Chapter 5

Question 1

Supply Chain network decisions include

Answer 1

the assignment of facility role;
location of manufacturing-, storage-, or transportation-related facilities;
and the allocation of capacity and markets to each facility

Question 2

Facility role

Answer 2

what role should each facility play?

what processes are performed at each facility?

Question 3

Facility location

Answer 3

where should facilities be located?

Question 4

Capacity Allocation

Answer 4

how much capacity should be allocated to each facility?

Question 5

Market and supply allocation

Answer 5

what markets should each facility service?

which supply sources should feed each facility?

Question 6

network design decisions have a significant impact on performance because

Answer 6

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.

Question 7

Facility location decisions have a long-term impact on a supply chains performance because

Answer 7

it is expensive to shut down a facility or move it to a different location. A good location decision can help a supply chain be responsive while keeping its costs low.

Question 8

Capacity allocation can be altered more easily than location, but

Answer 8

capacity decisions do tend to stay in place for several years.

Question 9

Allocating too much capacity to a location results in

Answer 9

poor utilization and as a result, higher costs.

Question 10

Allocating too little capacity results in

Answer 10

poor responsiveness if demand is not satisfied or high cost if demand is filled from a distant facility.

Question 11

Allocation of supply sources and markets to facilities has a significant impact on performance because

Answer 11

it affects total production, inventory, and transportation costs incurred by the supply chain to satisfy customer demand.
this decision should be reconsidered on a regular basis so the allocation can be changed as production and transportation costs, market conditions, or plant capacities change.

Question 12

A fundamental decision firms must make is

Answer 12

whether to locate their facilities close to or far from competitors.
The form of competition and factors such as raw material or labor availability influence this decision.

Question 13

Positive externalities occur when

Answer 13

the collocation of multiple firms benefits all of them.

Positive externalities leads to competitors locating close to each other.

Question 14

Positive externalities example

Answer 14

Retail stores tend to locate close to each other because doing so increases overall demand, thus benefiting all parties. By locating together in a mall, competing retail stores make it more convenient for customers, who need drive to only one location, to find everything they are looking for. This increases the total number of customers who visit the mall, increasing demand for all stores located there.

Question 15

What impact does competition have on attempting to minimize average customer travel distance?

Answer 15

The result of competition is for both firms to locate close together, even though doing so increases the average distance to the customer.

Question 16

Objective of Phase I:

Define a Supply Chain Strategy/Design

Answer 16

define a firm’s broad supply chain design. This includes determining the stages in the supply chain and whether each supply chain function will be performed in-house or outsourced.

Question 17

Objective of Phase I:

Define a Supply Chain Strategy/Design

Answer 17

define a firm’s broad supply chain design. This includes determining the stages in the supply chain and whether each supply chain function will be performed in-house or outsourced.

Question 18

Phase I starts with a clear definition of the firm’s competitive strategy as the set of customer needs that the supply chain aims to satisfy.

Answer 18

The supply chain strategy then specifies what capabilities the supply chain network must have to support the competitive strategy.

Question 19

Phase I:

Define a Supply Chain Strategy/Design

Answer 19

• Clearly defined competitive strategy
• forecast likely evolution of global competition
• identify constraints
• determine growth strategy

Question 20

Objective of Phase II:

Define the Regional Facility Configuration

Answer 20

identify regions where facilities will be located, their potential roles, and their approximate capacity.

Question 21

Phase II:

Define the Regional Facility Configuration

Answer 21

• Forecast demand by country or region;
• Economies of scale or scope
• Identify demand risk, exchange-rate risk, political risk, tariffs, etc.
• Identify competitors

Question 22

Objective of Phase III:

Select a Set of Desirable Potential Sites

Answer 22

select a set of desirable potential sites within each region where facilities are to be located.

Question 23

Phase III:

Select a Set of Desirable Potential Sites

Answer 23

Sites should be selected based on an analysis of infrastructure availability to support the desired production methodologies.
–Hard and soft infrastructure requirements

Question 24

Hard Infrastructure Requirements

Answer 24

include the availability of suppliers, transportation services, communication, utilities, and warehousing facilities.

Question 25

Soft Infrastructure requirements

Answer 25

include the availability of a skilled workforce, workforce turnover, and the community receptivity to business and industry.

Question 26

Objective of Phase IV: Location Choices

Answer 26

select, from among the potential sites, a precise location and capability allocation for each facility.

Question 27

A managers goal when locating facilities and allocating capacity should be to

Answer 27

maximize the overall profitability of the resulting supply chain network while providing customers with the appropriate responsiveness. -A manager must consider many trade-offs during network design

Question 28

Managers use network design models in two situations.

Answer 28

1. decide on locations and capacities | 2. assign current demand to facilities.

Question 29

Key Modeling Information.

Answer 29

- Location of supply sources and markets - Location of potential facility sites - Demand forecast by market - Facility, labor, and material costs by site - Transportation costs between each pair of sites - Inventory costs by site and as a function of quantity - Sale price of product in different regions - Taxes and tariffs - Desired response time and other service factors

Question 30

Duties that must be paid when products and/or equipment are moved across international, state, or city boundaries are referred to as

Answer 30

tariffs

Question 31

If a country has very high tariffs,

Answer 31

companies either do not serve the local market or set up manufacturing plants within the country to save on duties.

Question 32

Developing countries often create free trade zones where

Answer 32

duties and tariffs are relaxed as long as production is used primarily for export.

Question 33

Building some over-capacity in the supply chain network and making the capacity flexible allows a firm to alter production flows within the supply chain to

Answer 33

produce more in facilities that have a lower cost based on current exchange rates.

Question 34

Total logistics costs are a sum of the

Answer 34

inventory, transportation, and facility costs.

Question 35

The facilities in a supply chain network must

Answer 35

at least equal the number that minimizes total logistics cost.

Question 36

When faced with a network design decision, the goal of a manager is to design a network that

Answer 36

maximizes the firm's profits while satisfying customer needs in terms of demand and responsiveness.

Question 37

The objective of the first phase of network design is to

Answer 37

specify what capabilities the supply chain network must have to support a firm's competitive strategy.

Question 38

The objective of the second phase of network design is to

Answer 38

identify regions where facilities will be located, their potential roles, and their approximate capacity.

Question 39

The objective of the third phase of network design is to

Answer 39

C) select a set of desirable sites within each region where facilities are to be located.

Question 40

It is very important that long-term consequences be thought through when making facility decisions, because

Answer 40

facilities last a long time and have an enduring impact on a firm's performance.

Question 41

The implications of culture should not be glossed over because

Answer 41

tariffs and tax incentives should be carefully considered.

Question 42

The quality of life at selected facility locations has a significant impact on performance because

Answer 42

it influences the work force available and their morale.

Question 43

Capital, growth strategy, existing networks and global competition mostly affect which of the four Global Network Design Decisions?

Answer 43

Phase I - Supply Chain Strategy

Question 44

The availability of suppliers, transportation services, communication, utilities, and warehousing infrastructure mostly affect which of the four Global Network Design Decisions?

Answer 44

Phase III - Desirable Sites

Question 45

Tariffs, economies of scale and aggregate factor costs mostly affect which of the four Global Network Design Decisions?

Answer 45

Phase II - Regional Facility Configuration

Question 46

Supply chain network design decisions include

Answer 46

both the location of manufacturing, storage, or transportation-related facilities and the allocation of capacity and roles to each facility.

Question 47

Supply chain network design decisions classified as facility role are concerned with

Answer 47

what processes are performed at each facility.

Question 48

Supply chain network design decisions classified as facility location are concerned with

Answer 48

where facilities should be located.

Question 49

Supply chain network design decisions classified as capacity allocation are concerned with

Answer 49

how much capacity should be allocated to each facility.

Question 50

Supply chain network design decisions classified as market and supply allocation are concerned with

Answer 50

what markets each facility should serve and which supply sources should feed each facility.

Question 51

Decisions concerning the role of each facility are significant because

Answer 51

they determine the amount of flexibility the supply chain has in changing the way it meets demand.

Question 52

Facility location decisions have a long-term impact on a supply chain's performance because

Answer 52

it is very expensive to shut down a facility or move it to a different location.

Question 53

Capacity allocation decisions have a significant impact on supply chain performance because

Answer 53

capacity decisions tend to stay in place for several years.

Question 54

Allocating too much capacity to a location results in

Answer 54

poor utilization, and as a result, higher costs.

Question 55

Allocating too little capacity results in

Answer 55

poor responsiveness if demand is not satisfied or high cost if demand is filled from a distant facility.

Question 56

The allocation of supply sources and markets to facilities has a significant impact on performance because

Answer 56

it affects total production, inventory, and transportation costs incurred by the supply chain to satisfy customer demand.

Question 57

The allocation of supply sources and markets to facilities should be reconsidered on a regular basis so that

Answer 57

the allocation can be changed as market conditions or plant capacities change

Question 58

Network design decisions have a significant impact on performance because they

Answer 58

determine the supply chain configuration. and set constraints within which inventory, transportation, and information can be used to either decrease supply chain cost or increase responsiveness.

Question 59

Firms focusing on cost leadership tend to

Answer 59

find the lowest cost location for their manufacturing facilities.

Question 60

Firms focusing on responsiveness tend to

Answer 60

locate facilities close to the market they serve.

Question 61

A facility that serves the role of being a low-cost supply source for markets located outside the country where the facility is located is

Answer 61

an offshore facility.

Question 62

A facility that also has low cost as its primary objective, but its strategic role is broader than that of an offshore facility is

Answer 62

a source facility.

Question 63

A facility built because of tax incentives, local content requirement, tariff barriers, or high logistics cost to supply the region from elsewhere with the objective to supply the market where it is located is

Answer 63

a server facility.

Question 64

A facility located primarily to obtain access to knowledge or skills that may exist within a certain region is

Answer 64

an outpost facility

Question 65

A facility that serves the market where it is located but also assumes responsibility for product customization, process improvements, product modifications, or product development is

Answer 65

a contributor facility.

Question 66

A facility that creates new products, processes, and technologies for the entire network is

Answer 66

a lead facility.

Question 67

Production technology displays significant economies of scale,

Answer 67

few high-capacity locations are the most effective.

Question 68

If facilities have lower fixed costs,

Answer 68

many local facilities are preferred because this helps lower transportation costs.

Question 69

If the production technology is very inflexible and product requirements vary from one country to another, a firm has to set up

Answer 69

local facilities to serve the market in each country.

Question 70

If the technology is flexible,

Answer 70

it becomes easier to consolidate manufacturing in a few large facilities.