Module 2 SCM 300
I hope it helps you in preparation for the exam!
Questions and Answers
- 1.
Items for which demand is influenced by market conditions. Demand is not related to demand for other items in stock or produced.
- A.
Dependent Demand Item
- B.
SKU
- C.
Independent Demand Item
- D.
Lot size
Correct Answer
C. Independent Demand ItemExplanation
An independent demand item refers to an item for which demand is influenced by market conditions and is not related to the demand for other items in stock or produced. In other words, the demand for an independent demand item is determined by external factors such as customer preferences, market trends, and consumer demand. This item is not dependent on the demand for any other item and can be managed separately in terms of forecasting, inventory planning, and production scheduling.Rate this question:
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- 2.
A car or a computer are examples of:
- A.
Dependent Demand Item
- B.
Expensive Items
- C.
Independent Demand Items
- D.
Both A and B
Correct Answer
C. Independent Demand ItemsExplanation
A car or a computer are examples of independent demand items because their demand is not influenced by the demand for any other product. These items are typically purchased by consumers based on their own needs and preferences, rather than being required for the production of another product.Rate this question:
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- 3.
A mouse or a tire are examples of:
- A.
Independent Demand Item
- B.
Dependent Demand Item
- C.
Artifacts
- D.
None of the above
Correct Answer
B. Dependent Demand ItemExplanation
A mouse or a tire are examples of dependent demand items because their demand is dependent on the demand for the products they are used in. For example, the demand for a computer mouse is dependent on the demand for computers, as it is a component of a computer system. Similarly, the demand for tires is dependent on the demand for vehicles, as tires are used in vehicles. These items are not independently demanded but rather their demand is derived from the demand for other products.Rate this question:
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- 4.
Time elapsed between customer placing order and order being received by customer.
- A.
Delivery Time
- B.
Lead Time
- C.
Both A and B
- D.
On-time Delivery
Correct Answer
C. Both A and BExplanation
The time elapsed between a customer placing an order and the order being received by the customer is referred to as both delivery time and lead time. Delivery time specifically focuses on the time it takes for the order to be delivered to the customer, while lead time encompasses the entire process from order placement to order receipt. Therefore, both options A (Delivery Time) and B (Lead Time) are correct in this context.Rate this question:
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- 5.
Typically refers to the order size:
- A.
SKU
- B.
Lot size
- C.
T.B.O
- D.
None of the above
Correct Answer
B. Lot sizeExplanation
The correct answer is "Lot size" because lot size refers to the quantity of a product that is ordered or produced in a single batch. It is the number of units that are purchased or manufactured together, usually based on factors such as demand, production capacity, and inventory management. Lot size plays a crucial role in supply chain management and inventory control as it helps determine the optimal balance between costs, customer demand, and operational efficiency.Rate this question:
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- 6.
Why do companies need inventory?
- A.
Insurance- Manage Risk/Uncertainty
- B.
Customer Expectations- Support Strategic Plan
- C.
Managing Cost- Economies of Scale
- D.
All of the above
Correct Answer
D. All of the aboveExplanation
Companies need inventory for multiple reasons. Firstly, inventory helps manage risk and uncertainty by acting as a buffer against unexpected fluctuations in demand or supply. Secondly, it supports the strategic plan by meeting customer expectations and ensuring timely delivery of products. Lastly, inventory allows companies to take advantage of economies of scale by purchasing materials or products in bulk, reducing costs. Therefore, all of the given options are valid reasons why companies need inventory.Rate this question:
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- 7.
Car insurance is an example of what inventory classification?
- A.
Pipeline inventory
- B.
Market Inventory
- C.
Anticipation Inventory
- D.
Safety Stock
Correct Answer
D. Safety StockExplanation
Car insurance is an example of safety stock because it is a precautionary measure taken by car owners to protect themselves financially in case of accidents or damages to their vehicles. Just like safety stock, car insurance acts as a buffer to mitigate risks and uncertainties. It provides a sense of security and helps individuals avoid potential financial losses by transferring the risk to the insurance company.Rate this question:
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- 8.
Protects Against uncertainty demand, lead time, supply. Not intended to be used. Cushion Insurance.
- A.
Market Inventory
- B.
Safety Stock
- C.
Pipeline Inventory
- D.
Both A and B
Correct Answer
B. Safety StockExplanation
Safety stock is a type of inventory that is held as a buffer to protect against uncertainties in demand, lead time, and supply. It acts as a cushion to ensure that there is enough inventory available to meet unexpected fluctuations in customer demand or delays in the supply chain. Safety stock is not intended to be used in regular operations but is there to provide insurance against potential disruptions. Therefore, the correct answer is safety stock.Rate this question:
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- 9.
Used to absorb uneven rates of demand or supply. Seasonal demand, holidays, economic production runs.
- A.
Anticipatory Inventory
- B.
Market Inventory
- C.
Pipeline Inventory
- D.
Perishable Inventory
Correct Answer
A. Anticipatory InventoryExplanation
Anticipatory inventory refers to inventory that is held in anticipation of future demand or to absorb uneven rates of demand or supply. It is used to address seasonal demand fluctuations, holidays, or economic production runs. By stocking up on inventory in advance, businesses can ensure that they have enough stock to meet customer demand during peak periods or when supply may be limited. This helps to prevent stockouts and maintain customer satisfaction. Therefore, anticipatory inventory is the correct answer in this context.Rate this question:
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- 10.
Orders that have been placed but not yet received nor paid for by customer. Inventory "on its way" to the customer.
- A.
Market Inventory
- B.
Perishable Inventory
- C.
Pipeline Inventory
- D.
Long-term inventory
Correct Answer
C. Pipeline InventoryExplanation
Pipeline inventory refers to orders that have been placed but have not yet been received or paid for by the customer. It represents the inventory that is "on its way" to the customer. This type of inventory is typically in transit or in the process of being shipped to the customer. It is an important aspect of supply chain management as it helps to ensure that there is a continuous flow of inventory to meet customer demand.Rate this question:
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- 11.
Close-knit networks of vendors that continuously learn, improve, and prosper along with their parent companies.
- A.
Kieretsu
- B.
Supply Chain
- C.
Demand management
- D.
Supplier relations
Correct Answer
A. KieretsuExplanation
Kieretsu refers to close-knit networks of vendors that continuously learn, improve, and prosper along with their parent companies. This term is commonly used in the context of supply chain management and highlights the importance of strong relationships between suppliers and their parent companies. Kieretsu networks enable collaboration, knowledge sharing, and mutual growth, ultimately leading to improved efficiency and success for all parties involved.Rate this question:
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- 12.
Costs associated with inventory?
- A.
Cost of the item / Purchase Cost
- B.
Holding or Carrying Cost
- C.
Ordering Costs
- D.
Customer Service Cost
- E.
All of the above
Correct Answer
E. All of the aboveExplanation
The costs associated with inventory include the cost of the item or purchase cost, holding or carrying cost, ordering costs, and customer service cost. The cost of the item refers to the actual price paid to acquire the inventory. Holding or carrying cost includes expenses such as storage, insurance, and depreciation. Ordering costs are incurred when placing orders for inventory, including costs associated with processing and transportation. Customer service costs involve expenses related to providing support and assistance to customers regarding inventory. Therefore, all of the above options are correct as they represent different types of costs associated with inventory.Rate this question:
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- 13.
Taking over the role of your supplier. Example: We're not going to buy bread for our sandwiches, we'll make the bread ourselves from now on.
- A.
Vertical Integration
- B.
Backward Integration
- C.
Forward Integration
- D.
Acquisition
Correct Answer
B. Backward IntegrationExplanation
Backward integration refers to a strategy where a company takes over the role of its supplier. In this case, the company decides to make the bread themselves instead of buying it from a supplier. This allows the company to have more control over the supply chain and potentially reduce costs. By integrating backwards, the company can ensure a consistent supply of bread and potentially gain a competitive advantage in the market.Rate this question:
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- 14.
Taking over the role of companies closer to the customer. Example: We will no longer sell Coca-Coal through our distributors, from no on, we'll only sell Coke out of Coca-Cola local stores.
- A.
Backward Integration
- B.
Supplier management
- C.
Forward Integration
- D.
Vertical Integration
Correct Answer
C. Forward IntegrationExplanation
Forward integration refers to a strategy where a company expands its operations towards the end customer by taking over the role of companies closer to the customer. In this example, Coca-Cola is eliminating distributors and selling its products directly through its own local stores. This allows Coca-Cola to have more control over the sales process, customer experience, and potentially increase its profit margins. Forward integration can also help companies differentiate themselves from competitors and build stronger relationships with customers.Rate this question:
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- 15.
Inventory used to accommodate normal demand or inventory that varies directly with lot size.
- A.
Cycle Stock
- B.
Average Inventory
- C.
Cycle Inventory
- D.
All three mean the same thing
Correct Answer
D. All three mean the same thingExplanation
Cycle stock, average inventory, and cycle inventory all refer to the same concept in inventory management. They represent the inventory that is used to meet normal demand or that varies with the lot size. These terms are interchangeable and can be used interchangeably to describe the same inventory.Rate this question:
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- 16.
Average amount of inventory you have is:
- A.
Half of your order size
- B.
Half of you lot size
- C.
Both A and B
- D.
None of the above
Correct Answer
C. Both A and BExplanation
The correct answer is "Both A and B" because the average amount of inventory you have can be calculated by taking the average of both your order size and your lot size. This means that you will have half of your order size and half of your lot size as your average inventory amount.Rate this question:
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- 17.
If your holding cost is higher you are ordering too much.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
If your holding cost is higher, it means that the cost of storing and maintaining inventory is expensive. This suggests that you are ordering too much inventory, as you are incurring significant costs to hold it. Ordering too much inventory can lead to various issues such as increased storage costs, risk of obsolescence, and tying up capital that could be used elsewhere. Therefore, the statement "If your holding cost is higher you are ordering too much" is true.Rate this question:
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- 18.
You are ordering too much if your holding cost is low.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
You are ordering too much if your holding cost is high.Rate this question:
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- 19.
Plant/Warehouse location and Technology requirements are part of:
- A.
Long-term Supply Chain Considerations
- B.
Logistical Considerations when choosing a supplier
- C.
Competitive Priorities
- D.
All of the above
Correct Answer
B. Logistical Considerations when choosing a supplierExplanation
The correct answer is "Logistical Considerations when choosing a supplier." Plant/warehouse location and technology requirements are important factors to consider when choosing a supplier from a logistical perspective. These considerations involve assessing the supplier's ability to efficiently deliver products to the desired location and their technological capabilities to meet the specific requirements of the supply chain. By considering these logistical factors, a company can ensure smooth operations and effective supply chain management.Rate this question:
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- 20.
Long-term supply chain management considerations when choosing a supplier are:
- A.
Changing market
- B.
Product improvements
- C.
Growth management, capacity potential
- D.
2nd and 3rd tier suppliers
- E.
All of the above
Correct Answer
E. All of the aboveExplanation
When choosing a supplier, it is important to consider long-term supply chain management factors such as the changing market. This is because market conditions can fluctuate, and it is crucial to select a supplier who can adapt to these changes. Additionally, considering product improvements is important as it ensures that the supplier can keep up with advancements and meet the evolving needs of the business. Growth management and capacity potential are also important considerations as they determine if the supplier can handle increasing demand and if they have the capability to scale up production. Finally, considering 2nd and 3rd tier suppliers is important for risk management and ensuring a reliable supply chain. Therefore, all of the above factors should be taken into account when choosing a supplier for long-term supply chain management.Rate this question:
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- 21.
Volume, Avoid Duplication, Specialization, Consolidated Shipping, Common supply base are advantages of:
- A.
Decentralized Purchasing
- B.
Inventory
- C.
Centralized Purchasing
- D.
Supplier Demand
Correct Answer
C. Centralized PurchasingExplanation
Centralized purchasing refers to the procurement process where all purchasing decisions and activities are carried out by a central purchasing department or team. The advantages of centralized purchasing include volume discounts, as larger quantities can be ordered at once, avoiding duplication of efforts and reducing costs. Specialization can be achieved by having dedicated purchasing professionals who are experts in their field. Consolidated shipping allows for more efficient transportation and reduces shipping costs. Lastly, having a common supply base enables better negotiation power and stronger relationships with suppliers. Therefore, centralized purchasing is the correct answer as it encompasses all these advantages.Rate this question:
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- 22.
What are some Advantages of Decentralized Purchasing:
- A.
Closer knowledge of requirements
- B.
Local sourcing - Relationships, lead times, flexibility
- C.
Less bureaucracy
- D.
All of the above
Correct Answer
D. All of the aboveExplanation
The advantages of decentralized purchasing include having a closer knowledge of requirements, local sourcing which involves building relationships, shorter lead times, and increased flexibility, as well as less bureaucracy. All of these factors contribute to a more efficient and effective purchasing process, making the option "All of the above" the correct answer.Rate this question:
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- 23.
What are three types of perishable inventory?
- A.
Clothing and computers
- B.
Fruits, Vegetables, meat, and flowers
- C.
Airline seats, rental cars, hotel rooms
- D.
Nails, paper, and cleaning supplies
- E.
Spoilage, Obsolescence, and time perishable
Correct Answer
E. Spoilage, Obsolescence, and time perishableExplanation
The correct answer is spoilage, obsolescence, and time perishable. Perishable inventory refers to goods or items that have a limited shelf life and can deteriorate or become unusable over time. Spoilage refers to items that can spoil or decay, such as fruits, vegetables, meat, and flowers. Obsolescence refers to items that become outdated or obsolete, such as clothing and computers. Time perishable refers to items that have a limited usability or value over time, such as airline seats, rental cars, and hotel rooms.Rate this question:
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- 24.
Storage, transportation, shrinkage, money, legal considerations are all components of what process?
- A.
Supply chain management
- B.
Process inventory
- C.
Purchasing inventory
- D.
Supply chain integration
- E.
All of the above
Correct Answer
C. Purchasing inventoryExplanation
Purchasing inventory involves various components such as storage, transportation, shrinkage, money, and legal considerations. These factors are all part of the process of acquiring inventory for a business. Therefore, the correct answer is purchasing inventory.Rate this question:
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- 25.
Times savings, cost savings, accuracy, real time, mobility, trackability, management, benefits to the supplier are all advantages of what system?
- A.
Material acquisition
- B.
Upstream and downstream
- C.
Supplier base
- D.
E-Procurement
- E.
Centralization
Correct Answer
D. E-ProcurementExplanation
E-Procurement offers several advantages such as time savings, cost savings, accuracy, real-time processing, mobility, trackability, and improved management. It also benefits the suppliers by providing them with a streamlined process and access to a larger customer base.Rate this question:
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- 26.
According to the Harrah's example in the textbook what type of purchasing structure do they incorporate?
- A.
Centralization
- B.
Decentralization
- C.
Supply Management
- D.
Hybrid system
- E.
A, B, and D
Correct Answer
E. A, B, and DExplanation
The Harrah's example in the textbook incorporates a centralization, decentralization, and hybrid system purchasing structure. Centralization refers to the concentration of purchasing decisions and activities at a central level, while decentralization allows for some decision-making authority to be delegated to individual units or departments. The hybrid system combines elements of both centralization and decentralization to create a more flexible and efficient purchasing structure. Therefore, the correct answer is A, B, and D.Rate this question:
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- 27.
Backward vertical integration refers to:
- A.
Acquiring upstream suppliers
- B.
Acquiring downstream suppliers
- C.
Acquiring upstream customers
- D.
Acquiring downstream customers
Correct Answer
A. Acquiring upstream suppliersExplanation
Backward vertical integration refers to the strategy of acquiring upstream suppliers. This means that a company expands its operations by purchasing or merging with suppliers that provide the necessary raw materials or components for its production process. By doing so, the company gains more control over its supply chain, reduces dependency on external suppliers, and potentially achieves cost savings and improved efficiency.Rate this question:
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- 28.
Forward vertical integration refers to:
- A.
Acquiring upstream customers
- B.
Acquiring downstream suppliers
- C.
Acquiring upstream suppliers
- D.
Acquiring downstream customers
Correct Answer
D. Acquiring downstream customersExplanation
Forward vertical integration refers to the strategy of acquiring downstream customers. This means that a company expands its operations by acquiring or merging with businesses that are closer to the end consumers in the supply chain. By doing so, the company gains control over the distribution channels and can directly reach and serve the end customers. This strategy can help the company to increase its market share, improve efficiency, and enhance customer satisfaction by having direct access to the end consumers.Rate this question:
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- 29.
According to the pet food example in the textbook in refers to a breakdown of what process:
- A.
Supplier Certification "Certificate of analysis"
- B.
Supplier Evaluation
- C.
Supplier Scorecards
- D.
Capacity Potential
Correct Answer
A. Supplier Certification "Certificate of analysis"Explanation
The correct answer is Supplier Certification "Certificate of analysis". This is because the pet food example in the textbook refers to the process of ensuring that suppliers meet certain standards and provide a certificate of analysis to verify the quality and safety of their products. This certification helps to ensure that the pet food being produced is of high quality and meets the necessary standards. Supplier evaluation and scorecards may be part of the overall supplier certification process, but the specific breakdown mentioned in the example is the certification with a certificate of analysis.Rate this question:
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- 30.
Based on diversity of opinion, isolation, decentralization, are what type of forecasting method?
- A.
Qualititive
- B.
Quantitive
- C.
Historical Data
- D.
Both A and B
- E.
None of the above
Correct Answer
A. QualititiveExplanation
The given answer is "Qualitative". This is because diversity of opinion, isolation, and decentralization are characteristics of qualitative forecasting methods. Qualitative forecasting methods rely on subjective judgments and opinions rather than numerical data and statistical analysis. These methods are often used when historical data is not available or when the future is uncertain and difficult to predict.Rate this question:
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- 31.
How long does it take American and Japanese automakers to design a new car?
- A.
18 months vs 12 months
- B.
2 to 3 years vs 12 to 18 months
- C.
1 year vs 6 months
- D.
2 years vs 18 months
Correct Answer
B. 2 to 3 years vs 12 to 18 monthsExplanation
American automakers take 2 to 3 years to design a new car, while Japanese automakers take 12 to 18 months. This indicates that American automakers have a longer design process compared to their Japanese counterparts.Rate this question:
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- 32.
What is sole sourcing?
- A.
Multiple Suppliers
- B.
The supplier is the only available source
- C.
First tier supplier
- D.
1st and 2nd tier supplier
Correct Answer
B. The supplier is the only available sourceExplanation
Sole sourcing refers to a procurement strategy where the supplier is the only available source for a particular product or service. In this case, there are no other suppliers or options to choose from. This strategy is often used when there is a unique or specialized product, or when a long-term relationship has been established with a specific supplier. Sole sourcing can provide benefits such as cost savings, quality control, and better collaboration with the supplier. However, it also carries risks such as limited competition and potential dependence on a single supplier.Rate this question:
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- 33.
Buyer-supplier relationships, particularly in integrated supply chain settings, have evolved into trusting, cooperative, mutually beneficial long-term relationships. Based on these scenario what is the supplier base?
- A.
Increase their supplier base
- B.
Reduce their supplier base
- C.
Single source supplier
- D.
Sole sourcing supplier
Correct Answer
B. Reduce their supplier baseExplanation
Based on the given scenario of trusting, cooperative, mutually beneficial long-term relationships in integrated supply chain settings, it is logical for the buyer to reduce their supplier base. This would allow them to focus on building stronger relationships with a smaller number of suppliers, leading to more efficient and effective coordination, communication, and collaboration. By reducing the number of suppliers, the buyer can streamline their supply chain, improve quality control, enhance supplier performance, and potentially negotiate better terms and pricing.Rate this question:
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- 34.
To establish a good relationship, less quality variability, lower cost, transportation economies, proprietary products or process purchases, volume is to small to split. All refer to what type of supplier?
- A.
Supplier base
- B.
Multiple Supplier
- C.
Single Supplier
- D.
Sole source supplier
Correct Answer
C. Single SupplierExplanation
The given factors such as less quality variability, lower cost, transportation economies, proprietary products or process purchases, and volume being too small to split, all suggest that the situation is best suited for a single supplier. This means that the company should rely on only one supplier for their needs, rather than having multiple suppliers or a sole source supplier. This approach can help establish a good relationship with the supplier, ensure consistent quality, and potentially reduce costs through economies of scale.Rate this question:
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- 35.
Supplier Selection does NOT include which of the following:
- A.
Reliability
- B.
Capacity
- C.
Services Warranty
- D.
Proprietary technology
- E.
Location
Correct Answer
D. Proprietary technologyExplanation
Supplier selection is the process of choosing the most suitable suppliers for a business. It involves evaluating various factors such as reliability, capacity, services warranty, and location. Proprietary technology, on the other hand, refers to unique technology or intellectual property owned by a supplier. This factor is not typically considered during supplier selection as it is not directly related to the supplier's ability to deliver products or services. Therefore, proprietary technology is the correct answer as it is not included in the supplier selection process.Rate this question:
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- 36.
Challenges for Global Sourcing include:
- A.
Complexity and cost involve
- B.
Dealing with duties and tariffs
- C.
Political and Cultural
- D.
Labor and legal problems
- E.
All of the above
Correct Answer
E. All of the aboveExplanation
The challenges for global sourcing include complexity and cost involvement, dealing with duties and tariffs, political and cultural factors, as well as labor and legal problems. These factors can make global sourcing a difficult and complex process. Complexity and cost involvement refer to the challenges of managing a global supply chain and dealing with multiple suppliers and logistics. Dealing with duties and tariffs involves navigating international trade regulations and customs requirements. Political and cultural factors can create challenges in understanding and adapting to different business practices and norms in different countries. Labor and legal problems refer to issues related to labor laws, employment practices, and legal frameworks in different countries. Overall, all of these factors contribute to the challenges faced in global sourcing.Rate this question:
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- 37.
For every dollar you decrease your purchases spend what effect does it have on your profit before taxes. For example, if you have a 10% decrease in purchase spending, how would your profitability before taxes be affected?
- A.
Decrease by 10%
- B.
Increase by 10%
- C.
No change
- D.
Increase by 20%
Correct Answer
B. Increase by 10%Explanation
If you decrease your purchases spend by 10%, it means you are spending less on purchasing goods or services. This decrease in spending directly reduces your expenses, which in turn increases your profit before taxes. Therefore, your profitability before taxes would increase by 10%.Rate this question:
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