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Operations Management: Processes and Supply Chains, 10e (Krajewski et al.

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Chapter 12 Supply Chain Integration
1) Supply chain integration is the effective coordination of supply chain processes through the seamless
flow of information to suppliers, but does not include customers, such as distributors and retailers.
Answer: FALSE
Reference: Introduction
Difficulty: Easy
Keywords: supply chain integration, supplier, customer
Learning Outcome: Compare common approaches to supply chain design.
2) Supply chain integration is the effective coordination of supply chain processes through the seamless
flow of information to suppliers, up and down the supply chain
Answer: TRUE
Reference: Introduction
Difficulty: Easy
Keywords: supply chain integration, supplier, customer
Learning Outcome: Compare common approaches to supply chain design.
3) A supply chain can be thought of as a river that flows from raw material suppliers to consumers.
Answer: TRUE
Reference: Supply Chain Integration Across The Organization
Difficulty: Easy
Keywords: supply chain, river, raw material supplier, consumer
4) The finished goods of one firm may actually be the raw materials for another firm.
Answer: TRUE
Reference: Supply Chain Dynamics
Difficulty: Moderate
Keywords: finished goods, raw materials
5) The bullwhip effect says that in any supply chain, the ordering patterns experience increasing variance
as you move closer to the end customer.
Answer: FALSE
Reference: Supply Chain Dynamics
Difficulty: Moderate
Keywords: bullwhip, variance
Learning Outcome: Compare common approaches to supply chain design.
6) A common disruption of the external supply chain is product and service mix changes.
Answer: TRUE
Reference: Supply Chain Dynamics
Difficulty: Moderate
Keywords: disruption, external supply chain, mix

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7) A common disruption of the external supply chain is engineering changes.


Answer: FALSE
Reference: Supply Chain Dynamics
Difficulty: Moderate
Keywords: external supply chain, engineering change
8) A common disruption of the supply chain resulting from internal causes is order batching.
Answer: TRUE
Reference: Supply Chain Dynamics
Difficulty: Moderate
Keywords: disruption, internal supply chain, mix
9) A common disruption of the supply chain resulting from internal causes is demand volume changes.
Answer: FALSE
Reference: Supply Chain Dynamics
Difficulty: Moderate
Keywords: disruption, internal supply chain, mix
10) SKUs with higher volumes and lower weekly variability may be best served with a make- to-stock
supply chain design.
Answer: TRUE
Reference: Supply Chain Dynamics
Difficulty: Moderate
Keywords: MTS, make to stock, volume, variability
11) SKUs with lower volumes and higher weekly variability may be best served with an assemble-to-order
or make-to-order supply chain design.
Answer: TRUE
Reference: Supply Chain Dynamics
Difficulty: Moderate
Keywords: ATO, MTO, assemble to order, make to order, volume, variability
12) The SCOR model provides guidelines for how materials are to be delivered along a supply chain.
Answer: FALSE
Reference: Supply Chain Dynamics
Difficulty: Moderate
Keywords: SCOR, supply chain
13) The SCOR model focuses on the supply chain processes of planning, making, sourcing, delivering,
and returning.
Answer: TRUE
Reference: Supply Chain Dynamics
Difficulty: Moderate
Keywords: SCOR, supply chain

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14) Concurrent engineering is the term used to describe a firm's development of a new product after it
has been discovered that a competitor is engineering a similar product for launch.
Answer: FALSE
Reference: New Service or Product Development Process
Difficulty: Moderate
Keywords: concurrent engineering, product development
15) Concurrent engineering helps firms avoid the costly mismatch between the design of a new offering
and the capability of the processes required to produce it.
Answer: TRUE
Reference: New Service or Product Development Process
Difficulty: Moderate
Keywords: concurrent engineering, product development
16) The ramp-up stage of the development process precedes the full launch stage.
Answer: FALSE
Reference: New Service or Product Development Process
Difficulty: Moderate
Keywords: development, stage, launch stage, ramp-up
17) A strain is placed on the supply chain during the ramp-up stage of the development process due to
changing volumes, quality issues and last minute design changes.
Answer: TRUE
Reference: New Service or Product Development Process
Difficulty: Moderate
Keywords: development process, ramp-up stage
18) In presourcing, suppliers are selected early in the concept-development stage.
Answer: TRUE
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: presourcing, development
Learning Outcome: Compare common approaches to supply chain design.
19) Once certified, a supplier can be used by the purchasing department without the purchaser having to
make background checks.
Answer: TRUE
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: certified, supplier, background checks
Learning Outcome: Compare common approaches to supply chain design.
20) Value analysis is a systematic effort to reduce the cost or improve the performance of a service or
product.
Answer: TRUE
Reference: Supplier Relationship Process
Difficulty: Moderate
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Keywords: value analysis, systematic, reduce, improve


21) A buyer has more purchasing power when fewer substitutes are available.
Answer: FALSE
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: purchasing power, substitutes
22) Electronic Data Interchange enables the transmission of routine, standardized business documents
from computer to computer over telephone or direct leased lines.
Answer: TRUE
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: EDI, transmission, standardized business documents
Learning Outcome: Compare common approaches to supply chain design.
23) Green purchasing involves identifying, assessing, and managing the flow of environmental waste and
finding ways to reduce it and minimize its impact on the environment.
Answer: TRUE
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: green purchasing, environment
Learning Outcome: Discuss the role of operations management in corporate social responsibility and
sustainability
24) The competitive orientation to supplier relations is that the buyer and supplier are partners.
Answer: FALSE
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: competitive orientation, supplier, buyer
25) In a competitive orientation to negotiations between buyer and supplier, the buyer does not always
possess the power in the relationshipthe supplier sometimes holds the power and can exercise this
power during negotiations with the buyer.
Answer: TRUE
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: competitive orientation, supplier, buyer
26) The most used form of e-purchasing today is electronic data interchange.
Answer: TRUE
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: e-purchasing, electronic data interchange

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27) A catalog hub is a central distribution point where buyers may purchase items directly from
manufacturers before the items are shipped to retailers.
Answer: FALSE
Reference: Supplier Relationship Process
Difficulty: Easy
Keywords: catalog hub, central distribution point
Learning Outcome: Compare common approaches to supply chain design.
28) An electronic market that brings together textbook sellers, office supply companies, apparel vendors,
and students is an example of an exchange.
Answer: TRUE
Reference: Supplier Relationship Process
Difficulty: Easy
Keywords: exchange, electronic, buyer, seller
Learning Outcome: Compare common approaches to supply chain design.
29) Reducing the number of suppliers for an item carries an increased risk of interruption in supply.
Answer: TRUE
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: sourcing, risk, supply
Learning Outcome: Compare common approaches to supply chain design.
30) Early supplier involvement is a program that allows suppliers to fill orders prior to the customer
placing them.
Answer: FALSE
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: early supplier involvement
Learning Outcome: Compare common approaches to supply chain design.
31) The order-fulfillment process involves the activities to deliver a product or service to the customer.
Answer: TRUE
Reference: The Order Fulfillment Process
Difficulty: Moderate
Keywords: order-fulfillment, deliver, customer
32) Vendor-managed inventories are an example of the forward-placement tactic.
Answer: TRUE
Reference: The Order Fulfillment Process
Difficulty: Moderate
Keywords: vendor-managed inventories, forward-placement
Learning Outcome: Compare common approaches to supply chain design.

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33) Drop shipping occurs when a retailer passes customer orders directly to a wholesaler or manufacturer,
which then ships the order directly to the customer with the retailer's label on it.
Answer: TRUE
Reference: The Order Fulfillment Process
Difficulty: Moderate
Keywords: drop-shipping
Learning Outcome: Compare common approaches to supply chain design.
34) The cost of equipment, labor, facilities and maintenance must all be considered when a firm decides to
use a contract carrier for its distribution.
Answer: TRUE
Reference: The Order Fulfillment Process
Difficulty: Easy
Keywords: contract-carrier, distribution
Learning Outcome: Compare common approaches to supply chain design.
35) Using rail to move large quantities of goods is relatively cheap, but transit times are long and often
variable.
Answer: TRUE
Reference: The Order Fulfillment Process
Difficulty: Easy
Keywords: rail, large quantities, cheap
36) A cross-docking warehouse holds inventory from manufacturers until retailers are prepared to sell the
items.
Answer: FALSE
Reference: The Order Fulfillment Process
Difficulty: Easy
Keywords: cross-docking, warehouse
37) Which of the following is NOT a component of the supply chain?
A) order fulfillment
B) materials
C) customer relationship
D) competitors
Answer: D
Reference: Supply Chain Integration Across The Organization
Difficulty: Easy
Keywords: supply chain, component

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38) The bullwhip effect is characterized by:


A) ordering patterns that experience increasing variance as you proceed downstream in the chain.
B) ordering patterns that experience increasing variance as you proceed upstream in the chain.
C) purchasing patterns that experience increasing variance downstream in the chain.
D) purchasing patterns that experience decreasing variance as you proceed upstream in the chain.
Answer: B
Reference: Supply Chain Dynamics
Difficulty: Moderate
Keywords: bullwhip effect, variation
39) Which of the following changes would decrease the likelihood of the bullwhip effect?
A) changing the mix of items in an order
B) sending partial shipments of an order
C) instituting a policy of no discounts or promotions
D) sending late deliveries of an order
Answer: C
Reference: Supply Chain Dynamics
Difficulty: Moderate
Keywords: bullwhip effect, variation
40) Which of the following changes would increase the likelihood of a supply chain experiencing the
bullwhip effect?
A) engineering changes to the design of a product
B) instituting a more accurate materials management information system
C) closely coordinating promotions with the internal marketing department and suppliers
D) using a more reliable delivery company
Answer: A
Reference: Supply Chain Dynamics
Difficulty: Easy
Keywords: bullwhip effect, variation
41) Which of the following is NOT an internal cause of supply chain disruptions?
A) engineering changes
B) batching of orders
C) service or product promotions
D) underfilled shipments
Answer: D
Reference: Supply Chain Dynamics
Difficulty: Easy
Keywords: internal cause, supply chain disruptions

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42) Which of the following is NOT an external cause of supply chain disruptions?
A) late deliveries
B) new service or product introductions
C) customer service or product mix changes
D) underfilled shipments
Answer: B
Reference: Supply Chain Dynamics
Difficulty: Easy
Keywords: external cause, supply chain disruptions
43) One source of disruption caused by the internal supply chain is:
A) forecast error.
B) underfilled shipments.
C) volume changes.
D) late deliveries.
Answer: A
Reference: Supply Chain Dynamics
Difficulty: Easy
Keywords: internal supply chain, disruption
44) One source of disruption caused by the external supply chain is:
A) product or sales promotions.
B) new product or service introduction.
C) late deliveries.
D) engineering changes.
Answer: C
Reference: Supply Chain Dynamics
Difficulty: Moderate
Keywords: external supply chain, disruption
45) Possible causes of disruption due to internal supply chain problems are:
A) late deliveries.
B) machine breakdowns or inexperienced workers.
C) product and service mix changes.
D) underfilled shipments.
Answer: B
Reference: Supply Chain Dynamics
Difficulty: Moderate
Keywords: disruption, internal supply chain

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46) The SCOR model focuses on the basic supply chain processes of:
A) source, control, operate, return.
B) plan source, make deliver, return.
C) purchase, operate, control, logistics.
D) operations, marketing, finance.
Answer: B
Reference: Supply Chain Dynamics
Difficulty: Moderate
Keywords: SCOR
47) The SCOR model requires a(n):
A) three-tier supply chain.
B) point of reference.
C) make-to-order or assemble-to-order product.
D) process view.
Answer: B
Reference: Supply Chain Dynamics
Difficulty: Moderate
Keywords: SCOR
48) Which of the following is NOT a stage in the New Service / Product Development Process?
A) development
B) design
C) maintenance
D) analysis
Answer: C
Reference: New Service or Product Development Process
Difficulty: Easy
Keywords: stage, New Service / Product Development Process
49) The stage of new product or service development that links the creation of new services or products to
the corporate strategy of the firm is called:
A) design.
B) analysis.
C) development.
D) full launch.
Answer: A
Reference: New Service or Product Development Process
Difficulty: Moderate
Keywords: stage, development, new, corporate strategy

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50) The product development team ensures compatibility of the proposed product with corporate
strategy and regulatory standards in the:
A) design stage.
B) analysis stage.
C) development stage.
D) full launch stage.
Answer: B
Reference: New Service or Product Development Process
Difficulty: Moderate
Keywords: product development team, corporate strategy, regulatory standards
51) The stage of new service or product development at which personnel are trained and some pilot runs
can be conducted to look for possible problems in production is called:
A) design.
B) analysis.
C) development.
D) full launch.
Answer: C
Reference: New Service or Product Development Process
Difficulty: Moderate
Keywords: development, stage, new, service, product
52) A new product development team that is composed of product and process engineers, marketers,
quality specialists, and buyers that work together to make sure the new product can actually be built is
engaging in:
A) concurrent engineering.
B) joint application development.
C) reverse logistics.
D) core process design.
Answer: A
Reference: New Service or Product Development Process
Difficulty: Easy
Keywords: development, stage, new, service, product
53) Which one of the following statements is TRUE about purchasing?
A) Purchasing's primary role is to satisfy the firm's long-term supply needs.
B) Purchasing's primary role should be placing and tracking orders.
C) Purchasing's primary role is to negotiate lower prices.
D) Purchasing's primary role is to negotiate prices and delivery dates.
Answer: A
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: purchasing, supply

12-10
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Use the following to answer the questions below.


The Burdell Wheel and Tire Company assembles tires to wheel rims for use on cars during manufacture
of vehicles by the automotive industry. Burdell wants to locate a low-cost supplier for the tires he uses in
his assembly operation. The supplier will be selected based on total annual cost to supply Burdell's needs.
Burdell's annual requirements are for 25,000 tires, and the company operates 250 days a year. The
following data are available for two suppliers being considered.

SUPPLIER
LEXINGTON
TIRE
IRMO
AUTO

SHIPPING
QUANTITY ANNUAL PRICE INVENTORY LEAD
PER
SHIPPING / TIRE HOLD COSTS TIME
SHIPMENT COSTS
(p)
(H)
(DAYS)

ADMIN.
COSTS

2,000

$18,000

$30

$6.00

$15,000

1,000

$25,000

$29

$5.80

$18,000

54) Refer to the instruction above. What are the annual material costs for Lexington Tire?
A) $60,000
B) $750,000
C) $725,000
D) $3,000
Answer: B
Reference: Supplier Relationship Process
Difficulty: Easy
Keywords: supplier relationship, sourcing, supplier selection
AACSB: Analytic skills
55) Refer to the instruction above. What are the annual material savings available when comparing the
two suppliers?
A) $25,000
B) $150,000
C) $725,000
D) $3,000
Answer: A
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: supplier relationship, sourcing, supplier selection
AACSB: Analytic skills

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56) Refer to the instruction above. How many shipments per year are required if Irmo Auto is the supplier
selected?
A) 1,000
B) 750
C) 25
D) 100
Answer: C
Reference: Supplier Relationship Process
Difficulty: Easy
Keywords: supplier relationship, sourcing, supplier selection
AACSB: Analytic skills
57) Refer to the instruction above. What are the annual shipping savings available when comparing the
two suppliers?
A) $25,000
B) $18,000
C) $72,500
D) $7,000
Answer: D
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: supplier relationship, sourcing, supplier selection
AACSB: Analytic skills
58) Refer to the instruction above. What are the annual inventory costs if the lower inventory cost supplier
is selected?
A) $5,220
B) $9,600
C) $6,600
D) $6,320
Answer: A
Reference: Supplier Relationship Process
Difficulty: Hard
Keywords: supplier relationship, sourcing, supplier selection
AACSB: Analytic skills
59) Refer to the instruction above. What are the total annual costs if Lexington Tire is the supplier
selected?
A) $791,600
B) $792,600
C) $772,320
D) $769,320
Answer: B
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: supplier relationship, sourcing, supplier selection
AACSB: Analytic skills
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60) Refer to the instruction above. What are the total annual costs if Irmo Auto is the supplier selected?
A) $791,600
B) $792,600
C) $773,220
D) $769,320
Answer: C
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: supplier relationship, sourcing, supplier selection
AACSB: Analytic skills
61) Refer to the instruction above. Based on your Total Cost Analysis, which supplier should be selected if
the lower cost supplier is chosen?
A) Lexington Tire
B) Irmo Auto
C) Since the costs are the same, either supplier could be selected.
D) More information is needed to answer this question.
Answer: B
Reference: Supplier Relationship Process
Difficulty: Hard
Keywords: supplier relationship, sourcing, supplier selection
62) Refer to the instruction above. What are the total annual savings if the lower cost supplier is selected?
A) $1,000
B) $19,380
C) $3,000
D) $6,320
Answer: B
Reference: Supplier Relationship Process
Difficulty: Hard
Keywords: supplier relationship, sourcing, supplier selection
AACSB: Analytic skills
63) Refer to the instruction above. The high-cost supplier desperately wants the Burdell Company
business. They have indicated that if Burdell will select them as their supplier, they will not charge for
shipping. How does this change the decision on tire suppliers?
A) The high-cost supplier is now lower, and becomes the tire supplier for Burdell.
B) The suppliers are now equal cost, and Burdell can select either supplier.
C) It doesn't change the decisionthey are still the high-cost supplier.
D) More information is required to make this decision.
Answer: C
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: supplier relationship, sourcing, supplier selection

12-13
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Use the following to answer the questions below.


The Burdell Wheel and Tire Company has completed a total cost analysis for two suppliers of tires to
support their business. They also consider delivery speed, consistent quality and environmental
sensitivity in their selection process. Each criterion is given a weight (total = 100 points), and each
supplier is scored on each criterion (1 = poor, 10 = excellent). The data are shown in the following table.

CRITERION
Total Cost
Delivery Speed
Consistent Quality
Environmental Sensitivity

WEIGHT
20
25
25
30

LEXINGTON
TIRE
5
6
8
4

IRMO
AUTO
6
5
6
7

64) Refer to the instruction above. Using the preference matrix approach for selecting suppliers, what is
Lexington Tire's total weighted score?
A) 570
B) 100
C) 23
D) 605
Answer: A
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: supplier relationship, sourcing, supplier selection, preference matrix
AACSB: Analytic skills
65) Refer to the instruction above. Using the preference matrix approach for selecting suppliers, what is
Irmo Auto's total weighted score?
A) 570
B) 100
C) 24
D) 605
Answer: D
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: supplier relationship, sourcing, supplier selection, preference matrix
AACSB: Analytic skills
66) Refer to the instruction above. Using the preference matrix approach for selecting suppliers, which
supplier should Burdell select? total weighted score?
A) Lexington Tire
B) Irmo Auto
C) Neither is acceptabletheir preference matrix scores are not high enough to be selected.
D) More information is needed to make this decision.
Answer: B
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: supplier relationship, sourcing, supplier selection, preference matrix
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AACSB: Analytic skills


Use the following to answer the questions below.
The Steele Bike Company assembles bicycles for a major retail toy outlet. The main purchase is bicycle
frames for making these bicycles. Dan Steele, the owner, wants to locate a low-cost supplier for the frames
used in this assembly operation. The supplier will be selected based on total annual cost to supply Steele's
needs. Annual requirements are for 100,000 frames, and the company operates 200 days a year. Two
suppliers, Acme and State, have quoted the same price for the frames, but quantities, lead times and
shipping costs are considerably different. The following data are available for the two suppliers.
SHIPPING
QUANTITY
PER
SUPPLIER SHIPMENT
ACME
7,500
STATE
2,500

ANNUAL
SHIPPING
COSTS
$35,000
$60,000

PRICE /
FRAME (p)
$39
$39

INVENTORY
HOLD COSTS
(H)
$7.80
$7.80

LEAD
TIME
(DAYS)
7
3

ADMIN.
COSTS
$20,000
$45,000

67) Refer to the instruction above. What are the annual material costs for Acme?
A) $550,000
B) $750,000
C) $3,900,000
D) $35,000
Answer: C
Reference: Supplier Relationship Process
Difficulty: Easy
Keywords: supplier relationship, sourcing, supplier selection
AACSB: Analytic skills
68) Refer to the instruction above. What are the annual material savings available when comparing the
two suppliers?
A) $7,800
B) $390,000
C) $750,000
D) The materials are the same cost from either supplier
Answer: D
Reference: Supplier Relationship Process
Difficulty: Easy
Keywords: supplier relationship, sourcing, supplier selection
AACSB: Analytic skills

12-15
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69) Refer to the instruction above. How many shipments per year are required if State is the supplier
selected?
A) 13.3
B) 40
C) 200
D) 10
Answer: B
Reference: Supplier Relationship Process
Difficulty: Easy
Keywords: supplier relationship, sourcing, supplier selection
AACSB: Analytic skills
70) Refer to the instruction above. What are the annual shipping savings available when comparing the
two suppliers?
A) $25,000
B) $10,000
C) $7,500
D) Shipping costs are the same from either supplier
Answer: A
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: supplier relationship, sourcing, supplier selection
AACSB: Analytic skills
71) Refer to the instruction above. What are the annual inventory costs if the lower inventory cost supplier
is selected?
A) $56,550
B) $96,500
C) $21,450
D) $7,800
Answer: C
Reference: Supplier Relationship Process
Difficulty: Hard
Keywords: supplier relationship, sourcing, supplier selection
AACSB: Analytic skills
72) Refer to the instruction above. What are the total annual costs if Acme is the supplier selected?
A) $4,010,450
B) $113,550
C) $4,001,050
D) $4,011,550
Answer: D
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: supplier relationship, sourcing, supplier selection
AACSB: Analytic skills
12-16
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73) Refer to the instruction above. What are the total annual costs if State is the supplier selected?
A) $4,026,450
B) $110,450
C) $4,001,050
D) $4,016,550
Answer: A
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: supplier relationship, sourcing, supplier selection
AACSB: Analytic skills
74) Refer to the instruction above. Based on your Total Cost Analysis, which supplier should be selected if
the lower cost supplier is chosen?
A) Acme
B) State
C) Since the costs are the same, either supplier could be selected.
D) More information is needed to answer this question.
Answer: A
Reference: Supplier Relationship Process
Difficulty: Hard
Keywords: supplier relationship, sourcing, supplier selection
75) Refer to the instruction above. What are the total annual savings if the lower cost supplier is selected?
A) $1,000
B) $12,500
C) $9,400
D) $14,900
Answer: D
Reference: Supplier Relationship Process
Difficulty: Hard
Keywords: supplier relationship, sourcing, supplier selection
AACSB: Analytic skills
76) Refer to the instruction above. The high-cost supplier has indicated that if Steele will select them as
the supplier of choice, they will not charge for shipping. How does this change the decision on bicycle
frame suppliers?
A) The high-cost supplier is now the low-cost supplier, and becomes the frame supplier for Steele.
B) The suppliers are now equal cost, and Steele can select either supplier.
C) It doesn't change the decisionthey are still the high-cost supplier.
D) More information is required to make this decision.
Answer: A
Reference: Supplier Relationship Process
Difficulty: Easy
Keywords: supplier relationship, sourcing, supplier selection

12-17
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Use the following to answer the questions below.


The Steele Bike Company has completed a total cost analysis for two suppliers of bicycle frames to
support their business. They also consider on-time speed, top quality and customization in their selection
process. Each criterion is given a weight (total = 100 points), and each supplier is scored on each criterion
(1 = poor, 10 = excellent). The data are shown in the following table.
CRITERION
Total Cost
On-Time Delivery
Top Quality
Customization

WEIGHT
15
20
30
35

ACME
8
5
7
4

STATE
4
7
6
6

77) Refer to the instruction above. Using the preference matrix approach for selecting suppliers, what is
State's total weighted score?
A) 570
B) 100
C) 23
D) 590
Answer: D
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: supplier relationship, sourcing, supplier selection, preference matrix
AACSB: Analytic skills
78) Refer to the instruction above. Using the preference matrix approach for selecting suppliers, what is
Acme's total weighted score?
A) 100
B) 570
C) 24
D) 590
Answer: B
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: supplier relationship, sourcing, supplier selection, preference matrix
AACSB: Analytic skills
79) Refer to the instruction above. Using the preference matrix (total weighted score) approach for
selecting suppliers, which supplier should Steele select?
A) State
B) Acme
C) Either is acceptabletheir preference matrix scores are the same.
D) More information is needed to make this decision.
Answer: A
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: supplier relationship, sourcing, supplier selection, preference matrix
12-18
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80) The practice of selecting suppliers and giving them significant responsibility for the design of certain
components or systems of the product is called:
A) value analysis.
B) locus of control.
C) presourcing.
D) vendor-managed inventories.
Answer: C
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: supply chain, design, collaboration, early supplier involvement, presourcing
Learning Outcome: Compare common approaches to supply chain design.
81) A systematic effort to reduce the cost or improve the performance of services or products is known as:
A) presourcing.
B) cooperative orientation.
C) supplier certification.
D) value analysis.
Answer: D
Reference: Supplier Relationship Process
Difficulty: Easy
Keywords: supply chain, design, collaboration, early supplier involvement, value analysis
82) Suppliers can gain power from a number of sources in the buyer / supplier relationship. When a
supplier values identification with a buyer, this is called a(n) ________ source of power.
A) expert
B) reward
C) referent
D) legal
Answer: C
Reference: Supplier Relationship Process
Difficulty: Hard
Keywords: supply chain, negotiation, competitive, orientation, sources, power
Learning Outcome: Compare common approaches to supply chain design.
83) Suppliers can gain power from a number of sources in the buyer / supplier relationship. When a
buyer has access to knowledge, information and skills desired by the supplier, this is called a(n) ________
source of power.
A) expert
B) reward
C) referent
D) coercive
Answer: A
Reference: Supplier Relationship Process
Difficulty: Hard
Keywords: supply chain, negotiation, competitive, orientation, sources, power
Learning Outcome: Compare common approaches to supply chain design.
12-19
Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

84) Suppliers can gain power from a number of sources in the buyer / supplier relationship. When a
buyer can threaten to cancel future business unless the supplier adheres to the buyer's demands, this is
called a ________ source of power.
A) legal
B) reward
C) referent
D) coercive
Answer: D
Reference: Supplier Relationship Process
Difficulty: Hard
Keywords: supply chain, negotiation, competitive, orientation, sources, power
85) Approaches to e-purchasing include all of the following EXCEPT:
A) catalog hubs.
B) radio frequency identification (RFID).
C) exchanges.
D) electronic data interchange (EDI).
Answer: B
Reference: Supplier Relationship Process
Difficulty: Hard
Keywords: supply chain, buying, e-purchasing
Learning Outcome: Compare common approaches to supply chain design.
86) Examples of radio frequency identification (RFID) could include all of the following EXCEPT:
A) tracking the status of engineering changes during development of a new product line.
B) tracking cases and pallets of products into and out of warehouse inventories.
C) air travel use for baggage tracking.
D) tracking the flow of parts through a manufacturing process.
Answer: A
Reference: Supplier Relationship Process
Difficulty: Hard
Keywords: supply chain, buying, e-purchasing
87) The practice whereby a manufacturer has inventories of materials on consignment from its suppliers
falls under the scope of:
A) inventory pooling control.
B) virtual distribution.
C) electronic inventory control.
D) vendor-managed inventories.
Answer: D
Reference: Supplier Relationship Process
Difficulty: Easy
Keywords: virtual, supply chain, traditional
Learning Outcome: Compare common approaches to supply chain design.

12-20
Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

88) One of the benefits of a cooperative orientation in supplier relationships is:


A) the buyer sometimes suggests ways to improve the supplier's operations.
B) the supplier implements its own quality standards.
C) the buyer does not have to share much information with the supplier.
D) the supplier has complete freedom in choosing the delivery time.
Answer: A
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: cooperative orientation, supplier relationship
Learning Outcome: Compare common approaches to supply chain design.
89) Which one of the following statements correctly represents a benefit of centralized buying?
A) Local managers have more control over their business.
B) Purchases and production schedules are meshed more easily.
C) Customization to local preferences is simplified.
D) Increased buying power can result in significant savings in purchasing costs.
Answer: D
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: centralized buying, purchasing
Learning Outcome: Compare common approaches to supply chain design.
90) Which one of the following statements is TRUE about a cooperative orientation in supplier
relationships?
A) It cannot be implemented in Western countries because competitive bidding is more effective in that
culture.
B) It cannot be implemented in the Western countries because it always benefits the supplier.
C) It requires all parts and subassemblies to be purchased from the same supplier.
D) It requires few suppliers for each item or service.
Answer: D
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: cooperative orientation, supplier
Learning Outcome: Compare common approaches to supply chain design.
91) Which of the following statements about cross-docking is NOT correct?
A) Cross-docking is packing products on incoming shipments so they can be easily sorted for outgoing
shipments based on their final destination.
B) Cross-docking reduces inventory and storage space requirements, but handling costs and lead times
tend to increase.
C) Items are moved from incoming vehicles to outgoing vehicles without being stored in warehouse
inventory.
D) Inbound and outbound shipments must be tightly coordinated for cross-docking to work.
Answer: B
Reference: Order Fulfillment Process
Difficulty: Moderate
Keywords: order fulfillment, cross-docking
12-21
Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

92) Which of the following is NOT an advantage the Internet provides for a firm's order placement
process?
A) greater variety and better quality of products available
B) cost reduction
C) increase in revenue flow
D) pricing flexibility
E) global access
Answer: A
Reference: Customer Relationship Process
Difficulty: Easy
Keywords: customer relationship, Internet, order placement
93) Which of the following is NOT an advantage resulting from a firm outsourcing its customer service
process?
A) specific detailed questions can be answered by the customer service representative.
B) the firm gains more control over the customer interface process.
C) customer service labor costs are low.
D) automated systems are replaced by human contact.
Answer: B
Reference: Customer Relationship Process
Difficulty: Moderate
Keywords: customer relationship, customer service, outsourcing
Learning Outcome: Compare common approaches to supply chain design.
94) Which of the following is NOT a lever in an integrated supply chain?
A) collaborative activities by supply chain partners
B) reduced replenishment lead times
C) reduced order lot sizes
D) elimination of product shortages and backorders
Answer: D
Reference: Customer Relationship Process
Difficulty: Moderate
Keywords: supply chain, levers
Learning Outcome: Compare common approaches to supply chain design.
95) What is the meaning of the acronym 3PL?
A) three pofit/loss periods
B) three purchasing locations
C) three partner leverage
D) third party logistics provider
Answer: D
Reference: The Order Fulfillment Process
Difficulty: Moderate
Keywords: 3PL, third-party logistics
Learning Outcome: Compare common approaches to supply chain design.

12-22
Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

96) What services are typically offered by a 3PL?


A) transportation
B) product design
C) catalog hub
D) auction
Answer: A
Reference: The Order Fulfillment Process
Difficulty: Moderate
Keywords: 3PL, third-party logistics
Learning Outcome: Compare common approaches to supply chain design.
97) The ________ is the phenomenon in supply chains whereby ordering patterns experience increasing
variance as you proceed upstream in the chain.
Answer: bullwhip effect
Reference: Supply Chain Dynamics
Difficulty: Moderate
Keywords: bullwhip effect, variance
98) ________ and ________ supply chain designs are well-suited to products with low demand and high
variability.
Answer: ATO (assemble-to-order), MTO (make-to-order)
Reference: Supply Chain Dynamics
Difficulty: Moderate
Keywords: SCOR, supply chain operations reference model
99) The bullwhip effect results in greater demand variability at the ________ end of the supply chain and
lesser demand variability at the ________ end of the supply chain.
Answer: factory or upstream, customer or downstream
Reference: Supply Chain Dynamics
Difficulty: Moderate
Keywords: bullwhip effect
100) The ________ model focuses on the supply chain processes plan, source, make, deliver, and return.
Answer: SCOR (supply chain operations reference)
Reference: Supply Chain Dynamics
Difficulty: Moderate
Keywords: SCOR, supply chain operations reference model
101) ________ brings product engineers, process engineers, marketers, buyers, information specialists,
quality specialists and suppliers together to work jointly to design a product and all its processes.
Answer: Concurrent engineering
Reference: New Service or Product Development Process
Difficulty: Easy
Keywords: concurrent engineering, design, new

12-23
Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

102) ________ is the management of the acquisition process, which includes deciding which suppliers to
use, negotiating contracts, and deciding whether to buy locally.
Answer: Purchasing
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: purchasing, acquisition
103) ________ is a supplier relation in which the buyer and seller are partners, each helping the other as
much as possible.
Answer: Cooperative orientation
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: cooperative supplier orientation
Learning Outcome: Compare common approaches to supply chain design.
104) Steve-O engaged in ________ by using only suppliers that recycled and managed their flow of
environmental waste.
Answer: green purchasing
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: green purchasing, environmental waste
Learning Outcome: Discuss the role of operations management in corporate social responsibility and
sustainability
105) ________ programs verify that potential suppliers have the capability to provide materials or services
which the buying firms require.
Answer: Supplier certification
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: supplier, certification
106) ________ is the awarding of a contract for an item or service to only one supplier.
Answer: Sole sourcing
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: sole sourcing, source
107) ________ is a systematic effort to reduce the cost or improve the performance of products and
services, either purchased or produced.
Answer: Value analysis
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: value analysis

12-24
Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

108) Knoxville Industries had their supplier design the improved body armor for their new apparel. This
level of supplier involvement, known as ________ was sure to result in a pain free season.
Answer: presourcing
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: presourcing
Learning Outcome: Compare common approaches to supply chain design.
109) ________ are electronic marketplaces where buying and selling firms meet to do business, without
protracted contract negotiations.
Answer: Exchanges
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: exchange
Learning Outcome: Compare common approaches to supply chain design.
110) ________ is the condition where the buyer has purchasing power when the purchasing volume
represents a significant share of the supplier's sales.
Answer: Economic dependency
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: economic dependency
Learning Outcome: Compare common approaches to supply chain design.
111) The ________ process involves the activities required to register the need for a product or service and
to confirm the acceptance of the order.
Answer: order placement
Reference: The Customer Relationship Process
Difficulty: Moderate
Keywords: order placement
112) The ________ process involves the activities required to deliver a product or service to a customer.
Answer: order fulfillment
Reference: The Order Fulfillment Process
Difficulty: Moderate
Keywords: order fulfillment
113) ________ is an extreme application of the forward placement tactic.
Answer: Vendor managed inventories (VMI)
Reference: The Order Fulfillment Process
Difficulty: Moderate
Keywords: forward placement
Learning Outcome: Compare common approaches to supply chain design.

12-25
Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

114) Draw a graph illustrating the bullwhip effect and discuss its impact on the measures of supply chain
performance.
Answer: Sketches will vary slightly, but should illustrate increased variability upstream in the supply
chain. The inventory measures of supply chain performance, average aggregate inventory value, weeks of
supply, and inventory turnover, will fluctuate as the whip is cracked. At times, the measures may be
deceptively strong, but at other times in the bullwhip cycle the measures will be abysmal. Process
measures relating to customer relationship, order fulfillment, and supplier relationship will also fluctuate
although measures like "customer satisfaction" may deteriorate as customers tire of the rollercoaster
performance of the supply chain. Financial measures like ROA, CGS, total revenue, cash flow, and
working capital will also behave cyclically but will be weaker than a supply chain operating sans
bullwhip effect. At times, members of the supply chain will be caught holding the bag on inventory and
forced to dump it at bargain prices and at other times supply chain members will be unable to acquire the
inventory they need or will have to pay exorbitant costs to acquire it.
Reference: Supply Chain Dynamics/Measures of Supply Chain Performance
Difficulty: Moderate
Keywords: bullwhip effect, inventory measures
115) List and describe typical disruptions to the external supply chains.
Answer: Typical disruptions include volume changes, product and service mix changes, late deliveries,
and underfilled shipments. Volume changes occur when customers change the quantity of the product or
service they have ordered for a specific date or unexpectedly demand more of a standard product or
service. Product or service mix changes occur when customers change the mix of items in an order and
cause a ripple effect throughout the supply chain. Late deliveries of materials or delays in essential
services can force a firm to switch its schedule from production of one product model to another. Finally,
suppliers that send partial shipments do so because of disruptions at their own plants.
Reference: Supply Chain Dynamics
Difficulty: Moderate
Keywords: external supply chains, disruptions
116) .List and describe typical disruptions to the internal supply chain.
Answer: Typical disruptions include internally generated shortages, engineering changes, new product or
service introductions, product or service promotions, and information errors. Internally generated
shortages are the shortage of parts that result from machine breakdowns or inexperienced workers.
Engineering changes are changes to designs. The introduction of new products or services can cause
disruptions. Product or service promotions are a common practice of firms producing standard products
or services and can cause a spike in demand. Finally, information errors, such as demand-forecast errors
or physical count errors, can cause disruptions.
Reference: Supply Chain Dynamics
Difficulty: Moderate
Keywords: internal supply chains, disruptions
117) .What are the elements of the SCOR model?
Answer: The SCOR model focuses on basic supply chain plan, source, make, deliver, and return
processes, repeated again and again along the supply chain.
Reference: Supply Chain Dynamics
Difficulty: Moderate
Keywords: SCOR
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Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

118) What are some ways that supply chain partners can collaborate on product designs? How do these
ways differ?
Answer: An approach that many firms are using in their design collaboration process is called early
supplier involvement, which is a program that includes suppliers in the design phase of a service or
product. Suppliers provide suggestions for design changes and materials choices that will result in more
efficient operations and higher quality. In the automotive industry, an even higher level of early supplier
involvement is known as presourcing, whereby suppliers are selected early in a product's concept
development stage and are given significant, if not total, responsibility for the design of certain
components or systems of the product. Presourced suppliers also take responsibility for the cost, quality,
and on-time delivery of the items they produce. Firms can also improve performance by engaging in
value analysis, which is a systematic effort to reduce the cost or improve the performance of services or
products, either purchased or produced. It is an intensive examination of the services, materials,
processes, information systems, and flows of material involved in the production of a service or an item.
Benefits include reduced production, materials, and distribution costs; improved profit margins; and
increased customer satisfaction.
Reference: Supply Chain Dynamics
Difficulty: Moderate
Keywords: presourcing, value analysis, early supplier involvement

12-27
Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

119) The authors present four types of e-purchasing; what are they and how do they work? Which of
these could be accomplished by the least IT-savvy supply chain? Why?
Answer: The four approaches to e-purchasing presented in the text are: (1) electronic data interchange,
(2) catalog hubs, (3) exchanges, and (4) auctions.
Electronic data interchange (EDI) is a technology that enables the transmission of routine, standardized
business documents from computer to computer over telephone or direct leased lines. Special
communications software translates documents into and out of a generic form, allowing organizations to
exchange information even if they have different hardware and software components. Invoices, purchase
orders, and payments information are some of the routine documents that EDI can handle
Catalog hubs can be used to reduce the costs of placing orders to suppliers as well as the costs of the
services or goods themselves. Suppliers post their catalog of items on the hub, and buyers select what
they need and purchase them electronically. The hub connects the firm to potentially hundreds of
suppliers through the Internet, saving the costs of EDI, which requires one-to-one connections to
individual suppliers. Moreover, the buying firm can negotiate prices with individual suppliers for items
such as office supplies, technical equipment, services, and so forth. The catalog that the buying firm's
employees see consists only of the approved items and the prices the buyer has prenegotiated with its
suppliers. Employees use their PCs to select the items they need, and the system generates the purchase
orders, which are electronically dispatched to the suppliers.
An exchange is an electronic marketplace where buying firms and selling firms come together to do
business. The exchange maintains relationships with buyers and sellers, making it easy to do business
without the aspect of contract negotiations or other types of long-term conditions. Exchanges are often
used for "spot" purchases to satisfy an immediate need at the lowest possible cost. Commodity items such
as oil, steel, or energy fit this category.
An extension of the exchange is the auction, where firms place competitive bids to buy something. For
example, a site may be formed for a particular industry, and firms with excess capacity or materials can
offer them for sale to the highest bidder. Bids can either be closed or open to the competition.
Answers will vary as to the least IT-intensive approach, however EDI would probably not be the best
choice for this position piece.
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: presourcing, value analysis, early supplier involvement
120) Compare and contrast competitive orientation versus cooperative orientation for suppler relations.
Answer: Competitive orientation views supplier relations as a negotiation between buyer and seller. It is
generally considered a zero-sum gameone side wins, the other loses. In cooperative orientation, the
buyer and seller are partners, each one helping the other as much as possible. Generally, a cooperative
orientation means long-term commitment, joint work on quality, and support by the buyer of the
supplier's managerial, technological, and capacity development. Sharing of information takes place in
both directions.
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: competitive orientation, cooperative orientation, supplier relations
Learning Outcome: Compare common approaches to supply chain design.

12-28
Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

121) Define the term logistics and briefly discuss any three important logistics decisions.
Answer: Logistics is the process whereby products or services are delivered to the customer. The five
important decisions presented in the text are 1) degree of ownership, 2) facility location, 3) mode
selection, 4) capacity level, and 5) amount of cross docking.
Ownership. The firm has the most control over the logistics process if it owns and operates it, thereby
becoming a private carrier. Although this approach may help to better achieve the firm's competitive
priorities, the cost of equipment, labor, facilities, and maintenance could be high. The firm could instead
leave the distribution to a third-party logistics provider (3PL), negotiating with the carrier for specific
services. Those services could involve taking over a major portion of the order fulfillment process. 3PLs
typically provide integrated services, from transportation and packaging services to warehousing and
inventory management, for corporate clients that need to get their products to market. They can help with
the design of a client's supply chain and facilitate the flow of information up and down the supply chain.
Facility Location. A critical decision affecting the effectiveness of supply chains is the location of facilities
that serve as points of service, storage, or manufacture. Mode Selection. The five basic modes of
transportation are (1) truck, (2) train, (3) ship, (4) pipeline, and (5) airplane. The drivers for the selection
should be the firm's competitive priorities. Capacity. The performance of a logistics process is directly
linked to its capacity. The ownership decision and the modal selection decision are often intertwined
because the question of how much capacity is needed must be resolved.
Reference: The Order Fulfillment Process
Difficulty: Moderate
Keywords: competitive orientation, cooperative orientation, supplier relations
Learning Outcome: Compare common approaches to supply chain design.
122) The Burdell Wheel and Tire Company assembles tires to wheel rims for use on cars during
manufacture of vehicles by the automotive industry. Burdell wants to locate a low-cost supplier for the
tires he uses in his assembly operation. The supplier will be selected based on total annual cost to supply
Burdell's needs. Burdell's annual requirements are for 25,000 tires, and the company operates 250 days a
year. The following data are available for two suppliers being considered.
SHIPPING
QUANTITY
PRICE
PER
SHIPPING / TIRE
SUPPLIER SHIPMENT COSTS
(p)
LEXINGTO
N TIRE
2,000
$18,000
$30
IRMO
AUTO
1,000
$25,000
$29

INVENTORY LEAD
HOLD COSTS TIME
(H)
(DAYS)

ADMIN.
COSTS

$6.00

$15,000

$5.80

$18,000

Using the Total Cost Analysis for Supplier Selection, which supplier should Burdell choose? Provide
details to justify your answer.
Answer: Irmo Auto Total Cost of $773,220 Vs. Lexington's cost of $792,600
Reference: Supplier Relationship Process
Difficulty: Hard
Keywords: supplier relationship, sourcing, supplier selection
AACSB: Analytic skills

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Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

123) The Burdell Wheel and Tire Company has completed a total cost analysis for two suppliers of tires to
support their business. They also consider delivery speed, consistent quality and volume flexibility in
their selection process. Each criterion is given a weight (total = 100 points), and each supplier is scored on
each criterion (1 = poor, 10 = excellent). The data are shown in the following table.

CRITERION
Total Cost
Delivery Speed
Consistent Quality
Environmental
Sensitivity

WEIGHT
20
25
25

LEXINGTON
TIRE
5
6
8

IRMO AUTO
6
5
6

30

Using the preference matrix approach for selecting suppliers, which supplier should Burdell select?
Answer: Irmo Auto
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: supplier relationship, sourcing, supplier selection, preference matrix
AACSB: Analytic skills
124) The Steele Bike Company assembles bicycles for a major retail toy outlet. The main purchase is
bicycle frames for making these bicycles. Dan Steele, the owner, wants to locate a low-cost supplier for the
frames used in this assembly operation. The supplier will be selected based on total annual cost to supply
Steele's needs. Annual requirements are for 100,000 frames, and the company operates 200 days a year.
Two suppliers, Acme and State, have quoted the same price for the frames, but quantities, lead times and
shipping costs are considerably different. The following data are available for the two suppliers.
SHIPPING
QUANTITY
PER
SUPPLIER SHIPMENT
ACME
7,500
STATE
2,500

SHIPPING
COSTS
$35,000
$60,000

PRICE /
FRAME
(p)
$39
$39

INVENTORY
HOLD COSTS
(H)
$7.80
$7.80

LEAD
TIME
(DAYS)
7
3

ADMIN.
COSTS
$20,000
$45,000

Based on your Total Cost Analysis, which supplier should be selected if the lower cost supplier is chosen?
Answer: Acme
Reference: Supplier Relationship Process
Difficulty: Hard
Keywords: supplier relationship, sourcing, supplier selection
AACSB: Analytic skills

12-30
Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

125) The Steele Bike Company has completed a total cost analysis for two suppliers of bicycle frames to
support their business. They also consider on-time speed, top quality and customization in their selection
process. Each criterion is given a weight (total = 100 points), and each supplier is scored on each criterion
(1 = poor, 10 = excellent). The data are shown in the following table.
CRITERION
Total Cost
On-Time Delivery
Top Quality
Customization

WEIGHT
15
20
30
35

ACME
8
5
7
4

STATE
4
7
6
6

Using the preference matrix (total weighted score) approach for selecting suppliers, which supplier
should Steele select? What is the total weighted score?
Answer: State, with a total weighted score of 590
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: supplier relationship, sourcing, supplier selection, preference matrix
AACSB: Analytic skills
126) The Bahouth Bike Company has completed an exhaustive analysis for four suppliers of bicycle
frames to support their business. They considered on-time speed, top quality and customization in their
selection process. Each criterion is given a weight (total = 100 points), and each supplier is scored on each
criterion (1 = poor, 10 = excellent). The data are shown in the following table.
CRITERION
Sustainability
Cost
Quality
On-time Delivery

WEIGHT
3
6
8
4

A
9
3
4
0

B
2
0
0
6

C
0
3
9
1

D
1
10
4
0

Using the preference matrix (total weighted score) approach for selecting suppliers, which supplier
should Bahouth select? What is its total weighted score?
Answer: Supplier D has a weighted score of 95 which is 5 higher than Supplier C, 18 higher than A, and
65 higher than B
Reference: Supplier Relationship Process
Difficulty: Moderate
Keywords: supplier relationship, sourcing, supplier selection, preference matrix
AACSB: Analytic skills

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Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

127) Jackson Sheds has four different warehouse configurations under study, ranging from four
warehouses to seven warehouses (only integer values). Each warehouse has a capacity of 300 units and
costs $200 to maintain over the course of a year. Demand can range from 1000 units per year up to 2000
units in increments of 250 units. If the system warehouse capacity is sufficient to handle the year's
demand, then the per unit cost is $2 per unit, but if the warehouse capacity is insufficient, the per unit
cost for each unit in excess of system capacity is $5 per unit. The likelihood for each possible demand is
shown in the table.
Likelihood
Demand

0.1
1000

0.2
1250

0.3
1500

0.3
1750

0.1
2000

Which warehouse configuration is best for Jackson Sheds?


Answer: The cost table for four through seven warehouses is shown; the lowest cost occurs at a six
warehouse system.

Reference: The Order Fulfillment Process


Difficulty: Hard
Keywords: expected value
AACSB: Analytic skills

12-32
Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

128) Jackson Sheds has four different warehouse configurations under study, ranging from four
warehouses to seven warehouses (only integer values). Each warehouse has a capacity of 400 units and
costs $200 to maintain over the course of a year. Demand can range from 1000 units per year up to 2000
units in increments of 250 units. If the system warehouse capacity is sufficient to handle the year's
demand, then the per unit cost is $2 per unit, but if the warehouse capacity is insufficient, the per unit
cost for each unit in excess of system capacity is $5 per unit. The likelihood for each possible demand is
shown in the table.
Likelihood
Demand

0.1
1000

0.2
1250

0.3
1500

0.3
1750

0.1
2000

Which warehouse configuration is best for Jackson Sheds?


Answer: The cost table for four through seven warehouses is shown; the lowest cost occurs at a fivewarehouse system.

Reference: The Order Fulfillment Process


Difficulty: Hard
Keywords: expected value
AACSB: Analytic skills

12-33
Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

129) Jackson Sheds has four different warehouse configurations under study, ranging from four
warehouses to seven warehouses (only integer values). Each warehouse has a capacity of 200 units and
costs $400 to maintain over the course of a year. Demand can range from 1000 units per year up to 2000
units in increments of 250 units. If the system warehouse capacity is sufficient to handle the year's
demand, then the per unit cost is $2 per unit, but if the warehouse capacity is insufficient, the per unit
cost for each unit in excess of system capacity is $5 per unit. The likelihood for each possible demand is
shown in the table.
Likelihood
Demand

0.1
1000

0.2
1250

0.3
1500

0.3
1750

0.1
2000

Which warehouse configuration is best for Jackson Sheds?


Answer: The cost table for four through seven warehouses is shown; the lowest cost occurs at a sevenwarehouse system.

Reference: The Order Fulfillment Process


Difficulty: Hard
Keywords: expected value
AACSB: Analytic skills

12-34
Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

130) Jackson Sheds has four different warehouse configurations under study, ranging from four
warehouses to seven warehouses (only integer values). Each warehouse has a capacity of 200 units and
costs $200 to maintain over the course of a year. Demand can range from 1000 units per year up to 2000
units in increments of 250 units. If the system warehouse capacity is sufficient to handle the year's
demand, then the per unit cost is $2 per unit, but if the warehouse capacity is insufficient, the per unit
cost for each unit in excess of system capacity is $3 per unit. The likelihood for each possible demand is
shown in the table.
Likelihood
Demand

0.1
1000

0.2
1250

0.3
1500

0.3
1750

0.1
2000

Which warehouse configuration is best for Jackson Sheds?


Answer: The cost table for four through seven warehouses is shown; the lowest cost occurs at both the
four and five warehouse systems.

Reference: The Order Fulfillment Process


Difficulty: Hard
Keywords: expected value
AACSB: Analytic skills

12-35
Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall