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The tactic of overbooking or overselling the available asset is suitable in any situation where customers are able to cancel orders and the value of the asset drops significantly after a deadline. The forecast error measures the difference between the […]

Seasonal demand can be met by A) maintaining enough manufacturing capacity to meet demand in any period. B) building up inventory during the off season to meet demand during peak seasons. C) offering a price promotion during periods of low […]

The use of a seasonal workforce requires that the workforce be multi-skilled and easily adapt to being moved from line to line. Improperly structured sales force incentives are a significant obstacle to coordination in the supply chain. Answer: TRUE Quantity […]

It is more common for a manufacturer to not own the distribution network. A reliable supplier has low variability of lead time, whereas an unreliable supplier has high variability. Answer: TRUE Too low a level of overbooking will lead to […]

A reduction in supply can help dramatically reduce safety inventory required without hurting product availability. Revenue-sharing contracts counter double marginalization by decreasing the cost per unit charged to the retailer, thus effectively decreasing the cost of understocking. Answer: FALSE Lot […]

A price discount where the discount is based on the total quantity purchased over a given period, regardless of the number of lots purchased over that period, is A) customer based. B) lot size based. C) supplier based. D) volume […]

The tailored strategy “Focus on low-cost, decentralized capacity for predictable demand” follows which risk mitigation strategy? A) Get redundant suppliers. B) Increase capacity. C) Increase responsiveness. D) Increase inventory. The phenomenon where each actor is incentivized to maximize his gain […]

Firms focusing on cost leadership tend to find the lowest cost location for their manufacturing facilities, but only if that means locating very far from the markets they serve. To extract the maximum benefit from the online channel for physical […]

Personnel can utilize forecasts to make decisions concerning A) scheduling. B) promotions. C) plant/equipment investment. D) purchasing. Which of the following uses transportation to minimize the total cost (transportation, inventory, information, and facility) while providing an appropriate level of responsiveness […]

The bullwhip effect A) positively impacts performance at every stage. B) hurts the relationships between different stages of the supply chain. C) enhances the relationships between different stages of the supply chain. D) results in improved on-time order delivery. Allocating […]

The supply chain planning phase exceeds the supply chain design phase in duration. The goal when making the overbooking decision is to maximize supply chain profits by minimizing the cost of wasted capacity and the cost of capacity shortage. Answer: […]

What rate of return results in a present value of $432 for $250 received one year from now and another $250 received two years from now? A) 9.89% B) 10.32% C) 10.94% D) 11.37% A(n) ________ measure of performance is […]

It is much easier to return a product to an online retailer than to a traditional bricks and mortar seller. Time series forecasting methods are the most difficult methods to implement. Answer: FALSE A carrier uses transportation to minimize the […]

The two major types of facilities are production sites and storage sites. A lack of coordination occurs either because different stages of the supply chain have objectives that conflict or because information moving between stages gets delayed and distorted. Answer: […]

The objective of every supply chain is to A) minimize the overall cost generated. B) maximize the overall value generated. C) minimize the cost to the manufacturer. D) maximize the profit of the manufacturer. Most strategies that an aggregate planner […]

In adaptive forecasting, the estimates of level, trend, and seasonality are updated after each demand observation. The procurement process for indirect materials should focus on decreasing the transaction cost for each order. Answer: TRUE A key to reducing cycle inventory […]

Ignoring uncertainty in demand encourages a greater use of A) expensive but flexible transportation modes. B) inexpensive and inflexible transportation modes. C) inexpensive and flexible transportation modes. D) expensive and inflexible transportation modes. What is the responsibility of a designated […]

For products where the firm has market power, two-part tariffs can be used to achieve coordination in the supply chain and maximize supply chain profits. If price and demand vary over time in a global network, flexible production capacity can […]

An intermediary can increase the supply chain surplus by decreasing the number of relationships required between multiple buyers and sellers. This is called A) capacity aggregation. B) inventory aggregation. C) warehouse aggregation. D) relationship aggregation. Distributors add value to a […]

The cost of carrying one unit in inventory for a specified period of time, usually one year, is referred to as A) the material cost and is denoted by C. B) the fixed ordering cost and is denoted by S. […]

Most strategies that an aggregate planner actually uses are in combination, and are referred to as hybrid strategies. The use of software to determine transportation routes has been the most common IT application in transportation. Answer: TRUE Tailored sourcing may […]

Consider the factors influencing total cost and supplier performance. Which of the following is the LEAST quantifiable factor? A) Supplier price B) Supplier terms C) Support D) Warehousing cost ________ measures the incremental costs that are independent of the size […]

Effective sourcing processes within a firm can improve profits for the firm and total supply chain surplus in a variety of ways. The present value of a stream of cash flows is what that stream is worth in today’s dollars. […]

A high fashion retailer should rely on A) historical data to forecast next season’s demand. B) interpretation of industry trends and customer tastes to forecast next season’s demand. C) store-level POS data to forecast next season’s demand. D) distribution center […]

The rising popularity of bubble and squeak as a breakfast item on the menu has resulted in a steady demand for peas. Over the course of the past week, 457 patrons have ordered the hearty breakfast and each serving contains […]

If garbage collection services were billed based on the weight of refuse collected, most people would find a way to discard less and recycle more. Cycle inventory is inventory carried to satisfy demand that exceeds the amount forecasted for a […]

Simulation methods are very good at evaluating a decision where the path itself is decision dependent. There is a close connection between the design and management of supply chain flows and the success of a supply chain. Answer: TRUE To […]

The drive for strategic fit should come from A) the supply chain manager. B) the strategic planning department. C) the highest levels of the organization, such as the CEO. D) middle management. The opportunities from globalization are often accompanied by […]

Which of the following are key components of information that must be analyzed to increase efficiency and improve effectiveness in a supply chain? A) Software selection B) Source selection C) Warehouse selection D) Forecasting and aggregate planning Historical demand for […]

With supply and demand management decisions being made independently, A) it is increasingly difficult to coordinate the supply chain, thereby increasing profit. B) it is increasingly difficult to coordinate the supply chain, thereby decreasing profit. C) it is easier to […]

Quantity flexibility contracts counter double marginalization by giving the retailer the ability to modify the order based on improved forecasts closer to the point of sale. Most supply chain design innovations that lower transportation costs paradoxically tend to increase fuel […]

In most instances of differential pricing, demand from the segment paying the lower price arises earlier in time than demand from the segment paying the higher price. Traditionally, much of aggregate planning is focused within an enterprise and may not […]

The practice where a firm charges differential prices to maximize profits is A) lot pricing. B) marginal pricing. C) price incrimination. D) price discrimination. Historical demand for Peeps is as displayed in the table. Answer: D Use a simple moving […]

Transportation cost depends on the prices offered by different carriers and the extent to which the shipper uses inexpensive and slow, or expensive and fast, means of transportation. Predictable variabilityis change in demand that cannot be forecasted. Answer: FALSE Transportation […]

In a complex decision tree, there are thousands of possible paths that may result from the first period to the last. If facilities have higher fixed costs, many local facilities are preferred because this helps lower transportation costs. Answer: FALSE […]

Gang Aft Agley, a manufacturing company, faces the aggregate planning problem shown in the table below. Cost of regular production is $5 per unit, the cost of producing the same unit on overtime is $7.50, the cost of subcontracting is […]

A company’s ability to find a balance between responsiveness and efficiency that best matches the needs of the customer it is targeting is the key to achieving strategic fit. The major disadvantage of a distribution network with local storage is […]

A company that uses a more expensive short lead time supplier as a backup for a low cost, long lead time supplier is using A) tailored sourcing. B) quick response. C) postponement. D) improved forecasting. When demand is steady, cycle […]

The objective of every supply chain is to maximize the overall value generated. Long-term contracts for both warehousing and transportation requirements will be more effective if the demand and price of warehousing do not change in the future or if […]

The goal of procurement is A) to analyze spending across various suppliers and component categories to identify opportunities for decreasing the total cost. B) to analyze spending across various suppliers and component categories to identify opportunities for increasing the total […]

A decrease in the response time customers desire increases the number of facilities required in the network. Price discriminationis the practice where a firm charges differential prices to maximize profits. Answer: TRUE Supply chain network design decisions include the location […]

The bullwhip effect enables different stages of the supply chain to have a consistent estimate of what demand looks like. The goal of aggregate planning is to satisfy demand in a way that minimizes profit. Answer: FALSE The supply chain […]

The difference between the value of the product and its price remains with the customer as consumer surplus. There is greater environmental impact in the extended supply chain than there is within the main plant for most manufacturers. Answer: TRUE […]

Over the past several decades, the supply chains of most firms have become easier to coordinate. As inputs into the aggregate plan change, managers do not need to make changes to the aggregate plan. Answer: FALSE A planning horizon is […]

The objective of the second phase of network design is to A) select a precise location and capacity allocation for each facility. B) select a set of desirable sites within each region where facilities are to be located. C) identify […]

Information is potentially the biggest driver of performance in the supply chain as it directly affects each of the other drivers. Short-term production serves as a broad blueprint for operations and establishes the parameters within which aggregate planning decisions are […]

Promoting during a peak demand month may decrease overall profitability if a significant fraction of the demand increase results from a forward buy. In reality, demand and prices are highly uncertain and are likely to fluctuate during the life of […]

Pricing obstacles refer to situations in which the pricing policies for a product lead to an increase in variability of orders placed. A carrier’s decisions are affected by the prices that the market will bear, but not the responsiveness it […]

Pricing may influence demand if customers are price sensitive. Sourcing processes include the selection of suppliers, design of supplier contracts, product design collaboration, procurement of material, and evaluation of supplier performance. Answer: TRUE The intercompany scope of strategic fit is […]

The goal of trade promotions is to A) influence retailers to act in a way that helps the retailer achieve its objectives. B) influence retailers to act in a way that helps the manufacturer achieve its objectives. C) influence retailers […]

The sales typically measured by a manufacturer are A) the quantity sold to final customers (sell–through). B) the quantity sold to distributors or retailers (sell-in). C) the quantity reported by the salesperson. D) based on the quantity of supplies purchased […]

Offering a promotion during a peak period that has significant forward buying creates even more variable demand than before the promotion. The cost of oversellingis denoted by Coand is the loss incurred by a firm for each unsold unit at […]

The primary role of cycle inventory is to allow different stages in the supply chain to A) purchase product in lot sizes that maximize the sum of the material, ordering, and holding cost. B) purchase product in lot sizes that […]

________ is used to determine customer service levels. A) Inventory held B) Backlog/stockout quantity C) Workforce hired/laid off D) Machine capacity increase/decrease A high level of product availability requires A) large inventories and tends to raise costs for the supply […]

Average inventory A) increases if a promotion is run during the peak period. B) increases if a promotion is run during the off-peak period. C) decreases if a promotion is run during the peak period. D) decreases if a promotion […]

For commodity products where price is set by the market, manufacturers can use lot size based quantity discounts to achieve coordination in the supply chain and decrease supply chain cost. Surveys in sustainable farming have revealed that the typical consumer […]

Although a forward buy is often the retailer’s appropriate response and increases their own profits, it usually increases demand variability with a resulting increase in inventory and flow times within the supply chain. With reduced demand uncertainty, a supply chain […]

Companies should work with downstream partners to produce forecasts and with upstream partners to determine constraints when doing aggregate planning. Having multiple sources ensures a degree of competition and also the possibility of a backup, should a source fail to […]