33) The Mumbai dabbawalas have a transportation network that at the beginning of each day is
best described as
A) a milk run.
B) direct shipping to a single destination.
C) a tailored network.
D) direct shipping from source to customer.
34) The Mumbai dabbawalas have a transportation network that takes advantage of
A) a low uncertainty of demand.
B) temporal aggregation of demand.
C) use of transportation resources when they are underutilized.
D) both low uncertainty and temporal aggregation of demand and also use of transportation
resources while they are underutilized.
35) The total amount paid to various carriers for transporting products to customers is
A) transportation cost.
B) inventory cost.
C) facility cost.
D) processing cost.
36) The cost of holding inventory incurred by the shipper’s supply chain network is
A) transportation cost.
B) inventory cost.
C) facility cost.
D) processing cost.
37) The cost of various facilities in the shipper’s supply chain network is
A) transportation cost.
B) inventory cost.
C) facility cost.
D) processing cost.
38) The cost of loading/unloading orders, as well as other processing costs associated with
transportation, is considered
A) transportation cost.
B) inventory cost.
C) facility cost.
D) processing cost.
18
39) Temporal aggregation
A) is the process of combining orders across multiple locations.
B) increases a firm’s responsiveness.
C) decreases transportation costs because of economies of scale.
D) is purely a theoretical concept; no practical business examples of this exist.
Scenario 14.1 — Vidalia Onions
When Vidalia onions are ready, the entire 13 county (plus parts of seven other counties) area in
Georgia where they are grown is devoted to the harvest, packaging and shipping of this delicacy.
The Onion Shack currently purchases 120,000 bags of onions each year at a price of $100 per
bag (a bag is ten pounds). Onion Shack has historically purchased in lots of 3000 bags. Transit
time and capacity vary as indicated in the table. The safety inventory that Onion Shack requires
is 30% of lead time demand and the holding cost for a bag is 15% of cost.
Carrier
Quantity
Shipped (cwt)
Quantity shipped
(bags)
Shipping cost
($/cwt)
Transit time
(days)
Mashburn Rail
200+
2000+
$2.10
5
Sylvia Express
100+
1000+
$2.35
3
Anita Enterprises
250+
2500+
$1.35
3
Smith Trucking
250+
2500+
$1.00
3
40) Use Scenario 14.1 to determine the least expensive transportation option if the Onion Shack
continues to purchase 120,000 bags of Vidalia onions each year.
A) Mashburn Rail
B) Sylvia Express
C) Anita Enterprises
D) Smith Trucking
41) Use Scenario 14.1 to determine the least expensive transportation option if the Onion Shack
purchases 240,000 bags of Vidalia onions each year.
A) Mashburn Rail
B) Sylvia Express
C) Anita Enterprises
D) Smith Trucking
42) Use Scenario 14.1 to determine the least expensive transportation option if the Onion Shack
purchases 480,000 bags of Vidalia onions each year.
A) Mashburn Rail
B) Sylvia Express
C) Anita Enterprises
D) Smith Trucking
43) Use Scenario 14.1 to determine the transportation cost of the Anita Enterprises option if the
Onion Shack purchases 240,000 bags of Vidalia onions each year.
A) $156,000
B) $144,000
C) $162,000
D) $150,000
44) Use Scenario 14.1 to determine the in-transit inventory cost of the Anita Enterprises option if
the Onion Shack purchases 240,000 bags of Vidalia onions each year.
A) $1936.60
B) $2004.60
C) $1972.60
D) $1864.60
45) Use Scenario 14.1 to determine the in-transit inventory cost of the Mashburn Rail option if
the Onion Shack purchases 240,000 bags of Vidalia onions each year.
A) $3287.67
B) $2604.67
C) $1972.60
D) $1864.60
Scenario 14.2
SoxyBack, a manufacturer of fancy men’s socks worn by fashionable gentlemen everywhere, is
located in Oshkosh, Wisconsin. The socks are sold directly to fashion-conscious men all over
North America. SoxyBack currently divides the United States into ten territories, each with its
own sales force. All product inventories are maintained locally in each territory and replenished
from Oshkosh every five weeks using UPS. The average replenishment lead time using UPS is
one week. UPS charges at a rate of $0.75 + 0.33x where x is the quantity shipped in pounds. The
products sold fall into two categories–Dandy and Popinjay. Dandy products weigh 0.2 pounds
and cost $350 each. Popinjay products weigh 0.10 pounds and cost $35 each.
Weekly demand for Dandy products in each territory is normally distributed, with a mean of mH
= 3 and a standard deviation of sH = 6. Weekly demand for Popinjay products in each territory is
normally distributed, with a mean of mL = 25 and a standard deviation of sL = 6.
SoxyBack maintains sufficient safety inventories in each territory to provide a CSL of 0.975 for
each product. Annual holding cost at SoxyBack is 30 percent. In addition to the current
approach, the management team at SoxyBack is considering two other options:
Option A: Keep the current structure but replenish inventory once a week rather than once every
five weeks.
Option B: Eliminate inventories in the territories, aggregate all inventories in a finished goods
warehouse at Oshkosh, and replenish the warehouse once a week.
If inventories are aggregated at Oshkosh, orders will be shipped using FedEx, which charges
$7.25 + 0.77x per shipment, where x is the quantity shipped in pounds. The factory requires a
one-week lead time to replenish finished-goods inventories at the Oshkosh warehouse. An
average customer order is for 1 unit of Dandy and 10 units of Popinjay.
46) Use Scenario 14.2 to determine the total annual cost of SoxyBack’s current system.
A) $90,459
B) $75,994
C) $47,335
D) $42,598
47) Use Scenario 14.2 to determine the total annual cost of Option A for SoxyBack’s distribution
system.
A) $90,459
B) $75,994
C) $47,335
D) $42,598
48) Use Scenario 14.2 to determine the total annual cost of Option B for SoxyBack’s distribution
system.
A) $90,459
B) $75,994
C) $47,335
D) $42,598
49) Use Scenario 14.2 to determine the total annual cost of SoxyBack’s current system if a series
of promotions increases the standard deviation of demand for both the Dandy and Popinjay lines
to 10. Assume that the mean weekly demand for both product lines remains the same.
A) $116,672
B) $140,869
C) $128,771
D) $152,967
50) Use Scenario 14.2 to determine the percentage increase in total annual cost of SoxyBack’s
current system if the cost of transportation triples while all other parameters are held constant.
A) 0.9%
B) 9%
C) 90%
D) 200%
51) In Scenario 14.2, which option has the lowest annual inventory cost?
A) Current system
B) Option A
C) Option B
D) Option A and Option B have identical annual inventory costs.
52) During a heated meeting at SoxyBack Headquarters, Al suggests that the reorder interval be
changed from 5 weeks to 2.5 weeks, Bob suggests the ten locations be consolidated to five
locations, Charles demands that the customer service level be set at 0.925 instead of 0.975, and
David declares their holding cost should be 25% rather than 30%. If these four statements are
made regarding the current system as described in Scenario 14.2, which option has the lowest
annual inventory cost?
A) Al
B) Bob
C) Charles
D) David
53) During a heated meeting at SoxyBack Headquarters, Al suggests that the reorder interval be
changed from 5 weeks to 2.5 weeks, Bob suggests the ten locations be consolidated to five
locations, Charles demands that the customer service level be set at 0.925 instead of 0.975, and
David declares their holding cost should be 25% rather than 30%. Their boss, Indecisive Ivan
decides to make all of these changes to the current system as described in Scenario 14.2. How
much money will be saved in annual inventory costs from the current system?
A) $45,082
B) $52,404
C) $61,970
D) $64,043
54) Serving a high density of customers at a long distance is best done using
A) an LTL carrier.
B) a cross dock distribution center with milk runs.
C) a package carrier.
D) a private fleet with milk runs.
55) Serving a low density of customers at a long distance is best done using
A) an LTL carrier.
B) a cross dock distribution center with milk runs.
C) a package carrier.
D) a private fleet with milk runs.
56) Serving a high density of customers at a short distance is best done using
A) an LTL carrier.
B) a cross dock distribution center with milk runs.
C) a package carrier.
D) a private fleet with milk runs.
57) Serving a medium density of customers at a medium distance is best done using
A) an LTL carrier.
B) a cross dock distribution center with milk runs.
C) a package carrier.
D) a private fleet with milk runs.
58) Serving a medium density of customers at a short distance is best done using
A) an LTL carrier.
B) third party milk runs.
C) a package carrier.
D) a private fleet with milk runs.
59) It is best to disaggregate all inventories and use an inexpensive mode of transportation for
replenishment when you have a
A) high-value product and high demand.
B) high-value product and low demand.
C) low-value product and high demand.
D) low-value product and low demand.
60) A shrewd supply chain manager would aggregate only safety inventory and use an
inexpensive mode of transportation for replenishing cycle inventory if she is dealing with a
A) high-value product and high demand.
B) high-value product and low demand.
C) low-value product and high demand.
D) low-value product and low demand.
61) The skillful supply chain manager declared she would not only disaggregate cycle inventory,
but she would also aggregate safety inventory and use an inexpensive mode of transportation for
replenishing cycle inventory and fast mode when using safety inventory for her product that had
A) high value and high demand.
B) high value and low demand.
C) low value and high demand.
D) low value and low demand.
62) The competent supply chain manager decided to aggregate all inventories and as required,
use fast mode of transportation for filling customer orders of his
A) high-value and high-demand product.
B) high-value and low-demand product.
C) low-value and high-demand product.
D) low-value and low-demand product.
63) Managers should ensure that a firm’s transportation strategy
A) involves cost minimization.
B) involves profit maximization.
C) supports its competitive strategy.
D) is separate from competitive strategy.
64) 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.
65) Inexpensive and inflexible transportation modes tend to
A) perform poorly.
B) perform well when plans change.
C) perform well when everything goes as planned.
D) work the best in all situations.
1) Discuss the two key players involved in any transportation in the supply chain.
2) What trade-offs do managers need to consider when making transportation decisions?
3) Explain why transportation systems should be tailored.
4) Discuss the relationship between transportation strategy and competitive strategy.
5) Discuss the importance of designing flexibility into the transportation network.