filled with product, and potentially decrease theft. PTS: 5 BUSPROG: Communication LO: 13-4 Bloom’s: Comprehension Difficulty: Moderate 3. List FIVE of the eight supply chain business processes. ANS: a. b. c. d. e. f. g. h. Customer relationship management Customer service management Demand management Order fulfillment Manufacturing flow management Supplier relationship management Product development and commercialization Returns management PTS: 5 BUSPROG: Communication LO: 13-5 Bloom’s: Knowledge Difficulty: Easy 4. List and explain TWO of the causes of the bullwhip effect. ANS: a. Demand Forecast Updating Using varying customer orders to create an updated forecasts, production schedules, and purchased requirements b. Order Batching Ordering in large amounts in order to decrease order and transportation costs c. Price fluctuations Price incentives may cause erratic buying patterns when buyers attempt to stock up on inventory in order to take advantage of low costs, even though demand remains low/constant d. Rationing and Shortage Gaming shorting buyer orders when demand exceeds supply. This may cause buyers to over-inflate order sizes in an attempt to meet their demand during these times of short supply. PTS: 5 BUSPROG: Communication LO: 13-6 Bloom’s: Comprehension Difficulty: Moderate 5. How can corruption be managed on a global scale? ANS: Firms should be aware of Transparency International, which annually publishes its Corruption Perceptions Index to publicize the degree of corruption existing in many countries. Companies need to take steps to thwart corruption by reducing business connections with countries who continue to appear on the list. PTS: 5 BUSPROG: Communication LO: 13-7 Bloom’s: Application Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Moderate lOMoARcPSD|18015231 ESSAY 1. List and describe FIVE of the eight key supply chain business processes. ANS: a. Customer Relationship Management A process which seeks to identify and segment customers so that new products and services will meet their ever-changing needs. Also, it allows organizations to measure customer profitability and target very small customer segments such that they will be able to market to the small customer segments in more meaningful ways. b. Customer Service Management This process seeks to aid the customer by providing them information about order status, shipping dates, product availability, and other common customer service needs. Also, this process seeks to find new ways to service customers in the future. c. Demand Management This process attempts to balance customer demand with the organization's capacity. This is done through demand forecasting and coordination of production, purchasing, and distribution. d. Order Fulfillment Meeting customer requirements by synchronizing the firm's marketing, production, and distribution plans. f. Manufacturing Flow Management A process which attempts to satisfy customer demand by determining the required levels of flexibility and velocity from the manufacturing process. g. Supplier Relationship Management This process seeks to develop relationships with key suppliers. Modern supply chains say this is an important step in operating efficiently, and ultimately meeting the needs of the customer. h. Product Development and Commercialization Ineffective and efficient product development. Looking to suppliers and customers for information that will allow good products to get to market quickly. i. Returns Management The management of material usage, product recalls, packaging requirements, and returned product. This process is responsible for both managing those things in the present as well as trying to achieve related organizational effectiveness and efficiency in the future. PTS: 10 BUSPROG: Communication LO: 13-5 Bloom’s: Comprehension Difficulty: Difficult 2. The textbook states that "the bullwhip effect can be a pervasive and expensive problem along the supply chain." Answer the following questions in relation to the bullwhip effect: a. Briefly describe the bullwhip effect. b. List 2 key activities that cause the bullwhip effect. How do they exacerbate the problems associated with the bullwhip effect? c. How can process integration help prevent/minimize the bullwhip effect? d. List 2 other key activities that can act as deterrents against the bullwhip effect. How do they minimize and/or eliminate the problems associated with the bullwhip effect? ANS: Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 a. Briefly describe the bullwhip effect. The bullwhip effect is characterized by the amplified forecasts in order sizes that become prevalent as you move farther down the supply chain. The amplifications and subsequent demand variations cause problems with capacity planning, inventory control, and workforce production scheduling. Some of the end results may be product shortages which may upset customers, or high inventories which increase total supply chain costs. b. List 2 key activities that cause the bullwhip effect. How do they exacerbate the problems associated with the bullwhip effect? 1. Demand Forecast Updating Using varying customer orders to create updated forecasts, production schedules, and purchase requirements. These fluctuating forecasts, increasing leadtimes, and growing safety stocks contribute to the bullwhip effect. 2. Order Batching Ordering in large amounts in order to decrease order and transportation costs. This type of ordering amplifies demand variability, which in turn contributes to the bullwhip effect. 3. Price Fluctuations Price incentives may cause erratic buying patterns when buyers attempt to stock up on inventory in order to take advantage of low costs, even though demand remains low/constant. This type of ordering amplifies demand variability, which in turn contributes to the bullwhip effect. 4. Rationing and Shortage Gaming shorting buyer orders when demand exceeds supply. This may cause buyers to over-inflate order sizes in an attempt to meet their demand during these times of short supply. This obviously inflates demand, contributes to demand variability, which in turn contributes to the bullwhip effect. c. How can process integration help prevent/minimize the bullwhip effect? Many of the problems which cause the bullwhip effect are related to poor communication between the supply chain partners, the manufacturing firm, and the customers. Developing a supply chain with close relationships between suppliers and buyers, equipped with effective and efficient communication systems allow supply chain partners the ability to plan more accurately for the actual demands of the system. It is also important for the supply chain partners to continually develop these relationships and strive for continuous improvement. d. List 2 other key activities that can act as deterrents against the bullwhip effect. How do they minimize and/or eliminate the problems associated with the bullwhip effect? 1. Vendor Managed Inventory Systems VMI systems empower suppliers to manage inventories for their customers based on information supplied directly to the supplier via the customer's system. This not only allows for increased visibility, it also allows for suppliers to act at a time closer to the actual moment of need. 2. Increasing Information Visibility Developing information systems which allow organizations and their supply chain members to more accurately assess the needs of the system/customers will allow for more effective planning and in turn provide a more efficient use of resources. 3. Decreasing Order Sizes smaller order sizes help supply chain members more accurately track changes in demand. Such orders will be more frequent, and allows forecasts to be more accurate. 4. Maintaining a policy of Everyday Low Prices this helps to minimize or eliminate price fluctuations which may cause irregular buying patterns, or create an enlarged sense of demand variability. 5. Reducing the length of the supply chain can reduce the bullwhip effect by reducing the number of occasions when forecasts are calculated. 6. Reducing lead times from order to delivery will allow organizations to order in a Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) lOMoARcPSD|18015231 7. just-in-time manner, and allows for more small order quantities. Attempting to limit shortage gaming by allocating product for sale to buyers based on demand histories. PTS: 10 BUSPROG: Communication LO: 13-6 Bloom’s: Comprehension Difficulty: Difficult 3. The textbook lists the following activities as Supply Chain Risk Management activities: a. Increasing safety stock and forward buying b. Identify backup suppliers and logistics services c. Diversify the supply base d. Utilize a supply chain IT system e. Develop a formal risk management program For each also provide the downside of utilizing that particular strategy. ANS: a. Increasing safety stock and forward buying Whatever the disruption, late shipments, damaged or destroyed goods, stolen goods, etc. additional inventory will help in buying time until the disruption can be addressed. Downside: Cost of purchasing and holding inventory b. Identify backup suppliers and logistics services If your suppliers are disrupted or if your shipments are disrupted, having an alternative source of supplies and delivery can help eliminate the possible negative effects or at least decrease the disruption. Downside: Cost of researching and negotiating an agreement. Also, your present suppliers may feel slighted. c. Diversify the supply base Having multiple suppliers allows a company to manage risk since it is less likely that all suppliers will experience disruptions at the same time. Downside: Having multiple suppliers requires more effort when attempting to develop close supplier relationships. A truly globally diverse supply base will also introduce different types of risk associated with global purchasing and logistics. d. Utilize a supply chain IT system A good supply chain IT system increases supply chain visibility, which in turn allows companies to see problems early, or possibly even before they occur. This provides the company time for a quick response. Downside: The cost to purchase, implement, and train employees on a new IT system can be high. Also, the compatibility both internally and externally may be an issue. e. Develop a formal risk management program Anticipating, assessing, and planning responses for supply chain risks allows companies to be prepared for common disruptions, but they also help in dealing with unanticipated disruptions. This will hopefully help the company minimize risk exposure, alert employees what to watch for, and also provide a plan of action. Downside: The time, effort, and cost to develop a comprehensive risk management program can be a seem like an intimidating commitment. PTS: 10 BUSPROG: Communication LO: 13-7 Bloom’s: Application Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com) Difficulty: Difficult lOMoARcPSD|18015231 Downloaded by Kim Ngân Phan Nguy?n (kngancp10@gmail.com)
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