6) An efficient supply chain typically has:
A) a high capacity cushion.
B) high inventory turns.
C) supply chain partners that emphasize fast high quality.
D) supply chain partners that emphasize volume flexibility.
7) A responsive supply chain typically has:
A) a low capacity cushion.
B) high inventory turns.
C) supply chain partners that emphasize low prices.
D) supply chain partners that emphasize volume flexibility.
8) Responsive supply chains should be preferred when:
A) product variety is low.
B) demand is predictable.
C) contribution margins are low.
D) product variety is high.
9) The type of goods for which a responsive supply chain is appropriate are:
A) fashion goods.
B) products with a long shelf life.
C) inexpensive products.
D) those with infrequent design changes.
10) It is desirable for a firm in a responsive supply chain to have:
A) low-capacity cushions.
B) delivery by railroad.
C) high-capacity utilization consistent with high-volume delivery.
D) inventory investments as needed to enable fast delivery times.
11) The objective of a firm in a responsive supply chain is likely to be realized if it has a:
A) standardized product.
B) short lead time.
C) low-capacity cushion.
D) line-flow process.
12) When a customer orders an item that is a completely new and different product, the company’s
supply chain must be able to deliver an item that is ________-to-order.
13) In ________, the product is built to customer specifications from a stock of existing components.
14) Customer clothing and the Boeing 787 Dreamliner aircraft are based on standard designs but
component production and manufacture of the final product is ________.
1) Channel assembly is the process of using members of the distribution channel as if they were assembly
stations in the factory.
2) A firm may choose to use members of the distribution channel as if they were assembly stations in the
factory. Such an approach is known as:
A) backward integration.
B) postponement.
C) channel assembly.
D) deferred delay.
3) Which of the following is not identified in the text as a competitive advantage of a mass customization
strategy?
A) improvement of the quality of parts produced
B) management of customer relationships
C) elimination of finished goods inventory
D) an increase in perceived value of services or products
4) ________ uses a firm’s flexible processes to generate a wide variety of personalized services or products
at reasonably low costs.
A) Mass customization
B) Channel assembly
C) Outsourcing
D) Forward integration
5) A somewhat successful computer manufacturer makes a generic computer in five exciting colors. Once
orders are received, the computer guts are encased in the customer’s choice of colored case at the factory.
This approach to production is known as:
A) channel assembly.
B) postponement.
C) strategic sourcing.
D) strategic production.
6) A producer of medical devices makes a single model that can be customized to talk in and display any
of 47 different languages. This customization is performed in one of their five regional distribution
centers as firm orders are received, providing an elegant example of:
A) backward integration.
B) forward integration
C) channel assembly.
D) offshoring.
7) ________ is essentially standardization in chunks.
8) ________ is a concept whereby some of the final activities in the provision of a service or product are
delayed until the orders are received.
9) ________ is the process of using members of the distribution channel as if they were assembly stations
in the factory.
10) What is mass customization and what advantages does a producer benefit from if they can realize it?
Answer: Mass customization is the ability of a producer to produce on demand a wide variety of
customized services or products at reasonably low costs. The three important advantages are:
11) What’s the difference between postponement and channel assembly? Provide examples of both.
12.6 Outsourcing Processes
1) The supply chain management department of a major manufacturer pondered a particularly weighty
make or buy decision for weeks, ultimately deciding to make, rather than buy. This decision resulted in
increased:
A) outsourcing.
B) offshoring.
C) postponement.
D) backward integration.
Scenario 12.1
You currently make a part on old equipment at a cost of $50,000 per year and a variable cost of $20 / unit.
You have found an outside supplier who will make the part for $15 / unit if you will pay their annual
fixed costs of $200,000 / year. The following table summarizes the details of this make versus buy
decision.
ALTERNATIVE
FIXED COST
VARIABLE COST
Buy
$200,000 per year
$15 per unit
Make
$50,000 per year
$20 per unit
2) Use Scenario 12.1 to answer the question. What is the break even quantity between buying and
making?
A) 30,000 units per year
B) 40,000 units per year
C) 50,000 units per year
D) 60,000 units per year
3) Use Scenario 12.1 to answer the question. What are total costs to buy an annual quantity of 40,000
units?
A) $400,000
B) $500,000
C) $800,000
D) $850,000
4) Use Scenario 12.1 to answer the question. What are total costs to make a quantity of 40,000 units per
year?
A) $400,000
B) $450,000
C) $800,000
D) $850,000
5) Use Scenario 12.1 to answer the question. For what range of output would you prefer to buy?
A) 0 – 10,000 units per year
B) 30,001 or more units per year
C) 10,001 – 20,000 units per year
D) 20,001 – 30,000 units per year
6) Use Scenario 12.1 to answer the question. For what range of output would you prefer to make?
A) 40,001 or more units per year
B) 35,001 – 40,000 units per year
C) 30,001 to 35,000 units per year
D) 0 – 30,000 units per year
7) Use Scenario 12.1 to answer the question. What does the company save for the year by selecting the
low-cost option at an annual requirement of 40,000 units?
A) $150,000
B) $300,000
C) $50,000
D) $40,000
Scenario 12.2
SAGE Inc. receives too many applications each year for the Global MBA program so they turn to their
network of partners for assistance. Nothing in this world is free, of course, so their partners provide
quotes that include a per student cost as well as a facilities cost that SAGE would pay regardless of the
number of students they sent there. The costs in Rupees ( ) are elegantly summarized in the table below.
Per student
Cost
Facilities Cost
Oklahoma
17
15,000
Wisconsin
13
22,000
England
10
35,000
8) Use Scenario 12.2 to answer the question. At what volume of students does Wisconsin become
preferred over an Oklahoma choice?
A) 1,000 students
B) 1,250 students
C) 1,500 students
D) 1,750 students
9) Use Scenario 12.2 to answer the question. Which student makes England a more attractive option than
Wisconsin for SAGE?
A) the 4,334th student
B) the 2,858th student
C) the 1,751st student
D) the 44,750th student
10) Use Scenario 12.2 to answer the question. How much cheaper is the Wisconsin alternative when
SAGE is indifferent between Oklahoma and England?
A) about 3,221
B) about 2,967
C) about 4,428
D) about 3,967
11) Use Scenario 12.2 to answer the question. What is the lowest variable cost that causes the Wisconsin
option to never be the optimal location?
A) about 14.91
B) about 14.56
C) about 14.83
D) about 14.71
12) Which of the following is not a benefit of outsourcing?
A) comparative labor costs
B) increased logistics costs
C) reduction of transaction costs through use of the Internet
D) technology transfer to another country or company
13) A U.S. company faced with spiraling costs in their customer care center recreated that service in
Luxembourg at a fraction of the cost. This is an example of:
A) offshoring.
B) forward integration.
C) backward integration.
D) postponement.
14) One way to gain control over suppliers in a chain is to buy a controlling interest in them, known as
________.
15) When a company uses ________, it is moving upstream in the supply chain toward the source of raw
materials.
16) There was no reason to build a new call center and hire hundreds of customer service representatives
when there were perfectly viable options thousands of miles away. Hence, the company decided to
________ this process.
17) The VP of Finance studied the printing costs at the university and knew it was time for bold, decisive
action. The annual fixed cost of printing at the school was $1,250,000 and the per-page cost was one cent.
Fortunately, his brother–in-law happened to own a company that would lease the printers to the
university for only $850,000 and charge three cents per page. At what point would the university be
indifferent between owning their printers and leasing their printers?
18) The VP of Finance studied the printing costs at the university and knew it was time for bold, decisive
action. The annual fixed cost of printing at the school was $850,000 and the per-page cost was two cents.
Fortunately, his brother–in-law happened to own a company that would lease the printers to the
university for only $600,000 and charge ten cents per page. At what point would the university be
indifferent between owning their printers and leasing their printers?
19) The VP of Finance studied the printing costs at the university and knew it was time for bold, decisive
action. The annual fixed cost of printing at the school was $850,000 and the per-page cost was one cent.
Fortunately, his brother–in-law happened to own a company that would lease the printers to the
university for only $600,000. The only issue to be decided was what the per-page cost would be for the
leased printers. On average, the university had been printing about 10,000,000 pages per year. What
would a break-even per-page printing cost be given the average printing volume?
24
Scenario 12.2
SAGE Inc. receives too many applications each year for the Global MBA program so they turn to their
network of partners for assistance. Nothing in this world is free, of course, so their partners provide
quotes that include a per student cost as well as a facilities cost that SAGE would pay regardless of the
number of students they sent there. The costs in Rupees ( ) are elegantly summarized in the table below.
Per student
Cost
Facilities Cost
Oklahoma
17
15,000
Wisconsin
13
22,000
England
10
35,000
20) Use Scenario 12.2 to answer the question. Determine the ranges for which each alternative is
preferable from a total cost standpoint.
Answer: The Oklahoma alternative is superior for small volumes of students due to the comparatively
low fixed cost. It is surpassed by Wisconsin as dictated by the intersection point of the equations: