Question 1

An important characteristic of a just-in-time (JIT) inventory system is
A) the minimization of safety stock requirements.
B) the use of economic order quantity formulas.
C) lower usage rates.
D) increased inventory holding costs.

Accepted Answer

Just-in-time (JIT) inventory systems focus on reducing inventory levels and minimizing safety stock requirements to decrease storage costs and waste, ensuring materials are only ordered and received as needed.

Question 2

Just-in-time (JIT) inventory systems typically work in conjunction with a(n)
A) economic order quantity approach to inventory management.
B) electronic data interchange system.
C) quick response inventory system.
D) railroad form of transportation.

Accepted Answer

JIT inventory systems often use electronic data interchange (EDI) systems to facilitate real-time communication and coordination between suppliers and manufacturers, ensuring timely delivery of materials.

Question 3

What impact would a just-in-time inventory system have on a firm's warehousing strategy?
A) Its use of private warehouses would increase, while its use of public warehouses would decrease.
B) Its use of both private and public warehouses would diminish.
C) Its use of bonded warehouses would diminish, but its use of field warehouses would increase.
D) Its use of both bonded and field warehouses would increase.

Accepted Answer

A just-in-time inventory system reduces the need for large inventory storage, leading to a diminished use of both private and public warehouses as inventory is kept minimal and replenished as needed.

Question 4

A firm has $2,000,000 in net annual sales, its beginning inventory (for the year) was $400,000 (at retail), and its ending inventory was $600,000 (at retail). The firm's stock turnover rate for the year is ___ times.
A) 2.0
B) 3.3
C) 4.0
D) 5.0

Accepted Answer

The stock turnover rate is calculated as Net Sales divided by Average Inventory. Average Inventory = (Beginning Inventory + Ending Inventory) / 2 = ($400,000 + $600,000) / 2 = $500,000. Stock Turnover Rate = $2,000,000 / $500,000 = 4.0 times.

Question 5

A firm's stock turnover rate is three times the industry average. A possible negative consequence of this may be
A) high inventory carrying costs.
B) the loss of quantity discounts.
C) a high proportion of unsalable merchandise.
D) an unproductive investment in inventory.

Accepted Answer

A high stock turnover rate may mean the firm is not purchasing in large enough quantities to receive quantity discounts.

Question 6

A firm's order lead time is 7 days, its usage rate is 5 units per day, and its safety stock is 10 units. Its reorder point is ___ units.
A) 22
B) 45
C) 57
D) 75

Accepted Answer

The answer of A firm's order lead time is 7...

Question 7

What effect on a company's reorder point would increasing the safety stock from 5 to 15 units have?
A) The reorder point will fall by 10 units.
B) The reorder point will increase by 10 units.
C) The reorder point will increase by 10 percent.
D) The answer cannot be determined on the basis of the material provided.

Accepted Answer

Increasing the safety stock by 10 units directly increases the reorder point by the same amount, as the reorder point is calculated as the sum of the lead time demand and safety stock.

Question 8

A firm has a planned usage rate of 20 units per day, a planned safety stock of 20 units, and an expected order lead time of 5 days. If the actual usage rate is 25 units per day, the firm will be out of stock
A) at no time in the order cycle.
B) for one-quarter of a day.
C) for 1 1/4 days.
D) for 2 1/4 days.

Accepted Answer

The answer of A firm has a planned usage rate...

Question 9

A firm has order-processing costs of $8, an annual demand of 4,000 units, holding costs equal to 20 percent of the average inventory on hand, and wholesale unit costs of $2. What is its economic order quantity?
A) 10 units
B) 200 units
C) 400 units
D) 1,000 units

Accepted Answer

The Economic Order Quantity (EOQ) is calculated using the formula: EOQ = sqrt((2 * Demand * Order Cost) / Holding Cost). Here, Demand = 4000 units, Order Cost = $8, Holding Cost = 20% of $2 = $0.40. Plugging these values into the formula gives EOQ = sqrt((2 * 4000 * 8) / 0.40) = 400 units.

Question 10

A firm has heavy seasonal peaks in customer demand during the year. Which of these would be the WORST warehousing arrangement?
A) A public warehouse
B) Field warehousing
C) A bonded warehouse
D) A private warehouse

Accepted Answer

A private warehouse would be the worst option for a firm with heavy seasonal peaks in customer demand because it requires significant capital investment and fixed costs, making it less flexible and more expensive to manage during off-peak times compared to options like public or field warehousing, which offer more flexibility and scalability.

Question 11

There are two components to a value chain: the value chain itself and the value delivery chain.

Accepted Answer

The value chain refers to the internal activities a company engages in when transforming inputs into outputs (products or services), aiming to add value at each step. The value delivery chain encompasses the entire process, including the value chain, but also involves the interaction with suppliers and distribution channels to deliver the final product or service to the customer, thus focusing on the delivery of value to the end customer.

Question 12

Outsourcing is an important decision in formulating the total delivered product.

Accepted Answer

Outsourcing can significantly impact the cost, quality, and delivery time of the final product, making it a crucial factor in the overall product strategy.

Question 13

Manufacturers and final consumers are considered to be channel members.

Accepted Answer

Manufacturers and final consumers are both part of the distribution channel, with manufacturers producing goods and consumers being the end recipients.

Question 14

Final consumers are considered to be a distribution intermediary.

Accepted Answer

Final consumers are the end users of a product or service and are not involved in the distribution process as intermediaries. Distribution intermediaries are entities that facilitate the movement of products from the manufacturer to the consumer, such as wholesalers and retailers.

Question 15

A key factor in relationship marketing is the long-term nature of relationships in distribution.

Accepted Answer

Relationship marketing focuses on building long-term relationships with customers, suppliers, and distribution partners to foster loyalty and repeat business, rather than just focusing on individual transactions.

Question 16

The sorting process consists of acquiring a broad range of products to offer the final consumer the convenience of one-stop shopping.

Accepted Answer

The sorting process in distribution involves breaking down a large quantity of goods into smaller lots to meet the needs of specific customers, not acquiring a broad range of products for one-stop shopping.

Question 17

Independent intermediaries are used in a direct channel of distribution.

Accepted Answer

In a direct channel of distribution, products or services move directly from the producer to the consumer without the involvement of independent intermediaries.

Question 18

Direct channels reduce the number of transactions between a manufacturer and its final consumers.

Accepted Answer

Direct channels involve the manufacturer selling directly to the consumer, eliminating intermediaries, but not necessarily reducing the number of transactions.

Question 19

Administered channel arrangements are typically longer than contractual channel arrangements.

Accepted Answer

Administered channel arrangements are typically more flexible and based on the influence and power of one party over the others, without formal agreements, making them potentially shorter or more fluid compared to contractual channel arrangements, which are based on legal contracts defining the terms and duration of the relationship.

Question 20

Channel width may be reduced through horizontal integration (such as a wholesaler purchasing a competing wholesaler).

Accepted Answer

Horizontal integration involves a company acquiring or merging with its competitors in the same industry, which can lead to a reduction in the number of distribution channels or intermediaries (like wholesalers), thus potentially reducing the channel width.

Quiz 14: Value Chain Management and Logistics

An important characteristic of a just-in-time (JIT) inventory system is

Just-in-time (JIT) inventory systems typically work in conjunction with a(n)

What impact would a just-in-time inventory system have on a firm's warehousing strategy?

A firm has $2,000,000 in net annual sales, its beginning inventory (for the year) was $400,000 (at retail) , and its ending inventory was $600,000 (at retail) . The firm's stock turnover rate for the year is ___ times.

A firm's stock turnover rate is three times the industry average. A possible negative consequence of this may be

A firm's order lead time is 7 days, its usage rate is 5 units per day, and its safety stock is 10 units. Its reorder point is ___ units.

What effect on a company's reorder point would increasing the safety stock from 5 to 15 units have?

A firm has a planned usage rate of 20 units per day, a planned safety stock of 20 units, and an expected order lead time of 5 days. If the actual usage rate is 25 units per day, the firm will be out of stock

A firm has order-processing costs of $8, an annual demand of 4,000 units, holding costs equal to 20 percent of the average inventory on hand, and wholesale unit costs of $2. What is its economic order quantity?

A firm has heavy seasonal peaks in customer demand during the year. Which of these would be the WORST warehousing arrangement?