CHAPTER FIFTEEN
Discussion Questions
1. What are some ways that a firm such as Walmart benefits from good sourcing
decisions?
The bottom line is that good sourcing decisions improve profits for the firm and
total supply chain surplus. The authors’ list of benefits derived from effective
sourcing decisions includes:
2. What factors led Walmart to own its trucks although many retailers outsource all
their transportation?
3. How can a supplier with a lower price end up costing the buyer more than a
supplier with a higher price?
4. Explain why, for the same inventory level, a revenue-sharing contract results in a
lower sales effort from the retailer than if the retailer has paid for the product and
is responsible for all remaining inventory.
5. For a manufacturer that sells to many retailers, why does a quantity flexibility
contract result in less information distortion than a buyback contract?
6. Most firms offer their sales force monetary incentives based on exceeding a
specified target. What are some pros and cons of this approach? How would you
modify these contracts to rectify some of the problems?
7. An auto manufacturer sources both office supplies and subsystems such as seats.
What, if any, difference in sourcing strategy would you recommend for the two
types of products?
8. Why do you think assembly in the consumer electronics industry is performed by
third parties, whereas assembly in the auto industry is almost never outsourced?
9. For products such as home appliances, toys, garments, and consumer electronics,
what factors would influence selecting an onshore, near-shore, or offshore
supplier?