TEST BANK Principles of Supply Chain Management: A Balanced Approach 6th Edition by Joel D. Wisner, Keah-Choon Tan, G. Keong Leong
TABLE OF CONTENTS CHAPTER 1. Introduction to Supply Chain Management CHAPTER 2. Purchasing Management CHAPTER 3. Creating and Managing Supplier Relationships CHAPTER 4. Ethical and Sustainable Sourcing CHAPTER 5. Demand Forecasting CHAPTER 6. Resource Planning Systems CHAPTER 7. Inventory Management CHAPTER 8. Process Management—Lean and Six Sigma in the Supply Chain CHAPTER 9. Domestic U.S. and Global Logistics CHAPTER 10. Customer Relationship Management CHAPTER 11. Global Location Decisions CHAPTER 12. Service Response Logistics
CHAPTER 13. Supply Chain Process Integration CHAPTER 14. Performance Measurement along Supply Chains
Chapter 01: Introduction to Supply Chain Management Indicate whether the statement is true or false. 1. According to the textbook, the keys to successful supply chain management include trust, cooperation, collaboration and honest, accurate communications between supply chain partners. a. True b. False 2. Supply chain management is concerned about how suppliers’ products are designed, produced, and transported. a. True b. False 3. One definition of supply chain management is "Coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers." a. True b. False 4. The universally accepted definition of supply chain management is "the management and integration of the parties involved in producing the end items coveted by consumers." a. True b. False 5. The assembly or production of finished products, producing the right amount of product, and ensuring that finished products meet specific quality, cost, and customer service requirements can all be considered elements of operations. a. True b. False 6. According to the textbook, supply chains include raw material suppliers, intermediate component manufacturers, endproduct manufacturers, wholesale distributors, retailers and end-product consumers. a. True b. False 7. Trade estimates suggest that the bullwhip effect results in excess costs on the order of 50 percent for each firm in a supply chain. a. True b. False 8. According to the textbook, a supply chain's end customers are the only true source of income for all supply chain organizations. a. True b. False 9. The foundation elements of supply chain management are Supply, Operations, Customer Service, and Logistics. a. True b. False 10. Supply chain management activity includes managing the various compensation and benefit programs within an organization.
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Chapter 01: Introduction to Supply Chain Management
11. Highly valued customers with large purchasing budgets who achieve moderate supply chain management success have been known to lower purchasing and inventory carrying costs and create better quality products with higher levels of customer service. a. True b. False 12. Many large firms are moving to in-house vertically integrated structures where they have more control over each business unit. a. True b. False 13. Supply chain analytics can be used along the supply chain to schedule production according to expected supplier deliveries a. True b. False 14. According to the textbook, in the 1950s and 1960s, mass production techniques focused on creating supplier partnerships, improving process design and flexibility, and improving product quality. a. True b. False 15. Supply Chain Management activities work with computer-aided design programs to ensure continued supply of a scarce item. a. True b. False 16. According to the textbook, environmental and social impacts are considered outside of supply chain management. a. True b. False 17. Trends in supply chain management include expansion of the supply chain and decreasing supply chain visibility. a. True b. False 18. Circular economy refers to an economic system aimed at eliminating waste and the continual use of resources. a. True b. False 19. The bullwhip effect causes an amplification of the variation in the demand pattern along the supply chain. a. True b. False 20. The bullwhip effect is the result of companies producing excessive defective products; defective items are whipped back from the end customer toward the manufacturer of the defect.
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Chapter 01: Introduction to Supply Chain Management a. True b. False
Indicate the answer choice that best completes the statement or answers the question. 21. When a particular item is in short supply accompanied by rising prices, a firm might find it beneficial to: a. Discontinue buying the product and focus more on cheaper products. b. Align itself with one of the suppliers to ensure a continued supply of the scarce item. c. Purchase the item from a manufacturer who cuts corners and provides a product below market price. d. All of these 22. Supply chain management includes the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. It also includes: a. Human resources and job design b. Selling and marketing products c. Coordination and collaboration with channel partners d. Program evaluation and review techniques. 23. Which of the following companies are indirectly involved in most supply chains? a. Trucking and airfreight companies b. Freight forwarders c. Public warehousing firms d. All of these 24. According to the textbook, conditions which must be present for successful supply chain management include: a. High level of trust among firms b. Corporate contracts regarding performance expectations c. Short-term company focused performance d. Benchmarking 25. According to the text, the FOUR important elements of the supply chain are: a. Purchasing, manufacturing, transportation, retail stores b. Supply, operations, logistics, integration c. Purchasing, manufacturing, logistics, transportation d. Supply, operations, manufacturing, distribution 26. Encouraging or helping a firm's suppliers to perform in a desired fashion can be referred to as: a. Progressive procurement b. Supplier management c. Right-shoring d. Supply chain performance management 27. Which of the following activities would fall under the foundational element of operation? a. Distribution network b. Supplier management
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Chapter 01: Introduction to Supply Chain Management c. Demand management d. Third-party logistics services 28. One operational method for managing inventory is the implementation of a software system which can be referred to as: a. Customer relationship management (CRM) b. Demand capacity tracking (DCT) c. Material requirements planning (MRP) d. Demand process reengineering (DPR) 29. Which of the following tends to reduce duplicate testing and inspections and the need for extensive supplier evaluations? a. Supplier certification b. Right-shoring c. Business process reengineering d. Pilot Production 30. According to the textbook, the order of product and service flow is as follows: a. Raw material supplier, retailer, component manufacturer, wholesale distributor, end product manufacturer, end-product consumer b. Raw material supplier, component manufacturer, retailer, wholesale distributor, end product manufacturer, end-product consumer c. Component manufacturer, raw material supplier, retailer, wholesale distributor, end product manufacturer, end-product consumer d. Raw material supplier, component manufacturer, end product manufacturer, wholesale distributor, retailer, end-product consumer 31. Which of the following is a reverse logistics activity? a. Delivering finished goods to your customer b. Recycling products and components c. Developing a collaborative relationship with your supplier d. Managing the quality of products 32. Which of the following would be considered a third party logistics provider? a. A raw materials supplier b. An intermediate component manufacturer c. A firm that leases storage warehousing d. An end product manufacturer 33. Which of the following statements is TRUE? a. Supply chain management was invented by the auto manufacturing industry. b. Strategic partnerships are seen as one of the foundations of supply chain management. c. Purchasing is seen as the final and most difficult step in the supply chain. d. Service response logistics is the digital distribution of services.
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Chapter 01: Introduction to Supply Chain Management 34. Which of the following acronyms is NOT paired with its correct "translation"? a. TQM − Total Quality Management b. JIT − Just-in-Time c. TLS − Third-party Logistics Services d. ERP − Enterprise Resource Planning 35. Lean production is typically associated with which of the following company's production systems? a. Procter and Gamble b. Kraft c. Samsung d. Toyota 36. Customer relationship management, distribution network, transportation management, and service response logistics are all important issues that are most closely related to: a. Purchasing b. Logistics c. Integration d. Manufacturing 37. The following strategy is usually employed by lean organizations in an effort to ensure continued quality compliance among suppliers and with internal production facilities: a. Six Sigma b. MRP II c. 3PL d. CAPS 38. Indicate which of the following can be defined as “the ability to meet the needs of current supply chain members without hindering the ability to meet the needs of future generations.” a. Reverse logistics b. Enterprise resource planning c. Sustainability d. Strategic partnerships 39. According to the text, which of the following is considered a current trend in supply chain management? a. Outsourcing the CRM function b. Increasing supply chain visibility c. Use of self-directed teams d. None of these 40. Developed in the 1990s as a popular way of developing radically new business processes in an effort to reduce waste and increase performance is referred to as: a. Process integration b. Benchmarking c. Business process reengineering d. Vertical integration
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Chapter 01: Introduction to Supply Chain Management 41. The term Supply Chain Management and the field of study it represents today seems to have emerged in the: a. 1960s b. 1970s c. 1980s d. 1990s 42. An example of an internal or external event that causes a disruption or failure of supply chain operations is: a. Supply chain risk b. Back-shoring c. Six Sigma quality management d. COVID-19 Pandemic 43. Which of the following can happen as a result of the bullwhip effect? a. Increase in defective products b. Excess costs for each firm in a supply chain c. Decreased levels of safety stock d. Quicker distribution to warehouses 44. The continuing cycle of erratic demand causing forecasts to include safety stock which in turn magnify supplier forecasts and cause production planning problems is known as: a. Supply chain management b. Process integration c. Back-shoring d. Bullwhip effect 45. The following is an example of the bullwhip effect: a. Nike includes safety stock of 5,000 units of shoestrings in its demand forecast causing its shoestring supplier to increase their normal output for Nike. b. Nike products are so successful that it adds a new retailer for distribution c. Nike produces a defective product and thus realizes an excessive increase in consumer returns d. Nike is unhappy with the performance of a distributor which causes a chain-reaction of replacements to companies involved in its supply chain
46. There are many definitions for supply chain management. a. Define supply chain management in your own words. b. What is the goal of supply chain management? 47. Give three examples of benefits that may be realized by a firm that successfully manages its supply chain. 48. Briefly explain how technology has impacted supply chain management. Give three examples. 49. Briefly discuss three current trends in supply chain management:
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Chapter 01: Introduction to Supply Chain Management 50. Discuss the differences between supply chain partnerships of the past and those that have developed today. 51. List the four elements of supply chain management and provide a brief explanation of each of the four elements. What types of failures might each of those elements create within the supply chain? Why might those results be linked to errors in a particular element? 52. Explain the bullwhip effect. What can be done to reduce the bullwhip effect? Give an example of how the bullwhip effect results in excess costs in the supply chain. 53. Draw a generic global supply chain and label all the participants.
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Chapter 01: Introduction to Supply Chain Management Answer Key 1. True 2. True 3. True 4. False 5. True 6. True 7. False 8. True 9. False 10. False 11. True 12. False 13. True 14. False 15. False 16. False 17. False 18. True 19. True 20. False 21. b 22. c 23. d 24. a 25. b
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Chapter 01: Introduction to Supply Chain Management 26. b 27. c 28. c 29. a 30. d 31. b 32. c 33. b 34. c 35. d 36. b 37. a 38. c 39. b 40. c 41. c 42. d 43. b 44. d 45. a 46.46. a.
b.
Supply chain management is managing the activities involved in sourcing, production, and distribution of products. It is also involved in coordinating or integrating a number of goods- and services-related activities among supply chain participants. The goal of supply chain management typically involves improving operating efficiencies, increasing quality of products and strengthening customer service among the collaborating organizations.
47.47. a.
Benefits from successfully managing the supply chain Lower purchasing and inventory carrying costs
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Chapter 01: Introduction to Supply Chain Management b. c. d.
Better product quality Higher levels of customer service Increase in sales
48.48. a. b. c. d.
49.49. a.
b.
c.
How technology has impacted supply chain management Shipments can be tracked and monitored using technology and alerts sent to shippers about items that are in transit and delivered. Technology can be used to help a facility make more economic use of their utilities such as automated controls for lighting and air conditioning. RFID and automated storage and retrieval systems can be used to move product through a warehouse Inventory visibility is made easier by technology and the use of MRP and ERP systems.
Use of supply chain analytics which refers to examining raw supply chain data and then reaching conclusions or making predictions with the information. Improving supply chain sustainability which involves meeting the needs of current supply chain members without hindering the ability to meet the needs of future generations in terms of economic, environmental, and social challenges. Increasing supply chain visibility so manufacturers, business partners, and customers know exactly where products are, at any point in the supply chain.
50. In the past, supply chain partnerships did not really exist. ∙ Supply chains were seen as a series of independent organizations that were looked on, to perform their core competency for the sake of their downstream "partner." ∙ Firms in the past did not seek to share information. ∙ Buyers of supplies and services instead usually were reduced to bargain hunters. Low cost was valued over quality. ∙ Traditional relationships were also characterized by a large number of partners and shortterm contracts. This put an emphasis on low cost that would provide short-term profits versus sustainable profits that might come along with consistently high quality goods and services. ∙ In some cases, conglomerates were formed by firms seeking more supply chain control. Modern supply chain partnerships are much different. ∙ Partnerships of today encourage sharing and collaboration from the design phase to the delivery phase. ∙ Partners, nowadays, see each other as a chain of customers connected by their goal of pleasing the final end customer. ∙ While cost is still an important aspect of creating value for the customer, today supply chains also focus on the importance of higher quality, more customization, and swift delivery service. ∙ It is for this reason that modern partnerships focus on collaboration from the moment they
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Chapter 01: Introduction to Supply Chain Management ∙
begin to design a product until the product's lifecycle has run its course. Modern partnerships often include a small number of partners who understand the value of long-term contracts that value quality, speed, and flexibility as much, if not more, than cost.
51. Note: While the descriptions of each of the four elements are relatively general and accurate, the types of failures each of the elements may be responsible for, are rather long lists. Therefore, in many cases it is important for the student to explain why one element may ultimately be responsible for a certain problem with a list. a.
Supply Elements − Supply management professionals most often perform the purchasing function. Effective supply management has resulted in smaller supply bases and the development of more long-term supplier relationships to achieve the competitive benefits. Supply management is one of the foundations of supply chain management, since incoming material quality, delivery timing, purchase price, product safety, and purchasing’s impact on the environment are all affected by the buyer-supplier relationship and the capabilities of suppliers. Some of the mistakes in purchasing can cause low-quality end-items, high inventories, stockouts, excessive cost of goods sold, interruptions in production, or excessive operational costs.
b.
Operations Elements − The operations elements of the supply chain take into account the assembly or processing of materials and components into finished products or services. Operations is also responsible for creating the right amount of product within an appropriate period of time that will meet the demand needs of the customer while still satisfying their specific needs in terms of quality, cost, customization, and timely delivery. Mistakes in operations can cause shortages, stockouts, high inventories, low inventories, excessive operational costs, late deliveries, low-quality end-items, defects, or dangerous end-items.
c.
Logistics Elements − the distribution elements of the supply chain are focused on delivering products to customers at the right time, quality, and volume. The distribution elements include transportation, warehousing, break-bulking, packaging, containerization, and any services related to developing and keeping a distribution itinerary. Mistakes in distribution can cause shortages, stockouts, excessive operational costs, damaged end-items, high pilferage rates, customer complaints, delivery errors (wrong item to the wrong destination), and lost inventory.
d.
Integration Elements − The integration elements involve the planning and coordination required to create a seamless supply chain. Supply chain integration requires management to inform all supply chain parties of how important it is for them to share information, articulate their needs, and develop relationships. Poor supply chain integration will cause conflicts between supply chain partners, late deliveries, tardy production, overproduction, under production, poor forecasting, over purchasing, material shortages, long lead times, high operational costs, excessive waiting times, and excessive inventories.
52.52. a. The bullwhip effect is a build-up of safety stocks due to poor forecasting and
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Chapter 01: Introduction to Supply Chain Management
b.
c.
communication that cause order quantities to be increased throughout the supply chain. The increases become amplified as the product continues farther down the supply chain. This will likely cause overstock and excess costs for each firm in a supply chain. Better communication between each link in the supply chain and sharing of upcoming demand forecasts makes it easier for companies to feel confident about their order quantity. Trading partners feel more comfortable with manufacturers who consistently produce high quality products. Firms feel more confident and have better working relationships with manufactures that have better products and better services. Better working relationships lead to single source for supplies and this helps the manufacturer plan for demand. Example of the bullwhip effect – Company A sells widgets to customers. Actual demand from customers is 20 widgets. Company A orders 25 widgets from the distributor B; an extra 5 units are to ensure it doesn’t run out of floor stock. Distributor B wants to order in bulk to save costs, so it orders 30 widgets from supplier C. Supplier C always keeps safety 20% stock on hand, so it orders 36 widgets from Manufacturer D. At Manufacturer D’s factory, it must produce in runs of 50. Now 50 units have been produced for a demand of only 20 units causing each firm in the supply chain excess costs.
53. A Generic Supply Chain
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Chapter 02: Purchasing Management
Indicate whether the statement is true or false. 1. Purchasing can be broadly classified into two categories: merchants and industrial buyers. a. True b. False 2. Merchant buyers primary task is to purchase raw materials for resale purposes. a. True b. False 3. A low ROA suggests that management is capable of generating large profits with relatively small investments. a. True b. False 4. The procedures for public procurement differ from the private sector. a. True b. False 5. The supply base refers to the list of suppliers that a firm uses to acquire its materials, services, supplies, and equipment. a. True b. False 6. The goal of a good purchasing system is to ensure efficient information transitions between the materials users, the purchasing personnel, and the suppliers. a. True b. False 7. The purchase order is NOT a legally binding contract until it is accepted by the supplier. a. True b. False 8. A material requisition and a purchase requisition are the same thing. a. True b. False 9. The Uniform Commercial Code (UCC) governs the purchase and sale of goods in every state in the U.S. a. True b. False 10. Procurement credit cards can be used for small purchases including meals, lodging, and travel expenses. a. True b. False 11. Blank check purchase orders, Corporate purchasing cards, Petty cash, and Open-end purchase orders are all possible alternatives to dealing with small value purchases such as those for office supplies. a. True
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Chapter 02: Purchasing Management b. False 12. Generally, firms outsource noncore activities while focusing on core competencies. a. True b. False 13. If the break-even point in a typical make-buy scenario is 19,000 units and 10,000 units are required by the firm, then the firm should choose to make the units. a. True b. False 14. A reason for making items instead of buying them would include better quality control. a. True b. False 15. The Total Cost of Ownership Concept includes qualitative costs. a. True b. False 16. The total cost analysis demonstrates how the unit cost alone can affect purchase decisions. a. True b. False 17. The possibility of events like strikes, assembly line breakdowns, and natural disasters are all reasons a company should favor using a single supplier. a. True b. False 18. Centralized purchasing is the practice where individual, local purchasing departments throughout a single corporation make their own, individual purchasing decisions to fulfill their individual local needs. a. True b. False 19. USMCA and the EU are trade organizations seeking to reduce tariff and non-tariff barriers among its member countries. a. True b. False 20. Foreign suppliers located farther away may be able to deliver goods faster than domestic suppliers due to more efficient transportation and logistical systems. a. True b. False
Indicate the answer choice that best completes the statement or answers the question. 21. The primary goals of purchasing include all EXCEPT:
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Chapter 02: Purchasing Management a. Secure materials at the lowest cost b. Maximize customer satisfaction c. Improve the quality of finished goods produced d. Ensure the highest quality raw materials are purchased 22. Which of the following refers to the measurement of the impact of change in purchase spend on a firm’s profit before taxes, assuming gross sales and other expenses remain unchanged? a. Break-Even Analysis b. Profit-Leverage Effect c. Direct Offset d. Leveraging Purchase Volume 23. When calculating Return on Investment, fixed assets include: a. Cash, Accounts Receivable, and Inventory b. Cash, Accounts Receivable, and Equipment c. Accounts Receivable, Equipment, and Real Estate d. Equipment, Buildings, and Real Estate 24. Inventory Turnover can be calculated by: a. Ratio of cost of goods sold over average inventory cost b. Ratio of average inventory cost over cost of goods sold c. Ratio of inventory days in stock over average inventory cost d. Ratio of average inventory cost over inventory days in stock 25. Which type of requisition is used for materials and standard parts that are requested on a recurring basis? a. Open requisition b. Blanket requisition c. Traveling requisition d. Recyclable requisition (Cyc-Rec) 26. Which of the following is a form of purchasing that is placed directly to the supplier and suitable when firms use the same components to make standard goods over a relatively long period of time? a. Material requisition b. Green purchasing c. Planned order release d. Distributed purchasing 27. When a product is purchased that is complicated or highly technical, what may be issued instead of a request for quotation? a. Request for proposal b. Purchase order c. Contract for sale d. Sales order 28. Benefits derived from implementing e-procurement systems include all of the following EXCEPT:
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Chapter 02: Purchasing Management a. Allows buyers to submit bids and suppliers to respond to those bids in real time b. Increases the accuracy in communication between buyers and suppliers c. Creates numerous additional job opportunities in the purchasing department d. Allows buyers to support minority or locally owned businesses by storing this supplier information 29. While most public procurement is focused on goals like those of purchasing departments in the private sector, U.S. federal government purchases must comply with the: a. Services and Materials Acquisition Act b. Fair Standards and Equitable Purchases Act c. Federal Code of Conduct for Procurement d. Federal Acquisition Regulation 30. Petty cash is being phased out in favor of: a. Hard cash b. A blank check c. P-card d. Wire transferring 31. Blanket or open-end purchase orders are suitable for buying a. Computers b. Heavy equipment c. Custom built components d. Office supplies 32. Which of the following is a reason small value purchases are handled differently? a. To give the buyer additional supplier choices b. To obtain a higher quality product c. To have better tracking of material usage d. To control unnecessary administrative costs 33. Which of the following illustrates Forward Vertical Integration? a. Microsoft starting a new division that designs and manufactures clothing b. Ford automotive buying additional machines for production c. Subway sandwich company buying a bakery to make the bread for their sandwiches d. Dell Computers buying retail computer stores to sell computers to the public 34. Which of the following would be a good reason to outsource (buy) versus making? a. To utilize existing capacity within a company's own firm b. A firm is running at or near capacity and is unable to meet demand requirements c. To have more direct control over the design and production of an end item d. No competent supplier presently produces the needed item 35. Given the following make-buy information, what would be the break-even point? Make Option
Buy Option
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Chapter 02: Purchasing Management Fixed Costs Variable Costs a. 1500 units b. 1000 units c. 800 units d. 250 units
$6500 $ 5
$2500 $ 9
36. Given the following make-buy information, what would be the break-even point? Fixed Costs Variable Costs a. 2280 units b. 1550 units c. 1080 units d. 550 units
Make Option $13,000 $ 5
Buy Option $1600 $ 10
37. As firms seek to improve the products they offer to the market, companies are seeking help from their suppliers in new product design and development through: a. Supplier certification programs b. Heuristics c. Early supplier involvement d. Focused Work Centers 38. Firms typically use all of the following factors when considering which suppliers to select for important materials EXCEPT: a. Order system and cycle time b. Location c. Process and product technologies d. Slotting fees 39. Total Cost of Ownership does NOT consider which of the following factors? a. Purchase order costs b. Freight costs c. Currency exchange fees d. Tooling costs 40. The total cost of ownership for Supplier A is $1,670,000. The total cost of ownership for Supplier B is $2,250,000. The total cost of ownership for Supplier C is $1,990,000. Using Total Cost Analysis, it will be more cost-effective to use a. Supplier A b. Supplier B c. Supplier C d. Cannot be determined 41. Which of the following is a reason for favoring single sourcing? a. Encourages competition among suppliers
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Chapter 02: Purchasing Management b. Spreads the risk of supply interruption c. Reduces variabilities in quality levels d. Reduces information about new processing technologies 42. Which of the following is a reason that single sourcing is considered risky/bad? a. There could be supplier interruptions due to political instability b. It could establish close relationships with the supplier c. Larger orders make quantity discounts more likely d. Decreases the item quality variability of items purchased 43. Which of the following is an advantage of a centralized purchasing department? a. Less bureaucracy b. More frequent shipments c. Common supply base d. Closer contact between buyer and user 44. Which of the following statements is FALSE? a. Centralized purchasing is where individual, local purchasing departments, such as at the plant level, make their own purchasing decisions. b. Centralized purchasing minimizes the competition problem when scarce materials are purchased from the same supplier. c. Centralized purchasing eliminates the duplication of job functions. d. Centralized purchasing allows larger shipments to be made which can decrease overall transportation costs. 45. Which of the following is NOT a potential challenge for global sourcing? a. Long delivery lead times b. Costs involved in selecting foreign suppliers c. Reduction of international trade barriers d. Labor and legal problems 46. Which of the following is NOT a form of countertrade? a. Barter b. Kaizen blitz c. Offset d. Counterpurchase 47. According to the Buy American Act, which of the following does the Buy American Act apply to? a. The procurement is intended for public use within the U.S. b. The materials to manufacture the goods are available in the U.S. c. U.S. government purchasers must purchase domestically produced goods d. All of the choices are correct 48. Which of the following would decrease purchase spend? a. Increasing safety stock levels b. Increasing queue management