GSCM Ch.9, 10, 11, 12

Predictable variability is change in demand that cannot be forecasted.
False
Faced with predictable variability of demand, a company’s goal is to respond in a manner that maximizes profitability.
True
The advantage of carrying enough manufacturing capacity to meet demand in any period is very low inventory costs, because no inventory needs to be carried from period to period.
True
The disadvantage of carrying enough manufacturing capacity to meet demand in any period is that much of the expensive capacity would go unused during most months when demand was lower.
True
The advantage of building up inventory during the off season to keep production stable year round lies in the fact that a firm could get by with a smaller, more expensive factory.
False
The disadvantage of building up inventory during the off season to keep production stable year round is the expensive capacity that would go unused during most months when demand was lower.
False
An approach where a firm works with their retail partners in the supply chain to offer a price promotion during periods of low demand would shift some of the demand into a slow period, thereby spreading demand more evenly throughout the year and reducing the seasonal surge.
True
With supply and demand management decisions being made independently, it is easier to coordinate the supply chain, thereby increasing profit.
False
A firm can vary supply of product by controlling production capacity inventory.
True
A firm that uses flexible work hours from the workforce to manage capacity to better meet demand is using a seasonal workforce
False
Scheduling the workforce so that the available capacity better matches demand is using time flexibility from the workforce.
True
The use of a part-time workforce to increase the capacity flexibility by enabling the firm to have more people at work during peak periods is designing product flexibility into the production processes.
False
A firm that uses a temporary workforce during the peak season to increase capacity to match demand is using a seasonal workforce.
True
The use of dual facilities to manage capacity may be hard to sustain if the labor market is tight.
False
A firm that purchases peak production capability from other companies so that internal production remains level and can be done cheaply is using subcontracting.
True
A firm that builds dedicated facilities to produce a relatively stable output of products over time in a very efficient manner and purchases peak production capability from other companies is using subcontracting.
False
A firm that has production lines whose production rate can easily be varied to match demand has designed product flexibility into the production processes.
True
The use of a seasonal workforce requires that the workforce be multi-skilled and easily adapt to being moved from line to line.
True
The use of common components across multiple products, with each product having predictably variable demand, will result in the demand for the components being relatively constant.
True
When most of the products a firm produces have the same peak demand season, the use of common components to create relatively constant overall demand in the components is feasible.
False
When most of the products a firm produces have the same peak demand season, it is necessary to build products during the off season that have more predictable demand.
True
Operations usually make the promotion and pricing decisions.
False
Maximizing revenue is typically the objective when marketing and sales make the promotion and pricing decisions.
True
Pricing decisions based only on revenue considerations often result in an increase in overall profitability.
False
The combination of pricing and aggregate planning (both demand and supply management) can be used to maximize supply chain profitability.
True
When performing aggregate planning, the goal of all firms in the supply chain should be to maximize individual firm profits.
False
Determining how profits will be allocated to different members of the supply chain is a key to successful collaboration.
True
In general, as the fraction of increased demand coming from forward buying grows, offering the promotion during the peak demand period becomes more attractive.
False
Offering a promotion during a peak period that has significant forward buying creates even more variable demand than before the promotion.
True
Average inventory decreases if a promotion is run during the peak period and increases if the promotion is run during the off-peak period.
False
Promoting during a peak demand month may decrease overall profitability if a significant fraction of the demand increase results from a forward buy.
True
As forward buying becomes a smaller fraction of the demand increase from a promotion, it is less profitable to promote during the peak period.
False
As the product margin declines, promoting during the peak demand period becomes less profitable.
True
When faced with seasonal demand, a firm should use a combination of pricing (to manage demand) and production and inventory (to manage supply) to improve profitability.
True
Predictable variability is
a. change in demand that can be forecasted.
b. change in demand that cannot be forecasted.
c. change in demand that has been planned.
d. change in demand that has been scheduled.
e. all of the above
a. change in demand that can be forecasted.
Which of the following is not a problem caused by products experiencing predictable variability of demand?
a. high levels of stockouts during peak demand
b. high levels of excess inventory during periods of low demand
c. increased responsiveness of the supply chain
d. increased costs in the supply chain
e. decreased responsiveness of the supply chain
c. increased responsiveness of the supply chain
A firm can handle predictable variability by managing
a. supply using capacity, inventory, trade promotions, and backlogs.
b. supply using capacity, inventory, subcontracting, and backlogs.
c. demand using short-term price discounts and trade promotions.
d. a and c only
e. b and c only
e. b and c only
Seasonal demand can be met by
a. maintaining enough manufacturing capacity to meet demand in any period.
b. building up inventory during the off season to meet demand during peak seasons.
c. offering a price promotion during periods of low demand to shift some of the demand into a slow period.
d. all of the above
e. a and b only
d. all of the above
The advantage of maintaining enough manufacturing capacity to meet demand in any period is
a. very low inventory costs because inventory needs to be carried from period to period.
b. very low inventory costs because no inventory needs to be carried from period to period.
c. very high inventory costs because no inventory needs to be carried from period to period.
d. very high inventory costs because expensive capacity would go unused during most months when demand was lower.
e. none of the above
b. very low inventory costs because no inventory needs to be carried from period to period.
The disadvantage of maintaining enough manufacturing capacity to meet demand in any period is
a. much of the expensive capacity would go unused during most months when demand was lower.
b. the expensive capacity would be used consistently throughout the year.
c. most of the expensive capacity would still be used during most months when demand was lower.
d. very low inventory costs because no inventory needs to be carried from period to period.
e. None of the above are true.
a. much of the expensive capacity would go unused during most months when demand was lower.
The advantage of building up inventory during the off season to meet demand during peak seasons and keep production stable year round is
a. very low inventory costs because no inventory needs to be carried from period to period.
b. much of the expensive capacity would go unused during most months when demand was lower.
c. in the fact that a firm could get by with a smaller, less expensive factory.
d. in the fact that a firm could get by with a larger, more expensive factory.
e. None of the above are true.
c. in the fact that a firm could get by with a smaller, less expensive factory.
The disadvantage of building up inventory during the off season to meet demand during peak seasons and keep production stable year round is
a. very low inventory costs because no inventory needs to be carried from period to period.
b. very high inventory costs because inventory needs to be carried from period to period.
c. in the fact that a firm could get by with a smaller, less expensive factory.
d. in the fact that a firm could get by with a larger, more expensive factory.
e. None of the above are true.
b. very high inventory costs because inventory needs to be carried from period to period.
The advantage of offering a price promotion during periods of low demand to shift some of the demand into a slow period is
a. a demand pattern that is less expensive to supply.
b. very high inventory costs because inventory needs to be carried from period to period.
c. in the fact that a firm could get by with a smaller, more expensive factory.
d. much of the expensive capacity would go unused during most months when demand was lower.
e. all of the above
a. a demand pattern that is less expensive to supply.
Companies typically divide the task of supply and demand so that
a. Marketing manages demand and Operations manages supply.
b. Marketing manages supply and Operations manages demand.
c. Marketing manages demand and supply.
d. Operations manages demand and supply.
e. none of the above
a. Marketing manages demand and Operations manages supply.
As the product margin declines, promoting during the peak demand period becomes
a. less profitable.
b. more profitable.
c. less of a risk.
d. more desirable.
e. none of the above
a. less profitable.
Promoting during a peak demand month may decrease overall profitability if
a. a small fraction of the demand increase results from a forward buy.
b. any of the demand increase results from a forward buy.
c. a significant fraction of the demand increase results from a forward buy.
d. none of the above
e. all of the above
c. a significant fraction of the demand increase results from a forward buy.
Average inventory
a. increases if a promotion is run during the peak period.
b. increases if a promotion is run during the off-peak period.
c. decreases if a promotion is run during the peak period.
d. decreases if a promotion is run during the off-peak period.
e. both a and d
b. increases if a promotion is run during the off-peak period.
Offering a promotion during a peak period that has significant forward buying
a. creates a desirable demand pattern.
b. creates a demand pattern less costly to serve.
c. creates a demand pattern even more costly to serve.
d. shifts demand from the peak period to the slow period.
e. shifts demand to a more desirable period.
c. creates a demand pattern even more costly to serve.
In general, as the fraction of increased demand coming from forward buying grows, offering the promotion during the peak demand period becomes
a. less attractive.
b. more attractive.
c. more profitable.
d. less significant.
e. none of the above
a. less attractive.
Customers moving up future purchases to the present is
a. market growth.
b. stealing share.
c. forward selling.
d. forward buying.
e. none of the above
d. forward buying.
Customers substituting the firm’s product for a competitor’s product is
a. market growth.
b. stealing share.
c. forward selling.
d. forward buying.
e. none of the above
b. stealing share.
An increase in consumption of the product either from new or existing customers is
a. market growth.
b. stealing share.
c. forward selling.
d. forward buying.
e. none of the above
a. market growth.
Which of the following is not a factor that would result in increased demand from a trade promotion?
a. market growth
b. stealing share
c. forward selling
d. forward buying
e. All of the above are factors in increased demand.
c. forward selling
Which of the following is not a key factor influencing the timing of a trade promotion?
a. impact of the promotion on demand
b. product margins
c. cost of holding inventory
d. cost of changing capacity
e. none of the above
e. none of the above
One key to successful collaboration when the supply chain is performing aggregate planning is
a. determining how losses will be allocated to different members of the supply chain.
b. determining how profits will be allocated to different members of the supply chain.
c. determining how labor will be allocated to different members of the supply chain.
d. determining how customers will be allocated to different members of the supply chain.
e. none of the above
b. determining how profits will be allocated to different members of the supply chain.
When planning, the goal of all firms in the supply chain should be to maximize supply chain profits because
a. this leaves them less profit to divide among themselves.
b. this leaves them more profit to divide among themselves.
c. this outcome leaves them more profit to pay tax on.
d. this outcome will increase their charitable giving.
e. none of the above
b. this leaves them more profit to divide among themselves.
When performing aggregate planning, the goal of all firms should be to
a. minimize company profits.
b. maximize company profits.
c. minimize supply chain profits.
d. maximize supply chain profits.
e. All of the above are accurate.
d. maximize supply chain profits.
The combination of pricing and aggregate planning (both demand and supply management) can be used to
a. maximize customer orders.
b. minimize customer orders.
c. maximize supply chain profitability.
d. minimize supply chain profitability.
e. None of the above are accurate.
c. maximize supply chain profitability.
Pricing decisions based only on revenue considerations often result in
a. a decrease in overall profitability.
b. an increase in overall profitability.
c. a decrease in overall revenue.
d. a decrease in supply chain revenue.
e. an increase in supply chain profitability.
a. a decrease in overall profitability.
The promotion and pricing decisions made by marketing and sales typically have the objective of
a. maximizing profitability.
b. minimizing profitability.
c. minimizing revenue.
d. maximizing revenue.
e. maximizing profitability across the supply chain.
d. maximizing revenue.
The pricing and promotion decisions are often made by
a. marketing and sales.
b. marketing and operations.
c. operations and sales.
d. marketing, operations, and sales.
e. marketing and operations without sales.
a. marketing and sales.
Supply chains can influence demand by using
a. production capacity and inventory.
b. pricing and other promotions.
c. price promotions and inventory.
d. production capacity and inventory promotions.
e. production capacity and other promotions.
b. pricing and other promotions.
When most of the products a firm produces have the same peak demand season, in order to meet predictable variability with inventory, it must
a. use common components across multiple products.
b. use a seasonal workforce.
c. build inventory of high demand or predictable demand products.
d. use subcontracting.
e. use dual facilities—dedicated and flexible.
c. build inventory of high demand or predictable demand products.
Which of the following is an approach that firms can use when managing inventory to meet predictable demand variability?
a. time flexibility from workforce
b. use of seasonal workforce
c. use of subcontracting
d. use of dual facilities—dedicated and flexible
e. using common components across multiple products
e. using common components across multiple products
Which approach to capacity management would only be effective if the overall demand across all the products is relatively constant?
a. time flexibility from workforce
b. use of seasonal workforce
c. use of subcontracting
d. use of dual facilities—dedicated and flexible
e. designing product flexibility into the production processes
e. designing product flexibility into the production processes
Which approach to capacity management would use production machinery that can be changed easily from producing one product to another?
a. time flexibility from workforce
b. use of seasonal workforce
c. use of subcontracting
d. use of dual facilities—dedicated and flexible
e. designing product flexibility into the production processes
e. designing product flexibility into the production processes
Which approach to capacity management would require that the workforce be multi-skilled and easily adapt to being moved from line to line?
a. time flexibility from workforce
b. use of seasonal workforce
c. use of subcontracting
d. use of dual facilities—dedicated and flexible
e. designing product flexibility into the production processes
e. designing product flexibility into the production processes
The key to which capacity management approach would involve having both volume (fluctuating demand from a manufacturer) and variety flexibility (demand from several manufacturers) to be sustainable?
a. time flexibility from workforce
b. use of seasonal workforce
c. use of subcontracting
d. use of dual facilities—dedicated and flexible
e. designing product flexibility into the production processes
c. use of subcontracting
Which approach to capacity management would use a part-time workforce to increase capacity flexibility by enabling the firm to have more people at work during peak periods?
a. time flexibility from workforce
b. use of seasonal workforce
c. use of subcontracting
d. use of dual facilities—dedicated and flexible
e. designing product flexibility into the production processes
a. time flexibility from workforce
Which approach to capacity management would schedule the workforce so that the available capacity better matches demand?
a. time flexibility from workforce
b. use of seasonal workforce
c. use of subcontracting
d. use of dual facilities—dedicated and flexible
e. designing product flexibility into the production processes
a. time flexibility from workforce
Which approach to capacity management makes use of overtime, which is varied to match the variation in demand?
a. time flexibility from workforce
b. use of seasonal workforce
c. use of subcontracting
d. use of dual facilities—dedicated and flexible
e. designing product flexibility into the production processes
a. time flexibility from workforce
Which approach to capacity management makes use of spare plant capacity that exists in the form of hours when the plant is not operational?
a. time flexibility from workforce
b. use of seasonal workforce
c. use of subcontracting
d. use of dual facilities—dedicated and flexible
e. designing product flexibility into the production processes
a. time flexibility from workforce
Which approach to capacity management may be hard to sustain if the labor market is tight?
a. time flexibility from workforce
b. use of seasonal workforce
c. use of subcontracting
d. use of dual facilities—dedicated and flexible
e. designing product flexibility into the production processes
b. use of seasonal workforce
The capacity management approach where a firm has production lines whose production rate can easily be varied to match demand is
a. time flexibility from workforce.
b. the use of seasonal workforce.
c. the use of subcontracting.
d. the use of dual facilities—dedicated and flexible.
e. designing product flexibility into the production processes.
e. designing product flexibility into the production processes.
With supply and demand management decisions being made independently,
a. it is increasingly difficult to coordinate the supply chain, thereby increasing profit.
b. it is increasingly difficult to coordinate the supply chain, thereby decreasing profit.
c. it is easier to coordinate the supply chain, thereby decreasing profit.
d. it is easier to coordinate the supply chain, thereby increasing profit.
e. none of the above
b. it is increasingly difficult to coordinate the supply chain, thereby decreasing profit.
The capacity management approach where a firm builds facilities to produce a relatively stable output of products over time in a very efficient manner and facilities to produce a widely varying volume and variety of products, but at a higher unit cost is
a. time flexibility from workforce.
b. the use of seasonal workforce.
c. the use of subcontracting.
d. the use of dual facilities—dedicated and flexible.
e. designing product flexibility into the production processes.
d. the use of dual facilities—dedicated and flexible.
The capacity management approach where a firm purchases peak production from another firm so that internal production remains level and can be done cheaply is
a. time flexibility from workforce.
b. the use of seasonal workforce.
c. the use of subcontracting.
d. the use of dual facilities—dedicated and flexible.
e. designing product flexibility into the production processes.
c. the use of subcontracting.
The capacity management approach that uses a temporary workforce during the peak season to increase capacity to match demand is
a. time flexibility from workforce.
b. the use of seasonal workforce.
c. the use of subcontracting.
d. the use of dual facilities—dedicated and flexible.
e. designing product flexibility into the production processes.
b. the use of seasonal workforce.
The capacity management approach that uses flexible work hours from the workforce to manage capacity to better meet demand is
a. time flexibility from workforce.
b. use of seasonal workforce.
c. use of subcontracting.
d. use of dual facilities—dedicated and flexible.
e. designing product flexibility into the production processes.
a. time flexibility from workforce.
Cycle inventory exists because producing or purchasing in large lots allows a stage of the supply chain to exploit economies of scale and increase cost.
False
Increasing the lot size or cycle inventory often decreases the cost incurred by different stages of a supply chain.
True
Cycle inventory is primarily held to take advantage of economies of scale and reduce profit within the supply chain.
False
Lot sizes and cycle inventory do not affect the flow time of material within the supply chain.
False
The inventory profile is a plot depicting the level of inventory over time.
True
A lot or batch size is the quantity that a stage of the supply chain either produces or purchases at a given time.
True
Cycle inventory is the physical inventory in the supply chain due to either production or purchases demanded by the customer.
True
Cycle inventory exists in a supply chain because different stages exploit economies of scale to lower total cost
True
Aggregating across products, retailers, or suppliers in a single order allows for a reduction in lot size for individual products because fixed ordering and transportation costs are now spread across multiple products, retailers, or suppliers
True
A firm is often better served by ordering a convenient lot size close to the economic order quantity rather than the precise EOQ
True
Total ordering and holding costs are unstable around the economic order quantity
False
The costs considered in lot sizing decisions include material cost, fixed ordering cost, and manufacturing cost
False
A key to reducing cycle inventory is the reduction of lot size
True
Trade promotions lead to a significant increase in lot size and cycle inventory because of forward buying by the retailer
True
Although a forward buy is often the retailer’s appropriate response and increases their own profits, it usually increases demand variability with a resulting increase in inventory and flow times within the supply chain
True
The goal of trade promotions is to influence retailers to act in a way that helps the retailer achieve its objectives
False
Price discrimination is the practice where a firm charges differential prices to maximize profits
True
Discounts related to price discrimination will be lot size based
False
For products where the firm has market power, two-part tariffs can be used to achieve coordination in the supply chain and maximize supply chain profits
True
The supply chain profit is higher if each stage of the supply chain independently makes its pricing decisions with the objective of maximizing its own profit
False
For commodity products where price is set by the market, manufacturers can use lot size based quantity discounts to achieve coordination in the supply chain and decrease supply chain cost
True
A key to reducing lot size without increasing costs is to reduce the holding cost associated with each lot.
False
Quantity discounts lead to a minor buildup of cycle inventory in the supply chain
False
Marginal unit quantity discounts have also been referred to as multi-block tariffs
True
Pricing schedules with all unit quantity discounts encourage retailers to increase the size of their lots, which reduces the average inventory and flow time in a supply chain
False
A discount is volume-based if the discount is based on the total quantity purchased over a given period, regardless of the number of lots purchased over that period
True
A discount is volume-based if the pricing schedule offers discounts based on the quantity ordered in a single lot
False
Reduction of fixed cost may be achieved by aggregating lots across multiple products, customers, or suppliers
True
Cycle inventory exists because producing or purchasing in large lots allows a stage of the supply chain to
a. exploit economies of scale and raise cost.
b. exploit economies of scale and lower cost.
c. exploit customers and lower cost.
d. exploit customers and raise cost.
e. none of the above
b. exploit economies of scale and lower cost.
Which of the following is not a situation in which any stage of the supply chain exploits economies of scale in its replenishment decisions?
a. A fixed cost is incurred each time an order is placed or produced.
b. A holding cost is incurred each period for each unit of inventory.
c. The supplier offers price discounts based on the quantity purchased per lot.
d. The supplier offers short-term discounts or holds trade promotions.
e. all of the above
b. A holding cost is incurred each period for each unit of inventory.
Economies of scale in purchasing and ordering motivate a manager to
a. increase the lot size and cycle inventory.
b. decrease the lot size and cycle inventory.
c. eliminate inventory.
d. increase the lot size and reduce cycle inventory.
e. none of the above
a. increase the lot size and cycle inventory.
The primary role of cycle inventory is to allow different stages in the supply chain to
a. purchase product in lot sizes that maximize the sum of the material, ordering, and holding cost.
b. purchase product in lot sizes that minimize the sum of the material, ordering, and holding cost.
c. sell product in lot sizes that maximize the sum of the material, ordering, and holding cost.
d. sell product in lot sizes that minimize the sum of the material, ordering, and holding cost.
e. none of the above
b. purchase product in lot sizes that minimize the sum of the material, ordering, and holding cost.
The quantity of inventory that a stage of the supply chain either produces or purchases at a given time is
a. an order.
b. a job.
c. a shipment.
d. a lot or batch.
e. none of the above
d. a lot or batch.
Cycle inventory is primarily held to
a. take advantage of diseconomies of scale and increase cost within the supply chain.
b. take advantage of diseconomies of scale and reduce cost within the supply chain.
c. take advantage of economies of scale and increase cost within the supply chain.
d. take advantage of economies of scale and reduce cost within the supply chain.
e. None of the above are true.
d. take advantage of economies of scale and reduce cost within the supply chain.
A graphical plot depicting the level of inventory over time is
a. an inventory graph.
b. a distribution inventory.
c. an inventory drawing.
d. an inventory profile.
e. an inventory picture.
d. an inventory profile.
The average inventory in the supply chain due to either production or purchases in lot sizes that are larger than those demanded by the customer is
a. annual inventory.
b. distribution inventory.
c. cycle inventory.
d. physical inventory.
e. b and c only
c. cycle inventory.
Aggregating across products, retailers, or suppliers in a single order allows for a reduction in lot size for individual products because
a. fixed ordering and transportation costs are now charged to retailers.
b. fixed ordering and transportation costs are now charged to suppliers.
c. fixed ordering and transportation costs are now spread across multiple products, retailers, or suppliers.
d. holding costs are now charged to retailers or suppliers.
e. holding costs are now spread across multiple products, retailers, or suppliers.
c. fixed ordering and transportation costs are now spread across multiple products, retailers, or suppliers.
Aggregating across products, retailers, or suppliers in a single order allows for
a. an increase in lot size for individual products.
b. an increase in customer demand.
c. a reduction in holding cost per unit.
d. a reduction in lot size for individual products.
e. a reduction in purchase price per unit.
d. a reduction in lot size for individual products.
Total ordering and holding costs
a. are relatively stable.
b. are relatively stable around the economic order quantity.
c. are relatively unstable around the economic order quantity.
d. are unstable.
e. none of the above
b. are relatively stable around the economic order quantity.
Which of the following would not be included in holding cost?
a. cost of capital
b. cost of physically storing the inventory
c. cost of manufacturing
d. cost that results from the product becoming obsolete
e. none of the above
c. cost of manufacturing
Which of the following would not be an example of a fixed ordering cost?
a. administrative cost incurred to place an order
b. trucking cost incurred to transport an order
c. labor cost incurred to receive an order
d. labor cost incurred to manufacture a part
e. none of the above
d. labor cost incurred to manufacture a part
A key to reducing cycle inventory is
a. the reduction of holding cost.
b. the reduction of manufacturing cost.
c. the reduction of lot size.
d. the reduction of warehouse space.
e. all of the above
c. the reduction of lot size.
The practice where a firm charges differential prices to maximize profits is
a. lot pricing.
b. marginal pricing.
c. price incrimination.
d. price discrimination.
e. all of the above
d. price discrimination.
For products where the firm has market power, coordination in the supply chain can be achieved and supply chain profits maximized through the use of
a. two-part tariffs or volume based quantity discounts.
b. marginal unit quantity discounts.
c. all unit quantity discounts.
d. basic quantity discounts.
e. none of the above
a. two-part tariffs or volume based quantity discounts.
In a supply chain where each stage of the supply chain independently makes its pricing decisions with the objective of maximizing its own profit,
a. supply chain profit is lower than a coordinated solution.
b. supply chain profit is higher than a coordinated solution.
c. supply chain profit is about the same as a coordinated solution.
d. supply chain profit will be maximized.
e. None of the above are accurate.
a. supply chain profit is lower than a coordinated solution.
For commodity products where price is set by the market, manufacturers can use lot size based quantity discounts to
a. achieve coordination in the supply chain and decrease supply chain cost.
b. relax coordination in the supply chain and increase supply chain cost.
c. relax coordination in the supply chain and decrease supply chain cost.
d. achieve coordination in the supply chain and decrease supply chain cost.
e. None of the above are accurate.
d. achieve coordination in the supply chain and decrease supply chain cost.
Quantity discounts lead to
a. a significant buildup of cycle inventory in the supply chain.
b. a slight buildup of cycle inventory in the supply chain.
c. a decrease in cycle inventory in the supply chain.
d. minor fluctuations of cycle inventory in the supply chain.
e. a major drop in cycle inventory in the supply chain.
a. a significant buildup of cycle inventory in the supply chain.
In the pricing schedule for marginal unit quantity discounts
a. the average cost of a unit decreases at a breakpoint.
b. the average cost of a unit increases at a breakpoint.
c. the marginal cost of a unit decreases at a breakpoint.
d. the marginal cost of a unit increases at a breakpoint.
e. the average cost and the marginal cost of a unit decrease at a breakpoint.
c. the marginal cost of a unit decreases at a breakpoint.
Pricing schedules with all unit quantity discounts encourage retailers to
a. decrease the size of their lots.
b. increase the size of their lots.
c. decrease the size of their inventory.
d. increase the price of their products.
e. none of the above
a. decrease the size of their lots.
A key to reducing lot size without increasing costs is to
a. reduce the holding cost associated with each lot.
b. reduce the fixed cost associated with each lot.
c. reduce the material cost associated with each lot.
d. reduce the manufacturing cost associated with each lot.
e. increase the holding cost associated with each lot.
b. reduce the fixed cost associated with each lot.
A price discount where the discount is based on the total quantity purchased over a given period, regardless of the number of lots purchased over that period is
a. customer based.
b. lot size based.
c. supplier based.
d. volume based.
e. none of the above
d. volume based.
A price discount where the pricing schedule offers discounts based on the quantity ordered in a single lot is
a. customer based.
b. lot size based.
c. supplier based.
d. volume based.
e. none of the above
b. lot size based.
Discounts related to price discrimination will be
a. volume based.
b. unit based.
c. marginally based.
d. lot size based.
e. none of the above
a. volume based.
Which of the following would not be a component of order cost?
a. buyer time
b. transportation cost
c. handling cost
d. receiving cost
e. All of the above are components of order cost.
c. handling cost
Which cost should reflect the incremental change in space cost due to changing cycle inventory?
a. cost of capital
b. obsolescence (spoilage) cost
c. handling cost
d. occupancy cost
e. none of the above
d. occupancy cost
Which cost should only include receiving and storage costs that vary with the quantity of product received?
a. cost of capital
b. obsolescence (spoilage) cost
c. handling cost
d. occupancy cost
e. none of the above
c. handling cost
Which cost estimates the rate at which the value of the product being stored drops either because the market value of that product drops or because the product quality deteriorates?
a. cost of capital
b. obsolescence (spoilage) cost
c. handling cost
d. occupancy cost
e. none of the above
b. obsolescence (spoilage) cost
Which cost takes into account the return demanded on the firm’s equity and the amount the firm must pay on its debt?
a. cost of capital
b. obsolescence (spoilage) cost
c. handling cost
d. occupancy cost
e. none of the above
a. cost of capital
When developing estimates for holding and ordering costs, it is important to
a. estimate these costs to a high level of precision.
b. get a good approximation quickly.
c. develop estimates that will not be changed.
d. both a and c
e. none of the above
b. get a good approximation quickly.
The goal of trade promotions is to
a. influence retailers to act in a way that helps the retailer achieve its objectives.
b. influence retailers to act in a way that helps the manufacturer achieve its objectives.
c. influence retailers to act in a way that will maximize supply chain profit.
d. influence retailers to act in a way minimize supply chain cost.
e. none of the above
b. influence retailers to act in a way that helps the manufacturer achieve its objectives.
Replenishment orders in multi-echelon supply chains should be
a. synchronized to increase cycle inventory and order costs.
b. synchronized to facilitate supplier evaluation and selection.
c. synchronized to keep cycle inventory and order costs low.
d. separated to increase cycle inventory and order costs.
e. separated to keep cycle inventory and order costs low.
c. synchronized to keep cycle inventory and order costs low.
The retailer can justify the forward buying when
a. they have inadvertently built up a lot of excess inventory.
b. the forward buy allows the manufacturer to smooth demand by shifting it from peak to low-demand periods.
c. it decreases his total cost.
d. all of the above
e. a and c only
c. it decreases his total cost.
The manufacturer can justify offering trade promotions resulting in forward buying by retailers when
a. they have inadvertently built up a lot of excess inventory.
b. the forward buy allows the manufacturer to smooth demand by shifting it from peak to low-demand periods.
c. the retailer decreases his total cost.
d. all of the above
e. a and b only
e. a and b only
When the retailer decides to pass through very little of the promotion to customers but purchase in greater quantity during the promotion period to exploit the temporary reduction in price, the result is
a. a lowering of the price of the product for the end customer.
b. increased purchases and thus increased sales for the entire supply chain.
c. an increase in the amount of inventory held at the retailer.
d. all of the above
e. a and b only
c. an increase in the amount of inventory held at the retailer.
When the retailer decides to pass through some or all of the promotion to customers to spur sales, the result is
a. a lowering of the price of the product for the end customer.
b. increased purchases and thus increased sales for the entire supply chain.
c. an increase in the amount of inventory held at the retailer.
d. all of the above
e. a and b only
e. a and b only
Which of the following is a possible response that a retailer could make to a trade promotion?
a. Pass through some or all of the promotion to customers to spur sales.
b. Pass through very little of the promotion to customers but purchase in greater quantity during the promotion period to exploit the temporary reduction in price.
c. Shift inventory from the retailer to the customer.
d. a and b only
e. b and c only
d. a and b only
Which of the following is not a key goal (from the manufacturer’s perspective) of a trade promotion?
a. Induce retailers to use price discounts, displays, or advertising to spur sales.
b. Shift inventory from the manufacturer to the retailer and the customer.
c. Shift inventory from the retailer to the customer.
d. Defend a brand against competition.
e. none of the above
c. Shift inventory from the retailer to the customer.
Safety inventory is inventory carried for the purpose of satisfying demand that exceeds the amount forecasted for a given period.
True
A shortage occurs in a replenishment cycle only if the demand during the lead time exceeds the ROP
True
The expected shortage per replenishment cycle (ESC) is the average units of demand that are satisfied from inventory in stock per replenishment cycle.
False
With periodic review, inventory status is checked at regular intervals and an order is placed to raise the inventory level to a specified threshold.
True
With continuous review, inventory is continuously tracked and an order for a lot size Q is placed at regular intervals of time
False
Tracking order fill rates is important when customers place a high value on the entire order being filled simultaneously
True
The distinction between product fill rate and order fill rate is significant in a single product situation.
False
Product fill rate is the fraction of product demand that is satisfied from product in inventory.
True
Order fill rate is the fraction of product demand that is satisfied from product in inventory.
False
Product availability reflects a firm’s ability to fill a customer order out of available inventory.
True
Safety inventory is carried because demand forecasts are accurate and a product shortage may result if the forecast demand exceeds the actual demand
False
Lead time is the gap between when an order is placed and when it is received.
True
As the desired level of product availability increases, the required level of safety inventory decreases.
False
As the uncertainty of supply or demand grows, the required level of safety inventories increases.
True
The appropriate level of safety inventory is determined by the uncertainty of both demand and supply and the desired level of cycle inventory.
False
Carrying excessive inventory can help counter demand volatility when new products come on the market.
False
Raising the level of safety inventory increases inventory holding costs.
True
Raising the level of safety inventory increases product availability and thus the margin captured from customer purchases.
True
The fill rate increases and the cycle service level decreases as the safety inventory is increased.
False
15. When using a continuous review policy, a manager has to account for the uncertainty of demand during the lead time and the review interval.
False
Periodic review policies require more safety inventory than continuous review policies for the same level of product availability.
True
13. Postponement allows the supply chain to delay product differentiation, which results in disaggregating most of the inventories in the supply chain.
False
12. Manufacturer-driven substitution increases overall profitability for the manufacturer by allowing some aggregation of demand, which reduces the inventory requirements for the same level of availability.
True
10. If aggregation reduces the required safety inventory for a product by a small amount, it may be best to carry the product in multiple decentralized locations to reduce response time and transportation cost.
True
8. Aggregation reduces the standard deviation of demand only if demand across the regions being aggregated is not perfectly positively correlated.
True
For the same safety inventory, an increase in lot size increases the fill rate but not the cycle service level.
True
7. A reduction in supply can help dramatically reduce safety inventory required without hurting product availability.
False
6. In most supply chains, the key to reducing the underlying forecast uncertainty is to link all forecasts throughout the supply chain to customer demand data.
True
A goal of any supply chain manager is to reduce the level of safety inventory required regardless of the affect product availability.
False
The required safety inventory increases with an increase in the lead time and the standard deviation of periodic demand.
True
The required safety inventory grows rapidly with a decrease in the desired product availability.
False
Inventory carried for the purpose of satisfying demand that exceeds the amount forecasted for a given period is
a. cycle inventory.
b. demand inventory.
c. safety inventory.
d. security inventory.
e. all of the above
c. safety inventory.
Lead time is the gap between
a. when an order is placed and when it is received.
b. when an order is received and when it is put away.
c. when an order is received and when it is used.
d. when an order is acknowledged and when it is received.
e. none of the above
a. when an order is placed and when it is received.
As the desired level of product availability increases, the required level of safety inventory
a. decreases.
b. increases.
c. remains stable.
d. both a and b
e. none of the above
e. none of the above
8. As the uncertainty of supply or demand grows, the required level of safety inventories
a. decreases.
b. increases.
c. remains stable.
d. both a and b
e. none of the above
b. increases.
7. The appropriate level of safety inventory is determined by
a. the uncertainty of both demand and supply.
b. the desired level of product availability.
c. the desired level of cycle inventory.
d. the processes in a supply chain are divided into 2 categories depending all of the above
e. a and b only
e. a and b only
What key question(s) need(s) to be considered when planning safety inventory for any supply chain?
a. What is the appropriate lead time to establish?
b. What is the appropriate level of safety inventory to carry?
c. What actions can be taken to improve product availability while reducing safety inventory?
d. a and b only
e. b and c only
e. b and c only
Safety inventory is carried because
a. demand forecasts are accurate.
b. demand forecasts are uncertain.
c. adequate supplies are available.
d. excess product was manufactured.
e. forecast demand exceeds the actual demand.
b. demand forecasts are uncertain.
A key to success at which company has been its ability to provide a high level of product availability to customers while carrying very low levels of safety inventory in its supply chain?
a. Compaq
b. Hewlett-Packard
c. Dell
d. Packard-Bell
e. all of the above
c. Dell
4. The issue of product availability and the level of safety inventory is particularly significant in industries where
a. product life cycles are short and demand is stable.
b. product life cycles are short and demand is very volatile.
c. product life cycles are long and demand is stable.
d. product life cycles are long and demand is very volatile.
e. a and b only
b. product life cycles are short and demand is very volatile.
The trade-off that a supply chain manager must consider when planning safety inventory is
a. increasing product availability versus increasing inventory holding costs.
b. decreasing product availability versus decreasing inventory holding costs.
c. increasing product availability versus raising the level of safety inventory.
d. decreasing product availability versus decreasing the level of safety inventory.
e. none of the above
a. increasing product availability versus increasing inventory holding costs.
10. A company that checks inventory status at regular periodic intervals and places an order to raise the inventory level to a specified threshold is using
a. continuous review.
b. daily review.
c. occasional review.
d. periodic review.
e. none of the above
d. periodic review.
9. A company that tracks inventory and places an order for a lot size Q when the inventory declines to the reorder point (ROP) is using
a. continuous review.
b. daily review.
c. occasional review.
d. periodic review.
e. none of the above
a. continuous review.
A replenishment policy
a. consists of decisions regarding when to reorder and how much to reorder.
b. determines the cycle and safety inventories along with the fr and the CSL.
c. may take several forms.
d. All of the above are true.
e. None of the above are true.
d. All of the above are true.
The distinction between product fill rate and order fill rate is
a. not significant in a single product situation.
b. significant in a single product situation.
c. not significant when a firm is selling multiple products.
d. significant when a firm is selling multiple products.
e. both a and d
a. not significant in a single product situation.
If a customer order arrives when product is not available
a. a sale results.
b. the retailer allocates product to the customer.
c. a stockout results.
d. the order is filled from safety inventory.
e. none of the above
c. a stockout results.
Which of the following is not a measure of product availability?
a. customer fill rate
b. product fill rate
c. order fill rate
d. cycle service level (CSL)
e. none of the above
a. customer fill rate
5. The fraction of replenishment cycles that end with all the customer demand being met is the
a. customer fill rate.
b. product fill rate.
c. order fill rate.
d. cycle service level (CSL).
e. none of the above
d. cycle service level (CSL).
The fraction of product demand that is satisfied from product in inventory is the
a. customer fill rate.
b. product fill rate.
c. order fill rate.
d. cycle service level (CSL).
e. none of the above
b. product fill rate.
The fraction of orders that are filled from available inventory is the
a. customer fill rate.
b. product fill rate.
c. order fill rate.
d. cycle service level (CSL).
e. none of the above
c. order fill rate.
1. The expected shortage per replenishment cycle (ESC) is
a. the units of demand that are not satisfied from inventory in stock in a given replenishment cycle.
b. the units of demand that are satisfied from inventory in stock in a given replenishment cycle.
c. the average units of demand that are not satisfied from inventory in stock per replenishment cycle.
d. the average units of demand that are satisfied from inventory in stock per replenishment cycle.
e. none of the above
c. the average units of demand that are not satisfied from inventory in stock per replenishment cycle.
10. A goal of any supply chain manager is to
a. increase the level of safety inventory required in a way that does not adversely affect product availability.
b. increase the level of safety inventory required regardless of the effect on product availability.
c. reduce the level of safety inventory required regardless of the effect on product availability.
d. reduce the level of safety inventory required in a way that does not adversely affect product availability.
e. none of the above
d. reduce the level of safety inventory required in a way that does not adversely affect product availability.
The required safety inventory
a. increases with an increase in the lead time and the standard deviation of periodic demand.
b. decreases with an increase in the lead time and the standard deviation of periodic demand.
c. remains stable with an increase in the lead time and the standard deviation of periodic demand.
d. increases with a decrease in the lead time and the standard deviation of periodic demand.
e. none of the above
d. increases with a decrease in the lead time and the standard deviation of periodic demand.
The required safety inventory
a. grows rapidly with a decrease in the desired product availability.
b. grows rapidly with an increase in the desired product availability.
c. decreases with an increase in the desired product availability.
d. remains stable with an increase in the desired product availability.
e. none of the above
b. grows rapidly with an increase in the desired product availability.
For the same safety inventory, an increase in lot size
a. decreases the fill rate but not the cycle service level.
b. increases the fill rate but not the cycle service level.
c. decreases both the fill rate and the cycle service level.
d. increases both the fill rate and the cycle service level.
e. none of the above
c. decreases both the fill rate and the cycle service level.
5. As the safety inventory is increased
a. fill rate increases and cycle service level decreases.
b. fill rate decreases and cycle service level increases.
c. both fill rate and cycle service level increase.
d. both fill rate and cycle service level decrease.
e. none of the above
c. both fill rate and cycle service level increase.
4. A shortage occurs in a replenishment cycle
a. only if the demand during the lead time exceeds the ROP.
b. only if the demand during the lead time is less than the ROP.
c. only if the demand during the lead time exceeds the average demand.
d. only if the demand during the lead time is less than the average demand.
e. none of the above
a. only if the demand during the lead time exceeds the ROP.
Which of the following is not an approach to reduce the level of safety inventory required in a way that does not adversely affect product availability?
a. Reduce the supplier lead time.
b. Reduce the underlying uncertainty of demand.
c. Reduce the cost of material coming from suppliers.
d. All of the above are approaches.
e. None of the above are approaches.
c. Reduce the cost of material coming from suppliers.
18. As retailers decrease the level of safety inventory they carry, the distributor will have to
a. decrease his or her safety inventory.
b. increase his or her safety inventory.
c. keep his or her safety inventory at the same level.
d. increase his or her cycle inventory.
e. decrease his or her cycle inventory.
b. increase his or her safety inventory.
17. A distributor should decide his safety inventory levels based on
a. the level of safety inventory carried by all retailers supplied by him.
b. the level of safety inventory carried by other distributors.
c. the level of safety inventory carried by manufacturers supplying him.
d. the level of cycle inventory carried by all retailers supplied by him.
e. the level of cycle inventory carried by other distributors.
a. the level of safety inventory carried by all retailers supplied by him.
16. All inventory between a given stage in the supply chain and the final customer is called the
a. cycle inventory.
b. demand inventory.
c. echelon inventory.
d. safety inventory.
e. none of the above
c. echelon inventory.
15. Periodic review policies require
a. more safety inventory than continuous review policies for the same level of product availability.
b. less safety inventory than continuous review policies for the same level of product availability.
c. the same safety inventory as continuous review policies for the same level of product availability.
d. no more safety inventory than continuous review policies for the same level of product availability.
e. none of the above
a. more safety inventory than continuous review policies for the same level of product availability.
14. Continuous review policies for inventory replenishment require safety inventory to cover demand during
a. lead time only.
b. the review interval only.
c. both lead time and the review interval.
d. neither lead time or the review interval.
e. lead time when it exceeds the review interval.
a. lead time only.
Periodic review policies for inventory replenishment require safety inventory to cover demand during
a. lead time only.
b. the review interval only.
c. both lead time and the review interval.
d. neither lead time or the review interval.
e. lead time when it exceeds the review interval.
c. both lead time and the review interval.
12. Which approach to aggregation has the goal of moving product differentiation as close to the pull phase of the supply chain as possible?
a. information centralization
b. specialization
c. product substitution
d. component commonality
e. postponement
e. postponement
2. Often, safety inventory calculations in practice
a. do not include any measure of supply uncertainty, resulting in levels that may be higher than required.
b. do not include any measure of supply uncertainty, resulting in levels that may be lower than required.
c. include measures of supply uncertainty, resulting in levels that may be higher than required.
d. include any measures of supply uncertainty, resulting in levels that may be lower than required.
e. None of the above are accurate.
b. do not include any measure of supply uncertainty, resulting in levels that may be lower than required.
The ability of a supply chain to delay product differentiation or customization until closer to the time the product is sold is
a. information centralization.
b. specialization.
c. product substitution.
d. component commonality.
e. postponement.
e. postponement.
Which use of common components in a variety of products has been a very effective supply chain strategy to exploit aggregation and reduce component inventories?
a. information centralization
b. specialization
c. product substitution
d. component commonality
e. postponement
a. information centralization
The use of one product to satisfy demand for a different product is
a. information centralization.
b. specialization.
c. product substitution.
d. component commonality.
e. postponement.
c. product substitution.
Which approach to aggregation would stock the fast-moving items at decentralized locations close to the customer and slow-moving items at a centralized location?
a. information centralization
b. specialization
c. product substitution
d. component commonality
e. postponement
b. specialization
Which approach to aggregation requires an information system that allows access to current inventory records from each location?
a. information centralization
b. specialization
c. product substitution
d. component commonality
e. postponement
a. information centralization
6. Which of the following is not a method by which a supply chain can extract the benefits of aggregation without having to physically centralize all inventories in one location?
a. information centralization
b. specialization
c. product substitution
d. component differentiation
e. postponement
d. component differentiation
Which of the following is not a major disadvantage of aggregating all inventory in one location?
a. Increase in forecast accuracy of customer demand.
b. Increase in response time to customer order.
c. Increase in transportation cost to customer.
d. All of the above are disadvantages.
e. All of the above are advantages.
a. Increase in forecast accuracy of customer demand.
Aggregation reduces the standard deviation of demand
a. only if demand across the regions being aggregated is perfectly positively correlated.
b. only if demand across the regions being aggregated is not perfectly positively correlated.
c. even if demand across the regions being aggregated is not perfectly positively correlated.
d. whenever demand across the regions being aggregated is not perfectly positively correlated.
e. All of the above are accurate.
b. only if demand across the regions being aggregated is not perfectly positively correlated.
The level of product availability is also referred to as the customer service level.
True
23. In product-based tailored sourcing, low-volume products with uncertain demand are obtained from a flexible source, while high-volume products with less demand uncertainty are obtained from an efficient source.
True
In volume-based tailored sourcing, the predictable part of a product’s demand is produced at a flexible facility, whereas the uncertain portion is produced at an efficient facility.
False
21. Tailored sourcing may be volume-based or product-based depending on the source of uncertainty.
True
20. In tailored sourcing, firms use a combination of two supply sources, one focusing on cost and able to handle uncertainty well, and the other focusing on flexibility to handle uncertainty, but at a higher cost.
Answer: False
Difficulty: Moderate
False
19. Tailored postponement allows a firm to increase its profitability by only postponing the uncertain part of the demand and producing the predictable part at a lower cost without postponement.
True
18. Postponement may increase overall profits for a firm if a single product contributes the majority of the demand because the increased manufacturing expense due to postponement outweighs the small benefit that aggregation provides in this case.
False
17. Postponement is valuable for a firm that sells a large variety of products with demand that is independent and comparable in size.
True
There is a cost associated with postponement because the production cost using postponement is typically lower than the production cost without it.
False
Quick response results in the manufacturer making a lower profit in the short term if all else is unchanged.
True
A supply chain can use a high level of product availability to improve its responsiveness and attract customers.
True
If quick response allows multiple orders in the season, profits increase and the overstock quantity increases.
False
Supply chain managers are able to increase their forecast accuracy as lead times decrease, which allows them to better match supply with demand and increase supply chain profitability.
True
An increase in forecast accuracy increases both the overstocked and understocked quantity and decreases a firm’s profits.
False
With reduced demand uncertainty, a supply chain manager can better match supply and demand by reducing both overstocking and understocking.
True
As the ratio of the cost of overstocking to the cost of understocking gets smaller, the optimal level of product availability decreases.
False
9. The costs of overstocking and understocking have a direct impact on both the optimal cycle service level and profitability.
True
8. The cost of underselling is a key factor that influences the optimal level of product availability.
False
5. Whether the optimal level of availability is high or low depends on where a particular company believes they can maximize profits.
True
A supply chain needs to achieve a balance between the level of availability and the cost of inventory that maximizes supply chain revenues.
False
A high level of product availability requires less inventory, which will keep costs down for the supply chain.
False
The level of product availability
a. is also referred to as the customer service level.
b. is an important component of any supply chain’s responsiveness.
c. increases revenues for the supply chain by increasing sales.
d. All of the above are true.
e. Only a and b are true.
e. Only a and b are true.
20. A company with multiple products, that chooses to delay product differentiation until closer to the point of sale, is using
a. tailored sourcing.
b. quick response.
c. postponement.
d. improved forecasting.
e. decreased margin.
c. postponement.
19. A company that reduces replenishment lead time so that multiple orders may be placed in the selling season is making use of
a. tailored sourcing.
b. quick response.
c. postponement.
d. improved forecasting.
e. decreased margin.
b. quick response.
18. A company that uses better market intelligence and collaboration to reduce demand uncertainty is making use of
a. tailored sourcing.
b. quick response.
c. postponement.
d. improved forecasting.
e. decreased margin.
d. improved forecasting.
17. With reduced demand uncertainty, a supply chain manager can
a. increase both overstocking and understocking.
b. increase overstocking and reduce understocking.
c. reduce overstocking and increase understocking.
d. reduce both overstocking and understocking.
e. none of the above
d. reduce both overstocking and understocking.
16. Which of the following is not an approach to reduce the uncertainty of demand?
a. tailored sourcing
b. quick response
c. postponement
d. improved forecasting
e. decreased margin
e. decreased margin
15. As the ratio of the cost of overstocking to the cost of understocking gets smaller,
a. the optimal level of product availability becomes irrelevant.
b. the optimal level of product availability decreases.
c. the optimal level of product availability remains stable.
d. the optimal level of product availability increases.
e. none of the above
d. the optimal level of product availability increases.
A supply chain can use a high level of product availability to
a. improve its responsiveness and attract customers.
b. reduce costs for the supply chain by reducing inventories.
c. increase revenues for the supply chain by increasing sales.
d. All of the above are true.
e. Only a and c are true.
e. Only a and c are true.
14. Which of the following would be a strategy to decrease the margin lost in a stockout?
a. arranging for backup sourcing
b. discarding the unused material
c. selling unsold product to an outlet store
d. reduce the level of cycle inventory
e. none of the above
a. arranging for backup sourcing
13. Which of the following would be a strategy to increase the salvage value of an unsold product?
a. discarding the unused material
b. selling unsold product to an outlet store
c. keeping the product in inventory until it sells
d. reduce the level of cycle inventory
e. none of the above
b. selling unsold product to an outlet store
Which of the following is not a managerial lever to increase profitability?
a. increasing the salvage value of each unit
b. decreasing the margin lost from a stockout
c. reducing demand uncertainty
d. reducing the level of product availability below optimal
e. increasing forecast accuracy
d. reducing the level of product availability below optimal
11. The costs of overstocking and understocking have a direct impact on
a. the optimal cycle service level but not profitability.
b. profitability but not the optimal cycle service level.
c. both the optimal cycle service level and profitability.
d. neither the optimal cycle service level or profitability.
e. the optimal cycle service level and an indirect impact on profitability.
c. both the optimal cycle service level and profitability.
10. Which of the following is not a situation involving the trade-off between the cost of overstocking and the cost of understocking?
a. seasonal products where all leftover items must be disposed of at the end of the season
b. continuously stocked items where demand during stockout is backlogged
c. continuously stocked items where demand during stockout is lost
d. continuously stocked items where demand during stockout is redirected
e. none of the above
d. continuously stocked items where demand during stockout is redirected
The margin lost from current as well as future sales if the customer does not return should be included in
a. the cost of overstocking the product.
b. the cost of stocking the product.
c. the cost of understocking the product.
d. the cost of overselling the product.
e. the cost of underselling the product.
c. the cost of understocking the product.
8. The margin lost by a firm for each lost sale because there is no inventory on hand is
a. the cost of overstocking the product.
b. the cost of stocking the product.
c. the cost of understocking the product.
d. the cost of overselling the product.
e. the cost of underselling the product.
c. the cost of understocking the product.
The loss incurred by a firm for each unsold unit at the end of the selling season is
a. the cost of overstocking the product.
b. the cost of stocking the product.
c. the cost of understocking the product.
d. the cost of overselling the product.
e. the cost of underselling the product.
a. the cost of overstocking the product.
The key factors that influence the optimal level of product availability do not include
a. the cost of overstocking the product.
b. the cost of stocking the product.
c. the cost of understocking the product.
d. All of the above are key factors.
e. None of the above are key factors.
b. the cost of stocking the product.
5. Whether the optimal level of product availability is high or low depends on where a particular company believes they can
a. minimize cost.
b. maximize revenue.
c. maximize profits.
d. maximize product availability.
e. all of the above
c. maximize profits.
A high level of product availability requires
a. large inventories and tends to raise costs for the supply chain.
b. large inventories and tends to reduce costs for the supply chain.
c. small inventories and tends to raise costs for the supply chain.
d. small inventories and tends to reduce costs for the supply chain.
e. none of the above
a. large inventories and tends to raise costs for the supply chain.
A supply chain needs to achieve a balance between the level of availability and the cost of inventory that
a. maximizes supply chain revenues.
b. minimizes supply chain costs.
c. maximizes supply chain profitability.
d. maximizes supply chain availability.
e. all of the above
c. maximizes supply chain profitability.
1. A company that uses a more expensive short lead time supplier as a backup for a low cost, long lead time supplier is using
a. tailored sourcing.
b. quick response.
c. postponement.
d. improved forecasting.
e. decreased margin.
a. tailored sourcing.
17. In product-based tailored sourcing
a. low-volume products with uncertain demand are obtained from a flexible source.
b. high-volume products with less demand uncertainty are obtained from an efficient source.
c. high-volume products with less demand uncertainty are obtained from a flexible source.
d. all of the above
e. a and b only
e. a and b only
16. In volume-based tailored sourcing
a. the predictable part of a product’s demand is produced at an efficient facility.
b. the uncertain portion is produced at a flexible facility.
c. the predictable part of a product’s demand is produced at a flexible facility.
d. all of the above
e. a and b only
e. a and b only
15. In tailored sourcing, firms use a combination of two supply sources,
a. one focusing on cost but unable to handle uncertainty well, and the other focusing on flexibility to handle uncertainty, but at a higher cost.
b. one focusing on cost and able to handle uncertainty well, and the other focusing on flexibility to handle uncertainty, but at a higher cost.
c. one focusing on cost but unable to handle uncertainty well, and the other focusing on flexibility to handle uncertainty at a lower cost.
d. one focusing on cost and able to handle uncertainty well, and the other focusing on flexibility to handle uncertainty at a lower cost.
e. None of the above are accurate.
a. one focusing on cost but unable to handle uncertainty well, and the other focusing on flexibility to handle uncertainty, but at a higher cost.
14. Under tailored postponement, a firm produces the amount that is very likely to sell using
a. the lower cost production method with postponement and produces the portion of demand that is uncertain using postponement.
b. the lower cost production method without postponement and produces the portion of demand that is uncertain using postponement.
c. the higher cost production method with postponement and produces the portion of demand that is uncertain using postponement.
d. the higher cost production method without postponement and produces the portion of demand that is uncertain using postponement.
e. All of the above are accurate.
b. the lower cost production method without postponement and produces the portion of demand that is uncertain using postponement.
13. When a firm uses production with postponement to satisfy a part of its demand with the rest being satisfied without postponement, it is using
a. adjustable postponement.
b. flexible postponement.
c. managed postponement.
d. tailored postponement.
e. none of the above
d. tailored postponement.
12. Postponement is
a. not very effective if a large fraction of demand comes from multiple products.
b. not very effective if a small fraction of demand comes from a single product.
c. only effective if a large fraction of demand comes from a single product.
d. effective even if a large fraction of demand comes from a single product.
b. not very effective if a small fraction of demand comes from a single product.
11. Postponement is valuable for a firm that
a. sells a large variety of products with demand that is dependent and comparable in size.
b. sells a large variety of products with demand that is independent and comparable in size.
c. sells a small variety of products with demand that is dependent and comparable in size.
d. sells a small variety of products with demand that is independent and comparable in size.
e. focuses on processes that are internal to the firm.
b. sells a large variety of products with demand that is independent and comparable in size.
10. There is a cost associated with postponement because the production cost using postponement is typically
a. higher than the production cost without it.
b. lower than the production cost without it.
c. very stable.
d. equal to the production cost without it.
e. none of the above
a. higher than the production cost without it.
9. Quick response results in
a. the manufacturer making a lower profit in the long term if all else is unchanged.
b. the manufacturer making a lower profit in the short term if all else is unchanged.
c. the retailer making a lower profit in the short term if all else is unchanged.
d. the distributor making a lower profit in the short term if all else is unchanged.
e. none of the above
b. the manufacturer making a lower profit in the short term if all else is unchanged.
8. Quick response is clearly advantageous to
a. a distributor in the supply chain.
b. a retailer in the supply chain.
c. a manufacturer in the supply chain.
d. every step in the supply chain.
e. none of the above
b. a retailer in the supply chain.
2. An increase in forecast accuracy
a. decreases both the overstocked and understocked quantity and decreases a firm’s profits.
b. decreases both the overstocked and understocked quantity and increases a firm’s profits.
c. increases both the overstocked and understocked quantity and decreases a firm’s profits.
d. increases both the overstocked and understocked quantity and increases a firm’s profits.
e. none of the above
b. decreases both the overstocked and understocked quantity and increases a firm’s profits.
7. If quick response allows multiple orders in the season,
a. profits decrease and the overstock quantity decreases.
b. profits decrease and the overstock quantity increases.
c. profits increase and the overstock quantity decreases.
d. profits increase and the overstock quantity increases.
e. none of the above
c. profits increase and the overstock quantity decreases.
6. As the total quantity for the season is broken up into multiple smaller orders, the buyer is better able to
a. match supply and demand and increase cost.
b. match supply and demand and increase profitability.
c. match supply and demand and decrease profitability.
d. match supply and demand and decrease product availability.
e. none of the above
b. match supply and demand and increase profitability.
5. Which of the following is not a consequence of being able to place a second order during the season for a seasonal product?
a. The expected total quantity ordered during the season with two orders is less.
b. The average overstock to be disposed of at the end of the sales season is less.
c. The profits are higher.
d. The average inventory level is higher.
e. none of the above
d. The average inventory level is higher.
4. As lead times decrease, supply chain managers are able to
a. better match supply with demand.
b. better match demand with supply.
c. increase supply chain cost.
d. decrease product availability.
e. none of the above
a. better match supply with demand.
3. Supply chain managers are able to
a. increase their forecast accuracy as lead times increase.
b. increase their forecast accuracy as lead times decrease.
c. decrease their forecast accuracy as lead times decrease.
d. decrease their forecast accuracy as lead times increase.
e. a product is received into stock at a store.
b. increase their forecast accuracy as lead times decrease.