Managing Supply Chains A Logistics Approach International Edition 9th Edition by Coyle – Test Bank

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Sample Questions Posted Below

 

 

 

 

CHAPTER 5 TEST QUESTIONS

 

True-False

 

  1. A metric and a measurement are the same.

ANSWER: False

 

  1. A metric requires definition, involves a calculation, or is a combination of measurements, and is often a ratio.

ANSWER: True

 

  1. A metric could drive inappropriate behavior.

ANSWER: True

 

  1. Scorecards and key performance indicators (KPIs) are the same thing.

ANSWER: True

 

  1. Evaluating current or potential supply chain metrics is not important to a sound metrics program.

ANSWER: False

 

  1. The focus on performance measurement is a recent event in industry.

ANSWER: False

 

  1. Customers and suppliers should be included in the development of metrics.

ANSWER: True

 

  1. Managers should resist sub-optimization of their particular function unless it benefits the corporation as a whole.

ANSWER: True

 

  1. Four major categories that provide supply chain performance are: time, quality, cost, and inventory.

ANSWER: False

 

  1. Another metric classification scheme that has been receiving increased attention is that developed by the Supply Chain Council and contained in the Supply Chain Operations and Reference (SCOR) model as it dispenses with conventional metrics for a process named D1.

ANSWER: False

 

  1. Order cycle time (OCT) is another very important logistics service metric. OCT influences product availability, customer inventories, and seller’s cash flow and profit.

ANSWER: True

 

  1. Supply chain management involves the control of raw material, in-process, and finished goods inventories and cash flow.

ANSWER: False

 

Multiple Choice

 

  1. The purpose of this chapter is to
a. discuss metrics.
b. Examine developing metrics.
c. classify metrics.
d. all of these answers

 

 

ANSWER: d

 

  1. A metric requires
a. definition.
b. competitive analysis.
c. trade association oversight.
d. measures.

 

 

ANSWER:  a

 

  1. Scorecard and key performance indicators (KPIs) refer to
a. sporting events.
b. metrics.
c. management’s evaluation of supply chain staff.
d. measuring output.

 

 

ANSWER: b

 

  1. The logistics management approach was supported by
a. metrics.
b. total cost.
c. least cost.
d. the D1 concept developed by the Supply Chain Council.

 

 

ANSWER: b

 

  1. Another driving influence for supply chain reexamination has been the desire of organizations to change their supply chain focus from a ____ to an “investment” center.
a. warehouse system
b. logistics-oriented system
c. cost center
d. value neutral

 

 

ANSWER: c

 

 

  1. An “executive dashboard” is
a. a small number (usually less than five) of KPIs.
b. used by senior management to track profits.
c. a metric used by the Board of Directors.
d. a trend that has only recently developed.

 

 

ANSWER:  a

 

  1. There are four major categories with examples that provide a useful way for examining logistics and supply chain performance: They are time, ____, cost, and supporting metrics.
a. delivery
b. KPIs
c. competition
d. quality

 

 

ANSWER: d

 

  1. There are five major categories of metrics that need to be used to measure the performance of Process D1: reliability, ____, flexibility, cost, and assets.
a. ROA
b. responsiveness
c. supply chains
d. cash to cash cycle

 

 

ANSWER: b

 

  1. The decision to alter the supply chain process is essentially ____ issue.
a. a management
b. an optimization
c. a supply chain
d. a customer satisfaction

 

 

ANSWER: b

 

  1. What is the best financial metric?
a. ROA
b. Profit
c. Sales
d. Stock price

 

 

ANSWER:  a

 

 

  1. Channel structure management includes decisions regarding the use of outsourcing, channel inventories, ____, and channel structure.
a. cash to cash management
b. information systems
c. order cycle
d. KPIs

 

 

ANSWER: b

 

  1. Effective order management can have an impact on
a. reducing supply chain costs.
b. increasing revenues.
c. improving ROA.
d. all of these answers

 

 

ANSWER: d

 

  1. Which of the following is NOT an element of Order Management?
a. reducing stockouts
b. improving information
c. optimizing mode mix
d. optimizing order fill rate

 

 

ANSWER: c

 

  1. Which of the following is NOT a supply chain decision area regarding ROA improvement?
a. Channel Structure Management
b. Inventory Management
c. Order Management
d. Information Management

 

 

ANSWER: d

 

  1. Gross margin equals
a. sales minus COGS
b. Sales + taxes minus COGS
c. COGS – Sales
d. COGS – taxes

 

 

ANSWER:  a

 

 

Essay

 

  1. Discuss the differences between metrics and measure, and why this is important.

 

ANSWER:

Traditionally, the term measure was used to denote any quantitative output of an activity or process. Today, the term metric is being used more often in place of the term measure. A measure is easily defined with no calculations and with simple dimensions. Supply chain examples would include units of inventory and backorder dollars. A metric needs definition, involves a calculation, or is a combination of measurements, and is often a ratio. Supply chain examples would include inventory future days of supply, inventory turns, and sales dollars per stock-keeping unit.

 

 

  1. There are ten characteristics of supply chain metrics. Name at least five, and pick any two for further discussion.

 

ANSWER:

The characteristics are:

 

  • Quantitative
  • Easy to understand
  • Drives behavior
  • Visible and readily available
  • Proactive
  • Encompass both outputs and inputs (or cause and effect)
  • Focuses only on important data
  • Multidimensional
  • Use economies of effort (generates enough benefit to warrant cost)
  • Facilitates trust

 

 

 

  1. There are seven factors in developing supply chain metrics. Name them, and select any two to discuss in more detail.

 

ANSWER:

First, the development of a metrics program should be the result of a team effort. Second, involve customers and suppliers, where appropriate, in the metrics development process. Third, develop a tiered structure for the metrics. Many organizations develop a small number (usually less than five) of KPIs or “executive dashboard” metrics that are viewed at the executive level for strategic decision making. Fourth, identify metric “owners” and tie metric goal achievement to an individual’s or division’s performance evaluation. Fifth, establish a procedure to mitigate conflicts arising from metric development and implementation. A true process metric might require a functional area within an organization to suboptimize its performance to benefit the organization as a whole. Sixth, the supply chain metrics must be consistent with corporate strategy. Finally, establish top management support for the development of a supply chain metrics program.

 

 

 

  1. There are four performance categories. Name them, and select one to discuss in more detail.

 

ANSWER:

Four major categories that provide a useful way for examining logistics and supply chain performance: time, quality, cost, and supporting metrics.

 

 

 

  1. Discuss the metric classification scheme that has been developed by the Supply Chain Council and defined in the Supply Chain Operations and Reference (SCOR) model.

 

ANSWER:

According to the Supply Chain Council, there are five major categories of metrics that need to be used to measure the performance of Process D1: reliability, responsiveness, flexibility, cost, and assets. Reliability is the performance of the supply chain in delivering the correct product, to the correct place, at the correct time, in the correct condition and packaging, in the correct quantity, with the correct documentation, to the correct customer. Responsiveness is the speed at which the supply chain provides products to the customer. Flexibility is the agility of the supply chain in responding to marketplace changes to gain or maintain competitive advantage. Costs are the costs associated with operating the supply chain. Asset management is the effectiveness of an organization in managing assets to support demand satisfaction; this includes the management of all assets and fixed and working capital.

 

 

  1. Discuss how a seller’s cost influences a customer’s profit and on how a seller’s service impacts a customer’s revenue.

 

ANSWER:

If the cost of a seller’s logistics service allows a customer to make more profit from the seller’s product, the customer should be willing to buy more products from the seller. For example, a manufacturer is able to deliver its product to the buyer’s retail store for $0.25 cheaper per case than the competitor can deliver its product to the same store. By keeping the price constant at the shelf, the buyer can realize an additional $0.25 per case profit. Similarly, a manufacturer’s logistics service level will have an impact on the retailer’s revenues.

 

 

 

  1. What is the “Order to Cash” cycle?

 

ANSWER:

Order processing time has a direct bearing on an organization’s order-to-cash cycle. The order-to-cash cycle includes all of the activities that occur from the time an order is received by a seller until the seller receives payment for the shipment. Typically, the invoice is sent to the customer after the order is shipped. If the terms of sale are net 30 days, the seller will receive payment in 30 days plus the time needed to process the order. The longer the order-to-cash cycle, the longer it takes for the seller to get its payment. The longer the order-to-cash cycle, the higher the accounts receivable and the higher the investment in “sold” finished goods. So, the length of the order-to-cash cycle directly relates to the amount of capital tied up and not available for other investments.

 

 

  1. Discuss the revenue cost connection and include the formula.

 

ANSWER:

Logistics and supply chain managers find it advantageous to transform cost reductions into equivalent revenue increases to explain to top management the effects of improved supply chain cost performance. To accomplish this, the following equations can be used:

 

Profit = Revenue – Costs

where

Cost = (X%)(Revenue)

then

Profit = Revenue – (X%)(Sales) = Revenue(1 – X%)

where

(1 – X%) = Profit Margin

Sales = Profit/Profit Margin

 

Assuming that everything else remains unchanged, a logistics cost saving will directly increase pre-tax profits by the amount of the cost saving. If a logistics cost saving increases profit by the same amount, the revenue equivalent of this cost saving is found by dividing the cost saving by the profit margin as shown in the preceding equations.

 

 

  1. Discuss the Supply Chain Financial Impact on the firm.

 

ANSWER:

A major financial objective for any organization is to produce a satisfactory return for stockholders. This requires the generation of sufficient profit in relation to the size of the stockholders’ investment to assure that inventors will maintain confidence in the organization’s ability to manage its investments. Low returns over time will see investors seek alternative uses for their capital. High returns over time, however, will buoy investor confidence to maintain their investments with the organization.

 

The absolute size of the profit must be considered in relation to the stockholders’ net investment, or net worth. For example, if Company A makes a profit of $1 million and Company B makes a profit of $100 million, it would appear that Company B would be a better investment. However, if A has a net worth of $10 million and B $10 billion, the return on net worth for a stockholder in Company A is 10 percent ($1 million/$10 million) and for Company B it is 1 percent ($100 million/$10 billion).

 

An organization’s financial performance is also judged by the profit it generates in relationship to the assets utilized, or return on assets (ROA). An organization’s return on assets is a financial performance metric that is used as a benchmark to compare management and organization performance to that of other organizations in the same industry or similar industries. As with return on net worth, return on assets is dependent on the level of profits for the organization.

 

The supply chain plays a critical role in determining the level of profitability in an organization. The more efficient and productive the supply chain, the greater the profit potential of the organization. Conversely, the less efficient and less productive, the higher the supply chain costs and the lower the profitability.

 

 

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