Coyle Managing Supply Chains: A Logistics Approach, 9 th Edition Chapter 1 Test Bank 1 - 1 © 2013 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in par t. CHAPTER 1 TEST QUESTIONS True - False 1. The last decade of the twentieth century was a period of rapid change for organizations, especially businesses. ANSWER : True 2. A key element in Wal - Mart's ability to discount brand name products was an understanding of the criticality of efficiency in its logistics and supply chain system. ANSWER : True 3. Globalization has had little effect on consumers. ANSWER: False 4. Supply and demand has become less volatile as managers become more adept at controlling the elements. ANSWER: False 5. Outsourcing is a fairly new concept. ANSWER: False 6. SAB should examine their off - shore purchasing policy, even though the products are sourced from the U.S. ANSWER : True 7. The world economy still favors the United States and European countries, even though China and India can participate in the global economy much more readily. ANSWER: False 8. The U.S. transportation system was deregulated in the 1930s and 1940s in response to economic conditions and World War 2. ANSWER: False 9. Even though there are references to supply chain management in the 1980s, SCM did not capture the attention of senior - level management until the 1990s. ANSWER : True 10. Supply chain managers no longer need to worry about suboptimization in light of today's technology. ANSWER: False Coyle Managing Supply Chains: A Logistics Approach, 9 th Edition Chapter 1 Test Bank 1 - 2 © 2013 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in par t. Multiple Choice 11. Most retailers are essentially supply chain companies since a. they dominate the consumer market. b. own their warehouses and trucks. c. they buy products produced by others. d. engage in off - shore sourcing. ANSWER : c 12. Which of the below is not one of the external forces driving the rate of change and shaping our economic and political landscape? a. Government policy b. Technology c. Environmental concerns d. Globalization ANSWER : c 13. Outsourcing involves a. moving company facilities away from the home office. b. hiring foreign nationals to manage parts of the business. c. obtaining materials, parts, and products from other companies. d. building a factory in another country. ANSWER : c 14. Some individuals describe the current consumer as the "click here" generation because a. we all have Internet access. b. we no longer wait for information to be "pushed out" to us. c. we buy so much merchandise on line. d. we take little time to make purchasing decisions. ANSWER : b 15. The demographics of our society has changed because a. the "Baby Boom" generation is now turning 60. b. of the increase in two - career families and single - parent households. c. of immigration. d. birth rates have changed. ANSWER : b Coyle Managing Supply Chains: A Logistics Approach, 9 th Edition Chapter 1 Test Bank 1 - 3 © 2013 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in par t. 16. The Supply Chain Concept a. is very new and considered cutting edge technology. b. is highly dependent of computerization. c. not always well understood by senior managers. d. developed from the previous Physical Distribution concept. ANSWER : d 17. Logistics, in its simplest form, a. is a military term, as it was developed originally to supply the battlefield. b. combines inbound logistics with the outbound logistics of physical distribution. c. is another term for transportation management. d. does not involve customer service or other related functions. ANSWER : b 18. One of the major challenges of supply chain management is a. forward buying. b. maintaining the visibility of inventory. c. building safety - stock inventory. d. Pushing inventory back to vendors. ANSWER : b 19. Which of these flows only one way as illustrated in the figure below? Coyle Managing Supply Chains: A Logistics Approach, 9 th Edition Chapter 1 Test Bank 1 - 4 © 2013 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in par t. a. information b. products and services c. financials d. None of these answers ANSWER : d 20. Traditionally, information has been viewed as flowing in the opposite direction of products, that is, from the market/customer back to the wholesalers, manufacturers, and vendors. a. This is still true and has not changed. b. Computerization has greatly increased the flow of information from the source. c. The "Big Box" stores have developed their own sources. d. None of these answers ANSWER : d 21. The challenge to develop and sustain an efficient and effective supply chain(s) requires organizations to address a number of issues. Which is not included? a. complexity b. inventory deployment c. inventory carrying costs d. technology ANSWER : c 22. Which of the following is not part of the Supply Chain network? a. plants b. stores c. terminals d. distribution centers ANSWER : b 23. Complexity in the supply chain is caused by a. the number of SKUs. b. locations of customers and suppliers. c. transportation requirements. d. All of these answers. ANSWER : d 24. Cost/Value refers to a. getting the best value for the money spent. b. U.S. firms competing in the global arena. c. the importance of cost and value at the very end of the supply chain. d. product variety. ANSWER : c Coyle Managing Supply Chains: A Logistics Approach, 9 th Edition Chapter 1 Test Bank 1 - 5 © 2013 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in par t. 25. Performance measurement is important because a. it allows firms to rate competitors. b. without it, managers would not know how the global economy is doing. c. companies presently operating in the European Economic Community need to understand how its competitors are doing. d. lower - level metrics in an organization must connect directly to the high - level performance to achieve goals. ANSWER : d 26. A critical outcome of the supply chain is to deliver a. profits. b. the right product to the right place. c. cost/value. d. on management's expectations. ANSWER : b ESSAY 27. What is the significance of Globalization in Supply Chain Management? ANSWER : Arguably, globalization is the most frequently cited change factor by business l eaders, and it has replaced the post - World War II "cold war" as the dominant driving force for world economics. The concept of the "global marketplace" or global economy has taken on new meaning for all enterprises (profit and nonprofit; small, medium, and large) and for individual consumers during the last two decades. Overall, globalization has led to a more competitively intense economic and geopolitical environment. This environment manifests itself in opportunities and threats, both economic and political. Some individuals have implied that there is no "geography" in the current global environment (figuratively speaking) or perhaps more aptly that time and distance have been compressed. 28. What is Vendor Managed Inventory? ANSWER : Essentially, vendor - managed inventory (VMI) usually means that the manufacturer will manage the inventory of its products and possibly related products at the retailer's warehouse(s) and reorder as appropriate for customer fulfillment. The manufacturer may also have a representative at the designated retail warehouse locations to assure accurate and timely delivery. The retailer should experience lower costs associated with inbound logistics, and the manufacturer should be able to offset its cost with increased sales (fewer stockouts, more complete orders, etc.). Coyle Managing Supply Chains: A Logistics Approach, 9 th Edition Chapter 1 Test Bank 1 - 6 © 2013 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in par t. 29. Explain how today's consumers are empowered and how they impact Supply Chain Management. ANSWER : Today's consumers are more enlightened, educated, and empowered than ever before by the information they have at their disposal from the Internet and other sources. Their access to supply sources has expanded dramatically beyond their immediate locale by virtue of catalogs, the Internet, and other media. They have the opportunity to compare prices, quality, and service. Consequently, they demand competitive prices, high quality, tailored/customized products, convenience, flexibility, and responsiveness. They tend to have a low tolerance level for poor quality in products and/or services. Consumers also have increased buying power due to higher income levels. They demand the best quality at the best price and with the best service. These demands place increased challenges and pressure on the various supply chains for consumer products. 30. Describe the flows in the figure below. ANSWER : Supply chain management can be viewed as a pipeline or conduit for the efficient and effective flow of products/materials, services, information, and financials from the supplier's suppliers through the various intermediate organizations/companies out to the customer's customers. It is the system of connected networks between the original vendors and the ultimate final consumer. The extended enterprise perspective of supply chain management represents a logical extension of the logistics concept, providing an opportunity to view the total system of interrelated companies for increased efficiency and effectiveness. Coyle Managing Supply Chains: A Logistics Approach, 9 th Edition Chapter 1 Test Bank 1 - 7 © 2013 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in par t. 31. Discuss how globalization and consolidation in supply have increased complexity. ANSWER : Globalization and consolidation in supply chains have caused an increased complexity for organizations in terms of SKUs, customer/supplier locations, transportation requirements, trade regulations, taxes, etc. Companies need to take steps to simplify, as much as possible, the various aspects of their supply chains. For example, the number of SKUs has expanded for many companies, which exacerbates problems for inventory management and order fulfillment. Consequently, companies have been rationalizing SKUs to eliminate the slow movers and/or items that do not contribute to profitability. Locations also need to be analyzed to eliminate high - cost operations. Customer service levels need to be rationalized, as do vendors or suppliers. Layers of complexity develop and may seem necessary, but organizations need to continually evaluate those areas of complexity. 32. Discuss how Performance Measurement can affect Supply Chain Management. ANSWER : Most organizations have measures of performance or metrics in place to analyze and evaluate their efficiency and progress over different time periods. Sometimes, such measures are used for setting baseline performance objectives or expected outcomes, e.g., orders filled and shipped per day. Measurement is important, and at this juncture, it is important to recognize that lower - level metrics in an organization must connect directly to the high - level performance measures of the organization and the supply chain. Typical metrics include net profit, return on investment, or assets and cash flow. In some instances, metrics are set that appear logical for the subunit of the organization but are suboptimal for the overall organization or supply chain. For example, the warehouse manager who is measured by the cost per cubic foot of units stored will be motivated to fill the warehouse to the ceiling. 33. What is the role of Transportation Management in connection with Supply Chains? ANSWER : Transportation can be viewed as the glue that holds the supply chain model together. The critical outcomes of the supply chain are to deliver the right product, at the right time, in the right quantity and quality, at the right cost, and to the right destination. Transportation plays an important role in making these "rights" happen. Another aspect of the importance of transportation is related to some of the strategies that are being used by companies to remain competitive in today's economy -- for example, just - in - time inventory, lean logistics and manufacturing, scheduled deliveries, etc. The challenge has been exacerbated by economic changes among transportation providers; shortages of drivers, higher fuel costs, and changes in driver hour's regulations have led to what some individuals have called a transportation crisis or the "perfect storm." Transportation has gone from being a readily available "commodity" to potential users, especially in the 1990s, to being scarce in some current market areas. Coyle Managing Supply Chains: A Logistics Approach, 9 th Edition Chapter 2 Test Bank 2 - 1 © 2013 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in par t. CHAPTER 2 TEST QUESTIONS True - False 1. The utility created through the basic marketing activities is known as place utility. ANSWER : False 2. Transportation is the physical movement or flow of goods. ANSWER : True 3. During the 1990s and 2000s, logistics costs as a percentage of gross national product declined. ANSWER : True 4. Logistics systems having a very heavy inbound flow and a very simple outbound flow are reverse systems. ANSWER : False 5. Acme Battery distributes its batteries to warehouses, where they are stored until ordered by a retailer. The warehouses are located close by the retail markets served. This is the logistics channel approach to logistics. ANSWER : True 6. In a logistics system, warehousing should be optimized at the expense of related logistics activities, such as transportation and procurement. ANSWER : False 7. The mathematical calculation of the point of equality between systems under analysis is used for short - run/static analysis. ANSWER : False 8. To hold down distribution cost, the lowest cost carrier should always be used. ANSWER : False 9. The inverse relationship that exists between the cost of lost sales and inventory costs is the inventory effect. ANSWER : True Coyle Managing Supply Chains: A Logistics Approach, 9 th Edition Chapter 2 Test Bank 2 - 2 © 2013 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in par t. Multiple Choice 10. Ensuring the availability of the right product, in the right quantity, and the right condition, at the right place, at the right time, for the right customer at the right cost, is which definition of logistics? a. Seven Rs b. Council of Logistics Management c. Society of Logistic Engineers d. supply chain logistics ANSWER : a 11. Logistics is the process of anticipating customer needs and wants; acquiring the capital, materials, people, technologies, and information necessary to meet those needs and wants; optimizing the goods - or service - producing network to fulfill customer requests; and utilizing the network to fulfill customer requests in a timely manner. This is a a. definition from an inventory perspective. b. general definition. c. definition offered by the Society of Logistics Engineers. d. a definition provided by the Council of Logistics Management. ANSWER : b 12. All four subdivisions of logistics have some common characteristics. Which of the below does not belong in the list: a. transportation b. marketing c. scheduling d. forecasting ANSWER : b 13. The value that is added to a good through a manufacturing, production, or assembly process is: a. form utility b. place utility c. time utility d. possession utility ANSWER : a Coyle Managing Supply Chains: A Logistics Approach, 9 th Edition Chapter 2 Test Bank 2 - 3 © 2013 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in par t. 14. A product's form utility is created when value is added to the product through a manufacturing, production or assembly process. However, logistics activity can provide form utility also. Which is an example of the creation of form utility by a logistics activity? a. when lumber is cut and made into a chair b. when a firm's finance manager approves customer purchases on a credit basis c. when bulk computer disks in different colors are packed in three - color assortments for sale to computer users d. the breaking bulk and repackaging at a distribution center ANSWER : d 15. The utility that is created by moving goods from surplus points to points where demand exists is referred to as: a. form b. place c. time d. possession ANSWER : b 16. Which is created when a product or service is at a point when demanded by customers? a. form utility b. place utility c. time utility d. possession utility ANSWER : b 17. Time utility depends on a. when the carrier picks up the shipment. b. transportation companies delivering on time. c. proper forecasting. d. having the product available when the user wants it. ANSWER : d 18. What is often the largest component of logistics costs? a. inventory costs b. transportation costs c. shipper - related costs d. administrative costs ANSWER : b Coyle Managing Supply Chains: A Logistics Approach, 9 th Edition Chapter 2 Test Bank 2 - 4 © 2013 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in par t. 19. Materials handling is concerned with a. inventory levels. b. breaking bulk. c. scheduling trade - offs. d. short distance movement. ANSWER : d 20. Marketers have begun to recognize the strategic value of place in the marketing mix, as well as the benefits resulting from high - quality logistical services. As a result, which has been recognized as the interface activity between marketing and logistics? a. product b. promotion c. price d. customer service ANSWER : d 21. Celebrated Produc ts is introducing a new line of celebrity signature sunglasses. The sales manager wants a media blitz to make customers aware of the line and create early sales typical of a "pull" pattern. Which will be a likely result of the marketing manager's plan? a. a stable demand pattern b. emergency shipments c. an erratic demand pattern d. strain on the logistics system ANSWER : c 22. What activity is described as the movement of goods into a warehouse, the placement of goods in a warehouse, and the movement of goods from storage to order picking areas and eventually to dock areas for transportation out of the warehouse? a. materials handling b. physical distribution c. business logistics d. order fulfillment ANSWER : a 23. A(n) ____ relationship exists between the cost of lost sales and inventory cost. a. reverse b. proportional c. inverse d. non linear ANSWER : c Coyle Managing Supply Chains: A Logistics Approach, 9 th Edition Chapter 2 Test Bank 2 - 5 © 2013 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in par t. 24. Water Cruisers is located in Jacksonville, Florida, and makes small yachts and luxury pontoon boats for customers on the East coast of the United States. Each boat requires thousands of parts purchased from over 1,000 vendors. A number of boats are in production at any one time, so a large number of parts constantly arrive and are stored. Once a boat is finished, it is sailed up the coast to a convenient port for customer delivery. Which type of logistics system does Water Cruisers use? a. balanced system b. heavy inbound c. heavy outbound d. reverse system ANSWER : b 25. A number of product - related factors affect the cost and importance of logistics. Which is not one of these factors? a. value b. density c. stock keeping units d. risk of damage ANSWER : c 26. When a specific point in time, or level of production, is chosen and costs are developed for the various logistics cost centers, it is called a. least cost analysis. b. short run analysis. c. cost center analysis. d. link node analysis. ANSWER : b 27. A ____ analysis examines a logistics system over a long time period or range of output. a. cost center analysis b. dynamic c. link node analysis d. least cost analysis ANSWER : b 28. A balanced system is a. one where all four management systems are equal b. logistics expenses are equal to cost of goods sold c. another name for supply chain management d. inbound and outbound flows are nearly equal ANSWER : d 29. What are established spatial points where goods stop for storage or processing? a. nodes b. links Coyle Managing Supply Chains: A Logistics Approach, 9 th Edition Chapter 2 Test Bank 2 - 6 © 2013 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in par t. c. cost centers d. fulfillment centers ANSWER : a ESSAY 30. What is the primary challenge of logistics? ANSWER : The challenge is to manage the entire logistics system in such a way that order fulfillment meets and perhaps exceeds customer expectations. At the same time, the competitive marketplace demands efficiency -- controlling transportation, inventory, and other logistics - related costs. Cost and service tradeoffs have to be considered when evaluating customer service levels and the associated total cost of logistics; but both goals -- efficiency and effectiveness -- are important to an organization in today's competitive environment. 31. What is the definition of logistics which the authors choose and what group had formulated it? ANSWER : The definition offered by the Council of Supply Chain Management Professionals is: "The art and science of management, engineering, and technical activities concerned with requirements, design, and supplying and maintaining resources to support objectives, plans, and operations." 32. The text mentions four subdivisions of logistics. Pick one, define and discuss. ANSWER : • Busin ess logistics: That part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, service, and related information from point of use or consumption in order to meet customer requirements. • Military logistics: The design and integration of all aspects of support for the operational capability of the military forces (deployed or in garrison) and their equipment to ensure readiness, reliability, and efficiency. • Event logistics: The network of activities, facilities, and personnel required to organize, schedule, and deploy the resources for an event to take place and to efficiently withdraw after the event. • Service logistics: The acquisition, scheduling, and management of the facilities/assets, personnel, and materials to support and sustain a service operation or business. Coyle Managing Supply Chains: A Logistics Approach, 9 th Edition Chapter 2 Test Bank 2 - 7 © 2013 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in par t. 33. There are five principal types of economic utility that add value to a product or service. Name four of the five and pick one to discuss in more detail. ANSWER : The five principal types of economic utility that add value to a product or service. Included are form, time, place, quantity, and possession. Generally, production activities are credited with providing form utility; logistics activities with time, place, and quantity utilities; and marketing activities with possession utility. 34. The logistics definitions discussed indicate 14 activities for which the logistics manager might be responsible. Name at least eight and briefly discuss any two in detail. ANSWER : • Transportation • Warehousing and storage • Industrial packaging • Materials handling • Inventory control • Order fulfillment • Demand forecasting • Production planning/scheduling • Procurement • Customer service • Facility location • Return goods handling • Parts and service support • Salvage and scrap disposal 35. Another dimension of logistics is the micro perspective which examines the relationships between logistics and other functional areas in an organization. What are these other functions? Select one and discuss how it interacts with logistics. ANSWER : Another dimension of logistics is the micro - perspective, which examines the relationships between logistics and other functional areas in an organization -- marketing, manufacturing/operations, finance and accounting, and others. Logistics, by its nature, focuses on processes that cut across traditional functional boundaries, particularly in today's environment with its emphasis on the supply chain. Consequently, logistics interfaces in many important ways with other functional areas. Coyle Managing Supply Chains: A Logistics Approach, 9 th Edition Chapter 2 Test Bank 2 - 8 © 2013 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in par t. 36. What are the 4 "PHs"? Select one, and discuss how it affects logistics. ANSWER : Logistics is sometimes referred to as the other half of marketing. The rationale for this definition is that the physical distribution or outbound side of an organization's logistics system is responsible for the physical movement and storage of products for customers and thus plays an important role in selling a product. In some instances, physical distribution and order fulfillment might be the key variables in selling a product; that is, the ability to provide the product at the right time to the right place in the right quantities might be the critical element in making a sale. This section briefly discusses the interfaces between logistics and marketing activities in each principal area of the marketing mix. The material is organized according to the four Ps of marketing -- price, product, promotion, and place. In addition, recent trends in the interface between logistics and marketing will be discussed. 37. What is ROA? Discuss how it can impact logistics. ANSWER : While manufacturing and marketing are probably the two most important internal, functional interfaces for logistics in a product - oriented organization, there are other important interfaces. The finance area has become increasingly important during the last decade. The impact that logistics can have upon return on assets (ROA) or return on investment (ROI) is very significant. ROA is defined as follows: ROA = Revenue − Expenses/Assets Or ROA = Gross Profit/Assets Logistics can positively impact ROA in several ways. First, inventory is both an asset on the balance sheet and an expense on the income statement. Reducing inventory levels reduces the asset base as well as the corresponding variable expenses, thus having a positive impact on ROA. Second, transportation and warehousing costs can also influence ROA. If an organization owns its warehouses and transportation fleet, assets will be increased. If these assets are reduced or eliminated, ROA will increase. Similarly, if an organization utilizes third parties for warehousing and transportation, variable expenses will be incurred. Reducing these expenses will also have a positive impact on ROA. Finally, the focus on customer service can increase revenue. As long as the incremental increase in revenue is larger than the incremental increase in the cost of customer service, ROA will increase.