Chapter 13—Supply Chain Management TRUE/FALSE 1. Supply chain management is completely producer driven. Answer: False Rationale: Supply chain management is completely customer driven. 2. Companies that use supply chain management techniques typically also use a push promotional strategy. Answer: False Rationale: They typically use a pull strategy. 3. Supply chain management is a key means of differentiation for a firm and a critical component in marketing and corporate strategy. Answer: True Rationale: Supply chain management plays a crucial role in differentiating a firm and is integral to both marketing and corporate strategy. 4. Management practices that reflect a highly coordinated effort between supply chain partners are said to be “integrated.” Answer: True Rationale: Integrated management practices in supply chain involve close coordination and collaboration among supply chain partners to optimize processes and achieve common goals efficiently. 5. Supplier integration occurs when multiple firms in a supply chain coordinate their activities and processes so that they are seamlessly linked to one another in an effort to satisfy the customer. Answer: True Rationale: Supplier integration involves coordinating activities and processes across multiple firms in a supply chain to enhance customer satisfaction. 6. The demand management process seeks to align supply and demand throughout the supply chain by anticipating customer requirements at each level of creating demand-related plans of action prior to actual customer purchasing behavior. Answer: True Rationale: The demand management process involves forecasting and planning to synchronize supply and demand across the supply chain by anticipating customer needs and creating plans accordingly, aiming to minimize mismatches between supply and customer demand. 7. The goals of the manufacturing flow management process are centered on generating, filing, delivering, and providing on-the-spot service for customer orders. Answer: False Rationale: These activities are associated with the order fulfillment process, not the manufacturing flow management process. 8. RFID tags are not one of the components of a logistics information system. Answer: False Rationale: RFID tags are one of several components of a logistics information system. 9. EDI is often used to replace paper documents with electronic documents containing the same information. Answer: True Rationale: Electronic Data Interchange (EDI) commonly replaces paper documents with electronic versions containing the same information. 10. Managing inventory from the supplier to the manufacturer is called distribution resource planning (DRP). Answer: False Rationale: This is materials requirement planning (MRP). 11. The goal of a materials-handling system is to handle products as infrequently as possible Answer: True Rationale: The goal of a materials-handling system is to minimize the handling of products to reduce costs and improve efficiency. 12. The six criteria important in selecting a transportation mode are relative cost, transit time, reliability, capability, accessibility, and traceability. Answer: True Rationale: The criteria for selecting a transportation mode include relative cost, transit time, reliability, capability, accessibility, and traceability. 13. Water transportation is by far the most expensive mode of transportation, but it is also the most reliable. Answer: False Rationale: It is the least expensive and least reliable transportation mode. See Exhibit 14.1. 14. Traceability with respect to transporting modes refers to the relative ease with which a shipment can be located and transferred. Answer: True Rationale: Traceability in transportation modes refers to the ability to track and locate shipments throughout the transportation process, ensuring efficient transfer and delivery. 15. Both air transportation costs and traceability are high when compared with any other transportation mode. Answer: True Rationale: See Exhibit 14.1. Air transportation is often associated with high costs and provides high traceability compared to other transportation modes due to its speed, reliability, and tracking capabilities. 16. Another name for outsourcing is contract logistics. Answer: True Rationale: Outsourcing and contract logistics are often used interchangeably to refer to the practice of hiring external parties to manage certain aspects of a company's logistics and supply chain operations. 17. Digital distribution is a distribution technique that includes any kind of product or service that can be distributed electronically. Answer: False Rationale: This is known as electronic distribution. 18. Experiments with three-dimensional printing have not been successful in industries such as auto parts. Answer: False Rationale: Experiments with three-dimensional printing have indeed been successful in certain industries. 19. Manufacturers who require suppliers to meet certain environmental standards are implementing sustainable supply chain management. Answer: True Rationale: Manufacturers that impose environmental standards on their suppliers are promoting sustainable practices within their supply chain, which is a key aspect of sustainable supply chain management. 20. One of the most critical global supply issues for importers of any size is coping with the legalities of trade in other countries. Answer: True Rationale: Coping with the legalities of trade in other countries is a critical issue for importers, as they must navigate various international laws, regulations, and trade agreements to ensure compliance and avoid legal risks. MULTIPLE CHOICE 1. The connected chain of all of the business entities, both internal and external to the company, that perform or support the logistics function is known as the: A. channel of distribution. B. intermediary link. C. physical distribution integration. D. reseller network. E. supply chain. Answer: E Rationale: A company’s supply chain includes all of the companies involved in all of the upstream and downstream flows of products, services, finances, and information, from initial suppliers (point of origin) to the ultimate customer (point of consumption). 2. _____ coordinates and integrates all of the activities performed by channel members into a seamless process, from the source to the point of consumption, resulting in enhanced customer and economic value. A. Yield management B. Channel power C. Materials handling D. Supply chain management E. Physical distribution Answer: D Rationale: This is the definition of supply chain management. 3. Peachtree Windows does not make a window until an order is received. It can promise delivery in five working days because of the excellent relationships it has established with its suppliers. The partnering relationship that Peachtree Windows has established with its suppliers indicates the use of: A. supply chain management B. yield management C. channel networks D. horizontal marketing channels E. intensive distribution strategy Answer: A Rationale: Supply chain management coordinates and integrates all the activities from raw materials to product consumption. 4. A large automotive after-market business wanted to improve its current situation, which is characterized by excessive inventory, incomplete information, high logistics costs, slow reactions to environmental change, and lost profits at the retail level. Would supply chain management be of any help to the business? A. Yes, supply chain management is designed to coordinate and integrate all the activities from raw materials to product consumption. B. No, supply chain management is only applicable to distribution strategies for products being sold to the consumer market. C. Yes, supply chain management would be very useful because it relies so heavily on benchmarking. D. Yes, supply chain management would alleviate all channel conflict. E. No, supply chain management requires an expensive investment of time and resources to make it worthwhile. Answer: A Rationale: The correct answer contains the definition of supply chain management. 5. All of the following accurately describe supply chain management EXCEPT: A. physical flow process. B. customer driven. C. provides enhanced customer and economic value. D. plays the role of communicator of customer demand. E. relies on a “push” strategy. Answer: E Rationale: In earlier days, standardized products were “pushed” down through the supply channel to the consumer, but now the system relies on customers to “pull” the product through the channel. 6. All of the following are benefits of supply chain management EXCEPT: A. increased flexibility of supply chain activities. B. improved customer service. C. reduced supply chain costs. D. decreased cash flow. E. decreased inventory. Answer: D Rationale: Cash flow would likely be increased due to higher revenues. 7. Which of the following is a key principle of supply chain management that means multiple firms working together to perform tasks as a single unified system rather than as several individual companies acting in isolation? A. Pareto principle B. 80/20 principle C. Systems approach D. Win–win approach E. Integrative approach Answer: C Rationale: This describes a systems approach. 8. For true supplier integration to occur, all of the following must occur EXCEPT: A. firms must choose their suppliers carefully B. supply chain partners must interact in ways that minimize waste and redundancy C. firms need to adopt a “push” system rather than a “pull” system of supply chain management D. firms must monitor each supplier’s strategic goals and operational capabilities E. both firms must have a stake in the outcomes of their interactions Answer: C Rationale: In earlier days, standardized products were “pushed” down through the supply channel to the consumer, but now the system relies on customers to “pull” the product through the channel. 9. _____ occurs when all the firms and business units participating in the supply chain appear as though they are reading from the same script. A. Strategic channel operation B. Supply chain integration C. Strategic MRP D. Demand management E. Extensive distribution integration Answer: B Rationale: Supply chain integration occurs when multiple firms in a supply chain coordinate their activities and processes so that they are seamlessly linked to one another in an effort to satisfy the customer. 10. When the Boeing Co. announced it would delay the introduction of its new 787, the CEO blamed the problem on the company’s supply chain. Airplanes use thousands of individual parts, and in an attempt to relieve the smaller, individual supply chain quandary, Boeing used major suppliers to construct large pieces of the plane. Boeing would have benefited from more _____ integration. A. channel B. supply chain C. MRP D. functional E. tactical distribution Answer: B Rationale: Supply chain integration occurs when multiple firms in a supply chain coordinate their activities and processes so that they are seamlessly linked to one another in an effort to satisfy the customer. 11. _____ integration is the ability of two or more companies to develop social connections that serve to guide their interactions when working together. A. Relationship B. Social C. Customer D. Materials and service supplier E. Technology and planning integration Answer: A Rationale: This is the definition of relationship integration. 12. Which type of integration implies the performance assessment of the supply chain should be taken as a whole while also holding each member of the supply chain accountable for meeting its own goals? A. Accountability B. Benchmarking C. Social D. Planning E. Measurement Answer: E Rationale: Measurement integration reflects the idea that performance assessments should assess the performance of the supply chain as a whole while holding each individual firm or business unit accountable for meeting its own goals. 13. Which of the following is an example of one of the six types of integration that are sought by firms interested in providing top-level service to their customers? A. Strategic integration B. Hierarchical integration C. Material and service supplier integration D. Global integration E. All of the above Answer: C Rationale: The five types of integration are relationship integration, measurement integration, technology and planning integration, material and service supplier integration, and customer integration. 14. In terms of firm-to-firm social interactions, _____ integration provides important benefits. A. relationship B. measurement C. customer D. production E. technology and planning Answer: A Rationale: Relationship integration provides benefits to firms regarding their social interactions with one another. 15. By achieving _____ integration across their supply chains, firms can use hardware and software systems to gain the information needed to execute short-term and long-term planning, and thereby make better operational decisions. A. relationship B. social C. functional D. technology and planning E. internal operations Answer: D Rationale: Technology and planning integration is the creation and maintenance of information technology systems that connect managers across and through the firms in the supply chain, supporting supply chain activities that best satisfy customer demands. 16. Through the use of automatic shipping notices, Ace Hardware is effective at removing unnecessary costs from its supply chain. According to a VP of inventory for the retailer, “Information gathering that used to take three or four phone calls now is available immediately.” This is an example of the use of _____ integration. A. relationship B. social C. functional D. technology and planning E. internal operations Answer: D Rationale: By achieving technology and planning integration across their supply chains, firms can gain the information needed to execute short-term and long-term planning. The process is the creation and maintenance of information technology systems that connect managers across and through the firms in the supply chain, with the goal of supporting supply chain activities that best satisfy customer demands. 17. Food producers love big boxes because they serve as billboards on store shelves. Walmart wants to change this practice and promises suppliers that their shelf spaces won’t shrink even if their boxes do. As a result, some of its vendors have reengineered their packaging. This is an example of _____ integration. A. relationship B. social C. functional D. operational E. material and service supplier Answer: E Rationale: Both the retailer and its suppliers have a common vision of the total value creation process. 18. _____ integration holds that performance assessments should be transparent and measurable across the borders of different firms. A. Measurement B. Social C. Functional D. Relationship E. Material and service supplier Answer: A Rationale: Measurement integration reflects the idea that performance assessments should be transparent and measurable across the borders of different firms 19. Nabisco has linked seamlessly with its parts manufacturers and outsourced customer call centers to provide streamlined work processes and a high-quality customer experience. This seamless linking of Nabisco’s strategic business units toward a common vision is an example of _____ integration. A. relationship B. social C. functional D. hierarchical E. Material and service supplier Answer: E Rationale: Material and service supplier integration requires firms to link seamlessly to those outsiders that provide goods and services to them so that they can streamline work processes and thereby provide smooth, high-quality customer experiences. 20. Sobha Developers has begun to develop distinctive value-added offerings to its customers—starting with the oldest and most consistent ones. Sobha is working toward stronger _____ integration. A. relationship B. social C. functional D. operational E. customer Answer: E Rationale: Customer integration is a competency that enables firms to offer long-lasting, distinctive, value-added offerings to those customers who represent the greatest value to the firm or supply chain. 21. Highly integrated supply chains (those that are successful in achieving many or all of these types of integration) have been shown to be better at: A. satisfying customers. B. managing costs. C. delivering high-quality products. D. enhancing productivity. E. All of the above Answer: E Rationale: Highly integrated supply chains have been shown to be better at satisfying customers, managing costs, delivering high-quality products, and enhancing productivity, all of which translate into greater profitability for the firms and their partners working together in the supply chain. 22. _____ is (are) composed of bundles of interconnected activities that stretch across firms in the supply chain. A. ABC segmentation strategies B. Activity-based costing C. Customer relationship management D. Business processes E. Customer service activities Answer: D Rationale: This is the definition of business processes. 23. There are eight critical business processes on which supply chain managers must focus. Which of the following is one of those processes? A. Returns management B. Sales promotion activities C. Distribution intensity D. Public relations activities E. Environmental assessments Answer: A Rationale: Returns management is one of the eight critical business processes on which supply chain managers must focus. 24. Of the eight critical business processes on which supply chain managers must focus, which process allows companies to prioritize their marketing focus on different customer groups according to each group’s long-term value to the company or the supply chain? A. Customer relationship management B. Returns management C. Product development and commercialization D. Order fulfillment E. Demand management Answer: A Rationale: Customer relationship management is designed to identify and build relationships with good customers. 25. Of the eight critical business processes on which supply chain managers must focus, the _____ process presents a multi-company, unified response system to the customer whenever complaints, concerns, questions, or comments are voiced. A. manufacturing flow management B. customer service management C. product development and commercialization D. order fulfillment E. demand management Answer: B Rationale: The customer service management process is designed to ensure that customer relationships remain strong. 26. By working closely with its suppliers and listening to its customers, Target has improved the service encounter to a level that was not thought possible in mass retailing. This is an example of which of the eight critical processes performed by supply managers? A. Manufacturing flow management B. Customer service management C. Product development and commercialization D. Order fulfillment E. Demand management Answer: B Rationale: Of the eight critical business processes on which supply chain managers must focus, the customer service management process presents a multi-company, unified response system to the customer whenever complaints, concerns, questions, or comments are voiced. 27. Which business process is based on the activities involved in customer data collection, forecasting of future demand, synchronization of supply and demand by comparing production capacity to forecasts, and the development of activities to “smooth out” demand? A. Manufacturing flow management B. Customer service management C. Product development and commercialization D. Order fulfillment E. Demand management Answer: E Rationale: The demand management process is the alignment of supply and demand throughout the supply chain. 28. The activities that enable the demand management process to work include: A. customer data collection. B. forecasting of future demand. C. sales and operations planning. D. the development of activities that tend to “smooth out” demand. E. All of the above. Answer: E Rationale: All of the listed activities are necessary for the demand management process to work properly. 29. All of the following are activities related to the manufacturing flow process EXCEPT: A. improve manufacturing output in terms of quality, delivery speed, and flexibility B. updating account status following shipment C. leveraging the capabilities held by multiple members of the supply chain D. creating flexible agreements with suppliers and shippers E. producing of goods and service Answer: B Rationale: This is not an activity related to the manufacturing flow process. 30. The amount of time between order placement, receipt of the customer’s payment, and order shipment is known as the: A. 3PL cycle B. product life cycle C. purchase cycle D. order-to-cash cycle E. float Answer: D Rationale: When the order fulfillment process is managed diligently, the amount of time between order placement and receipt of the customer’s payment after order shipment, (known as the order-to-cash cycle), is minimized as much as possible. 31. A firm that provides functional logistics services to others is called a(n): A. third-party logistics firm (3PL) B. intermediate distributor C. industrial distributor D. merchant wholesaler E. ABC firm Answer: A Rationale: Because many firms do not view order fulfillment as a core competency, they often outsource this function to a third-party logistics firm (3PL) that specializes in the order fulfillment process. 32. ProLog is a firm that specializes in warehousing and fulfilling orders for firms as diverse as those supplying parts for manufacturers of complicated missile defense systems to those manufacturing pet-care products. Firms contract ProLog to manage part or all of their order fulfillment process. ProLog is an example of a: A. merchant wholesaler B. retailer C. distributor D. third-party logistics firm (3PL) E. manufacturing flow process manager Answer: D Rationale: Third-party logistics firms (3PLs) are contracted to manage part or all of another firm’s order fulfillment process. 33. Which business process ensures that firms in the supply chain have the resources they need? A. Manufacturing flow management B. Customer service management C. Product development and commercialization D. Order fulfillment E. Demand management Answer: A Rationale: The manufacturing flow management process is concerned with ensuring that firms in the supply chain have the needed resources to manufacture with flexibility and to move products through a multi-stage production process. 34. Which business process supports manufacturing flow by identifying and maintaining relationships with highly valued suppliers? A. Supplier relationship management B. Customer service management C. Product development and commercialization D. Order fulfillment E. Demand management Answer: A Rationale: The supplier relationship management process is closely related to the manufacturing flow management process and contains several characteristics that parallel the customer relationship management process. 35. Specialty Blades designs precision cutting devices for varied applications. On one recent project, they worked closely with a medical device company, developing a combination scalpel and stapler that slices tissue very neatly close to the staples, which results in less traumatic procedures and quicker patient recoveries. This is an example of which of the eight critical processes performed by supply chain managers? A. Supplier relationship management B. Customer service management C. Product development and commercialization D. Order fulfillment E. Demand management Answer: C Rationale: The product development and commercialization process includes the group of activities that facilitates the joint development and marketing of new offerings among a group of supply chain partners. 36. Mattel, the world’s biggest toymaker, ordered 18 million toys made in China to be recalled because of hazards such as the use of lead paint. Mattel’s _____ process allowed it to handle the product recall efficiently. A. order fulfillment B. returns management C. product commercialization D. demand management E. product fulfillment Answer: B Rationale: The returns management process enables firms to manage the returned merchandise while minimizing returns-related costs. 37. Companies operating under a demand-supply integration philosophy are better at their business because all of the different divisions within the company _____. A. work to minimize complexity B. have their own management systems C. compete with each other to earn revenue D. play from the same sheet of music E. operate under a strict hierarchy Answer: D Rationale: Under the DSI philosophy, functional areas communicate frequently and are synchronized. 38. New product idea generation and testing are related to which of the following processes? A. Demand management B. Order fulfillment C. Customer service management D. Product development and commercialization E. Customer relationship management Answer: D Rationale: The product development and commercialization process includes the group of activities that facilitates the joint development and marketing of new offerings among a group of supply chain partners. 39. Returns average as much as _____ percent of sales volume in certain cases. A. 2 B. 6 C. 10 D. 25 E. 40 Answer: E Rationale: Returns reach up to 40 percent of sales volume in certain industries such as apparel e-retailing. 40. The goal of most sourcing and procurement activities is to: A. reduce the cost of raw materials and supplies. B. provide satisfying customer service C. make sure the right amount of product is kept on hand D. identify, sort, and label goods E. move products from supplier to producer and from producer to buyer Answer: A Rationale: This is the goal of most sourcing and procurement activities. 41. All of the following are logistics components of the supply chain EXCEPT: A. trade promotions B. production C. inventory control D. warehousing and materials handling E. order processing Answer: A Rationale: The logistics function consists of several interrelated and integrated logistical components: (1) sourcing and procurement of raw materials and supplies, (2) inventory control, (3) order processing, (4) production, (5) warehousing and materials handling, and (6) transportation. 42. Which of the following provides the technological link connecting all of the logistics components of the supply chain? A. Logistics information system B. Materials requirement plan C. EDI D. RFID chips E. Distribution resources strategy Answer: A Rationale: The components of the system include software for materials acquisition and handling, warehouse-management and enterprise-wide solutions, data storage and integration in data warehouses, and so on. 43. One-quarter of Ace’s 60,000 SKUs are vendor managed through software called the “Collaboration” program. This software allows certain vendors to go online to get information to build their forecasts. The result of this application is fewer shipments, fuller pallets, increased pallets per truck, and a reduction in freight. Collaboration is part of Ace’s: A. logistics information system B. materials requirement plan C. EDI D. RFID chips E. distribution resources strategy Answer: A Rationale: A logistical information system provides the technological link connecting all of the logistics components of the supply chain 44. The supply chain team does all of the following EXCEPT: A. communicating, coordinating, and cooperating extensively. B. embracing all parties who participate in moving the product to market. C. typically cutting across organizational boundaries. D. providing financing for distributors. E. orchestrating the movement of goods, services, and information from the source to the consumer. Answer: D Rationale: The supply chain team does all of these, but it does not provide financing for distributors. 45. Which of the following is a member of a supply chain team that moves just-picked cotton to finished clothing and then to the consumer of that clothing? A. The warehouse in which the cotton was temporarily stored B. The ad agency that develops the promotion for the clothing C. The farmer who picks the cotton D. The trucking company that hauls the cotton to the clothing manufacturer E. All of the choices Answer: E Rationale: The supply chain team is composed of everyone who participates in the movement from raw material to consumer, including all external participants like ad agencies and transportation companies. 46. In which logistical component of the supply chain will you find electronic data interchange a common feature? A. Production scheduling B. Transportation C. Order processing D. Materials handling E. All of these Answer: C Rationale: Order processing is becoming more automated through the use of computer technology known as electronic data interchange (EDI). 47. _____ is information technology that replaces the paper documents that usually accompany business transactions. A. Business prioritizing B. Electronic data interchange C. Just-in-time inventory D. Real-time inventory E. Direct sourcing Answer: B Rationale: Electronic data interchange (EDI) is information technology that replaces the paper documents that usually accompany business transactions. 48. _____ is a method of developing and maintaining an adequate assortment of materials or products to meet a manufacturer’s or a customer’s demand. A. The materials-handling system B. An inventory control system C. Direct sourcing D. Contract logistics E. Warehousing Answer: B Rationale: This is the definition of an inventory control system. 49. Which of the following is the inventory control system that manages the replenishment of raw materials, supplies, and components from the supplier to the manufacturer? A. Electronic data interchange (EDI) B. Distribution resource planning (DRP) C. Third-party logistics firm (3PL) D. Materials requirement planning (MRP) E. Activity-based costing (ABC) Answer: D Rationale: This is the definition of materials requirement planning (MRP), which is also referred to as materials management. 50. The goal of inventory management is to: A. minimize inventory levels while maintaining an adequate supply of goods to meet customer demands. B. maximize inventory levels to prevent any possibility of stockouts. C. determine order timing and order quantity. D. estimate proper usage rates. E. integrate JIT to reduce risks of obsolescence, theft, and damage. Answer: A Rationale: Inventory decisions affect physical distribution costs and service levels. The goal is to balance minimum inventory levels while meeting customer needs for stock. 51. In which logistical component of the supply chain will you find distribution resource planning (DRP) a common feature? A. Production scheduling B. Transportation C. Order processing D. Materials handling E. Inventory control Answer: E Rationale: Distribution resource planning (DRP) is an inventory control system that manages the replenishment of goods from the manufacturer to the final consumer. 52. ZuTech makes sensitive monitors for measuring exposure to hazardous materials. ZuTech has suffered substantial losses when moving products from the assembly line to the warehouse and shipping docks. ZuTech should consider reducing the number of times an item is moved in the warehouse by installing a(n): A. inventory control system. B. materials-handling system. C. safety procedure to manage SKUs. D. order-processing system. E. outsourcing system. Answer: B Rationale: The goal of the materials-handling system is to move items quickly with minimal handling. 53. All of the following are types of inputs used in both materials requirement planning and distribution resource planning EXCEPT: A. the source of funding. B. lead times. C. the mode of transportation to be used. D. outstanding orders. E. sales forecasts. Answer: A Rationale: Both inventory systems use various inputs, such as sales forecasts, available inventory, outstanding orders, lead times, and mode of transportation to be used, to determine what actions must be taken to replenish goods at all points in the supply chain. 54. _____ provides time utility to buyers and sellers and aids manufacturers in managing supply and demand. A. Containerization B. Distribution C. Storage D. Direct sourcing E. Channelization Answer: C Rationale: Storage is necessary to match supply with demand and to provide a level of safety stock. 55. Which of the following moves inventory into, within, and out of a warehouse? A. An inventory control system B. A multichannel system C. An ERP control system D. A freight forwarder E. A materials-handling system Answer: E Rationale: A materials-handling system is a method of moving inventory into, within, and out of the warehouse. 56. The goal of any effective materials-handling system is to: A. reduce the time of the order-processing system B. optimize the inventory control system C. increase safety procedures D. move items quickly with minimal handling E. reduce the length of time a product is in the transportation subsystem Answer: D Rationale: Each time a product is handled, the cost and risk of damage increase. 57. All of the following are criteria used to choose a mode of transportation EXCEPT: A. diversity B. cost C. transit time D. reliability E. traceability Answer: A Rationale: Criteria used include cost, transit time, reliability, capability, accessibility, and traceability. 58. The mode of transportation that provides the most accessibility is: A. pipelines B. air freight C. truck freight D. water transport E. railroad Answer: C Rationale: Motor carriers (trucks) can go to more locations than any of the other modes of transportation. See Exhibit 14.1. 59. The relative ease with which a shipment can be located and transferred is: A. dependability B. traceability C. capability D. transit time E. observability Answer: B Rationale: This defines traceability. 60. The growers of Vidalia onions have determined that their chief priority for choosing a transportation mode within the United States is transit time. However, this must be tempered by practical cost considerations. In light of these considerations, Vidalia onion growers should use _____ to ship their onions. A. railroads B. motor carriers (trucks) C. airplanes D. water transportation E. pipelines Answer: B Rationale: Motor carriers are not as fast as airplanes, but they are less expensive, particularly when dealing with a bulky product like onions. See Exhibit 14.1. 61. One major advantage of pipelines over other modes of transportation is: A. availability B. points served C. flexibility D. speed E. reliability Answer: E Rationale: Pipelines are rarely interrupted by weather, traffic, or labor disputes. See Exhibit 14.1. 62. Which of the following describes a disadvantage associated with water transportation? A. Cannot be used for international trade B. High cost C. Capability D. Lack of speed E. Product weight restrictions Answer: D Rationale: Shipping via water is the slowest mode of transportation. See Exhibit 14.1. 63. Which of the following transportation modes can most easily determine the location of a package en route between shipper and receiver? A. Air B. Truck C. Rail D. Pipe E. Water Answer: A Rationale: In addition to speed, air transport offers an important additional benefit to shippers, that being the ease of tracing shipments. See Exhibit 14.1. 64. The Canadian lobster harvest requires special handling coupled with rapid transportation to ensure the cargo reaches destinations alive. The favored transportation mode would be: A. air B. water C. truck D. pipeline E. rail Answer: A Rationale: Air transportation ensures the speed necessary for lobster delivery. (Air Canada has developed special handling and shipping techniques for the lobsters.) See Exhibit 14.1. 65. All of the following are business trends currently having a strong influence on the job of the supply chain manager EXCEPT: A. bar coding and radio frequency technology. B. the advancement of computer technology. C. the outsourcing of logistical functions. D. replenishment benchmarking. E. electronic distribution. Answer: D Rationale: This is a fictitious term. 66. A manufacturer’s or supplier’s use of an independent third party to manage an entire function of the logistics system, such as transportation, warehousing, or order processing, is called: A. outsourcing. B. mediation. C. intermediary distribution. D. benchmarking. E. disintermediation. Answer: A Rationale: This is the definition of outsourcing, also called contract logistics. 67. Papa John’s pizza chain uses UPS trucks to carry supplies to its franchises. Papa John’s does not own the trucks but has contracted with UPS to have all of the trucks it uses in its deliveries to Papa John’s establishments painted with the Papa John’s logo and company colors. Papa John’s is using: A. a horizontal distribution channel. B. a selective distribution channel. C. outsourcing. D. multi-sourcing. E. a portable inventory control system. Answer: C Rationale: Papa John’s supplier is an outsourced, independent third party. 68. Volvo, working with FedEx, set up a warehouse in Memphis with a complete stock of truck parts. A dealer needing a part for an emergency phones a toll-free number, and the part is delivered by FedEx within 24 hours. This is an example of how manufacturers are using: A. outsourcing. B. cross-docking. C. disintermediation. D. piggybacking. E. an integrated demand channel. Answer: A Rationale: With outsourcing, a company would use an independent third party to operate some or all of its logistics system. 69. A manufacturer of automobile component parts that has turned over all transportation functions to an independent third party in its supply chain has engaged in: A. creating a dependent materials-handling system. B. outsourcing. C. removing entry barriers. D. task deployment. E. channel rotation. Answer: B Rationale: Outsourcing (or contract logistics) is a manufacturer’s or supplier’s use of an independent third party to manage an entire function of the logistics system, such as transportation, warehousing, or order processing. 70. When Rick purchased tickets to a concert on the Internet, it was an example of: A. single-sourcing distribution. B. one-way channelization. C. electronic distribution. D. mass customization. E. aggregated marketing. Answer: C Rationale: Electronic distribution includes any kind of product or service that can be distributed electronically. Tickets are just one of many types of products and services that can be distributed electronically. 71. Pepisco and Waste Management have developed a plan to improve the reverse supply chain for individual beverage bottles not most commonly thrown in trash cans and not recycled. Together Pepsico and Waste Management have plans to deploy thousands of “Dream Machines” in both permanent and temporary locations that will take in recycled bottles and provide rewards to consumers who participate. These companies are practicing: A. sustainable supply chain management B. contract logistics C. intermediary distribution D. eco-marketing E. environmental mediation Answer: A Rationale: Sustainable supply chain management is the integration of environmentally conscious thinking into all phases of key supply chain management processes. 72. All of the following are examples of sustainable supply chain management EXCEPT: A. revising routes taken by delivery drivers to minimize fuel consumption B. buying goods from a supplier located in a developing country in Africa C. limiting excess packaging materials from shipments D. shipping raw materials to point of use rather than point of manufacture E. instructing drivers to limit the amount of time trucks sit idling Answer: B Rationale: Buying local goods reduce carbon pollution to the air from fuel. This outcome is not achieved when goods are purchased thousands of miles away. Fishy Business DNA testing has revealed that sushi bar customers are not always getting what they pay for. Scientists at the American Museum of Natural History tested fish from 31 sushi bars and found that the tuna coveted by many diners is often a cheaper substitute, a banned fish, or an endangered species. This could be the result of an honest mistake in the supply chain, or it could be a deliberate attempt to deceive buyers. However, researchers have uncovered a DNA “bar code” that can accurately identify the type of fish. While still a ways off, the scientist who developed the tuna DNA bar code envisions a small device that can provide instantaneous species identification, which will result in restaurants ultimately providing what their customers are demanding and paying for. 73. Refer to Fishy Business. The way a restaurant coordinates and integrates the activities performed by its supply chain members into a collection of seamless end-to-end processes is an example of: A. yield management. B. channel power. C. materials handling. D. supply chain management. E. physical distribution. Answer: D Rationale: Supply chain management coordinates and integrates all of the activities performed by channel members into a seamless process, from the source to the point of consumption, resulting in enhanced customer and economic value 74. Refer to Fishy Business. If all the firms involved with getting the fish from the ocean onto consumers’ plates work together to perform tasks as a single unified system, which of the following are they using? A. A synergistic approach B. A systems approach C. A primary approach D. A networked approach E. An interdependent approach Answer: B Rationale: A systems approach is a key principle of supply chain management and involves multiple firms working together to perform tasks as a single, unified system rather than as several individual companies acting in isolation. 75. Refer to Fishy Business. In the future, a device will allow each member of the supply chain for fresh fish to verify accountability for providing the species of fish the customer ordered. Which element of supply chain integration is this when each individual firm or business unit is accountable for meeting its own goals regarding providing the fish it says it is providing? A. Benchmark integration B. Measurement integration C. Planning integration D. Management integration E. Leagile integration Answer: B Rationale: Measurement integration is the performance assessment of the supply chain as a whole that also holds each individual firm or business unit accountable for meeting is own goals. 76. Refer to Fishy Business. In the future, suppliers of fresh fish will be able to use electronic bar codes to verify the fish species for members of the supply chain. This information can be incorporated into the information technology used in the inventory management and control business process. This information technology is called: A. activity-based costing (ABC). B. electronic data interchange (EDI). C. benchmarking. D. a materials-handling system. E. procurement. Answer: B Rationale: Electronic data interchange (EDI) is the information technology that replaces the paper documents that usually accompany business transactions, such as purchase orders and invoices, with electronic transmission of the needed information to reduce inventory levels, improve cash flow, streamline operations, and increase the speed and accuracy of information transmission. 77. Refer to Fishy Business. Tsunami, a sushi bar, takes every precaution to make sure it does not purchase any species of fish that have been classified as endangered. It partners with its suppliers to verify—as much as is possible—the species of the fish it purchases. This is an example of: A. sustainable supply chain management B. contract logistics C. intermediary distribution D. eco-marketing E. environmental mediation Answer: A Rationale: Sustainable supply chain management is the integration of environmentally conscious thinking into all phases of key supply chain management processes. Whirlpool and Lowe’s Every week, Whirlpool and Lowe’s have an online conference call to discuss what appliances are selling in the stores and what capacity Whirlpool has to make product. Often, the discussion revolves around a particular model that is selling at a higher than expected rate in Lowe’s. This often results in Whirlpool quickly flexing its supply chain to make more of the high-selling product and delivering it to Lowe’s customers. However, sometimes the answer is that Whirlpool and/or its suppliers do not have the capacity to make more of the product in question. It then becomes a question of demand shaping for Lowe’s. What promotions, in-store displays, and sales incentives can Lowe’s implement to shift demand from the capacity-constrained model to one that the supply chain has more capacity to deliver? In this way, Lowe’s, Whirlpool, and their suppliers manage supply and also demand. 78. Refer to Whirlpool and Lowe’s. A tremendous amount of _____ exists between Lowe’s and Whirlpool, which is evident by the long-lasting, value-added offerings Whirlpool provides to Lowe’s. A. channel manipulation B. customer integration C. resources integration D. yield management E. corporate socialization Answer: B Rationale: Customer integration is a competency that enables Whirlpool and Lowe’s to offer long-lasting, distinctive, value-added offerings to those customers who represent the greatest value to the firm. 79. Refer to Whirlpool and Lowe’s. Which business process is Whirlpool and Lowe’s using when they work together to align supply and demand throughout the supply chain? A. Dependent materials handling B. Outsourcing C. Warehousing D. Demand management E. Channel rotation Answer: D Rationale: Demand management seeks to anticipate customer requirements at each level and create demand-related plans of actions such as Lowe’s promotions. 80. Refer to Whirlpool and Lowe’s. Whirlpool contracts with another firm to manage its order fulfillment process with Lowe’s. This contracted firm is referred to as a(n): A. third-party logistics firm (3PL) B. drop shipper C. mediator D. independent agent E. interloper Answer: A Rationale: A third-party logistics firm (3PL) is contracted to manage part or all of another firm’s order fulfillment process. 81. Refer to Whirlpool and Lowe’s. Given that accessibility and reliability are keys to Lowe’s marketing strategy, what mode of transportation is most likely used in this relationship? A. Air B. Water C. Truck D. Pipeline E. Rail Answer: C Rationale: Trucks excel at providing users with product accessibility and reliability. ESSAY 1. How has the use of supply chain management resulted in a radical reformulation of traditional marketing, production, and distribution functions? Answer: The use of supply chain management has resulted in a customer-driven view of traditional marketing, production, and distribution functions. It has reversed the flow of demand from a “push” to a “pull.” Through the channel partnering of suppliers, manufacturers, wholesalers, and retailers along the whole supply chain who work together toward the common goal of creating customer value, supply chain management allows companies to respond with the unique product configuration and mix of services demanded by the customers. Thus, supply chain management communicates customer demands from the point of sale all the way to the supplier. In addition, supply chain management engineers the timely and cost-effective flow of goods through the entire supply pipeline. 2. What is relationship integration? Describe a supply chain that has achieved high relationship integration. Answer: Relationship integration is the ability of two or more companies to develop social connections that serve to guide their interactions when working together. When multiple firms in a supply chain have achieved high relationship integration, member firms are able to perform at a higher level than would be possible for any of the partners working alone. Relationally integrated supply chains tend to be managed by social guidelines. In addition, relationally integrated supply chains tend to be open to information sharing across firm/business unit boundaries so that everyone involved in the supply chain can clearly see the problems and opportunities that arise when firm-to-firm collaboration is taking place. 3. Explain what is meant by supply chain integration and list the five types of integration sought by firms interested in providing top-level service to customers. Answer: Supply chain integration is when multiple firms in a supply chain coordinate their activities and processes so that they are seamlessly linked to one another in an effort to satisfy the customer. Five types of integration are sought by firms interested in providing top-level service to customers: (1) relationship integration, (2) measurement integration, (3) technology and planning integration, (4) material and service supplier integration, and (5) customer integration. 4. List the eight critical business processes on which supply chain managers must focus. Answer: 1. Customer relationship management 2. Customer service management 3. Demand management 4. Order fulfillment 5. Manufacturing flow management 6. Supplier relationship management 7. Product development and commercialization 8. Returns management 5. What is the customer service management process? List five activities that may be considered part of this process. Answer: The customer service management process presents a multi-company, unified response system to the customer whenever complaints, concerns, questions, or comments are voiced. It includes such activities as taking customer call or requests for information, developing response procedures, amending orders, aiding in installation, measuring customer satisfaction with the service encounter, and checking warranty status. Students may have other equally correct ideas about this process. 6. Describe the manufacturing flow management process and discuss the goals of this process. Answer: The manufacturing flow management process is a process that ensures that firms in the supply chain have the resources they need. The goals of the manufacturing flow process are centered on leveraging the capabilities held by multiple members of the supply chain to improve overall manufacturing output in terms of quality, delivers speed, and flexibility, all tied to increasing profitability. 7. Discuss the financial implications of the returns management process. Answer: The returns management process enables firms to manage volumes of returned product efficiently while minimizing returns-related costs and maximizing the value of the returned assets to the firms in the supply chain. These activities can also impact the firm’s financial position negatively if this process is not efficiently handled. Some students may recognize that returns management creates additional marketing and customer service touch points that can be leveraged for added customer value above and beyond normal sales and promotion-driven encounters. 8. List the components of the logistics function in the supply chain. Answer: 1. Sourcing and procurement 2. Inventory control 3. Order processing 4. Production 5. Warehousing and materials handling 6. Transportation 9. What is an inventory control system? Discuss the objective of inventory management, and describe materials requirement planning (MRP) and distribution resource planning (DRP). Answer: An inventory control system develops and maintains an adequate assortment of products to meet a manufacturer’s or a customer’s demands. The objective of inventory management is to balance minimum inventory levels (to reduce costs) while maintaining an adequate supply of goods to meet customer demand. Managing inventory from the supplier to the manufacturer is called materials requirement planning (MRP). This is an inventory control system that manages the replenishment of raw materials, supplies, and components from the supplier to the manufacturer. The system that manages the replenishment of goods from manufacturer to end user is commonly referred to as distribution resource planning (DRP). Both inventory systems use inputs, such as sales forecasts, available inventory, outstanding orders, lead times, and mode of transportation to be used, to determine what actions must be taken to replenish goods at all points in the supply chain. 10. Distribution managers select different transportation modes based on several distinct criteria. List and briefly define these criteria, and name the best and worst transportation mode for each criterion. Answer: COST. The total amount a specific carrier charges to move the product from the point of origin to the destination. Airways have the highest cost, while water is the cheapest mode. TRANSIT TIME. The total time a carrier has possession of goods. Water is the slowest, requiring the most transit time, and air is the fastest mode. RELIABILITY. The consistency with which the carrier delivers goods on time and in an acceptable condition. Pipelines are the most reliable, while water transport is the least reliable. CAPABILITY. The ability of the carrier to provide the appropriate equipment and conditions for moving specific kinds of goods. Water has the most capability, while pipelines have the least. ACCESSIBILITY. A carrier’s ability to move goods over a specific route or network. Trucks have the best accessibility, and pipelines have the most limited accessibility. TRACEABILITY. The relative ease with which a shipment can be located and transferred. Air is the best mode, and pipeline is the worst. 11. Describe outsourcing. How does outsourcing affect the efficient deployment of supply chain management? Answer: With outsourcing, or contract logistics, a company turns over the entire function of buying and managing transportation to a third party, usually an independent carrier. Third-party carriers have economies of scale because of consolidating transportation modes and can also offer extra services. Many corporations use contract logistics due to budget constraints, mergers and divestitures, and increased globalization. Outsourcing can also apply to contract warehousing. Outsourcing allows companies to cut inventories, locate stock at fewer plants and distribution centers, and provide the same service level or better. Outsourcing often leads to exclusive partnerships between suppliers, retailers, or manufacturers and carriers, warehousing experts, or logistics management suppliers. These partnerships allow better inventory management, the ability to meet delivery dates, efficiency in filling emergency orders, and high accuracy in filling orders. Thus, outsourcing is becoming increasingly important in efficient deployment of supply chain management. Test Bank for MKTG Charles W. Lamb, Jr. Hair, Joseph F., Carl McDaniel 9781285091860
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