27) Approaches to e-purchasing include all of the following except:
A) catalog hubs.
B) radio frequency identification (RFID).
C) exchanges.
D) electronic data interchange (EDI).
28) Examples of radio frequency identification (RFID) could include all of the following except:
A) tracking the status of engineering changes during development of a new product line.
B) tracking cases and pallets of products into and out of warehouse inventories.
C) air travel use for baggage tracking.
D) tracking the flow of parts through a manufacturing process.
29) The practice whereby a manufacturer has inventories of materials on consignment from its suppliers
falls under the scope of:
A) inventory pooling control.
B) virtual distribution.
C) electronic inventory control.
D) vendor-managed inventories.
30) One of the benefits of a cooperative orientation in supplier relationships is:
A) the buyer sometimes suggests ways to improve the supplier’s operations.
B) the supplier implements its own quality standards.
C) the buyer does not have to share much information with the supplier.
D) the supplier has complete freedom in choosing the delivery time.
31) Which one of the following statements correctly represents a benefit of centralized buying?
A) Local managers have more control over their business.
B) Purchases and production schedules are meshed more easily.
C) Customization to local preferences is simplified.
D) Increased buying power can result in significant savings in purchasing costs.
32) Which one of the following statements is true about a cooperative orientation in supplier
relationships?
A) It cannot be implemented in Western countries because competitive bidding is more effective in that
culture.
B) It cannot be implemented in the Western countries because it always benefits the supplier.
C) It requires all parts and subassemblies to be purchased from the same supplier.
D) It requires few suppliers for each item or service.
33) ________ is the management of the acquisition process, which includes deciding which suppliers to
use, negotiating contracts, and deciding whether to buy locally.
34) ________ is a supplier relation in which the buyer and seller are partners, each helping the other as
much as possible.
35) Steve-O engaged in ________ by using only suppliers that recycled and managed their flow of
environmental waste.
36) ________ programs verify that potential suppliers have the capability to provide materials or services
which the buying firms require.
37) ________ is the awarding of a contract for an item or service to only one supplier.
38) ________ is a systematic effort to reduce the cost or improve the performance of products and
services, either purchased or produced.
24
39) Knoxville Industries had their supplier design the improved body armor for their new apparel. This
level of supplier involvement, known as ________ was sure to result in a pain free season.
40) ________ are electronic marketplaces where buying and selling firms meet to do business, without
protracted contract negotiations.
41) ________ is the condition where the buyer has purchasing power when the purchasing volume
represents a significant share of the supplier’s sales.
42) What are some ways that supply chain partners can collaborate on product designs? How do these
ways differ?
Answer: An approach that many firms are using in their design collaboration process is called early
supplier involvement, which is a program that includes suppliers in the design phase of a service or
product. Suppliers provide suggestions for design changes and materials choices that will result in more
43) The authors present four types of e-purchasing; what are they and how do they work? Which of these
could be accomplished by the least IT-savvy supply chain? Why?
Answer: The four approaches to e-purchasing presented in the text are: (1) electronic data interchange,
(2) catalog hubs, (3) exchanges, and (4) auctions.
Electronic data interchange (EDI) is a technology that enables the transmission of routine, standardized
business documents from computer to computer over telephone or direct leased lines. Special
communications software translates documents into and out of a generic form, allowing organizations to
exchange information even if they have different hardware and software components. Invoices, purchase
44) Compare and contrast competitive orientation versus cooperative orientation for supplier relations.
45) The Burdell Wheel and Tire Company assembles tires to wheel rims for use on cars during
manufacture of vehicles by the automotive industry. Burdell wants to locate a low-cost supplier for the
tires he uses in his assembly operation. The supplier will be selected based on total annual cost to supply
Burdell’s needs. Burdell’s annual requirements are for 25,000 tires, and the company operates 250 days a
year. The following data are available for two suppliers being considered.
SUPPLIER
SHIPPING
QUANTITY
PER
SHIPMENT
SHIPPING
COSTS
PRICE /
TIRE (p)
INVENTORY
HOLD COSTS
(H)
LEAD
TIME
(DAYS)
ADMIN.
COSTS
LEXINGTON
TIRE
2,000
$18,000
$30
$6.00
6
$15,000
IRMO AUTO
1,000
$25,000
$29
$5.80
4
$18,000
Using the Total Cost Analysis for Supplier Selection, which supplier should Burdell choose? Provide
details to justify your answer.
46) The Burdell Wheel and Tire Company has completed a total cost analysis for two suppliers of tires to
support their business. They also consider delivery speed, consistent quality and volume flexibility in
their selection process. Each criterion is given a weight (total = 100 points), and each supplier is scored on
each criterion (1 = poor, 10 = excellent). The data are shown in the following table.
CRITERION
LEXINGTON
TIRE
IRMO
AUTO
Total Cost
5
6
Delivery Speed
6
5
Consistent Quality
8
6
Environmental
Sensitivity
4
7
Using the preference matrix approach for selecting suppliers, which supplier should Burdell select?
47) The Bahouth Bike Company has completed an exhaustive analysis for four suppliers of bicycle frames
to support their business. They considered on-time speed, top quality and customization in their selection
process. Each criterion is given a weight (total = 100 points), and each supplier is scored on each criterion
(1 = poor, 10 = excellent). The data are shown in the following table.
CRITERION
WEIGHT
A
B
C
D
Sustainability
3
9
2
0
1
Cost
6
3
0
3
10
Quality
8
4
0
9
4
On-time Delivery
4
0
6
1
0
Using the preference matrix (total weighted score) approach for selecting suppliers, which supplier
should Bahouth select? What is its total weighted score?
Table 14.1
Alison’s Accessories is a high volume worldwide fashion house with outlets in 65 countries. Kalil, the
supply chain manager is conducting her usual thorough analysis of her final four candidates for supplier
and has developed the following tables of pertinent costs and other shipping metrics. Regardless of
supplier, Alison’s Accessories will operate 220 days per year and has forecast annual demand of 250,000
units. Kalil has obtained quotes for three different shipment sizes (Freight Costs table). All costs are in US
Dollars.
Unit costs
Price/Unit
Carrying Cost
123
22
125
19
126
18
100
40
Freight Costs
15,000 units
25,000 units
380,000
260,000
615,000
547,000
285,000
240,000
380,000
260,000
Other Costs
Lead Time
Admin Costs
30
250,000
15
275,000
7
225,000
90
2,500,000
48) Use the date in Table 14.1. Analyze costs and make recommendations regarding the shipping options
and suppliers. Which combination of shipping amount and supplier yields the lowest total cost?
A
B
D
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14.5 Order Fulfillment Process
1) The order-fulfillment process involves the activities to deliver a product or service to the customer.
2) Vendor-managed inventories are an example of the forward-placement tactic.
3) Using rail to move large quantities of goods is relatively cheap, but transit times are long and often
variable.
4) A cross-docking warehouse holds inventory from manufacturers until retailers are prepared to sell the
items.
5) Which of the following statements about cross-docking is not correct?
A) Cross-docking is packing products on incoming shipments so they can be easily sorted for outgoing
shipments based on their final destination.
B) Cross-docking reduces inventory and storage space requirements, but handling costs and lead times
tend to increase.
C) Items are moved from incoming vehicles to outgoing vehicles without being stored in warehouse
inventory.
D) Inbound and outbound shipments must be tightly coordinated for cross-docking to work.
6) What is the meaning of the acronym 3PL?
A) three profit/loss periods
B) three purchasing locations
C) three partner leverage
D) third party logistics provider
7) What services are typically offered by a 3PL?
A) transportation
B) product design
C) catalog hub
D) auction
8) The ________ process involves the activities required to deliver a product or service to a customer.
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9) ________ is an extreme application of the forward placement tactic.
10) Define the term logistics and briefly discuss any three important logistics decisions.
Answer: Logistics is the process whereby products or services are delivered to the customer. The five
important decisions presented in the text are 1) degree of ownership, 2) facility location, 3) mode
selection, 4) capacity level, and 5) amount of cross docking.
Ownership. The firm has the most control over the logistics process if it owns and operates it, thereby
becoming a private carrier. Although this approach may help to better achieve the firm’s competitive
11) Jackson Sheds has four different warehouse configurations under study, ranging from four
warehouses to seven warehouses (only integer values). Each warehouse has a capacity of 300 units and
costs $200 to maintain over the course of a year. Demand can range from 1,000 units per year up to 2,000
units in increments of 250 units. If the system warehouse capacity is sufficient to handle the year’s
demand, then the per unit cost is $2 per unit, but if the warehouse capacity is insufficient, the per unit
cost for each unit in excess of system capacity is $5 per unit. The likelihood for each possible demand is
shown in the table.
0.1
0.2
0.3
0.3
0.1
1,000
1,250
1,500
1,750
2,000
Which warehouse configuration is best for Jackson Sheds?
12) Jackson Sheds has four different warehouse configurations under study, ranging from four
warehouses to seven warehouses (only integer values). Each warehouse has a capacity of 400 units and
costs $200 to maintain over the course of a year. Demand can range from 1,000 units per year up to 2,000
units in increments of 250 units. If the system warehouse capacity is sufficient to handle the year’s
demand, then the per unit cost is $2 per unit, but if the warehouse capacity is insufficient, the per unit
cost for each unit in excess of system capacity is $5 per unit. The likelihood for each possible demand is
shown in the table.
0.1
0.2
0.3
0.3
0.1
1,000
1,250
1,500
1,750
2,000
Which warehouse configuration is best for Jackson Sheds?
13) Jackson Sheds has four different warehouse configurations under study, ranging from four
warehouses to seven warehouses (only integer values). Each warehouse has a capacity of 200 units and
costs $400 to maintain over the course of a year. Demand can range from 1,000 units per year up to 2,000
units in increments of 250 units. If the system warehouse capacity is sufficient to handle the year’s
demand, then the per unit cost is $2 per unit, but if the warehouse capacity is insufficient, the per unit
cost for each unit in excess of system capacity is $5 per unit. The likelihood for each possible demand is
shown in the table.
0.1
0.2
0.3
0.3
0.1
1,000
1,250
1,500
1,750
2,000
Which warehouse configuration is best for Jackson Sheds?
14) Jackson Sheds has four different warehouse configurations under study, ranging from four
warehouses to seven warehouses (only integer values). Each warehouse has a capacity of 200 units and
costs $200 to maintain over the course of a year. Demand can range from 1,000 units per year up to 2,000
units in increments of 250 units. If the system warehouse capacity is sufficient to handle the year’s
demand, then the per unit cost is $2 per unit, but if the warehouse capacity is insufficient, the per unit
cost for each unit in excess of system capacity is $3 per unit. The likelihood for each possible demand is
shown in the table.
0.1
0.2
0.3
0.3
0.1
1,000
1,250
1,500
1,750
2,000
Which warehouse configuration is best for Jackson Sheds?
14.6 Customer Relationship Process
1) Which of the following is not an advantage the Internet provides for a firm‘s order placement process?
A) greater variety and better quality of products available
B) cost reduction
C) increase in revenue flow
D) pricing flexibility
E) global access
2) Which of the following is not an advantage resulting from a firm outsourcing its customer service
process?
A) Specific detailed questions can be answered by the customer service representative.
B) The firm gains more control over the customer interface process.
C) Customer service labor costs are low.
D) Automated systems are replaced by human contact.
3) Which of the following is not a lever in an integrated supply chain?
A) collaborative activities by supply chain partners
B) reduced replenishment lead times
C) reduced order lot sizes
D) elimination of product shortages and backorders
4) The ________ process involves the activities required to register the need for a product or service and
to confirm the acceptance of the order.
14.7 Supply Chain Risk Management
1) Production shifting is a form of low-cost hopping.
2) One way to mitigate the bullwhip effect is to refuse to offer discounts and promotions.
3) A company adopts the supply chain strategy of contracting with a number of geographically dispersed
suppliers just in case prices rise in one part of the world. This approach is known as:
A) price hopping.
B) hedging.
C) outsourcing.
D) futures.
4) One electronics manufacturer manages risk by making agreements with factories well in advance to
guarantee productive capacity at an agreed price. If their product is popular, then they can use that
productive capacity during an otherwise busy season at a lower cost. Such an agreement could best be
described as:
A) a futures contract.
B) low-cost hopping.
C) theory of constraints management.
D) the bullwhip effect.
5) When I signed on at Seagate, they gave me an ID card that was dutifully checked each morning as I
stumbled in to the office at 7:30. This process could best be described as ________.
6) The standard for supply chain security management is ________.
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7) What are five ways to minimize the bullwhip effect in supply chains?
Answer: The authors provide nine ways, listed below.
Strategic alignment–once an appropriate design is determined for the supply chain, make sure that all
partners adhere to competitive priorities that are consistent with its strategic thrust. Misalignment of
priorities, goals, and objectives can cause delays or disruptions in flows in a supply chain. Internal
business functions should similarly be aligned.
Upstream/downstream supply chain integration–working closely with customers and suppliers in CDP
and the new service or product design collaboration process improves information flows and reduces
surprises from demand spikes due to promotions or supply hang-ups because of poorly designed
services or products. The integration should extend as far upstream in the supply chain as possible,
beyond first and second-tier suppliers.
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Cooperation and trustworthiness–being cooperative in solving supply issues and providing information
that can be trusted serves to reduce costs for all members of the supply chain and mitigates the
deleterious effects of supply chain dynamics.
Difficulty: Moderate
Keywords: break-even, fixed cost
Learning Outcome: Compare common approaches to supply chain design
AACSB: Application of Knowledge
Learning Obj.: Explain how firms can mitigate the operational, financial, and security risks in a supply chain.