Contemporary Logistics, 12th edition Paul R Murphy Test Bank

Contemporary Logistics, 12th edition By Paul R. Murphy

Email: richard@qwconsultancy.com

TEST BANK CHAPTER 1: AN OVERVIEW OF LOGISTICS Multiple Choice Questions (correct answers are bolded) 1. Logistics clearly contributes to ___________ and ___________ utility. a. time; place b. form; time c. place; form d. possession; time [LO 1.1: To discuss the economic impacts of logistics; Moderate; Application; AACSB Category 3: Analytical thinking] 2. ___________ utility refers to the value or usefulness that comes from a customer being able to take possession of a product. a. Time b. Place c. Form d. Possession [LO 1.1: To discuss the economic impacts of logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 3. ___________ utility refers to having products available where they are needed by customers. a. b. c. d.

Possession Time Place Form

[LO 1.1: To discuss the economic impacts of logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 4. All of the following are types of economic utility except: a. time. b. production. c. place. d. possession.

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[LO 1.1: To discuss the economic impacts of logistics; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 5. “How well a company does what it says it’s going to do” represents ___________. a. efficiency b. productivity c. quality d. effectiveness [LO 1.2: To define what logistics is; Easy; Concept; AASCB Category 3: Analytical thinking] 6. What concept refers to “how well company resources are used to achieve what a company promises it can do”? a. b. c. d.

efficiency productivity reengineering effectiveness

[LO 1.2: To define what logistics is; Easy; Concept; AASCB Category 3: Analytical thinking] 7. Every customer getting the same type and level of logistics service refers to ___________. a. tailored logistics b. mass logistics c. effectiveness d. efficiency [LO 1.2: To define what logistics is; Easy; Concept; AASCB Category 3: Analytical thinking] 8. Which of the following is not a reason for the increased importance of logistics? a. b. c. d.

growing power of manufacturers reduction in economic regulation globalization of trade technological advances

[LO 1.3: To analyze the increased importance of logistics; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 9. Widespread reductions in economic regulation of U.S. transportation carriers occurred in ___________. a. the 1960s and 1970s b. the 1970s and 1980s 2 .

c. the 1980s and 1990s d. only the 1990s [LO 1:3: To analyze the increased importance of logistics; Easy; Application; AACSB Category 3: Analytical thinking] 10. The ___________ concept suggests that the customer desires a product offering that is highly tailored to the customer’s exact preferences. a. market demassification b. relationship marketing c. customized customer d. niche marketing [LO 1.3: To analyze the increased importance of logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 11. Approximately ___________ percent of U.S. families with children reports that both parents work. a. 70 b. 60 c. 50 d. 40 [LO 1.3: To analyze the increased importance of logistics; Moderate; Application; AACSB Category 3: Analytical thinking] 12. ___________ refers to the removal of intermediaries between producer and consumer. a. Direct channel b. Market demassification c. Consolidation d. Disintermediation [LO 1.3: To analyze the increased importance of logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 13. ___________ are stores with large amounts of both floor space and product for sale. a. Mass merchandisers b. Power retailers c. Big-box retailers d. Do-it-yourself (DIY) retailers

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[LO 1.3: To analyze the increased importance of logistics; Easy; Application; AACSB Category 3: Analytical thinking] 14. An example of ___________ involves ordering something online and then picking it up at a bricks-and-mortar store. a. supply chain management b. finance c. omnichannel retailing d. big-box retailing [LO 1.3: To analyze the increased importance of logistics; Easy; Application; AACSB Category 3: Analytical thinking] 15. World trade has grown at an average annual rate of approximately ___________ percent since 1990. a. 6 b. 5 c. 4 d. 3 [LO 1.3: To analyze the increased importance of logistics; Moderate; Application; AACSB Category 3: Analytical thinking] 16. The ___________ approach indicates that a company’s objectives can be realized by recognizing the mutual interdependence of major functional areas. a. systems b. supply chain c. physical distribution d. materials management [LO 1.4: To discuss the systems and total cost approaches to logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 17. The movement and storage of materials into a firm refers to ___________. a. physical distribution b. materials management c. supply chain management d. materials handling [LO 1.4: To discuss the systems and total cost approaches to logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 4 .

18. Which concept refers to the storage of finished product and movement to the customer? a. supply chain management b. business logistics c. physical distribution d. materials management [LO 1.4: To discuss the systems and total cost approaches to logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 19. Logistics managers use the ___________ approach to coordinate materials management and physical distribution in a cost-efficient manner. a. total cost b. supply chain c. balanced d. intrafunctional logistics [LO 1.4: To discuss the systems and total cost approaches to logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 20. A cost trade-off is a situation where: a. all costs react according to their individual degrees of inflation in the economy. b. all costs are reflected as a percentage variation from standard costs. c. some costs increase and some costs decrease. d. some costs are eliminated by efficient management controls.

[LO 1.4: To discuss the systems and total cost approaches to logistics; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 21. The ___________ department often measures inventory in terms of its cost or value in dollars whereas ___________ tends to measure inventory in terms of units. a. marketing; logistics b. finance; production c. marketing; production d. finance; logistics [LO 1.5: To expose you to logistical relationships within the firm; Moderate; Application; AACSB Category 3: Analytical thinking] 22. A common interface between production and logistics involves: a. the types of materials handling equipment. b. the length of production runs.

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c. the use of plastic versus wood pallets. d. the mode of transportation.

[LO 1.5: To expose you to logistical relationships within the firm; Moderate; Application; AACSB Category 3: Analytical thinking] 23. ___________ refers to the delay of value-added activities such as assembly, production, and packaging to the latest possible time. a. Building block b. Lean manufacturing c. Deferral d. Postponement [LO 1.5: To expose you to logistical relationships within the firm; Easy; Concept; AACSB Category 3: Analytical thinking] 24. The four basic components of the marketing mix include all of the following except: a. price. b. production. c. place. d. promotion.

[LO 1.5: To expose you to logistical relationships within the firm; Easy; Concept; AACSB Category 3: Analytical thinking] 25. Landed costs refer to: a. the costs of a product shipped via surface transport. b. the costs of a product that is quoted cash on delivery (COD). c. the costs of a prepaid shipment. d. a price that includes both the cost of the product plus transportation to the buyer.

[LO 1.5: To expose you to logistical relationships within the firm; Moderate; Concept; AACSB Category 3: Analytical thinking] 26. ___________ refers to being out of an item at the same time there is demand for it. a. Postponement b. Tailored logistics c. Stockout d. Supplier indifference [LO 1.5: To expose you to logistical relationships within the firm; Easy; Concept; AACSB Category 3: Analytical thinking] 6 .

27. Enticing customers with the promise of a low-priced product, only to find that it is unavailable, but having a higher-priced substitute product readily available refers to ___________. a. loss-leader marketing b. unfair trade practices c. bait-and-switch tactics d. price lining [LO 1.5: To expose you to logistical relationships within the firm; Easy; Concept; AACSB Category 3: Analytical thinking] 28. Which of the following is not part of the marketing channel? a. logistics channel b. negotiations channel c. management channel d. finance channel [LO 1.6: To introduce you to marketing channels; Moderate; Application; AACSB Category 3: Analytical thinking] 29. The ownership channel consists of all parties except: a. customers. b. manufacturers. c. wholesalers. d. retailers.

[LO 1.6: To introduce you to marketing channels; Moderate; Concept; AACSB Category 3: Analytical thinking] 30. Which channel covers the movement of title to the goods? a. promotions b. logistics c. finance d. ownership [LO 1.6: To introduce you to marketing channels; Easy; Concept; AACSB Category 3: Analytical thinking] 31. ___________ is bringing together similar stocks from different sources. a. Accumulating 7 .

b. Assorting c. Auditing d. Allocating [LO 1.6: To introduce you to marketing channels; Moderate; Concept; AACSB Category 3: Analytical thinking] 32. ___________ refers to breaking a homogeneous supply into smaller lots. a. Sorting out b. Allocating c. Accumulating d. Assorting [LO 1.6: To introduce you to marketing channels; Moderate; Concept; AACSB Category 3: Analytical thinking] 33. Channel intermediaries: a. assume temporary ownership of the goods. b. tend to lack focus. c. fill niches. d. tend to disappear as the market becomes organized.

[LO 1.6: To introduce you to marketing channels; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 34. Brokers are intermediaries that are commonly associated with the ___________ channel. a. promotions b. finance c. ownership d. negotiation [LO 1.6: To introduce you to marketing channels; Moderate; Concept; AACSB Category 3: Analytical thinking] 35. The costliest logistics activity in many firms is ___________. a. industrial packaging b. transportation management c. order management d. warehousing management [LO 1.7: To provide a brief overview of activities in the logistics channel; Moderate; Application; AACSB Category 3: Analytical thinking] 8 .

True-False Questions 1. Absolute and relative logistics costs in relation to gross domestic product (GDP) vary from country to country. (True) [LO 1.1: To discuss the economic impacts of logistics; Easy; Application; AACSB Category 3: Analytical thinking] 2. The four general types of economic utility are production, possession, time, and place. (False) [LO 1.1: To discuss the economic impacts of logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 3. Logistics clearly contributes to time and form utility. (False) [LO 1.1: To discuss the economic impacts of logistics; Easy; Application; AACSB Category 3: Analytical thinking] 4. The current definition of logistics, as promulgated by the Council of Supply Chain Management Professionals (CSCMP), suggests that logistics is part of supply chain management. (True) [LO 1.2: To define what logistics is; Easy; application; AASCB Category 3: Analytical thinking] 5. Logistics is only concerned with forward flows—that is, those directed toward the point of consumption. (False) [LO 1.2: Define what logistics is; Easy; Application; AASCB Category 3: Analytical thinking] 6. The purpose of logistics is to maximize customer service. (False) [LO 1.2: To define what logistics is; Easy; Application; AASCB Category 3: Analytical thinking] 7. In mass logistics, groups of customers with similar logistical needs and wants are provided with logistics services appropriate to those wants and needs. (False) [LO 1.2: To define what logistics is; Easy; Concept; AASCB Category 3: Analytical thinking] 8. Humanitarian logistics represents an emerging application of logistics to not-for-profit organizations. (True) [LO 1.2: To define what logistics is; Easy; Application; AASCB Category 3: Analytical thinking] 9. Reductions in economic regulation allowed individual transportation companies flexibility in pricing and service. (True) [LO 1.3: To analyze the increased importance of logistics; Easy; Application; AACSB Category 3: Analytical thinking] 10. Market demassification suggests that the customer desires a product offering that is highly tailored to his exact preference. (False) [LO 1.3: To analyze the increased importance of logistics; Moderate; Concept; AACSB Category 3: Analytical thinking] 11. Disintermediation refers to the removal of intermediaries between producer and consumer.

(True) [LO 1.3: To analyze the increased importance of logistics; Easy; Concept; AACSB Category 3: Analytical thinking]

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12. Superior logistics is an essential component of corporate strategies for many big-box retailers. (True) [LO 1.3: To analyze the increased importance of logistics; Easy; Application; AACSB Category 3: Analytical thinking] 13. Logistics has played a minor role in the growth of global trade. (False) [LO 1.3: To analyze the increased importance of logistics; Easy; Application; AACSB Category 3: Analytical thinking] 14. The systems approach indicates that a company’s objectives can be realized by recognizing the mutual interdependence of the major functional areas of a firm. (True) [LO 1.4: To discuss the systems and total cost approaches to logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 15. A stock-keeping unit (SKU) refers to a line item of inventory offered for sale by a company.

(True) [LO 1.4: To discuss the systems and total cost approaches to logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 16. Physical distribution is synonymous with materials management. (False) [LO 1.4: To discuss the systems and total cost approaches to logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 17. Interfunctional logistics attempts to coordinate materials management and physical distribution in a cost-efficient manner that supports an organization’s customer service objectives. (False) [LO 1.4: To discuss the systems and total cost approaches to logistics; Moderate; Application; AACSB Category 3: Analytical thinking] 18. The key to the total cost approach is that all relevant cost items are considered simultaneously when making a decision. (True) [LO 1.4: To discuss the systems and total cost approaches to logistics; Easy; Application; AACSB Category 3: Analytical thinking] 19. The finance department tends to measure inventory in terms of units whereas logistics tends to measure inventory in terms of its cost or value. (False) [LO 1.5: Logistical relationships within the firm; Easy; Application; AACSB Category 3: Analytical thinking] 20. Long production runs sometimes result in excessive inventory of products with limited demand for them. (True) [LO 1.5: To expose you to logistical relationships within the firm; Easy; Application; AACSB Category 3: Analytical thinking] 21. Postponement is the delay of value-added activities such as assembly, production, and packaging to the latest possible time. (True) [LO 1.5: To expose you to logistical relationships within the firm; Easy; Concept; AACSB Category 3: Analytical thinking] 22. Logistics offers many companies an important route for creating marketing superiority.

(True) [LO 1.5: To expose you to logistical relationships within the firm; Moderate; Application; AACSB Category 3: Analytical thinking] 10 .

23. Dual distribution refers to an alliance that allows customers to purchase products from two or more name-brand retailers at one store location. (False) [LO 1.5: To expose you to logistical relationships within the firm; Easy; Concept; AACSB Category 3: Analytical thinking] 24. Landed costs refer to the price of a product at its source. (False) [LO 1.5: To expose you to logistical relationships within the firm; Easy; Concept; AACSB Category 3: Analytical thinking] 25. Stockouts refer to a situation in which a company is out of an item at the same time that there is demand for that item. (True) [LO 1.5: To expose you to logistical relationships within the firm; Easy; Concept; AACSB Category 3: Analytical thinking] 26. Logistical decisions tend not to be impacted by marketers’ growing emphasis on offering sustainable products. (False) [LO 1.5: To expose you to logistical relationships within the firm; Easy; Application; AACSB Category 3: Analytical thinking] 27. Many promotional decisions, such as pricing campaigns that lower the price of certain items, require close coordination between marketing and logistics. (True) [LO 1.5: To expose you to logistical relationships within the firm; Easy; Application; AACSB Category 3: Analytical thinking] 28. The ownership channel is the one where buy and sell agreements are reached. (False) [LO 1.6: To introduce you to marketing channels; Easy; Application; AACSB Category 3: Analytical thinking] 29. The financing channel handles a company’s credit and payment for goods. (True) [LO 1.6: To introduce you to marketing channels; Easy; Application; AACSB Category 3: Analytical thinking] 30. There is no link between the promotions and logistics channels. (False) [LO 1.6: To introduce you to marketing channels; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 31. The most significant contribution that the logistics channel makes to the overall channel process is the sorting function. (True) [LO 1.6: To introduce you to marketing channels; Hard; Application; AACSB Category 3: Analytical thinking] 32. The sorting function has four steps. (True) [LO 1.6: To introduce you to marketing channels; Moderate; Application; AACSB Category 3: Analytical thinking] 33. The sorting function takes place between retailers and the consumer. (False) [LO 1.6: To introduce you to marketing channels; Easy; Application; AACSB Category 3: Analytical thinking] 34. Intermediaries assume ownership of goods while those goods are in the marketing channel.

(False) [LO 1.6: To introduce you to marketing channels; Moderate; Application; AACSB Category 3: Analytical thinking] 11 .

35. A broker is a type of intermediary often associated with the negotiations channel. (True) [LO 1.6: To introduce you to marketing channels; Easy; Concept; AACSB Category 3: Analytical thinking] 36. A commonly used logistical intermediary is the freight forwarder. (True) [LO 1.6: To introduce you to marketing channels; Moderate; Application; AACSB Category 3: Analytical thinking] 37. Demand forecasting is not considered to be a logistics-related activity. (False) [LO 1.7: To provide a brief overview of activities in the logistics channel; Easy; Application; AACSB Category 3: Analytical thinking] 38. Packaging can have both a marketing and logistical dimension. (True) [LO 1.7: To provide a brief overview of activities in the logistics channel; Moderate; Application; AACSB Category 3: Analytical thinking] 39. Warehousing represents the costliest logistics activity in many organizations. (False) [LO 1.7: To provide a brief overview of activities in the logistics channel; Moderate; Application; AACSB Category 3: Analytical thinking] 40. The job market for logisticians and supply chain managers continues to be strong at the undergraduate, but not the MBA, level. (False) [LO 1.8: To familiarize you with logistics careers; Easy; Application; AACSB Category 3: Analytical thinking]

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TEST BANK CHAPTER 2: LOGISTICS AND INFORMATION TECHNOLOGY Multiple Choice Questions (correct answers are bolded) 1. Which of the following is not a benefit to utilizing information in logistics? a. greater knowledge and visibility across the supply chain b. greater awareness of customer demand via point-of-sale data c. better coordination of manufacturing, merchandising, and distribution through enterprise resource planning (ERP) tools d. lower costs [LO 2.1: To explain the importance of effective and efficient utilization of information for logistics management; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 2. How do data and information differ? a. Data are a body of facts in a format suitable for decision making whereas information is simply facts. b. Data and information are the same. c. Data are simply facts; information is a body of facts in a format suitable for decision making. d. Data are associated with decision support systems; information is associated with enterprise resource planning (ERP) systems.

[LO 2.1: To explain the importance of effective and efficient utilization of information for logistics management; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 3. ___________ refers to the collection of large amounts of near-real-time data collected through a variety of sources such as sensors and smart phones. a. Cloud computing b. Big data c. Data warehousing d. Decision support systems [LO 2.1: To explain the importance of effective and efficient utilization of information for logistics management; Easy; Concept; AACSB Category 3: Analytical thinking] 4. ___________ provide effective ways to process organizational business data, to perform calculations, and to create documents. a. Enterprise resource planning (ERP) systems b. Transaction processing systems 1 .

c. Decision support systems d. Office automation systems [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Concept; AACSB Category 3: Analytical thinking] 5. The most relevant general software package for logisticians is ___________. a. spreadsheets b. word processing c. presentation packages d. email [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Easy; Application; AACSB Category 3: Analytical thinking] 6. ___________ help various stakeholders—employers, suppliers, customers—work together by interacting and sharing information in many different forms. a. Decision support systems b. Communication systems c. Office automation systems d. Transaction processing systems [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Concept; AACSB Category 3: Analytical thinking] 7. What has emerged as the measuring stock for logistics information technology in the twentyfirst century? a. Facebook b. the Internet c. wireless communication d. enterprise resource planning (ERP) systems [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Application; AACSB Category 3: Analytical thinking] 8. Which of the following refers to a network of satellites that transmits signals that pinpoint the exact location of an object? a. Global positioning systems (GPS) b. Cloud computing c. Internet of things d. Electronic data interchange (EDI)

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[LO 2.2: To distinguish between the general types of information systems and their logistical applications; Easy; Concept; AACSB Category 3: Analytical thinking] 9. Electronic data interchange (EDI) represents what general type of information management system? a. communication system b. transaction processing system c. decision support system d. office automation system [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Application; AACSB Category 3: Analytical thinking] 10. ___________ refers to the computer-to-computer transmission of business data in a structured format. a. Big data b. Enterprise resource planning (ERP) systems c. Electronic data interchange (EDI) d. Data mining [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Easy; Concept; AACSB Category 3: Analytical thinking] 11. Automatic identification systems are an essential component in ___________. a. every warehouse b. point-of-sale systems c. a logistics information system (LIS) d. dual distribution [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Application; AACSB Category 3: Analytical thinking] 12. The most popular automatic identification system currently in use is ___________. a. voice-data entry b. radio-frequency identification (RFID) c. magnetic strips d. bar code scanners [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Application; AACSB Category 3: Analytical thinking] 13. Which of the following statements about radio-frequency identification (RFID) is false?

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a. RFID only offers read capabilities. b. Walmart has been a major catalyst for RFID usage in logistics. c. RFID can store large quantities of data. d. RFID has helped to reduce the occurrence of inventory stockouts.

[LO 2.2: To distinguish between the general types of information systems and their logistical applications; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 14. A logistics information system (LIS) begins with ___________. a. a logistics manager requesting information b. a good computer system c. a lot of money d. a customer order [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Application; AACSB Category 3: Analytical thinking] 15. All of the following statements about logistics information systems (LIS) are true except: a. “Timely” can refer to the up-to-date status of information. b. Internal sources of logistics information are relatively plentiful. c. “Timely” can refer to how quickly a manager receives requested information. d. A logistics information system (LIS) must be concerned with the nature and quality of data.

[LO 2.2: To distinguish between the general types of information systems and their logistical applications; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 16. The primary advantage of ___________ is that it enables a firm to test the feasibility of proposed changes at relatively little expense. a. data mining b. application-specific software c. simulation d. artificial intelligence [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Application; AACSB Category 3: Analytical thinking] 17. Which of the following is not a logistics-related decision support system? a. simulation b. application-specific software c. transportation management systems (TMS) 4 .

d. electronic data interchange (EDI) [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 18. Warehouse management systems (WMS) represent an example of what general type of information management system? a. communication system b. transaction processing system c. decision support system d. office automation system [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Application; AACSB Category 3: Analytical thinking] 19. Which of the following is not a potential benefit of transportation management systems (TMS)? a. fewer stockouts b. reduced fuel consumption c. decreased empty vehicle miles d. reduced transportation expenditures [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 20. ___________ refers to the application of mathematical tools to large bodies of data in order to extract correlations and rules. a. Fuzzy logic b. Factor analysis c. Data mining d. Linear regression [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Easy; Concept; AACSB Category 3: Analytical thinking] 21. ___________ refers to a computer-based discipline that leverages algorithms that can “learn” from data. a. Artificial intelligence b. The Internet of things (IoT) c. Expert systems d. Machine learning

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[LO 2.2: To distinguish between the general types of information systems and their logistical applications; Easy; Concept; AACSB Category 3: Analytical thinking] 22. ___________ create and maintain consistent data processing methods and an integrated database across multiple business functions. a. Logistics information systems (LIS) b. Enterprise systems c. Decision support systems d. Transaction processing systems [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Application; AACSB Category 3: Analytical thinking] 23. The origins of contemporary enterprise resource planning (ERP) systems can be traced back to logistics and ___________. a. manufacturing b. marketing c. purchasing d. finance [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Application; AACSB Category 3: Analytical thinking] 24. Which of the following statements about enterprise resource planning (ERP) is false? a. In recent years, ERP vendors have begun to provide high-quality application-specific logistic capabilities. b. ERP implementation costs can easily reach tens of millions of dollars. c. ERP’s origins can be traced back to finance and manufacturing. d. ERP glitches often have a logistical component to them.

[LO 2.2: To distinguish between the general types of information systems and their logistical applications; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 25. A general rule of thumb is that the actual time to implement enterprise resource planning (ERP) systems may range from ___________ to ___________ times longer than the time specified by the ERP vendor. a. 2;3 b. 2;4 c. 2;5 d. 3;4

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[LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Application; AACSB Category 3: Analytical thinking] 26. Approximately ___________ percent of the world’s population currently uses the Internet. a. 53 b. 49 c. 42 d. 35 [LO 2.3: To review how logistics supports online retailing; Moderate; Application; AACSB Category 3: Analytical thinking] 27. Which of the following statements is false? a. Orders associated with online retailing tend to be for smaller quantities than in-store retailing. b. Online retailing is characterized by open-case, rather than full-case, picking. c. Online retailers are challenged by last-mile considerations. d. Online retailing and in-store retailing experience similar rates of product return.

[LO 2.3: To review how logistics supports online retailing; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 28. What has emerged as the most popular application of on-demand logistics software (cloud computing)? a. warehouse management systems (WMS) b. transportation management systems (TMS) c. inventory optimization d. collaborative forecasting [LO 2.4: To illustrate how cloud computing is being used to support logistics software usage; Moderate; Application; AACSB Category 3: Analytical thinking] 29. Which of the following is not a type of benefits that comes from electronic procurement? a. transactional benefits b. management information benefits c. compliance benefits d. production benefits [LO 2.5: To report how companies are using electronic procurement to drive purchasing efficiency; Moderate; Application; AACSB Category 3: Analytical thinking] 30. In a reverse auction, ___________.

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a. multiple sellers invite bids from multiple buyers b. one buyer invites bids from one seller c. one buyer invites bids from multiple sellers d. multiple sellers invite bids from one buyer [LO 2.5: To report how companies are using electronic procurement to drive purchasing efficiency; Easy; Concept; AACSB Category 3: Analytical thinking] 31. The Internet of things (IoT) is expected to drive value in the supply chain and logistics disciplines through enhanced customer interactions and ___________. a. improved order management techniques b. faster transit times c. reduced warehousing requirements d. improvements in employee productivity [LO 2.6: To explain how the Internet of things is affecting the information available to logistics managers; Moderate; Application; AACSB Category 3: Analytical thinking] 32. ___________ has been identified as the biggest information technology challenge that companies face today. a. Software viruses b. Information security c. The cost of technology d. Employee resistance [LO 2.7: To identify contemporary information technology issues; Moderate; Application; AACSB Category 3: Analytical thinking]

True-False Questions 1. The effective and efficient use of information allows organizations to either reduce costs or improve customer satisfaction. (False) [LO 2.1: To explain the importance of effective and efficient utilization of information for logistics management; Moderate; Application; AACSB Category 3: Analytical thinking] 2. “Data” and “information” are synonymous terms. (False) [LO 2.1: To explain the importance of effective and efficient utilization of information for logistics management; Easy; Application; AACSB Category 3: Analytical thinking] 3. Big data refers to large amounts of near-real-time data collected through a variety of sources such as sensors and smart phones. (True) [LO 2.1: To explain the importance of effective and

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efficient utilization of information for logistics management; Easy; Concept; AACSB Category 3: Analytical thinking] 4. Office automation systems provide effective ways to process personal and organizational business data, to perform calculations, and to create documents. (True) [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Easy; Concept; AACSB Category 3: Analytical thinking] 5. A transaction processing system helps people work together by interacting and sharing information in many different forms. (False) [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Application; AACSB Category 3: Analytical thinking] 6. The Internet has emerged as the measuring stick for logistics information technology during the first decade of the twenty-first century. (False) [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Application; AACSB Category 3: Analytical thinking] 7. Transportation companies that have implemented global positioning systems (GPS) have reported increased worker productivity, reduced operating costs, and improved customer relations. (True) [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 8. Electronic data interchange (EDI) is an example of a logistics-related transaction processing system. (True) [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Application; AACSB Category 3: Analytical thinking] 9. Electronic data interchange (EDI) is no longer an important logistics technology in the twentyfirst century. (False) [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Easy; Application; AACSB Category 3: Analytical thinking] 10. The idea behind point-of-sale systems is to provide data to guide and enhance managerial decision making. (True) [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Application; AACSB Category 3: Analytical thinking] 11. Radio-frequency identification (RFID) is the most popular automatic identification system currently in use. (False) [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Application; AACSB Category 3: Analytical thinking] 12. One prominent drawback to radio-frequency identification (RFID) involves privacy concerns. (True) [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Synthesis; AACSB Category 3: Analytical thinking]

9 .

13. A logistics information system (LIS) begins with a logistics manager requesting information and ends with the manager receiving regular and customized reports. (True) [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Application; AACSB Category 3: Analytical thinking] 14. “Timely” information can refer to its nature and quality. (False) [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 15. The primary advantage of simulation is that it enables a firm to test the feasibility of proposed changes at relatively little expense. (True) [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Application; AACSB Category 3: Analytical thinking] 16. Application-specific software is a type of decision support system. (True) [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Application; AACSB Category 3: Analytical thinking] 17. One benefit to transportation management systems (TMS) is fewer stockouts. (False) [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 18. Activities that can be controlled by a warehouse management system (WMS) include inventory management, determination of storage locations, and order shipping. (True) [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 19. Correlation analysis uses sophisticated quantitative techniques to find “hidden” patterns in large volumes of data. (False) [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Easy; Concept; AACSB Category 3: Analytical thinking] 20. Walmart and its vendors make extensive use of data mining to improve supply chain efficiency and effectiveness. (True) [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Easy; Application; AACSB Category 3: Analytical thinking] 21. Artificial intelligence refers to a computer-based discipline that leverages algorithms that can “learn” from data. (False) [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Easy; Concept; AACSB Category 3: Analytical thinking] 22. The attractiveness of enterprise resource planning (ERP) systems comes from their potential for lower costs as well as increased productivity and customer satisfaction. (True) [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Application; AACSB Category 3: Analytical thinking] 10 .

23. The origin of enterprise resource planning (ERP) systems can be traced back to finance and manufacturing. (False) [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Application; AACSB Category 3: Analytical thinking] 24. A general rule of thumb is that the actual time to implement an enterprise resource planning (ERP) system may range from 1.5 to 2 times longer than the time period specified by the ERP vendor. (False) [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Application; AACSB Category 3: Analytical thinking] 25. In recent years, enterprise resource planning (ERP) vendors have begun to provide highquality application-specific logistical capabilities. (True) [LO 2.2: To distinguish between the general types of information systems and their logistical applications; Moderate; Application; AACSB Category 3: Analytical thinking] 26. About 25 percent of the world’s population currently uses the Internet. (False) [LO 2.3: To review how logistics supports online retailing; Moderate; Application; AACSB Category 3: Analytical thinking] 27. There are few logistical similarities between online and in-store retailing. (False) [LO 2.3: To review how logistics supports online retailing; Easy; Application; AACSB Category 3: Analytical thinking] 28. The smaller order quantities occasioned by online retailing tend to favor transport companies with extensive delivery networks and expertise in parcel shipments. (True) [LO 2.3: To review how logistics supports online retailing; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 29. The return rates associated with online retailing are quite similar to those associated with other kinds of retailing. (False) [LO 2.3: To review how logistics supports online retailing; Easy; Application; AACSB Category 3: Analytical thinking] 30. In response to a study that indicated that 35 percent of avid online shoppers desire locations with extended hours and not at their homes, UPS plans to install self-service parcel lockers in approximately 300 locations across the United States. (True) [LO 2.3: To review how logistics supports online retailing; Moderate; Application; AACSB Category 3: Analytical thinking] 31. One reason for the popularity of on-demand software is that is pay-per-use formula allows customers to avoid high capital investment costs. (True) [LO 2.4: To illustrate how cloud computing is being used to support logistics software usage; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 32. Cloud-based software allows for a great deal of customization. (False) [LO 2.4: To illustrate how cloud computing is being used to support logistics software usage; Easy; Application; AACSB Category 3: Analytical thinking] 11 .

33. The Internet is the primary transaction medium for cloud-based software. (True) [LO 2.4: To illustrate how cloud computing is being used to support logistics software usage; Easy; Application; AACSB Category 3: Analytical thinking] 34. Electronic procurement uses the Internet to make it easier, faster, and less expensive for an organization to purchase goods and services. (True) [LO 2.5: To report how companies are using electronic procurement to drive purchasing efficiency; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 35. In a reverse auction, one seller invites bids from multiple buyers. (False) [LO 2.5: To report how companies are using electronic procurement to drive purchasing efficiency; Easy; Concept; AACSB Category 3: Analytical thinking] 36. The Internet of things (IoT) refers to the sensors and data-communication technology that is built into physical objects that enables them to be tracked and controlled over the Internet. (True) [LO 2.6: To explain how the Internet of things is affecting the information available to logistics managers; Moderate; Application; AACSB Category 3: Analytical thinking] 37. The Internet of things (IoT) is expected to drive value in the supply chain and logistics disciplines through faster transit times and enhanced customer interactions. (False) [LO 2.6: To explain how the Internet of things is affecting the information available to logistics managers; Moderate; Application; AACSB Category 3: Analytical thinking] 38. Information technology should be regarded as a tool to help managers address organizational problems. (True) [LO 2.7: Information technology challenges; Moderate; Application; AACSB Category 3: Analytical thinking] 39. Software viruses are viewed as the most important information technology issue that companies face today. (False) [LO 2.7: To identify contemporary information technology issues; Moderate; Application; AACSB Category 3: Analytical thinking] 40. People-related factors, such as employee resistance, have been identified as a major cause of information technology implementation failure. (True) [LO 2.7: To identify contemporary information technology issues; Moderate; Synthesis; AACSB Category 3: Analytical thinking]

12 .

TEST BANK CHAPTER 3: STRATEGIC AND FINANCIAL LOGISTICS Multiple Choice Questions (correct answers are bolded) 1. Depending on industry and product type, reverse logistics costs as a percent of revenue can range between ___________ and ___________ percent. a. 5; 10 b. 4; 8 c. 3; 6 d. 2; 4 [LO: material at beginning of the chapter; Moderate; Application; AACSB Category 3: Analytical thinking] 2. Which of the following is not a level at which strategy can be formulated? a. corporate b. business unit c. functional d. individual location [LO 3.1: To understand how logistics decisions can influence an organization’s strategic financial outcomes; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 3. ___________ strategy is focused on determining the goals for the company, the types of businesses in which the company should compete, and the way the company will be managed. a. Functional level b. Business unit level c. Divisional level d. Corporate level [LO 3.1: To understand how logistics decisions can influence an organization’s strategic financial outcomes; Easy; Concept; AACSB Category 3: Analytical thinking] 4. Strategy at a ___________ level is primarily focused on the products and services provided to customers and on finding ways to develop and maintain a sustainable competitive advantage with these customers. a. functional b. business unit c. divisional d. corporate 1 .

[LO 3.1: To understand how logistics decisions can influence an organization’s strategic financial outcomes; Easy; Concept; AACSB Category 3: Analytical thinking] 5. Which of the following is not one of the generic strategies that can be pursued by an organization, as identified by strategist Michael Porter? a. value enhancement b. differentiation c. cost leadership d. focus [LO 3.1: To understand how logistics decisions can influence an organization’s strategic financial outcomes; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 6. A ___________ strategy entails an organization developing a product and/or service that offers unique attributes that are valued by customers and that the customer perceives to be distinct from competitor offerings. a. focus b. differentiation c. value enhancement d. market orientation [LO 3.1: To understand how logistics decisions can influence an organization’s strategic financial outcomes; Easy; Concept; AACSB Category 3: Analytical thinking] 7. Which generic strategy concentrates an organization’s effort on a narrowly defined market to achieve either a cost leadership or differentiation strategy? a. hybrid b. market orientation c. tailored d. focus [LO 3.1: To understand how logistics decisions can influence an organization’s strategic financial outcomes; Easy; Concept; AACSB Category 3: Analytical thinking] 8. A(n) ___________ entails the functional units of an organization providing input into the other levels of strategy formulation. a. supply chain b. differentiation strategy c. hierarchy of strategy d. enterprise resource system

2 .

[LO 3.1: To understand how logistics decisions can influence an organization’s strategic financial outcomes; Moderate; Concept; AACSB Category 3: Analytical thinking] 9. Which of the following represents the preferred hierarchy of strategy (i.e., from the first strategy to be developed to the last to be developed)? a. corporate→business unit→functional b. functional→business unit→corporate c. corporate→business unit→divisional d. business unit→divisional→functional [LO 3.1: To understand how logistics decisions can influence an organization’s strategic financial outcomes; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 10. ___________ strategy decisions involve issues such as the number and location of warehouses and the selection of appropriate transportation modes. a. Marketing b. Production c. Finance d. Logistics [LO 3.1: To understand how logistics decisions can influence an organization’s strategic financial outcomes; Moderate; Application; AACSB Category 3: Analytical thinking] 11. Which of the following is not a potential type of logistics strategy decision? a. investments in technology that support logistics activities b. selection of appropriate transportation modes c. deployment of inventory d. product availability [LO 3.1: To understand how logistics decisions can influence an organization’s strategic financial outcomes; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 12. When developing logistics strategy, a(n) ___________ strategy refers to the management of logistics activities with a focus on costs. a. market b. process c. differentiation d. information [LO 3.1: To understand how logistics decisions can influence an organization’s strategic financial outcomes; Moderate; Concept; AACSB Category 3: Analytical thinking]

3 .

13. A(n) ___________ strategy refers to management of logistical activities with a goal of achieving coordination and collaboration through the channel. a. market b. process c. differentiation d. information [LO 3.1: To understand how logistics decisions can influence an organization’s strategic financial outcomes; Moderate; Concept; AACSB Category 3: Analytical thinking] 14. A(n) ___________ strategy allows retail customers to order products anywhere, any time, and on any device, while also allowing them to take delivery when and where they want. a. value co-creation b. omnichannel c. hybrid logistics d. information-centric [LO 3.1: To understand how logistics decisions can influence an organization’s strategic financial outcomes; Moderate; Concept; AACSB Category 3: Analytical thinking] 15. The ___________ shows revenues, expenses, and profit for a period of time. a. balance sheet b. current ratio c. income statement d. statement of cash flows [LO 3.2: To review basic financial terminology used by logistics managers; Easy; Concept; AACSB Category 3: Analytical thinking] 16. In general, the ___________ measures the profitability of the products and/or services provided by a company. a. balance sheet b. Strategic Profit Model (SPM) c. Balanced Scorecard (BSC) d. income statement [LO 3.2: To review basic financial terminology used by logistics managers; East; Application; AACSB Category 3: Analytical thinking] 17. The ___________ reflects the assets, liabilities, and owners’ equity at a given point in time. a. Balanced Scorecard (BSC) 4 .

b. balance sheet c. income statement d. Strategic Profit Model (SPM) [LO 3.2: To review basic financial terminology used by logistics managers; Easy; Concept; AACSB Category 3: Analytical thinking] 18. The balance sheet reflects the assets, liabilities, and ___________ at a given point in time. a. costs of goods sold b. net income c. owners’ equity d. asset turnover [LO 3.2: To review basic financial terminology used by logistics managers; Easy; Concept; AACSB Category 3: Analytical thinking] 19. Which of the following does not appear on the balance sheet? a. assets b. owners’ equity c. liabilities d. net income [LO 3.2: To review basic financial terminology used by logistics managers; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 20. Which of the following does not affect cash flows within an organization? a. revenue growth b. asset utilization c. inventory d. accounts receivable [LO 3.2: To review basic financial terminology used by logistics managers; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 21. The ___________ Act has implications for logistics managers in terms of internal controls, off balance sheet obligations, and timely reporting of material events. a. Glass-Steagall b. Financial Managers c. Sarbanes-Oxley d. Regulatory Accountability

5 .

[LO 3.3: To explain organizational financial reporting requirements affected by logistics activities; Moderate; Application; AACSB Category 3: Analytical thinking]

22. The current ratio is calculated by dividing ___________ by ___________. a. total current assets; total current liabilities b. total current liabilities; total current assets c. total assets; total liabilities d. total liabilities; total assets [LO 3.4: To employ the strategic profit model to highlight the financial impact of logistics activities; Moderate; Application; AACSB Category 3: Analytical thinking] 23. Which of the following is a common measure of organizational financial success? a. Net profit margin b. Income statement c. Current ratio d. Return on Investment (ROI) [LO 3.4: To employ the strategic profit model to highlight the financial impact of logistics activities; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 24. What provides the framework for conducting return on assets (ROA) analysis by incorporating revenues and expenses to generate net profit margin, as well as inclusion of assets to measure asset turnover? a. Balanced Scorecard (BSC) b. Strategic Profit Model (SPM) c. Balance Sheet d. Supply Chain Operations Reference Model [LO 3.4: To employ the strategic profit model to highlight the financial impact of logistics activities; Moderate; Concept; AACSB Category 3: Analytical thinking] 25. Return on assets (ROA) equals: a. current assets divided by total assets. b. return on investment divided by return on net worth. c. net profit margin times asset turnover. d. total assets divided by costs of goods sold.

[LO 3.4: To employ the strategic profit model to highlight the financial impact of logistics activities; Moderate; Concept; AACSB Category 3: Analytical thinking]

6 .

26. Suppose that a logistics manager is able to eliminate some unnecessary inventory, which reduces the value of current assets as well as total asset value. What is the corresponding impact on inventory turnover and return on assets (ROA)? a. Both inventory turnover and ROA increase. b. Inventory turnover increases and ROA decreases. c. Inventory turnover decreases and ROA increases. d. Both inventory turnover and ROA decrease.

[LO 3.4: To employ the strategic profit model to highlight the financial impact of logistics activities; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 27. What is the formula for net profit margin? a. Gross Profit minus Interest Expenses b. Sales divided by Costs of Goods Sold c. Total Sales divided by Total Assets d. Net Profit divided by Sales [LO 3.4: To employ the strategic profit model to highlight the financial impact of logistics activities; Moderate; Concept; AACSB Category 3: Analytical thinking] 28. With respect to net profit margin, the most relevant categories for logistics managers to consider are: a. sales, costs of goods sold, and asset turnover. b. accounts receivable, costs of goods sold, and total expenses. c. sales, costs of goods sold, and total expenses. d. inventory, accounts receivable, and total expenses.

[LO 3.4: To employ the strategic profit model to highlight the financial impact of logistics activities; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 29. What is the formula for asset turnover? a. total sales divided by total assets b. net profit divided by total assets c. return on assets divided by total assets d. return on investment divided by return on net worth [LO 3.4: To employ the strategic profit model to highlight the financial impact of logistics activities; Moderate; Concept; AACSB Category 3: Analytical thinking] 30. With respect to asset turnover, ___________ is typically the most relevant logistics asset. a. warehousing 7 .

b. inventory c. transportation equipment d. materials handling equipment [LO 3.4: To employ the strategic profit model to highlight the financial impact of logistics activities; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 31. The Balanced Scorecard (BSC) approach is based on the belief that management should evaluate their business from ___________ distinct perspectives. a. two b. three c. four d. five [LO 3.5: To consider the value of utilizing the Balanced Scorecard approach for examining the performance of a logistics system; Moderate; Concept; AACSB Category 3: Analytical thinking] 32. The ___________ is based on the belief that management should evaluate their business from four different perspectives. a. Balanced Scorecard (BSC) b. Strategic Profit Model (SPM) c. Boston Consulting Group Matrix d. Gross Margin Return on Inventory [LO 3.5: To consider the value of utilizing the Balanced Scorecard approach for examining the performance of a logistics system; Moderate; Concept; AACSB Category 3: Analytical thinking] 33. Logistics measurement systems have been traditionally designed to include information on how many types of performance? a. two b. three c. four d. five [LO 3.6: To compare some of the common performance measures for logistics activities; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 34. Performance measurement in ___________ is used to identify design and operations options that provide benefits in terms of increased speed or reduced costs. a. materials handling 8 .

b. warehousing c. packaging d. order management [LO 3.6: To compare some of the common performance measures for logistics activities; Moderate; Application; AACSB Category 3: Analytical thinking] 35. ___________ looks at how long an organization’s cash is tied up in receivables, payables, and inventory. a. Cash-to-cash cycle b. Cash flow c. Gross margin return on investment (GMROI) d. Current ratio [LO 3.6: To compare some of the common performance measures for logistics activities; Moderate; Concept; AACSB Category 3: Analytical thinking] True-False Questions 1.

Depending on the industry and product type, reverse logistics costs as a percentage of revenues can range between 2 and 4 percent. (False) [LO: material at beginning of the chapter; Moderate; Application; AACSB Category 3: Analytical thinking] 2.

Developing financial fluency is a critical skill for contemporary logistics managers.

(True) [LO: material at beginning of the chapter; Moderate; Application; AACSB Category 3: Analytical thinking] 3.

Logistics performance is important for achieving competitive advantage for many firms.

(True) [LO 3.1: To understand how logistics decisions can influence an organization’s strategic financial outcomes; Easy; Application; AACSB Category 3: Analytical thinking] 4.

Strategy can be formulated at a corporate level, a business unit level, and a functional level. (True) [LO 3.1: To understand how logistics decisions can influence an organization’s strategic financial outcomes; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 5.

Strategy at a business unit level is primarily focused on the types of businesses in which the company should compete and the way the company should be managed. (False) 9 .

[LO 3.1: To understand how logistics decisions can influence an organization’s strategic financial outcomes; Moderate; Concept; AACSB Category 3: Analytical thinking] 6.

Strategist Michael Porter identified three generic strategies that can be pursued by an organization—namely, cost leadership, differentiation, and value enhancement. (False) [LO 3.1: To understand how logistics decisions can influence an organization’s strategic financial outcomes; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 7.

A differentiation strategy entails an organization developing a product and/or service that offers unique attributes that are valued by customers and that customers perceive to be distinct from competitor offerings. (True) [LO 3.1: To understand how logistics decisions can influence an organization’s strategic financial outcomes; Moderate; Concept; AACSB Category 3: Analytical thinking] 8.

The hierarchy of strategy entails the functional units of an organization providing input into the other levels of strategy formulation. (True) [LO 3.1: To understand how logistics decisions can influence an organization’s strategic financial outcomes; Moderate; Concept; AACSB Category 3: Analytical thinking] 9.

Functional level strategies exist in marketing and production, but not in logistics. (False)

[LO 3.1: To understand how logistics decisions can influence an organization’s strategic financial outcomes; Moderate; Application; AACSB Category 3: Analytical thinking] 10.

Marketing goals in areas such as product availability, desired customer service levels, and packaging design have limited influence on logistics decisions. (False) [LO 3.1: To understand how logistics decisions can influence an organization’s strategic financial outcomes; Moderate; Application; AACSB Category 3: Analytical thinking] 11.

A process strategy refers to management of logistics activities across business units with a focus on reducing complexity for customers. (False) [LO 3.1: To understand how logistics decisions can influence an organization’s strategic financial outcomes; Easy; Concept; AACSB Category 3: Analytical thinking] 12.

Research indicates a positive benefit to aligning functional strategies, such as marketing or logistics, with the overall corporate strategy. (True) [LO 3.1: To understand how logistics decisions can influence an organization’s strategic financial outcomes; Moderate; Application; AACSB Category 3: Analytical thinking]

10 .

13.

An omnichannel strategy allows retail customers to order products anywhere, any time, and on any device, while also allowing them to take delivery when and where they want. (True) [LO 3.1: To understand how logistics decisions can influence an organization’s strategic financial outcomes; Easy; Concept; AACSB Category 3: Analytical thinking] 14.

An understanding of financial terminology can help logisticians to manage logistical activities to improve their company’s financial performance. (True) [LO 3.2: To review basic financial terminology used by logistics managers; Moderate; Application; AACSB category 3: Analytical thinking] 15.

The income statement is the same thing as the balance sheet. (False)

[LO 3.2: To review basic financial terminology used by logistics managers; Moderate; Application; AACSB category 3: Analytical thinking] 16.

In general, the income statement measures the profitability of the products and/or service provided by a company. (True) [LO 3.2: To review basic financial terminology used by logistics managers; Easy; Concept; AACSB Category 3: Analytical thinking] 17.

Superior logistics service can have a positive influence on an organization’s financial performance. (True) [LO 3.2: To review basic financial terminology used by logistics managers; Moderate; Application; AACSB Category 3: Analytical thinking] 18.

The balance sheet reflects the assets, liabilities, and costs of goods sold at a given point in time. (False) [LO 3.2: To review basic financial terminology used by logistics managers; Easy; Concept; AACSB category 3: Analytical thinking] 19.

Long-term assets have a useful life of more than two years. (False)

[LO 3.2: To review basic financial terminology used by logistics managers; Easy; Concept; AACSB Category 3: Analytical thinking] 20.

Owners’ equity is the difference between what a company owns and what it owes at any particular point in time. (True) [LO 3.2: To review basic financial terminology used by logistics managers; Easy; Concept; AACSB Category 3: Analytical thinking]

11 .

21.

The income statement details how an organization generates cash and where cash is used during a defined period of time. (False) [LO 3.2: To review basic financial terminology used by logistics managers; Easy; Concept; AACSB Category 3: Analytical thinking] 22.

In terms of the statement of cash flows, the connections between logistics activities and cash flows occur primarily in the operating and financing areas. (True) [LO 3.2: To review basic financial terminology used by logistics managers; Moderate; Application; AACSB Category 3: Analytical thinking] 23.

Three primary areas where the Sarbanes-Oxley Act (SOX) has implications for logistics managers are internal controls, off balance sheet obligations, and timely reporting of material events. (True) [LO 3.3: To explain organizational financial reporting requirements affected by logistics activities; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 24.

The current ratio is calculated by dividing total current liabilities by total current assets.

(False) [LO 3.4: To employ the strategic profit model to highlight the financial impact of logistics activities; Easy; Concept; AACSB Category 3: Analytical thinking] 25.

A common measure of organizational financial success is return on investment (ROI).

(True) [LO 3.4: To employ the strategic profit model to highlight the financial impact of logistics activities; Moderate; Application; AACSB Category 3: Analytical thinking] 26.

Return on assets (ROA) equals net profit margin times asset turnover. (True)

[LO 3.4: To employ the strategic profit model to highlight the financial impact of logistics activities; Easy; Concept; AACSB Category 3: Analytical thinking] 27.

The Balanced Scorecard (BSC) provides the framework for conducting return on assets (ROA) analysis by incorporating revenues and expenses to generate net profit margin, as well as inclusion of assets to measure asset turnover. (False) [LO 3.4: To employ the strategic profit model to highlight the financial impact of logistics activities; Moderate; Concept; AACSB Category 3: Analytical thinking] 28.

A reduction in inventory would increase inventory turnover, which means an increase in that organization’s return on assets (ROA). (True)

12 .

[LO 3.4: To employ the strategic profit model to highlight the financial impact of logistics activities; Moderate; Application; AACSB Category 3: Analytical thinking] 29.

Operationally, net profit margin is net profit divided by cost of goods sold. (False)

[LO 3.4: To employ the strategic profit model to highlight the financial impact of logistics activities; Moderate; Concept; AACSB Category 3: Analytical thinking] 30.

With respect to net profit margin, the most relevant categories for logistics managers to consider are sales, costs of goods sold, and asset turnover. (False) [LO 3.4: To employ the strategic profit model to highlight the financial impact of logistics activities; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 31.

The primary influence of logistics activities on sales would be through the improvement of customer service. (True) [LO 3.4: To employ the strategic profit model to highlight the financial impact of logistics activities; Moderate; Application; AACSB Category 3: Analytical thinking] 32.

Asset turnover is calculated by dividing return on assets by total assets. (False)

[LO 3.4: To employ the strategic profit model to highlight the financial impact of logistics activities; Easy; Concept; AACSB Category 3: Analytical thinking] 33.

With respect to asset turnover, inventory is typically the most relevant logistics asset.

(True) [LO 3.4: To employ the strategic profit model to highlight the financial impact of logistics activities; Moderate; Application; AACSB Category 3: Analytical thinking] 34.

A decision to invest in an electronic data interchange system that would increase invoice accuracy should result in a lower amount of accounts receivable. (True) [LO 3.4: To employ the strategic profit model to highlight the financial impact of logistics activities; Moderate; Application; AACSB Category 3: Analytical thinking] 35.

The Balanced Scorecard (BSC) is based on the belief that management should evaluate their business from five different perspectives. (False) [LO 3.5: To consider the value of utilizing the Balanced Scorecard approach for examining the performance of a logistics system; Moderate; Application; AACSB Category 3: Analytical thinking]

13 .

36.

According to the Balanced Scorecard (BSC) approach, the financial perspective is considered the best indicator of whether or not logistics strategy is being properly implemented and executed. (False) [LO 3.5: To consider the value of utilizing the Balanced Scorecard approach for examining the performance of a logistics system; Moderate; Application; AACSB Category 3: Analytical thinking] 37.

The measures associated with the Balanced Scorecard (BSC) can be at a strategic or tactical level. (True) [LO 3.5: To consider the value of utilizing the Balanced Scorecard approach for examining the performance of a logistics system; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 38.

Best in Class companies tend to use transportation scorecards less frequently than other companies. (False) [LO 3.6: To compare some of the common performance measures for logistics activities; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 39.

The cash-to-cash cycle looks at how long an organization’s cash is tied up in receivables, payables, and inventory. (True) [LO 3.6: To compare some of the common performance measures for logistics activities; Moderate; Concept; AACSB Category 3: Analytical thinking] 40.

When applying performance measures to logistics activities, determination of the key measures should be tailored to the individual organization and level of decision making. (True) [LO 3.6: To compare some of the common performance measures for logistics activities; Moderate; Synthesis; AACSB Category 3: Analytical thinking]

14 .

TEST BANK CHAPTER 4: ORGANIZATIONAL AND MANGERIAL ISSUES IN LOGISTICS Multiple Choice Questions (correct answers are bolded) 1. ___________ and ___________ are the two basic organizational structures associated with logistics. a. Centralized; hierarchical b. Fragmented; centralized c. Fragmented; unified d. Unified; hierarchical [LO 4.1: To explain organizational structure for logistics; Moderate; Concept; AACSB Category 3: Analytical thinking] 2. In a ___________ logistics structure, logistics activities are managed in multiple departments throughout an organization. a. unified b. fragmented c. decentralized d. matrix [LO 4.1: To explain organizational structure for logistics; Moderate; Concept; AACSB Category 3: Analytical thinking] 3. One problem with a ___________ logistics structure is that because logistics activities are scattered throughout a firm, they likely remain subservient to the objectives of the department in which they are housed. a. fragmented b. matrix c. decentralized d. hierarchical [LO 4.1: To explain organizational structure for logistics; Moderate; Concept; AACSB Category 3: Analytical thinking] 4. In a ___________ logistics structure, multiple logistics activities are combined into, and managed as, a single department. a. hierarchical b. centralized c. matrix 1 .

d. unified [LO 4.1: To explain organizational structure for logistics; Moderate; Concept; AACSB Category 3: Analytical thinking] 5. A ___________ logistics organization implies that the corporation maintains a single logistics department that administers the related activities for the entire company from the home office. a. centralized b. hierarchical c. unified d. command-and-control [LO 4.1: To explain organizational structure for logistics; Moderate; Concept; AACSB Category 3: Analytical thinking] 6. A(n) ___________ logistics organization means that logistics-related decisions are made separately at the divisional or product group level. a. fragmented b. decentralized c. flexible d. agile [LO 4.1: To explain organizational structure for logistics; Moderate; Concept; AACSB Category 3: Analytical thinking] 7. A primary advantage of ___________ logistics is its relative efficiency, whereas a primary advantage of ___________ logistics is its customer responsiveness. a. unified; fragmented b. unified; decentralized c. centralized; decentralized d. fragmented; centralized [LO 4.1: To explain organizational structure for logistics; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 8. Which of the following is an advantage of a decentralized logistics organization? a. It can be less expensive than a centralized organization. b. There are good opportunities for freight consolidation. c. There is better control over company data. d. It can be responsive to customer service requirements.

[LO 4.1: To explain organizational structure for logistics; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 2 .

9. Which of the following is an advantage of a centralized logistics organization? a. It can be less expensive than a decentralized organization. b. It has good opportunities for freight consolidation. c. It can be responsive to customer service requirements. d. It is easier to manage than a decentralized organization.

[LO 4.1: To explain organizational structure for logistics; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 10. ___________ organizational design has its foundations in the command-and-control military operation, where decision making and communication often follow a top-down flow. a. Centralized b. Unified c. Matrix d. Hierarchical [LO 4.2: To compare traditional and contemporary organizational design for logistics; Moderate; Concept; AACSB Category 3: Analytical thinking] 11. A ___________ organizational design attempts to create an organization that is responsive to the parameters of the contemporary business environment. a. matrix b. network c. decentralized d. unified [LO 4.2: To compare traditional and contemporary organizational design for logistics; Moderate; Concept; AACSB Category 3: Analytical thinking] 12. A key attribute of network organizational design is a shift from ___________ to ___________. a. function; process b. centralization; decentralization c. process; function d. decentralization; centralization [LO 4.2: To compare traditional and contemporary organizational design for logistics; Moderate; Application; AACSB Category 3: Analytical thinking] 13. ___________ refers to satisfying current and emerging customer needs.

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a. Responsiveness b. Flexibility c. Relevancy d. Accommodation [LO 4.2: To compare traditional and contemporary organizational design for logistics; Moderate; Concept; AACSB Category 3: Analytical thinking] 14. ___________ can be defined as an organization’s ability to address unexpected operational situations. a. Relevancy b. Flexibility c. Accommodation d. Responsiveness [LO 4.2: To compare traditional and contemporary organizational design for logistics; Moderate; Concept; AACSB Category 3: Analytical thinking] 15. ___________ refers to the amount of output divided by the amount of input. a. Control b. Monitoring c. Productivity d. Input–output analysis [LO 4.3: To identify productivity issues and improvement efforts in logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 16. Productivity improvement efforts in logistics are often directed toward ___________. a. reducing input while increasing output b. increasing output by a greater percentage than inputs are increased c. reducing input while holding output constant d. increasing output while holding input constant [LO 4.3: To identify productivity issues and improvement efforts in logistics; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 17. What is the most important purpose of warehouse work rules? a. to control pilferage b. to keep employees from engaging in unproductive and potentially destructive activities c. to protect companies from union grievance procedures d. to give managers control over warehouse workers 4 .

[LO 4.3: To identify productivity issues and improvement efforts in logistics; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 18. What major retailer has been testing drones within its warehouses as a potential solution to enhance productivity? a. Amazon b. Home Depot c. Walmart d. Target [LO 4.3: To identify productivity issues and improvement efforts in logistics; Moderate; Application; AACSB Category 3: Analytical thinking] 19. A ___________ is a device used to monitor and control the actions taken by a driver and his/her vehicle. a. tachograph b. tachometer c. speedometer d. regulator [LO 4.3: To identify productivity issues and improvement efforts in logistics; Moderate; Concept; AACSB Category 3: Analytical thinking] 20. ___________ refers to an organization making their unused resources available to other organizations. a. Sharing economy b. Flexibility c. Responsiveness d. Excess capacity [LO 4.3: To identify productivity issues and improvement efforts in logistics; Moderate; Concept; AACSB Category 3: Analytical thinking] 21. ___________ is a set of generic standards used to document, implement, and demonstrate quality management and assurance systems. a. Benchmarking b. Six Sigma c. ISO 9000 d. ISO 14000

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[LO 4.4: To discuss quality issues in logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 22. The quality concept that emphasizes the elimination of business errors is known as ___________. a. the Lean approach b. Six Sigma c. benchmarking d. zero tolerance [LO 4.4: To discuss quality issues in logistics; Moderate; Concept; AACSB Category 3: Analytical thinking] 23. ___________ refers to the integration of Six Sigma and the Lean approach. a. ISO 9000 b. Quality management c. Supply chain management d. Lean Six Sigma [LO 4.4: To discuss quality issues in logistics; Moderate; Concept; AACSB Category 3: Analytical thinking] 24. What is a key difference between IS0 9000 and the Malcolm Baldrige National Quality Award? a. Only the Baldrige Award focuses on quality. b. The Baldrige Award is more externally focused than is ISO 9000. c. ISO 9000 is more externally focused than the Baldrige Award. d. ISO 9000 focuses more on lean practices than does the Baldrige Award.

[LO 4.4: To discuss quality issues in logistics; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 25. The ___________ has been established to identify uncertainty sources that can affect the risk exposure for logistics activities. a. Perfect Order b. Logistics Uncertainty Pyramid Model c. Department of Homeland Security d. Logistics Risk Factor [LO 4.5: To report on programs designed to lessen the impact of terrorism on logistics systems; Moderate; Concept; AACSB Category 3: Analytical thinking]

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26. From a logistics perspective, two of most important government agencies incorporated into the Department of Homeland Security (DHS) were the Transportation Security Administration (TSA) and ___________. a. Department of Transportation b. Federal Maritime Commission c. Surface Transportation Board d. Customs and Border Protection (CBP) [LO 4.5: To report on programs designed to lessen the impact of terrorism on logistics systems; Difficult; Application; AACSB Category 3: Analytical thinking] 27. The ___________ is responsible for the security of the U.S. transportation system. a. Department of Commerce b. Department of Transportation c. Transportation Security Administration (TSA) d. U.S. State Department [LO 4.5: To report on programs designed to lessen the impact of terrorism on logistics systems; Moderate; Application; AACSB Category 3: Analytical thinking] 28. ___________ refers to a program where public and private organizations work together to prevent terrorism against the United States. a. Container Security Initiative (CSI) b. Importer Security Filing (ISF) rule c. Customs Trade Partnership Against Terrorism (C-TPAT) d. Securing America’s Borders (SAB) [LO 4.5: To report on programs designed to lessen the impact of terrorism on logistics systems; Moderate; Application; AACSB Category 3: Analytical thinking] 29. The Importer Security Filing (ISF) rule requires importers to file ___________ pieces of information and carriers to file ___________ pieces of information. a. 10; 2 b. 5; 5 c. 2; 10 d. 4; 8 [LO 4.5: To report on programs designed to lessen the impact of terrorism on logistics systems; Moderate; Application; AACSB Category 3: Analytical thinking] 30. Which of the following statements is false?

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a. Pilferage refers to employee theft. b. The time and costs associated with theft aren’t always covered by insurance. c. Some organizations avoid locating their facilities in areas characterized by high crime rates. d. Theft refers to stolen merchandise worth more than $500.

[LO 4.6: To describe ways to manage theft and pilferage; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 31. The materials stolen in ___________ are usually for the employee’s own use. a. theft b. demurrage c. non-monetary compensation d. pilferage [LO 4.6: To describe ways to manage theft and pilferage; Moderate; Concept; AACSB Category 3: Analytical thinking] 32. What is the primary difference between pilferage and theft? a. There is no difference between the two terms. b. Pilferage involves a firm’s own employees, while theft involves efforts from outsiders. c. Theft refers to stolen merchandise worth more than $500. d. Pilferage refers to stolen merchandise worth more than $500.

[LO 4.6: To describe ways to manage theft and pilferage; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 33. Approximately ___________ percent of all pirate attacks in recent years have involved petroleum tankers. a. 40 b. 30 c. 20 d. 10 [LO 4.6: To describe ways to manage theft and pilferage; Moderate; Application; AACSB Category 3: Analytical thinking] 34 The concept of logistics social responsibility, or corporate social responsibility issues that relate directly to logistics, did not emerge until which decade? a. 1970s b. 1980s 8 .

c. 1990s d. 2000s [LO 4.7: To review the concept of logistics social responsibility; Moderate; Application; AACSB Category 3: Analytical thinking] 35. The two areas in logistics systems where most energy costs occur are ___________ and ___________. a. warehousing; transportation b. packaging; transportation c. materials handling; packaging d. warehousing; materials handling [LO 4.7: To review the concept of logistics social responsibility; Moderate; Application; AACSB Category 3: Analytical thinking] 36. With respect to the design of warehouses, one suggestion for energy savings is to make sure that dock doors are not placed on the ___________ side of a building. a. west b. east c. north d. south [LO 4.7: To review the concept of logistics social responsibility; Moderate; Application; AACSB Category 3: Analytical thinking] 37. Transportation accounts for approximately ___________ of all petroleum consumption in the United States. a. three-quarters b. two-thirds c. one-half d. one-third [LO 4.7: To review the concept of logistics social responsibility; Moderate; Application; AACSB Category 3: Analytical thinking] 38. Which of the following is not one of the three critical factors associated with the process of managing returned goods? a. why products are returned b. whether returned goods should be managed internally or outsourced to a third party c. how to optimize reverse logistics d. how many products are returned 9 .

[LO 4.7: To review the concept of logistics social responsibility; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 39. ___________ complexity refers to the growing number nodes and the associated changes to the links in the logistics system. a. Process b. Range c. Network d. System [LO 4.8: To articulate logistics issues associated with complexity; Moderate; Concept; AACSB Category 3: Analytical thinking] 40. ___________ complexity centers on the implications associated with the increasing number of products that most companies continue to face in an effort to differentiate themselves with their customers. a. Process b. Range c. Network d. System [LO 4.8: To articulate logistics issues associated with complexity; Moderate; Concept; AACSB Category 3: Analytical thinking] True-False Questions 1. The organization of logistics activities within a firm depends on a number of factors, including the number and location of customers and an organization’s size. (True) [LO 4.1: To explain organizational structure for logistics; Moderate; Application; AACSB Category 3: Analytical thinking] 2. In a decentralized logistics structure, logistics activities are managed in multiple departments throughout an organization. (False) [LO 4.1: To explain organizational structure for logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 3. One problem with a fragmented logistics structure is that because logistics activities are scattered throughout the firm, they likely remain subservient to the objectives of the departments in which they are housed. (True)

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[LO 4.1: To explain organizational structure for logistics; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 4. In a unified logistics structure, multiple logistics activities are combined into, and managed as, a single department. (True) [LO 4.1: To explain organizational structure for logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 5. A centralized logistics organization generally results in better customer responsiveness than a decentralized logistics organization. (False) [LO 4.1: To explain organizational structure for logistics; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 6. A decentralized logistics organization means that logistics-related decisions are made at the divisional or product group level and often in different geographic areas. (True) [LO 4.1: To explain organizational structure for logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 7. The majority of companies employ a chief logistics officer (CLO). (False) [LO 4.1: To explain organizational structure for logistics; Moderate; Application; AACSB Category 3: Analytical thinking] 8. A matrix organizational design can be very responsive to customer requirements. (True) [LO 4.2: Organizational design for logistics; Moderate; Application; AACSB Category 3: Analytical thinking] 9. From a logistics perspective, a network organizational design in logistics is manifested in terms of relevancy, responsiveness, and flexibility. (True) [LO 4.2: Organizational design for logistics; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 10. Responsiveness refers to satisfying current and emerging customer needs. (False) [LO 4.2: Organizational design for logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 11. The postponement of product assembly and labeling until exact customer requirements are known is an example of responsiveness. (False)

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[LO 4.2: Organizational design for logistics; Moderate; Application; AACSB Category 3: Analytical thinking] 12. Productivity efforts in logistics are often directed at increasing the amount of output while holding input constant. (True) [LO 4.3 To identify productivity issues and improvement efforts in logistics; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 13. Union work rules are often very specific in the sense that job descriptions spell out the responsibilities associated with a particular job. (True) [LO 4.3 To identify productivity issues and improvement efforts in logistics; Easy; Application; AACSB Category 3: Analytical thinking] 14. Walmart has begun testing drones within its warehouses as a potential solution to enhance warehouse productivity. (True) [LO 4.3 To identify productivity issues and improvement efforts in logistics; Easy; Application; AACSB Category 3: Analytical thinking] 15. The odometer is a recording instrument that produces a continuous, timed record of the truck, its speed, and its engine speed. (False) [LO 4.3 To identify productivity issues and improvement efforts in logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 16. Wireless communications, global positioning systems, and graphical information systems offer tremendous opportunities to improve driver productivity. (True) [LO 4.3 To identify productivity issues and improvement efforts in logistics; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 17. Excess capacity, or unused available space, can be unproductive because it may result in the purchase of additional equipment or space. (True) [LO 4.3 To identify productivity issues and improvement efforts in logistics; Moderate; Application; AACSB Category 3: Analytical thinking] 18. Coopetition is a concept that entails an organization making its unused resources available to other organizations. (False) [LO 4.3 To identify productivity issues and improvement efforts in logistics; Moderate; Concept; AACSB Category 3: Analytical thinking]

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19. Logistics service quality relates to a firm’s ability to deliver products, materials, and services without defects or errors to both internal and external customers. (True) [LO 4.4 To discuss quality issues in logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 20. ISO 14000 is a set of generic standards used to document, implement, and demonstrate quality management and assurance systems. (False) [LO 4.4 To discuss quality issues in logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 21. The integration of Six Sigma with the Lean approach refers to Lean Six Sigma. (True) [LO 4.4 To discuss quality issues in logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 22. ISO 9000 involves organizations benchmarking themselves against organizations from outside their particular industry. (False) [LO 4.4 To discuss quality issues in logistics; Moderate; Concept; AACSB Category 3: Analytical thinking] 23. The Logistics Uncertainty Index has been established to identify uncertainty sources that can affect the risk exposure for logistics activities. (False) [LO 4.5: To report on programs designed to lessen the impact of terrorism on logistics systems; Moderate; Concept; AACSB Category 3: Analytical thinking] 24. Terrorism can be viewed as an illegal use of or threat of force or violence made by a group or an individual against a person, a company, or somebody’s property with a goal of menacing the target, often grounded in politics or ideology. (True) [LO 4.5: To report on programs designed to lessen the impact of terrorism on logistics systems; Moderate; Concept; AACSB Category 3: Analytical thinking] 25. From a logistical perspective, the Transportation Security Administration (TSA) and the Department of Transportation are two of the most important government entities that were incorporated into the Department of Homeland Security (DHS). (False) [LO 4.5: To report on programs designed to lessen the impact of terrorism on logistics systems; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 26. The Transportation Worker Identification Credential (TWIC) uses biometric data to exclude certain workers from secure areas at ports and terminals. (True)

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[LO 4.5: To report on programs designed to lessen the impact of terrorism on logistics systems; Moderate; Application; AACSB Category 3: Analytical thinking] 27. Customs and Border Protection (CBP) is responsible for securing U.S. borders to protect the American people and the U.S. economy. (True) [LO 4.5: To report on programs designed to lessen the impact of terrorism on logistics systems; Moderate; Application; AACSB Category 3: Analytical thinking] 28. Companies that participate in the Customs Trade Partnership Against Terrorism (C-TPAT) are exempt from all import tariffs and all import quotas. (False) [LO 4.5: To report on programs designed to lessen the impact of terrorism on logistics systems; Moderate; Application; AACSB Category 3: Analytical thinking] 29. The Importer Security Filing (ISF) rule requires carriers to file 10 pieces of information and importers to file 2 pieces of information. (False) [LO 4.5: To report on programs designed to lessen the impact of terrorism on logistics systems; Moderate; Concept; AACSB Category 3: Analytical thinking] 30. Experts recommend that the best pilferage policy should be based on zero tolerance. (True) [LO 4.6: To describe ways to manage theft and pilferage; Easy; Application; AACSB Category 3: Analytical thinking] 31. One of the most effective methods of protecting goods from theft or pilferage is to keep them moving through the system. (True) [LO 4.6: To describe ways to manage theft and pilferage; Moderate; Application; AACSB Category 3: Analytical thinking] 32. More than 50 percent of all pirate attacks in recent years have involved petroleum tankers.

(True) [LO 4.6: To describe ways to manage theft and pilferage; Moderate; Application; AACSB Category 3: Analytical thinking] 33. Logistics does not have an inherent connection to sustainability. (False) [LO 4.7: To review the concept of logistics social responsibility; Easy; Application; AACSB Category 3: Analytical thinking] 34. Potential logistics social responsibility dimensions include the environment, diversity, safety, and philanthropy, among others. (True)

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[LO 4.7: To review the concept of logistics social responsibility; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 35. Warehousing and packaging are the two areas in logistics systems where the most energy costs occur. (False) [LO 4.7: To review the concept of logistics social responsibility; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 36. Roof color is often overlooked as an area for warehousing energy control. (True) [LO 4.7: To review the concept of logistics social responsibility; Moderate; Application; AACSB Category 3: Analytical thinking] 37. Transportation accounts for about one-half of all petroleum consumption in the United States. (False) [LO 4.7: To review the concept of logistics social responsibility; Moderate; Application; AACSB Category 3: Analytical thinking] 38. Reverse logistics can be four to five times more expensive than forward logistics. (True) [LO 4.7: To review the concept of logistics social responsibility; Moderate; Application; AACSB Category 3: Analytical thinking] 39. Network complexity refers to the growing number of nodes and the associated changes to the links in logistics systems. (True) [LO 4.8: To articulate logistics issues associated with complexity; Easy; Concept; AACSB Category 3: Analytical thinking] 40. System complexity centers on the implications associated with the increasing number of products that most companies continue to face in an effort to differentiate themselves with their customers. (False) [LO 4.8: To articulate logistics issues associated with complexity; Moderate; Concept; AACSB Category 3: Analytical thinking]

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TEST BANK CHAPTER 5: THE SUPPLY CHAIN MANAGEMENT CONCEPT Multiple Choice Questions (correct answers are bolded) 1. An underperforming supply chain is defined as one that exhibits poor service, unproductive assets, or ___________. a. high variable operating costs b. outdated information technology c. high fixed costs d. transactional exchanges [LO: Material at beginning of the chapter; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 2. The supply chain management concept originated in what discipline? a. marketing b. operations c. logistics d. production [LO 5.1: To explain the concept of supply chains and how the network of interorganizational relationships is managed; Moderate; Application; AACSB Category 3: Analytical thinking] 3. The early to mid-___________ witnessed a growing recognition that there could be value in coordinating various business functions within and across organizations. a. 1960s b. 1970s c. 1980s d. 1990s [LO 5.1: To explain the concept of supply chains and how the network of interorganizational relationships is managed; Moderate; Application; AACSB Category 3: Analytical thinking] 4. What concept can be viewed as a combination of processes, functions, activities, relationships, and pathways along which products, services, information, and financial transactions move in and between enterprises from original producer to ultimate end user or consumer? a. logistics b. supply chain c. marketing channel d. interorganizational coordination 1 .

[LO 5.1: To explain the concept of supply chains and how the network of interorganizational relationships is managed; Moderate; Concept; AACSB Category 3: Analytical thinking] 5. Although nearly any organization can be part of a supply chain, supply chain management requires (SCM) ___________. a. the involvement of third-party logistics companies b. the participation of world-class organizations c. at least one organization to be a multinational company d. companies to adopt an enterprise-to-enterprise point of view [LO 5.1: To explain the concept of supply chains and how the network of interorganizational relationships is managed; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 6. The two most prominent SCM process frameworks are the Supply Chain Operations Reference (SCOR) Model and the ___________. a. Supply Chain Efficiency (SCE) Model b. Process Classification Framework (PCF) c. Global Supply Chain Forum (GSCF) Model d. Council of Supply Chain Management Professionals (CSCMP) Model [LO 5.2: To summarize supply chain process frameworks; Moderate; Application; AACSB Category 3: Analytical thinking] 7. Which organizational function is not a focus of the Supply Chain Operations Reference (SCOR) Model? a. marketing b. logistics c. operations d. procurement [LO 5.2: To summarize supply chain process frameworks; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 8. Source, plan, make, and enable are processes associated with the ___________. a. Global Supply Chain Forum (GSCF) Model b. Supply Chain Operations Reference (SCOR) Model c. Process Classification Framework (PCF) d. Supply Chain Efficiency (SCE) Model [LO 5.2: To summarize supply chain process frameworks; Moderate; Application; AACSB Category 3: Analytical thinking]

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9. Which of the following is not one of the processes in the Supply Chain Operations Reference (SCOR) Model? a. source b. plan c. demand management d. enable [LO 5.2: To summarize supply chain process frameworks; Moderate; Application; AACSB Category 3: Analytical thinking] 10. The current Global Supply Chain Forum (GSCF) Model identifies ___________ key processes associated with supply chain management. a. five b. six c. seven d. eight [LO 5.2: To summarize supply chain process frameworks; Moderate; Concept; AACSB Category 3: Analytical thinking] 11. Customer relationship management, supplier relationship management, order fulfillment, and returns management are processes associated with the ___________. a. Global Supply Chain Forum (GSCF) Model b. Process Classification Framework (PCF) c. Supply Chain Efficiency (SCE) Model d. Supply Chain Operations Reference (SCOR) Model [LO 5.2: To summarize supply chain process frameworks; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 12. Contemporary supply chains are increasingly required to be fast and ___________. a. lean b. agile c. interactive d. relevant [LO 5.3: To illustrate potential enablers of supply chain management implementation; Moderate; Application; AACSB Category 3: Analytical thinking] 13. An organization’s ability to respond to changes in demand with respect to volume and variety refers to ___________.

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a. responsiveness b. leanness c. agility d. relevancy [LO 5.3: To illustrate potential enablers of supply chain management implementation; Easy; Concept; AACSB Category 3: Analytical thinking] 14. Which of the following is not a potential outcome from a supply chain’s failure to be fast and agile? a. dissatisfied customers b. reduced profitability c. decreased market share d. increased stock price [LO 5.3 To illustrate potential enablers of supply chain management implementation; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 15. What is a perfect order? a. simultaneous achievement of relevant customer metrics b. order that arrives on time c. order that arrives undamaged d. order that is easy for the receiver to fill [LO 5.3: To illustrate potential enablers of supply chain management implementation; Moderate; Concept; AACSB Category 3: Analytical thinking] 16. ___________ refers to focusing part of one’s supply chain on a timely response to fluctuating customer orders and/or product variety and another part of the supply chain on leveling out the planning requirements to smooth production output. a. Supply chain management b. Flexibility c. Responsiveness d. Leagility [LO 5.3: To illustrate potential enablers of supply chain management implementation; Moderate; Concept; AACSB Category 3: Analytical thinking] 17. What concept refers to the variability in demand orders among supply chain participants? a. unpredictability b. bullwhip effect c. order fluctuation 4 .

d. agile supply chain [LO 5.3: To illustrate potential enablers of supply chain management implementation; Moderate; Concept; AACSB Category 3: Analytical thinking] 18. Which of the following is not a way to reduce inventory levels? a. smaller, more frequent orders b. use of premium transportation c. supply–push replenishment d. elimination of slower-moving products [LO 5.3: To illustrate potential enablers of supply chain management implementation; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 19. Which of the following is not an attribute of relational exchanges? a. trust b. dependence c. joint investment d. opportunism [LO 5.3: To illustrate potential enablers of supply chain management implementation; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 20. Cooperative supply chain relationships developed to enhance the overall business performance of both parties is a definition of ___________. a. third-party logistics b. supply chain collaboration c. leagility d. relational exchanges [LO 5.3: To illustrate potential enablers of supply chain management implementation; Moderate; Concept; AACSB Category 3: Analytical thinking] 21. Supply chain collaboration can be classified as transactional, strategic, or ___________ in nature. a. operational b. relational c. managerial d. tactical information sharing [LO 5.3: To illustrate potential enablers of supply chain management implementation; Moderate; Application; AACSB Category 3: Analytical thinking] 5 .

22. ___________ collaborations offer the best opportunity for improving supply chain performance. a. Transactional b. Tactical information sharing c. Strategic d. Operational [LO 5.3: To illustrate potential enablers of supply chain management implementation; Moderate; Application; AACSB Category 3: Analytical thinking] 23. Tailored business relationships between two supply chain members refer to ___________. a. supply chain partnership b. supply chain management c. relational exchanges d. tailored logistics [LO 5.3: To illustrate potential enablers of supply chain management implementation; Moderate; Concept; AACSB Category 3: Analytical thinking] 24. Which of the following is not an attribute of supply chain partnerships? a. mutual trust b. increased willingness to share information c. high independence among the partners d. compatible goals [LO 5.3: To illustrate potential enablers of supply chain management implementation; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 25. According to the text, ___________ has been at the center of the changes taking place that affect the supply chain. a. economic malaise b. logistics c. customer power d. technology [LO 5.3: To illustrate potential enablers of supply chain management implementation; Moderate; Application; AACSB Category 3: Analytical thinking] 26. Two key factors, ___________ and ___________, have sparked much of the technological change affecting supply chains.

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a. electronic data interchange; enterprise resource planning b. computing power; Internet c. Internet, electronic data interchange d. computing power; enterprise resource planning [LO 5.3: To illustrate potential enablers of supply chain management implementation; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 27. The general idea behind ___________ is that one company allows a specialist company to provide it with one or more logistics functions. a. supply chain management b. multichannel marketing c. third-party logistics d. cross-organizational collaboration [LO 5.3: To illustrate potential enablers of supply chain management implementation; Moderate; Concept; AACSB Category 3: Analytical thinking] 28. Which of the following statements is true? a. Third-party logistics companies demand only a few activities from third-party logistics providers. b. The decision to use third-party logistics can only be strategic in nature. c. Third-party logistics is synonymous with fourth-party logistics. d. A common cause of third-party logistics failure is unreasonable and unrealistic expectations.

[LO 5.3: To illustrate potential enablers of supply chain management implementation; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 29. What is a fourth-party logistics provider? a. a company that ensures that various third-party logistics companies are working toward the relevant supply chain goals and objectives b. a third-party logistics provider that has achieved ISO 9000 certification c. a logistics intermediary that specializes in one logistics activity, such as warehousing or transportation d. a third-party logistics provider that specializes in two or more logistics activities, such as warehousing and transportation [LO 5.3: To illustrate potential enablers of supply chain management implementation; Moderate; Concept; AACSB Category 3: Analytical thinking] 30. Which of the following statements is false?

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a. Top management commitment is essential if supply chain efforts are to have any chance of success. b. Some companies are uncomfortable with the concept of customer power in supply chains. c. Senior management commitment to supply chain management occurs in one of every two organizations. d. Some companies are hesitant to enter into long-term relationships because such relationships might be perceived as limiting a company’s operational flexibility.

[LO 5.4: To illustrate potential barriers to supply chain management implementation; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 31. ___________ combines technology with manual employee effort to identify trends, perform comparisons, and highlight opportunities in supply chain processes, even when large amounts of data are involved. a. Data mining b. Supply chain analytics c. Benchmarking d. Third-party logistics [LO 5.4: To illustrate potential barriers to supply chain management implementation; Easy; Concept; AACSB Category 3: Analytical thinking] 32. A recent study of senior executives found that ___________ percent (within 2 percent) had implemented analytics focused on supply chain activities. a. 35 b. 25 c. 15 d. 5 [LO 5.4: To illustrate potential barriers to supply chain management implementation; Moderate; Application; AACSB Category 3: Analytical thinking] 33. In a(n) ___________ approach, all relevant software applications are provided by a single vendor. a. single integrator b. best-of-breed approach c. customer-centric d. information outsourcing [LO 5.4: To illustrate potential barriers to supply chain management implementation; Moderate; Concept; AACSB Category 3: Analytical thinking]

8 .

34. Which of the following is not a barrier to supply chain management? a. regulatory and political considerations b. lack of top management commitment c. reluctance to share, or use, relevant data d. use of supply chain facilitators [LO 5.4: To illustrate potential barriers to supply chain management implementation; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 35. ___________ refers to “how we do things around here” and reflects an organization’s vision, values, and strategic plans. a. Supply chain management b. Corporate strategy c. Supply chain collaboration d. Corporate culture [LO 5.4: To illustrate potential barriers to supply chain management implementation; Moderate; Concept; AACSB Category 3: Analytical thinking] 36. Which of the following is not a term for a long-term mutually beneficial supply chain agreement? a. partnerships b. third-party arrangements c. coopetition d. contract logistics [LO 5.5: To compare optional approaches for supply chain integration; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 37. Which concept refers to the situation in which one organization owns multiple participants in the supply chain? a. supply chain management b. vertical integration c. horizontal integration d. intensive distribution [LO 5.5: To compare optional approaches for supply chain integration; Moderate; Concept; AACSB Category 3: Analytical thinking] 38. There are three primary methods that organizations can pursue when attempting to integrate their supply chains. Which of the following is not one of them?

9 .

a. informal agreements b. formal contracts c. vertical integration d. centralized organization [LO 5.5: To compare optional approaches for supply chain integration; Moderate; Synthesis; AACSB Category 3: Analytical thinking] True-False Questions 1. Research on underperforming supply chains suggests that logistics can be crucial to achieving desired levels of supply chain performance. (True) [LO: Material at the beginning of the chapter; Easy; Synthesis; AACSB Category 3: Analytical thinking] 2. The supply chain concept originated in the manufacturing literature. (False) [LO 5.1: To explain the concept of supply chains and how the network of interorganizational relationships is managed; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 3. Supply chains are a new concept in the sense that they were first identified in the 1970s and 1980s. (False) [LO 5.1: To explain the concept of supply chains and how the network of interorganizational relationships is managed; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 4. Customers can be a potential value co-creator of supply chain activities. (True) [LO 5.1: To explain the concept of supply chains and how the network of interorganizational relationships is managed; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 5. Supply chain management requires companies to adopt an enterprise-to-enterprise point of view. (True) [LO 5.1: To explain the concept of supply chains and how the network of interorganizational relationships is managed; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 6. The two prominent supply chain management frameworks are the Supply Chain Operations Reference (SCOR) model and the Process Classification Framework (PCF). (False) [LO 5.2: To summarize supply chain process frameworks; Moderate; Application; AACSB Category 3: Analytical thinking] 7. The Supply Chain Operations Reference (SCOR) model identifies five key processes associate with supply chain management. (False) 10 .

[LO 5.2: To summarize supply chain process frameworks; Easy; Concept; AACSB Category 3: Analytical thinking] 8. The Global Supply Chain Forum (GSCF) model identifies eight relevant processes associated with supply chain management. (True) [LO 5.2: To summarize supply chain process frameworks; Easy; Concept; AACSB Category 3: Analytical thinking] 9. Because customer needs and wants change relatively quickly, supply chains should be fast and lean. (False) [LO 5.3: To illustrate potential enablers of supply chain management implementation; Moderate; Application; AACSB Category 3: Analytical thinking] 10. With respect to supply chains, relevancy focuses on an organization’s ability to respond to changes in demand with respect to volume and variety. (False) [LO 5.3: To illustrate potential enablers of supply chain management implementation; Moderate; Concept; AACSB Category 3: Analytical thinking] 11. A perfect order simultaneously achieves relevant customer metrics. (True) [LO 5.3: To illustrate potential enablers of supply chain management implementation; Easy; Concept; AACSB Category 3: Analytical thinking] 12. Leagility refers to a supply chain that combines the lean and agile paradigms. (True) [LO 5.3: To illustrate potential enablers of supply chain management implementation; Easy; Concept; AACSB Category 3: Analytical thinking] 13. The leagility effect refers to variability in demand orders among supply chain members.

(False) [LO 5.3: To illustrate potential enablers of supply chain management implementation; Moderate; Concept; AACSB Category 3: Analytical thinking] 14. Supply chain disruptions (e.g., terrorist attacks, natural disasters) have caused some supply chains to reassess their emphasis on inventory reduction. (True) [LO 5.3: To illustrate potential enablers of supply chain management implementation; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 15. Relational changes cannot be successful without information sharing among various participants. (True) 11 .

[LO 5.3: To illustrate potential enablers of supply chain management implementation; Moderate; Application; AACSB Category 3: Analytical thinking] 16. Big-box retailers have been at the center of changes taking place that affect the supply chain.

(False) [LO 5.3: To illustrate potential enablers of supply chain management implementation; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 17. A primary objective of supply chain management is to optimize the performance of the supply chain as a whole. (True) [LO 5.3: To illustrate potential enablers of supply chain management implementation; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 18. Coopetition refers to cooperative relationships between members of a supply chain to enhance the overall business performance of all parties. (False) [LO 5.3: To illustrate potential enablers of supply chain management implementation; Moderate; Concept; AACSB Category 3: Analytical thinking] 19. Tactical information sharing offers the best opportunity for improving supply chain performance. (False) [LO 5.3: To illustrate potential enablers of supply chain management implementation; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 20. A willingness to share information and buying decisions based on value rather than cost or price are two characteristics of supply chain partnerships. (True) [LO 5.3: To illustrate potential enablers of supply chain management implementation; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 21. The Internet has been referred to as the greatest force of commoditization known to man, for both goods and services. (True) [LO 5.3: To illustrate potential enablers of supply chain management implementation; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 21. Enhanced communications across organizations in a supply chain is only dependent on the technological capabilities of the organizations. (False) [LO 5.3: To illustrate potential enablers of supply chain management implementation; Moderate; Synthesis; AACSB Category 3: Analytical thinking]

12 .

22. The general idea behind third-party logistics is that one company allows a specialist company to provide it with one or more logistics functions. (True) [LO 5.3: To illustrate potential enablers of supply chain management implementation; Easy; Concept; AACSB Category 3: Analytical thinking] 23. The decision to use third-party logistics companies can be driven by strategic or tactical considerations. (True) [LO 5.3: To illustrate potential enablers of supply chain management implementation; Moderate; Application; AACSB Category 3: Analytical thinking] 24. Two causes of failure in third-party logistics arrangements involve unreasonable expectations and lack of flexibility. (True) [LO 5.3: To illustrate potential enablers of supply chain management implementation; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 25. A fourth-party logistics provider is a supply chain facilitator that has achieved ISO 9000 certification. (False) [LO 5.3: To illustrate potential enablers of supply chain management implementation; Moderate; Concept; AACSB Category 3: Analytical thinking] 26. Regulatory considerations represent a bigger obstacle than political considerations to supply chain management. (False) [LO 5.4: To illustrate potential barriers to supply chain management implementation; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 27. The overall global climate for business has shifted toward allowing more cooperation among firms—which should help supply chain management. (True) [LO 5.4: To illustrate potential barriers to supply chain management implementation; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 28. Top management is sometimes hesitant to fully commit to supply chain management. (True) [LO 5.4: To illustrate potential barriers to supply chain management implementation; Moderate; Application; AACSB Category 3: Analytical thinking] 29. Actual senior management commitment to supply chain management occurs in one of every two organizations. (False) [LO 5.4: To illustrate potential barriers to supply chain management implementation; Moderate; Application; AACSB Category 3: Analytical thinking] 13 .

30. One cause of the bullwhip effect is asymmetrical information among supply chain participants. (True) [LO 5.4: To illustrate potential barriers to supply chain management implementation; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 31. Supply chain analytics combines technology with manual employee effort to identify trends, perform comparisons, and highlight opportunities in supply chain processes, even when large amounts of data are involved. (True) [LO 5.4: To illustrate potential barriers to supply chain management implementation; Moderate; Concept; AACSB Category 3: Analytical thinking] 32. A recent survey of 1,000 senior executives indicated that approximately 30 percent of them had implemented analytics focused on supply chain activities. (False) [LO 5.4: To illustrate potential barriers to supply chain management implementation; Moderate; Application; AACSB Category 3: Analytical thinking] 33. Today, computer hardware is a larger barrier than computer software to interorganizational collaboration. (False) [LO 5.4: To illustrate potential barriers to supply chain management implementation; Moderate; Application; AACSB Category 3: Analytical thinking] 34. A best-of-breed approach chooses the best software application for a particular function.

(True) [LO 5.4: To illustrate potential barriers to supply chain management implementation; Easy; Concept; AACSB Category 3: Analytical thinking] 35. Corporate cultures should not be considered when designing a supply chain. (False) [LO 5.4: To illustrate potential barriers to supply chain management implementation; Moderate; Application; AACSB Category 3: Analytical thinking] 36. Supply chain integration tends to be more challenging in global, as opposed to domestic, supply chains. (True) [LO 5.4: To illustrate potential barriers to supply chain management implementation; Moderate; Synthesis; AACSB Category 3: Analytical thinking 37. An individual firm can be involved in only one supply chain at a time. (False) [LO 5.5: To compare optional approaches for supply chain integration; Moderate; Application; AACSB Category 3: Analytical thinking] 14 .

38. Supply chain agreements should be designed to reward all participants when collaborative ventures are successful and all participants should share the consequences when these ventures are less successful than desired. (True) [LO 5.5: To compare optional approaches for supply chain integration; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 39. Horizontal integration refers to where one organization owns multiple participants in a supply chain. (False) [LO 5.5: To compare optional approaches for supply chain integration; Moderate; Concept; AACSB Category 3: Analytical thinking] 40. Broadly speaking, organizations can pursue three primary methods—vertical integration, formal contracts, and informal agreements—when attempting to integrate their supply chains.

(True) [LO 5.5: To compare optional approaches for supply chain integration; Difficult; Synthesis; AACSB Category 3: Analytical thinking]

15 .

TEST BANK CHAPTER 6: PROCUREMENT Multiple Choice Questions (correct answers are bolded) 1. ___________ refers to the raw materials, component parts, and supplies bought from outside organizations to support a company’s operations. a. Inbound logistics b. Procurement c. Materials management d. Supply management [LO 6.1: To compare procurement, purchasing, and supply management; Moderate; Concept; AACSB Category 3: Analytical thinking] 2. Procurement costs often range between ___________ and ___________ percent of an organization’s revenues. a. 60; 80 b. 50; 70 c. 40; 60 d. 30; 50 [LO 6.1: To compare procurement, purchasing, and supply management; Moderate; Application; AACSB Category 3: Analytical thinking] 3. Procurement’s historical focus in many organizations was to ___________. a. incur minimal supply disruptions b. use a limited number of suppliers c. minimize loss and damage d. achieve the lowest possible cost [LO 6.1: To compare procurement, purchasing, and supply management; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 4. Procurement and ___________ are viewed as synonymous terms. a. materials management b. supply management c. purchasing d. inbound logistics

1 .

[LO 6.1: To compare procurement, purchasing, and supply management; Easy; Concept; AACSB Category 3: Analytical thinking] 5. ___________ involves an increased focus on identifying and using data internally and across a supply chain so that a company can consolidate its purchasing power for enhanced value. a. Supply management b. Strategic sourcing c. Supply chain management d. Procurement [LO 6.1: To compare procurement, purchasing, and supply management; Moderate; Concept; AACSB Category 3: Analytical thinking] 6. Which of the following is not a potential benefit associated with procurement cards (p-cards)? a. There is a reduced number of invoices. b. Users can make purchases in a more timely fashion. c. Suppliers can be paid in a more timely fashion. d. They can be used in non-domestic markets.

[LO 6.1: To compare procurement, purchasing, and supply management; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 7. Which of the following is not a potential procurement objective? a. minimizing procurement costs b. supporting organizational goals and objectives c. managing the supply base d. supporting operational requirements [LO 6.2: To review procurement objectives; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 8. A focus on satisfying internal customers is associated with which procurement objective? a. managing the supply base b. supporting operational requirements c. supporting organizational goals and objectives d. managing the purchasing process effectively and efficiently [LO 6.2: To review procurement objectives; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 9. The selection, development, and maintenance of supply sources is associated with which procurement objective?

2 .

a. b. c. d.

managing the purchasing process effectively and efficiently supporting operational requirements developing relationships with other functional groups managing the supply base

[LO 6.2: To review procurement objectives; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 10. Buying the right products, at the right price, from the right source, at the right specifications, in the right quantity, and for delivery at the right time to the right internal customer is associated with what procurement objective? a. managing the supply base b. managing the purchasing process effectively and efficiently c. supporting operational requirements d. supporting organizational goals and objectives [LO 6.2: To review procurement objectives; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 11. What is the first step in supplier selection and evaluation? a. Prepare a request for proposal. b. Prepare a procurement budget. c. Identify possible suppliers. d. Identify the need for supply.

[LO 6.3: To review supplier selection and evaluation approaches; Moderate; Application; AACSB Category 3: Analytical thinking] 12. With respect to the supplier selection and evaluation process, ___________ looks at both the internal and external environment within which the supply decision is to be made. a. Identify the need for supply. b. Identify suppliers. c. Perform a situation analysis. d. Evaluate suppliers.

[LO 6.3: To review supplier selection and evaluation approaches; Moderate; Application; AACSB Category 3: Analytical thinking] 13. What is the final step in the supplier selection and evaluation process? a. Provide feedback. b. Select suppliers.

3 .

c. Implement the decision. d. Evaluate the decision.

[LO 6.3: To review supplier selection and evaluation approaches; Moderate; Application; AACSB Category 3: Analytical thinking] 14. Multiple sourcing uses more than one supplier in hopes of increased competition, improved market intelligence, and ___________. a. greater supply risk mitigation b. lower costs per unit c. increased cooperation d. increased communication [LO 6.3: To review supplier selection and evaluation approaches; Moderate; Application; AACSB Category 3: Analytical thinking] 15. Single sourcing consolidates purchase volume with a single supplier in hopes of increasing cooperation and communication in the supply relationship as well as ___________. a. greater supply risk mitigation b. increased amounts of competition c. improved market intelligence d. lower costs per unit [LO 6.3: To review supplier selection and evaluation approaches; Moderate; Application; AACSB Category 3: Analytical thinking] 16. Which of the following statements is false? a. Supplier selection and evaluation generally involves multiple criteria. b. The evolution of business practices and philosophies may require new supplier selection criteria. c. Selecting suppliers is the final step of the supplier selection and evaluation process. d. Some supplier selection criteria may be contradictory.

[LO 6.3: To review supplier selection and evaluation approaches; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 17. Which of the following would not be part of a supplier audit? a. supplier’s structure b. supplier’s resources c. supplier’s scorecard d. supplier’s financial and risk health 4 .

[LO 6.3: To review supplier selection and evaluation approaches; Moderate; Application; AACSB Category 3: Analytical thinking] 18. Kraljic’s Portfolio Matrix ___________. a. provides a framework for evaluating warehousing decisions b. is used by many managers to classify corporate purchases in terms of their importance and supply complexity c. allows managers to evaluate whether to add, or not add, product lines d. is synonymous with the total cost of ownership [LO 6.4: To review Kraljic’s Portfolio Matrix; Moderate; Concept; AACSB Category 3: Analytical thinking] 19. Bottleneck, leverage, and strategic are categories associated with ___________. a. Kraljic’s Portfolio Matrix b. Supplier Audit Matrix c. Supplier Development Matrix d. Global Procurement Matrix [LO 6.4: To review Kraljic’s Portfolio Matrix; Moderate; Application; AACSB Category 3: Analytical thinking] 20. A degree of aggressive procurement involvement not normally encountered in supplier selection refers to ___________. a. supply management b. supplier development c. materials management d. physical supply [LO 6.4: To review Kraljic’s Portfolio Matrix; Moderate; Concept; AACSB Category 3: Analytical thinking] 21. Supplier development is synonymous with ___________. a. supplier selection and evaluation b. procurement c. materials management d. reverse marketing [LO 6.4: To review Kraljic’s Portfolio Matrix; Moderate; Concept; AACSB Category 3: Analytical thinking]

5 .

22. Which of the following is not a reason that purchasers are adopting a more proactive and aggressive role in the procurement process? a. There are myriad inefficiencies associated with suppliers initiating marketing efforts toward purchasers. b. They are achieving a competitive advantage in the supply chain. c. An excess number of suppliers currently exists. d. Purchasers may be aware of important benefits that are not known to the supplier.

[LO 6.4: To review Kraljic’s Portfolio Matrix; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 23. Which of the following is false? a. In the factor-input strategy, an organization is seeking low-cost or high-quality sources of supply. b. Global procurement refers to buying components and inputs anywhere in the world. c. Planning is the first step in global procurement. d. A market access strategy emphasizes procurement from geographically close countries.

[LO 6.5: To establish issues associated with global procurement; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 24. What is the first step in a global sourcing development model? a. planning b. specification c. situation analysis d. problem recognition [LO 6.5: To establish issues associated with global procurement; Moderate; Application; AACSB Category 3: Analytical thinking] 25. ___________ is often a major shortcoming of many global procurement plans. a. Confiscation b. Specification c. Implementation d. Evaluation [LO 6.5: To establish issues associated with global procurement; Moderate; Application; AACSB Category 3: Analytical thinking] 26. What concept refers to when firms consider all the costs that can be assigned to the acquisition, use, and maintenance of a purchase?

6 .

a. activity-based costing b. cost trade-offs c. the systems approach d. total cost of ownership [LO 6.5: To establish issues associated with global procurement; Easy; Application; AACSB Category 3: Analytical thinking] 27. Procuring products from suppliers close to one’s own facilities refers to ___________. a. agglomeration b. near-sourcing c. sustainability d. outsourcing [LO 6.5: To establish issues associated with global procurement; Easy; Application; AACSB Category 3: Analytical thinking] 28. Which of the following is not a dimension associated with socially responsible procurement? a. profit b. safety c. the environment d. human rights [LO 6.6: To identify social and environmental aspects of sustainable procurement; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 29. With respect to gift giving and gift receiving, a ___________ refers to money paid before an exchange. a. kickback b. agglomeration c. bribe d. dovetailing [LO 6.6: To identify social and environmental aspects of sustainable procurement; Easy; Concept; AACSB Category 3: Analytical thinking] 30. With respect to gift giving and gift receiving, a ___________ refers to money paid after an exchange. a. kickback b. agglomeration c. bribe 7 .

d. dovetailing [LO 6.6: To identify social and environmental aspects of sustainable procurement; Easy; Concept; AACSB Category 3: Analytical thinking] 31. ___________ identifies opportunities to recover revenues or reduce costs associated with scrap, surplus, obsolete, and waste materials. a. Recycling b. Reuse c. Reverse logistics d. Investment recovery [LO 6.6: To identify social and environmental aspects of sustainable procurement; Easy; Concept; AACSB Category 3: Analytical thinking] 32. ___________ materials refer to stock that exceeds the reasonable requirements of an organization. a. Waste b. Excess c. Obsolete d. Scrap [LO 6.6: To identify social and environmental aspects of sustainable procurement; Moderate; Concept; AACSB Category 3: Analytical thinking] 33. ___________ materials are no longer serviceable, have been discarded, or are a by-product of the production process. a. Waste b. Obsolete c. Scrap d. Excess [LO 6.6: To identify social and environmental aspects of sustainable procurement; Moderate; Concept; AACSB Category 3: Analytical thinking] 34. ___________ materials have no economic value. a. Waste b. Scrap c. Obsolete d. Excess

8 .

[LO 6.6: To identify social and environmental aspects of sustainable procurement; Moderate; Concept; AACSB Category 3: Analytical thinking] 35. ___________ refers to a set of technology and finance-based processes that strive to optimize cash flow by allowing businesses to extend their payment terms to their suppliers while simultaneously allowing their suppliers to get paid early. a. Cash flow management b. Supply chain finance c. Flexible payment system d. Supplier credit float [LO 6.7: To describe the concept of supply chain finance and how it can be used in procurement relationships; Moderate; Concept; AACSB Category 3: Analytical thinking] True-False Questions 1. Procurement refers to the raw materials, component parts, and supplies bought from outside organizations to support a company’s operations. (True) [LO 6.1: To compare procurement, purchasing, and supply management; Easy; Concept; AACSB Category 3: Analytical thinking] 2. Procurement’s costs often range between 40 and 60 percent of an organization’s revenues.

(False) [LO 6.1: To compare procurement, purchasing, and supply management; Moderate; Application; AACSB Category 3: Analytical thinking] 3. Procurement’s historical focus in many organizations was to minimize the total number of outside suppliers. (False) [LO 6.1: To compare procurement, purchasing, and supply management; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 4. A contemporary procurement manager might have responsibility for reducing cycle times and for generating additional revenues by collaborating with the marketing department.

(True) [LO 6.1: To compare procurement, purchasing, and supply management; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 5. Procurement and purchasing are viewed as synonymous terms. (True) [LO 6.1: To compare procurement, purchasing, and supply management; Easy; Concept; AACSB Category 3: Analytical thinking] 9 .

6. Supply chain management refers to a relational exchange approach involving a limited number of suppliers. (False) [LO 6.1: To compare procurement, purchasing, and supply management; Moderate; Concept; AACSB Category 3: Analytical thinking] 7. Strategic sourcing involves an increased focus on identifying and using data internally and across the supply chain so that a company can consolidate its purchasing power for enhanced value. (True) [LO 6.1: To compare procurement, purchasing, and supply management; Moderate; Application; AACSB Category 3: Analytical thinking] 8. One benefit to procurement cards is that they are easily used outside of their domestic market. (False) [LO 6.1: To compare procurement, purchasing, and supply management; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 9. First and foremost, procurement’s objectives must manage the purchasing process effectively and efficiently. (False) [LO 6.2: To review procurement objectives; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 10. One of procurement’s most important responsibilities involves supplier selection and evaluation. (True) [LO 6.3: To review supplier selection and evaluation approaches; Easy; Application; AACSB Category 3: Analytical thinking] 11. The first step in supplier selection and evaluation is situation analysis. (False) [LO 6.3: To review supplier selection and evaluation approaches; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 12. A benefit to multiple sourcing is increased cooperation and communication in a supply relationship. (False) [LO 6.3: To review supplier selection and evaluation approaches; Moderate; Application; AACSB Category 3: Analytical thinking] 13. Single sourcing consolidates purchase volume with a single supplier with the hopes of enjoying lower costs per unit. (True)

10 .

[LO 6.3: To review supplier selection and evaluation approaches; Easy; Application; AACSB Category 3: Analytical thinking] 14. The final step of the supplier selection process is to evaluate the decision. (True) [LO 6.3: To review supplier selection and evaluation approaches; Easy; Synthesis; AACSB Category 3: Analytical thinking] 15. Supplier scorecards involve assessments of a supplier’s structure, resources, technology, health, and responsibility. (False) [LO 6.3: To review supplier selection and evaluation approaches; Moderate; Concept; AACSB Category 3: Analytical thinking] 16. Supplier scorecards can be categorical, weighted point, or cost based in nature. (True) [LO 6.3: To review supplier selection and evaluation approaches; Moderate; Application; AACSB Category 3: Analytical thinking] 17. Supplier selection and evaluation generally involve multiple criteria, and these criteria can vary in both number and importance, depending on the particular situation. (True) [LO 6.3: To review supplier selection and evaluation approaches; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 18. The Optimal Cost Reliability Model is used by many managers to classify corporate purchases in terms of their importance and supply complexity. (False) [LO 6.4 To review Kraljic’s Portfolio Matrix; Moderate; Concept; AACSB Category 3: Analytical thinking] 19. Bottleneck refers to the low importance, low complexity category of Kraljic’s Portfolio Matrix. (False) [LO 6.4 To review Kraljic’s Portfolio Matrix; Moderate; Application; AACSB Category 3: Analytical thinking] 20. Leverage refers to the high importance, low complexity category of Kraljic’s Portfolio Matrix. (True) [LO 6.4 To review Kraljic’s Portfolio Matrix; Moderate; Application; AACSB Category 3: Analytical thinking] 21. Supply management refers to a degree of aggressive procurement not normally encountered in supplier selection. (False)

11 .

[LO 6.4 To review Kraljic’s Portfolio Matrix; Moderate; Concept; AACSB Category 3: Analytical thinking] 22. Supplier development is synonymous with reverse marketing. (True) [LO 6.4 To review Kraljic’s Portfolio Matrix; Easy; Concept; AACSB Category 3: Analytical thinking] 23. One reason for the growth of the supplier development concept is that achieving competitive advantage in the supply chain is predicated on purchasers adopting a more aggressive approach. (True) [LO 6.4 To review Kraljic’s Portfolio Matrix; Moderate; Application; AACSB Category 3: Analytical thinking] 24. Global procurement refers to buying components and inputs anywhere in the world. (True) [LO 6.5: To establish issues associated with global procurement; Easy; Concept; AACSB Category 3: Analytical thinking] 25. Global procurement is primarily driven by the input-output and market-access strategies.

(False) [LO 6.5: To establish issues associated with global procurement; Moderate; Application; AACSB Category 3: Analytical thinking] 26. Problem recognition is the first step in global procurement. (False) [LO 6.5: To establish issues associated with global procurement; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 27. Because global sourcing increases the distance that components and inputs must be moved, managers must consider the trade-off between transportation and holding costs. (True) [LO 6.5: To establish issues associated with global procurement; Moderate; Application; AACSB Category 3: Analytical thinking] 28. Implementation is often a major shortcoming of many global procurement plans. (True) [LO 6.5: To establish issues associated with global procurement; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 29. When taking an activity-based costing approach, firms consider all the costs that can be assigned to the acquisition, use, and maintenance of a purchase. (False) [LO 6.5: To establish issues associated with global procurement; Moderate; Concept; AACSB Category 3: Analytical thinking] 12 .

30. Dovetailing refers to procuring products from suppliers closer to one’s own facilities. (False) [LO 6.5: To establish issues associated with global procurement; Moderate; Concept; AACSB Category 3: Analytical thinking] 31. Sustainable procurement refers to the integration of social and environmental considerations into all stages of the purchasing process. (True) [LO 6.6: To identify social and environmental aspects of sustainable procurement; Easy; Concept; AACSB Category 3: Analytical thinking] 32. Diversity and philanthropy are two dimensions of socially responsible procurement. (True) [LO 6.6: To identify social and environmental aspects of sustainable procurement; Easy; Application; AACSB Category 3: Analytical thinking] 33. With respect to gift giving and gift receiving, bribes refer to money paid after an exchange.

(False) [LO 6.6: To identify social and environmental aspects of sustainable procurement; Moderate; Concept; AACSB Category 3: Analytical thinking] 34. The relevance, importance, and challenges associated with socially responsible procurement are likely to lessen in the coming years. (False) [LO 6.6: To identify social and environmental aspects of sustainable procurement; Moderate; Application; AACSB Category 3: Analytical thinking] 35. Investment recovery identifies opportunities to recover revenues or reduce costs associated with scrap, surplus, obsolete, and waste materials. (True) [LO 6.6: To identify social and environmental aspects of sustainable procurement; Easy; Concept; AACSB Category 3: Analytical thinking] 36. Investment recovery is often the responsibility of the finance manager. (False) [LO 6.6: To identify social and environmental aspects of sustainable procurement; Moderate; Application; AACSB Category 3: Analytical thinking] 37. Excess materials refer to stock that exceeds the reasonable requirements of an organization.

(True) [LO 6.6: To identify social and environmental aspects of sustainable procurement; Easy; Concept; AACSB Category 3: Analytical thinking]

13 .

38. Scrap materials are no longer serviceable, have been discarded, or are a by-product of the production process. (True) [LO 6.6: To identify social and environmental aspects of sustainable procurement; Easy; Concept; AACSB Category 3: Analytical thinking] 39. Obsolete materials have no economic value. (False) [LO 6.6: To identify social and environmental aspects of sustainable procurement; Moderate; Concept; AACSB Category 3: Analytical thinking] 40. Supply chain finance refers to a set of technology and finance-based processes that strive to optimize cash flow by allowing businesses to extend their payment terms to their suppliers while simultaneously allowing suppliers to be paid early. (True) [LO 6.6: To identify social and environmental aspects of sustainable procurement; Moderate; Concept; AACSB Category 3: Analytical thinking]

14 .

TEST BANK CHAPTER 7: DEMAND MANAGEMENT, ORDER MANAGEMENT AND CUSTOMER SERVICE Multiple Choice Questions (correct answers are bolded) 1. The creation across the supply chain and its markets of a coordinated flow of demand is the definition of ___________. a. order cycle b. order management c. demand management d. supply chain management [LO 7.1: To explain demand management and demand forecasting models; Easy; Concept; AACSB Category 3: Analytical thinking] 2. ___________ refers to finished goods that are produced prior to receiving a customer order. a. Make-to-stock b. Supply management c. Make-to-order d. Speculation [LO 7.1: To explain demand management and demand forecasting models; Easy; Concept; AACSB Category 3: Analytical thinking] 3. ___________ refers to finished goods that are produced after receiving a customer order. a. Make-to-stock b. Supply management c. Make-to-order d. Postponement [LO 7.1: To explain demand management and demand forecasting models; Easy; Concept; AACSB Category 3: Analytical thinking] 4. Which of the following is not a basic type of demand forecasting model? a. exponential smoothing b. cause and effect c. judgmental d. time series

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[LO 7.1: To explain demand management and demand forecasting models; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 5. Surveys and analog techniques are examples of ___________ forecasting. a. cause and effect b. time series c. exponential smoothing d. judgmental [LO 7.1: To explain demand management and demand forecasting models; Moderate; Application; AACSB Category 3: Analytical thinking] 6. An underlying assumption of ___________ forecasting is that future demand is dependent on past demand. a. trial and error b. time series c. judgmental d. cause and effect [LO 7.1: To explain demand management and demand forecasting models; Moderate; Concept; AACSB Category 3: Analytical thinking] 7. Which forecasting technique assumes that one or more factors are related to demand and that this relationship can be used to estimate future demand? a. exponential smoothing b. judgmental c. cause and effect d. time series [LO 7.1: To explain demand management and demand forecasting models; Moderate; Concept; AACSB Category 3: Analytical thinking] 8. Which forecasting technique tends to be appropriate when there is little or no historical data? a. exponential smoothing b. judgmental c. time series d. cause and effect [LO 7.1: To explain demand management and demand forecasting models; Moderate; Application; AACSB Category 3: Analytical thinking]

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9. ___________ suggests that supply chain partners will be working from a collectively agreedto single demand forecast number as opposed to each member working off its own demand forecast projection. a. Supply chain orientation b. Collaborative planning, forecasting, and replenishment (CPFR) concept c. Order management d. Supply chain analytics [LO 7.1: To explain demand management and demand forecasting models; Easy; Concept; AACSB Category 3: Analytical thinking] 10. ___________ refers to the management of various activities associated with the order cycle. a. Logistics b. Order processing c. Demand management d. Order management [LO 7.2: To examine the order cycle and its four components; Easy; Concept; AACSB Category3: Analytical thinking] 11. The order cycle is ___________. a. the time that it takes for a check to clear b. the time that it takes from when a customer places an order until the selling firm receives the order c. also called the replenishment cycle d. also called the vendor cycle [LO 7.2: To examine the order cycle and its four components; Moderate; Concept; AACSB Category3: Analytical thinking] 12. The order cycle is composed of each of the following except: a. order retrieval. b. order delivery. c. order picking and assembly. d. order transmittal.

[LO 7.2: To examine the order cycle and its four components; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 13. Which of the following statements is false?

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a. Some organizations have expanded the order management concept to include the length of time it takes for an organization to receive payment for an order. b. The order cycle should be analyzed in terms of total cycle time and cycle time variability. c. Order management has been profoundly impacted by advances in information systems. d. Order management is synonymous with order cycle.

[LO 7.2: To examine the order cycle and its four components; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 14. Order transmittal is ___________. a. the series of events that occurs from the time a customer places an order and the time the customer receives the order b. the series of events that occurs between the time a customer places an order and the time the seller receives the order c. the series of events that occurs between the time a customer perceives the need for a product and the time the seller receives the order d. the series of events that occurs between the time a customer places an order and the time the order cycle begins [LO 7.2: To examine the order cycle and its four components; Moderate; Concept; AACSB Category 3: Analytical thinking] 15. In general, there are ___________ possible ways to transmit orders. a. three b. four c. five d. six [LO 7.2: To examine the order cycle and its four components; Moderate; Application; AACSB Category 3: Analytical thinking] 16. ___________ and electronic ordering are order transmittal techniques that have emerged over the last 30 years. a. In-person b. Mail c. Fax d. Telephone [LO 7.2: To examine the order cycle and its four components; Easy; Application; AACSB Category 3: Analytical thinking] 17. What is the second phase of the order cycle?

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a. order transmittal b. order processing c. order picking and assembly d. order delivery [LO 7.2: To examine the order cycle and its four components; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 18. ___________ refers to the time from when the seller receives an order until an appropriate location is authorized to fill the order. a. Order processing b. Order cycle c. Order management d. Order transmittal [LO 7.2: To examine the order cycle and its four components; Moderate; Concept; AACSB Category 3: Analytical thinking] 19. Classifying orders according to pre-established guidelines so that a company can prioritize how orders are to be filled refers to ___________. a. order fill rate b. order management c. order processing d. order triage [LO 7.2: To examine the order cycle and its four components; Moderate; Concept; AACSB Category 3: Analytical thinking] 20. Order picking and assembly is ___________. a. the final stage of the order cycle b. the most important component of the order cycle c. the order cycle component that follows order processing d. the order cycle component that follows order transmittal [LO 7.2: To examine the order cycle and its four components; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 21. The text suggests that ___________ often represents the best opportunity to improve the effectiveness and efficiency of an order cycle. a. order transmittal b. order picking and assembly 5 .

c. order delivery d. order processing [LO 7.2: To examine the order cycle and its four components; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 22. Which of the following is not a characteristic of contemporary voice-based order picking systems? a. easily disrupted by other noises b. better voice quality c. more powerful d. less costly [LO 7.2: Order Management; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 23. Which of the following is not a benefit of voice-based order picking? a. fewer picking errors b. improved productivity c. minimal training time to learn the technology d. fewer employee accidents [LO 7.2: To examine the order cycle and its four components; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 24. The final phase of the order cycle is called order ___________. a. picking and assembly b. delivery c. receiving d. replenishment [LO 7.2: To examine the order cycle and its four components; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 25. The time span within which an order must arrive refers to ___________. a. transit time reliability b. order delivery c. delivery window d. transit time [LO 7.2: To examine the order cycle and its four components; Moderate; Concept; AACSB Category 3: Analytical thinking]

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26. A commonly used rule of thumb is that it costs approximately ___________ times as much to get a new customer as it does to keep an existing customer. a. three b. four c. five d. six [LO 7.3: To understand the four dimensions of customer service as they pertain to logistics; Moderate; Application; AACSB Category 3: Analytical thinking] 27. An unhappy customer will tell ___________ other people about her/his unhappiness. a. seven b. nine c. twelve d. fifteen [LO 7.3: To understand the four dimensions of customer service as they pertain to logistics; Moderate; Application; AACSB Category 3: Analytical thinking] 28. The ability of logistics management to satisfy users in terms of time, dependability, communication, and convenience is the definition of ___________. a. customer service b. the order cycle c. a perfect order d. customer satisfaction [LO 7.3: To understand the four dimensions of customer service as they pertain to logistics; Moderate; Concept; AACSB Category 3: Analytical thinking] 29. The order cycle is an excellent example of the ___________ dimension of customer service. a. time b. convenience c. dependability d. communication [LO 7.3: To understand the four dimensions of customer service as they pertain to logistics; Moderate; Application; AACSB Category 3: Analytical thinking] 30. The percentage of orders that can be completely and immediately filled from existing stock is the ___________ rate. a. optimal inventory 7 .

b. order cycle c. perfect order d. order fill [LO 7.3: To understand the four dimensions of customer service as they pertain to logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 31. What component of customer service focuses on the ease of doing business with a seller? a. convenience b. dependability c. time d. communication [LO 7.3: To understand the four dimensions of customer service as they pertain to logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 32. What are multichannel marketing systems? a. channels that have multiple intermediaries between the producer and the consumer b. separate marketing channels that serve an individual customer c. the same thing as horizontal marketing systems d. channels that combine horizontal and vertical marketing systems [LO 7.3: To understand the four dimensions of customer service as they pertain to logistics; Moderate; Concept; AACSB Category 3: Analytical thinking] 33. Objectives should be SMART—that is, ___________, measurable, achievable, realistic, and timely. a. specific b. strategic c. static d. striving [LO 7.4: To familiarize you with select managerial issues associated with customer service; Moderate; Application; AACSB Category 3: Analytical thinking] 34. Which of the following statements is false? a. Goals tend to be broad, generalized statements regarding the overall results that the firm is trying to achieve. a. Objectives are more specific than goals. c. A central element to the establishment of customer service goals and objectives is determining the customer’s viewpoint. d. Objectives should be specific, measurable, achievable, and responsive.

8 .

[LO 7.4: To familiarize you with select managerial issues associated with customer service; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 35. ___________ refers to a process that continuously identifies, understands, and adapts outstanding processes inside and outside an organization. a. Environmental scanning b. Quality management c. Benchmarking d. Continuous improvement [LO 7.4: To familiarize you with select managerial issues associated with customer service; Moderate; Concept; AACSB Category 3: Analytical thinking] 36. ___________ is the process of taking corrective action when measurements indicate that the goals and objectives of customer service are not being achieved. a. Benchmarking b. Leadership c. Control d. Managing [LO 7.4: To familiarize you with select managerial issues associated with customer service; Moderate; Concept; AACSB Category 3: Analytical thinking] 37. Which statement about measuring customer service is true? a. Firms should choose those aspects of customer service that are easiest to measure. b. Order cycle time is the most commonly used customer service measure. c. Firms should use as many customer service measures as they can. d. It is possible for organizations to use only one customer service metric.

[LO 7.4: To familiarize you with select managerial issues associated with customer service; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 38. ___________ refers to the allocation of revenues and costs to customer segments or individual customers to calculate the profitability of the segments or customers. a. Customer profitability analysis b. Net present value c. Customer lifetime value d. Activity-based costing (ABC) [LO 7.4: To familiarize you with select managerial issues associated with customer service; Easy; Concept; AACSB Category 3: Analytical thinking] 9 .

39. Which of the following statements is false? a. The service recovery paradox is where a customer holds the responsible company in higher regard after the service recovery than if a service failure had not occurred in the first place. b. A set formula that companies should follow for service recovery exists. c. One service recovery guideline involves fair treatment for customers. d. Service recovery refers to a process for returning a customer to a state of satisfaction after a service or product has failed to live up to expectations.

[LO 7.4: To familiarize you with select managerial issues associated with customer service; Difficult; Synthesis; AACSB Category 3: Analytical thinking]

True-False Questions 1. Demand management is important because efficient and effective supply chains have learned to match both supply and demand. (True) [LO: Beginning of the chapter material; Moderate; Application; AACSB Category 3: Analytical thinking] 2. In make-to-order situations, finished goods are produced after receiving a customer order.

(True) [LO 7.1: To explain demand management and demand forecasting models; Easy; Concept; AACSB Category 3: Analytical thinking] 3. Simple moving averages and weighted moving averages are examples of judgmental forecasting. (False) [LO 7.1: To explain demand management and demand forecasting models; Moderate; Application; AACSB Category 3: Analytical thinking] 4. Judgmental forecasting is appropriate when there is little or no historical data. (True) [LO 7.1: To explain demand management and demand forecasting models; Moderate; Application; AACSB Category 3: Analytical thinking] 5. Forecasting accuracy refers to the relationship between the actual and forecasted demand.

(True) [LO 7.1: To explain demand management and demand forecasting models; Easy; Concept; AACSB Category 3: Analytical thinking]

10 .

6. Demand chain management is where supply chain partners share planning and forecasting data to better match up supply and demand. (False) [LO 7.1: To explain demand management and demand forecasting models; Moderate; Concept; AACSB Category 3: Analytical thinking] 7. In general terms, order management refers to management of the various activities associated with the order cycle. (True) [LO 7.2: To examine the order cycle and its four components; Easy; Concept; AACSB Category 3: Analytical thinking] 8. The order cycle is usually the time from when a customer places an order to when the firm receives the order. (False) [LO 7.2: To examine the order cycle and its four components; Moderate; Concept; AACSB Category 3: Analytical thinking] 9. There are four possible ways to transmit orders. (False) [LO 7.2: To examine the order cycle and its four components; Moderate; Application; AACSB Category 3: Analytical thinking] 10. Order information is checked for completeness and accuracy in the order processing component of the order cycle. (True) [LO 7.2: To examine the order cycle and its four components; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 11. The order triage function refers to correcting mistakes that may occur with order picking.

(False) [LO 7.2: To examine the order cycle and its four components; Moderate; Concept; AACSB Category 3: Analytical thinking] 12. A commonsense approach is to fill an order from the facility location that is closest to the customer, with the idea that this should generate lower transportation costs as well as a shorter order cycle time. (True) [LO 7.2: To examine the order cycle and its four components; Easy; Application; AACSB Category 3: Analytical thinking] 13. Order processing often represents the best opportunity to improve the effectiveness and efficiency of the order cycle. (False)

11 .

[LO 7.2: To examine the order cycle and its four components; Moderate; Application; AACSB Category 3: Analytical thinking] 14. Travel time accounts for a majority of an order picker’s total pick time. (True) [LO 7.2: To examine the order cycle and its four components; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 15. Pick-to-light technology is an order picking technique that has grown in popularity in recent years. (True) [LO 7.2: To examine the order cycle and its four components; Moderate; Application; AACSB Category 3: Analytical thinking] 16. Order retrieval is the final phase of the order cycle. (False) [LO 7.2: To examine the order cycle and its four components; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 17. A key change in the order delivery component of the order cycle is that more and more shippers are emphasizing both the elapsed transit time and transit time variability. (True) [LO 7.2: To examine the order cycle and its four components; Moderate; Application; AACSB Category 3: Analytical thinking] 18. It costs about five times as much to get a new customer as it does to keep an existing customer. (True) [LO 7.3: To understand the four dimensions of customer service as they pertain to logistics; Easy; Application; AACSB Category 3: Analytical thinking] 19. Consumers are demanding about the same levels of service today as in years past. (False) [LO 7.3: To understand the four dimensions of customer service as they pertain to logistics; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 20. The increased use of vendor quality-control programs necessitates higher levels of customer service. (True) [LO 7.3: To understand the four dimensions of customer service as they pertain to logistics; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 21. Customer service can be defined as the ability of logistics management to satisfy users in terms of quality, dependability, communication, and convenience. (False)

12 .

[LO 7.3: To understand the four dimensions of customer service as they pertain to logistics; Moderate; Concept; AACSB Category 3: Analytical thinking] 22. Dependability consists of consistent order cycles, safe delivery, and complete delivery.

(True) [LO 7.3: To understand the four dimensions of customer service as they pertain to logistics; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 23. Companies today will not accept slower order cycles in exchange for higher order cycle consistency. (False) [LO 7.3: To understand the four dimensions of customer service as they pertain to logistics; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 24. Order fill rate is the percentage of orders that can be completely and immediately filled from existing stock. (True) [LO 7.3: To understand the four dimensions of customer service as they pertain to logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 25. Text messaging and the Internet have lessened the need for telephone interaction and face-toface contact between seller and customer. (False) [LO 7.3: To understand the four dimensions of customer service as they pertain to logistics; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 26. The convenience component of customer service focuses on the ease of doing business with a seller. (True) [LO 7.3: To understand the four dimensions of customer service as they pertain to logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 27. Today’s customer likes to have multiple purchasing options at her/his disposal, and organizations have responded by developing hybrid marketing channels—that is, separate marketing channels to serve an individual customer. (False) [LO 7.3: To understand the four dimensions of customer service as they pertain to logistics; Moderate; Concept; AACSB Category 3: Analytical thinking] 28. Goals are the means by which objectives are achieved. (False) [LO 7.4: To familiarize you with select managerial issues associated with customer service; Moderate; Concept; AACSB Category 3: Analytical thinking] 29. Objectives should be specific, measurable, achievable, realistic, and timely. (True) 13 .

[LO 7.4: To familiarize you with select managerial issues associated with customer service; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 30. Continuous improvement refers to a process that continuously identifies, understands, and adapts outstanding processes found inside and outside an organization. (False) [LO 7.4: To familiarize you with select managerial issues associated with customer service; Moderate; Concept; AACSB Category 3: Analytical thinking] 31. Benchmarking should only involve numerical comparisons of relevant metrics. (False) [LO 7.4: To familiarize you with select managerial issues associated with customer service; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 32. The nature of the product can affect the level of customer service that should be offered.

(True) [LO 7.4: To familiarize you with select managerial issues associated with customer service; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 33. A product just being introduced needs a different level of service support than one that is in a mature or declining market stage. (True) [LO 7.4: To familiarize you with select managerial issues associated with customer service; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 34. Leadership is the process of taking corrective action when measurements indicate that the goals and objectives of customer service are not being achieved. (False) [LO 7.4: To familiarize you with select managerial issues associated with customer service; Moderate; Concept; AACSB Category 3: Analytical thinking] 35. The customer service metrics that are chosen should be relevant and important from the customer’s perspective. (True) [LO 7.4: To familiarize you with select managerial issues associated with customer service; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 36. It is possible for organizations to use only one customer service metric to measure customer service. (True) [LO 7.4: To familiarize you with select managerial issues associated with customer service; Easy; Application; AACSB Category 3: Analytical thinking

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37. Customer profitability analysis explicitly recognizes that all customers are not the same and that some customers are more valuable than others to an organization. (True) [LO 7.4: To familiarize you with select managerial issues associated with customer service; Moderate; Concept; AACSB Category 3: Analytical thinking] 38. Customer profitability analysis is grounded in traditional accounting cost allocation methods.

(False) [LO 7.4: To familiarize you with select managerial issues associated with customer service; Moderate; Application; AACSB Category 3: Analytical thinking] 39. Poor customer experiences cost U.S. business in excess of $75 billion per year. (False) [LO 7.4: To familiarize you with select managerial issues associated with customer service; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 40. In the service recovery paradox, a customer holds the responsible company in higher regard after the service than if a service failure had not occurred in the first place. (True) [LO 7.4: To familiarize you with select managerial issues associated with customer service; Moderate; Application; AACSB Category 3: Analytical thinking]

15 .

TEST BANK CHAPTER 8: INVENTORY MANAGEMENT Multiple Choice Questions (correct answers are bolded) 1. ___________ refers to stocks of goods and materials that are maintained for many purposes, the most common being to satisfy normal demand patterns. a. Logistics b. Supply chain management c. Inventory d. Production [LO: Beginning of chapter material; Easy; Concept; AACSB Category 3: Analytical thinking] 2. Holding high levels of inventory results in ___________ inventory carrying costs and ___________ stockout costs. a. high; high b. high; low c. low; high d. low; low [LO: Beginning of chapter material: Moderate; Application; AACSB Category 3: Analytical thinking] 3. Holding low levels of inventory results in ___________ inventory carrying costs and ___________ stockout costs. a. high; high b. high; low c. low; high d. low; low [LO: Beginning of chapter material: Moderate; Application; AACSB Category 3: Analytical thinking] 4. ___________ stock refers to inventory that is needed to satisfy normal demand during the course of an order cycle. a. Base b. Speculative c. Pipeline d. Safety

1 .

[LO 8.1: To learn about the ways that inventory can be classified; Easy; Concept; AACSB Category 3: Analytical thinking] 5. ___________ stock refers to inventory that is held in addition to cycle stock to guard against uncertainty in demand and/or lead time. a. Base b. Pipeline c. Speculative d. Buffer [LO 8.1: To learn about the ways that inventory can be classified; Easy; Concept; AACSB Category 3: Analytical thinking] 6. Another name for safety stock is ___________ stock. a. base b. buffer c. cycle d. speculative [LO 8.1: To learn about the ways that inventory can be classified; Easy; Concept; AACSB Category 3: Analytical thinking] 7. ___________ stock refers to inventory that is en route between various nodes in a logistics system. a. Pipeline b. Safety c. Speculative d. Cycle [LO 8.1: To learn about the ways that inventory can be classified; Easy; Concept; AACSB Category 3: Analytical thinking] 8. ___________ stock refers to inventory that is held for several reasons, to include seasonal demand, projected price increases, and potential shortages of product. a. Base b. Safety c. Pipeline d. Speculative [LO 8.1: To learn about the ways that inventory can be classified; Easy; Concept; AACSB Category 3: Analytical thinking]

2 .

9. ___________ stock is carried to stimulate demand. a. Base b. Psychic c. Speculative d. Attractive [LO 8.1: To learn about the ways that inventory can be classified; Moderate; Concept; AACSB Category 3: Analytical thinking] 10. Inventory costs in the United States in the twenty-first century represent approximately ___________ of total logistics costs. a. one-fifth b. one-fourth c. one-third d. one-half [LO 8.2: To discuss inventory costs and the trade-offs that exist among them; Moderate; Application; AACSB Category 3: Analytical thinking] 11. Which of the following statements if false? a. The importance of individual carrying costs factors (categories) is generally consistent from product to product. b. Inventory carrying costs consist of a number of different components or factors. c. In general, companies prefer to carry less inventory as carrying costs increase. d. In general, inventory carrying costs are expressed in percentage terms.

[LO 8.2: To discuss inventory costs and the trade-offs that exist among them; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 12. Inventory carrying costs in the United States since 2010 have ranged between ___________ and ___________ percent. a. 4; 5 b. 9; 10 c. 14; 15 d. 19; 20 [LO 8.2: To discuss inventory costs and the trade-offs that exist among them; Difficult; Application; AACSB Category 3: Analytical thinking] 13. Inventory shrinkage ___________. a. refers to another name for inventory turnover 3 .

b. refers to the fact that more items are recorded entering than leaving warehousing facilities c. refers to situations where the size and/or volume of inventory is decreased over time d. refers to a technique of stabilizing unit loads by using shrink wrap packaging [LO 8.2: To discuss inventory costs and the trade-offs that exist among them; Moderate; Concept; AACSB Category 3: Analytical thinking] 14. Each of the following is a component of inventory carrying cost except: a. accounting cost. b. storage cost. c. shrinkage cost. d. interest cost.

[LO 8.2: To discuss inventory costs and the trade-offs that exist among them; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 15. In the United States, ___________ has traditionally provided a convenient starting point when estimating the interest charges associated with maintaining inventory. a. Gross Domestic Product growth b. Consumer Price Index c. the prime rate of interest d. the yield on U.S. Treasury bills [LO 8.2: To discuss inventory costs and the trade-offs that exist among them; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 16. Which of the following costs is not a component of ordering (order) costs? a. preparing invoices b. receiving orders c. verifying inventory availability d. transporting orders [LO 8.2: To discuss inventory costs and the trade-offs that exist among them; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 17. Which of the following situations is likely the most damaging (costly) with respect to a stockout? a. The customer buys a substitute product that yields a higher profit for the seller. b. The customer buys a substitute product that yields a lower profit for the seller. c. The customer goes to a competitor for a purchase. d. The customer says, “Call me when it’s in.”

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[LO 8.2: To discuss inventory costs and the trade-offs that exist among them; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 18. Which of the following statements is false? a. With respect to stockouts, a delayed sale is virtually costless to a company because of the customer’s brand loyalty. b. Stockouts are generally less costly than having too many items in stock. c. The higher the average cost for a stockout, the more inventory (safety stock) that should be held. d. Trade-offs exist between carrying costs and stockout costs.

[LO 8.2: To discuss inventory costs and the trade-offs that exist among them; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 19. With respect to determining the average cost of a stockout, the higher the probability of a delayed sale, the ___________ the average stockout costs and the ___________ the inventory that needs to be held. a. higher; higher b. lower; lower c. higher; lower d. lower; higher [LO 8.2: To discuss inventory costs and the trade-offs that exist among them; Difficult; Application; AACSB Category 3: Analytical thinking] 20. Under conditions of certainty, a reorder point is equal to ___________. a. average daily demand times the length of the replenishment cycle b. safety stock plus an economic order quantity (EOQ) c. two times base stock d. base stock minus safety stock [LO 8.3: To identify when to order and how much to order, with a particular emphasis on the economic order quantity; Moderate; Application; AACSB Category 3: Analytical thinking] 21. The economic order quantity (EOQ) deals with calculating the proper order size with respect to ___________ costs and ___________ costs. a. ordering; stockout b. stockout; carrying c. accounting; carrying d. carrying; ordering

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[LO 8.3: To identify when to order and how much to order, with a particular emphasis on the economic order quantity; Moderate; Application; AACSB Category 3: Analytical thinking] 22. The economic order quantity (EOQ) determines ___________. a. the point at which a company should reorder b. the point at which carrying costs equal ordering costs c. the point at which the sum of carrying costs and ordering costs is maximized d. the relevant inventory flow for a particular time period [LO 8.3: To identify when to order and how much to order, with a particular emphasis on the economic order quantity; Moderate; Application; AACSB Category 3: Analytical thinking] 23. Which of the following is not an assumption associated with the basic economic order quantity (EOQ) model? a. no inventory in transit b. an infinite planning horizon c. stockouts are permitted d. a constant and known replenishment or lead time [LO 8.3: To identify when to order and how much to order, with a particular emphasis on the economic order quantity; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 24. Concerning the EOQ model, if demand or annual usage increases by 10 percent, then the EOQ will ___________. a. It depends on the particular product. b. increase c. decrease d. stay unchanged [LO 8.3: To identify when to order and how much to order, with a particular emphasis on the economic order quantity; Difficult; Application; AACSB Category 3: Analytical thinking] 25. Concerning the EOQ model, if the ordering costs increase by 10 percent and the product value increases by 10 percent, then the EOQ will ___________. a. stay unchanged b. increase c. decrease d. It depends on the particular product.

[LO 8.3: To identify when to order and how much to order, with a particular emphasis on the economic order quantity; Difficult; Application; AACSB Category 3: Analytical thinking]

6 .

26. Inventory flow diagrams illustrate that safety stock can prevent two problem areas, ___________ and ___________. a. decreased rate of demand; longer-than-normal replenishment b. increased rate of demand; shorter-than-normal replenishment c. decreased rate of demand; shorter-than-normal replenishment d. increased rate of demand; longer-than-normal replenishment [LO 8.4: To differentiate the various inventory flow patterns; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 27. ___________ recognizes that all inventories are not of equal value to a firm and thus all inventories should not be managed in the same way. a. Vendor-managed inventory b. Inventory turnover c. Inventory classification d. ABC analysis of inventory [LO 8.5: To discuss special concerns with inventory management; Easy; Concept; AACSB Category 3: Analytical thinking] 28. ABC analysis of inventory ___________. a. applies activity-based costing to managing inventory b. recognizes that inventories are not of equal value to a firm c. is synonymous with vendor-managed inventory d. is an alternative to the EOQ model [LO 8.5: To discuss special concerns with inventory management; Moderate; Concept; AACSB Category 3: Analytical thinking] 29. Dead inventory (dead stock) refers to a product for which there are no sales during a ___________-month period. a. 3 b. 6 c. 12 d. 24 [LO 8.5: To discuss special concerns with inventory management; Moderate; Application; AACSB Category 3: Analytical thinking] 30. All of the following are suggestions for dealing with dead stock (inventory) except: a. aggressive marketing.

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b. donating to charities. c. make to stock. d. throwing it away.

[LO 8.5: To discuss special concerns with inventory management; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 31. ___________ refers to the number of times inventory is sold in a one-year period. a. Churn b. Inventory turnover c. Cost of goods sold d. Average inventory [LO 8.5: To discuss special concerns with inventory management; Easy; Concept; AACSB Category 3: Analytical thinking] 32. Inventory turnover can be calculated by ___________. a. dividing the cost of goods sold by average inventory b. dividing average inventory by the cost of goods sold c. multiplying average inventory by 1.5 d. adding beginning and ending inventory and then dividing by 2 [LO 8.5: To discuss special concerns with inventory management; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 33. ___________ items refer to those that are used or distributed together. a. Psychic stock b. Substitute c. Co-branded product mix d. Complementary [LO 8.5: To discuss special concerns with inventory management; Easy; Concept; AACSB Category 3: Analytical thinking] 34. ___________ products refer to those that customers view as being able to fill the same need or want as another product. a. Psychic stock b. Complementary c. Substitute d. Co-branded

8 .

[LO 8.5: To discuss special concerns with inventory management; Easy; Concept; AACSB Category 3: Analytical thinking] 35. Which of the following is not an example of a lean inventory approach? a. just-in-time (JIT) b. collaborative planning, forecasting, and replenishment c. efficient consumer response (ECR) d. quick response (QR) [LO 8.6: To identify several contemporary approaches to managing inventory; Moderate; Application; AACSB Category 3: Analytical thinking] 36. Which of the following statements about the lean approach and just-in-time (JIT) is false? a. JIT tends to focus on product movement from manufacturer to retailer. b. Organizations should give careful consideration before adopting a lean philosophy. c. The lean approach views inventory as waste. d. Trucking is an important mode of transportation in JIT systems.

[LO 8.6: To identify several contemporary approaches to managing inventory; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 37. Efficient consumer response (ECR) tends to focus on ___________. a. movement of materials and component parts from supplier to producer b. product movement from manufacturer to retailer c. last mile deliveries d. filling large orders [LO 8.6: To identify several contemporary approaches to managing inventory; Moderate; Application; AACSB Category 3: Analytical thinking] 38. Which of the following statements about service parts logistics is false? a. Customer expectations for service parts logistics continues to increase. b. Some organizations outsource their service parts logistics to companies that specialize in this area. c. Service parts logistics creates a variety of potential challenges for logisticians. d. It is relatively easy to forecast the demand for the necessary parts.

[LO 8.6: To identify several contemporary approaches to managing inventory; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 39. Under ___________, the size and timing of replenishment orders are the responsibility of the manufacturer.

9 .

a. quick response (QR) b. supply chain management c. vendor-managed inventory d. efficient consumer response (ECR) [LO 8.6: To identify several contemporary approaches to managing inventory; Moderate; Concept; AACSB Category 3: Analytical thinking] 40. Which of the following statements about vendor-managed inventory (VMI) is false? a. Vendors might be more proficient than customers at managing inventories. b. Vendors have more control over when and how inventory is shipped to customers. c. There may be inadequate sharing of data between the relevant parties. d. VMI will produce immediate benefits.

[LO 8.6: To identify several contemporary approaches to managing inventory; Difficult; Synthesis; AACSB Category 3: Analytical thinking] True-False Questions 1. Inventories are stocks of goods and materials that are maintained for many purposes. (True) [LO: Beginning of chapter material; Easy; Concept; AACSB Category 3: Analytical thinking] 2. Different organizational functions, such as marketing and production, tend to have similar inventory management objectives. (False) [LO: Beginning of chapter material; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 3. Inventory carries its greatest costs after value has been added through manufacturing and processing. (True) [LO: Beginning of chapter material; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 4. Buffer stock is also referred to as cycle stock. (False) [LO 8.1: To learn about the ways that inventory can be classified; Moderate; Concept; AACSB Category 3: Analytical thinking] 5. Safety stock refers to inventory that is held in addition to cycle stock to guard against uncertainty in demand and/or lead time. (True)

10 .

[LO 8.1: To learn about the ways that inventory can be classified; Easy; Concept; AACSB Category 3: Analytical thinking] 6. Pipeline stock is inventory that is en route between various fixed facilities in a logistics system. (True) [LO 8.1: To learn about the ways that inventory can be classified; Easy; Concept; AACSB Category 3: Analytical thinking] 7. Psychic stock is associated with retail stores. (True) [LO 8.1: To learn about the ways that inventory can be classified; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 8. Inventory tends to be one of the largest assets (in terms of dollar value) on a company’s balance sheet. (True) [LO 8.2: To discuss inventory costs and the trade-offs that exist among them; Easy; Synthesis; AACSB Category 3: Analytical thinking] 9. As a general rule, companies prefer to carry less inventory as the carrying cost percentage decreases. (False) [LO 8.2: To discuss inventory costs and the trade-offs that exist among them; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 10. Inventory shrinkage refers to the fact that products lose value through time. (False) [LO 8.2 To discuss inventory costs and the trade-offs that exist among them; Moderate; Concept; AACSB Category 3: Analytical thinking] 11. Obsolescence costs are one component of inventory carrying costs. (True) [LO 8.2: To discuss inventory costs and the trade-offs that exist among them; Moderate; Application; AACSB Category 3: Analytical thinking] 12. The trade-off that exists between carrying costs and ordering costs is that they respond in opposite ways to the number of orders or size of orders. (True) [LO 8.2: To discuss inventory costs and the trade-offs that exist among them; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 13. Not having enough items in inventory can be as bad as, and sometimes worse than, having too many items in inventory. (True) [LO 8.2: To discuss inventory costs and the trade-offs that exist among them; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 11 .

14. The higher the average cost of a stockout, the more likely a company is going to want to hold some amount of inventory (safety stock) to protect against stockouts. (True) [LO 8.2: To discuss inventory costs and the trade-offs that exist among them; Moderate; Application; AACSB Category 3: Analytical thinking] 15. A reorder point is equal to average daily demand divided by the length of the replenishment cycle. (False) [LO 8.3: To identify when to order and how much to order, with a particular emphasis on the economic order quantity; Moderate; Application; AACSB Category 3: Analytical thinking] 16. One requirement of a fixed order quantity system is that the inventory must be constantly monitored. (True) [LO 8.3: To identify when to order and how much to order, with a particular emphasis on the economic order quantity; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 17. A fixed order quantity system is more susceptible to stockouts than is a fixed order interval system. (False) [LO 8.3: To identify when to order and how much to order, with a particular emphasis on the economic order quantity; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 18. The economy order quantity (EOQ) is the point at which carrying costs equal ordering costs.

(True) [LO 8.3: To identify when to order and how much to order, with a particular emphasis on the economic order quantity; Easy; Concept; AACSB Category 3: Analytical thinking 19. One assumption of the basic economy order quantity (EOQ) model is a continuous, constant, and known rate of demand. (True) [LO 8.3: To identify when to order and how much to order, with a particular emphasis on the economic order quantity; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 20. The economy order quantity (EOQ) can only be calculated with respect to the number of units to be ordered. (False) [LO 8.3: To identify when to order and how much to order, with a particular emphasis on the economic order quantity; Moderate; Application; AACSB Category 3: Analytical thinking 21. The economy order quantity (EOQ) cannot be modified to account for one or more conditions of uncertainty. (False)

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[LO 8.3: To identify when to order and how much to order, with a particular emphasis on the economic order quantity; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 22. Inventory flow diagrams graphically depict the demand for, and replenishment of, inventory.

(True) [LO 8.4: To differentiate the various inventory flow patterns; Easy; Concept; AACSB Category 3: Analytical thinking] 23. Safety stock can prevent against two problem areas: an increased rate of demand and longerthan-normal replenishment. (True) [LO 8.4: To differentiate the various inventory flow patterns; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 24. ABC analysis recognizes that all inventories should not be managed in the same way. (True) [LO 8.5: To discuss special concerns with inventory management; Easy; Application; AACSB Category 3: Analytical thinking] 25. In terms of ABC analysis of inventory, no more than 25 percent of items should be classified as A items.” (False) [LO 8.5: Inventory management: special concerns; Moderate; Application; AACSB Category 3: Analytical thinking] 26. Dead stock (inventory) refers to product for which there are no sales during a six-month period. (False) [LO 8.5: To discuss special concerns with inventory management; Moderate; Concept; AACSB Category 3: Analytical thinking] 27. One way of dealing with dead stock (inventory) is for companies to simply throw it away.

(True) [LO 8.5: To discuss special concerns with inventory management; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 28. The number of times that inventory is sold in one year is referred to as average inventory.

(False) [LO 8.5: To discuss special concerns with inventory management; Moderate; Concept; AACSB Category 3: Analytical thinking] 29. Inventory turnover can be calculated by dividing cost of goods sold by average inventory.

(True) 13 .

[LO 8.5: To discuss special concerns with inventory management; Moderate; Application; AACSB Category 3: Analytical thinking] 30. High inventory turnover indicates that a company is taking longer to sell its inventory.

(False) [LO 8.5: To discuss special concerns with inventory management; Moderate; Application; AACSB Category 3: Analytical thinking] 31. Complementary products can be defined as inventories that can be used or distributed together, such as razor blades and razors. (True) [LO 8.5: To discuss special concerns with inventory management; Easy; Concept; AACSB Category 3: Analytical thinking] 32. Many grocery chains target in-stock rates of 90 percent for individual stores so that sufficient substitutes exist for a customer to purchase a substitute item rather than go to a competing store. (False) [LO 8.5: To discuss special concerns with inventory management; Moderate; Application; AACSB Category 3: Analytical thinking] 33. The lean concept focuses on the elimination of waste. (True) [LO 8.6: To identify several contemporary approaches to managing inventory; Easy; Application; AACSB Concept 3: Analytical thinking] 34. Because of smaller, more frequent orders and closer supplier location, trucking tends to be an important mode of transportation in the just-in-time (JIT) approach. (True) [LO 8.6: To identify several contemporary approaches to managing inventory; Moderate; Synthesis; AACSB Concept 3: Analytical thinking] 35. Efficient consumer response (ECR) and collaborative planning, forecasting, and replenishment (CPFR) are examples of lean inventory approaches. (False) [LO 8.6: To identify several contemporary approaches to managing inventory; Moderate; Application; AACSB Concept 3: Analytical thinking] 36. A confluence of events, such as increasing global sourcing, suggests that organizations should carefully consider the potential trade-offs before adopting a lean inventory philosophy. (True) [LO 8.6: To identify several contemporary approaches to managing inventory; Moderate; Synthesis; AACSB Concept 3: Analytical thinking] 14 .

37. Service parts logistics has decreased in importance in recent years. (False) [LO 8.6: To identify several contemporary approaches to managing inventory; Moderate; Synthesis; AACSB Concept 3: Analytical thinking] 38. One logistical challenge with service parts logistics is that it can be extremely difficult to forecast the demand for the necessary parts. (True) [LO 8.6: To identify several contemporary approaches to managing inventory; Moderate; Synthesis; AACSB Concept 3: Analytical thinking] 39. In vendor-managed inventory, the size and timing of replenishment orders are the responsibility of the manufacturer. (True) [LO 8.6: To identify several contemporary approaches to managing inventory; Moderate; Application; AACSB Concept 3: Analytical thinking] 40. Vendor-managed inventory can only be applied to consumer, and not industrial, products.

(False) [LO 8.6: To identify several contemporary approaches to managing inventory; Moderate; Synthesis; AACSB Concept 3: Analytical thinking]

15 .

TEST BANK CHAPTER 9: FACILITY LOCATION Multiple Choice Questions (correct answers are bolded) 1. The initial focus in facility location is on a ___________. a. city b. county c. state or province d. region [LO: Beginning of the chapter material; Moderate; Application; AACSB Category 3: Analytical thinking] 2. Which of the following statements is false? a. The initial focus in facility location is on a region. b. Because manufacturing plants and warehousing can be very expensive to lease or build, companies are hesitant to close them. c. Poorly located facilities do not impact logistical effectiveness. d. Poorly located facilities negatively impact logistical efficiency.

[LO 9.1: To examine the strategic importance of facility location; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 3. ___________ refers to companies that reconfigure their logistics networks to bring some production facilities closer to key consumer markets. a. Nearsourcing b. Outsourcing c. Relocation d. Locavore strategy [LO 9.1: To examine the strategic importance of facility location; Easy; Concept; AACSB Category 3: Analytical thinking] 4. ___________ is the most popular location for nearsourcing among companies that do business in North America. a. Canada b. Mexico c. Puerto Rico d. Brazil

1 .

[LO 9.1: To examine the strategic importance of facility location; Moderate; Application; AACSB Category 3: Analytical thinking] 5. In 2010, the three most populous U.S. states were located in the West, Southwest, and ___________. a. Northeast b. Southeast c. Midwest d. Southwest [LO 9.1: To examine the strategic importance of facility location; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 6. What two countries account for approximately one-third of the world’s population? a. China and Indonesia b. India and the United States c. China and India d. the United States and China [LO 9.1: To examine the strategic importance of facility location; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 7. A locavore strategy ___________. a. is based on the agglomeration concept b. refers to purchasing locally grown or produced foods c. focuses on hiring local workers d. is associated with reducing inventory turnover [LO 9.1: To examine the strategic importance of facility location; Moderate; Concept; AACSB Category 3: Analytical thinking] 8. The text indicates that ___________ plans to open 500 new stores per year in China through 2020. a. KFC b. McDonald’s c. Subway d. Starbucks [LO 9.1: To examine the strategic importance of facility location; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 9. A pure material is one that___________.

2 .

a. loses no weight in manufacturing b. cannot be mixed with other materials c. is soluble in water d. comes from the ocean [LO 9.3: To describe the major factors that influence facility location; Easy; Concept; AACSB Category 3: Analytical thinking] 10. The processing point for a pure material ___________. a. should be closer to the source than to the market b. should be closer to the market than to the source c. can be anywhere in the world d. can be anywhere near the source and the market [LO 9.3: To describe the major factors that influence facility location; Moderate; Application; AACSB Category 3: Analytical thinking] 11. The processing point for a weight-losing raw material ___________. a. can be anywhere near the source and the market b. should be near its source c. should be near the final market d. should be equidistant between the source and the market [LO 9.3: To describe the major factors that influence facility location; Moderate; Application; AACSB Category 3: Analytical thinking] 12. The processing point for a weight-gaining raw material ___________. a. can be anywhere near the source and the market b. should be near its source c. should be near the final market d. should be equidistant between the source and the market [LO 9.3: To describe the major factors that influence facility location; Moderate; Application; AACSB Category 3: Analytical thinking] 13. Over the past quarter century, discussion of natural resources and facility location has increasingly factored in ___________ considerations. a. cost b. supply chain c. diversity d. environmental 3 .

[LO 9.3: To describe the major factors that influence facility location; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 14. Which of the following statements is false? a. Pure materials lose no weight in processing. b. With weight-gaining products, the processing point should be close to the market. c. Water is a requirement for the location of many facilities. d. With weight-losing products, the processing point should be close to the market.

[LO 9.3: To describe the major factors that influence facility location; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 15. What country’s population is projected to grow from approximately 160 million in 2010 to nearly 260 million in 2033? a. Indonesia c. Russia c. Nigeria d. Ethiopia [LO 9.3: To describe the major factors that influence facility location; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 16. Labor force ___________ is/are a key locational determinant as supply chains become more global in nature. a. wage rates b. size c. skills d. age [LO 9.3: To describe the major factors that influence facility location; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 17. ___________ plants, which are located just south of the U.S.–Mexican border, provide much needed jobs to Mexican workers and allow for low-cost, duty-free production so long as all goods are exported from Mexico. a. Industry cluster b. Locavore c. Maquiladora d. Free trade zone

4 .

[LO 9.3: To describe the major factors that influence facility location; Moderate; Concept; AACSB Category 3: Analytical thinking]

18. Which of the following is not a key shortcoming of the sweatshops associated with the electronics industry? a. violations of working hours b. poor workplace ventilation c. violations of wage agreements d. discriminatory practices based on age [LO 9.3: To describe the major factors that influence facility location; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 19. Right-to-work laws refer to a situation where ___________. a. worker strikes are illegal b. every person who wants a job is guaranteed a job c. each state provides employment to those people receiving public assistance d. an individual cannot be compelled to join a union as a condition of employment [LO 9.3: To describe the major factors that influence facility location; Easy; Concept; AACSB Category 3: Analytical thinking] 20. Which of the following statements is false? a. Countries with low labor costs often have a multitude of sweatshops. b. There has been a decrease in maquiladoras in recent years. c. A workforce’s union status may be a key locational determinant for some organizations. d. Expatriate work assignments can be costly.

[LO 9.3: To describe the major factors that influence facility location; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 21. An expatriate refers to a person who ___________. a. is sent to work in other countries for extended periods of time b. holds dual citizenship c. has been stripped of citizenship d. is ineligible to work outside his/her home country [LO 9.3: To describe the major factors that influence facility location; Moderate; Concept; AACSB Category 3: Analytical thinking] 5 .

22. Turnover rates for expatriate workers current run between ___________ and ___________ percent. a. 10; 20 b. 15; 25 c. 20; 40 d. 25; 45 [LO 9.3: To describe the major factors that influence facility location; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 23. From a business perspective, ___________ taxes are analogous to the personal property taxes paid by individuals. a. sales b. real estate c. inventory d. corporate franchising [LO 9.3: To describe the major factors that influence facility location; Moderate; Application; AACSB Category 3: Analytical thinking] 24. The state of Massachusetts provided ___________ with approximately $145 million in incentives to move its corporate headquarters to Boston. a. Procter & Gamble b. General Electric c. Boeing d. McDonald’s [LO 9.3: To describe the major factors that influence facility location; Moderate; Application; AACSB Category 3: Analytical thinking] 25. Which of the following statements is false? a. The accessibility of highway transportation often ranks as one of the most important criteria in facility location. b. Transportation considerations are a key aspect of facility location decisions. c. A poor facility location can increase transportation costs as well as negatively impact customer service. d. Intermodal competition refers to the number of carriers within a particular mode of transportation.

[LO 9.3: To describe the major factors that influence facility location; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 6 .

26. The existence of transportation competition, whether intermodal or intramodal, tends to have ___________. a. both cost and service benefits to a user b. cost, but not service, benefits to a user c. service, but not cost, benefits to a user d. neither cost nor service benefits to a user [LO 9.3: To describe the major factors that influence facility location; Moderate; Application; AACSB Category 3: Analytical thinking] 27. ___________ refers to the net advantages that can be gained by a sharing of common locations by various enterprises. a. Supplier development b. Coopetition c. Supplier relationship management d. Agglomeration [LO 9.3: To describe the major factors that influence facility location; Moderate; Concept; AACSB Category 3: Analytical thinking] 28. The agglomeration concept is better known today as the ___________ concept. a. nearsourcing b. coopetition c. industry cluster d. supply chain management [LO 9.3: To describe the major factors that influence facility location; Moderate; Application; AACSB Category 3: Analytical thinking] 29. Supplier parks are a concept that developed around ___________ and their suppliers in Europe. a. appliance makers b. apparel makers c. computer makers d. automakers [LO 9.3: To describe the major factors that influence facility location; Moderate; Application; AACSB Category 3: Analytical thinking] 30. With respect to commodity flows, logisticians are especially interested in ___________ and ___________.

7 .

a. what is being produced; where it is being shipped b. how much is being produced; where it is being produced c. how much is being produced; where it is being shipped d. what is being produced; where it is being produced [LO 9.3: To describe the major factors that influence facility location; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 31. The European Union’s expansion into Central and Eastern European countries has resulted in the Czech Republic and ___________ becoming favored distribution sites because of their relatively central location. a. Poland b. Hungary c. Switzerland d. Austria [LO 9.3: To describe the major factors that influence facility location; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 32. One branding expert has argued that in the twenty-first century ___________ represents the leading reason why businesses locate in a particular area. a. transportation considerations b. quality-of-life considerations c. labor considerations d. natural resource consideration [LO 9.3: To describe the major factors that influence facility location; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 33. ___________ has identified bureaucratic red tape as causing business to be diverted to Asian ports characterized by less bureaucratic red tape. a. Thailand b. China c. Indonesia d. Malaysia [LO 9.3: To describe the major factors that influence facility location; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 34. A brownfield is ___________. a. a term for where crushed boxes are stored before recycling 8 .

b. a term that refers to a potential site that has no trees needing to be cleared before construction c. a property for which use and redevelopment is complicated by past use d. a property that has been excavated but not further developed [LO 9.4: To examine a site’s specialized location characteristics; Moderate; Concept; AACSB Category 3: Analytical thinking] 35. Which of the following is not a site-specific (specialized) factor in facility location? a. environment b. zoning restrictions c. weather d. natural resources [LO 9.4: To examine a site’s specialized location characteristics; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 36. A free trade zone refers to an area ___________. a. that is home to businesses that are owned and operated by large concentrations of a particular ethnic group b. in which products can be stored, exhibited, or processed without being subjected to duties and quotas unless they enter the customs territory of the zone country c. in which the federal government disregards all import and export quotas for products coming from, or destined to, “favored” nations d. outside the legal jurisdiction of federal, state, and/or local governments [LO 9.4: To examine a site’s specialized location characteristics; Moderate; Concept; AACSB Category 3: Analytical thinking] 37. The center-of-gravity approach to location analysis minimizes ___________. a. labor costs b. warehousing costs c. real estate taxes d. distance to existing facilities [LO 9.5: To explain location decisions using simple grid systems; Moderate; Application; AACSB Category 3: Analytical thinking] 38. How does the weighted center-of-gravity approach to location analysis differ from the centerof-gravity approach to location analysis? a. The weighted approach considers real estate taxes. b. The weighted approach is less complicated.

9 .

c. The weighted approach considers shipment volume. d. The weighted approach considers tapering rates.

[LO 9.5: To explain location decisions using simple grid systems; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 39. The Worker Adjustment and Retraining Notification (WARN) Act mandates that employers give ___________ days’ notice about plant closings and mass layoffs. a. 30 b. 60 c. 90 d. 120 [LO 9.6: To learn about facility relocation and facility closing; Moderate; Application; AACSB Category 3: Analytical thinking] 40. Which of the following is not a possible reason for a facility closing? a. eliminating redundant capacity in mergers and acquisitions b. poor planning c. insufficient volume of business d. limited competition [LO 9.6: To learn about facility relocation and facility closing; Moderate; Synthesis; AACSB Category 3: Analytical thinking]

10 .

True-False Questions 1. The initial focus in facility location is on a county. (False) [LO: Beginning of the chapter material; Moderate; Application; AACSB Category 3: Analytical thinking] 2. Facility location is a logistics/supply chain activity that has evolved from a tactical decision to one of tremendous strategic importance in numerous organizations. (True) [LO 9.1: To examine the strategic importance of facility location; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 3. Poorly located facilities, such as manufacturing plants and warehouses, negatively impact logistical effectiveness, but have little impact on logistical efficiency. (False) [LO 9.1: To examine the strategic importance of facility location; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 4. Agglomeration refers to companies reconfiguring their logistics networks to bring some production facilities closer to key consumer markets. (False) [LO 9.1: To examine the strategic importance of facility location; Moderate; Concept; AACSB Category 3: Analytical thinking] 5. China and India account for approximately one-third of the world’s population. (True) [LO 9.1: To examine the strategic importance of facility location; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 6. A locavore strategy focuses on hiring local workers. (False) [LO 9.1: To examine the strategic importance of facility location; Moderate; Concept; AACSB Category 3: Analytical thinking] 7. Retailers might add a distribution center when some of its stores can no longer consistently be supplied within two days by existing facilities. (True) [LO 9.2: To explain the general process of determining the optimum number of facilities; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 8. A pure material is one that is totally water soluble. (False) [LO 9.3: To describe the major factors that influence facility location; Moderate; Concept; AACSB Category 3: Analytical thinking]

11 .

9. The processing point for a weight-losing raw material can be anywhere between the source and the market. (False) [LO 9.3: To describe the major factors that influence facility location; Moderate; Application; AACSB Category 3: Analytical thinking] 10. The processing point for a weight-gaining raw material should be close to the market. (True) [LO 9.3: To describe the major factors that influence facility location; Moderate; Application; AACSB Category 3: Analytical thinking] 11. Over the past quarter century, discussion of natural resources and facility location has increasingly factored in environmental and sustainability considerations. (True) [LO 9.3: To describe the major factors that influence facility location; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 12. Population can be viewed as both a market for goods and a potential source of labor. (True) [LO 9.3: To describe the major factors that influence facility location; Easy; Application; AACSB Category 3: Analytical thinking] 13. Population size is an irrelevant consideration in the facility location decision. (False) [LO 9.3: To describe the major factors that influence facility location; Moderate; Synthesis; AACSB Category 3: Analytical thinking]] 14. Labor wage rates appear to be a key locational determinant as supply chains become more global in nature. (True) [LO 9.3: To describe the major factors that influence facility location; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 15. Maquiladora plants have experienced a resurgence in recent years because of a focus on manufactured products that depend on fast time to market. (True) [LO 9.3: To describe the major factors that influence facility location; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 16. Sweatshops are organizations that exploit workers and that do not comply with fiscal and legal obligations toward employees. (True) [LO 9.3: To describe the major factors that influence facility location; Easy; Concept; AACSB Category 3: Analytical thinking] 17. Right-to-work laws mean that every person who wants a job is guaranteed a job. (False) 12 .

[LO 9.3: To describe the major factors that influence facility location; Moderate; Concept; AACSB Category 3: Analytical thinking] 18. An expatriate is a person who is not allowed to work outside his/her home country. (False) [LO 9.3: To describe the major factors that influence facility location; Moderate; Concept; AACSB Category 3: Analytical thinking] 19. Inventory taxes have become increasingly difficult to collect in part because of a lack of agreement as to what is meant by inventory. (True) [LO 9.3: To describe the major factors that influence facility location; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 20. A general rule of thumb is that the services received from business taxes represent only about 50 percent of the taxes that were paid. (True) [LO 9.3: To describe the major factors that influence facility location; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 21. Massachusetts provided General Electric with approximately $145 million in incentives to move its corporate headquarters to Boston. (True) [LO 9.3: To describe the major factors that influence facility location; Moderate; Application; AACSB Category 3: Analytical thinking] 22. Intermodal competition refers to the number of carriers within a particular mode of transportation. (False) [LO 9.3: To describe the major factors that influence facility location; Moderate; Concept; AACSB Category 3: Analytical thinking] 23. A poor facility location can increase transportation costs, but has minimal impact on customer service. (False) [LO 9.3: To describe the major factors that influence facility location; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 24. Centralized facilities tend to minimize total transit distances, which likely results in minimum transportation costs. (True) [LO 9.3: To describe the major factors that influence facility location; Easy; Application; AACSB Category 3: Analytical thinking] 25. Agglomeration refers to the net advantages that can be gained by a sharing of common locations by various enterprises. (True) 13 .

[LO 9.3: To describe the major factors that influence facility location; Moderate; Concept; AACSB Category 3: Analytical thinking] 26. The agglomeration concept is better known today as the supply chain management concept.

(False) [LO 9.3: To describe the major factors that influence facility location; Moderate; Concept; AACSB Category 3: Analytical thinking] 27. Supplier parks refer to places where main component makers locate in specially created industrial complexes adjacent to assembly plants. (True) [LO 9.3: To describe the major factors that influence facility location; Easy; Concept; AACSB Category 3: Analytical thinking] 28. With respect to commodity flows, logisticians are especially interested in what is being produced and where it is being produced. (False) [LO 9.3: To describe the major factors that influence facility location; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 29. The development and implementation of multicountry trade agreements has had profound impacts on trade patterns. (True) [LO 9.3: To describe the major factors that influence facility location; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 30. The European Union’s expansion into Central and Eastern European countries has seen Hungary become a favored distribution site because of its relatively central geographic location. (False) [LO 9.3: To describe the major factors that influence facility location; Moderate; Application; AACSB Category 3: Analytical thinking] 31. Quality of life considerations play a limited role in facility location decisions. (False) [LO 9.3: To describe the major factors that influence facility location; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 32. Government considerations such as the relevant legal system, political stability, and protectionism are important when companies are thinking of facility location in non-domestic countries. (True) [LO 9.3: To describe the major factors that influence facility location; Moderate; Synthesis; AACSB Category 3: Analytical thinking]

14 .

33. A community can encourage or discourage business activity through changes in the zoning classifications of land. (True) [LO 9.4 To examine a site’s specialized location characteristics; Moderate; Application; AACSB Category 3: Analytical thinking] 34. Brownfields refer to a place where flattened cartons are stored until they are recycled. (False) [LO 9.4: To examine a site’s specialized location characteristics; Moderate; Concept; AACSB Category 3: Analytical thinking] 35. Free trade zones must be adjacent to a port or an airport. (False) [LO 9.4: To examine a site’s specialized location characteristics; Moderate; Application; AACSB Category 3: Analytical thinking] 36. Grid systems are important to locational analysis because they allow one to analyze spatial relationships with relatively simple mathematical tools. (True) [LO 9.5: To explain location decisions using simple grid systems; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 37. The idea behind a weighted center-of-gravity approach is that a prospective warehousing facility will be located closer to the existing sites with the greatest current demand. (True) [LO 9.5: To explain location decisions using simple grid systems; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 38. Facility relocation is associated with business growth, while facility closing is associated with business contraction. (True) [LO 9.6: To learn about facility relocation and facility closing; Moderate; Concept; AACSB Category 3: Analytical thinking] 39. The Worker Adjustment and Retraining Notification (WARN) Act mandates that employers give 90 days’ notice about plant closings and mass layoffs. (False) [LO 9.6: To learn about facility relocation and facility closing; Moderate; Application; AACSB Category 3: Analytical thinking] 40. The human impact of facility closing should be a relatively low priority. (False) [LO 9.6: To learn about facility relocation and facility closing; Easy; Application; AACSB Category 3: Analytical thinking]

15 .

TEST BANK CHAPTER 10: WAREHOUSING MANAGEMENT Multiple Choice Questions (correct answers are bolded) 1. Warehousing and ___________ are substitutes for each other. a. transportation b. materials handling c. packaging d. inventory management [LO 10.1: To discuss the role of warehousing in a logistics system; Moderate; Application; AACSB Category 3: Analytical thinking] 2. Which of the following has been referred to as “transportation at zero miles per hour”? a. materials handling b. inventory management c. procurement d. warehousing [LO 10.1: To discuss the role of warehousing in a logistics system; Moderate; Concept; AACSB Category 3: Analytical thinking] 3. ___________ and ___________ refer to adjustments associated with the quantity of product. a. Allocating; assorting b. Accumulating; allocating c. Sorting out; accumulating d. Sorting out; assorting [LO 10.1: To discuss the role of warehousing in a logistics system; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 4. ___________ involves bringing together similar stocks from different sources. a. Bulk-breaking b. Assorting c. Accumulating d. Sorting out

[LO 10.1: To discuss the role of warehousing in a logistics system; Moderate; Concept; AACSB Category 3: Analytical thinking] 1

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5. ___________ refers to building up a variety of different products for resale to particular customers. a. Accumulating b. Allocating c. Sorting out d. Assorting [LO 10.1: To discuss the role of warehousing in a logistics system; Moderate; Concept; AACSB Category 3: Analytical thinking] 6. ___________ refers to separating products into grades and qualities desired by different target markets. a. Assorting b. Sorting out c. Allocating d. Accumulating [LO 10.1: To discuss the role of warehousing in a logistics system; Moderate; Concept; AACSB Category 3: Analytical thinking] 7. Warehouses emphasize ___________ and their primary purpose is to maximize ___________. a. rapid movement of product; usage of available storage space b. rapid movement of product; throughput c. product storage; usage of available storage space d. product storage; throughput [LO 10.1: To discuss the role of warehousing in a logistics system; Difficult; Application; AACSB Category 3: Analytical thinking] 8. Distribution centers emphasize ___________, and their primary purpose is to maximize ___________. a. rapid movement of product; throughput b. product storage; throughput c. product storage; usage of available storage space d. rapid movement of product; usage of available storage space [LO 10.1: To discuss the role of warehousing in a logistics system; Difficult; Application; AACSB Category 3: Analytical thinking] 9. Throughput refers to ___________.

2

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a. storage capacity of a warehousing facility b. volume through a pipeline c. inventory turnover in a one-month period d. amount of product entering and leaving a facility in a given time period [LO 10.1: To discuss the role of warehousing in a logistics system; Moderate; Concept; AACSB Category 3: Analytical thinking] 10. ___________ are focused on e-commerce orders. a. Warehouses b. Distribution centers c. Fulfillment centers d. Cross-dock facilities [LO 10.1: To discuss the role of warehousing in a logistics system; Moderate; Concept; AACSB Category 3: Analytical thinking] 11. ___________ refers to a process of receiving product and shipping it out the same day or overnight without putting it into storage. a. Just-in-time b. Cross-docking c. Accumulation d. Agglomeration [LO 10.1: To discuss the role of warehousing in a logistics system; Moderate; Concept; AACSB Category 3: Analytical thinking] 12. Which of the following is not a possible design shape for a cross-dock facility? a. I b. H c. U d. X [LO 10.1: To discuss the role of warehousing in a logistics system; Difficult; Application; AACSB Category 3: Analytical thinking] 13. Warehousing labor safety practices in the United States are monitored by which federal government agency? a. Warehousing Safety Administration b. Department of Commerce c. Occupational Safety and Health Administration (OSHA) d. Consumer Product Safety Commission 3

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[LO 10.2: To learn about public, private, contract, and multiclient warehousing; Moderate; Application; AACSB Category 3: Analytical thinking] 14. Which of the following is not a characteristic of public warehousing? a. It requires no capital investment from users. b. Users have a fairly exact determination of their warehousing costs. c. It is good for users dealing with large volumes of inventory. d. There is a lack of control by users.

[LO 10.2: To learn about public, private, contract, and multiclient warehousing; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 15. What are the two major sources of labor in logistics? a. warehousing and materials handling b. transportation and warehousing c. order management and materials handling d. packaging and transportation [LO 10.2: To learn about public, private, contract, and multiclient warehousing; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 16. What is considered to be the biggest drawback to public warehousing? a. high fixed cost to the user b. lack of safety regulation c. lack of locational flexibility d. lack of control by the user [LO 10.2: To learn about public, private, contract, and multiclient warehousing; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 17. ___________ warehousing is owned by the firm storing goods in the facility. a. Private b. Public c. Contract d. Multiclient [LO 10.2: To learn about public, private, contract, and multiclient warehousing; Easy; Concept; AACSB Category 3: Analytical thinking] 18. Which of the following statements about private warehousing is false?

4

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a. It generates high fixed costs for the user. b. It is feasible when demand patterns are irregular. c. It gives users a great deal of control. d. It may reduce an organization’s flexibility.

[LO 10.2: To learn about public, private, contract, and multiclient warehousing; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 19. With respect to contract warehousing, ___________ to ___________ contracts appear to allow sufficient time for the warehousing provider to learn the client’s business while allowing the client some flexibility in case the agreement fails to produce acceptable results. a. one-year; two-year b. two-year; three-year c. three-year; five-year d. five-year; seven-year [LO 10.2: To learn about public, private, contract, and multiclient warehousing; Moderate; Application; AACSB Category 3: Analytical thinking] 20. Multiclient warehousing mixes attributes of ___________ and ___________ warehousing. a. private; contract b. common; private c. public; common d. public; contract [LO 10.2: To learn about public, private, contract, and multiclient warehousing; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 21. Which of the following statements is false? a. The primary design consideration in warehousing should be the facility’s function. b. The relative emphasis placed on storage and distribution affects the space layout of a warehousing facility. c. The quantity and character of goods to be handled must be known prior to designing a warehousing facility. d. Online orders should be filled from warehousing facilities designed to supply retail store locations.

[LO 10.3: To analyze select considerations when designing warehouse facilities; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 22. Trade-offs must be made among space, labor, and ___________ with respect to warehousing design.

5

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a. cost b. construction materials c. mechanization d. speed

[LO 10.3: To analyze select considerations when designing warehouse facilities; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 23. ___________ is a popular strategy that slots the most frequently picked items in the most accessible location. a. Fixed slot location b. Variable slot location c. Velocity slotting d. ABC slotting [LO 10.3: To analyze select considerations when designing warehouse facilities; Moderate; Concept; AACSB Category 3: Analytical thinking] 24. A key advantage of fixed slot locations in a warehouse is ___________. a. improved employee morale b. knowledge of where specific products are located c. better materials handling d. increased space utilization [LO 10.3: To analyze select considerations when designing warehouse facilities; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 25. A key advantage of variable slot locations in a warehouse is ___________. a. increased space utilization b. better materials handling c. ease of record keeping d. more logical and simple product layout [LO 10.3: To analyze select considerations when designing warehouse facilities; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 26. As one builds higher, building costs ___________, while warehousing equipment costs tend to ___________. a. increase; decrease b. increase; increase c. decrease; decrease 6

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d. decrease; increase [LO 10.3: To analyze select considerations when designing warehouse facilities; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 27. Which of the following statements about a one-dock layout is false? a. Each and every dock can be used for both shipping and receiving. b. It requires carriers to pick up and deliver at specific times. c. Goods move in a straight configuration. d. The product may sometimes be reloaded in the vehicle that delivered it.

[LO 10.3: To analyze select considerations when designing warehouse facilities; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 28. Narrow aisles can store ___________ to ___________ percent more product than conventional aisles. a. 30; 40 b. 20; 25 c. 15; 20 d. 10; 15 [LO 10.3: To analyze select considerations when designing warehouse facilities; Moderate; Application; AACSB Category 3: Analytical thinking] 29. Which of the following is not an example of warehouse automation? a. radio frequency identification b. narrow aisle forklifts c. automated guided vehicles d. pallet jacks [LO 10.3: To analyze select considerations when designing warehouse facilities; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 30. Which of the following is not a trade-off in warehousing design? a. two-dock versus single-dock layout b. build up versus build out c. order-picking versus order-taking functions d. degree of warehouse automation [LO 10.3: To analyze select considerations when designing warehouse facilities; Difficult; Synthesis; AACSB Category 3: Analytical thinking]

7

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31. One estimate suggests that only approximately ___________ percent of a facility’s cubic capacity is actually occupied by product. a. 20 b. 25 c. 35 d. 50 [LO 10.3: To analyze select considerations when designing warehouse facilities; Moderate; Application; AACSB Category 3: Analytical thinking] 32. Which of the following is not a potential measure of warehousing productivity? a. average warehouse capacity used b. order fill rate c. pallets shipped per person d. cases shipped per person [LO 10.4: To examine some prominent operational issues in warehousing; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 33. In the United States, forklifts account for 1 of every ___________ workplace deaths. a. 5 b. 6 c. 10 d. 14 [LO 10.4: To examine some prominent operational issues in warehousing; Moderate; Application; AACSB Category 3: Analytical thinking] 34. What is the most frequent source of injuries among warehousing personnel? a. repetitive motion b. assault by other warehousing personnel c. workers struck by an object d. back and shoulder injuries [LO 10.4: To examine some prominent operational issues in warehousing; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 35. What is dunnage? a. additional payment for special handling b. a type of packaging material that is placed inside of boxes c. material that is used to block and brace products inside carrier equipment 8

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d. additional transportation fees that are charged to small shippers [LO 10.4: To examine some prominent operational issues in warehousing; Moderate; Concept; AACSB Category 3: Analytical thinking] 36. The two most common causes of warehousing fires in recent years have been those caused by electrical distribution and lighting equipment and ___________. a. those caused by lightning strikes b. those that were intentionally set c. those that resulted from the heat source being too close to combustibles d. those where cutting or welding took place too close to combustibles [LO 10.4: To examine some prominent operational issues in warehousing; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 37. A safety data sheet (SDS) is required for ___________. a. all finished goods stored in a warehouse b. each hazardous product to be stored in a facility c. all raw materials brought into a firm d. any product imported into the United States [LO 10.4: To examine some prominent operational issues in warehousing; Moderate; Application; AACSB Category 3: Analytical thinking] 38. Which of the following is not one of the four questions associated with effective management of hazardous materials storage? a. What material is being stored? b. Why is the material being stored? c. What is the material’s source? d. Where is the material being stored?

[LO 10.4: To examine some prominent operational issues in warehousing; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 39. In general, warehousing security can be enhanced by focusing on people, ___________, and ___________. a. building; equipment b. buildings; cost c. cost; processes d. facilities; processes

9

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[LO 10.4: To examine some prominent operational issues in warehousing; Moderate; Application; AACSB Category 3: Analytical thinking] 40. Which of the following statements is false? a. Clean and sanitary warehousing facilities can have a positive impact on morale. b. One suggestion for warehouse sanitation is to clean the facility at least once a day. c. Clean and sanitary warehousing facilities can reduce employee turnover. d. Clean and sanitary warehousing facilities require costly technology.

[LO 10.4: To examine some prominent operational issues in warehousing; Difficult; Synthesis; AACSB Category 3: Analytical thinking] True-False Questions 1. Many well-run companies view warehousing as a strategic consideration and as a potential source of competitive advantage. (True) [LO: Beginning of the chapter material; Easy; Application; AACSB Category 3: Analytical thinking] 2. Materials handling has been referred to as transportation at zero miles per hour. (False) [LO 10.1: To discuss the role of warehousing in a logistics system; Moderate; Concept; AACSB Category 3: Analytical thinking] 3. Warehousing is needed because patterns of production and consumption may not coincide.

(True) [LO 10.1: To discuss the role of warehousing in a logistics system; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 4. Assorting and sorting refer to adjustments associated with the quantity of product. (False) [LO 10.1: To discuss the role of warehousing in a logistics system; Moderate; Application; AACSB Category 3: Analytical thinking] 5. Accumulating involves bringing together similar stocks from different sources. (True) [LO 10.1: To discuss the role of warehousing in a logistics system; Easy; Concept; AACSB Category 3: Analytical thinking] 6. Assorting involves breaking larger quantities into smaller quantities. (False) [LO 10.1: To discuss the role of warehousing in a logistics system; Moderate; Concept; AACSB Category 3: Analytical thinking] 10

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7. Warehouses emphasize the rapid movement of products through a facility and attempt to maximize throughput. (False) [LO 10.1: To discuss the role of warehousing in a logistics system; Moderate; Concept; AACSB Category 3: Analytical thinking] 8. Throughput is the amount of product entering and leaving a warehousing facility in a given period of time. (True) [LO 10.1: To discuss the role of warehousing in a logistics system; Easy; Concept; AACSB Category 3: Analytical thinking] 9. Fulfillment centers represent a special type of distribution center that is focused on ecommerce orders. (True) [LO 10.1: To discuss the role of warehousing in a logistics system; Easy; Concept; AACSB Category 3: Analytical thinking] 10. One drawback of cross-docking is that it increases the amount of necessary warehousing space. (False) [LO 10.1: To discuss the role of warehousing in a logistics system; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 11. The preferred design for a cross-dock facility is an “H” shape. (False) [LO 10.1: To discuss the role of warehousing in a logistics system; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 12. With public warehousing the user rents space as needed, thus avoiding the cost of unneeded space. (True) [LO 10.2: To learn about public, private, contract, and multiclient warehousing; Moderate; Application; AACSB Category 3: Analytical thinking] 13. In the United States, the Department of Commerce has primary responsibility for warehousing safety practices. (False) [LO 10.2: To learn about public, private, contract, and multiclient warehousing; Moderate; Application; AACSB Category 3: Analytical thinking] 14. Perhaps the biggest drawback to public warehousing is the inability to provide specialized services. (False)

11

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[LO 10.2: To learn about public, private, contract, and multiclient warehousing; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 15. Private warehousing tends to be feasible when demand patterns are relatively stable. (True) [LO 10.2: To learn about public, private, contract, and multiclient warehousing; Easy; Application; AACSB Category 3: Analytical thinking] 16. Private warehousing offers potential users a great deal of control over their storage needs.

(True) [LO 10.2: To learn about public, private, contract, and multiclient warehousing; Moderate; Application; AACSB Category 3: Analytical thinking] 17. Public warehousing has embraced value-adding activities such as customization and reverse logistics to a greater degree than has contract warehousing. (False) [LO 10.2: To learn about public, private, contract, and multiclient warehousing; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 18. Three-to-five year contracts appear to allow sufficient time for contract warehouses to learn their client’s business while at the same time allowing clients some flexibility. (True) [LO 10.2: To learn about public, private, contract, and multiclient warehousing; Moderate; Application; AACSB Category 3: Analytical thinking] 19. In essence, multiclient warehousing mixes attributes of private and contract warehousing.

(False) [LO 10.2: To learn about public, private, contract, and multiclient warehousing; Moderate; Concept; AACSB Category 3: Analytical thinking] 20. A storage facility with low rates of product turnover should be laid out in a manner that maximizes utilization of the cubic capacity of the storage facility. (True) [LO 10.3: To analyze select considerations when designing warehouse facilities; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 21. Trade-offs must be made among space, labor, and mechanization with respect to warehousing design. (True) [LO 10.3: To analyze select considerations when designing warehouse facilities; Moderate; Application; AACSB Category 3: Analytical thinking] 22. Fixed slot location systems slot the most frequently picked items in the most accessible location. (False)

12

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[LO 10.3: To analyze select considerations when designing warehouse facilities; Moderate; Concept; AACSB Category 3: Analytical thinking] 23. A variable slot location warehousing system may result in low space utilization. (False) [LO 10.3: To analyze select considerations when designing warehouse facilities; Moderate; Application; AACSB Category 3: Analytical thinking] 24. A general rule of thumb is that it is cheaper to build up than build out. (True) [LO 10.3: To analyze select considerations when designing warehouse facilities; Easy; Application; AACSB Category 3: Analytical thinking] 25. A one-dock warehouse layout, in contrast to a two-dock layout, increases the space needed for storage docks. (False) [LO 10.3: To analyze select considerations when designing warehouse facilities; Moderate; Application; AACSB Category 3: Analytical thinking] 26. Narrower aisles can increase the space utilization of a facility. (True) [LO 10.3: To analyze select considerations when designing warehouse facilities; Easy; Application; AACSB Category 3: Analytical thinking] 27. Radio frequency identification is an example of warehouse automation. (True) [LO 10.3: To analyze select considerations when designing warehouse facilities; Moderate; Application; AACSB Category 3: Analytical thinking] 28. Recent estimates suggest that only approximately 30 percent of a warehousing facility’s cubic capacity is actually occupied by product. (False) [LO 10.3: To analyze select considerations when designing warehouse facilities; Moderate; Application; AACSB Category 3: Analytical thinking] 29. Motivation of warehousing employees can be difficult because of the somewhat repetitive nature of the operation. (True) [LO 10.4: To examine some prominent operational issues in warehousing; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 30. Increases in warehousing productivity require significant investment in technology or mechanized or automated equipment. (False) [LO 10.4: To examine some prominent operational issues in warehousing; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 13

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31. Forklifts account for one of every six workplace deaths in the United States. (True) [LO 10.4: To examine some prominent operational issues in warehousing; Moderate; Application; AACSB Category 3: Analytical thinking] 32. Forklift operators in the United States must be recertified every five years. (False) [LO 10.4: To examine some prominent operational issues in warehousing; Moderate; Application; AACSB Category 3: Analytical thinking]

33. Back and shoulder injuries are the most frequent injuries among warehousing personnel.

(True) [LO 10.4: To examine some prominent operational issues in warehousing; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 34. Dunnage refers to charges for accessorial transportation service. (False) [LO 10.4: To examine some prominent operational issues in warehousing; Moderate; Concept; AACSB Category 3: Analytical thinking] 35. Fires are a constant threat in warehousing. (True) [LO 10.4: To examine some prominent operational issues in warehousing; Moderate; Application; AACSB Category 3: Analytical thinking] 36. Government regulations require organizations to create a safety data sheet (SDS) for each imported item that is stored in a warehousing facility. (False) [LO 10.4: To examine some prominent operational issues in warehousing; Moderate; Application; AACSB Category 3: Analytical thinking] 37. Buildings that store hazardous materials often have walls and doors that can withstand several hours of intense fire. (True) [LO 10.4: To examine some prominent operational issues in warehousing; Moderate; Application; AACSB Category 3: Analytical thinking] 38. Potential threats to warehousing security include theft, pilferage, heat and humidity, and fire.

(True) [LO 10.4: To examine some prominent operational issues in warehousing; Moderate; Synthesis; AACSB Category 3: Analytical thinking]

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39. In general, warehousing security can be enhanced by focusing on people, facilities, and information. (False) [LO 10.4: To examine some prominent operational issues in warehousing; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 40. Clean and sanitary warehousing facilities can have a positive impact on employee safety, morale, and productivity. (True) [LO 10.4: To examine some prominent operational issues in warehousing; Moderate; Application; AACSB Category 3: Analytical thinking]

15

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TEST BANK CHAPTER 11: PACKAGING AND MATERIALS HANDLING Multiple Choice Questions (correct answers are bolded) 1. Products exist in ___________ forms, and each form has specific packaging requirements. a. two b. three c. four d. five [LO 11.1: To illustrate how product characteristics affect packaging and materials handling; Moderate; Application; AACSB Category 3: Analytical thinking] 2. Product density refers to a product’s ___________. a. volume b. weight c. weight per volume d. fragility [LO 11.1: To illustrate how product characteristics affect packaging and materials handling; Easy; Concept; AACSB Category 3: Analytical thinking] 3. Which of the following statements is false? a. A product’s chemical characteristics have little to no influence on the way the product is handled. b. Some products can be exposed to freezing weather; others cannot. c. The various properties of goods must be made known to consumers to help them make the correct buying decision and properly care for the product. d. Perishable products require special packaging as they move from source to customer.

[LO 11.1: To illustrate how product characteristics affect packaging and materials handling; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 4. Which of the following is not an ethylene-sensitive product? a. lettuce b. watermelon c. broccoli d. tomatoes

1 .

[LO 11.1: To illustrate how product characteristics affect packaging and materials handling; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 5. The building blocks concept is associated with which logistics function? a. warehousing b. packaging c. materials handling d. inventory management [LO 11.2: To discuss packaging fundamentals, such as packaging functions and labeling; Moderate; Application; AACSB Category 3: Analytical thinking] 6. ___________ refers to materials used for the containment, protection, handling, delivery, and presentation of goods. a. Materials management b. Materials handling c. Procurement d. Packaging [LO 11.2: To discuss packaging fundamentals, such as packaging functions and labeling; Easy; Concept; AACSB Category 3: Analytical thinking] 7. Packaging serves ___________ general functions. a. five b. four c. three d. two [LO 11.2: To discuss packaging fundamentals, such as packaging functions and labeling; Moderate; Application; AACSB Category 3: Analytical thinking] 8. Properly designing a protective packaging system requires three important kinds of information. Which of the following is not one of the three kinds of information? a. severity of the distribution environment b. performance characteristics of the various cushion materials c. fragility of the product to be protected d. value of the product to be protected [LO 11.2: To discuss packaging fundamentals, such as packaging functions and labeling; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 9. Each of the following is a shipping hazard that a package may be exposed to except: 2 .

a. retraction. b. vibration. c. compression. d. rough handling.

[LO 11.2: To discuss packaging fundamentals, such as packaging functions and labeling; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 10. Which of the following statements is false? a. Package labeling is usually done at the end of the assembly line. b. Pictures are preferable to words for labeling a product. c. Labeling regulations may differ from country to country. d. Labeling requirements within a particular country can vary from state to state (province to province).

[LO 11.2: To discuss packaging fundamentals, such as packaging functions and labeling; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 11. As a general rule, labeling requirements and enforcement tends to be more stringent in ___________ countries than in ___________ countries. a. larger; smaller b. older; younger c. economically developed; economically developing d. smaller; larger [LO 11.2: To discuss packaging fundamentals, such as packaging functions and labeling; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 12. The Globally Harmonized System of Classification and Labeling of Chemicals (GHS) was developed by the ___________. a. International Chamber of Commerce b. World Trade Organization c. World Bank d. United Nations [LO 11.2: To discuss packaging fundamentals, such as packaging functions and labeling; Moderate; Application; AACSB Category 3: Analytical thinking] 13. Which of the following is not a key piece of classification and labeling information provided by the Globally Harmonized System of Classification and Labeling of Chemicals (GHS)? a. signal word (e.g., “danger”) 3 .

b. picture of the chemical or hazardous material c. symbol d. hazard statement (e.g., “severe projection hazard”) [LO 11.2: To discuss packaging fundamentals, such as packaging functions and labeling; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 14. Which of the following is not a characteristic of plastic packaging? a. There is a lack of versatility. b. It takes a long time to biodegrade. c. Plastic packaging is cheaper than paper packaging. d. Plastic litter can kill marine animals.

[LO 11.3: To identify select issues that affect packaging, such as environmental protection and packaging inefficiencies; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 15. Which of the following statements about biodegradable plastics is false? a. It takes less time to break down. b. It requires more energy to produce. c. It is easier to recycle. d. It is non-toxic.

[LO 11.3: To identify select issues that affect packaging, such as environmental protection and packaging inefficiencies; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 16. The text indicates that there has been a marked increase in the usage of reusable plastic containers by ___________. a. apparel companies b. book publishers c. snack food companies d. produce shippers [LO 11.3: To identify select issues that affect packaging, such as environmental protection and packaging inefficiencies; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 17. ___________ systems consider the reverse flow of products, their reuse, and the marketing and distribution of recovered products. a. Eco-friendly b. Open-loop c. Closed-loop d. Dynamic

4 .

[LO 11.3: To identify select issues that affect packaging, such as environmental protection and packaging inefficiencies; Easy; Concept; AACSB Category 3: Analytical thinking] 18. Three countries in the world, including the United States and Myanmar, do not use the metric system. What is the third country that doesn’t use the metric system? a. Algeria b. Liberia c. Argentina d. Cambodia [LO 11.3: To identify select issues that affect packaging, such as environmental protection and packaging inefficiencies; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 19. What has been described as the “last frontier” of logistics savings opportunities? a. information technology b. transportation consolidation c. packaging inefficiencies d. inventory management [LO 11.3: To identify select issues that affect packaging, such as environmental protection and packaging inefficiencies; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 20. A leading packaging consultant has indicated that improved packaging efficiency can lead to a typical client achieving a ___________ percent reduction in packaging, transportation, and warehousing costs. a. 5 b. 7 c. 10 d. 14 [LO 11.3: To identify select issues that affect packaging, such as environmental protection and packaging inefficiencies; Moderate; Application; AACSB Category 3: Analytical thinking] 21. A “box-maker’s certificate” ___________. a. indicates a box’s environmental friendliness b. is given in recognition of superior box-making ability c. assures that boxes are free from any visible defects d. assures railroads and motor carriers that boxes are sufficiently sturdy to meet their handling requirements [LO 11.3: To identify select issues that affect packaging, such as environmental protection and packaging inefficiencies; Moderate; Concept; AACSB Category 3: Analytical thinking] 5 .

22. Dimensional weight ___________. a. considers a shipment’s density to determine a shipment’s billable weight b. only applies to big and bulky items c. is the same as a shipment’s actual weight d. tends to decrease shipping costs [LO 11.3: To identify select issues that affect packaging, such as environmental protection and packaging inefficiencies; Moderate; Concept; AACSB Category 3: Analytical thinking]

23. A unit load involves ___________. a. a convoy of railcars carrying the same product b. loading an entire vehicle with shipments from three or fewer shippers c. the usage of a pallet rack system of storage d. consolidation of several units into larger units to improve efficiency in handling and to reduce shipping costs [LO 11.4: To learn about unit loads and the unit load platform; Moderate; Concept; AACSB Category 3: Analytical thinking] 24. A major advantage of the unit load is ___________. a. its environmental friendliness b. that mechanical devices can be substituted for manual labor c. its value to companies that deal in small quantities d. that it simplifies transportation requirements [LO 11.4: To learn about unit loads and the unit load platform; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 25. Which of the following statements is false? a. The unit load is of limited value to shippers that deal in smaller quantities. b. Unit loads may lead to increased pilferage. c. The unit load allows mechanical devices to be substituted for manual labor. d. Pallets suffer from a lack of standardized sizes, particularly in the United States.

[LO 11.4: To learn about unit loads and the unit load platform; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 26. The ___________ has established six international pallet size standards. a. World Trade Organization 6 .

b. International Chamber of Commerce c. International Standards Organization d. United Nations [LO 11.4: To learn about unit loads and the unit load platform; Moderate; Application; AACSB Category 3: Analytical thinking] 27. The ___________ is generally viewed as the basic unit in unit loading. a. box b. crate c. pallet d. container [LO 11.4: To learn about unit loads and the unit load platform; Moderate; Application; AACSB Category 3: Analytical thinking] 28. The vast majority of pallets are made of ___________. a. wood b. plastic c. fiberboard d. metal [LO 11.4: To learn about unit loads and the unit load platform; Moderate; Application; AACSB Category 3: Analytical thinking] 29. A major drawback to metal and plastic pallets is their ___________. a. life span b. price c. weight d. incompatibility with existing forklifts [LO 11.4: To learn about unit loads and the unit load platform; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 30. From a space utilization perspective, one pallet occupies ___________ times more space than a plastic slip sheet. a. 80 b. 60 c. 40 d. 20

7 .

[LO 11.4: To learn about unit loads and the unit load platform; Moderate; Application; AACSB Category 3: Analytical thinking] 31. ___________ refers to the short distance movement that usually takes place within the confines of a building such as a plant or distribution center and between a building and a transportation service provider. a. Physical distribution b. Materials management c. Warehousing d. Materials handling [LO 11.5: To explain materials handling principles and materials handling equipment; Easy; Concept; AACSB Category 3: Analytical thinking] 32. With respect to density, a vehicle loaded with ___________ is most likely to cube out (cubic capacity is filled before reaching its weight capacity). a. grain b. coal c. soybeans d. gravel [LO 11.5: To explain materials handling principles and materials handling equipment; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 33. A dry bulk material’s ___________ is important for determining the quantity that can be stored in a given location. a. viscosity b. specific gravity c. angle of repose d. market value [LO 11.5: To explain materials handling principles and materials handling equipment; Moderate; Application; AACSB Category 3: Analytical thinking] 34. ___________ refers to the science that seeks to adapt work or working conditions to suit the abilities of the worker. a. Materials handling b. Kinetics c. Physiology d. Ergonomics

8 .

[LO 11.5: To explain materials handling principles and materials handling equipment; Moderate; Concept; AACSB Category 3: Analytical thinking] 35. It is important that the materials handling equipment be aligned with an organization’s objectives, customers, and ___________. a. suppliers b. top management c. products d. stakeholders [LO 11.5: To explain materials handling principles and materials handling equipment; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 36. Which of the following is not an example of materials handling storage equipment? a. conveyor systems b. racks c. shelves d. bins [LO 11.5: To explain materials handling principles and materials handling equipment; Difficult; Application; AACSB Category 3: Analytical thinking] 37. All of the following are examples of handling equipment in materials handling except: a. lift trucks. b. cranes. c. bins. d. conveyor systems.

[LO 11.5: To explain materials handling principles and materials handling equipment; Difficult; Application; AACSB Category 3: Analytical thinking] 38. Which of the following statements is false? a. Racks and bins are examples of storage equipment. b. Automation refers to equipment that complements, rather than replaces, human contact. c. Forklifts can be dangerous. d. In a part-to-picker system, the pick location is brought to the picker.

[LO 11.5: To explain materials handling principles and materials handling equipment; Difficult; Synthesis; AACSB Category 3: Analytical thinking] True-False Questions 9 .

1. Packaging and materials handling decisions can be made in isolation from other logistics activities. (False) [LO: Beginning of chapter material; Moderate; Application; AACSB Category 3: Analytical thinking] 2. The physical characteristics of some goods change while they are moving in the logistics channel. (True) [LO 11.1: To illustrate how product characteristics affect packaging and materials handling; Moderate; Application; AACSB Category 3: Analytical thinking] 3. Certain products should not, for safety or health reasons, be packaged together. (True) [LO 11.1: To illustrate how product characteristics affect packaging and materials handling; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 4. Procurement can be thought of in terms of the building-blocks concept. (False) [LO 11.2: To discuss packaging fundamentals, such as packaging functions and labeling; Moderate; Concept; AACSB Category 3: Analytical thinking] 5. One general function of packaging is to identify the relevant product. (True) [LO 11.2: To discuss packaging fundamentals, such as packaging functions and labeling; Easy; Application; AACSB Category 3: Analytical thinking] 6. The severity of the distribution environment is the primary consideration in properly designing a protective packaging system. (False) [LO 11.2: To discuss packaging fundamentals, such as packaging functions and labeling; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 7. When new products or new packaging techniques are about to be introduced, it is somewhat advisable to have the packages pretested. (True) [LO 11.2: To discuss packaging fundamentals, such as packaging functions and labeling; Moderate; Application; AACSB Category 3: Analytical thinking] 8. Shipping hazards include vibrations, dropping, rough handling, and overexposure to extreme temperatures. (True) [LO 11.2: To discuss packaging fundamentals, such as packaging functions and labeling; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 9. Most package labeling takes place at the end of the assembly line. (True) 10 .

[LO 11.2: To discuss packaging fundamentals, such as packaging functions and labeling; Moderate; Application; AACSB Category 3: Analytical thinking] 10. As a general rule, labeling requirements and enforcement tend to be more stringent in larger countries (based on population) than in smaller countries. (False) [LO 11.2: To discuss packaging fundamentals, such as packaging functions and labeling; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 11. Failure to comply with labeling guidelines can result in surcharges, administrative fees, or penalty charges. (True) [LO 11.2: To discuss packaging fundamentals, such as packaging functions and labeling; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 12. The International Chamber of Commerce developed the Globally Harmonized System of Classification and Labeling of Chemicals (GHS). (False) [LO 11.2: To discuss packaging fundamentals, such as packaging functions and labeling; Moderate; Application; AACSB Category 3: Analytical thinking] 13. Plastic packaging tends to be cheaper, more versatile, and more consumer-friendly than paper packaging. (True) [LO 11.3: To identify select issues that affect packaging, such as environmental protection and packaging inefficiencies; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 14. Plastic accounts for an overwhelming majority of the litter in marine habitats. (True) [LO 11.3: To identify select issues that affect packaging, such as environmental protection and packaging inefficiencies; Easy; Application; AACSB Category 3: Analytical thinking] 15. Polyvinyl chloride (PVC), commonly referred to as vinyl, is considered a friendly plastic because it has few, if any, potential side effects. (False) [LO 11.3: To identify select issues that affect packaging, such as environmental protection and packaging inefficiencies; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 16. Compared to traditional plastic packaging, biodegradable plastic packaging requires more energy to produce. (False) [LO 11.3: To identify select issues that affect packaging, such as environmental protection and packaging inefficiencies; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 17. Reusable containers work best in a closed-loop system. (True) 11 .

[LO 11.3: To identify select issues that affect packaging, such as environmental protection and packaging inefficiencies; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 18. The United States is the only country in the world that does not currently use the metric system of measurement. (False) [LO 11.3: To identify select issues that affect packaging, such as environmental protection and packaging inefficiencies; Difficult; Application; AACSB Category 3: Analytical thinking] 19. Transportation consolidation has been described as the “last frontier” of logistics savings opportunities. (False) [LO 11.3: To identify select issues that affect packaging, such as environmental protection and packaging inefficiencies; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 20. Carriers’ tariffs and classifications influence the type of packaging and packing methods that must be used. (True) [LO 11.3: To identify select issues that affect packaging, such as environmental protection and packaging inefficiencies; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 21. A “box maker’s certificate” assures that boxes are free from any visible defects. (False) [LO 11.3: To identify select issues that affect packaging, such as environmental protection and packaging inefficiencies; Moderate; Concept; AACSB Category 3: Analytical thinking] 22. A product’s dimensional weight (dim weight) is the same as its actual weight. (False) [LO 11.3: To identify select issues that affect packaging, such as environmental protection and packaging inefficiencies; Moderate; Concept; AACSB Category 3: Analytical thinking] 23. When a unit load is secured to a pallet, it is more difficult for pilferage to take place. (True) [LO 11.4: To learn about unit loads and the unit load platform; Easy; Application; AACSB Category 3: Analytical thinking] 24. The major advantage of the unit load is that it enables mechanical devices to be substituted for manual labor. (True) [LO 11.4: To learn about unit loads and the unit load platform; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 25. The World Trade Organization has established six international pallet size standards. (False)

12 .

[LO 11.4: To learn about unit loads and the unit load platform; Moderate; Application; AACSB Category 3: Analytical thinking] 26. The retail package is the basic unit in unit loading. (False) [LO 11.4: To learn about unit loads and the unit load platform; Moderate; Application; AACSB Category 3: Analytical thinking] 27. In the United States, the majority of pallets are made of wood. (True) [LO 11.4: To learn about unit loads and the unit load platform; Moderate; Application; AACSB Category 3: Analytical thinking] 28. Plastic pallets tend to be less expensive than wooden or metal pallets. (False) [LO 11.4: To learn about unit loads and the unit load platform; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 29. Advances in technology have created stronger plastics that can be used for slip sheets, and this has resulted in a corresponding decrease in damage rates. (True) [LO 11.4: To learn about unit loads and the unit load platform; Moderate; Application; AACSB Category 3: Analytical thinking] 30. Load-planning software can be used to suggest how to load a container with different sizes of cartons. (True) [LO 11.4: To learn about unit loads and the unit load platform; Moderate; Application; AACSB Category 3: Analytical thinking] 31. Weighing out refers to a container that has been weighed prior to its departure from a container yard. (False) [LO 11.4: To learn about unit loads and the unit load platform; Moderate; Concept; AACSB Category 3: Analytical thinking]

32. Materials handling deals with the short distance movement that usually takes place within the confines of a building such as a plant or DC and between a building and a transportation service provider. (True) [LO 11.5: To explain materials handling principles and materials handling equipment Easy; Concept; AACSB Category 3: Analytical thinking] 33. Iron ore is more likely than coal to cube out a vehicle (i.e., equipment’s cubic capacity is filled before reaching its weight capacity). (False) 13 .

[LO 11.5: To explain materials handling principles and materials handling equipment; Moderate; Application; AACSB Category 3: Analytical thinking] 34. A material’s angle of repose refers to the size of angle that would be formed by the side of a conical stack of that material. (True) [LO 11.5: To explain materials handling principles and materials handling equipment; Moderate; Concept; AACSB Category 3: Analytical thinking] 35. The standardization principle is generally regarded as the most important of the 10 materials handling principles. (False) [LO 11.5: To explain materials handling principles and materials handling equipment; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 36. Ergonomics refers to the science that seeks to adapt work or working conditions to suit the abilities of the worker. (True) [LO 11.5: To explain materials handling principles and materials handling equipment; Easy; Concept; AACSB Category 3: Analytical thinking] 37. It is important that materials handling equipment be aligned with an organization’s objectives, customers, and products. (True) [LO 11.5: To explain materials handling principles and materials handling equipment; Moderate; Application; AACSB Category 3: Analytical thinking] 38. Automatic guided vehicles (AGVs) are an example of mechanized materials handling equipment. (False) [LO 11.5: To explain materials handling principles and materials handling equipment; Difficult; Synthesis; AACSB Category 3: Analytical thinking 39. It has been suggested that automation becomes economically viable only when a facility handles at least 50,000 cartons a day. (True) [LO 11.5: To explain materials handling principles and materials handling equipment; Moderate; Application; AACSB Category 3: Analytical thinking] 40. As a general rule, picker-to-part systems are preferable to part-to-picker systems. (False) [LO 11.5: To explain materials handling principles and materials handling equipment; Moderate; Synthesis; AACSB Category 3: Analytical thinking]

14 .

TEST BANK CHAPTER 12: TRANSPORTATION (correct answers are bolded) Multiple Choice Questions 1. ___________ is the actual, physical movement of goods and people between two points. a. Logistics b. Transportation c. Materials handling d. Materials management [LO: Material at the beginning of the chapter; Easy; Concept; AACSB Category 3: Analytical thinking] 2. There are ___________ modes of transportation. a. three b. four c. five d. six [LO: Material at the beginning of the chapter; Moderate; Application; AACSB Category 3: Analytical thinking] 3. A 3,047 meter (10,000 foot) runway is significant because it is ___________. a. generally viewed as adequate for accommodating the largest existing wide-body aircraft b. the longest that can be used worldwide due to safety regulations c. the longest runway in the world d. only found in economically developed countries [LO 12.1: To compare and contrast transportation infrastructures in several countries; Moderate; Application; AACSB Category 3: Analytical thinking] 4. Rail gauge refers to ___________. a. the allowable speed on a particular segment of track b. the thickness of rail track c. the length of rail track d. the distance between the inner sides of two parallel rail tracks 1 .

[LO 12.1: To compare and contrast transportation infrastructures in several countries; Moderate; Concept; AACSB Category 3: Analytical thinking] 5. In terms of rail gauge, China primarily uses ___________ rail gauge whereas India primarily uses ___________ rail gauge. a. standard; broad b. broad; standard c. narrow; broad d. standard; narrow [LO 12.1: To compare and contrast transportation infrastructures in several countries; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 6. In the United States, ___________ account for the largest share of ton miles and ___________ account for the majority of freight revenues. a. railroads; railroads b. trucks; trucks c. trucks; railroads d. railroads; truck [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 7. ___________ refers to the terminal-to-terminal movement of freight or passengers. a. Materials handling b. Accessorial service c. Line-haul d. Order delivery [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Moderate; Concept; AACSB Category 3: Analytical thinking] 8. ___________ are generally the fastest form of transportation for shipments exceeding 600 miles. a. Less-than-truckload motor carriers b. Air carriers c. Parcel carriers d. Truckload motor carriers [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Easy; Application; AACSB Category 3: Analytical thinking] 2 .

9. Consignees are ___________. a. extremely large less-than-truckload carriers b. shippers of freight c. receivers of freight d. preferred suppliers [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Moderate; Concept; AACSB Category 3: Analytical thinking] 10. Accessorial service ___________. a. only applies to air transportation b. is associated with commodity rates c. refers to additional service provided to apparel shipments d. is transportation service that is supplemental to the line-haul [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Moderate; Concept; AACSB Category 3: Analytical thinking] 11. Airfreight is best suited to transport ___________, ___________ products. a. high-value; lower-volume b. low-value; lower-volume c. high-value; higher-volume d. low-value; higher-volume [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 12. Less-than-truckload motor carriers ___________. a. serve only regional markets b. operate through a series of terminals c. are exempt from hours-of-service regulations d. carry the shipment directly from shipper to consignee [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Moderate; Application; AACSB Category 3: Analytical thinking] 13. All of the following are less-than-truckload (LTL) carriers except: a. YRC Freight b. Estes Express c. UPS Freight d. Swift Transportation 3 .

[LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Difficult; Synthesis; AACSB Category 3; Analytical thinking] 14. Truckload carriers focus on shipments of greater than ___________ pounds. a. 10,000 b. 15,000 c. 17,500 d. 20,000 [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Moderate; Application; AACSB Category 3: Analytical thinking] 15. Each of the following statements is true except: a. Schneider National is an example of a truckload carrier. b. In truckload shipments, the shipper loads and the consignee unloads the trailer. c. A truckload shipment involves only one customer. d. Truckload carriers focus on shipments of greater than 10,000 pounds.

[LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 16. Hours-of-service (HOS) rules and speed limits have long been justified in the motor carrier industry on the basis of ___________. a. cost efficiency b. customer requirements c. operational efficiency d. safety concerns [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 17. The primary advantage for motor carriers is ___________. a. reliability b. speed c. capability d. flexibility [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Moderate; Application; AACSB Category 3: Analytical thinking]

4 .

18. Airfreight is the costliest mode for freight transportation. What is the second most expensive mode of freight transportation? a. motor carrier b. water c. rail d. pipeline [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 19. ___________ is the most reliable form of transportation. a. Rail b. Motor carrier c. Pipeline d. Air [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 20. ___________ pipelines carry crude oil from gathering-line concentration points to the oil refineries. a. Product b. Trunk c. Slurry d. Collection [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Moderate; Concept; AACSB Category 3: Analytical thinking] 21. ___________ have a level of market concentration and dominance that is not found in the other modes. a. Railroads b. Pipelines c. Airlines d. Motor carriers [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 22. Which mode is not the “best” or “worst” on any of the six attributes (e.g., capability, flexibility, etc.) that were used to compare transport modes?

5 .

a. railroads b. water carriers c. pipelines d. motor carriers [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 23. Railroads tend to transport ___________, ___________ shipments. a. higher-value; higher-volume b. lower-value; lower-volume c. higher-value; lower-volume d. lower-value; higher-volume [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 24. Inland waterways in the United States are dredged to a depth of ___________ feet, which tends to be the minimum depth required for most barges. a. 15 b. 12 c. 9 d. 6 [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Moderate; Application; AACSB Category 3: Analytical thinking] 25. A ___________ raises or lowers barges so that they can meet the river’s level as they move upstream or downstream. a. container ship b. lock c. unit load device d. towboat [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Moderate; Concept; AACSB Category 3: Analytical thinking] 26. The predominant commodity moved by barge transportation is ___________. a. grain b. coal c. iron ore d. petroleum 6 .

[LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Moderate; Application; AACSB Category 3: Analytical thinking] 27. ___________ transportation occurs when two or more modes work closely together in an attempt to utilize the advantages of each mode while at the same time minimizing their disadvantages. a. Intermodal b. Relational c. Intramodal d. Collaborative [LO 12.3: To discuss intermodal transportation; Easy; Concept; AACSB Category 3: Analytical thinking] 28. What container size is often used to rank water ports and measure containership capacity? a. 48-foot container b. 40-foot container c. 20-foot container e. 10-foot container [LO 12.3: To discuss intermodal transportation; Moderate; Application; AACSB Category 3: Analytical thinking] 29. The primary advantage to land bridge service is ___________. a. less loss and damage b. reduced transit times c. lower transportation cost d. improved reliability [LO 12.3: To discuss intermodal transportation; Moderate; Application; AACSB Category 3: Analytical thinking] 30. Freight forwarders ___________. a. are the same as shippers’ associations b. consolidate the shipments of several carriers c. represent the consignees’ interests d. consolidate the shipments of several shippers [LO 12.4: To describe several types of transportation specialists; Moderate; Concept; AACSB Category 3: Analytical thinking] 7 .

31. Shippers’ associations ___________. a. are the same as freight forwarders b. function in a manner similar to freight forwarders c. specialize in truckload shipments d. are used only for agricultural products [LO 12.4: To describe several types of transportation specialists; Moderate; Application; AACSB Category 3: Analytical thinking] 32. A transportation broker ___________. a. looks to match a shipper’s freight with a carrier to transport it b. deals only with agricultural products c. is the same as a freight forwarder d. tends to be spun off from carriers or management consulting firms [LO 12.4: To describe several types of transportation specialists; Moderate; Concept; AACSB Category 3: Analytical thinking] 33. Firms that specialize in carrying packages that weigh up to 150 pounds are called ___________. a. couriers b. accessorial carriers c. parcel carriers d. expedited carriers [LO 12.4: To describe several types of transportation specialists; Moderate; Concept; AACSB Category 3: Analytical thinking] 34. What is the largest transportation company by revenues in the United States? a. FedEx b. Union Pacific c. United Parcel Service d. United Airlines [LO 12.4: To describe several types of transportation specialists; Moderate; Application; AACSB Category 3: Analytical thinking] 35. In the United States, commercial airline pilots must retire at age ___________. a. 70 b. 65 c. 62 8 .

d. 60 [LO 12.5: To explain how different types of regulation impact transportation; Moderate; Application; AACSB Category 3: Analytical thinking] 36. The U.S. ________ is the federal government body with primary responsibility for transportation safety regulation. a. Interstate Commerce Commission (ICC) b. Department of Commerce c. Department of Homeland Security d. Department of Transportation (DOT) [LO 12.5: To explain how different types of regulation impact transportation; Moderate; Application; AACSB Category 3: Analytical thinking] 37. With respect to U.S. economic regulation, the ___________ has primary responsibility for resolving railroad rate and service disputes, reviewing potential rail mergers, and some jurisdiction over motor carriers, domestic water transportation, and pipelines. a. Surface Transportation Board (STB) b. Interstate Commerce Commission (ICC) c. Federal Trade Commission d. Department of Commerce [LO 12.5: To explain how different types of regulation impact transportation; Moderate; Application; AACSB Category 3: Analytical thinking] 38. Common carriers of transportation have ___________ obligations. a. six b. five c. four d. three [LO 12.6: To identify the legal classification of transportation carriers; Moderate; Application; AACSB Category 3: Analytical thinking] 39. Which of the following is not a legal classification of carriers? a. exempt b. contract c. private d. third-party transportation [LO 12.6: To identify the legal classification of transportation carriers; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 9 .

40. Private transportation is most prevalent in the ___________ industry. a. pipeline b. trucking c. railroad d. airline [LO 12.6: To identify the legal classification of transportation carriers; Difficult; Synthesis; AACSB Category 3: Analytical thinking] True-False Questions 1. Transportation refers to the actual, physical movement of goods and people between two points. (True) [LO: Material at the beginning of the chapter; Easy; Concept; AACSB Category 3: Analytical thinking] 2. There are four different modes of transportation. (False) [LO: Material at the beginning of the chapter; Moderate; Application; AACSB Category 3: Analytical thinking] 3. A 10,000-foot (3,047 meter) runway is viewed as adequate for accommodating the largest existing wide-body aircraft. (True) [LO 12.1: To compare and contrast transportation infrastructures in several countries; Moderate; Application; AACSB Category 3: Analytical thinking] 4. Rail gauge refers to the thickness of rail track. (False) [LO 12.1: To compare and contrast transportation infrastructures in several countries; Moderate; Concept; AACSB Category 3: Analytical thinking] 5. In the United States, motor carriers have the largest share of ton miles. (False) [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Moderate; Application; AACSB Category 3: Analytical thinking] 6. Air is generally the fastest mode of transportation for shipments exceeding 600 miles. (True) [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Moderate; Synthesis; AACSB Category 3: Analytical thinking]

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7. Products that move by airfreight tend to be high in value and tend to require urgent delivery.

(True) [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 8. Less-than-truckload shipments range from about 150 to 10,000 pounds. (True) [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Moderate; Application; AACSB Category 3: Analytical thinking] 9. Truckload freight moves through a carrier’s terminal(s). (False) [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Moderate; Concept; AACSB Category 3: Analytical thinking] 10. Hours-of-service rules and speed limits have generally been justified on the basis of operational efficiency. (False) [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 11. The primary advantage for motor carriers is flexibility (the ability to deliver the product to the customer). (True) [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Moderate; Application; AACSB Category 3: Analytical thinking] 12. Pipelines are a unique mode of transportation because they are the only one without vehicles.

(True) [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Moderate; Application; AACSB Category 3: Analytical thinking] 13. Railroads are considered the most reliable form of transportation. (False) [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 14. The U.S. railroad industry is dominated by four freight carriers. (True) [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Moderate; Application; AACSB Category 3: Analytical thinking] 15. Twelve feet of water is the minimum depth required for most barges. (False) 11 .

[LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Moderate; Application; AACSB Category 3: Analytical thinking] 16. A barge crane raises or lowers barges so they can meet the river’s level as they move upstream or downstream. (False) [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Moderate; Concept; AACSB Category 3: Analytical thinking] 17. Barge transportation tends to be slow. (True) [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Moderate; Application; AACSB Category 3: Analytical thinking] 18. Of the modes with vehicles, railroads offer the greatest capacity, or volume, that can be carried at one time. (False) [LO 12.2: To identify the five modes of transportation and learn about their respective characteristics; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 19. With intermodal transportation, two or more modes work closely together in an attempt to utilize the advantages of each mode while at the same time minimizing their disadvantages.

(True) [LO 12.3: To discuss intermodal transportation; Easy; Concept; AACSB Category 3: Analytical thinking] 20. Airfreight containers are commonly referred to as pallets. (False) [LO 12.3: To discuss intermodal transportation; Easy; Concept; AACSB Category 3: Analytical thinking] 21. A commonly used metric for measuring container volumes is the TEU (twenty-foot equivalent unit). (True) [LO 12.3: To discuss intermodal transportation; Moderate; Application; AACSB Category 3: Analytical thinking] 22. Land bridge services involve the use of surface transportation—generally rail transportation—between an origin and destination port. (True) [LO 12.3: To discuss intermodal transportation; Moderate; Concept; AACSB Category 3: Analytical thinking] 23. Freight forwarders are the same thing as freight brokers. (False) 12 .

[LO 12.4: To describe several types of transportation specialists; Moderate; Concept; AACSB Category 3: Analytical thinking] 24. Freight forwarders sell freight at a higher rate per pound than they pay carriers to haul it.

(True) [LO 12.4: To describe several types of transportation specialists; Moderate; Application; AACSB Category 3: Analytical thinking] 25. The main benefit of shippers’ associations is one-stop shopping. (False) [LO 12.4: To describe several types of transportation specialists; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 26. A transportation broker looks to match a shipper’s freight with a carrier to transport it. (True) [LO 12.4: To describe several types of transportation specialists; Easy; Concept; AACSB Category 3: Analytical thinking] 27. Parcels refer to packages weighing up to 100 pounds. (False) [LO 12.4: To describe several types of transportation specialists; Moderate; Concept; AACSB Category 3: Analytical thinking] 28. U.S. commercial airline pilots face mandatory retirement at age 70. (False) [LO 12.5: To explain how different types of regulation impact transportation; Moderate; Application; AACSB Category 3: Analytical thinking] 29. The level and degree of transportation regulation varies from country to country. (True) [LO 12.5: To explain how different types of regulation impact transportation; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 30. Environmental regulation of transportation is concerned with water, noise, and air pollution.

(True) [LO 12.5: To explain how different types of regulation impact transportation; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 31. The U.S. Department of Homeland Security is the federal government body with primary responsibility for transportation safety regulation. (False) [LO 12.5: To explain how different types of regulation impact transportation; Moderate; Application; AACSB Category 3: Analytical thinking] 13 .

32. U.S. pipelines are so safe that there is no federal safety agency assigned to regulate them.

(False) [LO 12.5: To explain how different types of regulation impact transportation; Moderate; Application; AACSB Category 3: Analytical thinking] 33. Economic regulation in transportation refers to control over business practices and activities such as entry and exit, pricing, service, accounting and financial issues, and mergers and acquisitions. (True) [LO 12.5: To explain how different types of regulation impact transportation; Moderate; Concept; AACSB Category 3: Analytical thinking] 34. The U.S. Department of Commerce has primary responsibility for resolving railroad rate and service disputes as well as reviewing potential rail mergers. (False) [LO 12.5: To explain how different types of regulation impact transportation; Moderate; Application; AACSB Category 3: Analytical thinking] 35. Since economic deregulation, transportation carriers are no longer constrained with respect to the variety of service they can offer. (True) [LO 12.5: To explain how different types of regulation impact transportation; Moderate; Application; AACSB Category 3: Analytical thinking] 36. Private carriers do not have to comply with environmental and safety regulations. (False) [LO 12.6: To identify the legal classification of transportation carriers; Moderate; Application; AACSB Category 3: Analytical thinking] 37. Common carrier transportation companies have four specific obligations. (True) [LO 12.5: To identify the legal classification of transportation carriers; Easy; Application; AACSB Category 3: Analytical thinking] 38. A contract carrier is under no obligation to render services to the general public. (True) [LO 12.5: To identify the legal classification of transportation carriers; Moderate; Application; AACSB Category 3: Analytical thinking] 39. Private transportation is most prevalent in the pipeline industry. (False) [LO 12.5: To identify the legal classification of transportation carriers; Moderate; Application; AACSB Category 3: Analytical thinking]

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40. One disadvantage of private transportation is that managerial costs are often ignored or underestimated. (True) [LO 12.5: To identify the legal classification of transportation carriers; Moderate; Synthesis; AACSB Category 3: Analytical thinking]

15 .

TEST BANK CHAPTER 13: TRANSPORTATION MANAGEMENT Multiple Choice Questions (correct answers are bolded) 1. ___________ refers to the buying and controlling of transportation services by either a shipper or consignee. a. Transportation management b. Logistics management c. Routing d. Tracking [LO: Material at the beginning of the chapter; Easy; Concept; AACSB Category 3: Analytical thinking] 2. In general terms, ___________ accounts for about 6 percent of U.S. gross domestic product. a. warehousing b. logistics c. supply chain management d. transportation [LO: Material at the beginning of the chapter; Moderate; Application; AACSB Category 3: Analytical thinking] 3. ___________ signifies the price charged for freight transportation. a. Fare b. Tariff c. Rate d. Revenue [LO 13.1: To discuss how rates are determined; Easy; Concept; AACSB Category 3: Analytical thinking] 4. Which of the following is not one of the three primary factors that transportation rates are based upon? a. product b. density c. weight d. distance

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[LO 13.1: To discuss how rates are determined; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 5. Weight times rate equals ___________. a. density b. transportation cost c. stowability d. volume [LO 13.1: To discuss how rates are determined; Easy; Application; AACSB Category 3: Analytical thinking] 6. A(n) ___________ rate refers to a specific rate for every possible combination of product, weight, and distance. a. classification b. ad valorem c. commodity d. class [LO 13.1: To discuss how rates are determined; Easy; Concept; AACSB Category 3: Analytical thinking] 7. A(n) ___________ rate is very good for dealing with demand-specific situations. a. density b. commodity c. class d. ad valorem [LO 13.1: To discuss how rates are determined; Moderate; Application; AACSB Category 3: Analytical thinking] 8. A(n) ___________ rate simplifies each of the three primary rate factors—product, weight, and distance. a. class b. ad valorem c. density d. commodity [LO 13.1: To discuss how rates are determined; Easy; Concept; AACSB Category 3: Analytical thinking]

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9. Which of the following is not one of the four factors used to determine a product’s classification? a. density b. liability to damage and theft c. stowability d. product value [LO 13.1: To discuss how rates are determined; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 10. The National Motor Freight Classification (NMFC) currently has 18 separate ratings, or classes, that range from Class 50 to Class ___________. a. 300 b. 400 c. 500 d. 600 [LO 13.1: To discuss how rates are determined; Moderate; Application; AACSB Category 3: Analytical thinking] 11. ___________ refers to how heavy a product is in relation to its size. a. Stowability b. Volume c. Weight d. Density [LO 13.1: To discuss how rates are determined; Moderate; Concept; AACSB Category 3: Analytical thinking] 12. ___________ refers to how easy a commodity is to pack into a load. a. Recoupering b. Stowability c. Dunnage d. Materials handling [LO 13.1: To discuss how rates are determined; Moderate; Concept; AACSB Category 3: Analytical thinking] 13. Liability for loss and damage is one factor used to determine a product’s freight classification. Which of the following is not a loss and damage consideration? a. a commodity’s propensity to damage other freight 3 .

b. the ability to load freight on top of a commodity c. the perishability of a commodity d. a commodity’s value [LO 13.1: To discuss how rates are determined; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 14. Which of the following statements about the class rate system is false? a. Origin and destination zip codes are commonly used when calculating a shipment’s total cost. b. A commodity’s classification can noticeably impact transportation expenses. c. Shippers can reduce their transportation expenses by utilizing fewer, heavier shipments rather than multiple, lighter shipments. d. Shipment costs increase in direct proportion to the increase in distance.

[LO 13.1: To discuss how rates are determined; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 15. With respect to a commodity’s freight classification, shippers tend to prefer a ___________ classification number and carriers tend to prefer a ___________ classification number. a. lower, lower b. lower, higher c. higher, lower d. higher, higher [LO 13.1: To discuss how rates are determined; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 16. Suppose that a particular item is class 200 according to the National Motor Freight Classification (NMFC). What is the relationship between this item’s rate and the rate for an item in class 100? a. The class 200 rate is lower than the class 100 rate. b. The rate relationship depends on other factors. c. The rates are identical. d. The class 200 rate is higher than the class 100 rate.

[LO 13.1: To discuss how rates are determined; Difficult; Application; AACSB Category 3: Analytical thinking] 17. With ___________, the buyer assumes title and control of a shipment at the point of pickup. a. FOB destination b. integrated logistics 4 .

c. FOB origin d. omnichannel marketing [LO 13.1: To discuss how rates are determined; Moderate; Application; AACSB Category 3: Analytical thinking] 18. With ___________, the seller retains title and control of a shipment until it is delivered. a. FOB destination b. integrated logistics c. FOB origin d. omnichannel marketing [LO 13.1: To discuss how rates are determined; Moderate; Application; AACSB Category 3: Analytical thinking] 19. Which of the following is not a possible payment option (terms of sale) for U.S. domestic shipments? a. FOB origin, freight collect and charged back b. FOB origin, freight collect c. FOB origin, freight prepaid d. FOB origin, freight prepaid and charged back [LO 13.1: To discuss how rates are determined; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 20. With FOB destination, freight prepaid ___________. a. the buyer pays the freight charges, but the seller owns the goods in transit b. the buyer pays the freight charges and owns the goods in transit c. the seller pays the freight charges and owns the goods in transit d. the seller pays the freight charges, but the buyer owns the goods in transit [LO 13.1: To discuss how rates are determined; Difficult; Application; AACSB Category 3: Analytical thinking] 21. A(n) ___________ refers to a transportation manager who purchases a prespecified level of transportation service and is indifferent to the mode and carrier used to provide the transportation service. a. class rate shipper b. certified logistics professional c. third-party logistics shipper d. amodal shipper

5 .

[LO 13.2: To learn about modal and carrier selection; Moderate; Concept; AACSB Category 3: Analytical thinking] 22. The most important single transportation document is the ___________. a. freight bill b. bill of lading c. commercial invoice d. certificate of origin [LO 13.3: To distinguish among various transportation documents; Moderate; Application; AACSB Category 3: Analytical thinking] 23. Each of the following is true except: a. The bill of lading is the most important transportation document. b. The bill of lading adds to the complexity of the transportation manager’s job. c. The straight bill of lading contains the name of the consignee. d. The order bill of lading does not contain the name of the consignee.

[LO 13.3: To distinguish among various transportation documents; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 24. An order bill of lading is used ___________. a. for overseas shipments b. when a shipment must be expedited c. when a shipment is started before the buyer is known d. to guard against disruptions in transit [LO 13.3: To distinguish among various transportation documents; Moderate; Application; AACSB Category 3: Analytical thinking] 25. An invoice submitted by the carrier requesting to be paid is ___________. a. a freight bill b. a bill of lading c. voucher d. dunnage [LO 13.3: To distinguish among various transportation documents; Easy; Concept; AACSB Category 3: Analytical thinking] 26. A freight claim must be filed within ___________ months from the date on the bill of lading. a. 3 6 .

b. 6 c. 9 d. 12 [LO 13.3: To distinguish among various transportation documents; Moderate; Application; AACSB Category 3: Analytical thinking] 27. Which of the following statements is false? a. Freight claims must be filed within nine months of the delivery date. b. Concealed loss and damage is a delicate area for shippers and carriers. c. The volume of freight claims activity has dropped since transportation deregulation. d. Shippers or carriers are entitled to a product’s full retail value when filing a freight claim.

[LO 13.3: To distinguish among various transportation documents; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 28. If a product destroyed or damaged in transit is intended to be placed into general replacement inventory, then the retailer would likely receive ___________. a. the retail price plus freight if previously paid b. the wholesale price plus 20 percent c. the retail price minus 20 percent d. the wholesale price plus freight if previously paid [LO 13.3: To distinguish among various transportation documents; Difficult; Application; AACSB Category 3: Analytical thinking] 29. Small shipments are defined as those that ___________. a. involve three or fewer cartons b. are moved primarily by parcel carriers c. weigh more than 150 pounds but less than 500 pounds d. weigh more than 10 pounds but less than 100 pounds [LO 13.4: To illustrate select activities associated with making and receiving small shipments; Moderate; Concept; AACSB Category 3: Analytical thinking] 30. Which of the following statements is false? a. Carriers may be reluctant to accept small shipments because they require a high degree of manual labor. b. Some carriers believe they lose money on small shipments. c. Consolidating small shipments into larger ones could result in poorer service to the final customer.

7 .

d. Small shipments should be consolidated across place rather than across time.

[LO 13.4: To illustrate select activities associated with making and receiving small shipments; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 31. Demurrage charges are collected by railroads, ___________, and ___________. a. motor carriers, pipelines b. water carriers, pipelines c. motor carriers, water carriers d. airlines, pipelines [LO 13.4: To illustrate select activities associated with making and receiving small shipments; Difficult; Application; AACSB Category 3: Analytical thinking] 32. Which of the following statements is false? a. Detention is similar to demurrage except that detention applies to pipelines. b. Demurrage is a penalty payment made to a railroad for keeping equipment beyond the time it should be released. c. Averaging agreements can be used with demurrage. d. Carriers and shippers can negotiate demurrage and detention policies.

[LO 13.4: To illustrate select activities associated with making and receiving small shipments; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 33. ___________ can be defined as the process of determining how a shipment will be moved between origin and destination. a. Tracking b. Demurrage c. Transportation d. Routing [LO 13.4: To illustrate select activities associated with making and receiving small shipments; Easy; Concept; AACSB Category 3: Analytical thinking] 34. A ___________ provides a variety of shipment information such as shipment preparation, freight invoicing, a list of preferred carriers, and a list of which carrier or carriers to use for shipments moving between two points. a. freight classification manual b. routing guide c. tariff d. bill of lading

8 .

[LO 13.4: To illustrate select activities associated with making and receiving small shipments; Moderate; Concept; AACSB Category 3: Analytical thinking 35. ___________ refers to determining a shipment’s location during the course of its move. a. Expediting b. Calibration c. Reparation d. Tracking [LO 13.4: To illustrate select activities associated with making and receiving small shipments; Easy; Concept; AACSB Category 3: Analytical thinking] 36. ___________ refers to rapidly moving a shipment through a carrier’s system. a. Expediting b. Tracking c. Fast logistics d. Cross-docking [LO 13.4: Making and receiving small shipments; Easy; Concept; AACSB Category 3: Analytical thinking] True-False Questions 1. Today’s transportation manager can play an active role in blending the appropriate pricing and service packages for his/her organization. (True) [LO: Material at the beginning of the chapter; Moderate; Application; AACSB Category 3: Analytical thinking] 2. Routing refers to the buying and controlling of transportation services by a shipper or consignee. (False) [LO: Material at the beginning of the chapter; Moderate; Concept; AACSB Category 3: Analytical thinking] 3. Freight transportation accounts for approximately 10 percent of U.S. gross domestic product.

(False) [LO: Material at the beginning of the chapter; Moderate; Application; AACSB Category 3: Analytical thinking] 4. A rate is the logistics term that signifies the price charged for freight transportation. (True)

9 .

[LO 13.1: To discuss how rates are determined; Easy; Concept; AACSB Category 3: Analytical thinking] 5. A transportation charge (the cost of transportation) can be calculated by multiplying a product’s weight times the applicable rate. (True) [LO 13.1: To discuss how rates are determined; Easy; Application; AACSB Category 3: Analytical thinking] 6. A commodity rate is very good for dealing with demand-specific situations. (True) [LO 13.1: To discuss how rates are determined; Moderate; Application; AACSB Category 3: Analytical thinking] 7. The class rate system simplifies with respect to three primary factors—density, product, and distance. (False) [LO 13.1: To discuss how rates are determined; Moderate; Application; AACSB Category 3: Analytical thinking] 8. The National Motor Freight Classification (NMFC) has 20 separate classes, or ratings, from class 50 to class 600. (False) [LO 13.1: To discuss how rates are determined; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 9. Ease or difficulty of handling is one of the four factors used to determine a product’s freight classification. (True) [LO 13.1: To discuss how rates are determined; Moderate; Application; AACSB Category 3: Analytical thinking] 10. Liability to damage and theft is viewed as the primary factor in setting a product’s freight classification. (False) [LO 13.1: To discuss how rates are determined; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 11. Volume refers to how heavy a product is in relation to its size. (False) [LO 13.1: To discuss how rates are determined; Moderate; Concept; AACSB Category 3: Analytical thinking] 12. Stowability refers to how easy a commodity is to pack into a load. (True)

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[LO 13.1: To discuss how rates are determined; Moderate; Concept; AACSB Category 3: Analytical thinking] 13. An item with a freight classification of class 200 will be charged a higher rate than an item with a freight classification of class 100. (True) [LO 13.1: To discuss how rates are determined; Moderate; Application; AACSB Category 3: Analytical thinking] 14. With respect to a commodity’s freight classification, shippers tend to prefer a higher classification number whereas carriers tend to prefer a lower classification number. (False) [LO 13.1: To discuss how rates are determined; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 15. With respect to class rates, longer distance shipments are more expensive than shorter distance shipments, and the difference in costs is proportional to the increase in distance.

(False) [LO 13.1: To discuss how rates are determined; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 16. The price and service trade-offs available to today’s transportation manager are limited only by his/her creativity and ingenuity. (True) [LO 13.1: To discuss how rates are determined; Moderate; Application; AACSB Category 3: Analytical thinking] 17. With FOB origin pricing, the seller retains title and control of the shipment until it is delivered. (False) [LO 13.1: To discuss how rates are determined; Moderate; Application; AACSB Category 3: Analytical thinking] 18. A disadvantage of FOB destination pricing from a seller’s perspective is that the seller’s organization must have a thorough knowledge of transportation management. (True) [LO 13.1: To discuss how rates are determined; Moderate; Application; AACSB Category 3: Analytical thinking] 19. Because transportation costs tend to be lower per unit of weight for larger shipments, there is a natural motivation to consolidate smaller shipments into larger ones. (True) [LO 13.1: To discuss how rates are determined; Easy; Application; AACSB Category 3: Analytical thinking]

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20. The carrier selection procedure appears to be less straightforward than the procedure for modal selection. (True) [LO 13.2: To learn about modal and carrier selection; Moderate; Application; AACSB Category 3: Analytical thinking] 21. Transit time reliability is the most important factor that shippers tend to use when selecting carriers. (False) [LO 13.2: To learn about modal and carrier selection; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 22. An amodal shipper refers to the use of a logistics intermediary to make the relevant transportation decisions. (False) [LO 13.2: To learn about modal and carrier selection; Moderate; Concept; AACSB Category 3: Analytical thinking] 23. Transportation documentation serves both a practical function (e.g., what, where, and how much is being transported) as well as potentially providing legal recourse if something goes awry. (True) [LO 13.3: To distinguish among various transportation documents; Moderate; Application; AACSB Category 3: Analytical thinking] 24. The most important single transportation document is the bill of lading. (True) [LO 13.3: To distinguish among various transportation documents; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 25. An order bill of lading specifies the consignee. (False) [LO 13.3: To distinguish among various transportation documents; Moderate; Application; AACSB Category 3: Analytical thinking] 26. Order bills of lading can be used when faced with slow-paying customers. (True) [LO 13.3: To distinguish among various transportation documents; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 27. The bill of lading is an invoice, submitted by the carrier, requesting to be paid. (False) [LO 13.3: To distinguish among various transportation documents; Moderate; Concept; AACSB Category 3: Analytical thinking]

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28. Freight bill audits are designed to detect errors that result in overcharges and to correct those errors in the future. (True) [LO 13.3: To distinguish among various transportation documents; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 29. A freight claim must be filed within six months of the shipment’s delivery date. (False) [LO 13.3: To distinguish among various transportation documents; Moderate; Application; AACSB Category 3: Analytical thinking] 30. Suppose that a shipment of products destined for a particular retailer is lost or damaged. If these products were going into general inventory replacement stock, then the retailer would be entitled to recover the wholesale price plus any freight costs already paid. (True) [LO 13.3: To distinguish among various transportation documents; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 31. Concealed loss and damage claims are some of the most difficult for shippers and carriers to handle. (True) [LO 13.3: To distinguish among various transportation documents; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 32. The volume of transportation freight claims has increased in recent years. (False) [LO 13.3: To distinguish among various transportation documents; Moderate; Application; AACSB Category 3: Analytical thinking] 33. Small shipments refer to those that can be handled relatively expeditiously and inexpensively by a small package carrier. (False) [LO 13.4: To illustrate select activities associated with making and receiving small shipments; Moderate; Concept; AACSB Category 3: Analytical thinking] 34. From a carrier perspective, there may be a reluctance to accept small shipments because they tend to require a high degree of manual labor. (True) [LO 13.4: To illustrate select activities associated with making and receiving small shipments; Moderate; Application; AACSB Category 3: Analytical thinking] 35. Demurrage is a penalty payment associated with railroads whereas detention is a penalty payment associated with motor carriers. (True) [LO 13.4: To illustrate select activities associated with making and receiving small shipments; Moderate; Concept; AACSB Category 3: Analytical thinking] 13 .

36. In demurrage-related averaging agreements, slow equipment returns can be offset by fast equipment returns. (True) [LO 13.4: To illustrate select activities associated with making and receiving small shipments; Moderate; Application; AACSB Category 3: Analytical thinking] 37. A routing guide can provide a variety of shipment-related information such as shipment preparation and a list of preferred carriers for shipments moving between two points. (True) [LO 13.4: To illustrate select activities associated with making and receiving small shipments; Moderate; Application; AACSB Category 3: Analytical thinking] 38. Expediting refers to determining a shipment’s location during the course of its move. (False) [LO 13.4: To illustrate select activities associated with making and receiving small shipments; Moderate; Concept; AACSB Category 3: Analytical thinking] 39. Expedited shipments by motor carriage can sometimes provide faster and more reliable service than expedited shipping involving air transportation. (True) [LO 13.4: To illustrate select activities associated with making and receiving small shipments; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 40. Some transportation managers utilize performance scorecards that contain a list of relevant attributes and an evaluation of each carrier on every attribute. (True) [LO 13.4: To illustrate select activities associated with making and receiving small shipments; Moderate; Application; AACSB Category 3: Analytical thinking]

14 .

TEST BANK CHAPTER 14: INTERNATIONAL LOGISTICS Multiple Choice Questions (correct answers are bolded) 1. ___________ refers to the sum of the gross domestic product of all countries. a. Net world product b. World net income c. Gross world product d. Gross world income [LO: Material at the beginning of the chapter; Easy; Concept; AACSB Category 3: Analytical thinking] 2. ___________ are taxes that governments place on the importation of certain items. a. Tariffs b. Surcharges c. Quotas d. Embargoes [LO 14.1: To discuss macroenvironmental influences on international logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 3. A(n) ___________ limits the amount of product that may be imported from any one country during a particular period of time. a. embargo b. import quota c. confiscation d. tariff [LO 14.1: To discuss macroenvironmental influences on international logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 4. A(n) ___________ prohibits trade between countries. a. expropriation b. confiscation c. import quota d. embargo

1 .

[LO 14.1: To discuss macroenvironmental influences on international logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 5. What is the name for a system of accounts that records a country’s international financial transactions? a. tariffs b. balance of payments c. import/export accounts d. gross domestic product [LO 14.1: To discuss macroenvironmental influences on international logistics; Moderate; Concept; AACSB Category 3: Analytical thinking] 6. Cargo preference rules ___________. a. are synonymous with embargoes b. indicate how each shipment should be loaded into a transport vehicle c. indicate a shipper’s preferred carrier(s) d. require a certain percentage of traffic to move on a nation’s flag vessels [LO 14.1: To discuss macroenvironmental influences on international logistics; Moderate; Concept; AACSB Category 3: Analytical thinking] 7. When one country’s currency is weak relative to other currencies, ___________. a. it becomes costlier to import products to the country, but its exports surge b. both imports and exports surge c. it becomes costlier to export products from the country, but its imports surge d. it becomes costlier to import and export products [LO 14.1: To discuss macroenvironmental influences on international logistics; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 8. Which of the following statements about sachets is false? a. Sachets can be easier to lose. b. Sachets are more prone to theft. c. Sachets need different packaging. d. Sachets tend to be sold in higher-income countries.

[LO 14.1: To discuss macroenvironmental influences on international logistics; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 9. ___________ was the most recent country to be admitted to the European Union, in 2013.

2 .

a. Turkey b. Serbia c. Croatia d. Montenegro [LO 14.1: To discuss macroenvironmental influences on international logistics; Moderate; Application; AACSB Category 3: Analytical thinking] 10. A ___________ is used in areas where dockworkers cannot read but need a method to keep documents and shipments together. a. RFID tag b. shipper’s mark c. shipment coordinator d. bar code [LO 14.1: To discuss macroenvironmental influences on international logistics; Difficult; Concept; AACSB Category 3: Analytical thinking] 11. Which of the following is not a cultural factor that can influence international logistics? a. language b. time orientation c. population d. national holidays [LO 14.1: To discuss macroenvironmental influences on international logistics; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 12. A ___________ specifies the country or countries in which a product is manufactured and can be required by governments for control purposes or by an exporter to verify the location of manufacture. a. commercial invoice b. waybill c. certificate of origin d. shipper’s export declaration [LO 14.2: To explain documentation as well as terms of sale and methods of payment for international shipments; Moderate; Concept; AACSB Category 3: Analytical thinking] 13. A ___________ is similar in nature to a domestic bill of lading and summarizes the entire transaction. a. certificate of origin b. commercial invoice 3 .

c. shipper’s letter of instruction (SLI) d. shipper’s export declaration (SED) [LO 14.2: To explain documentation as well as terms of sale and methods of payment for international shipments; Moderate; Concept; AACSB Category 3: Analytical thinking] 14. A ___________ often serves as the basis for a country’s official export statistics. a. shipper’s export declaration b. shipper’s bill of lading c. certificate of origin d. commercial invoice [LO 14.2: To explain documentation as well as terms of sale and methods of payment for international shipments; Moderate; Application; AACSB Category 3: Analytical thinking] 15. Incoterms refer to ___________. a. standardized procedures for handling international shipments b. standardized international trade terminology c. a specific method of payment for international shipments d. terms of sale for international shipments [LO 14.2: To explain documentation as well as terms of sale and methods of payment for international shipments; Moderate; Concept; AACSB Category 3: Analytical thinking] 16. Which of the following Incoterms does not apply to sea and inland waterway transport only? a. free alongside ship (FAS) b. cost and freight (CFR) c. free carrier (FCA) d. free on board (FOB) [LO 14.2: To explain documentation as well as terms of sale and methods of payment for international shipments; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 17. Which of the following is not a method of payment for international shipments? a. letter of credit b. open account c. cash in advance d. forfaiting [LO 14.2: To explain documentation as well as terms of sale and methods of payment for international shipments; Difficult; Synthesis; AACSB Category 3: Analytical thinking]

4 .

18. Which method of payment for international shipments is extremely risky for the seller and minimally risky for the buyer? a. letter of credit b. open account c. bills of exchange d. cash in advance [LO 14.2: To explain documentation as well as terms of sale and methods of payment for international shipments; Moderate; Application; AACSB Category 3: Analytical thinking] 19. What international method of payment is issued by a bank and guarantees payment to a seller provided that the seller has complied with applicable terms and conditions of the particular transaction? a. bill of exchange b. letter of credit c. forfaiting d. open account [LO 14.2: To explain documentation as well as terms of sale and methods of payment for international shipments; Moderate; Application; AACSB Category 3: Analytical thinking] 20. Advising on acceptance of letters of credit, booking space on carriers, and obtaining consular documents are principal functions provided by ___________. a. export packers b. export management companies c. international freight forwarders d. customs brokers [LO 14.3: To distinguish among the unique activities of international trade specialists; Moderate; Application; AACSB Category 3: Analytical thinking] 21. Consular documents ___________. a. involve obtaining permission from the importing country for the goods to enter b. must be filed for every export shipment c. can be used in place of a shipper’s export declaration d. list the shipper, consignee, commodity or commodities, and place of export [LO 14.3: To distinguish among the unique activities of international trade specialists; Moderate; Concept; AACSB Category 3: Analytical thinking] 22. Which of the following is not a source of income for international freight forwarders?

5 .

a. payment for freight pickup and delivery b. buying space wholesale and selling it retail c. commissions on shipping revenues generated for carriers d. fees for document preparation and performing research [LO 14.3: To distinguish among the unique activities of international trade specialists; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 23. Which international logistics service provider is often confused with the international freight forwarder? a. customs broker b. nonvessel-operating common carrier (NVOCC) c. export management company (EMC) d. export packers [LO 14.3: To distinguish among the unique activities of international trade specialists; Moderate; Application; AACSB Category 3: Analytical thinking] 24. ___________ act as the export sales department for a manufacturer. a. International freight forwarders b. Shippers associations c. Export management companies d. Export trading companies [LO 14.3: To distinguish among the unique activities of international trade specialists; Moderate; Application; AACSB Category 3: Analytical thinking] 25. An ___________ custom packs shipments when the exporter lacks the equipment or the expertise to do so itself. a. export management company b. customshouse broker c. international freight forwarder d. export packer [LO 14.3: To distinguish among the unique activities of international trade specialists; Easy; Concept; AACSB Category 3: Analytical thinking] 26. Approximately ___________ percent of cross-border shipments move by water transportation. a. 40 b. 50 c. 60 6 .

d. 70 [LO 14.4: To illustrate transportation and inventory considerations in international distribution; Moderate; Application; AACSB Category 3: Analytical thinking] 27. ___________ is the world’s busiest container port. a. Singapore b. Shanghai c. Hong Kong d. Shenzhen [LO 14.4: To illustrate transportation and inventory considerations in international distribution; Moderate; Application; AACSB Category 3: Analytical thinking] 28. Seven of the 10 busiest container ports are located in ___________. a. Europe b. the United States c. China d. the Middle East [LO 14.4: To illustrate transportation and inventory considerations in international distribution; Moderate; Application; AACSB Category 3: Analytical thinking] 29. ___________ refer to major ports where thousands of containers arrive and depart each week. a. Load centers b. Break-bulk centers c. Consolidation points d. Hubs [LO 14.4: To illustrate transportation and inventory considerations in international distribution; Easy; Concept; AACSB Category 3: Analytical thinking] 30. Shipping conferences refer to ___________. a. annual meetings of large international shippers b. international shippers’ associations c. cartels of ocean vessel operators operating between certain trade areas d. water ports that are located in the same geographic area [LO 14.4: To illustrate transportation and inventory considerations in international distribution; Moderate; Concept; AACSB Category 3: Analytical thinking]

7 .

31. What concept refers to a situation in which ocean carriers retain their individual identities but cooperate in the area of operations? a. ocean carrier alliances b. relational exchanges c. shipping conferences d. partnerships [LO 14.4: To illustrate transportation and inventory considerations in international distribution; Moderate; Concept; AACSB Category 3: Analytical thinking] 32. Ocean carrier alliances provide two primary benefits to participating members, namely, the sharing of vessel space and ___________. a. antitrust immunity b. a broader service network c. lower rates d. faster transit times [LO 14.4: To illustrate transportation and inventory considerations in international distribution; Moderate; Application; AACSB Category 3: Analytical thinking] 33. Integrated air carriers ___________. a. perform transportation in tightly linked supply chains b. are those that own several modes of transportation c. utilize the services of scheduled airlines d. own all their vehicles as well as pick up and delivery facilities [LO 14.4: To illustrate transportation and inventory considerations in international distribution; Moderate; Concept; AACSB Category 3: Analytical thinking] 34. The Open Aviation Area is an open skies agreement between the United States and ___________. a. China b. Brazil c. the European Union d. India [LO 14.4: To illustrate transportation and inventory considerations in international distribution; Moderate; Application; AACSB Category 3: Analytical thinking] 35. Which countries rank first, second, and third, respectively in terms of highway mileage? a. United States, India, China 8 .

b. China, India, United States c. China, United States, Russia d. Russia, United States, China [LO 14.4: To illustrate transportation and inventory considerations in international distribution; Difficult; Application; AACSB Category 3: Analytical thinking] 36. Which of the following statements is false? a. In China, freight is often given lower priority than passengers in rail transportation. b. China ranks first in the world in terms of highway mileage. c. Highway freight transportation can be provided by animals and carts in some countries. d. Some countries limit a motor carrier’s operations to within a particular state’s borders.

[LO 14.4: To illustrate transportation and inventory considerations in international distribution; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 37. Short-sea shipping (SSS) is widely accepted and practiced in ___________. a. North America b. South America c. Europe d. Asia [LO 14.4: To illustrate transportation and inventory considerations in international distribution; Difficult; Application; AACSB Category 3: Analytical thinking] 38. Which of the following statements about international inventory management is false? a. Product return policies are a concern. b. Inventory valuation is difficult because of continually changing exchange rates. c. Safety stocks generally need to be larger. d. Inventory for sale in one nation generally serves the needs of markets in nearby nations.

[LO 14.4: To illustrate transportation and inventory considerations in international distribution; Difficult; Synthesis; AACSB Category 3: Analytical thinking] 39. The Logistics Performance Index (LPI) ___________. a. was created in recognition of the importance of logistics in international trade b. measures a company’s logistics cost as a percentage of its total cost c. compares inventory turnover for major retailers d. applies the Balanced Scorecard approach to international logistics activities

9 .

[LO 14.5: To introduce you to the Logistics Performance Index; Moderate; Application; AACSB Category 3: Analytical thinking] 40. ___________ was the top-ranked country in the 2016 Logistics Performance Index (LPI). a. The United States b. Germany c. The Netherlands d. Luxembourg [LO 14.5: To introduce you to the Logistics Performance Index; Moderate; Application; AACSB Category 3: Analytical thinking] True-False Questions 1. Gross world product refers to the sum of the gross domestic product of all countries. (True) [LO: Material at the beginning of the chapter; Easy; Concept; AACSB Category 3: Analytical thinking] 2. Tariffs refer to taxes that governments place on the importation of certain items. (True) [LO 14.1: To discuss macroenvironmental influences on international logistics; Easy; Concept; AACSB Category 3: Analytical thinking] 3. The primary purpose of a nontariff barrier is to encourage exports. (False) [LO 14.1: To discuss macroenvironmental influences on international logistics; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 4. Embargoes are physical limits on the amount that may be imported from any one country during a period of time. (False) [LO 14.1: To discuss macroenvironmental influences on international logistics; Moderate; Concept; AACSB Category 3: Analytical thinking] 5. Some nations with weak balance-of-payment positions issue an import license on the condition that the goods move on an aircraft or vessel flying that nation’s flag. (True) [LO 14.1: To discuss macroenvironmental influences on international logistics; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 6. Cargo preference rules indicate how each shipment should be loaded into a transport vehicle.

(False)

10 .

[LO 14.1: To discuss macroenvironmental influences on international logistics; Moderate; Concept; AACSB Category 3: Analytical thinking] 7. When one country’s currency is weak relative to other currencies, it is more costly to import products into that country. (True) [LO 14.1: To discuss macroenvironmental influences on international logistics; Moderate; Application; AACSB Category 3: Analytical thinking] 8. Sachets (single-use packets) require different packaging and are easier to lose and more prone to theft than products sold in larger quantities. (True) [LO 14.1: To discuss macroenvironmental influences on international logistics; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 9. Serbia, in 2013, was the most recent country admitted to the European Union. (False) [LO 14.1: To discuss macroenvironmental influences on international logistics; Moderate; Application; AACSB Category 3: Analytical thinking] 10. It might not be unusual for cargo handlers in some countries to be illiterate. (True) [LO 14.1: To discuss macroenvironmental influences on international logistics; Easy; Synthesis; AACSB Category 3: Analytical thinking] 11. National holidays have no impact on the effectiveness and efficiency of international logistics. (False) [LO 14.1: To discuss macroenvironmental influences on international logistics; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 12. The documentation requirements for international shipments can act as a nontariff barrier to trade. (True) [LO 14.2: To explain documentation as well as terms of sale and methods of payment for international shipments; Easy; Synthesis; AACSB Category 3: Analytical thinking] 13. A certificate of origin specifies the country or countries in which a product is manufactured.

(True) [LO 14.2: To explain documentation as well as terms of sale and methods of payment for international shipments; Easy; Concept; AACSB Category 3: Analytical thinking] 14. A shipper’s letter of instruction (SLI) contains relevant export transaction data such as the transportation mode(s), transaction participants, and description of what is being exported.

(False) 11 .

[LO 14.2: To explain documentation as well as terms of sale and methods of payment for international shipments; Moderate; Concept; AACSB Category 3: Analytical thinking] 15. Some free trade agreements have actually resulted in an increase in documentation requirements. (True) [LO 14.2: To explain documentation as well as terms of sale and methods of payment for international shipments; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 16. Incoterms 2010 now divides terms of sale into two groups, one of which applies to any mode of transport and the other which applies to sea and inland water transport only. (True) [LO 14.2: To explain documentation as well as terms of sale and methods of payment for international shipments; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 17. The use of Incoterms is mandatory for international shipments. (False) [LO 14.2: To explain documentation as well as terms of sale and methods of payment for international shipments; Moderate; Application; AACSB Category 3: Analytical thinking] 18. Four distinct international methods of payment (e.g., letters of credit) exist. (True) [LO 14.2: To explain documentation as well as terms of sale and methods of payment for international shipments; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 19. An open account is of minimal risk to the seller and extremely risky to the buyer. (False) [LO 14.2: To explain documentation as well as terms of sale and methods of payment for international shipments; Moderate; Application; AACSB Category 3: Analytical thinking] 20. Consular documents involve obtaining permission from the importing country for goods to enter. (True) [LO 14.3: To distinguish among the unique activities of international trade specialists; Moderate; Concept; AACSB Category 3: Analytical thinking] 21. International freight forwarders’ income comes from two primary sources. (False) [LO 14.3: To distinguish among the unique activities of international freight specialists; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 22. From a shipper’s perspective, a nonvessel-operating common carrier (NVOCC) is a carrier; from an ocean carrier’s perspective, an NVOCC is a shipper. (True)

12 .

[LO 14.3: To distinguish among the unique activities of international freight specialists; Moderate; Application; AACSB Category 3: Analytical thinking] 23. Export trading companies act as the export sales department for a manufacturer. (False) [LO 14.3: To distinguish among the unique activities of international freight specialists; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 24. Export packers custom pack shipments when the exporter lacks the equipment or expertise to do so itself. (True) [LO 14.3: To distinguish among the unique activities of international trade specialists; Easy; Concept; AACSB Category 3: Analytical thinking] 25. International transportation cannot be effective or efficient without fairly identical handling equipment being in place at each end of the trip. (True) [LO 14.4: To illustrate transportation and inventory considerations in international distribution; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 26. Approximately 75 percent of cross-border shipments move by water transportation. (False) [LO 14.4: To illustrate transportation and inventory considerations in international distribution; Moderate; Application; AACSB Category 3: Analytical thinking] 27. In terms of container throughput, Shanghai is the world’s busiest container port. (True) [LO 14.4: To illustrate transportation and inventory considerations in international distribution; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 28. Five of the world’s 10 busiest container ports are located in the United States. (False) [LO 14.4: To illustrate transportation and inventory considerations in international distribution; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 29. Load centers refer to major ports where thousands of containers arrive and depart each week.

(True) [LO 14.4: To illustrate transportation and inventory considerations in international distribution; Easy; Concept; AACSB Category 3: Analytical thinking] 30. Shipping conferences refer to annual meetings of large international shippers. (False) [LO 14.4: To illustrate transportation and inventory considerations in international distribution; Moderate; Concept; AACSB Category 3: Analytical thinking]

13 .

31. Ocean carrier alliances provide two primary benefits to participating members, namely, the sharing of vessel space and lower rates. (False) [LO 14.4: To illustrate transportation and inventory considerations in international distribution; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 32. Integrated air carriers own all their vehicles and the facilities that fall in between. (True) [LO 14.4: To illustrate transportation and inventory considerations in international distribution; Moderate; Concept; AACSB Category 3: Analytical thinking] 33. Bilateral agreements liberalize international aviation opportunities and limit federal government involvement. (False) [LO 14.4: To illustrate transportation and inventory considerations in international distribution; Moderate; Concept; AACSB Category 3: Analytical thinking] 34. China ranks first in the world in terms of highway mileage. (False) [LO 14.4: To illustrate transportation and inventory considerations in international distribution; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 35. Some countries conduct inspections of trucks as they move from one state to another. (True) [LO 14.4: To illustrate transportation and inventory considerations in international distribution; Moderate; Synthesis; AACSB Category 3: Analytical thinking] 36. Drayage refers to ocean shipping, often along a region’s coast, rather than across oceans.

(False) [LO 14.4: To illustrate transportation and inventory considerations in international distribution; Moderate; Concept; AACSB Category 3: Analytical thinking 37. Because greater uncertainties, misunderstandings, and delays often arise in international movements, safety stocks must be larger. (True) [LO 14.4: To illustrate transportation and inventory considerations in international distribution; Moderate; Application; AACSB Category 3: Analytical thinking] 38. Inventory valuation on an international scale is difficult because of continually changing exchange rates. (True) [LO 14.4: To illustrate transportation and inventory considerations in international distribution; Moderate; Synthesis; AACSB Category 3: Analytical thinking]

14 .

39. The Netherlands ranked first in overall performance in the 2016 Logistics Performance Index (LPI). (False) [LO 14.5: To introduce you to the Logistics Performance Index; Moderate; Application; AACSB Category 3: Analytical thinking] 40. The Logistics Performance Index (LPI) was created in recognition of the importance of logistics in international trade. (True) [LO 14.5: To introduce you to the Logistics Performance Index; Moderate; Synthesis; AACSB Category 3: Analytical thinking]

15 .