Supply Chain Management: Strategy, Planning, and Operation, 7e (Chopra)
Chapter 10 Coordination in a Supply Chain
10.1 True/False Questions
1) Supply chain coordination requires each stage of the supply chain to take into account the
impact its actions have on other stages.
2) 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.
3) The bullwhip effect enables different stages of the supply chain to have a consistent estimate
of what demand looks like.
4) Supply chain coordination improves if all stages of the chain take actions that are aligned and
together increase total supply chain surplus.
5) With an uncoordinated supply chain each stage tries to maximize its own profits, resulting in
actions that often diminish total supply chain profits.
6) The bullwhip effect moves a supply chain away from the efficient frontier by increasing cost
and decreasing responsiveness.
7) The bullwhip effect reduces the profitability of a supply chain by making it simpler to provide
a given level of product availability.
8) Incentive obstacles refer to situations where incentives offered to different stages or
participants in a supply chain lead to actions that increase variability and reduce total supply
chain profits.
9) Improperly structured sales force incentives are a significant obstacle to coordination in the
supply chain.
10) Measuring performance based on sell-through is often justified on the grounds that the
manufacturer’s sales force does not control sell-in.
11) The lack of information sharing between the retailer and manufacturer leads to a large
fluctuation in manufacturer orders.
12) Pricing obstacles refer to situations in which the pricing policies for a product lead to an
increase in variability of orders placed.
13) Lot size based quantity discounts reduce the bullwhip effect within the supply chain.
14) Trade promotions and other short-term discounts offered by a manufacturer result in large
orders during the promotion period followed by very small orders after that.
15) Behavioral obstacles are often related to the way the supply chain is structured and reduce
the bullwhip effect.
16) Sharing of POS data helps reduce the bullwhip effect because it allows each stage of the
supply chain to use orders from the previous stage to forecast future demand.
17) When a single stage controls replenishment decisions for the entire chain, the problem of
multiple forecasts is magnified and coordination within the supply chain follows.
18) A reduction of lot sizes increases the amount of fluctuation that can accumulate between any
pair of stages of a supply chain, thus increasing the bullwhip effect.
19) Tying allocation to past sales removes any incentive a retailer may have to inflate orders, as a
result dampening the bullwhip effect.
20) Managers can encourage the bullwhip effect by devising pricing strategies that encourage
retailers to order in smaller lots and reduce forward buying.
21) Information distortion can be dampened by practices that assign replenishment responsibility
across the supply chain to a single entity.
22) Dollar General switches to VMI for two different producers of beef jerky. It is likely that the
overall inventory level of beef jerky in the store will increase over levels before they went to
VMI.
23) A Computer Processing Factory Rationing (CPFR) system is used to assign inventory in a
supply chain when supply is disrupted.
24) A Computer Processing Factory Rationing (CPFR) is dependent on technology.
25) Retail event collaboration is a special case of CPFR.
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10.2 Multiple Choice Questions
1) Information distortion is exaggerated by the fact that
A) supply chains today produce a large amount of product variety.
B) supply chains today produce a small amount of product variety.
C) the telephone effect is extreme in situations where technology is in use.
D) different stages of supply chains send excessive data.
2) The situation in which fluctuations in orders increase as they move up the supply chain from
retailers to wholesalers to manufacturers to suppliers is known as
A) market fluctuations.
B) the whiplash effect.
C) the bullwhip effect.
D) the butterfly effect.
3) The bullwhip effect causes
A) maximization of supply chain surplus.
B) improved accuracy of demand information within the supply chain.
C) different stages of the supply chain to have a very different estimate of what demand looks
like.
D) less need for aggregate planning.
4) The lack of coordination within a supply chain will result in a decrease in
A) manufacturing cost.
B) inventory cost.
C) replenishment lead time.
D) level of product availability.
5) The lack of coordination within a supply chain will result in an increase in
A) profitability.
B) inventory accuracy.
C) replenishment lead time.
D) level of product availability.
6) Long-term boom and bust cycles that mimic the bullwhip effect include
A) calendars and greeting cards.
B) the length of hemlines.
C) university textbooks.
D) memory chips for personal computers.
7) The bullwhip effect decreases
A) product availability.
B) manufacturing cost.
C) replenishment lead time.
D) transportation cost.
8) The bullwhip effect decreases
A) transportation cost.
B) profitability.
C) replenishment lead time.
D) shipping and receiving cost.
9) 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.
10) The bullwhip effect moves a supply chain
A) away from the efficient frontier by increasing cost and decreasing responsiveness.
B) away from the efficient frontier by decreasing cost and increasing responsiveness.
C) toward the efficient frontier by increasing cost and decreasing responsiveness.
D) toward the efficient frontier by increasing cost and increasing responsiveness.
11) Situations where incentives offered to different stages or participants in a supply chain lead
to actions that increase variability and reduce total supply chain profits are referred to as
A) incentive obstacles.
B) information processing obstacles.
C) operational obstacles.
D) behavioral obstacles.
12) Incentives that focus only on the local impact of an action result in decisions that
A) do not maximize total supply chain profits.
B) maximize total supply chain profits.
C) minimize total supply chain profits.
D) minimize total supply chain cost.
13) The lack of supply chain coordination on various measures of performance has costs
associated with it. Which of the following is one of these costs?
A) Quality
B) Reliability
C) Manufacturing
D) Pricing
14) The lack of supply chain coordination on various measures of performance has costs
associated with it. Which of the following is NOT one of these costs?
A) Inventory
B) Reliability
C) Transportation
D) Quality
15) The impact of the lack of coordination on supply chain processes decreases for the following
measure.
A) Manufacturing cost
B) Level of product availability
C) Transportation cost
D) Replenishment lead time
16) Stefan’s compensation plan rewards his hard work by paying him ten cents per mile driven
while he delivers orders to the downstream members of his supply chain. Some managers view
this reward as counterproductive since there is a temptation to take the longest route between two
points rather than making more deliveries. This obstacle to supply chain coordination falls into
the category of
A) incentive obstacles.
B) information processing obstacles.
C) operational obstacles.
D) behavioral obstacles.
17) Improperly structured sales force incentives
A) help create stable demand.
B) have very little effect on the timing of customer orders.
C) tend to create spikes in customer orders.
D) ensure that orders are quickly and accurately entered and communicated to other affected
supply chain processes.
18) 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 from key suppliers.
19) Situations where demand information is distorted as it moves between different stages of the
supply chain, leading to increased variability in orders within the supply chain are referred to as
A) incentive obstacles.
B) information processing obstacles.
C) operational obstacles.
D) behavioral obstacles.
20) Customer Rick places orders with retailer Negan, who orders from Dwight, who orders from
Simon, who orders from Regina. Simon is a whiz at statistics and makes his forecast for the
coming year based on the orders he receives from Dwight. Simon’s process is creating a(n)
A) incentive obstacle.
B) operational obstacle.
C) information processing obstacle.
D) behavioral obstacle.
21) The fact that each stage in a supply chain forecasts demand based on the stream of orders
received from the downstream stage results in
A) forecasts based on actual consumer demand patterns.
B) a reduction in demand as we move up the supply chain from the retailer to the manufacturer.
C) a magnification of fluctuations in demand as we move up the supply chain from the retailer to
the manufacturer.
D) an increase in forecast accuracy.
22) The lack of information sharing between the retailer and manufacturer
A) improves supply chain coordination.
B) minimizes the fluctuation in manufacturer orders.
C) leads to a large fluctuation in manufacturer orders.
D) leads to smaller fluctuations in suppliers’ orders.
23) Actions taken in the course of placing and filling orders that lead to an increase in variability
are referred to as
A) incentive obstacles.
B) information processing obstacles.
C) operational obstacles.
D) pricing obstacles.
24) When a firm places orders in lot sizes that are much larger than the lot sizes in which
demand arises,
A) variability of orders is minimized up the supply chain.
B) variability of orders is magnified up the supply chain.
C) suppliers gain better visibility of consumer demand.
D) suppliers gain a more stable demand pattern.
25) Geoff receives course transfer requests on a continual basis from student advisors throughout
the week. His policy has always been to sign the accumulated course transfer requests on Friday
afternoons. Once he signs them, they are forwarded to his assistant and then on to the student
advisor for that student’s major. The Friday afternoon procedure is creating a(n):
A) incentive obstacles.
B) information processing obstacles.
C) operational obstacles.
D) pricing obstacles.
26) Situations in which the pricing policies for a product lead to an increase in variability of
orders placed are referred to as
A) incentive obstacles.
B) information processing obstacles.
C) operational obstacles.
D) pricing obstacles.
27) Forward buying results in
A) a stabilized buying pattern.
B) small orders during the promotion period followed by very small orders after that.
C) small orders during the promotion period followed by large orders after that.
D) large orders during the promotion period followed by very small orders after that.
28) Problems in learning within organizations that contribute to the bullwhip effect are referred
to as
A) incentive obstacles.
B) information processing obstacles.
C) pricing obstacles.
D) behavioral obstacles.
29) Operational improvements that reduce lot sizes can dampen the bullwhip effect by
A) decreasing the uncertainty of demand during the lead time.
B) decreasing the amount of fluctuation that can accumulate between any pair of stages of a
supply chain.
C) discouraging retailers from artificially inflating their orders in the case of a shortage.
D) allocating the available supply based on past retailer sales.
30) Managers can improve coordination within the supply chain by
A) holding product in inventory but off official inventory records.
B) listing product in inventory without actually holding the physical goods.
C) aligning goals and incentives.
D) decreasing product visibility.
31) All transportation decisions should be evaluated based on their effect on
A) transportation costs.
B) fuel costs.
C) total costs.
D) sales revenue.
32) Coordination requires every stage of the supply chain to focus on
A) the functional revenues for each supply chain member.
B) the functional profits for each supply chain member.
C) the functional costs for each supply chain member.
D) supply chain surplus.
33) The practice of combining shipments for several retailers on the same truck is known as
A) a milk run.
B) a less than truckload shipment.
C) a truckload shipment.
D) an ASN.