Designing Distribution Networks and Applications to e-Business Pt2

28) Which distribution network is also referred to as drop-shipping with product delivered directly from the manufacturer to the customer location? A) Manufacturer storage with direct shipping B) Manufacturer storage with direct shipping and in-transit merge C) Distributor storage with package carrier delivery D) Distributor storage with last mile delivery E) Manufacturer/distributor storage with customer pickup Answer: A 29) Which of the following is an advantage of manufacturer storage with direct shipping? A) Transportation costs are low because the average outbound distance to the end consumer is small and package carriers are used to shipping the product. B) Supply chains save on the fixed cost of facilities, because the need for other warehousing space in the supply chain has been eliminated. C) Response times tend to be small because the order has to be transmitted from the retailer to the manufacturer. D) Order tracking is easy to implement because of the complete integration of information systems at both the retailer and the manufacturer. E) The handling of returns is likely to be simple and inexpensive, improving customer satisfaction. Answer: B 30) Which of the following would be a disadvantage of manufacturer storage with direct shipping? A) The ability to reduce cost of inventory by centralizing inventories at the manufacturer. B) The manufacturer has to postpone customization until after the customer order has been placed. C) Supply chains have to eliminate other warehousing space to save on the fixed cost of facilities. D) Response times tend to be large because the order has to be transmitted from the retailer to the manufacturer and shipping distances are on average longer from the manufacturer's centralized site. E) Provides a good customer experience when a single order containing products from several manufacturers is delivered in partial shipments. Answer: D 31) Which distribution network design is similar to pure drop-shipping, except that pieces of the order coming from different locations are combined so that the customer gets a single delivery? A) Manufacturer storage with direct shipping B) Manufacturer storage with direct shipping and in-transit merge C) Distributor storage with package carrier delivery D) Distributor storage with manufacturer pickup E) Retail storage with customer pickup Answer: B 32) The main advantage of in-transit merge over drop-shipping is A) the ability to reduce cost of inventory by centralizing inventories at the manufacturer. B) supply chains save on the fixed cost of facilities, because the need for other warehousing space in the supply chain has been eliminated. C) somewhat lower transportation cost and improved customer experience. D) order tracking is easy to implement because of the complete integration of information systems at both the retailer and the manufacturer. E) the handling of returns is likely to be simple and inexpensive, improving customer satisfaction. Answer: C 33) The major disadvantage of in-transit merge compared to drop-shipping is A) transportation costs are high because the average outbound distance to the end consumer is large and package carriers are used to shipping the product. B) response times tend to be large because the order has to be transmitted from the retailer to the manufacturer and shipping distances are on average longer from the manufacturer's centralized site. C) order tracking becomes harder to implement because it requires complete integration of information systems at both the retailer and the manufacturer. D) the additional effort during the merge itself. E) the handling of returns is likely to be difficult and more expensive, hurting customer satisfaction. Answer: D 34) Which distribution network design is being used when inventory is not held by manufacturers at the factories, but is held by distributors/retailers in intermediate warehouses and package carriers are used to transport products from the intermediate location to the final customer? A) Manufacturer storage with direct shipping B) Manufacturer storage with direct shipping and in-transit merge C) Distributor storage with package carrier delivery D) Distributor storage with manufacturer pickup E) Retail storage with customer pickup Answer: C 35) Which of the following is an advantage of distributor storage with carrier delivery? A) Inventory cost is higher than with manufacturer storage. B) Product variety is lower than with manufacturer storage. C) Order visibility for the customer is easier than with manufacturer storage. D) Higher cost to provide the same level of product availability as manufacturer storage. E) Cost of facilities and handling is somewhat higher than manufacturer storage. Answer: C 36) Which of the following is a disadvantage of distributor storage with carrier delivery? A) Information infrastructure is simpler than manufacturer storage. B) Response time is faster than with manufacturer storage. C) Returnability is easier than with manufacturer storage. D) Product variety is lower than with manufacturer storage. E) Transportation cost is lower than with manufacturer storage. Answer: D 37) Which distribution network design is being used when the distributor/retailer delivers the product to the customer's home instead of using a package carrier? A) Manufacturer storage with direct shipping B) Manufacturer/distributor storage with customer pickup C) Distributor storage with package carrier delivery D) Distributor storage with last mile delivery E) Retail storage with customer pickup Answer: D 38) Which of the following is an advantage of distributor storage with last mile delivery? A) More expensive to provide product availability than any other option except retail stores. B) Inventory cost is higher than distributor storage with package carrier delivery. C) Response time is very quick ranging from same day to next day delivery. D) Transportation cost is higher than any other distribution option. E) Returnability is harder and more expensive than a retail network. Answer: C 39) Which of the following is a disadvantage of distributor storage with last mile delivery? A) Transportation cost is higher than any other distribution option. B) Information cost is similar to distributor storage with package carrier delivery. C) Customer experience is very good, particularly for bulky items. D) Returnability is easier to implement than other options. E) Order traceability is less of an issue and easier to implement than manufacturer storage or distributor storage with package carrier delivery. Answer: A 40) Which distribution network design is being used when inventory is stored at the manufacturer or distributor warehouse but customers place their orders online or on the phone and then come to designated pickup points to collect their orders? A) Manufacturer storage with direct shipping B) Manufacturer/distributor storage with customer pickup C) Distributor storage with package carrier delivery D) Distributor storage with last mile delivery E) Retail storage with customer pickup Answer: B 41) Which of the following is an advantage of manufacturer/distributor storage with customer pickup? A) Facility costs can be very high if new facilities have to be built. B) Transportation cost is lower than the use of package carriers, especially if using an existing delivery network. C) Order visibility is difficult but essential. D) Product variety is similar to other manufacturer or distributor storage options. E) Significant investment in information infrastructure required. Answer: B 42) Which of the following is a disadvantage of manufacturer/distributor storage with customer pickup? A) Customer experience is lower than other options because of the lack of home delivery. B) Response time is similar to package carrier delivery with manufacturer or distributor storage. C) Returnability is somewhat easier given that pickup location can handle returns. D) Product availability is similar to other manufacturer or distributor storage options. E) Facilities costs are lower if existing facilities are used. Answer: A 43) Which distribution network design is being used when inventory is stored locally at retail stores and customers walk into the retail store or place an order online or on the phone and pick it up at the retail store? A) Manufacturer storage with direct shipping B) Manufacturer/distributor storage with customer pickup C) Distributor storage with package carrier delivery D) Distributor storage with last mile delivery E) Retail storage with customer pickup Answer: E 44) Which of the following is an advantage of retail storage with customer pickup? A) Inventory cost is higher than all other options. B) Transportation cost is lower than all other options. C) Facilities and handling costs are higher than other options. D) Product variety is lower than all other options. E) Product availability is more expensive to provide than all other options. Answer: B 45) Which of the following is a disadvantage of retail storage with customer pickup? A) Returnability is easier than other options given that pickup location can handle returns. B) Inventory cost is higher than all other options. C) Transportation cost is lower than all other options. D) Facilities and handling costs are lower than other options. E) Product variety is higher than all other options. Answer: B 46) Distributors add value to a supply chain between a supply stage and a customer stage A) if there is a small number of customers requiring a large amount of product. B) if there is a large number of customers requiring a large amount of product. C) if there are many small players at the customer stage, each requiring a small amount of the product at a time. D) if there are a few large players at the customer stage, each requiring a large amount of the product at a time. E) Distributors do not add value to a supply chain. Answer: C 47) Improvement in supply chain performance at the result of distributors occurs for which of the following reasons? A) Reduction in transportation cost because of LTL shipments from manufacturers to distributor. B) Reduction in outbound transportation cost because the distributor combines products from many customers into a single outbound shipment. C) Reduction in inventory costs because distributor disaggregates safety inventory rather than aggregating at each retailer. D) A more stable order stream from distributor to manufacturer (compared to erratic orders from each retailer) allows manufacturers to lower cost by planning production more effectively. E) By carrying inventory closer to the point of sale, manufacturers are able to provide a better response time than distributors can. Answer: D 48) Which of the following statements about distribution networks is true? A) The ownership structure of the distribution network can have as big an impact as the type of distribution network. B) The choice of a distribution network has very long-term consequences. C) The choice of an exclusive distribution strategy may be advantageous. D) All of the above are true. E) None of the above are true. Answer: D 49) ________ is a cost factor performance characteristic of Retail Storage at Consumer Pickup Sites that is higher than all other options. A) Transportation B) Inventory C) Information D) Facilities and Handling Answer: B 50) ________ is a service factor performance characteristic of Retail Storage at Consumer Pickup Sites that is lower than all other options. A) Response time B) Product variety C) Product availability D) Time to market Answer: B 51) ________ is a service factor performance characteristic of Manufacturer or Distributor Storage with Customer Pickup that is lower than other options because of the lack of home delivery. Experience is very sensitive to capability of pickup location. A) Response time B) Product variety C) Customer experience D) Time to market Answer: C 52) ________ is a cost factor performance characteristic of Manufacturer or Distributor Storage with Customer Pickup that is lower than the use of package carriers, especially if using an existing delivery network. A) Transportation B) Inventory C) Information D) Facilities and Handling Answer: A 53) ________ is the amount of time it takes for a customer to receive an order. A) Time to market B) Product Availability C) Returnability D) Response Time Answer: D 54) Changing the distribution network design DOES NOT affect the following supply chain costs A) transportation. B) inventories. C) information. D) sourcing. Answer: D 55) Facility costs decrease as the number of facilities is reduced. Which company employs a network design like this? A) Barnes and Noble B) Books-A-Million C) Starbucks D) Amazon Answer: D 56) Which is NOT considered a primary part of Total Logistics Costs for a supply chain network? A) Inventory B) Manufacturing C) Transportation D) Facility cost Answer: D 4.3 Essay Questions 1) Explain the measures of customer service that are influenced by the structure of the distribution network. Answer: Response time is the time between when a customer places an order and receives delivery. Product variety is the number of different products/configurations that a customer desires from the distribution network. Availability is the probability of having a product in stock when a customer order arrives. Customer experience includes the ease with which the customer can place and receive their order. It also includes purely experiential aspects, such as the possibility of getting a cup of coffee and the value that the sales staff provides. Order visibility is the ability of the customer to track their order from placement to delivery. Returnability is the ease with which a customer can return unsatisfactory merchandise and the ability of the network to handle such returns. 2) Explain how the design of the distribution network affects the cost of the four supply chain drivers. Answer: As the number of facilities in a supply chain increases, the inventory and resulting inventory costs also increase. To decrease inventory costs, firms try to consolidate and limit the number of facilities in their supply chain network. Outbound transportation costs per unit tend to be higher than inbound costs because inbound lot sizes are typically larger. Increasing the number of warehouse locations decreases the average outbound distance to a customer and makes outbound transportation distance a smaller fraction of total distance traveled by the product. Thus, as long as inbound transportation economies of scale are maintained, increasing the number of facilities decreases total transportation cost. Facility costs decrease as the number of facilities is reduced, because a consolidation of facilities allows a firm to exploit economies of scale. As the number of facilities increases, total logistics costs first decrease and then increase. Each firm should have at least the number of facilities that minimize total logistics costs. As a firm wants to further reduce the response time to its customers, it may have to increase the number of facilities beyond the point that minimizes logistics costs. A firm should add facilities beyond the cost-minimizing point only if managers are confident that the increase in revenues because of better responsiveness is greater than the increase in costs because of the additional facilities. In general, no distribution network will outperform others along all dimensions. Thus, it is important to ensure that the strengths of the distribution network fit with the strategic position of the firm. 3) Explain the six distinct distribution network designs that may be used to move products from factory to customer. Answer: In manufacturer storage with direct shipping, product is shipped directly from the manufacturer to the end customer, bypassing the retailer (who takes the order and initiates the delivery request). This option is also referred to as drop-shipping with product delivered directly from the manufacturer to the customer location. Manufacturer storage with direct shipping and in-transit merge is similar to pure drop-shipping, except that pieces of the order coming from different locations are combined so that the customer gets a single delivery. Distributor storage with package carrier delivery is being used when inventory is not held by manufacturers at the factories, but is held by distributors/retailers in intermediate warehouses, and package carriers are used to transport products from the intermediate location to the final customer. Distributor storage with last mile delivery is being used when the distributor/retailer delivers the product to the customer's home instead of using a package carrier. Manufacturer/distributor storage with customer pickup is being used when inventory is stored at the manufacturer or distributor warehouse but customers place their orders online or on the phone and then come to designated pickup points to collect their orders. Retail storage with customer pickup is being used when inventory is stored locally at retail stores and customers walk into the retail store or place an order online or on the phone and pick it up at the retail store. 4) Explain how distributors add value to a supply chain and improve its performance. Answer: Distributors add value to a supply chain between a supply stage and a customer stage if there are many small players at the customer stage, each requiring a small amount of the product at a time. The value added increases if distributors carry products from many manufacturers. Improvement in supply chain performance occurs for the following reasons: ∙ Reduction in inbound transportation cost because of TL shipments from manufacturers to distributor. ∙ Reduction in outbound transportation cost because the distributor combines products from many manufacturers into a single outbound shipment. ∙ Reduction in inventory costs because distributor aggregates safety inventory rather than disaggregating at each retailer. ∙ A more stable order stream from distributor to manufacturer (compared to erratic orders from each retailer) allows manufacturers to lower cost by planning production more effectively. ∙ By carrying inventory closer to the point of sale, distributors are able to provide a better response time than manufacturers can. ∙ Distributors are able to offer one-stop shopping with products from several manufacturers. 5) Total logistics costs are the sum of inventory, transportation, and facility costs for a supply chain network. What occurs as the number of facilities increases? Answer: Total logistics costs first decrease and then increase as the number of facilities increases. Each firm should have at least the number of facilities that minimize total logistics costs. For example, Amazon has more than one warehouse primarily to reduce its logistics costs (and improve response time). If a firm wants to reduce the response time to its customers further, it may have to increase the number of facilities beyond the point that minimizes logistics costs. A firm should add facilities beyond the cost-minimizing point only if managers are confident that the increase in revenues because of better responsiveness is greater than the increase in costs because of the additional facilities.