MGT400 Chapter 9 Test

Chapter
9 Test—Supply Chain Design

TRUE/FALSE: Circle
Your Answer

1. True or False A supply chain is broader in scope
than the value chain, and encompasses all pre- and post-production activity.

2. True or False Supply chains often must be redesigned
when a firm’s product lines and markets change or expand.

3. True or False The basic purpose of a supply chain is
to coordinate communication among employees and customers in order to maximize
customer satisfaction.

4. True or False Distribution centers are warehouses
that act as intermediaries between suppliers and factories.

5. True or False Orders
are passed upstream in a supply chain, while materials and finished goods are sent
downstream in a supply chain.

6. True or False In
the Supply Chain Operations Reference (SCOR) model, the “Make” step
involves managing orders, transportation, and
distribution to provide goods and services.

7. True or False In
the Supply Chain Operations Reference (SCOR) model, the “Plan” step
involves identifying and selecting suppliers.

8. True or False Contract
manufacturers can provide the benefit of lower total costs resulting from economies
of scale.

9. True or False In
designing an efficient supply chain, an organization would need high levels of inventory
stored in many small distribution centers.

10. True or False Wal-Mart
uses a push supply chain.

11. True or False A
supply chain must be either a push or a pull system.

12. True or False Accurate
forecasts are more critical to a pull system.

13. True or False For
Dell Inc., the push-pull boundary is very early in the supply chain, where
suppliers store inventory for frequent deliveries.

14. True or False An
automobile company that installs satellite radio at the dealership instead of
at the factory is applying a postponement strategy.

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15. True or False If a
multisite organization has a stable customer benefit package and many identical
and standardized facilities,
then a responsive supply chain is the best design.

16. True or False The
bullwhip effect results from order amplification in the supply chain.

17. True or False The
bullwhip effect could be reduced if all members of the supply chain would use demand
data from the point of the supply chain closest to the customer.

18. True or False Large
order sizes and frequent price changes will reduce the bullwhip effect in a supply chain.

19. True or False The
facility location decision must attempt to minimize the combined cost of producing the good or service and delivering them to
customers.

20. True or False A
great servicescape and facility layout can usually overcome a poor location decision.

21. True or False Both economic and noneconomic factors
should play an important role in location decisions in supply and value
chains.

22. True or False The
center-of-gravity method determines the best X and Y coordinates (location) for
multiple facilities by finding a central location and
then assigning the facilities around the
periphery of that location.

23. True or False The
center-of-gravity model minimizes the weighted distance between the facility to
be located and its supply and demand points.

24. True or False Water
transportation is vital to the efficiency of most consumer-goods supply chains.

25. True or False With
vendor-managed inventory, a manufacturer monitors and managers inventory for a
customer.

MULTIPLE
CHOICE: Circle Your Answer

26. Which one of the following statements is false?

a.	Historically, General Motors used to push system to get vehicles to their dealers.
b.	Wal-Mart is a good example of a highly efficient supply chain.
c.	Sony is a good example of a global contract manufacturer.
d.	Postponement is the process of delaying product customization until the product is closer to the customer at the end of the supply chain.

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27. Which one of the following statements is false?

a.	Boeing’s new 787 Dreamliner airplane has encountered many startup and supply chain coordination problems.
b.	At Dell, Inc. customer financing of purchases is a post-production service in their value chain.
c.	At Dell, Inc. installation, warranty, and field repair services are normally done on a prepaid contract basis with customers.
d.	Federal Express has over one million pickup and delivery sites and therefore, is a good example of multisite management.

28. Which of the following is not a basic function of the
Supply Chain Operations Reference (SCOR) model?

a.	source
b.	make
c.	deliver
d.	control

29. Which one of the following statements is true about
vendor-managed inventory (VMI)?

a.	VMI is a form of outsourcing.
b.	VMI often increases the bullwhip effect.
c.	VMI is used only in responsive supply chains.
d.	VMI is identical to contract manufacturing.

30. The point in the supply chain that separates the push system from
the pull system is called the

a.	Reversal point
b.	Push-pull boundary
c.	Postponement site
d.	Center of gravity

31. Which one of the following is not directly related to a
supply chain?

a.	Distribution center
b.	Inventory
c.	Promotion/Advertising
d.	Supplier

32. Managing the flow of goods and materials from the customer
backward through the supply chain is called

a.	Reverse Logistics
b.	The Pull System
c.	The Push System
d.	Response Management

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33. The Supply Chain Operations Reference (SCOR) Model function that
entails all order management activities from processing customer orders to
routing shipments, managing goods at distribution centers and invoicing the
customer is called ____.

a.	Return
b.	Source
c.	Make

34. The Supply Chain Operations Reference (SCOR) Model function that
entails procuring goods and services to meet planned or actual demand is called
____.

a.	Plan
b.	Source
c.	Make
d.	Deliver

35. Where in its supply chain does Dell, Inc. begin to use a pull
system?

a.	supplier
b.	factory
c.	distribution center
d.	customer

36. A firm that specializes in certain types of goods-producing
activities, such as customized design, manufacturing, assembly, and packaging,
and works for end users is called a ____.

a.	Responsive supply chain
b.	Contract manufacturer
c.	Distribution center
d.	Vendor-managed inventory supplier

37. A(n) ____ produces goods in advance of customer demand using a
forecast of sales and moves them to points of sale where they are stored as
finished goods inventory.

a.	Responsive supply chain
b.	Efficient supply chain
c.	Push system
d.	Pull system

38. A(n) ____ produces only what is needed at upstream stages in the
supply chain in response to customer demand signals.

a.	Responsive supply chain
b.	Efficient supply chain
c.	Push system
d.	Pull system

39. A(n) ____ seeks to balance capacity and demand, might use only a
few large distribution centers, and minimize costs of routing products from
factories to retail stores and customers.

a.	Responsive supply chain
b.	Efficient supply chain
c.	Push system
d.	Pull system

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40. Which is true regarding a responsive supply chain?

a.	Demand is stable and predictable.
b.	Product life cycles are short and change often because of innovation.
c.	Customers require standardization.
d.	Contribution margins are low.

41. A push system

a.	can adjust easily to poor forecasts
b.	is more appropriate for make-to-order items
c.	can reduce transportation costs by using full-truckload shipments
d.	works best with variable sales patterns

42. A pull system

a.	requires high levels of finished goods inventory
b.	relies heavily on accurate sales forecasts
c.	waits for customer orders
d.	necessitates standardized products

43. For General Motors’ supply chain, the ____ is the push-pull
boundary.

a.	Supplier
b.	Factory
c.	Dealer
d.	Custom

44. ____ is the process of delaying product customization until the
product is closer to the customer at the end of a supply chain.

a.	Postponement
b.	Sourcing
c.	Deferral
d.	Multisite management

45. A contract manufacturer can offer significant competitive
advantages. Which one of the following is not an advantage of using a
contract manufacturer?

a.	Access to advanced manufacturing technologies
b.	Faster product time-to-market
c.	Lower costs from economies of scale
d.	Standardized design

46. The metric “perfect order fulfillment” is often used to
measure ____.

a.	Delivery reliability
b.	Responsiveness
c.	Supply chain efficiency
d.	Supply chain financial performance

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47. Which of the following is true regarding order amplification?

a.	The fluctuation of orders is larger than the fluctuation in sales.
b.	The amplitude of order quantity over time is smaller than the variation of sales.
c.	The less the uncertainty, the greater the amplification in orders.
d.	The amplification is greatest near the customer.

48. All of the following are considered non-economic factors in
location decisions except

a.	Availability of labor
b.	Employee empowerment
c.	Transportation services
d.	Quality of life

49. Factors such as managers’ preferences, services and taxes,
available transportation systems, banking services and environmental impacts
would be most closely related to which level of the facility location
hierarchy?

a.	Global (National) location
b.	Regional location
c.	District or community location
d.	Local site selection

50. The center-of-gravity method takes all the following into account except

a.	Location of facilities and markets
b.	Demand
c.	Transportation costs
d.	Service objectives

51. The weights typically used in the center-of-gravity method are

a.	Transportation costs
b.	Distances
c.	Volumes of goods
d.	Times

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PROBLEMS: Show
Your Work

52. The As-You-Like-It Hamburger Shop is considering adding a new
location. The investment at each of the four potential sites is the same. The
price they can charge for hamburgers is set by the competition in the area.

Given the information
below, which site is expected to be the most profitable?

Factor	Site A	Site B	Site C	Site D
Fixed Cost	$10,000	$8,000	$6,000	$11,000
Variable Cost per Unit	$0.70	$0.70	$0.85	$0.65
Price per Unit	$1.30	$1.20	$1.25	$1.10
Forecast Volume (Units)	20,000	22,000	18,000	24,000

53. Given the retail location coordinates and the value of material
movement in the following chart, find the best supply point location using the
center-of-gravity method.

Retail Outlet	Location Coordinates X, Y	Material Movement
1	25, 05	1,500
2	17, 20	3,000
3	12, 12	1,000
4	06, 09	2,200

54. Using the following information about material volume shipped from
a plant to four retail outlets, find the best location for the plant using the
center of gravity method.

Retail Outlet	Location Coordinates X, Y	Material Movement
1	18, 6	1,500
2	12, 15	2,100
3	7, 10	1,900
4	7, 20	1,200

55. A major grocery chain desires to build a facility in a city with
three distinct market demographic segments. The number of possible customers in
each segment, and the central location coordinates of the segments are given
below. Using the center of gravity method, what would be the best location?

Market Segment	Location Coordinates X, Y	Number of Customers
1	15, 18	2,500
2	2, 13	3,200
3	8, 10	3,900

56. A manufacturer is considering some expansion alternatives. One is
to increase the capacity at their present location. A second set of
alternatives is to build a new plant at one of two possible locations. The
projected operating costs have been estimated as follows:

	Expand at Present
Cost Category	Location	Location A	Location B
Fixed	$125,000	$225,000	$175,000
Direct labor per unit	$32.5	$30	$33
Direct material per unit	$16	$17	$15.50
Overhead cost per unit	$2.90	2.40	$2.50
Transportation cost per 100 units	$125	$100	$110

If the forecast of
additional demand for the next year is 25,000 units, which alternative should
be selected?

57. Supreme Redeem, Inc. plans to open a large manufacturer’s rebate
processing center. Supreme has narrowed the potential sites to three locations.
Data for each location are provided in the following table. (A score of 1 is
least favorable; a 5 is most favorable.)

		Location
Factors	Weight	Phoenix	Miami	Detroit
Cost to process rebate	.45	3	3	4
Cost of living	.20	3	4	5
Transportation	.15	4	5	3
Union activities	.05	5	3	2
Recreation	.15	4	4	3

a.	What is the total weighted score for each of the three locations?
b.	Which location should be chosen, based on total weighted score?

58. Call Centers, Ltd. has decided to use the weighted scoring model
approach to aid the company in finding new locations for major call centers.
Below is information regarding four potential locations. (A score of 1 is least
favorable; a 5 is most favorable.)

		Location
Factors	Weight	A	B	C	D
Labor cost/hour	.50	3	5	4	3
Labor availability	.25	5	4	3	4
Government regulations	.15	5	2	4	5
Transportation	.10	4	3	5	4

a.	What is the total weighted score for each of the three locations?
b.	Which location should be chosen, based on total weighted score?

8. William Green, vice president of
manufacturing for Computer Products Corporation (CPC), and his staff are
studying three Midwestern alternative locations for a new production facility
for producing high-resolution scanners. His staff analysts predict that the
scanners will be a growing market over the next ten years, and the analysis
group shares marketing’s enthusiasm for planning facilities for producing this
new product line. The analysts have developed these estimates for the three
locations:

	Annual Fixed Costs	Variable Cost
Location Alternative	(Millions of Dollars)	per Scanner
Cleveland, Ohio	$3.9	$3,400
South Bend, Indiana	3.6	3,700
Grand Rapids, Michigan	3.1	4,000

The marketing
department at CPC estimates sales for the scanners will be 1,000 scanners in
the first year, 2,000 in the second year, and 4,000 in the third year.

a.	In what range of production capacity would each of the locations be preferred?
b.	Use breakeven analysis to determine which location would be preferred in Years 1, 2, and 3. Which single location should be chosen and in what year will CPC break even?