SCM MBA 570 77 Questions Multiple Choice – some calculations

Answers based upon Textbook

Chapter 1—Introduction to Supply Chain Management

1. Successful modern supply chain management typically includes the practice of:
All participants in the supply chain benefit.
Boundaries are dynamic and extend from “the firm’s suppliers’ suppliers to its customers’ customers (i.e., second
tier suppliers and customers).”
Supply chains now deal with reverse logistics to handle returned products, warranty repairs, and recycling.
2. Consumers buy products based on a combination of:
Cost, quality, availability, maintainability, and reputation factors. Also customer want the product to meet their
requirements and expectations.

3. What is a reverse logistics activity

4. Conditions which must be present for successful supply chain management include:
Cooperation among firms
5. Know the bullwhip effect:
Reduced Bullwhip Effect - the magnified reduction of safety stock costs based on coordinated planning and
sharing of information

6. Pick able to select a third party provider

A firm that leases storage warehousing
7. Know the following:
a. Business process reengineering -
b. Benchmarking Benchmarking - improve over competitors’ performance
c. Process integration when supply chain participants work for common goals. Requires
intra-firm functional integration. Based on efforts to change attitudes & adversarial
relationships
d. Vertical integration
8. What is a 3PL?
Third-party service providers (3PLs)
9. FOUR important elements of the supply chain are:
Supply, Operations, Logistics, integration.
10. Know the following acronyms
a. TQM 
b. JIT 
c. MRP 
d. ERP  Enterprise Resource Planning
Supply Chain Management (SCM)
Just-In-Time (JIT)
Total Quality Management (TQM)
Business Process Reengineering (BPR)

11. Strategic partnerships are seen as one of the foundations of ?

Supply. Strategic partnerships - successful and trusting relationships with top-performing suppliers
 12. Lean production is typically associated with which of the following company's production systems?
Toyota
13. Know which functions the following relate to
a. Purchasing
b. Manufacturing
c. Logistics Logistics management, customer relationship management, network design,
RFID, global supply chains, sustainability, service response logistics

d. Integration Risk and security management, performance measurement, green supply

chains

14. What is a strategy usually employed by lean organizations

b. Six Sigma

15. Know which functions the following relate to

a. Purchasing
b. Operations Demand management, CPFR, MRP, ERP, inventory visibility, lean systems,
Six Sigma quality systems
c. Integration
d. Distribution

Chapter 2—Purchasing Management

16. The primary goals of purchasing are:

Secure materials at the lowest cost
Improve the quality of finished goods produced
Maximize customer satisfaction

17. Know:
a. Break-Even Analysis
break-even analysis is a handy tool for computing the cost-effectiveness of sourcing deci-
sions when cost is the most important criterion.
b. Direct Offset
Direct offset usually
involves coproduction, or a joint venture and exchange of related goods or services;
whereas indirect offset involves exchange of goods or services unrelated to the initial
purchase.
c. Profit-Leverage Effect
A decrease in purchasing expenditures directly increases profits before taxes (assuming no
decrease in quality or purchasing total cost)
d. Leveraging Purchase Volume
The concentration of purchase volume to create quantity discounts, less-costly volume
shipments and other more favorable purchase terms.

18. Inventory Turnover can be calculated by:

Ratio of cost of goods sold over average inventory cost
19. A form of purchasing that is placed directly to the supplier and suitable when firms use the same
components to make standard goods over a relatively long period of time is referred to as:
Planned Order Release
 20. When a material is not available in the warehouse and there is no current supplier for the item, the buyer
must identify a pool of suppliers and issue a:
Request for Quotation
21. On occasion, firms assist suppliers, new or old, to improve their processing capabilities, product or service
quality, delivery effectiveness, and cost performance by providing the required technical and financial
assistance. This is referred to as:
Supplier development
22. Which of the following documents is considered the buyer's offer to purchase products or services from a
supplier, is legally binding once the supplier accepts it, and usually has the terms and conditions of purchase
preprinted on the back of the document?
Purchase order
23. What is Forward Vertical Integration?

24. Know:
a. Backward vertical integration
The process of acquiring upstream suppliers.
b. Forward vertical integration
The process of acquiring downstream customers.
c. Backward horizontal integration
d. Forward horizontal integration
25. What are reasons to outsource (buy) versus making?
Protect proprietary technology
No competent supplier
Better quality control:
Use existing idle capacity
Control of lead-time, transportation and warehousing cost
Lower cost:

26. Given make-buy information, what would be the break-even point?

The break-even point Q is found by setting the total cost of the two options equal to
one another and solving for Q
27. As firms seek to improve the products they offer to the market, companies are seeking help from their
suppliers in new product design and development through:
Early supplier involvement
28. Which are the reason(s) that single sourcing is considered risky/bad?
The limited (finite) capacity of one supplier
Chapter 3—Creating and Managing Supplier Relationships

29. What is important in developing successful relationships in a partnership?

a. Personal relationships
c. Mutual benefits and needs
d. Performance metrics

30. The combination of the purchase price of a good and additional costs incurred before or after product
delivery can be referred to as:
Total cost of ownership

31. Field failures, loss of goodwill, a decreased reputation, and warranty costs can all be classified as pre or post
transaction costs?
 Post-transaction costs
32. Benefits of implementing an effective supplier certification program include all:

Building long-term relationships

Reducing time spent on incoming inspections
Recognizing excellence

33. Given a company using a weighted-criteria evaluation system has established these 5 categories and the
appropriate weights and the company has received the following ratings in each of the five categories. What
is their total score?
C Cost (0.20)
D Technology (0.10)

Company X received the following ratings in each of the five categories: Quality(90), Responsiveness(80),
Delivery(80), Cost(90), Technology(90). What is their total score?
a. 87.0
b. 85.5
c. 86.0
d. 84.0

ANS: C PTS: 1 REF: p. 85

34. Know what the following are:

a. ISO 14000 ISO 14000 certifies an organization's environmental management. ISO 14000
maintains standards in energy consumption, resource consumption, environmental liability
and risk, waste and pollution generation, and community goodwill.
b. ISO 9000 ISO 9000 certifies an organization's management structure and practices and
their quality output in the areas of design, development, production, installation, and
service.
35. Direct benefits of ISO 14000 include:
36. The acronym SRM refers to: [Supplier Relationship Management]
37. SRM software should be capable of:
Automation of transactional processes between an organization and its suppliers.
• Integration that provides a view of the supply chain that spans multiple departments,
processes and software applications for internal users and external
partners.
• Visibility of information and process flows in and between organizations. Views
are customized by role and aggregated via a single portal.
• Collaboration through information sharing and suppliers’ ability to input information
directly into an organization’s supply chain information system.
• Optimization of processes and decision-making through enhanced analytical tools
such as data warehousing and online analytical processing (OLAP) tools with
the migration toward more dynamic optimization tools in the future.

Chapter 4—Ethical and Sustainable Sourcing

 38. Know:
a. Buyer-supplier integration
The management of the firm's external resources through identification and selection of
suppliers, management of supplier relationships, and monitoring and rewarding supplier
performance in an effort to support the long-term goals of the organization
b Acceptance sampling
. acceptance sampling can be used to determine whether or not a shipment
will be accepted, returned to the supplier, or used for billback purposes when defects
are fixed or units are eliminated by the buyer.
c. Procurement rationalization

d Strategic sourcing
. Strategically managing a firm’s external resources and services to improve cost, quality, de-
livery, performance and competitive advantage.

39. Which are considered outcomes of implementing a supplier evaluation and selection criteria?
Allows firm to screen out poor performing suppliers in its present supplier base.
Allows firm to screen out undesirable suppliers that they may be considering for future
purchases.
Allows firm and its suppliers to develop a better corporate relationship
All of these

40. The Ethical Trading Initiative (ETI) is about?

Working hours are not excessive
Regular employment is provided
Freedom of association and the right to collective bargaining are respected

41. Wal-mart is the driving force behind a system of measurement intended to influence how products are made
and purchased in the future. This system of measurement is the:
Global sustainability index

42. An outsourcing program can result in which of the following positive outcomes:
Reducing staffing levels
Cost reduction
Gains in manufacturing flexibility

43. One of the most value enhancing activities performed by a supplier, for a key customer, which minimizes
carrying costs and can avoid stockouts:
Vendor managed inventory
44. Know the acronyms: VMI & 3PL
VMI: vendor managed inventory (VMI) A progressive
partner-based approach to controlling inventory
and reducing supply chain costs. Customers
provide information to the key supplier, including
 historical usage, current inventory levels,
minimum and maximum stock levels, sales
forecasts and upcoming promotions, who then
takes on the responsibility and risk for planning,
managing and monitoring the replenishment
of inventory. The supplier may even own
the inventory until the product is sold.
3PL: third-party logistics providers
45. The inventory level where suppliers replenish their customer's inventory with a predetermined order
quantity is called the:
Reorder point

46. Collaborative relationships place a relatively lower importance rating on which of the following competitive
priorities: Cost
47. Benchmarking is: A practice where companies attempt to learn and apply the best practices of other
companies.

Chapter 5—Demand Forecasting

48. Which indices provided by the Institute for Supply Management (ISM) is considered the most important by
economists because it is a composite of five weighted, seasonally adjusted indices?
Purchasing Managers Index
49. The impact of poor communication and inaccurate forecasts resonates along the supply chain and results in
the:
Bullwhip effect
50. Know all common qualitative forecasting models:
Sales force composite
Consumer survey
Jury of executive opinion

51. Know all common qualitative forecasting models:

a. Trend Variations
b. Cyclical Variations
c. Seasonal Variations
d. Random Variations

52. Using Data Set E1, what would be the forecast for period 7 using a four period moving average: (Choose the
closest answer.)
a. 17625
b. 15225
c. 15300
d. 17250

53. Using Data Set E1, what would be the forecast for period 6 using a five period weighted moving average?
The weights for each period are 0.05, 0.10, 0.20, 0.30, and 0.35 from the oldest period to the most recent
period, respectively. (Choose the closest answer.)
16500
54. Using Data Set E1, what would be the forecast for period 6 using the exponential smoothing method?
Assume the forecast for period 5 is 14000. Use a smoothing constant of  = 0.4 (Choose the closest answer.)
 16600
55. The equation for a simple linear regression that saw sales averaging $225,000 over the last ten periods, and
advertising budgets averaging $3,000 over the last 10 periods is:
120
This indicates that a $1 increase in advertising will increase sales by:

56. One common Cause-and-Effect Model used is:

Regression analysis
57. What does the acronym CPFR represent?
Collaborative planning, forecasting, and replenishment

Chapter 6—Resource Planning Systems

58. Which of the following is an engineering document that shows an inclusive listing of all the component
parts and assemblies making up the final product?
Bill of Materials
59. The goal of resource planning is to minimize the discrepancy between capacity and:
Demand
60. What consists of different products that share similar characteristics, components or manufacturing
processes?
Product family
61. Which seeks to develop short range plans seeking to effectively and efficiently manage components and/or
subassemblies over time period of few days to a few weeks?
MRP
62. Which is a Long Range Materials Plan:
Aggregate Production Plan
63. Which basic production strategies used for addressing the aggregate planning problem would work best with
make-to-order manufacturing firms?
Chase Production Strategy
64. What is the Planned Order Release? (fill in the X in table, G = given numbers)

Item ABC-Level 1 1 2 3 4
Gross Requirements G G G G
Schedule Receipts G
Projected on Hand Inventory G G G G G
Net Requirements
Planned Order Releases X
Q = G; LT = G; SS = G
65. Same as problem 64
66. The acronym ERP is short for: Enterprise Resource Planning
67. What are common modules of ERP systems?
Human Resources Management
Customer Relationship Management
Supply Chain Management

Chapter 7—Inventory Management

 68. What is a dependent demand item?
69. Know:
a. Raw materials Unprocessed purchased inputs
or materials that are used to manufacture finished
goods.
b. Work-in-process Materials that are partially
processed but not yet ready for sales.
c. Maintenance, repair and operating supplies materials and supplies
used when producing the products but are not parts of the products
d. Finished goods are completed products ready for shipment.
e. Cycle stock Cycle stock is the average amount of inventory a business needs to meet customer demand between the
times it orders more inventory from suppliers.

70.What is a disadvantage of excessive inventory? It hides production and other problems.

ABC Inventory Matrix
Use the graph below to answer the question(s).

71. In the ABC Inventory Matrix, inventory in area Y suggests inventory matches sales.

72. The primary purpose of the basic economic order quantity model is to minimize the sum of setup cost and
holding cost
73. The cost of a widget is $X, and the carrying rate is YY%; cost of processing an order is $ZZ, annual demand
is for XXX widgets, and supply and usage patterns are stable. What is the economic order quantity (EOQ)?
74. Use this information below to calculate the optimal order quantity:
Annual demand for backpacks is X units
The cost to place an order is $D
The per unit cost of the item is $U
The annual holding rate is ZZ%

18. Use this information below to calculate the optimal order quantity:
Annual demand for backpacks is 43,000 units
The cost to place an order is $220
The per unit cost of the item is $60.00
 The annual holding rate is 37.5%

Choose the closest answer.

a. 920 units
b. 250 units
c. 710 units
d. 830 units

ANS: A PTS: 1 REF: p. 226-229

75. The EOQ model with quantity discounts attempts to determine how many units should be ordered.

Figure 7-1
Use the graph below to answer the question(s).

76. Know Figure 7-1.

77. In the absence of demand and delivery lead time variation, if demand is eight per day and purchase lead time
is four days, the reorder point is:

32.