Supply Chain Management: From Vision to Implementation

by Stanley Fawcett, Lisa Ellram, and Jeffrey Ogden

Test Item File - Chapter 1: Supply Chain Management and Competitive Strategy

Multiple Choice

1. One definition of supply chain management is managing the flow of _________and _________
from the suppliers’ supplier to the customers’ customer.
A) raw materials, labor
B) orders, inventory
C) information, materials
D) suppliers, customers
Moderate

2. A goal of supply chain managers is to use technology and teamwork to build efficient and effective
processes that create _____for the end customer.
A) value
B) profit
C) inventory
D) processes
Easy

3. One definition of supply chain management is the design and management of seamless value-added
_________ across organizational boundaries to meet the real needs of the __________.
A) products, producer
B) processes, end customer
C) information systems, supply chain
D) services, supplier
Difficult

4. A “value chain” defined by Michael Porter in the text refers to ________.

A) external products of suppliers that add value to a process
B) the business’s financial return on investment
C) only the manufacturing transformation of raw materials to customer products
D) the interconnectivity of internal business functions whose decisions create value to a product
or process
Difficult

5. Supply chain members experience the “bullwhip effect” ________.

A) as a direct result of inadequate communications up and down the supply chain
B) when members of the supply chain initiate a collaborative forecast
C) when demand forecasts are stable, quantified and communicated throughout the chain
D) typically during a new product introduction when the rate of increase in demand occurs
Moderate

6. _________ is a phenomenon that occurs when demand variations are exaggerated as decisions are
made up the chain.
A) CPFR
B) SCM
C) The Bullwhip effect
D) Contingency theory
Easy
7. All of the following are major problems cited in the text regarding supply chain management in
actual practice except ________.
A) they do not effectively work together to reduce inventory levels and costs up and down the
chain
B) excessive management focus on the external supply chain while minimal attention on the
internal chain
C) companies are actually members of the supply chain, they manage as separate distinct entities
D) most company efforts at collaboration target only the first tier customers and suppliers
Difficult

8. _________ theory regarding strategic thinking conceptualizes the relationship between a changing
environment, managerial decision-making, and performance.
A) Contingency
B) Industrial organization
C) Resource-based
D) Business model
Moderate

9. __________theory regarding strategic thinking claims that market forces should drive decision-
making.
A) Contingency
B) Industrial organization
C) Resource-based
D) Business model
Moderate

10. _________theory regarding strategic thinking focuses on building organizational skills and
processes that enable a company to deliver distinctive products and services.
A) Contingency
B) Business model
C) Industrial organization
D) Resource-based
Moderate

11. Managers must consider each of the following areas in developing effective supply chain strategies
to satisfy its customers except ________.
A) core competencies
B) environment
C) feedback
D) resources
Easy

12. A major weakness of historical supply chain strategies is________.

A) the operating costs are seldom budgeted
B) the lack of consideration of supplier geographic location
C) that interdependencies of the supply chain members are not realized
D) that they frequently do not require use contract manufacturers
Moderate

13. Questions that a supply chain strategist must ask in the development of supply chain strategy are?
A) How does the company uniquely help the chain deliver on its value proposition?
B) What valued capabilities do other members of the chain possess?
 C) What is the overall supply chain’s value proposition?
D) How can we do the job better than anyone else?
Moderate

14. SCM is the design and management of seamless, ________ processes across organizational
boundaries to meet the real needs of the end customer.
A) purchasing
B) business
C) value-added
D) quantifiable
Easy

15. The terms 1st tier, 2nd tier, 3rd tier, in the context of a supply chain refers to the ________.
A) levels of supplier certification
B) sequence of suppliers or customers that are in the chain but distant from the base/focal
company
C) value categories of procured commodities
D) number of suppliers for a procured commodity
Moderate

16. Typical members of an internal value chain of a business include all of the following except:
A) Finance
B) Logistics
C) Supply Chain Management
D) 2nd tier supplier
Easy

17. The operations function of logistics is typically to ________.

A) move and store materials so they are available when and where they are needed
B) manage the upstream and downstream business processes
C) provide business management with customer and supplier information systems
D) manage distribution centers
Easy

18. Major components of a well-performing supply chain feedback system include all of the following
except________.
A) good information systems
B) information archival capability
C) consistent performance measurement
D) frequent information sharing
Moderate

19. The theoretical ideal supply chain process collaboration is __________.

A) internal process integration
B) forward and backward integration from the supplier’s supplier to the customer’s customer
C) backward process integration with valued first-tier suppliers
D) forward process integration with valued first-tier customers
Difficult

20. Before SC processes can be managed effectively up and down the supply chain, they must be
________.
A) documented as a value chain process
B) supported adequately with supply chain expert staffing
 C) managed well within the focal firm
D) evaluated for efficiency and effectiveness
Moderate

21. Major objectives of a supply chain manager include all of the following except ________.
A) reduce product or service costs
B) create value for the end customer
C) improve service to operations and the customer
D) transform inputs acquired from suppliers into more highly valued products
Difficult

22. Assuming you are the manufacturer of a product, from your perspective a Distributor is an
example of a ________ member of the value chain.
A) downstream
B) upstream
C) not a member of the value stream
D) internal
Easy

23. Assume for a moment you are a SC manager at Dell Computer. One of the commodities you plan
and purchase is the microprocessor device from Intel. Intel is therefore considered a (an) _________
member of the value chain.
A) downstream
B) upstream
C) not a member of the value stream
D) internal
Easy

24. The term “outsource” is used frequently in the text. Outsourcing is defined as________.
A) Disqualifying a supplier for a procured product or service
B) A decision to have certain components in the value chain provided outside of one’s business
C) Relying on the customer to add-value to the product or service
D) Reducing the number of suppliers of a product or service to only one source
Easy

25. A major SC management cause of why inventories of a business could become excessive is all of
the following except ________.
A) SC management viewed itself as an independent distinct entity removed from the other chain
members
B) SC management failed to share information with other members of the chain
C) SC management does not routinely challenge product forecast accuracy
D) SC management actions resulted in a lack of speed in flow of product through the chain
Difficult

True/False

1. Purchased goods and services flow from downstream suppliers to the focal firm. False Easy

2. Supply chain information typically flows both upstream and downstream from the focal firm.
True Easy
3. Supply chain management is often defined as managing the flow of information and materials
from the “suppliers’ supplier to the customers’ customer. True Moderate

4. Supply chain management is the design and management of seamless, value-added processes
across organizational boundaries to meet the real needs of the manufacturer/service provider.
False Difficult

5. Before processes can be managed effectively up and down the supply chain, they must be
managed well inside the focal firm. True Easy

6. The term internal “value chain” describes the interconnected nature of a business’s internal
functions such as R&D, Operations, and Marketing that add value to a process. True Moderate

7. A supply chain phenomenon “The Bullwhip Effect” occurs as the result of a well planned,
well communicated coordinated management effort throughout the supply chain membership.
False Easy

8. The theoretical ideal supply chain collaboration is “backward process integration with valued
first-tier suppliers”. False Moderate

9. Winning supply chain strategies should help a company do more than just beat the
competition; they should help the company meet the real needs of their customers. True
Moderate

10. Industrial organization theory suggests that supplier and technology forces should drive
corporate strategic decision-making. False Difficult

11. There are four distinct decision areas that must be addressed in any effective strategy. They
are Environment, Resources, Objectives and Feedback. True Easy

12. The strategic development decision area, “Feedback”, helps managers adapt the organization’s
strategy to meet the demands of a changing requirements world. True Moderate

13. Resources, in the context of a business, refer only to the tangible assets of a company. False
Easy

14. The most important role of a business’s strategy is to define a company’s business model.
True Moderate

15. Several of the major questions an executive addresses when developing supply chain strategy
are: (1) What is the overall supply chain’s value proposition? (2) How does the company
uniquely help the chain deliver on its value proposition? (3) What valued capabilities do other
members of the chain possess? True Difficult

16. Three basic theories guide modern strategy formulation and execution: contingency theory,
industrial collaboration theory and resource-based theory. False Difficult

17. Strategy’s role is to guide managerial decision making to develop a winning business model.
True Moderate

18. Supply Chain Management requires management to evaluate how the resources of the entire
chain can be used to better meet the needs of the customer. True Moderate
 19. Strategic planning helps managers use resources effectively in a changing marketplace to
create value for the company. False Moderate

20. “Supply” chain and “Value” chain are unrelated and independent of each other. False Easy

21. A “first-tier supplier” refers to a supplier in the chain that provides products or services
immediately preceding the focal business. True Easy

22. A supply chain is made up of a series of linked company-level value chains that provide only
products (never services) to their customers. False Moderate

23. A possible step to minimize the impact of “The Bullwhip Effect” is to encourage retailers to
communicate with distributors and manufacturers to develop a collaborative forecast. True
Moderate

24. A business objective is a theoretical goal that unifies decision-making throughout a company.
False Moderate

25. When developing strategies and when the focus is on the decision area “Environments”,
consideration of the internal environments might include corporate culture, functional
relationships and/or reward systems. True Difficult

Essay

1. Explain in a clear, concise paragraph what is the “value chain” and examples of operational
functions that would add value to the chain.
The linked set of activities within a supply chain that actively add value to the end product, as
opposed to support or reporting activities. Marketing, logistics, R&D, Operations, Suppliers,
Distribution, etc.
Moderate
2. Describe in detail the supply chain phenomenon “the bullwhip effect” and at least three
recommendations to minimize the effect.
Demand variations are likely to be exaggerated as decisions are made up the chain.
a. Point of sale information available to all members of the chain.
b. Collaborative forecasts
c. Planning future product promotions
Moderate
3. Explain the differences, strengths and weaknesses of “competitive” versus “winning” business
strategies.
Competitive: (S) Foundation of business practices with customer focus (W) May be
insufficient to establish market leadership
Winning: (S) Development of exceptional products or services, recognizing the internal and
external value chain contribution (W) Leader implies risks
Moderate
4. The basic road map elements that are considered in the formulation of the Global Supply
Chain Strategy include the following questions: Who are we? How do we fit? How should
we fit? How do we get there? Explain each of these elements in the context of today’s modern
supply chains. Answers will vary.
Moderate
5. Explain in sufficient depth the supply chain perspective for each of the following areas of
strategy for your new manufacturing business: Environment, Resources, Objectives and
Feedback. Choose one of the following businesses to support your response.
 a. Poker tables, chairs, accessories.
b. Men’s and women’s athletic shoes
c. Backpack manufacturer
Environment: Global suppliers with consideration of culture, infrastructure and regulations.
Resources: Understand all the resources of the total supply chain.
Objectives: Fulfilling the needs of the end or final customer.
Feedback: Members of the chain working together based on quality of the information system.
Moderate
6. Describe the similarities and the differences of the “internal value chain” and the “external
value chain.
Internal value chain includes all operations and support functions within a business while the
external are the suppliers, sub-tier suppliers, distributors, end customers, etc external to the
business but key members of the supply chain.
Moderate
7. Define at least 3 benefits a business will experience with an effective/efficient SC function.
 Improved customer satisfaction
 Lower operating costs
 Speed/flexibility of the chain
Moderate

Fill in the Blank(s) (Blank Identified in RED)

1. Supply chain management is often described as managing the flow of information and
materials from the sub-tier suppliers to the final customers. Easy

2. Supply chain management is the design and management of seamless, value-added processes
across organizational boundaries to meet the real needs of the end customer. Easy

3. According to Michael Porter, the business’s interconnected nature of internal functions forms
a value chain. Easy

4. Name three typical organizational members of a business’s internal value chain. Executive
Management, R&D, Supply Management, Operations, Logistics, Marketing, Human
Resources, Accounting, Finance, Information Technology. Moderate

5. Modern strategic thinking emerged when contingency theory conceptualized the relationship
between a changing environment, managerial decision-making, and performance. Moderate

6. Regarding strategic thinking, industrial organization theory suggests that market forces should
drive decision-making. Moderate

7. Resource-based theory in strategic management focuses on building organizational skills and

processes that enable a company to deliver distinctive products and services. Moderate

8. Business strategies that effectively use resources to satisfy customers better than rivals are
based on the consideration of four decision areas. They are Environment, Resources,
Objectives and Feedback. Easy

9. A focal firm’s supply chain includes both upstream suppliers and downstream customers.
Easy

10. A focal firm’s supply chain includes both upstream suppliers and downstream customers.
Easy
11. Supply chain management as a functional member of an internal value chain, coordinates the
upstream supply base, finding the right suppliers and building partnerships with them. Easy

12. Better processes and more competitive products result when managers in the various business
functions understand customer needs, company strategy, and work well together. Moderate

13. The Bullwhip Effect experienced in the supply chain is often the result of a failure in
communication upstream and downstream within the supply chain. Easy

14. When designing a supply chain strategy, there are four key factors to consider for a successful
implementation. Relationship alignment, information sharing, performance measurement, and
people empowerment. Difficult

15. Strategic planning helps managers use resources effectively in a changing marketplace to
create value for the customer. Moderate

16. All supply chains are made up of a series of linked company-level value chains. Easy

17. Strategy’s role is to guide managerial decision making to develop a winning business model.
Easy

18. Leading supply chain companies us an iterative 4-step process to develop a supply chain
enabled business model. The steps include assessment, planning, execution, and learning.
Moderate

19. Before supply chain processes can be managed effectively up and down the external supply
chain, they must be managed well within the focal firm. Moderate

20. There are typically two types of businesses discussed that supply chains support,
manufacturing and service companies. Easy

21. If Apple Computer purchased disk drives directly from supplier Maxtor, that supplier would
be considered a 1st tier supplier to Apple. Easy

22. Outsourcing is defined as a decision to have certain components or commodities in the value
chain provided by suppliers outside of one’s business. Easy