Deck 9: Supply Chain Design

Question 1

Supply chains often must be redesigned when a firm's product lines and markets change or expand.

Answer 1

True

Question 2

A great servicescape and facility layout can usually overcome a poor location decision.

Answer 2

False

Question 3

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

Answer 3

True

Question 4

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

Question 5

Distribution centers are warehouses that act as intermediaries between suppliers and factories.

Question 6

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

Question 7

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.

Question 8

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

Question 9

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

Question 10

Wal-Mart uses a push supply chain.

Question 11

The bullwhip effect results from order amplification in the supply chain.

Question 12

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

Question 13

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

Question 14

In the Supply Chain Operations Reference SCOR) model, the "Make" step involves managing orders, transportation, and distribution to provide goods and services.

Question 15

In the Supply Chain Operations Reference SCOR) model, the "Plan" step involves identifying and selecting suppliers.

Question 16

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

Question 17

Contract manufacturers can provide the benefit of lower total costs resulting from economies of scale.

Question 18

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.

Question 19

Accurate forecasts are more critical to a pull system.

Question 20

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

Question 21

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

Question 22

An) ____ 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

Question 23

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

Question 24

With vendor-managed inventory, a manufacturer monitors and managers inventory for a customer.

Question 25

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.

Question 26

Water transportation is vital to the efficiency of most consumer-goods supply chains.

Question 27

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

Question 28

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

Question 29

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

Question 30

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

A)Distribution center
B)Inventory
C)Promotion/Advertising
D)Supplier

Question 31

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

Question 32

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

A)supplier
B)factory
C)distribution center
D)customer

Question 33

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.

Question 34

An) ____ 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

Question 35

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

Question 36

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.

Question 37

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.

Question 38

An) ____ 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

Question 39

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.

Question 40

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
D)Deliver

Question 41

Explain the difference between a supply chain and a value chain.

Question 42

What are the key functions of a supply chain?

Question 43

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

A)Transportation costs
B)Distances
C)Volumes of goods
D)Times

Question 44

Describe some common supply chain metrics used to evaluate performance.

Question 45

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

Question 46

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.

Question 47

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

Question 48

Explain the difference between an efficient and a responsive supply chain, and the business context for which each works best.

Question 49

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

Question 50

Explain the importance of the bullwhip effect. What can managers do to reduce it?

Question 51

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

Question 52

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

A)Supplier
B)Factory
C)Dealer
D)Custom

Question 53

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

Question 54

Describe how supply chains should be designed for multisite management situations.

Question 55

Explain the concept of postponement and provide an example of it.

Question 56

The metric "perfect order fulfillment" is often used to measure ____.

A)Delivery reliability
B)Responsiveness
C)Supply chain efficiency
D)Supply chain financial performance

Question 57

Summarize the Supply Chain Operations Reference SCOR) model.

Question 58

____ 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

Question 59

Explain the typical structure of a supply chain.

Question 60

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

Question 61

Discuss some of the key economic and non-economic factors that are evaluated in making a facility location decision.

Question 62

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:
$\begin{array}{lccc} \underline{\text {Cost Category}}& \underline{\text {Expand at Present Location}}& \underline{\text {Location A }}& \underline{\text {Location B}}\\\text { Fixed } & \$ 125,000 & \$ 225,000 & \$ 175,000 \\\text { Direct labor per unit } & \$ 32.5 & \$ 30 & \$ 33 \\\text { Direct material per unit } & \$ 16 & \$ 17 & \$ 15.50 \\\text { Overhead cost per unit } & \$ 2.90 & 2.40 & \$ 2.50 \\\text { Transportation cost per } 100 \text { units } & \$ 125 & \$ 100 & \$ 110\end{array}$
If the forecast of additional demand for the next year is 25,000 units, which alternative should be selected?

Question 63

Define the concept of Vendor-Managed Inventory VMI). How does VMI improve supply chain performance?

Question 64

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?
$\begin{array}{lccc}\underline{\text {Factor}}& \underline{\text { Site A } }& \underline{ \text { Site B }}& \underline{ \text { Site C }}&\underline{ \text { Site D}}\\\text {Fixed Cost}& \$ 10,000 & \$ 8,000 & \$ 6,000 & \$ 11,000 \\\text {Variable Cost per Unit}&\$ 0.70 & \$ 0.70 & \$ 0.85 &\$ 0 .65 \\\text {Price per Unit}&\$ 1.30 & \$ 1.20 & \$ 1.25 & \$1.10 \\\text {Forecast Volume Units)}& 20,000 & 22,000 & 18,000 & 24,00 \\ \end{array}$

Question 65

Differentiate between a push system and a pull system. Include the advantages of each.

Question 66

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.)
$\begin{array}{c}\begin{array}{lc}\\ \underline{\text { Factors }} & \underline{\text { Weight } }\\\text { Cost to process rebate } & .45 \\\text { Cost of living } & .20 \\\text { Transportation } & .15 \\\text { Union activities } & .05 \\\text { Recreation } & .15\end{array}\begin{array}{|ccc}&\text { Location }\\ \underline{ \text { Phoenix }} & \underline{ \text { Miami }} & \underline{ \text { Detroit }} \\3 & 3 & 4 \\ 3 & 4 & 5 \\4 & 5 & 3 \\ 5 & 3 & 2 \\4 & 4 & 3 \\\end{array}\end{array}$
a. What is the total weighted score for each of the three locations?
b. Which location should be chosen, based on total weighted score?

Question 67

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.
$$\begin{array} { c c c } \text { Retail Outlet } & \text { Lacation Coordinates } X ,Y & \text { Materal Movement } \\\hline 1 & 18,6 & 1,500 \\2 & 12,15 & 2,100 \\3 & 7,10 & 1,900 \\4 & 7,20 & 1,200\end{array}$$

Question 68

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.)
$\begin{array}{lc|cccc}&&&&\text { Location }\\\text { Factors } & \text { Weight } & \text { A } & \text { B } & \text { C } & \text { D } \\\hline\text { Labor cost/hour } & .50 & 3 & 5 & 4 & 4 \\\text { Labor availability } & .25 & 5 & 4 & 3 & 5 \\\text { Government regulations } & .15 & 5 & 2 & 4 & 5 \\\text { Transportation } & .10 & 4 & 3 & 5 & 4\end{array}$
a. What is the total weighted score for each of the three locations?
b. Which location should be chosen, based on total weighted score?

Question 69

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?
$$\begin{array} { c c c } \text { Market Segment } & \text { Location Coordinates X ,Y } & \text { Number of Custamers } \\1 & 15,18 & 2,500 \\2 & 2,13 & 3,200 \\3 & 8,10 & 3,900 \\\end{array}$$

Question 70

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:
$\begin{array}{lcc}&\text {Annual Fixed Costs}&\text {Variable Cos}\\\underline{\text { Location Alternative }} & \underline{ \text { Millions of Dollars) }} & \underline{\text { per Scanner }}\\\text { Cleveland, Ohio } & \$ 3.9 & \$ 3,400 \\\text { South Bend, Indiana } & 3.6 & 3,700 \\\text { Grand Rapids, Michigan } & 3.1 & 4,000\end{array}$ 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 break-even 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?

Question 71

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.
$$\begin{array} { c c c } \text { Retail Outlet } & \text { Lacation Coordinates } \mathbf { X } , \mathbf { Y } & \text { Materal Movement } \\\hline 1 & 25,05 & 1,500 \\2 & 17,20 & 3,000 \\3 & 12,12 & 1,000 \\4 & 06,09 & 2,200\end{array}$$