Chapter 3Supply Chain Drivers and ObstaclesTrue/False1. The major drivers of supply chain performance are facilities, inventory,transportation, and information.Answer: TrueDifficulty: Moderate2. The major drivers of supply chain performance are customers, facilities,inventory, transportation, and information.Answer: FalseDifficulty: Moderate3. The two major types of facilities are production sites and storage sites.Answer: TrueDifficulty: Moderate4. The two major types of facilities are distribution sites and storagesites.Answer: FalseDifficulty: Moderate5. Inventory is an important supply chain driver because changing inventorypolicies can dramatically alter the supply chain’s efficiency andresponsiveness.Answer: TrueDifficulty: Moderate6. Information is potentially the biggest driver of performance in thesupply chain as it directly affects each of the other drivers.Answer: TrueDifficulty: Easy7. Information is potentially the biggest driver of performance in thesupply chain even though it has little impact on each of the otherdrivers.Answer: FalseDifficulty: Easy8. A facility with little excess capacity will likely be more efficient perunit of product it produces than one with a lot of unused capacity.Answer: TrueDifficulty: Easy9. A facility with little excess capacity will likely be no more or lessefficient per unit of product it produces than one with a lot of unused capacity.Answer: FalseDifficulty: Easy10. The high utilization facility will have difficulty responding to demandfluctuations.Answer: TrueDifficulty: Easy11. The high utilization facility will have no more difficulty responding todemand fluctuations than one with a lot of unused capacity.Answer: FalseDifficulty: Easy12. Stock keeping unit (SKU) storage is the warehousing methodology thatuses a traditional warehouse to store all of one type of producttogether.Answer: TrueDifficulty: Moderate13. Warehouse unit storage is the warehousing methodology that uses atraditional warehouse to store all of one type of product together.Answer: FalseDifficulty: Moderate14. The components of inventory decisions include cycle inventory, safetyinventory, seasonal inventory, and sourcing.Answer: TrueDifficulty: Easy15. The components of inventory decisions include capacity, cycle inventory,safety inventory, seasonal inventory, and sourcing.Answer: FalseDifficulty: Easy16. Cycle inventory is inventory that is built up to counter predictablevariability in demand.Answer: FalseDifficulty: Easy17. Seasonal inventory is inventory that is built up to counter predictablevariability in demand.Answer: TrueDifficulty: Moderate18. Companies using seasonal inventory will build up inventory in periods oflow demand and store it for periods of high demand when they will nothave the capacity to produce all that is demanded.Answer: TrueDifficulty: Moderate19. Companies using seasonal inventory will maintain a level inventoryincrease rate of production for periods of high demand.Answer: FalseDifficulty: Easy20. A company’s ability to find a balance b etween responsiveness andefficiency that best matches the needs of the customer it is targetingis the key to achieving strategic fit.Answer: TrueDifficulty: Moderate21. Many obstacles, such as growing product variety and shorter life cycles,have made it increasingly difficult for supply chains to achievestrategic fit.Answer: TrueDifficulty: ModerateMultiple Choice1. Which of the following is not a major driver of supply chain performance?a. Facilitiesb. Inventoryc. Transportationd. Informatione. All of the above are major drivers of supply chain performance.Answer: eDifficulty: Easy2. Which of the following is not a major driver of supply chain performance?a. Customersb. Facilitiesc. Inventoryd. Transportatione. InformationAnswer: aDifficulty: Moderate3. The places in the supply chain network where product is stored, assembled,or fabricated are known asa. facilities.b. inventory.c. transportation.d. information.e. customers.Answer: aDifficulty: Easy4. All raw materials, work in process, and finished goods within a supplychain are known asa. facilities.b. inventory.c. transportation.d. information.e. customers.Answer: bDifficulty: Easy5. Moving inventory from point to point in the supply is known asa. facilities.b. inventory.c. transportation.d. information.e. customers.Answer: cDifficulty: Easy6. The data and analysis concerning facilities, inventory, transportation, andcustomers throughout the supply chain is known asa. facilities.b. inventory.c. transportation.d. information.e. customers.Answer: dDifficulty: Easy7. The two major types of facilities area. distribution sites and storage sites.b. production sites and distribution sites.c. production sites and storage sites.d. retail sites and distribution sites.e. distribution sites and inventory sites.Answer: cDifficulty: Moderate8. Which component of the supply chain decision-making framework would beestablished first?a. Customer strategyb. Supply chain strategyc. Supply chain structured. Competitive strategye. Replenishment strategyAnswer: dDifficulty: Moderate9. Which component of the supply chain decision-making framework would beestablished second?a. Customer strategyb. Supply chain strategyc. Supply chain structured. Competitive strategye. Replenishment strategyAnswer: bDifficulty: Moderate10. Which component of the supply chain decision-making framework would be usedto reach the performance level dictated by the supply chain strategy?a. Customer strategyb. Supply chain strategyc. Supply chain structured. Competitive strategye. Replenishment strategyAnswer: cDifficulty: Easy11. Which of the following is not a component of facilities decisions?a. Locationb. Capacityc. Operations methodologyd. Warehousing methodologye. All of the above are components of facilities decisions.Answer: eDifficulty: Moderate12. Which of the following is not a component of facilities decisions?a. Warehousing methodologyb. Forecasting methodologyc. Operations methodologyd. Capacitye. LocationAnswer: bDifficulty: Moderate13. Which of the following statements concerning decisions regarding locationof facilities is false?a. Deciding where a company will locate its facilities constitutes alarge part of the design of a supply chain.b. A basic trade-off here is whether to centralize to gain economiesof scale or decentralize to become more responsive by beingcloser to the customer.c. Companies must also consider a host of issues related to thevarious characteristics of the local area in which the facilitymay be situated.d. All of these statements are true.e. None of these statements are true.Answer: dDifficulty: Moderate14. Which of the following is not an issue companies need to consider infacility location decisions?a. quality of workersb. product developmentc. proximity to customers and the rest of the networkd. cost of facilitye. tax effectsAnswer: bDifficulty: Moderate15. Which of the following is not an issue companies need to consider infacility location decisions?a. quality of workersb. availability of infrastructurec. proximity to customers and the rest of the networkd. cost of facilitye. All of the above are issues companies need to consider in facilitylocation decisions.Answer: eDifficulty: Moderate16. Excess capacitya. allows a facility to be very flexible and to respond to wideswings in the demands placed on it.b. costs money and therefore can decrease efficiency.c. requires proximity to customers and the rest of the network.d. both a and be. all of the aboveAnswer: dDifficulty: Moderate17. Which of the following is a characteristic of a facility with excesscapacity?a. will likely be more efficient per unit of product it producesthan one with a lot of unused capacityb. would be very flexible and to respond to wide swings in thedemands placed on itc. would be considered a high utilization facilityd. will have difficulty responding to demand fluctuationse. none of the aboveAnswer: aDifficulty: Easy18. A facility with little excess capacitya. will likely be more efficient per unit of product it producesthan one with a lot of unused capacity.b. would be considered a high utilization facility.c. will have difficulty responding to demand fluctuations.d. All of the above are true.e. None of the above are true.Answer: dDifficulty: Moderate19. Which of the following would be a characteristic of a facility with littleexcess capacity?a. allows a facility to be very flexible and to respond to wide swingsin the demands placed on itb. costs money and therefore can decrease efficiencyc. requires proximity to customers and the rest of the networkd. will likely be more efficient per unit of product it producese. none of the aboveAnswer: dDifficulty: Moderate20. Which of the following is not a warehousing methodology?a. Warehouse unit storageb. Stock keeping unit (SKU) storagec. Job lot storaged. Cross-dockinge. All of the above are warehousing methodologies.Answer: aDifficulty: Moderate21. The warehousing methodology that uses a traditional warehouse to store allof one type of product together isa. warehouse unit storage.b. stock keeping unit (SKU) storage.c. job lot storage.d. cross-docking.e. none of the aboveAnswer: bDifficulty: Moderate22. The warehousing methodology in which all the different types of productsneeded to perform a particular job or satisfy a particular type of customer are stored together isa. warehouse unit storage.b. stock keeping unit (SKU) storage.c. job lot storage.d. cross-docking.e. none of the aboveAnswer: cDifficulty: Moderate23. The following warehousing methodology is one in which goods are notactually warehoused in a facility. Instead, trucks from suppliers, each carrying a different type of product, deliver goods to a facility. There the inventory is broken into smaller lots and quickly loaded onto store-bound trucks that carry a variety of products, some from each of thesupplier trucks.a. warehouse unit storageb. stock keeping unit (SKU) storagec. job lot storaged. cross-dockinge. none of the aboveAnswer: dDifficulty: Moderate24. All of the following are components of inventory decisions excepta. cycle inventory.b. safety inventory.c. seasonal inventory.d. sourcing.e. All of the above are components of inventory decisions.Answer: eDifficulty: Easy25. All of the following are components of inventory decisions excepta. capacity.b. cycle inventory.c. safety inventory.d. seasonal inventory.e. sourcing.Answer: aDifficulty: Easy26. The average amount of inventory used to satisfy demand between receipt ofsupplier shipments is referred to asa. cycle inventory.b. safety inventory.c. seasonal inventory.d. sourcing.e. none of the aboveAnswer: aDifficulty: Moderate27. The inventory that is built up to counter predictable variability in demandis calleda. cycle inventory.b. safety inventory.c. seasonal inventory.d. sourcing.e. none of the aboveAnswer: cDifficulty: Moderate28. The inventory held in case demand exceeds expectation in order to counteruncertainty is calleda. cycle inventory.b. safety inventory.c. seasonal inventory.d. sourcing.e. none of the aboveAnswer: bDifficulty: Moderate29. The set of business processes required to purchase goods and services isknown asa. cycle inventory.b. safety inventory.c. seasonal inventory.d. sourcing.e. none of the aboveAnswer: dDifficulty: Easy30. Cycle inventory decisions involvea. how much to order for replenishment.b. how often to place orders.c. a basic trade-off between the cost of holding larger lots ofinventory and the cost of ordering product frequently.d. all of the abovee. a and b onlyAnswer: dDifficulty: Moderate31. Cycle inventory is used becausea. the world is perfectly predictable.b. demand is uncertain and may exceed expectations.c. it involves making a trade-off between the costs of having toomuch inventory and the costs of losing sales due to not havingenough inventory.d. it focuses on processes that are external to the firm.e. it focuses on processes that are internal to the firm.Answer: bDifficulty: Moderate32. Seasonal inventory should be used whena. a company can rapidly change the rate of its production system ata very low cost.b. changing the rate of production is expensive (e.g., when workersmust be hired or fired).c. adjusting to a period of low demand without incurring large costs.d. the world is perfectly predictable.e. production rate is flexible.Answer: aDifficulty: Hard33. Sourcing involvesa. deciding the tasks that will be outsourced and those that will beper-formed within the firm.b. deciding whether to source from a single supplier or a portfolioof suppliers.c. identifying the set of criterion that will be used to selectsuppliers and measure their performance.d. selecting suppliers and negotiating contracts with them.e. all of the aboveAnswer: eDifficulty: Easy34. Which of the following are key components of transportation decisions whendesigning and operating a supply chain?a. Mode of transportationb. Route and network selectionc. In-house or outsourced. all of the abovee. none of the aboveAnswer: dDifficulty: Moderate35. Which of the following are key components of transportation decisions whendesigning and operating a supply chain?a. Software selectionb. Mode of transportationc. Source selectiond. Warehouse selectione. none of the aboveAnswer: bDifficulty: Easy36. Which of the following are key components of information that must beanalyzed to increase efficiency and improve effectiveness in a supply chain?a. Push versus pullb. Coordination and information sharingc. Forecasting and aggregate planningd. Pricing and revenue managemente. all of the aboveAnswer: eDifficulty: Moderate37. Which of the following are key components of information that must beanalyzed to increase efficiency and improve effectiveness in a supply chain?a. Software selectionb. Source selectionc. Warehouse selectiond. Forecasting and aggregate planninge. none of the aboveAnswer: dDifficulty: Moderate38. When all the different stages of a supply chain work toward the objectiveof maximizing total supply chain profitability, rather than each stagedevoting itself to its own profitability without considering total supply chain profit, it is known asa. supply chain coordination.b. forecasting.c. aggregate planning.d. revenue management.e. pricing.Answer: aDifficulty: Easy39. The art and science of making projections about what future demand andconditions will be isa. supply chain coordination.b. forecasting.c. aggregate planning.d. revenue management.e. pricing.Answer: bDifficulty: Easy40. Transforming forecasts into plans of activity to satisfy the projecteddemand is known asa. supply chain coordination.b. forecasting.c. aggregate planning.d. revenue management.e. pricing.Answer: cDifficulty: Easy41. The process by which a firm decides how much to charge customers for itsgoods and services isa. supply chain coordination.b. forecasting.c. aggregate planning.d. revenue management.e. pricing.Answer: eDifficulty: Easy42. The use of differential pricing over time or customer segments to maximizeprofits from a limited set of supply chain assets isa. supply chain coordination.b. forecasting.c. aggregate planning.d. revenue management.e. pricing.Answer: dDifficulty: Moderate43. Which of the following are technologies that share and analyze informationin the supply chain?a. Electronic Data Interchange (EDI)b. Internetc. Enterprise Resource Planning (ERP)d. Supply Chain Management (SCM) softwaree. all of the aboveAnswer: eDifficulty: Easy44. Which of the following are technologies that share and analyze informationin the supply chain?a. Internetb. Enterprise Data Planning (EDP)c. Electronic Resource Interchange (ERI)d. Chain Management (CM) softwaree. none of the aboveAnswer: aDifficulty: Moderate45. Which of the following are obstacles to achieving strategic fit?a. Increasing variety of productsb. Decreasing product lifecyclesc. Increasingly demanding customersd. Fragmentation of supply chain ownershipe. all of the aboveAnswer: eDifficulty: Easy46. Which of the following are obstacles to achieving strategic fit?a. Difficulty executing new strategiesb. Globalizationc. Increasingly demanding customersd. Fragmentation of supply chain ownershipe. all of the aboveAnswer: eDifficulty: Moderate47. Which of the following is not an obstacle to achieving strategic fit?a. Increasing variety of productsb. Decreasing product lifecyclesc. Increasingly demanding customersd. Consolidation of supply chain ownershipe. none of the aboveAnswer: dDifficulty: ModerateEssay/Problems1. List and define the four major drivers of supply chain performance.Answer: Facilities are the places in the supply chain network whereproduct is stored, assembled, or fabricated. The two major types offacilities are production sites and storage sites.Inventory is all raw materials, work in process, and finished goodswithin a supply chain. Inventory is an important supply chain driverbecause changing inventory policies can dramatically alter the supply chain’s efficiency and responsiveness.Transportation entails moving inventory from point to point in thesupply chain. Transportation can take the form of many combinations of modes and routes.Information consists of data and analysis concerning facilities,inventory, transportation, and customers throughout the supply chain.Information is potentially the biggest driver of performance in thesupply chain as it directly affects each of the other drivers.Difficulty: Moderate2. Explain the supply chain decision-making framework and the role of thefour major drivers.Answer: The goal of a supply chain strategy is to strike the balancebetween responsiveness and efficiency, resulting in a strategic fit with the competitive strategy. To reach this goal, a company uses the foursupply chain drivers discussed earlier. For each of the individualdrivers, supply chain managers must make a trade-off between efficiency and responsiveness. The combined impact of these four drivers thendetermines the responsiveness and efficiency of the entire supply chain.Most companies begin with a competitive strategy and then decide whattheir supply chain strategy ought to be. The supply chain strategydetermines how the supply chain should perform with respect toefficiency and responsiveness. The supply chain must then use the supply chain drivers to reach the performance level the supply chain strategydictates.Difficulty: Moderate3. Explain the basic trade-off between responsiveness and efficiency foreach of the major drivers of supply chain performance.Answer: The fundamental trade-off when making facilities decisions isbetween the cost of the number, location, and type of facilities(efficiency) and the level of responsiveness that these facilitiesprovide the company’s customers.The fundamental trade-off when making inventory decisions is betweenresponsiveness and efficiency. Increasing inventory will generally make the supply chain more responsive to the customer. This choice, however, comes at a cost as the added inventory decreases efficiency. Therefore,a supply chain manager can use inventory as one of the drivers forreaching the level of responsiveness and efficiency the competitivestrategy targets.The fundamental trade-off for transportation is between the cost oftransporting a given product (efficiency) and the speed with which that product is transported (responsiveness). The transportation choiceinfluences other drivers such as inventory and facilities. When supplychain managers think about making transportation decisions, they framethe decision in terms of this trade-off.Good information systems can help a firm improve both its responsiveness and efficiency. The information driver is used to improve theperformance of other drivers and the use of information is based on the strategic position the other drivers support. Accurate information canhelp a firm improve efficiency by decreasing inventory andtransportation costs. Accurate information can improve responsiveness by helping a supply chain better match supply and demand.Difficulty: Moderate4. Explain the role of each of the major drivers of supply chainperformance.Answer: Facilities are the where of the supply chain if we think ofinventory as what is being passed along the supply chain andtransportation as how it is passed along. They are the locations to orfrom which the inventory is transported. Within a facility, inventory is either processed or transformed into another state (manufacturing) or it is stored before being shipped to the next stage (warehousing).Inventory exists in the supply chain because of a mismatch betweensupply and demand. An important role that inventory plays in the supplychain is to increase the amount of demand that can be satisfied byhaving product ready and available when the customer wants it. Anothersignificant role inventory plays is to reduce cost by exploiting anyeconomies of scale that may exist during both production anddistribution. Inventory is spread throughout the supply chain from rawmaterials to work in process to finished goods that suppliers,manufacturers, distributors, and retailers hold.Inventory is a major source of cost in a supply chain and it has a hugeimpact on responsiveness. The location and quantity of inventory canmove the supply chain from one end of the responsiveness spectrum to the other.Inventory also has a significant impact on the material flow time in asupply chain. Material flow time is the time that elapses between thepoint at which Another important area where inventory has a significantimpact is throughput.Inventory and flow time are synonymous in a supply chain. Managersshould use actions that lower the amount of inventory needed withoutincreasing cost or reducing responsiveness, because reduced flow timecan be a significant advantage in a supply chain.Transportation moves product between different stages in a supply chain.Like the other supply chain drivers, transportation has a large impacton both responsiveness and efficiency. Faster transportation, whether in the form of different modes of transportation or different amounts being transported, allows a supply chain to be more responsive but reduces its efficiency. The type of transportation a company uses also affects theinventory and facility locations in the supply chain.Information could be overlooked as a major supply chain driver becauseit does not have a physical presence. Information, however, deeplyaffects every part of the supply chain. Its impact is easy tounderestimate as information affects a supply chain in many differentways. Information serves as the connection between the supply chain’svarious stages, allowing them to coordinate and bring about many of thebenefits of maximizing total supply chain profitability. Information is also crucial to the daily operations of each stage in a supply chain. For instance, a production scheduling system uses information on demand to create a schedule that allows a factory to produce the right products in an efficient manner. A warehouse management system uses information to create visibility of the warehouse’s inventory. The company can then use this information to determine whether new orders can be filled.Difficulty: Hard5. Explain the role of each of the major drivers of supply chainperformance in the competitive strategy.Answer: Facilities and their corresponding capacities to perform theirfunctions are a key driver of supply chain performance in terms ofresponsiveness and efficiency. For example, companies can gain economies of scale when a product is manufactured or stored in only one location;this centralization increases efficiency. The cost reduction, however,comes at the expense of responsiveness, as many of a company’scustomers may be located far from the production facility. The oppositeis also true. Locating facilities close to customers increases thenumber of facilities needed and consequently reduces efficiency. If thecustomer demands and is willing to pay for the responsiveness thathaving numerous facilities adds, however, then this facilities decisionhelps meet the company’s competitive strategy goals.Inventory plays a significant role in a supply chain’s ability tosupport a firm’s competitive strategy. If a firm’s competitivestrategy requires a very high level of responsiveness, a company can use inventory to achieve this responsiveness by locating large amounts ofinventory close to the customer. Conversely, a company can also useinventory to make itself more efficient by reducing inventory throughcentralized stocking. The latter strategy would support a competitivestrategy of being a low-cost producer. The trade-off implicit in theinventory driver is between the responsiveness that results from moreinventory and the efficiency that results from less inventory.The role of transportation in a company’s competitive strategy figuresprominently when the company is considering the target customer’s needs.If a firm’s competitive strategy targets a customer that demands a very high level of responsiveness, and that customer is willing to pay forthis responsiveness, then a firm can use transportation as one driverfor making the supply chain more responsive. The opposite is true aswell. If a company’s competitive strategy targets customers whose maindecision criterion is price, then the company can use transportation tolower the cost of the product at the expense of responsiveness. As acompany may use both inventory and transportation to increaseresponsiveness or efficiency, the optimal decision for the company often means finding the right balance between the two.。
