Operations Management, 12e (Heizer/Render/Munson)
Supplement 11 Supply Chain Management Analytics
Section 1 Techniques for Evaluating Supply Chains
1) Unfortunately, not many supply chain metrics exist that can be effectively used to evaluate performance within a company and for its supply chain partners.
Answer: FALSE
Diff: 1
Learning Outcome: Discuss options for measuring supply chain performance
2) The Great East Japan Earthquake of 2011 was centered off of the Pacific coast of which region of Japan?
- A) Kant
- B) Chbu
- C) Thoku
- D) Kansai
- E) Chgoku
Answer: C
Diff: 3
Objective: LO S11.1 Use a decision tree to determine the best number of suppliers to manage disaster risk
Learning Outcome: Compare common approaches to supply chain design
3) Which of the following statements is TRUE regarding the 2011 Thoku earthquake and tsunami?
- A) It devastated eastern sections of Japan.
- B) Some manufacturers around the globe had been relying exclusively on suppliers located in the affected zones.
- C) Japanese-built vehicle outputs for Toyota and Honda were down more than 60% in the month following the disaster.
- D) Manufacturers in several industries worldwide took 6 months or longer before they saw their supply chains working normally again.
- E) All of the above are true.
Answer: E
Diff: 1
Objective: LO S11.1 Use a decision tree to determine the best number of suppliers to manage disaster risk
Learning Outcome: Compare common approaches to supply chain design
Section 2 Evaluating Disaster Risk in the Supply Chain
1) Firms often use multiple suppliers for important components to mitigate the risks of total supply disruption.
Answer: TRUE
Diff: 1
Objective: LO S11.1 Use a decision tree to determine the best number of suppliers to manage disaster risk
Learning Outcome: Compare common approaches to supply chain design
2) In the disaster risk model, as the probability of a super-event (S) increases, the advantage of utilizing multiple suppliers increases.
Answer: FALSE
Diff: 2
AACSB: Reflective thinking
Objective: LO S11.1 Use a decision tree to determine the best number of suppliers to manage disaster risk
Learning Outcome: Discuss options for measuring supply chain performance
3) What technique does the text use to determine the best number of suppliers to manage disaster risk?
- A) linear programming
- B) factor weighting technique
- C) transportation model
- D) decision tree
- E) simulation
Answer: D
Diff: 1
Objective: LO S11.1 Use a decision tree to determine the best number of suppliers to manage disaster risk
Learning Outcome: Discuss options for measuring supply chain performance
4) Which of the following is NOT an element of the disaster risk decision tree model?
- A) the buyer's financial loss incurred in a supply cycle if supplier i were disrupted
- B) the marginal cost of managing a supplier
- C) the buyer's financial loss incurred in a supply cycle if all suppliers were disrupted
- D) the probability of a "super-event" that would disrupt all suppliers simultaneously
- E) the probability of a "unique-event" that would disrupt only one supplier
Answer: A
Diff: 2
Objective: LO S11.1 Use a decision tree to determine the best number of suppliers to manage disaster risk
Learning Outcome: Discuss options for measuring supply chain performance
5) Consider the disaster risk decision tree model. Using the notation from the model, what is the expected monetary value (cost) of choosing two suppliers?
- A) 2C
- B) [1 - P(2)] × 2C + P(2) × (L + 2C)
- C) 2C + SL
- D) P(2) × 2C + [1 - P(2)] × (L + 2C)
- E) 2C + (S + U2)L
Answer: B
Diff: 3
AACSB: Analytical thinking
Objective: LO S11.1 Use a decision tree to determine the best number of suppliers to manage disaster risk
Learning Outcome: Discuss options for measuring supply chain performance
6) Under the disaster risk decision tree model, which of the following conditions would create the HIGHEST incentive to use MORE suppliers?
- A) lower S, lower U
- B) lower S, higher U
- C) higher S, lower U
- D) higher S, higher U
- E) higher S, higher U, higher C
Answer: B
Diff: 3
AACSB: Analytical thinking
Objective: LO S11.1 Use a decision tree to determine the best number of suppliers to manage disaster risk
Learning Outcome: Discuss options for measuring supply chain performance
7) Under the disaster risk decision tree model, which of the following conditions would create the HIGHEST incentive to use FEWER suppliers?
- A) lower L, lower C
- B) lower L, higher C
- C) higher L, lower C
- D) higher L, higher C
- E) lower L, higher C, lower S
Answer: B
Diff: 3
AACSB: Analytical thinking
Objective: LO S11.1 Use a decision tree to determine the best number of suppliers to manage disaster risk
Learning Outcome: Discuss options for measuring supply chain performance
8) Suppose that the manager of a company has estimated the probability of a super-event sometime during the next five years that will disrupt all suppliers as 0.23%. In addition, the firm currently uses three suppliers for its main component, and the manager estimates the probability of a unique-event that would disrupt one of them sometime during the next five years to be 1.4%. What is the probability that all three suppliers will be disrupted at the same time at some point during the next five years?
- A) 4.4203%
- B) 0.2300%
- C) 4.4300%
- D) 0.2297%
- E) 0.2303%
Answer: E
Diff: 2
AACSB: Analytical thinking
Objective: LO S11.1 Use a decision tree to determine the best number of suppliers to manage disaster risk
Learning Outcome: Discuss options for measuring supply chain performance
9) Suppose that the manager of a company has estimated the probability of a super-event sometime during the next three years that will disrupt all suppliers as 2%. In addition, the firm currently uses four suppliers for its main component, and the manager estimates the probability of a unique-event that would disrupt one of them sometime during the next three years to be 20%. Supplier management costs during this period are $50,000 per supplier. The financial cost incurred if all four suppliers are disrupted at the same time is estimated to be $10,000,000. What is the expected monetary value (cost) of the current supplier diversification arrangement?
- A) $412,800
- B) $415,680
- C) $10,200,000
- D) $215,680
- E) $8,240,000
Answer: B
Diff: 3
AACSB: Analytical thinking
Objective: LO S11.1 Use a decision tree to determine the best number of suppliers to manage disaster risk
Learning Outcome: Discuss options for measuring supply chain performance
10) In the disaster risk decision tree model, a(n) ________ disrupts all suppliers simultaneously.
Answer: super-event
Diff: 2
Objective: LO S11.1 Use a decision tree to determine the best number of suppliers to manage disaster risk
Learning Outcome: Discuss options for measuring supply chain performance
11) For the disaster risk decision tree model, explain why an increase in S and an increase in U have the opposite impact on the choice of how many suppliers to use. What is the implication of these two phenomena taken together?
Answer: From formula (S11-1), we notice that when S increases, (1 - S) decreases; therefore, the disruption risk probability due to all suppliers individually failing at the same time receives less weight. In other words, there's a higher chance that all will be disrupted by a super-event anyway, so there is less incentive to increase the supplier base to handle the case where every supplier has a unique-event at the same time. Mathematically, the impact of a higher n in the second term is smaller because it's being multiplied by (1 - S), which is smaller. Having said that, a larger S does increase the overall probability of total disruption, so it's never a desired occurrence--it just means that simply adding more suppliers may not be quite as effective of a mitigation strategy. On the other hand, when U increases, the impact of the second term of formula (S11-1) increases, so adding another supplier (raising n by 1) has even more impact. This makes sense--the greater the chance that each supplier will individually fail, the more likely it is that we will want more suppliers.
An implication of all of this is to try to reduce the value of S by changing the geographical landscape. In other words, in most circumstances, S would be larger for a city than for a country than for the whole world. Therefore, a geographically diversified supplier base would reduce S. In conclusion, when multiple suppliers are used, managers may consider using ones that are geographically dispersed to lessen the probability of all failing simultaneously.
Diff: 3
AACSB: Reflective thinking
Objective: LO S11.1 Use a decision tree to determine the best number of suppliers to manage disaster risk
Learning Outcome: Discuss options for measuring supply chain performance
12) Walsh Construction is considering two options for its supplier portfolio. Option 1 uses two local suppliers. Each has a "unique-event" risk of 8%, and the probability of a "super-even" that would disable both at the same time is estimated to be 2.5%. Option 2 uses two suppliers located in different countries. Each has a "unique-event" risk of 18%, and the probability of a "super-event" that would disable both at the same time is estimated to be 1.2%.
(a) What is the probability that both suppliers will be disrupted using option 1?
(b) What is the probability that both suppliers will be disrupted using option 2?
(c) Which option would provide the lowest risk of a total shutdown?
Answer:
(a) S = 0.025; U = 0.08
From (S11 - 1), P(2) = 0.025 + (1 - 0.025)0.082 = 0.025 + 0.975(0.0064) = 0.03124
(b) S = 0.012; U = 0.18
From (S11 - 1), P(2) = 0.012 + (1 - 0.012)0.182 = 0.012 + 0.988(0.0324) = 0.04401
(c) Since 0.03124 < 0.04401, Option 1 (two local suppliers) carries the lower risk.
Diff: 2
AACSB: Analytical thinking
Objective: LO S11.1 Use a decision tree to determine the best number of suppliers to manage disaster risk
Learning Outcome: Discuss options for measuring supply chain performance
13) Consider the disaster risk decision tree model.
(a) Derive a formula to represent the amount that the probability of all suppliers being disrupted simultaneously, P(n), will increase if the super-event probability S is doubled.
(b) Test your formula by computing the amount of increase if the original S equals 1% and there are two suppliers, each with U = 4%.
Answer:
(a) Formula (S11 - 1) can be rewritten as: P(n) = S + Un - SUn
If S doubles: P(n) = 2S + Un - 2SUn
Subtracting the first equation from the second yields an increase of:
S - SUn, or S(1 - Un)
(b) The original P(2) = .01 + (1 - .01)(.042) = .01 + .001584 = .011584
If S doubles to .02, P(2) = .02 + (1 - .02)(.042) = .02 + .001584 = .021568
The increase = .021568 - .011584 = .009984 = .01(1 - .042)
Diff: 3
AACSB: Analytical thinking
Objective: LO S11.1 Use a decision tree to determine the best number of suppliers to manage disaster risk
Learning Outcome: Discuss options for measuring supply chain performance
14) Suzy Jones is trying to decide whether to use one or two suppliers for the motors than go into the chain saws that her company produces. She wants to use local suppliers because her firm runs a JIT operation. Her factory is located in a coastal town that is prone to hurricanes. She estimates that the probability in any year of a "super-event" that might shut down all suppliers at the same time for at least two weeks is 5%. Such a total shutdown would cost the company approximately $100,000. She estimates the "unique-event" risk for any of the suppliers to be 10%. Assuming that the marginal cost of managing an additional supplier is $12,000 per year, should Suzy use one or two suppliers?
Answer: S = 0.05, U = 0.10, L = $100,000, C = $12,000
Using equation (S11-1), the probability of a total disruption using 1 or 2 suppliers equals:
P(1): 0.05 + (1 - 0.05)0.101 = 0.05 + (0.95)(0.10) = 0.145
P(2): 0.05 + (1 - 0.05)0.102 = 0.05 + (0.95)(0.01) = 0.0595
EMV(1 supplier) = $12,000(1 - 0.145) + $112,000(0.145) = $10,260 + $16,240 = $26,500
EMV(2 suppliers) = $24,000(1 - 0.0595) + $124,000(0.0595) = $22,572 + $7,378 = $29,950
In this case, the lower disruption probability of diversification is outweighed by the cost of managing a second supplier. Thus, one supplier should be chosen.
Diff: 3
AACSB: Analytical thinking
Objective: LO S11.1 Use a decision tree to determine the best number of suppliers to manage disaster risk
Learning Outcome: Discuss options for measuring supply chain performance
Section 3 Managing the Bullwhip Effect
1) The bullwhip effect describes the tendency for larger order size fluctuations in the supply chain as orders move from suppliers toward retailers.
Answer: FALSE
Diff: 2
Objective: LO S11.2 Explain and measure the bullwhip effect
Learning Outcome: Discuss options for measuring supply chain performance
2) The bullwhip effect can occur when orders decrease as well as when they increase.
Answer: TRUE
Diff: 2
Objective: LO S11.2 Explain and measure the bullwhip effect
Learning Outcome: Discuss options for measuring supply chain performance
3) The overarching solution to the bullwhip effect is simply for supply chain members to share information and work together.
Answer: TRUE
Diff: 2
Objective: LO S11.2 Explain and measure the bullwhip effect
Learning Outcome: Discuss options for measuring supply chain performance
4) A bullwhip measure value greater than zero indicates that the bullwhip effect exists.
Answer: FALSE
Diff: 2
Objective: LO S11.2 Explain and measure the bullwhip effect
Learning Outcome: Discuss options for measuring supply chain performance
5) Which of the following is NOT a potential cause of the bullwhip effect?
- A) shortage gaming
- B) channel coordination
- C) order batching
- D) demand forecast errors
- E) price fluctuations
Answer: B
Diff: 2
Objective: LO S11.2 Explain and measure the bullwhip effect
Learning Outcome: Discuss options for measuring supply chain performance
6) Which of the following is NOT a remedy for the bullwhip effect?
- A) share demand information
- B) channel coordination
- C) order batching
- D) price stabilization
- E) allocate orders based on past demand
Answer: C
Diff: 2
Objective: LO S11.2 Explain and measure the bullwhip effect
Learning Outcome: Discuss options for measuring supply chain performance
7) Which of the following is the prescribed remedy when the bullwhip effect is caused by shortage gaming?
- A) share demand information
- B) channel coordination
- C) increase capacity
- D) price stabilization
- E) allocate orders based on past demand
Answer: E
Diff: 2
Objective: LO S11.2 Explain and measure the bullwhip effect
Learning Outcome: Discuss options for measuring supply chain performance
8) What is the formula for the bullwhip measure?
- A) variance of orders / variance of demand
- B) variance of orders - variance of demand
- C) variance of demand / variance of orders
- D) variance of orders2/ variance of demand2
- E) variance of demand - variance of orders
Answer: A
Diff: 1
Objective: LO S11.2 Explain and measure the bullwhip effect
Learning Outcome: Discuss options for measuring supply chain performance
9) What value of the bullwhip measure would indicate that the bullwhip effect exists?
- A) greater than 1
- B) greater than 0
- C) less than 0
- D) less than 1
- E) 1
Answer: A
Diff: 2
Objective: LO S11.2 Explain and measure the bullwhip effect
Learning Outcome: Discuss options for measuring supply chain performance
10) What value of the bullwhip measure would indicate that a dampening scenario exists?
- A) greater than 1
- B) greater than 0
- C) less than 0
- D) less than 1
- E) 0
Answer: D
Diff: 2
Objective: LO S11.2 Explain and measure the bullwhip effect
Learning Outcome: Discuss options for measuring supply chain performance
11) What is the value of the bullwhip measure for a company with a standard deviation of demand equal to 20, and a variance of orders equal to 450?
- A) 0.889
- B) 22.5
- C) 1.125
- D) 0.044
- E) 50
Answer: C
Diff: 2
AACSB: Analytical thinking
Objective: LO S11.2 Explain and measure the bullwhip effect
Learning Outcome: Discuss options for measuring supply chain performance
12) If the variance of orders of a manufacturer equals 800, and the variance of orders of its supplier equals 750, what is happening at this part of the supply chain?
- A) The bullwhip effect is present.
- B) The supplier is providing a dampening (anti-bullwhip) effect.
- C) The bullwhip measure for the supplier equals 1.067
- D) Neither amplification nor smoothing is present.
- E) Both amplification and smoothing are present.
Answer: B
Diff: 2
AACSB: Analytical thinking
Objective: LO S11.2 Explain and measure the bullwhip effect
Learning Outcome: Discuss options for measuring supply chain performance
13) Suppose that in month 1, both the retailer and the wholesaler in a supply chain ordered 20,000 units. Then in month 2, the retailer decreases its order size by 1000 units. If the wholesaler then decreases its order size in month 2 by 700 units, which of the following is TRUE?
- A) The wholesaler is contributing to the bullwhip effect.
- B) The wholesaler is providing a dampening (anti-bullwhip) effect.
- C) The bullwhip measure for the wholesaler equals 0.70.
- D) Neither amplification nor smoothing is present.
- E) The wholesaler is providing both amplification and smoothing.
Answer: B
Diff: 2
AACSB: Analytical thinking
Objective: LO S11.2 Explain and measure the bullwhip effect
Learning Outcome: Discuss options for measuring supply chain performance
14) The U.S. ________ program, designed to stimulate the economy and improve fuel efficiency, produced an unintended bullwhip effect in the automobile industry.
Answer: Cash for Clunkers
Diff: 2
Objective: LO S11.2 Explain and measure the bullwhip effect
Learning Outcome: Discuss options for measuring supply chain performance
15) Identify the four primary causes of the bullwhip effect and the remedy for each.
Answer:
(1) Cause: Demand forecast errors (cumulative uncertainty in the supply chain); Remedy: Share demand information throughout the supply chain.
(2) Cause: Order batching (large, infrequent orders leading suppliers to order even larger amounts); Remedy: Channel coordination—determine lot sizes as though the full supply chain was one company.
(3) Cause: Price fluctuations (buying in advance of demand to take advantage of low prices, discounts, or sales); Remedy: Price stabilization (everyday low prices).
(4) Cause: Shortage gaming (hoarding supplies for fear of a supply shortage); Remedy: Allocate orders based on past demand.
Diff: 3
Objective: LO S11.2 Explain and measure the bullwhip effect
Learning Outcome: Discuss options for measuring supply chain performance
16) Describe how the U.S. Cash for Clunkers program unintentionally contributed to the bullwhip effect in the automobile industry.
Answer: In an effort to stimulate the economy and improve fuel efficiency, the United States offered attractive rebates for trading old cars in exchange for new, more fuel-efficient vehicles. This eight-week program proved very popular with consumers. Fearing a shortage and assuming that they would not receive 100% of their orders, some dealers inflated orders for new cars to try to receive a larger pool of allocated vehicles. In one month, the program increased demand by 50% for automakers, many of whom had already cut capacity significantly. Almost overnight, manufacturers and parts suppliers had to transform from a shift reduction mode to an overtime mode.
Diff: 3
Objective: LO S11.2 Explain and measure the bullwhip effect
Learning Outcome: Discuss options for measuring supply chain performance
17) Suppose that a firm incurs a demand variance of 400 units per week, and the variance of orders that it places equals 750 per week. What is the value of the bullwhip measure for this company?
Answer: Variance of orders / Variance of demand = 750 / 400 = 1.875 (so amplification is present)
Diff: 1
AACSB: Analytical thinking
Objective: LO S11.2 Explain and measure the bullwhip effect
Learning Outcome: Discuss options for measuring supply chain performance
18) Consider a supply chain where a manufacturer sells to a distributor who sells to a wholesaler who sells to a retailer. Last year, the retailer's weekly variance of demand was 4000 units. The weekly variance of orders was 5000; 8000; 12,000; and 17,000 units for the retailer, wholesaler, distributor, and manufacturer, respectively. (Note that the variance of orders equals the variance of demand for that firm's supplier.)
(a) Calculate the bullwhip measure for the retailer.
(b) Calculate the bullwhip measure for the wholesaler.
(c) Calculate the bullwhip measure for the distributor.
(d) Calculate the bullwhip measure for the manufacturer.
(e) Which firm appears to be contributing the most to the bullwhip effect in this supply chain?
Answer:
(a) 5000 / 4000 = 1.25; (b) 8000 / 5000 = 1.6; (c) 12,000 / 8000 = 1.5; (d) 17,000 / 12,000 = 1.42
(e) With the highest bullwhip measure value of 1.6, the wholesaler appears to be contributing the most to the bullwhip effect in this supply chain.
Diff: 2
AACSB: Analytical thinking
Objective: LO S11.2 Explain and measure the bullwhip effect
Learning Outcome: Discuss options for measuring supply chain performance
19) Over the past six months, Wholesale Foods of Fresno has experienced a standard deviation of demand of 600 units. Standard deviation of its orders during that period was 800 units.
(a) What is the bullwhip measure for Wholesale Foods of Fresno?
(b) If Wholesale Foods of Fresno had made a perfect forecast of demand over the past 6 months and had decided to order 1/6 of that demand each month, what would its bullwhip measure have been?
Answer:
(a) Variance of orders / Variance of demand = 8002 / 6002 = 640,000 / 360,000 = 1.78 (Note that while using the standard deviations to calculate the bullwhip measure would still indicate whether or not amplification exists, the value of that calculation would be different from that prescribed by equation (S11-2).)
(b) If order sizes are always the same, then the variance of orders equals 0. From Equation (S11-2), the bullwhip measure = 0 / 360,000 = 0 (complete dampening).
Diff: 2
AACSB: Analytical thinking
Objective: LO S11.2 Explain and measure the bullwhip effect
Learning Outcome: Discuss options for measuring supply chain performance
Section 4 Supplier Selection Analysis
1) When using the factor weighting approach, most companies will use the same list of criteria and the same criteria weights.
Answer: FALSE
Diff: 1
Objective: LO S11.3 Describe the factor-weighting approach to supplier evaluation
Learning Outcome: Discuss options for measuring supply chain performance
2) The factor weighting model is an attempt to add subjectivity to decision making when selecting among suppliers.
Answer: FALSE
Diff: 1
Objective: LO S11.3 Describe the factor-weighting approach to supplier evaluation
Learning Outcome: Discuss options for measuring supply chain performance
3) Choosing suppliers simply based on the lowest bid has become a somewhat rare approach.
Answer: TRUE
Diff: 1
Objective: LO S11.3 Describe the factor-weighting approach to supplier evaluation
Learning Outcome: Discuss options for measuring supply chain performance
4) A grocery store is trying to find a new supplier for carrots. Its three most important supplier criteria are freshness, lot size, and cost, with factor weights of 0.6, 0.1, and 0.3, respectively. What would a supplier with ratings of 6, 8, and 10 in the three respective categories score as a weighted total?
- A) 24
- B) 1
- C) 7.4
- D) 9.8
- E) 8
Answer: C
Diff: 2
AACSB: Analytical thinking
Objective: LO S11.3 Describe the factor-weighting approach to supplier evaluation
Learning Outcome: Discuss options for measuring supply chain performance
5) An industrial producer is searching for a supplier for ball bearings. Its three most important supplier criteria are price, quality, and delivery reliability. The firm has decided that quality and delivery reliability should carry the same weight, and that each of them are twice as important as price. If the weights sum to 100%, what would a supplier with ratings of 40, 90, and 75 in the three respective categories score as a weighted total?
- A) 37
- B) 370
- C) 49
- D) 205
- E) 74
Answer: E
Diff: 3
AACSB: Analytical thinking
Objective: LO S11.3 Describe the factor-weighting approach to supplier evaluation
Learning Outcome: Discuss options for measuring supply chain performance
6) Which of the following is NOT REQUIRED information to obtain to conduct the factor weighting technique in supplier selection analysis?
- A) a set of supplier criteria
- B) a weight for each supplier criterion
- C) a score for each potential supplier on each criterion
- D) a qualitative scale on which to rate suppliers
- E) a numerical scale on which to rate suppliers
Answer: D
Diff: 2
Objective: LO S11.3 Describe the factor-weighting approach to supplier evaluation
Learning Outcome: Discuss options for measuring supply chain performance
7) Which of the following elements of the factor weighting technique in supplier selection analysis does NOT contain a certain degree of subjectivity?
- A) the formula used to calculate the total weighted score for each supplier
- B) the weights applied to each supplier criterion
- C) the scores for each potential supplier on each criterion
- D) the set of supplier criteria
- E) the numerical scale used to rate suppliers
Answer: A
Diff: 1
Objective: LO S11.3 Describe the factor-weighting approach to supplier evaluation
Learning Outcome: Discuss options for measuring supply chain performance
8) The ________ model adds objectivity to decision making when selecting suppliers.
Answer: factor weighting
Diff: 1
Objective: LO S11.3 Describe the factor-weighting approach to supplier evaluation
Learning Outcome: Discuss options for measuring supply chain performance
9) Briefly describe how to conduct the factor weighting approach to supplier evaluation.
Answer: The factor weighting technique simultaneously considers multiple supplier criteria. First a set of important selection criteria must be chosen. Then an importance weight must be assigned to each factor. These weights often sum to 100%. Then each potential supplier is scored on each selection criterion according to the same numerical scale (e.g., 1-10). Finally, each supplier's weighted total score equals the sum over all selection criteria of the product of that supplier's score multiplied by the importance weight for that criterion. The supplier with the highest total scored is deemed most attractive.
Diff: 3
Objective: LO S11.3 Describe the factor-weighting approach to supplier evaluation
Learning Outcome: Discuss options for measuring supply chain performance
10) A company is about to select a vendor for the outsourcing of all of its engineering, environmental, and CAD requirements. It has identified four criteria critical to the selection. These criteria, and their importance weights, appear below. Three firms, A, C, and E, have indicated that they are interested in this position. The company has scored each of the three candidates on these criteria, using a 1-10 scale, where 10 is best. Candidate A scored 7, 7, 7, and 5, respectively, on the four criteria. Candidate C scored 9, 4, 8, and 6. Candidate E scored 5, 10, 10, and 7. Which vendor has the highest composite score?
Criterion |
Weight |
Engineering expertise |
.40 |
Financial and managerial strength |
.20 |
Integrity |
.15 |
Staff experience and qualifications |
.25 |
Answer:
Company E has the highest composite score of 7.25
Diff: 2
AACSB: Analytical thinking
Objective: LO S11.3 Describe the factor-weighting approach to supplier evaluation
Learning Outcome: Discuss options for measuring supply chain performance
11) Tommy's Family Furniture is looking for a new supplier for its armchairs. Tommy is primarily interested in only two criteria: price and name brand value. He considers the value of the name brand to be three times more important than price. Tommy has narrowed his choices to two suppliers. On a 10-point scale, he has assigned Amy's Armchairs a score of 8 on price and 5 on name brand value. He has assigned Annie's Armchairs a score of 3 on price and 6 on name brand value. Apply the factor weighting technique to help Tommy choose a new armchair supplier.
Answer: To determine the appropriate weights for each category, create a simple algebraic relationship.
Let X = the weight for criterion 1.
Then X + 3X = 100%, i.e., 4X = 1, or X = 0.25 = 25%. Thus, price has a weight of 25%, and name brand value has a weight of 3(25%) = 75%.
The total score for Amy's Armchairs = 8(0.25) + 5(0.75) = 2.0 + 3.75 = 5.75
The total score for Annie's Armchairs = 3(0.25) + 6(0.75) = 0.75 + 4.5 = 5.25
Despite a lower score on the more important criterion, the difference in price attractiveness was enough to give Amy's Armchairs the highest score. Thus, Amy's Armchairs should be selected.
Diff: 3
AACSB: Analytical thinking
Objective: LO S11.3 Describe the factor-weighting approach to supplier evaluation
Learning Outcome: Discuss options for measuring supply chain performance
Section 5 Transportation Mode Analysis
1) The primary trade-off in transportation mode analysis involves evaluating holding cost against the cost of shipping.
Answer: TRUE
Diff: 1
Objective: LO S11.4 Evaluate cost-of-shipping alternatives
Learning Outcome: Discuss options for measuring supply chain performance
2) Typically, a more expensive shipping option is:
- A) slower with a lower holding cost.
- B) slower with a higher holding cost.
- C) faster with a lower holding cost.
- D) faster with a higher holding cost.
- E) faster, but holding cost is unaffected by delivery speed.
Answer: C
Diff: 1
Objective: LO S11.4 Evaluate cost-of-shipping alternatives
Learning Outcome: Discuss options for measuring supply chain performance
3) Which of the following would NOT be considered (in addition to delivery speed) when choosing a mode of transportation?
- A) on-time delivery
- B) coordinating shipments to maintain a schedule
- C) getting new products to market
- D) keeping a customer happy
- E) All of the above may be considered.
Answer: E
Diff: 2
Objective: LO S11.4 Evaluate cost-of-shipping alternatives
Learning Outcome: Discuss options for measuring supply chain performance
4) Suppose that a product's value is $1000. The manufacturer experiences a holding cost of 2.5% per month. The firm ships the product across country by truck, and it arrives six days later. The shipping cost is $80 per unit. What is the holding cost on each unit shipped? (Assume 30 days per month.)
- A) $0.83
- B) $5.00
- C) $0.07
- D) $0.40
- E) $150.00
Answer: B
Diff: 2
AACSB: Analytical thinking
Objective: LO S11.4 Evaluate cost-of-shipping alternatives
Learning Outcome: Discuss options for measuring supply chain performance
5) The primary trade-off in transportation mode analysis involves evaluating ________ against the cost of shipping.
Answer: holding cost
Diff: 2
Objective: LO S11.4 Evaluate cost-of-shipping alternatives
Learning Outcome: Discuss options for measuring supply chain performance
6) Identify at least four factors in addition to delivery speed (and its impact on holding cost) that may need to be considered when choosing the best mode of shipment.
Answer: The four presented in the text are: (1) on-time delivery, (2) coordinating shipments to maintain a schedule, (3) getting a new product to market, and (4) keeping a customer happy.
Students may think of other valid considerations as well.
Diff: 3
Objective: LO S11.4 Evaluate cost-of-shipping alternatives
Learning Outcome: Discuss options for measuring supply chain performance
7) A shipment of parts valued at $75,000 needs to be shipped from Tampa, FL, to Chicago, IL. They could be shipped by rail, taking 15 days at a cost of $1,575, or by truck, taking 4 days at a cost of $2,640. The annual holding cost rate for this type of item has been estimated at 22%. What option is more economical?
Answer:
Daily cost of holding the item is .22(75,000)/365 = $45.21
Days saved by using truck is 15 - 5 = 11 days
11 days × $45.21 = $497.31
Extra shipping cost = $2,640 - $1,575 = $1,065
The $497.27 savings does not offset the extra shipping cost of $1,065. Send the shipment by rail.
Diff: 2
AACSB: Analytical thinking
Objective: LO S11.4 Evaluate cost-of-shipping alternatives
Learning Outcome: Discuss options for measuring supply chain performance
8) A container of ball-bearings valued at $25,000, currently located in Houston, TX, needs to be delivered to the Morton, IL, plant. The standard shipment method takes two days. However, for an additional charge of $500, the container can be sent overnight to arrive one day later. The annual holding cost rate for this type of item has been estimated at 28%. Which option is more economical?
Answer: Daily cost of holding the item is .28(25,000)/365 = $19.18. Since the extra shipping cost is $500, the $19.18 savings does not offset the extra shipping cost. Send the shipment using the standard method.
Diff: 2
AACSB: Analytical thinking
Objective: LO S11.4 Evaluate cost-of-shipping alternatives
Learning Outcome: Discuss options for measuring supply chain performance
Section 6 Warehouse Storage
1) The primary trade-off in warehouse storage location analysis involves evaluating the number of trips taken for an item vs. the physical weight of that item.
Answer: FALSE
Diff: 2
Objective: LO S11.5 Allocate items to storage locations in a warehouse
Learning Outcome: Discuss options for measuring supply chain performance
2) The most expensive items in a warehouse should be placed near the dock.
Answer: FALSE
Diff: 1
Objective: LO S11.5 Allocate items to storage locations in a warehouse
Learning Outcome: Discuss options for measuring supply chain performance
3) The items listed below are stored in a one-dock warehouse. Which of them should be stored at the very back (furthest away from the dock)?
Item |
Trips |
Area Needed (Blocks) |
A |
2000 |
5 |
B |
5 |
1 |
C |
200 |
2 |
D |
1000 |
3 |
E |
500 |
1 |
- A) A
- B) B
- C) C
- D) D
- E) E
Answer: B
Diff: 2
Objective: LO S11.5 Allocate items to storage locations in a warehouse
Learning Outcome: Discuss options for measuring supply chain performance
4) The items listed below are stored in a one-dock warehouse. Which of them should be stored at the very front (closest to the dock)?
Item |
Trips |
Area Needed (Blocks) |
A |
2000 |
5 |
B |
5 |
1 |
C |
200 |
2 |
D |
1000 |
3 |
E |
500 |
1 |
- A) A
- B) B
- C) C
- D) D
- E) E
Answer: E
Diff: 2
Objective: LO S11.5 Allocate items to storage locations in a warehouse
Learning Outcome: Discuss options for measuring supply chain performance
5) The items listed below are stored in a one-dock warehouse. Which of them should be stored at the very back (furthest away from the dock)?
Item |
Trips |
Area Needed (Blocks) |
A |
300 |
60 |
B |
220 |
3 |
C |
72 |
1 |
D |
90 |
10 |
E |
24 |
3 |
- A) A
- B) B
- C) C
- D) D
- E) E
Answer: A
Diff: 2
Objective: LO S11.5 Allocate items to storage locations in a warehouse
Learning Outcome: Discuss options for measuring supply chain performance
6) The items listed below are stored in a one-dock warehouse. Which of them should be stored at the very front (closest to the dock)?
Item |
Trips |
Area Needed (Blocks) |
A |
300 |
60 |
B |
220 |
3 |
C |
72 |
1 |
D |
90 |
10 |
E |
24 |
3 |
- A) A
- B) B
- C) C
- D) D
- E) E
Answer: B
Diff: 2
Objective: LO S11.5 Allocate items to storage locations in a warehouse
Learning Outcome: Discuss options for measuring supply chain performance
7) The items listed below are stored in a one-dock warehouse. In what order should they be placed in the warehouse (moving from closest to the dock to furthest away from the dock)?
Item |
Trips |
Area Needed (Blocks) |
A |
400 |
80 |
B |
210 |
7 |
C |
720 |
72 |
D |
90 |
10 |
E |
240 |
30 |
- A) A-E-D-C-B
- B) C-A-E-B-D
- C) A-C-E-D-B
- D) B-C-D-E-A
- E) D-B-E-A-C
Answer: D
Diff: 2
Objective: LO S11.5 Allocate items to storage locations in a warehouse
Learning Outcome: Discuss options for measuring supply chain performance
8) The items listed below are stored in a one-dock warehouse. In what order should they be placed in the warehouse (moving from closest to the dock to furthest away from the dock)?
Item |
Trips |
Area Needed (Blocks) |
A |
40 |
5 |
B |
20 |
2 |
C |
80 |
5 |
D |
18 |
1 |
E |
55 |
11 |
- A) C-E-A-B-D
- B) E-A-C-B-D
- C) E-C-A-B-D
- D) E-A-B-C-D
- E) D-C-B-A-E
Answer: E
Diff: 2
Objective: LO S11.5 Allocate items to storage locations in a warehouse
Learning Outcome: Discuss options for measuring supply chain performance
9) When determining storage locations in a warehouse with a single dock, the items that should be placed closest to the dock are those that have the highest:
- A) cost per unit.
- B) number of trips / blocks of storage area needed.
- C) number of trips.
- D) annual volume × unit cost.
- E) number of trips × blocks of storage area needed.
Answer: B
Diff: 2
Objective: LO S11.5 Allocate items to storage locations in a warehouse
Learning Outcome: Discuss options for measuring supply chain performance
10) The primary trade-off in warehouse storage location analysis involves evaluating the number of trips taken for an item vs. the ________.
Answer: blocks of storage area needed
Diff: 2
Objective: LO S11.5 Allocate items to storage locations in a warehouse
Learning Outcome: Discuss options for measuring supply chain performance
11) Explain how the solution procedure for the warehouse storage location problem uses a "bang-for-the-buck" approach.
Answer: The "bang" (value) here is the number of trips. Because we want to minimize travel, we would like to place items with high-frequency visits near the front. The storage space represents the "buck" (cost). We want items that take up a lot of space moved toward the back because if they were placed near the front, we would have to travel past their multiple blocks every time we needed to store or retrieve an item from a different category. This bang versus buck trade-off is neatly accommodated by using the trips/blocks ratio.
Diff: 3
Objective: LO S11.5 Allocate items to storage locations in a warehouse
Learning Outcome: Discuss options for measuring supply chain performance
12) The items listed below are stored in a one-dock warehouse. In what order should they be placed in the warehouse (moving from closest to the dock to furthest away from the dock)?
Item |
Trips |
Area Needed (Blocks) |
A |
50 |
5 |
B |
20 |
4 |
C |
80 |
10 |
D |
18 |
2 |
E |
48 |
8 |
Answer: Answer: The Trips/Blocks ratios are A: 50/5 = 10; B: 20/4 = 5; C: 80/10 = 8; D: 18/2 = 9; E: 48/8 = 6
Ranking these from highest to lowest = A-D-C-E-B.
Diff: 2
Objective: LO S11.5 Allocate items to storage locations in a warehouse
Learning Outcome: Discuss options for measuring supply chain performance
----------------------------------
OPERATIONS MANAGEMENT - 2017 - COLLECTION
FREE DOWNLOAD
EBOOKS
Operations Management, 2015, 12th Edition, William J. Stevenson - Free Download Link
Operations Management, Sustainability and Supply Chain Management, 11th Edition, 2014, Jay Heizer, Barry Render - Free Download Link
Operations Management: Sustainability and Supply Chain Management, 12th Edition, Jay Heizer, Barry Render, Chuck Munson, 2017
Principles of Operations Management: Sustainability and Supply Chain Management, 10th Edition, 2017
Operations Research: An Introduction, 10th Edition, Hamdy A. Taha, 2017
Introduction to Operations and Supply Chain Management, 4th Edition, Cecil B. Bozarth, Robert B. Handfield, 2016
Operations Management: Processes and Supply Chains, 11th Edition, Lee J. Krajewski, Manoj K. Malhotra, Larry P. Ritzman, 2016
Free Online Course Materials
1. Operations Management Ebooks - Free Downloads
2. Slides - 11th Edition - Free Downloads
3. Slides - 12nd Edition - Free Downloads
4. Full List of Videos Case Studies - Link
5. All articles about Operations Management
http://top20mba.com/mba-cases/94-mba-operation-management
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6. QUIZ, Multiple choice questions and answers
7. CASE STUDY GUIDES
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