Test-Bank-for-Heizer-Operations-Management-9e

72.All of the following are "opportunities" for supply chain management except

a.postponement

b.drop shipment

c.blanket orders

d.channel assembly

e.line balancing

e (Managing the supply chain, moderate)

73.Which of the following is an advantage of the postponement technique?

a.reduction in automation

b.early customization of the product

c.better quality of the product

d.reduction in training costs

e.reduction in inventory investment

e (Managing the supply chain, moderate)

74.A furniture maker has delivered a dining set directly to the end consumer rather than to the furniture store. The furniture maker is practicing

a.postponement

b.drop shipping

c.channel assembly

d.passing the buck

e.float reduction

b (Managing the supply chain, moderate)

75.What is the average capacity utilization in the motor carrier (trucking) industry?

a.25%

b.50%

c.75%

d.95%

e.99%

b (Logistics management, moderate)

76.What term is used to describe the outsourcing of logistics?

a.E-Logistics

b.Shipper Managed Inventory (SMI)

c.Hollow Logistics

d.Sub-Logistics

e.Third-Party Logistics

e (Logistics management, easy)

77.E-procurement

a.works best in long-term contract situations, and is not suited for auctions

b.is the same thing as Internet purchasing

c.represents only the auction and bidding components of Internet purchasing

d.is illegal in all states except Nevada and New Jersey

e.All of the above are true of e-procurement.

b (E-Procurement, moderate) {AACSB: Use of IT}

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78.The three classic types of negotiation strategies are

a.vendor evaluation, vendor development, and vendor selection

b.Theory X, Theory Y, and Theory Z

c.many suppliers, few suppliers, and keiretsu

d.cost-based price model, market-based price model, and competitive bidding

e.None of the above is correct.

d (Vendor selection, moderate)

79.Consider a firm with a 2007 net income of $20 million, revenue of $60 million and cost of goods sold of $25 million. If the balance sheet amounts show $2 million of inventory and $500,000 of property, plant & equipment, what is the inventory turnover?

a.12.50

b.10.00

c.42.00

d.4.16

e.20.00

a (Measuring supply chain performance, moderate) {AACSB: Analytic Skills}

80.The three stages of vendor selection, in order, are

a.vendor evaluation, vendor development, and negotiations

b.vendor development, vendor evaluation, and vendor acquisition

c.introduction, growth, and maturity

d.vendor evaluation, negotiations, and vendor development

e.EDI, ERP, and ASN

a (Vendor selection, easy)

81.Which one of the following distribution systems offers quickness and reliability when emergency supplies are needed overseas?

a.trucking

b.railroads

c.airfreight

d.waterways

e.pipelines

c (Logistics management, easy)

82.With the growth of JIT, which of the following distribution systems has been the biggest loser?

a.trucking

b.railroads

c.airfreight

d.waterways

e.pipelines

b (Logistics management, moderate)

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83.By which distribution system is 90 percent of the nation's coal shipped?

a.railroads

b.trucks

c.waterways

d.pipelines

e.none of the above

a (Logistics management, easy)

84.Which distribution system is the fastest growing mode of shipping?

a.railroads

b.trucks

c.airfreight

d.waterways

e.pipelines

c (Logistics management, moderate)

85.Which of the following devices represents an opportunity for technology to improve security of container shipments?

a.devices that identify truck and container location

b.devices that sense motion

c.devices that measure radiation or temperature

d.devices that can communicate the breaking of a container lock or seal

e.all of the above

e (Logistics management, easy)

86.Which one of the following performance measures is not true of a world class firm?

a.short time placing an order

b.high percentage of accepted material

c.large lead time

d.high percentage of on-time deliveries

e.low number of shortages per year

c (Measuring supply chain performance, easy)

87.Consider a firm with a 2007 net income of $20 million, revenue of $60 million and cost of goods sold of $25 million. If the balance sheet amounts show $2 million of inventory and $500,000 of property, plant & equipment, how many weeks of supply does the firm hold?

a.12.50

b.5.20

c.2.60

d.0.08

e.4.16

e (Measuring supply chain performance, moderate) {AACSB: Analytic Skills}

FILL-IN-THE BLANK

88._______________ is the management of activities that procure raw materials, transform those materials into intermediate goods and final products, and deliver the products through a distribution system.

Supply chain management (The supply chain’s strategic importance, easy)

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89.The ________________ decision involves choosing between producing a component or a service internally and purchasing it externally.

make-or-buy (Supply chain economics, easy)

90.Transferring to external vendors a firm’s activities that have traditionally been internal is known as

_________.

outsourcing (Supply chain economics, easy)

91.The _________is an organization that has published principles and standards for ethical supply management conduct.

Institute for Supply Management (Ethics in the supply chain, easy) {AACSB: Ethical Reasoning}

92.The supply chain strategy of ____________ increases the willingness to participate in JIT. few suppliers (Supply chain strategies, moderate)

93.____________ is developing the ability to produce goods or services previously purchased or actually buying a supplier or a distributor.

Vertical integration (Supply chain strategies, moderate)

94.__________ is a Japanese term to describe suppliers who become part of a company coalition.

Keiretsu (Supply chain strategies, moderate)

95.____________ rely on a variety of supplier relationships to provide services on demand.

Virtual companies (Supply chain strategies, moderate)

96.Local optimization, incentives, and large lots all contribute to __________ about what is really occurring in the supply chain.

distortion of information (Managing the supply chain, moderate)

97.__________ involves delaying any modifications or customization to the product as long as possible in the production process.

Postponement (Managing the supply chain, moderate)

98.___________ postpones final assembly of a product so the distribution channel can assemble it.

Channel assembly (Managing the supply chain, moderate)

99.____________ involves reducing the number of variations in materials and components as an aid to cost management.

Standardization (Managing the supply chain, moderate)

100._____________ is a standardized data-transmittal format for computerized communications between organizations.

Electronic data interchange (EDI) (E-Procurement, moderate) {AACSB: Use of IT}

101.______________ is the term describing purchasing facilitated through the internet.

E-Procurement (E-Procurement, easy) {AACSB: Use of IT}

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102.Of the three stages of vendor selection, the stage at which criteria, weights, and scores allow a numeric comparison is ______________.

vendor evaluation (Vendor selection, moderate)

103._____________ is an approach that seeks efficiency of operations through the integration of all material acquisition, movement, and storage activities.

Logistics management (Logistics management, moderate)

104.The fastest growing mode of shipping is ______________. airfreight (Logistics management, easy)

SHORT ANSWER

105.What is e-procurement?

Purchasing facilitated through the Internet. (E-procurement, easy) {AACSB: Use of IT}

106.As the firm strategies vary from low-cost to response to differentiation, how does this impact the criteria used for selection of a supply chain strategy?

The supply chain must support the operations management strategy. For a firm using the low-cost strategy, supplier selection should be based primarily on cost. When using the response strategy, the selection criteria are capacity, speed, and flexibility. For differentiation strategy, the supplier is selected based on product development skills. (The supply chain’s strategic importance, moderate)

107.What are the three versions of online catalogs?

The three versions of online catalogues are: (1) catalogs provided by vendors, (2) catalogs provided by intermediaries, and (3) exchanges provided by buyers. (E-procurement, moderate) {AACSB: Use of IT}

108.What are the special requirements of supply chain systems in global environments?

Supply chains in a global environment must be flexible, so that the firm can react to sudden changes that might occur in parts availability or currency rates. They must be able to use latest information technology for scheduling and managing shipments of parts and products. And they must be staffed with specialists to handle duties, customs, and political issues in other countries. (The supply chain’s strategic importance, moderate) {AACSB: Multiculture and Diversity}

109.Identify the reasons for making in the make-or-buy decision.

The reasons for making in the make-or-buy decision include: (1) maintain core competence,

(2) lower production cost, (3) unsuitable suppliers, (4) assure adequate supply, (5) utilize surplus labor or facilities and make a marginal contribution, (6) obtain desired quality, (7) remove supplier collusion, (8) obtain unique item that would entail a prohibitive commitment for a supplier, (9) protect personnel from a layoff, (10) protect proprietary design or quality, and (11) increase or maintain size of the company (management preference) (Supply chain economics, moderate)

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110.Identify the reasons for buying in the make-or-buy decision.

The reasons for buying in the make-or-buy decision include freeing management to focus on primary business; lower acquisition cost; preserve supplier commitment; obtain technical or managerial ability; inadequate capacity; reduce inventory costs; ensure alternative sources of supply; inadequate managerial or technical resources; reciprocity; and item is protected by patent or trade secret. (Supply chain economics, moderate)

111.How are outsourcing and vertical integration related? Can a single firm successfully do both?

Outsourcing transfers what were traditional internal activities to outside vendors. It is a way of increasing specialization which allows the firm to focus on its core strengths, and not try to do all possible tasks. Vertical integration is much the opposite, decreasing a firm's specialization so that it can perform additional functions along its supply chain. Vertical integration has become increasingly difficult in the face of increasing specialization. It seems unlikely that firms which make significant use of outsourcing would do much vertical integration, but it is possible that a firm's set of competitive advantages would support outsourcing in some functions and vertical integration in others. (Managing the supply chain, difficult) {AACSB: Reflective Thinking}

112.Of all areas of the organization, why is the supply chain especially vulnerable to ethical lapses?

The supply chain offers more opportunities for ethical issues than some other functions in the organization. Some of these opportunities arise from the large sums of money involved. Perhaps these opportunities arise because of the close and long-term personal contact between buyer and seller. Globalization adds even more complexity to the decisions made in the supply chain. (Ethics in the supply chain, moderate) {AACSB: Ethical Reasoning}

113.Identify and describe briefly the five supply chain strategies.

1.Many suppliers is the traditional American approach of negotiating with many suppliers and playing one supplier off against another.

2.The strategy of few suppliers develops long, "partnering" relationships with a few suppliers who will work with the purchaser in satisfying the end customer.

3.Firms that practice vertical integration may decide to pursue backward integration by actually buying the supplier.

4.Suppliers become part of a company coalition in the keiretsu strategy.

5.With the virtual companies strategy, firms use suppliers on an as-needed basis.

(Supply chain strategies, moderate)

114.Can an organization's plans for vertical integration be supported by the tools of make-or-buy analysis? Explain; provide an example.

Yes; the decision to acquire the provider of an upstream operation is the same as choosing to make whatever has been provided. Not to acquire is the equivalent of "buy." The analysis also holds for downstream operations: the acquisition of a delivery fleet is equivalent to "make" in the downstream operation of distribution. (Supply chain strategies, moderate) {AACSB: Reflective Thinking}

115.Identify the advantages and disadvantages of using the few suppliers approach.

Advantages: long-term suppliers better understand firm, suppliers may gain economies of scale, trust, and willingness to participate in JIT. Disadvantages: concern about trade secrets and suppliers venturing out, high cost of changing partners, and risk of poor supplier performance. (Supply chain strategies, moderate)

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116.Describe some ways that effective supply chain partners build and utilize mutual trust.

Members of the chain must enter into a relationship that shares information. Visibility throughout the supply chain is a requirement. Risk and cost savings should be shared. Activities such as end-customer research, sales analysis, forecasting, and production planning should be joint activities. (Managing the supply chain, moderate) {AACSB: Communication}

117.What opportunities exist for reducing the “bullwhip” effect, and improving the supply chain?

The opportunities include accurate “pull” data, lot size reduction, single control of replenishment, vendor managed inventory (VMI), blanket orders, standardization, postponement, drop shipping and special packaging, pass-through facility, and channel assembly. (Managing the supply chain, moderate)

118.What is a keiretsu?

A keiretsu is a network of suppliers. Usually the suppliers are partially owned or debtors to the purchasing organization. This structure is quite common in Japan. (Supply chain strategies, easy)

119.Describe the state of capacity utilization in the motor carrier (trucking) industry. What, if anything, has been implemented by the industry to address the issue?

The motor carrier industry averages a capacity utilization of only 50%. That underutilized space costs the U.S. economy over $31 billion per year. To improve logistics efficiency, the industry is establishing Web sites that let shippers and truckers find each other to use some of this idle capacity. Shippers may pick from thousands of approved North American carriers that have registered. (Logistics management, moderate)

120.Describe vendor managed inventory (VMI). How is it related to outsourcing? Cite an example from your experiences as a shopper.

In vendor managed inventory, the supplier maintains material for the buyer, often delivering directly to the buyer's using department. It is a form of outsourcing, because the buying firm has transferred the shipping, stocking, and receiving tasks to an external vendor. There are many instances of VMI in today's retail model; shelves of snack foods and soft drinks are routinely managed by the distributor, not the retailer. (Managing the supply chain, easy) {AACSB: Reflective Thinking}

121.Name three common things that contribute to distortion of information about the supply chain?

The occurrences include local optimization, incentives (sales incentives, quantity discounts, and promotions), and large lots. (Managing the supply chain, moderate)

122.Why is channel assembly popular in the personal computer industry?

Channel assembly is popular in the personal computer industry because of better market response with less investment. This is possible because the late-stage assembly and customization is a natural part of a rapidly changing industry. (Managing the supply chain, moderate)

123.Define EDI.

Electronic data interchange is a standardized data transmittal format for computerized communications between organizations. (E-Procurement, moderate) {AACSB: Use of IT}

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124.What advantages may result from effectively outsourcing the logistics function to a third party?

Driving down inventory investment and costs while improving delivery reliability and speed. (Logistics management, moderate)

125.What are the three negotiation strategies? Briefly describe each of them.

The three strategies for negotiating with vendors are the cost-based model, the market-based price model, and competitive bidding. In the cost-based model, contract price is a function of vendor costs, such as those for time and materials. In the market-based price model, price is set by some form of published, auction, or index price. Competitive bidding may be used when vendors are not open to the cost-based model, or where information is not perfect enough for market-based pricing. (Vendor selection, moderate)

126.Identify three specific measures that indicate how well assets are utilized. What are the formulas for each measure?

Percent invested in inventory = (Total inventory investment/Total assets) × 100 Inventory turnover = Cost of goods sold/Inventory investment

Weeks of supply = Inventory investment/(Annual cost of goods sold/52 weeks) (Measuring supply chain performance, moderate)

127.What are the advantages of shipping by truck?

The advantages of shipping by truck include flexibility, on-time behavior, no damage, paperwork in order, and low cost. (Logistics management, moderate)

128.Identify some technological advances that can serve to improve logistics management and also improve shipping security.

Several technological advances can serve both security and logistics purposes. They may provide environmental information that is useful for product quality as well as security, or geospatial information useful to JIT as well as security. They include devices that can detect a broken seal on a shipping container, devices that can detect whether a container is in motion, devices that sense and transmit temperature and humidity, and devices that can transmit truck or container location. (Logistics management, moderate) {AACSB: Use of IT}

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PROBLEMS

129.A regional grocery chain spends 70 percent of its sales in the supply chain, and has a net profit margin of 2 percent. They have just initiated an Internet-based inventory management program that is expected to save the chain $500,000 per year. What is the equivalent increase in sales to this saving? Use Table 11.3, reproduced below.

The relevant entry in Table 11.3, 70% of sales and 2% net profit, is $6.25. If $500,000 can be saved, the equivalent value of increased sales is $500,000 x 6.25 = $3,125,000. (Supply chain economics, moderate) {AACSB: Analytic Skills}

130.A container of ball-bearings valued at $25,000, currently located in Houston, TX, needs to be delivered to the Morton, IL, plant. The standard shipment method takes two days. However, for an additional charge of $500, the container can be sent overnight. The annual holding cost rate for this type of item has been estimated at 28%. What option is more economical?

Daily cost of holding the item is .28(25,000)/365 = $19.18.

Since the extra shipping cost is $500, the $19.18 savings does not offset the extra shipping cost. Send the shipment using the standard method. (Logistics management, moderate) {AACSB: Analytic Skills}

131.A shipment of parts valued at $75,000 needs to be shipped from Tampa, FL, to Chicago, IL. They could be shipped by rail, taking 15 days at a cost of $1,575, or by truck, taking 4 days at a cost of $2,640. The annual holding cost rate for this type of item has been estimated at 22%. What option is more economical?

Daily cost of holding the item is .22(75,000)/365 = $45.21 Days saved by using truck is 15-5=11 days

11 days x $45.21 = $497.27

Extra shipping cost = $2,640 - $1,575 = $1,065

The $497.27 savings does not offset the extra shipping cost of $1,065. Send the shipment by rail. (Logistics management, moderate) {AACSB: Analytic Skills}

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132.A transportation firm spends 60 percent of its sales in the supply chain, and has a net profit margin of 6 percent. The company is about to invest $100,000 in one of two ventures. One venture is advertising-based, and is expected to increase revenues (sales) by $600,000 (after spending the $100,000). The other venture applies the money in supply chain efficiencies that are expected to save $200,000 (again, after spending the $100,000). Which of these two ventures offers the larger increase in profit to the firm? Use Table 11.3, reproduced below.

The relevant entry in Table 11.3, 60% of sales and 6% net profit, is $4.35. If $200,000 can be saved, the equivalent value of increased sales is $200,000 x 4.35 = $870,000. In other words, $200,000 in supply chain savings and $870,000 in increased sales yield the same increase in profit. Since the expected increase in sales is only $600,000, the better use of the $100,000 is to pursue the supply chain efficiencies. (Supply chain economics, moderate) {AACSB: Analytic Skills}

133.A company is about to select a vendor for the outsourcing of all of its engineering, environmental, and CAD requirements. It has identified four criteria critical to the selection. These criteria, and their importance weights, appear below. Three firms, A, C, and E, have indicated that they are interested in this position. The company has scored each of the three candidates on these criteria, using a 1-10 scale, where 10 is best. Candidate A scored 7, 7, 7, and 5 on the four criteria. Candidate C scored 9, 4, 8, and 6. Candidate E scored 5, 10, 10, and 7. Which vendor has the highest composite score?

Company E has the highest score, and should be selected. (Vendor selection, moderate) {AACSB: Analytic Skills}

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