DSCI 303 Chapter 15

A company’s supply chain involves the flow of materials and information from suppliers, through production, to the end users.
TRUE
Flow of materials and information are the central focus of supply chain management.
In supply chain organizations, functions must operate independently of each other.
FALSE
Functions should be integrated.
In purchasing, one’s only ethical obligation is to one’s suppliers.
FALSE
Purchasing personnel have ethical obligations with regard to a variety of stakeholders, primarily the organizations that employ them.
Using third-party logistics involves using your organization’s logistics function to ship to customers that are not officially part of the supply chain.
FALSE
Using third-party logistics involves outsourcing the logistics function.
Every business organization is part of at least one supply chain.
TRUE
Either the business organization is a complete supply chain or it is a player in a supply chain.
Frequent deliveries of small shipments can reduce inventory but also result in an increase in the transportation cost per unit.
TRUE
This is one of the trade-offs inherent in supply chain management.
The materials in the supply chain flow toward the end of the chain, while the information and the dollars move toward the beginning of the chain.
FALSE
Material flows toward the final consumer and information and dollars flow upstream.
Managing supply chain visibility involves making sure that potential supply chain partners are aware of your organization’s needs.
FALSE
Supply chain visibility has to do with making sure that current trading partners have access to needed data in real time.
The goal of supply chain management is to synchronize supply and demand of all of the organizations that are part of the chain.
TRUE
Synchronizing multiple organizations is one of the difficulties of supply chain management.
The need for supply chain management increases as globalization increases.
TRUE
As globalization increases, supply chain management is becoming more important.
The design of the supply chain and establishing partnerships with vendors and distributors are examples of operational issues in a supply chain.
FALSE
These are tactical responsibilities.
Traffic management refers to truck movement within our parking areas.
FALSE
Traffic management is the management of the shipment of incoming and outgoing goods.
One of the major reasons for a company to adopt third-party logistics is to concentrate on one’s core business.
TRUE
Outsourcing logistics to third parties enables a company to focus on its core business.
E-commerce refers to the use of electronic technology to facilitate business transactions.
TRUE
E-commerce is a growing trend in supply chain management.
E-commerce involves business-to-business (B2B) interaction only.
FALSE
E-commerce can also involve business-to-consumer (B2C) interactions.
Disintermediation refers to the phenomenon that the traditional retailer or service provider is reduced or eliminated in a supply chain.
TRUE
Disintermediation involves reducing one or more steps in a supply chain by cutting out intermediaries.
Most people working for a business organization are somehow involved with the supply chain of that business.
TRUE
Most people working for a business organization are involved in the flow of materials, money, or information.
Strategic partnering is encouraged when two or more business organizations have complementary products or services that would benefit the others.
TRUE
Complementarity is key to successful strategic partnering.
Forming strategic partnerships is beneficial for two or more business organizations that have the same products or services.
FALSE
Complementarity is key to successful strategic partnering.
Inventory velocity refers to the average speed (in miles/hour) of material handling equipment in a warehouse.
FALSE
Velocity refers to the rate at which goods pass through a supply chain.
Global supply chains make purchasing easier because there are more options.
FALSE
Global purchasing is more complex because of the variety of issues and risks that must be considered.
Centralized or decentralized purchasing is directly related to the size of an organization.
FALSE
The use of centralized or decentralized purchasing is independent of organization size.
The optimization of the supply chain uses a mathematical model to determine the optimal number of business organizations to be included in the chain.
FALSE
Optimizing a supply chain through mathematical models is typically not feasible.
Information technology is the key to success of global supply chains.
TRUE
Global supply chains are made possible by the use of information technology.
Bullwhip effect refers to a phenomenon in which demand variations that exist at the customer end of the supply chain are magnified as orders are generated back through the supply chain.
TRUE
The effect of demand variations grows as it works its way back through the supply chain.
Starting with the final customer and moving backward through the supply chain, batch sizes and the level of safety stock tend to decrease.
FALSE
Safety stock might increase, but batch sizes won’t.
Scheduling and maintaining equipment are operational decisions.
TRUE
Maintenance would be a form of corrective or preventive action to ensure the continued availability of capacity.
To avoid temporary storage in a warehouse, cross-docking can be used.
TRUE
In cross-docking, inbound goods are moved directly onto outbound trucks.
Delayed differentiation is a means of increasing product variety without building the customized product from scratch or keeping large inventories of custom products.
TRUE
Delayed differentiation is used to create customized output without large inventories
Returned goods are part of reverse logistics.
TRUE
Reverse logistics involves managing the flow of goods back up the supply chain.
A 30 percent reduction in product and service variety will not affect the efficiency of a supply chain.
FALSE
Reducing variety is a prominent means of increasing efficiency.
The service function of purchasing interfaces with many areas, including legal, accounting, and engineering functions.
TRUE
Purchasing interfaces with a wide variety of areas.
Gatekeeping manages the cost of shipping returned goods.
FALSE
Gatekeeping manages the cost of dealing with inappropriately returned goods.
Outsourcing logistics gives a company less flexibility because it forces them to focus more on core businesses.
FALSE
Outsourcing logistics can lead to more flexibility.
Vendor analysis examines the function of purchased parts and materials with a view toward improvement or cost reduction.
FALSE
Vendor analysis evaluates sources of supply with respect to price, quality, reputation, and service.
Using third-party fulfillment means losing control of fulfillment.
TRUE
Outsourcing this key function means a loss of control
Price is the primary determining factor in choosing a vendor since most products are essentially the same.
FALSE
With vendor analysis, price is just one of many considerations.
RFID eliminates the need for counting and bar-code scanning.
TRUE
RFID does away with the need for counting and bar-code scanning
The importance of purchasing relates only to the cost of parts and materials purchased, which is often 60 percent or more of the cost of finished goods.
FALSE
Purchasing is important because other costs resulting from the purchase of parts and materials are highly consequential.
Important factors in purchasing include the cost of goods purchased, the quality of goods and services, and the timing of deliveries of goods or services.
TRUE
These costs resulting from the purchase of parts and materials are highly consequential
Vendor analysis is the process that evaluates the source of supply in terms of price, quality, reputation, and service.
TRUE
Evaluating sources in terms of price, quality, reputation, and service is vendor analysis.
In e-commerce, the front-end design is significantly more important than the back-end design.
FALSE
Back-end design is often more consequential in e-commerce.
One disadvantage to RFID is that it requires a clear “line of sight” to operate.
FALSE
RFID doesn’t need line-of-sight reading
Decentralized purchasing can usually offer quicker response than centralized purchasing.
TRUE
Centralized purchasing can be more efficient, but decentralized purchasing can offer faster response.
Some firms have structured their procurement function to include both centralized and decentralized purchasing.
TRUE
Good purchasing can involve both centralized and decentralized elements.
Creating an effective supply chain requires linking the marketing, distribution, and supplier channels.
TRUE
These need to be synchronized if the supply chain is to be effective.
An advantage of decentralized purchasing is the attention given to local needs.
TRUE
Decentralized purchasing is more responsive to specific needs.
Event management is the advanced planning required for major performances such as concerts or conferences.
FALSE
Event management involves detecting and responding to unplanned events.
Strategies to address supply chain risks include:

(I) risk avoidance.
(II) risk reduction.
(III) risk projection.
(IV) risk sharing.

A. I, II, and IV only

B. II and III only

C. I and IV only

D. II and IV only

E. I, II, III, and IV

A- Risk management strategies include risk avoidance, risk reduction, and risk sharing with supply chain partners.
Which of the following, while desirable from some perspectives, might actually increase the risk of supply chain reductions?

(I) fewer supply chain partners
(II) a shorter supply chain
(III) greater supply chain visibility

A. I and II only

B. II and III only

C. I and III only

D. I only

E. I, II, and III

D- Fewer suppliers results in greater concentration among suppliers, making the supply chain riskier.
One of the biggest ethical risks in supply chain management is that the __________ supply chain member tends to be the one that suffers the blame and/or lost goodwill when something goes wrong.

A. most responsible

B. buying

C. most visible

D. supplying

E. most ethical

C- Consumers tend to blame the major company or brand in the supply chain associated with the ethical infractions.
The more __________ a company’s supply chain, the more difficult it is to ensure that the supply chain is managed ethically.

A. interconnected

B. global

C. visible

D. shortened

E. competitive

B- Problems with supply chain ethics are particularly difficult to manage when supply chains are global.
It is especially the case for small businesses that closer interactions and increased agility make __________ relatively more attractive.

A. domestic suppliers

B. centralized purchasing

C. global suppliers

D. decentralized purchasing

E. risk transfer

A- For small businesses, the advantages of domestic suppliers include lower shipping times and costs, closer interactions with suppliers, and increased agility.
Which of these aspects of supply chain management are especially concerning to small business?

(I) customer reliability
(II) inventory management
(III) purchasing costs
(IV) risk management
(V) international trade

A. III, IV, and V only

B. I, II, and III only

C. I, III, and IV only

D. I and II only

E. II, IV, and V only

E- Three aspects of supply chain management that are often of concern to small businesses are: (1) inventory management; (2) reducing risks; and (3) international trade.
Which of the following is not a goal of supply chain management?

A. fewer suppliers and long-term relationships

B. small lot sizes

C. on-time deliveries

D. lowest possible transportation costs

E. delivery often to the place of use

D- Minimizing transportation costs might lead to an unacceptable trade-off elsewhere.
Logistics includes all of these except:

A. the movement of materials within a production facility.

B. incoming shipments of goods or materials.

C. outgoing shipments of goods or materials.

D. customer selection.

E. returned goods processing.

D-Logistics involves moving goods.
Small changes in consumer demand can result in large variations in orders placed because of the:

A. supply chain.

B. safety stock requirement.

C. lead time effect.

D. bullwhip effect.

E. FCFS scheduling.

D- Variations are amplified as they move backwards in the supply chain.
RFID chips:

(I) are used to track goods in distribution.
(II) are used to track job progress in production.
(III) are used to provide special instructions to operators.
(IV) can be used in inventory record keeping.

A. II and III only

B. I and II only

C. II, III, and IV

D. I, II, and IV

E. IV only

D- RFID chips do not contain special instructions.
Which of the following is not a benefit of RFID?

A. increased productivity

B. elimination of paperwork

C. frequent deliveries of smaller shipments

D. reduction in clerical labor

E. increased accuracy

C- RFID does little to facilitate the cost reductions required to make frequent, small deliveries feasible.
A factor that makes it desirable for business organizations to actively manage their supply chains is:

A. more potential vendors.

B. increasing globalization.

C. downsizing.

D. the Internet.

E. RFIDs.

B- Globalization is making supply chain management more important.
Which of the following is not a benefit of effective supply chain management?

A. lower inventory costs

B. higher productivity

C. shorter lead times

D. greater customer loyalty

E. larger number of suppliers

E- Supply chain management often results in fewer suppliers.
Which of the following is not a measure of the reliability of the supply chain?

A. supply chain response time

B. on-time delivery

C. fill rate

D. lead time variability

E. improving e-fulfillment statistics

A- Response time is a measure of supply chain effectiveness.
The automatic identification of material is part of/facilitated by:

A. holding costs.

B. RFID.

C. working capital reduction.

D. net present value calculations.

E. vendor analysis.

B- RFID facilitates the automatic identification of material.
Which of the following is not an application of E-business?

A. Internet buying and selling

B. e-mail

C. order and shipment tracking

D. electronic data interchange (EDI)

E. universal product codes

E- Universal product codes are not part of E-business.
Which of the following is an advantage of E-business?

(I) reduction of transaction costs
(II) shortened supply chain response time
(III) greater customer loyalty

A. I

B. II

C. I and II

D. II and III

E. I, II, and III

C- Gaining and maintaining customer loyalty is even more difficult once a firm is involved in E-business.
Which of the following is a barrier to the integration of separate organizations in the supply chain?

(I) conflicting objectives of the companies in the chain
(II) different capacity levels of the companies in the chain
(III) reluctance of the organizations in the chain to allow other organizations access to their data

A. I only

B. I and II

C. II and III

D. I and III

E. I, II, and III

D- Capacity imbalances can be overcome, but conflicting objectives and mistrust are substantial barriers.
_________ has/have helped firms to concentrate on their core business.

A. Supply chains

B. Scheduling

C. Outsourcing

D. ERP

E. Lean production

C- Outsourcing enables firms to focus on what they do, or should do, best.
Outsourcing followed by __________ is not simple.

A. integration

B. unionization

C. backsourcing

D. computerization

E. just-in-time

C- Backsourcing is difficult to implement effectively if outsourcing has been done.
The interface between the firm and its suppliers is:

A. purchasing.

B. production.

C. distribution.

D. engineering.

E. accounting.

A- The purchasing function bridges the organization and its suppliers.
The two types of decisions that are relevant to supply chain management are:

A. short- and long-term.

B. domestic and international.

C. location and layout.

D. in-sourcing and outsourcing.

E. tactical and operational.

E- Decision making in supply chain management falls into either tactical or operational areas.
One important objective of purchasing is to:

A. set quality standards for purchased items.

B. be knowledgeable about new products.

C. maintain numerous sources of supply.

D. obtain the lowest prices on all purchased items.

E. determine the processes that should be used.

B- Purchasing can play a crucial role by helping solidify the supplier base for a new product.
The purchasing cycle begins with:

A. selecting a supplier.

B. placing an order.

C. evaluating potential vendors.

D. conducting a value analysis.

E. receiving a requisition.

E- The requisition notes what is needed, in what quantity, and when it is needed.
Examination of the sources of supply for purchased parts or materials in order to improve performance is called:

A. vendor analysis.

B. value analysis.

C. negotiated purchasing.

D. reverse engineering.

E. disintegration.

A- Performance can be evaluated with respect to price, quality, reputation, or service.
Vendor analysis has the greatest potential for savings for items which have:

A. low cost per unit.

B. low annual cost-volume.

C. high cost per unit.

D. high annual usage.

E. high annual cost-volume.

E- These represent the bulk of purchasing costs.
Which of the following is not true of vendor analysis?

A. It involves an examination of the function of purchased parts or raw materials.

B. Its purpose is to reduce costs and/or improve performance of purchased goods or services.

C. It is usually performed only periodically.

D. Representatives from design and operations may work with purchasing.

E. If improvements are identified, purchasing implements those that purchasing agrees are justified.

A- The function of purchased parts or raw materials would be done by the procuring department.
Which of the following is not a performance driver?

A. quality

B. cost

C. stability

D. velocity

E. flexibility

C- Stability is not a performance driver.
Which of the following would not usually be a main factor in selecting a vendor?

A. location

B. price

C. quality

D. inventory turnover

E. vendor services

D- Turnover would only rarely be associated with the vendor that is selected.
Which of the following is part of the purchasing cycle?

(I) Purchasing selects a supplier.
(II) Orders from vendors are received.
(III) Purchasing receives a requisition.

A. II and III

B. I, II, and III

C. I only

D. I and II

E. I and III

B- These are all part of the purchasing cycle.
Which of the following is least likely to be a key consideration when a company chooses a supplier?

A. lead time and on-time delivery

B. reputation and financial stability

C. value analysis

D. quality and quality assurance

E. flexibility of design change

C- All the others are highly likely to be considered in supplier selection.
Which of the following is not a benefit of centralized purchasing?

A. potential for quantity discounts

B. better service from suppliers

C. quick response to local needs

D. potential for use of purchasing specialists

E. supplier research

C- Quick response to local needs is a benefit of decentralized purchasing.
The purchasing perspective of the supplier as a partner is characterized by:

A. an emphasis on low prices.

B. one or a few suppliers.

C. low flexibility.

D. 100 percent inspection for quality.

E. low volume.

B- Fewer suppliers enhance the chances of building real partnerships.
Vendor analysis is the examination of the _________ of purchased materials.

A. function

B. source

C. quality

D. cycle

E. quantity

B- Sources of supply are evaluated in vendor analysis.
Last quarter, a retailer sold 8,000 T-shirts, 7,000 of which were sold directly from on-hand inventory. This retailer’s ________ was 88 percent.

A. fill rate

B. inventory yield

C. profit margin

D. inventory turnover

E. working yield

A- This retailer’s fill rate was 88 percent.
Which of the following is a principle required for ethical behavior in purchasing?

(I) loyalty to employer
(II) justice to those you deal with
(III) faith in your profession

A. III only

B. I only

C. II only

D. I, II, and III

E. II and III only

D- All of these are ethical principles in purchasing.
The activity which begins with a request from within the organization is:

A. outsourcing search.

B. purchasing cycle.

C. supplier selection.

D. order receipt.

E. supply chain management.

B- The purchasing cycle begins with a requisition.
Our organization can obtain visibility to potential trading partners on the Internet by using:

A. C2C.

B. B2C.

C. B2B.

D. C2B.

E. 2BC.

C- B2B helps the organization let the market know of the organization’s needs
Real-time information about product movement on store shelves could benefit from the use of:

A. batch processing.

B. economic order quantities.

C. statistical process control.

D. radio frequency identification tags.

E. infrared remote scanners.

D- RFID facilitates real-time data gathering.
The website and order fulfillment are essential features of:

A. delayed differentiation.

B. e-commerce.

C. Internet service providers.

D. inventory balancing.

E. market segmentation.

B- These are front-end and back-end facets of e-commerce.