Question 1

Decisions made during the supply chain design phase regarding significant investments in the supply chain, such as the number and size of plants to build, the number of trucks to purchase or lease, and whether to build or lease warehouse space, cannot be altered in the short term.

Accepted Answer

Significant investments made during the supply chain design phase are usually long-term decisions that cannot be easily altered in the short term. They require careful consideration and planning to ensure their effectiveness and efficiency in the long run. Therefore, it is crucial to make informed decisions based on data and projections to avoid the cost of changing plans halfway through the implementation phase.

Question 2

The present value of a stream of cash flows is what that stream is worth in today's dollars.

Accepted Answer

The present value of a stream of cash flows is the current worth of a series of future cash flows, discounted at the appropriate discount rate. This value represents the amount that would need to be invested today to generate the future cash flows at the given rate of return.

Question 3

Long-term contracts for both warehousing and transportation requirements will be more effective if the demand and price of warehousing do not change in the future or if the price of warehousing goes up.

Accepted Answer

Long-term contracts can lock in current prices and conditions, making them more effective if prices are expected to rise or remain stable, as they provide cost certainty and protection against future price increases.

Question 4

Simulation methods are very good at evaluating a decision where the path itself is decision dependent.

Accepted Answer

The answer of Simulation methods are very good at evaluating...

Question 5

The value of flexibility increases with an increase in uncertainty.

Accepted Answer

This statement is true as flexibility becomes more important in uncertain situations to adapt to changing circumstances and capitalize on new opportunities.

Question 6

The rate of return k is also referred to as the present value of capital.

Accepted Answer

The rate of return is not the present value of capital. The present value of capital refers to the amount of money needed now to invest in order to achieve a certain amount of money in the future.

Question 7

Offshoring typically lowers labor, working capital and fixed costs but increases risk and freight costs.

Accepted Answer

The answer of Offshoring typically lowers labor, working capital and...

Question 8

The degree of demand and price uncertainty has a significant influence on the appropriate portfolio of long- and short-term warehousing space that a firm should carry.

Accepted Answer

The degree of demand and price uncertainty affects a firm's inventory management strategies, including the amount and types of long- and short-term warehousing space needed to effectively meet customer demands and optimize costs.

Question 9

In a complex decision tree, there are thousands of possible paths that may result from the first period to the last.

Accepted Answer

A complex decision tree can have multiple decision points with several possible outcomes at each decision point. As a result, there can be thousands of possible paths that may result from the first period to the last.

Question 10

Discounted cash flow (DCF) analysis evaluates the present value of any stream of future cash flows and allows management to compare two streams of cash flows in terms of their financial value.

Accepted Answer

DCF analysis is a widely used financial modeling technique to determine the value of an investment based on future cash flows. It helps management to make informed decisions by comparing the present value of different streams of cash flows.

Question 11

Strategic planning and financial planning should be combined during supply chain network design.

Accepted Answer

Strategic planning and financial planning are both important considerations in supply chain network design. Strategic planning involves identifying the goals and objectives of the supply chain network, while financial planning involves assessing the costs and risks associated with different design options. Integrating these two aspects of planning can help ensure that the supply chain network is not only strategically sound, but also financially viable.

Question 12

Financial analysis should be used as an input to decision making, not as the decision-making process.

Accepted Answer

Financial analysis provides valuable information that should be considered when making decisions, but it should not be the sole factor in making decisions. Other factors such as strategic goals, company culture, and market trends should also be taken into account.

Question 13

If price and demand vary over time in a global network, flexible production capacity can be reconfigured to maximize profits in the new environment.

Accepted Answer

Flexible production capacity allows for adjustments to be made according to changes in price and demand, allowing for optimization of profits in evolving markets.

Question 14

The main advantage of simulation models is that they can provide low-cost evaluations of complex situations.

Accepted Answer

The answer of The main advantage of simulation models is...

Question 15

A negative NPV for an option indicates that the option will lose money for the supply chain.

Accepted Answer

A negative NPV indicates that the option's costs exceed its benefits, resulting in a net loss for the supply chain.

Question 16

During network design, managers need a methodology that allows them to estimate the certainty in their forecast of demand and price and then incorporate this certainty into the decision-making process.

Accepted Answer

The answer of During network design, managers need a methodology...

Question 17

Appropriate flexibility is an effective approach for a global supply chain to deal with a variety of risks and uncertainties. Extra flexibility is always worth the cost.

Accepted Answer

While flexibility can help a global supply chain cope with risks and uncertainties, it may not always be worth the cost. A balance must be struck between flexibility and cost-effectiveness, and the optimal level of flexibility may vary depending on the specific situation and needs of the supply chain.

Question 18

A firm may choose to build a flexible global supply chain even in the presence of little demand or supply uncertainty if certainty exists in exchange rates or prices.

Accepted Answer

A firm typically builds a flexible global supply chain to mitigate risks associated with uncertainties, including demand, supply, exchange rates, and prices. If there is little uncertainty in demand or supply, and certainty exists in exchange rates or prices, the incentive to invest in a flexible supply chain diminishes, as the primary risks it aims to mitigate are reduced.

Question 19

When faced with uncertain conditions it is always best to sign long-term contracts (because they are typically cheaper) and avoid all flexible capacity (because it is more expensive).

Accepted Answer

When faced with uncertain conditions, signing long-term contracts could lock a company into an unrealistic capacity or price, leading to financial losses. Flexible capacity, such as short-term contracts or usage-based pricing, can provide greater cost savings and adaptability to changing market conditions.

Question 20

In reality, demand and prices are highly uncertain and are likely to fluctuate during the life of any supply chain decision.

Accepted Answer

Due to various external factors such as competition, economic conditions, consumer behavior, and technological advancements, demand and prices can vary significantly and unexpectedly. Therefore, supply chain decisions must consider the potential fluctuations in demand and pricing to ensure the sustainability of the supply chain.

Quiz 6: Designing Global Supply Chain Networks