Chapter 16 – Global Operations and Supply Chain Management
Answers to End of Chapter Questions
1. What recent developments have caused supply chain management to become increasingly
important to international companies?
Individual businesses no longer operate in a vacuum and are forced to compete with businesses from
2. What are the main differences between sequential and concurrent approaches to the design of
products and services?
The main difference between sequential and concurrent approaches to design is who within the
3. Why would a company choose to source raw materials, components, or other products or
services from a foreign supplier?
The primary reason for sourcing material globally is to obtain lower prices. Other reasons include
lack of locally produced material meaning materials must be imported or the foreign source is of a
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Chapter 16 – Global Operations and Supply Chain Management
4. Why does the cost of raw materials represent about 55 to 80 percent of the cost of goods sold
in U.S. industry, and why has this proportion been increasing over time?
The reason for a large and increasing proportion of cost of raw materials in the overall cost of goods
sold is due to the greater complexity of products and the increasing pressure for firms to focus on their
5. Why is indirect procurement an important focus for management attention?
Indirect procurement – the purchasing of goods and services that are not part of finished goods –
6. What are some of the primary problems or concerns associated with sourcing from a foreign
supplier?
Lower price is the primary reason companies make foreign purchases. As a result, they may be
surprised that what initially appeared to be a lower price is not really lower once all the costs
connected to the purchase are considered. For example, the costs associated with foreign sourcing may
7. What is the benefit to a buyer company and to a vendor company of standards such as ISO
9000?
Benefits of standards such as ISO 9000 to the buyer include assurance that materials, products,
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Chapter 16 – Global Operations and Supply Chain Management
8. What are the advantages to a worldwide firm of global standardization of its production
facilities?
The complexity of a global manufacturing company’s operation is immense. Standardization of its
production facilities allows the business to simplify the production systems and allows for more
9. Discuss the influence of the uncontrollable environmental forces in global standardization of a
firm’s production facilities.
ICs operate in an ever-changing global marketplace. To be successful business leaders must
understand uncontrollable environmental forces and adapt to these changes. Examples that impact
international standardization of production include but are not limited to the following:
10. Discuss some of the alternative design solutions available to a company that chooses not to
completely standardize its production facilities.
The design of a company’s products and services has a fundamental relationship with the type of inputs
that the company will require, including labor, materials, information, and financing. An important
consideration in design is the extent to which the international company’s products and services will be
standardized across nations or regions or adapted to meet the different needs of various markets. The
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Chapter 16 – Global Operations and Supply Chain Management
1 GlobalEDGE Answers
Exercise One
1. The World Bank’s Logistics Performance Index (LPI) assesses the logistics environment of
countries. Locate the most recent LPI ranking. How is the index constructed? Identify the top and
bottom ten logistics performers. Prepare an executive summary highlighting the key findings from
the LPI. How are these findings helpful for companies trying to build a competitive supply chain
network?
Answer:
http://globaledge.msu.edu
Exercise Two
2. Struggling to remain competitive in the medical devices industry, your firm has decided to begin
sourcing components internationally. Though your firm’s current operations are only in the United
States and Germany, you must assess the relative costs for manufacturing medical devices in a
variety of cities worldwide. Your manager, previously a consultant with KPMG, indicates that the
Competitive Alternatives surveys published annually by KPMG may assist you. Develop a brief
report addressing the following questions: 1) Which three cities in the survey have the lowest and
highest manufacturing costs for your firm’s specific industry?; and 2) Do you think that changing
your firm’s sourcing strategy will resolve the current problems? Why or why not?
Answer:
http://globaledge.msu.edu
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