Strategic Sourcing Study Guide
Questions
Course Introduction
Strategic Sourcing explores the processes and methodologies organizations use to analyze, evaluate, and manage their procurement functions in support of long-term business objectives. This course examines the development and implementation of sourcing strategies, supplier selection, negotiation tactics, cost analysis, and performance measurement. Students will learn how to align sourcing initiatives with organizational goals, foster mutually beneficial supplier relationships, and utilize technology and market intelligence to create value and gain competitive advantage in the supply chain. Ethical considerations and global sourcing challenges are also addressed to equip students with a comprehensive understanding of strategic procurement in a dynamic business environment.
Recommended Textbook
Supply Chain Management 5th Edition by Sunil Chopra
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Chapter 1: Understanding the Supply Chain
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Q1) The cycle view of the supply chain is useful when considering operational decisions,because
A) it categorizes processes based on whether they are initiated in response to or in anticipation of customer orders.
B) it specifies the roles and responsibilities of each member of the supply chain.
C) processes are identified as either reactive or speculative.
D) it focuses on processes that are external to the firm.
E) it focuses on processes that are internal to the firm.
Answer: B
Q2) The replenishment cycle occurs at the distributor/manufacturer interface.
A)True
B)False
Answer: False
Q3) The procurement cycle occurs at the manufacturer/supplier interface.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Supply Chain Performance: Achieving Strategic
Fit and Scope
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Q1) Discuss the impact of the product life cycle on strategic fit between implied demand uncertainty and supply chain responsiveness.
Answer: As products go through their life cycle,the demand characteristics and the needs of the customer segments being served change.Supply characteristics also change as the product and production technologies mature.High-tech products are particularly prone to these life cycle swings over a very compressed time span.A product goes through life cycle phases from the introductory phase,when only the leading edge of customers is interested in it and supply is uncertain,all the way to the point at which the product becomes a commodity,the market is saturated,and supply is predictable.Thus,if a company is to maintain strategic fit,its supply chain strategy must evolve as its products enter different phases.As products mature,the corresponding supply chain strategy should,in general,move from being responsive to being efficient.The key point here is that demand and supply characteristics change over a product's life cycle.Because demand and supply characteristics change,the supply chain strategy must also change over the product life cycle if a company is to continue achieving strategic fit.
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Page 4
Chapter 3: Supply Chain Drivers and Metrics
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Q1) Which of the following are key components of transportation decisions when designing and operating a supply chain?
A) Mode of transportation
B) Route and network selection
C) In-house or outsource
D) all of the above
E) none of the above
Answer: D
Q2) Which of the following are key components of information that must be analyzed to increase efficiency and improve effectiveness in a supply chain?
A) Software selection
B) Source selection
C) Warehouse selection
D) Forecasting and aggregate planning
E) none of the above
Answer: D
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Chapter 4: Designing Distribution Networks and Applications to E-Business
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Q1) As the number of facilities in a supply chain network increases,total logistics costs will
A) decrease.
B) decrease at first and then increase.
C) increase.
D) increase at first and then decrease.
E) neither increase or decrease.
Q2) Which distribution network design is similar to pure drop-shipping,except that pieces of the order coming from different locations are combined so that the customer gets a single delivery?
A) Manufacturer storage with direct shipping
B) Manufacturer storage with direct shipping and in-transit merge
C) Distributor storage with package carrier delivery
D) Distributor storage with manufacturer pickup
E) Retail storage with customer pickup
Q3) Only niche companies will end up using a single distribution network.
A)True
B)False
Q4) Explain how distributors add value to a supply chain and improve its performance.
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Chapter 5: Network Design in the Supply Chain
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Q1) Network design decisions have a significant impact on performance because they determine the supply chain configuration and set constraints within which the other supply chain drivers can be used either to decrease supply chain cost or to increase responsiveness.
A)True
B)False
Q2) The facilities in a supply chain network must
A) at least maximize total logistics cost.
B) at least equal the number that maximizes total logistics cost.
C) at least equal the number that minimizes total logistics cost.
D) at least minimize total logistics cost.
E) none of the above
Q3) Total logistics costs are a sum of the
A) inventory and facility costs.
B) transportation and facility costs.
C) inventory and transportation costs.
D) inventory, transportation, and facility costs.
E) inventory, transportation, and faculty costs.
Q4) Explain how supply chain network design decisions are classified.
Q5) Describe the factors that influence supply chain network design decisions.
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Chapter 6: Designing Global Supply Chain Networks
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Q1) The NPV (net present value)of a cash stream that is equal to $100 per period for 5 periods with a rate of return of 10% (.10)per period would be
A) 379.08.
B) 416.98.
C) 500.00.
D) 610.51.
E) 671.56.
Q2) If price and demand do vary over time in a global network,
A) flexible production capacity should not be used in the new environment.
B) flexible production capacity will be ineffective in the new environment.
C) flexible production capacity can be reconfigured to minimize profits in the new environment.
D) flexible production capacity can be reconfigured to maximize profits in the new environment.
E) flexible production capacity should never be used in an uncertain environment.
Q3) Discuss the ideas that managers should consider to make better supply chain network design decisions under uncertainty.
Q4) Explain additive and multiplicative binomial representations of uncertainty.
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Page 8
Chapter 7: Demand Forecasting in a Supply Chain
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Q1) A static method of forecasting assumes that the estimates of level,trend,and seasonality within the systematic component vary as new demand is observed.
A)True
B)False
Q2) The result when each stage in the supply chain makes its own separate forecast is often a match between supply and demand,because these forecasts are often very different.
A)True
B)False
Q3) The measure of forecast error where the amount of error of each forecast is squared and then an average is calculated is
A) mean squared error (MSE).
B) mean absolute deviation (MAD).
C) mean absolute percentage error (MAPE).
D) bias.
E) the tracking signal.
Q4) Long-term forecasts are usually more accurate than short-term forecasts.
A)True
B)False
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Chapter 8: Aggregate Planning in a Supply Chain
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Q1) To create an aggregate plan,a company must specify the planning horizon for the plan and the duration of each period within the planning horizon.
A)True
B)False
Q2) Safety capacity is defined as capacity used to satisfy demand that is lower than forecasted.
A)True
B)False
Q3) Aggregate planning solves problems involving aggregate decisions rather than stock keeping unit (SKU)level decisions.
A)True
B)False
Q4) Discuss the primary objective and operational parameters of aggregate planning.
Q5) Capacity used to satisfy demand that is higher than forecasted is A) safety backlog.
B) safety capacity.
C) safety inventory.
D) safety sales.
E) safety workforce.
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Chapter 9: Sales and Operations Planning: Planning Supply and Demand in
a Supply
Chain
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Q1) Faced with predictable variability of demand,a company's goal is to respond in a manner that maximizes profitability.
A)True
B)False
Q2) Which of the following is not an approach that firms can use when managing capacity to meet predictable demand variability?
A) Time flexibility from workforce
B) Use of seasonal workforce
C) Use of subcontracting
D) Use of dual facilities-dedicated and flexible
E) Using common components across multiple products
Q3) Maximizing revenue is typically the objective when marketing and sales make the promotion and pricing decisions.
A)True
B)False
Q4) Discuss the importance of collaboration within a supply chain when performing aggregate planning.
Q5) Discuss the impact of promotion on demand within a supply chain.
Page 11
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Chapter 10: Coordination in a Supply Chain
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Q1) Rationing schemes that allocate limited production in proportion to the orders placed by retailers
A) result in a game in which retailers try to increase the size of their orders to increase the amount supplied to them.
B) lead to a magnification of the bullwhip effect.
C) lead to the manufacturer being left with a surplus of product and capacity.
D) all of the above
E) B and C only
Q2) The bullwhip effect enables different stages of the supply chain to have a consistent estimate of what demand looks like.
A)True
B)False
Q3) A reduction in replenishment lead time helps dampen the bullwhip effect by reducing the underlying uncertainty of demand.
A)True
B)False
Q4) The bullwhip effect results in improved supply chain coordination.
A)True
B)False
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Chapter 11: Managing Economies of Scale in the Supply
Chain: Cycle Inventory
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Q1) When developing estimates for holding and ordering costs,it is important to A) estimate these costs to a high level of precision.
B) get a good approximation quickly.
C) develop estimates that will not be changed.
D) both A and C
Q2) The total annual cost is the sum of annual material cost,annual order cost,and annual holding cost,and is given as TC = CD + (D/Q)S + (Q/2)hC.
A)True
B)False
Q3) Aggregating across products,retailers,or suppliers in a single order allows for A) an increase in lot size for individual products.
B) an increase in customer demand.
C) a reduction in holding cost per unit.
D) a reduction in lot size for individual products.
E) a reduction in purchase price per unit.
Q4) Holding cost is the cost of carrying one unit in inventory for a specified period of time,usually one year.
A)True
B)False
Page 13
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Chapter 12: Managing Uncertainty in a Supply Chain: Safety Inventory
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Q1) Periodic review policies require
A) more safety inventory than continuous review policies for the same level of product availability.
B) less safety inventory than continuous review policies for the same level of product availability.
C) the same safety inventory as continuous review policies for the same level of product availability.
D) no more safety inventory than continuous review policies for the same level of product availability.
Q2) The distinction between product fill rate and order fill rate is
A) not significant in a single product situation.
B) significant in a single product situation.
C) not significant when a firm is selling multiple products.
D) significant when a firm is selling multiple products.
Q3) The required safety inventory
A) grows rapidly with a decrease in the desired product availability.
B) grows rapidly with an increase in the desired product availability.
C) decreases with an increase in the desired product availability.
D) remains stable with an increase in the desired product availability.
Page 14
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Chapter 13: Determining the Optimal Level of Product Availability
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Q1) The key factors that influence the optimal level of product availability do not include
A) the cost of overstocking the product.
B) the cost of stocking the product.
C) the cost of understocking the product.
D) All of the above are key factors.
Q2) ________ allows a firm to increase profits and better match supply and demand if the firm produces a large variety of products whose demand is unpredictable,not positively correlated,and is of about the same size.
A) Shortened forecasting window
B) Quick response
C) Postponement
D) Tailored sourcing
Q3) The costs of overstocking and understocking have a direct impact on both the optimal cycle service level and profitability.
A)True
B)False
Q4) Explain how tailored postponement can improve profitability.
Q5) Explain how tailored sourcing can be used to improve profitability.
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Chapter 14: Transportation in a Supply Chain
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Q1) Investment decisions regarding the transportation infrastructure (rails,locomotives,trucks,airplanes,etc.)are the primary concern of A) the shipper.
B) the supplier.
C) the manufacturer.
D) the carrier.
Q2) Explain why transportation systems should be tailored.
Q3) A firm can meet customer needs by using tailored transportation to provide the appropriate transportation choice based on customer and product characteristics,but at a higher cost.
A)True
B)False
Q4) Firms can significantly reduce the safety inventory they require by physically aggregating inventories in one location,which will also decrease transportation cost.
A)True
B)False
Q5) Discuss the two key players involved in any transportation in the supply chain.
Q6) Discuss the importance of designing flexibility into the transportation network.
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Chapter 15: Sourcing Decisions in a Supply Chain
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Q1) The procurement process for indirect materials should focus on decreasing the transaction cost for each order.
A)True
B)False
Q2) Price has traditionally been the only dimension that suppliers have been compared on during the process of
A) procurement.
B) sourcing.
C) supplier scoring and assessment.
D) supplier selection.
Q3) The value of better information coordination will be linked to the amount of variability introduced into the supply chain as a result of the bullwhip effect.
A)True
B)False
Q4) Which of the following is a cross-functional driver of sourcing?
A) Transportation
B) Inventory
C) Sourcing
D) Faciltities
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Chapter 16: Pricing and Revenue Management in a Supply Chain
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Q1) The reserved quantity for the spot market will be affected by
A) the difference in margin between the spot market and the bulk sale.
B) the distribution of demand from the bulk sale.
C) the distribution of demand from the spot market.
D) A and C only
Q2) The forecasting function is
A) the foundation of any revenue management system.
B) unnecessary for a revenue management system.
C) an added plus for any revenue management system.
D) likely to create problems for any revenue management system.
Q3) In theory,the concept of differential pricing decreases total cost for a firm.
A)True
B)False
Q4) Revenue management is the use of marketing to increase the profit generated from a limited supply of supply chain assets.
A)True
B)False
Q5) How can firms address the problem of perishable assets?
Q7) Describe the role of revenue management. Page 18
Q6) Explain how differential pricing can benefit a firm.
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Chapter 17: Information Technology in a Supply Chain
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Q1) The emergence of supply chain management has broadened the scope across which companies make decisions to
A) the supplier.
B) the enterprise.
C) the entire supply chain.
D) the customer.
Q2) The ISCM processes should have strong integration with the SRM macro process because
A) SRM applications have the most data and insight on customer behavior to be used in forecasting.
B) supply planning, fulfillment, and field service are all dependent on suppliers.
C) order management must integrate closely with fulfillment and be an input for effective demand planning.
D) A and B only
Q3) Often companies will have large amounts of data that are not helpful with decision making.
A)True
B)False
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Chapter 18: Sustainability and the Supply Chain
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Q1) What type of inventory is one of the most damaging from a sustainability perspective?
A) Raw materials
B) Work in process
C) Finished goods
D) Landfill
Q2) What are the challenges to greater sustainability posed by the tragedy of the commons?
Q3) McDonough and Braungart (2002)discuss the importance of ________ design if we are to truly limit the landfill inventory generated by a supply chain.
A) cradle to grave
B) cradle to cradle
C) manageable sustainability
D) recyclable content
Q4) Discuss the role of sustainability supply chains.
Q5) Most concrete action has been observed primarily when a focus on sustainability
A) increases revenue for sustainability initiatives.
B) makes the world more sustainable.
C) attracts customers who value sustainability.
D) reduces risk and improving the financial performance of the supply chain.
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