Chapter 10 Supply Chain Design Multiple Choice

20) Which one of the following is TRUE for supply chain management? A) Supply chain applies to both manufacturing and service organizations. B) Supply chain applies only to manufacturing because it deals with flow of materials. C) Supply chain is about suppliers and does not include distributors or customers. D) Supply chain includes any operation that deals with materials. Answer: A Reference: Supply Chain Design Across the Organization Difficulty: Easy Keywords: supply chain, service, manufacturing This figure represents the impact of supply chain performance on total costs. Use it to answer the next two questions. 21) Refer to the figure above. The movement from point A to point B indicates the: A) increase in time it takes for your firm to deliver goods and services. B) decrease in time it takes for your firm to deliver goods and services. C) increase in cost. D) decrease in cost. Answer: D Reference: Introduction Difficulty: Moderate Keywords: supply chain, efficiency curve 22) Refer to the figure above. Which is the best statement if a company simultaneously moves from point A to point B and from point D to point C? A) The new supply chain efficiency curve is superior to the old one. B) The new costs are higher, but the performance is better. C) The new supply chain is still inferior to the supply chain efficiency curve. D) The new performance is worse, but the costs are lower. Answer: A Reference: Introduction Difficulty: Moderate Keywords: supply chain, efficiency curve 23) A typical manufacturer spends: A) about 25% of its total income from sales on purchased services and materials. B) about 45% of its total income from sales on purchased services and materials. C) more than 60% of its total income from sales on purchased services and materials. D) almost 80% of its total income from sales on purchased services and materials. Answer: C 4 Reference: Supply Chains for Services and Manufacturing Difficulty: Easy Keywords: supply chain, manufacturing, purchased services 24) Henderson Corporation is a supplier of alloy ball bearings to auto manufacturers in Detroit. Because of the specialized manufacturing process employed, considerable work-inprocess and raw material inventories are created. The average inventory levels are $1,152,000 and $2,725,000, respectively. In addition, finished goods inventory is $3,225,000, and sales (at cost) for the current year are expected to be about $24 million. The inventory turnover that Henderson Corporation is currently expecting is: A) less than 2.0. B) greater than 2.0 but less than 2.5. C) greater than 2.5 but less than 3.0. D) greater than 3.0. Answer: D Reference: Measures of Supply Chain Performance Difficulty: Moderate Keywords: inventory, turnover AACSB: Analytic skills 25) Maple Leaf, Inc., a television manufacturer, would like to reduce its inventory. To this end, you are asked by the operations manager to assess its inventory level. You have the following information on average inventories from last year's financial statement: Raw materials $2,500,000 Work-in-process $1,000,000 Finished goods $ 800,000 In addition, the cost of goods sold last year (50 weeks) was $15 million. What was the inventory turnover? A) less than or equal to two B) greater than two but less than three C) greater than three but less than four D) greater than four Answer: C Reference: Measures of Supply Chain Performance Difficulty: Moderate Keywords: inventory, turnover AACSB: Analytic skills 5 26) The average inventory at Hamilton Industries, comprising raw materials, work-inprocess, and finished goods, was found to be $17.2 million last year. If the cost of goods sold per week averaged $1.32 million, what was the inventory turnover experienced by Hamilton Industries? Assume the company had 50 working weeks per year. A) less than or equal to 3.50 B) greater than 3.50 but less than 3.75 C) greater than 3.75 but less than 4.00 D) greater than 4.00 Answer: C Reference: Measures of Supply Chain Performance Difficulty: Moderate Keywords: inventory, turnover AACSB: Analytic skills 27) Padco averages $15 million worth of inventory in all of its worldwide locations. They operate 51 weeks a year and each week average $3 million in sales (at cost). Their inventory turnover is: A) 1.13 turns. B) 5 turns. C) 10.2 turns. D) 17 turns. Answer: C Reference: Measures of Supply Chain Performance Difficulty: Moderate Keywords: inventory, turnover AACSB: Analytic skills 28) Weeks of inventory and inventory turns are reflected in: A) working capital. B) operating expenses. C) cost of goods sold. D) cash flow. Answer: A Reference: Measures of Supply Chain Performance Difficulty: Moderate Keywords: working capital 29) Some discount stores are able to sell items before they have to pay their suppliers, resulting in a negative: A) net profit. B) return on assets. C) number of inventory turns. D) cash-to-cash measure. Answer: D Reference: Measures of Supply Chain Performance Difficulty: Moderate Keywords: cash flow, cash-to-cash 6 30) Shipments of Product Q from a plant to a wholesaler are made in lots of 400. The wholesaler's average demand for Q is 150 units per week. Lead time from plant to wholesaler is 5 weeks. The wholesaler pays for the shipments when they leave the plant. The plant has proposed several new lead time and lot size options to the wholesaler (see table below). If the wholesaler's goal is to minimize total cycle plus pipeline inventories, which option should the wholesaler select? OPTION CURRENT 1 2 3 SHIPMENT LOT SIZE 400 500 800 1,000 PLANT-TO- WHOLESALER LEAD TIME 5 4 3 2 A) option #1 B) option #2 C) option #3 D) remain with the current option Answer: C Reference: Inventory and Supply Chains Difficulty: Moderate Keywords: types of inventories, cycle inventory, pipeline inventory AACSB: Analytic skills 31) Which one of the following statements on inventory placement of finished goods is best? A) Forward placement might help reduce transportation cost. B) Forward placement is consistent with a competitive priority that calls for customization. C) Inventory pooling should be avoided when demand in various regions fluctuates month to month. D) Backward placement is consistent with a competitive priority that calls for fast delivery times. Answer: A Reference: Inventory Placement Difficulty: Moderate Keywords: inventory, forward placement 32) Which location shift would qualify as forward placement? A) from the manufacturer to a distribution center B) from the retailer to the wholesaler C) from the wholesaler to the manufacturer D) from the retailer to the manufacturer Answer: A Reference: Inventory Placement Difficulty: Moderate Keywords: inventory, forward placement 7 33) Which one of the following statements about the relation between financial and supplychain performance measures is TRUE? A) Longer delivery times require higher levels of working capital. B) Shorter new product development time decreases revenue. C) Higher inventory turns call for higher working capital requirements. D) Lower aggregate inventory value means higher current assets. Answer: A Reference: Measures of Supply Chain Performance Difficulty: Moderate Keywords: financial measures, supply chain, working capital 34) A firm may choose to use members of the distribution channel as if they were assembly stations in the factory. Such an approach is known as: A) backward integration. B) postponement. C) channel assembly. D) deferred delay. Answer: C Reference: Mass Customization Difficulty: Easy Keywords: channel assembly Learning Outcome: Compare common approaches to supply chain design. 35) Which of the following is NOT identified in the text as a competitive advantage of a mass customization strategy? A) improvement of the quality of parts produced B) management of customer relationships C) elimination of finished goods inventory D) an increase in perceived value of services or products Answer: A Reference: Mass Customization Difficulty: Easy Keywords: mass customization, competitive advantages 36) ________ uses a firm's flexible processes to generate a wide variety of personalized services or products at reasonably low costs. A) Mass customization. B) Channel assembly C) Postponement D) Forward integration Answer: A Reference: Mass Customization Difficulty: Moderate Keywords: mass customization Learning Outcome: Compare common approaches to supply chain design. 8 37) A somewhat successful computer manufacturer makes a generic computer in five exciting colors. Once orders are received, the computer guts are encased in the customer's choice of colored case at the factory. This approach to production is known as: A) channel assembly. B) postponement. C) strategic sourcing. D) strategic production. Answer: B Reference: Mass Customization Difficulty: Moderate Keywords: postponement, delayed differentiation 38) A producer of medical devices makes a single model that can be customized to talk in and display any of 47 different languages. This customization is performed in one of their five regional distribution centers as firm orders are received, providing an elegant example of: A) backward integration B) forward integration C) channel assembly. D) offshoring. Answer: C Reference: Mass Customization Difficulty: Moderate Keywords: channel assembly Learning Outcome: Compare common approaches to supply chain design. 39) The supply chain management department of a major manufacturer pondered a particularly weighty make or buy decision for weeks, ultimately deciding to make, rather than buy. This decision resulted in increased: A) outsourcing. B) offshoring. C) postponement. D) backward integration. Answer: D Reference: Outsourcing Processes Difficulty: Easy Keywords: make-or-buy decisions, integration Learning Outcome: Compare and contrast different sourcing strategies including outsourcing and insourcing 9 Use the following scenario to answer the questions below. A company must decide if it will make or buy an item it needs. The company can make the item for $10 / unit, but must spend $15,000 per year in tooling to do so. An outside firm has quoted a total price of $12 / unit to supply the quantity required. 40) Refer to the instruction above. What is the break-even point in this situation? A) 6,500 units B) 7,250 units C) 7,500 units D) 8,000 units Answer: C Reference: Outsourcing Processes Difficulty: Moderate Keywords: outsourcing, make-or-buy decisions Learning Outcome: Compare and contrast different sourcing strategies including outsourcing and insourcing AACSB: Analytic skills 41) Refer to the instruction above. Which alternative should be selected if annual requirements are 5,000 units? A) Make B) Buy C) Either make or buy; costs are the same for either option at 5,000 units D) Can't be determined with information given Answer: B Reference: Outsourcing Processes Difficulty: Moderate Keywords: outsourcing, make-or-buy decisions Learning Outcome: Compare and contrast different sourcing strategies including outsourcing and insourcing AACSB: Analytic skills 42) Refer to the instruction above. What does the company save for the year by selecting this low-cost option (for annual requirements of 5,000 units)? A) $5,000 B) $15,000 C) $65,000 D) can't be determined with information given Answer: A Reference: Outsourcing Processes Difficulty: Moderate Keywords: outsourcing, make-or-buy decisions AACSB: Analytic skills 10 Use the following scenario to answer the questions below. A company is considering making versus buying a part needed for manufacturing. Particulars are as follows: Make: Buy: Variable Cost / Unit = Fixed Costs = $9,000 / year $2 Variable Cost / Unit = Fixed Costs = $3,000 / year $5 43) Refer to the instruction above. What is the annual break-even quantity for choosing between making and buying in this situation? A) 1,000 units B) 2,000 units C) 6,000 units D) 3,000 units Answer: B Reference: Outsourcing Processes Difficulty: Moderate Keywords: outsourcing, make-or-buy decisions Learning Outcome: Compare and contrast different sourcing strategies including outsourcing and insourcing AACSB: Analytic skills 44) Refer to the instruction above. For an annual volume of 3,000 units, which supplier should be chosen? A) Make B) Buy C) Either Make or Buy; costs are the same for either option at 3,000 units D) Can't be determined with information given Answer: A Reference: Outsourcing Processes Difficulty: Moderate Keywords: outsourcing, make-or-buy decisions Learning Outcome: Compare and contrast different sourcing strategies including outsourcing and insourcing AACSB: Analytic skills 45) Refer to the instruction above. What does the company save for the year by selecting this low-cost option (for annual requirements of 3,000 units)? A) $5,000 B) $1,000 C) $3,000 D) Can't be determined with information given Answer: C Reference: Outsourcing Processes Difficulty: Moderate Keywords: outsourcing, make-or-buy decisions Learning Outcome: Compare and contrast different sourcing strategies including outsourcing and insourcing AACSB: Analytic skills Use the following scenario to answer the questions below. You currently make a part on old equipment at a cost of $50,000 per year and a variable cost of $20 / unit. You have found an outside supplier who will make the part for $15 / unit if you will pay their annual fixed costs of $200,000 / year. The following table summarizes the details of this make versus buy decision. 11 ALTERNATIVE Buy Make FIXED COST $200,000 per year $50,000 per year VARIABLE COST $15 per unit $20 per unit 46) Refer to the instruction above. What is the break even quantity between buying and making? A) 30,000 units per year B) 40,000 units per year C) 50,000 units per year D) 60,000 units per year Answer: A Reference: Outsourcing Processes Difficulty: Moderate Keywords: outsourcing, make-or-buy decisions Learning Outcome: Compare and contrast different sourcing strategies including outsourcing and insourcing AACSB: Analytic skills 47) Refer to the instruction above. What are total costs to buy an annual quantity of 40,000 units? A) $400,000 B) $500,000 C) $800,000 D) $850,000 Answer: C Reference: Outsourcing Processes Difficulty: Easy Keywords: outsourcing, make-or-buy decisions Learning Outcome: Compare and contrast different sourcing strategies including outsourcing and insourcing AACSB: Analytic skills 48) Refer to the instruction above. What are total costs to make a quantity of 40,000 units per year? A) $400,000 B) $450,000 C) $800,000 D) $850,000 Answer: D Reference: Outsourcing Processes Difficulty: Easy Keywords: outsourcing, make-or-buy decisions AACSB: Analytic skills 12 49) Refer to the instruction above. For what range of output would you prefer to buy? A) 0 - 30,000 units per year B) 30,000 or more units per year C) 40,000 or more units per year D) 0 - 40,000 units per year Answer: B Reference: Outsourcing Processes Difficulty: Easy Keywords: outsourcing, make-or-buy decisions Learning Outcome: Compare and contrast different sourcing strategies including outsourcing and insourcing AACSB: Analytic skills 50) Refer to the instruction above. For what range of output would you prefer to make? A) 40,000 or more units per year B) 0 - 40,000 units per year C) 30,000 or more units per year D) 0 - 30,000 units per year Answer: D Reference: Outsourcing Processes Difficulty: Easy Keywords: outsourcing, make-or-buy decisions AACSB: Analytic skills 51) Refer to the instruction above. What does the company save for the year by selecting the low-cost option at an annual requirement of 40,000 units? A) $150,000 B) $300,000 C) $50,000 D) $40,000 Answer: C Reference: Outsourcing Processes Difficulty: Moderate Keywords: outsourcing, make-or-buy decisions Learning Outcome: Compare and contrast different sourcing strategies including outsourcing and insourcing AACSB: Analytic skills 13 52) Which of the following is not a benefit of outsourcing? A) comparative labor costs B) lower logistics costs C) reduction of transaction costs through use of the Internet D) technology transfer to another country or company Answer: D Reference: Outsourcing Processes Difficulty: Moderate Keywords: outsourcing, make-or-buy decisions Learning Outcome: Compare and contrast different sourcing strategies including outsourcing and insourcing 53) A U.S. company faced with spiraling costs in their customer care center recreated that service in Luxembourg at a fraction of the cost. This is an example of: A) offshoring. B) forward integration. C) backward integration. D) postponement. Answer: A Reference: Outsourcing Processes Difficulty: Easy Keywords: offshoring, outsourcing Learning Outcome: Compare and contrast different sourcing strategies including outsourcing and insourcing 54) An efficient supply chain should be preferred when: A) product variety is high. B) competitive priority is customization. C) demand is highly predictable. D) demand is unpredictable. Answer: C Reference: Strategic Implications Difficulty: Moderate Keywords: efficient supply chain 55) An efficient supply chain typically has: A) a high capacity cushion. B) high inventory turns. C) supply chain partners that emphasize fast delivery time. D) supply chain partners that emphasize volume flexibility. Answer: B Reference: Strategic Implications Difficulty: Moderate Keywords: efficient supply chain 14 56) A responsive supply chain typically has: A) a low capacity cushion. B) high inventory turns. C) supply chain partners that emphasize low prices. D) supply chain partners that emphasize volume flexibility. Answer: D Reference: Strategic Implications Difficulty: Moderate Keywords: responsive supply chain 57) Responsive supply chains should be preferred when: A) product variety is low. B) demand is predictable. C) contribution margins are low. D) product variety is high. Answer: D Reference: Strategic Implications Difficulty: Moderate Keywords: responsive supply chain 58) The type of goods for which a responsive supply chain is appropriate are: A) fashion goods. B) products with a long shelf life. C) expensive products. D) those with infrequent design changes. Answer: A Reference: Strategic Implications Difficulty: Hard Keywords: responsive supply chain 59) It is desirable for a firm in a responsive supply chain to have: A) low-capacity cushions. B) delivery by railroad. C) high-capacity utilization consistent with high-volume delivery. D) inventory investments as needed to enable fast delivery times. Answer: D Reference: Strategic Implications Difficulty: Moderate Keywords: responsive supply chain 15 60) The objective of a firm in a responsive supply chain is likely to be realized if it has a: A) standardized product. B) short lead time. C) low-capacity cushion. D) line-flow process. Answer: B Reference: Strategic Implications Difficulty: Moderate Keywords: responsive supply chain 16