Supply Chain Management: Strategy, Planning, and Operation, 7e (Chopra)
Chapter 3 Supply Chain Drivers and Metrics
3.1 True/False Questions
1) Cash to case (C2C) is the duration of time from when cash enters the process as cost to when
it returns as collected revenue. Best in class performance on this metric is a C2C that is almost
zero.
2) Lost sales are easily tracked by most retailers.
3) The major drivers of supply chain performance are customers, facilities, inventory,
transportation, and information.
4) The two major types of facilities are production sites and storage sites.
5) Inventory is an important supply chain driver because changing inventory policies can
dramatically alter the supply chain’s efficiency and responsiveness.
6) Information is potentially the biggest driver of performance in the supply chain as it directly
affects each of the other drivers.
7) A facility with little excess capacity will likely be no more or less efficient per unit of product
it produces than one with a lot of unused capacity.
8) The high utilization facility will have difficulty responding to demand fluctuations.
9) The components of inventory decisions include capacity, cycle inventory, safety inventory,
seasonal inventory, and sourcing.
10) Cycle inventory is inventory that is built up to counter predictable variability in demand.
11) Seasonal inventory is inventory that is built up to counter predictable variability in demand.
12) Companies using seasonal inventory will build up inventory in periods of low demand and
store it for periods of high demand when they will not have the capacity to produce all that is
demanded.
13) Companies using seasonal inventory will maintain a level inventory increase rate of
production for periods of high demand.
14) 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.
15) A company using a faster mode of transportation can function as effectively with fewer
facilities than a company using a slower mode of transportation.
16) Average inbound transportation cost and average outbound transportation cost are ideally
measured on a per unit basis.
17) The most significant sourcing decision is whether to perform a task in house or to outsource
it to a third party.
18) Procurement should be designed to decrease both the total cost of ownership and the supply
chain surplus.
1) Katz reports total revenue of $245,600, cost of goods sold of $18,950 and net income of
$121,000. Their total assets are $585,000 and total liabilities are $250,000. What is their return
on equity (ROE)?
A) 36.12%
B) 48.40%
C) 20.68%
D) 41.98%
2) Katz reports total revenue of $375,650, cost of goods sold of $267,400 and net income of
$48,325. Their total assets are $784,325 and total liabilities are $387,775. What is their return on
equity (ROE)?
A) 33.72%
B) 12.19%
C) 6.16%
D) 21.38%
3) Dogz reports total revenue of $47,561, cost of goods sold of $32,856 and net receivables of
$19,595. Their property, plant and equipment is $19,813 and they have $16,240 of inventory.
What is their accounts receivable turnover?
A) 2.42
B) 1.67
C) 2.02
D) 2.23
4) Dogz reports total revenue of $47,561, cost of goods sold of $32,856 and net receivables of
$19,595. Their property, plant and equipment is $19,813 and they have $16,240 of inventory.
Which ratio is highest — ART, INVT or PPET?
A) ART
B) INVT
C) PPET
D) cannot be determined from the information provided
5) Dogz reports total revenue of $47,561, cost of goods sold of $32,856 and net receivables of
$19,595. Their property, plant and equipment is $19,813 and they have $16,240 of inventory. If
they operate 300 days a year, how long does the average item stay in inventory?
A) 141 days
B) 137 days
C) 125 days
D) 148 days
6) Which of the following would result in lower return on assets for Katz if all other entries in
their selected financial data were held constant?
A) A reduction in earnings before interest and taxes
B) An increase in asset turnover
C) A reduction in total assets
D) An increase in profit margin
7) Which of the following would result in an improvement in the C2C cycle for Katz if all other
entries in their selected financial data were held constant?
A) An increase in accounts payable turnover
B) An increase weeks payable
C) An increase in weeks receivable
D) An increase in weeks in inventory
8) Geoff strolled into his local big box retailer in search of sunflower seeds for the flock of
cardinals that graced his property during the cold winter. Much to his (and the cardinals’) dismay,
the shelf where the 50 pound bags of sunflower seeds were kept was bare. He pirouetted and left
the store in disgust, empty-handed and fearing the wrath of an angry flock of cardinals when he
returned home. This sad scenario illustrates
A) safety inventory.
B) cycle inventory.
C) a markdown.
D) a lost sale.
9) Why would anyone in their right mind buy a brand new car in the spring when they know that
new car models will appear in late summer and early fall and the dealers will use
A) markdowns to move that old inventory?
B) information systems to move that old inventory?
C) pull systems to move that old inventory?
D) lost sales to move that old inventory?
10) The places in the supply chain network where product is stored, assembled, or fabricated are
known as
A) facilities.
B) inventory.
C) transportation.
D) information.
11) All raw materials, work in process, and finished goods within a supply chain are known as
A) facilities.
B) inventory.
C) transportation.
D) information.
12) Moving inventory from point to point in the supply is known as
A) facilities.
B) inventory.
C) transportation.
D) information.
13) The data and analysis concerning facilities, inventory, transportation, and customers
throughout the supply chain is known as
A) facilities.
B) inventory.
C) transportation.
D) information.
14) Which component of the supply chain decision-making framework would be established
first?
A) Customer strategy
B) Supply chain strategy
C) Supply chain structure
D) Competitive strategy
15) Which component of the supply chain decision-making framework would be used to reach
the performance level dictated by the supply chain strategy?
A) Customer strategy
B) Supply chain strategy
C) Supply chain structure
D) Competitive strategy
16) The two major types of facilities are
A) distribution sites and storage sites.
B) production sites and distribution sites.
C) production sites and storage sites.
D) retail sites and distribution sites.
17) Which of the following is a characteristic of a facility with excess capacity?
A) Will likely be more efficient per unit of product it produces than one with a lot of unused
capacity
B) Would be very inflexible and respond to wide swings in the demands placed on it
C) Would be considered a high utilization facility
D) Will have difficulty responding to demand fluctuations
18) Which of the following would be a characteristic of a facility with little excess capacity?
A) Allows a facility to be very flexible and to respond to wide swings in the demands placed on
it
B) Costs money and therefore can decrease efficiency
C) Requires proximity to customers and the rest of the network
D) Will likely be more efficient per unit of product it produces
19) The following warehousing methodology is one in which goods are not actually warehoused
in a facility. Instead, trucks from suppliers, each carrying a different type of product, deliver
goods to a facility. There the inventory is broken into smaller lots and quickly loaded onto store-
bound trucks that carry a variety of products, some from each of the supplier trucks.
A) Warehouse unit storage
B) Stock keeping unit (SKU) storage
C) Job lot storage
D) Cross-docking
20) The average amount of inventory used to satisfy demand between receipt of supplier
shipments is referred to as
A) cycle inventory.
B) safety inventory.
C) seasonal inventory.
D) sourcing.
21) The inventory that is built up to counter predictable variability in demand is called
A) cycle inventory.
B) safety inventory.
C) seasonal inventory.
D) sourcing.
22) The inventory held in case demand exceeds expectation in order to counter uncertainty is
called
A) cycle inventory.
B) safety inventory.
C) seasonal inventory.
D) sourcing.
23) The set of business processes required to purchase goods and services is known as
A) cycle inventory.
B) safety inventory.
C) seasonal inventory.
D) sourcing.
24) Safety inventory is held because
A) the world is perfectly predictable.
B) demand is uncertain and may exceed expectations.
C) it involves making a trade-off between the costs of having too much inventory and the costs
of losing sales due to not having enough inventory.
D) it focuses on processes that are external to the firm.
25) Seasonal inventory should be used when
A) a company can rapidly change the rate of its production system at a very low cost.
B) changing the rate of production is expensive (e.g., when workers must be hired or fired).
C) adjusting to a period of low demand without incurring large costs.
D) the world is perfectly predictable.
26) Which of the following are key components of transportation decisions when designing and
operating a supply chain?
A) Software selection
B) Mode of transportation
C) Source selection
D) Warehouse selection
27) Although faster transportation is more expensive, a firm receives which benefit as a result of
the faster transportation?
A) Fewer rejects
B) Higher profit
C) Lower inventories
D) More warehouses
28) Blue Nile is an online retailer of diamonds that has used responsive transportation to ship
diamonds to customers in the United States, Canada, and several countries in Europe and Asia.
Which is the mode of transportation used with this strategy?
A) Sea
B) Rail
C) Internet
D) Air
29) Blue Nile is an online retailer of diamonds that has used responsive transportation to ship
diamonds to customers in the United States, Canada, and several countries in Europe and Asia.
As part of an audit, their logistics manager has been asked to calculate the sum of the fraction
transported by mode for all modalities. What should this sum equal?
A) 100
B) It depends on the number of modes used by Blue Nile.
C) 1
D) The total value of diamonds shipped in that year.