Test Bank Supply Chain Management 5th Edition Chopra

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Chopra 
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What student Can Expect From A Test Bank? 
A test bank will include the following questions: 
1. True/False 
2. Multiple Choice Questions 
3. Matching Questions 
4. Fill In The Blanks 
5. Essay Questions 
6. Short  Questions 
  
Description 
Supply Chain Management, 5e (Chopra/Meindl) 
Chapter 4   Designing Distribution Networks and Applications to e-Business 
  
4.1   True/False Questions 
  
1) Distribution occurs between every pair of stages in the supply chain. 
Answer: TRUE 
Diff: 2 
Topic: 4.1 The Role of Distribution in the Supply Chain 
Learning Outcome: Compare common approaches to supply chain design 
  
2) Companies in the same industry often select very different distribution networks, 
because the choice of the distribution network can be used to achieve a variety of 
supply chain objectives ranging from low cost to high responsiveness. 
Answer: TRUE 
Diff: 2 
Topic: 4.1 The Role of Distribution in the Supply Chain 
Learning Outcome: Compare common approaches to supply chain design 
  
3) Companies in the same industry should always select similar distribution networks, 
because their objectives will be similar. 
Answer: FALSE 
Diff: 2 
Topic: 4.1 The Role of Distribution in the Supply Chain 
  
4) A customer does not necessarily want the highest level of performance along all 
dimensions of customer service, including response time, product variety, product 
availability, customer experience, order visibility, and returnability. 
Answer: TRUE 
Diff: 1 
Topic: 4.2 Factors Influencing Distribution Network Design 
Learning Outcome: Compare common approaches to supply chain design 
  
5) Outbound transportation costs per unit tend to be lower than inbound costs, because 
inbound lot sizes are typically larger. 
Answer: FALSE 
Diff: 1 
Topic: 4.2 Factors Influencing Distribution Network Design 
Learning Outcome: Compare common approaches to supply chain design 
  
6) Transportation costs are high with drop-shipping because the average outbound 
distance to the end consumer is large and package carriers are used to shipping the 
product. 
Answer: TRUE 
Diff: 1 
Topic: 4.2 Factors Influencing Distribution Network Design 
  
  
7) The main advantage of in-transit merge over drop-shipping is the somewhat lower 
transportation cost and improved customer experience. 
Answer: TRUE 
Diff: 2 
Topic: 4.3 Design Options for a Distribution Network 
Learning Outcome: Compare common approaches to supply chain design 
8) The main advantage of a distribution network with local storage is that it can lower 
the delivery cost and provide a faster response than other networks. 
Answer: TRUE 
Diff: 2 
Topic: 4.3 Design Options for a Distribution Network 
Learning Outcome: Compare common approaches to supply chain design 
  
9) The main advantage of a distribution network with local storage is that it can lower 
the inventory and facility costs. 
Answer: FALSE 
Diff: 2 
Topic: 4.3 Design Options for a Distribution Network 
  
10) The major disadvantage of a distribution network with local storage is the increased 
inventory and facility costs. 
Answer: TRUE 
Diff: 1 
Topic: 4.3 Design Options for a Distribution Network 
Learning Outcome: Compare common approaches to supply chain design 
  
11) A distribution network designer needs to consider product characteristics as well as 
network requirements when deciding on the appropriate delivery network. 
Answer: TRUE 
Diff: 3 
Topic: 4.3 Design Options for a Distribution Network 
Learning Outcome: Compare common approaches to supply chain design 
  
12) Only niche companies will end up using a single distribution network. 
Answer: TRUE 
Diff: 1 
Topic: 4.3 Design Options for a Distribution Network 
Learning Outcome: Compare common approaches to supply chain design 
  
13) Distributors add value to a supply chain between a supply stage and a customer 
stage if there are many small players at the customer stage, each requiring a small 
amount of the product at a time. 
Answer: TRUE 
Diff: 2 
Topic: 4.3 Design Options for a Distribution Network 
Learning Outcome: Compare common approaches to supply chain design 
  
14) As long as inbound transportation economies of scale are maintained, increasing 
the number of facilities decreases total transportation cost. 
Answer: TRUE 
Diff: 1 
Topic: 4.2 Factors Influencing Distribution Network Design 
AACSB: Analytic Skills 
Learning Outcome: Compare common approaches to supply chain design 
15) Customers always want the highest level of performance along all the dimensions 
response time, product variety and returnability. 
Answer: FALSE 
Diff: 2 
Topic: 4.2 Factors Influencing Distribution Network Design 
AACSB: Analytic Skills 
Learning Outcome: Compare common approaches to supply chain design 
  
16) Firms that target customers who can tolerate a long response time require only a 
few locations that may be far from the customer. 
Answer: TRUE 
Diff: 1 
Topic: 4.2 Factors Influencing Distribution Network Design 
Learning Outcome: Compare common approaches to supply chain design 
  
17) A decrease in the response time customers desire increases the number of facilities 
required in the network. 
Answer: TRUE 
Diff: 1 
Topic: 4.2 Factors Influencing Distribution Network Design 
Learning Outcome: Compare common approaches to supply chain design 
  
  
4.2   Multiple Choice Questions 
  
1) The steps taken to move and store a product from the supplier stage to a customer 
stage in the supply chain is referred to as 
1. A) transportation. 
2. B) retailing. 
3. C) wholesaling. 
4. D) distribution. 
5. E) manufacturing. 
Answer: D 
Diff: 1 
Topic: 4.1 The Role of Distribution in the Supply Chain 
AACSB: Analytic Skills 
Learning Outcome: Compare common approaches to supply chain design 
  
2) Distribution is a key driver of the overall profitability of a firm because 
1. A) the addition of distributors only adds cost to the supply chain. 
2. B) it directly impacts both the supply chain cost and the customer experience. 
3. C) it slows down the responsiveness of the supply chain. 
4. D) it cannot be developed as a part of supply chain strategy. 
5. E) Distribution is not a key driver of profitability. 
Answer: B 
Diff: 2 
Topic: 4.1 The Role of Distribution in the Supply Chain 
AACSB: Analytic Skills 
Learning Outcome: Compare common approaches to supply chain design 
3) The choice of the distribution network can be used to achieve supply chain objectives 
such as 
1. A) low cost. 
2. B) high responsiveness. 
3. C) high cost. 
4. D) high responsibility. 
5. E) A and B only 
Answer: E 
Diff: 2 
Topic: 4.2 Factors Influencing Distribution Network Design 
AACSB: Analytic Skills 
Learning Outcome: Compare common approaches to supply chain design 
  
  
4) Companies in the same industry often select very different distribution networks 
because 
1. A) some companies are poorly run. 
2. B) different companies try to avoid using the same approach. 
3. C) different companies have different objectives for their supply chain. 
4. D) all of the above 
5. E) none of the above 
Answer: C 
Diff: 2 
Topic: 4.2 Factors Influencing Distribution Network Design 
  
5) A poor/inappropriate distribution network can 
1. A) lead to high profitability. 
2. B) hurt the level of service customers receive while increasing cost. 
3. C) have a significant negative impact on the profitability of a firm. 
4. D) all of the above 
5. E) B and C only 
Answer: D 
Diff: 2 
Topic: 4.2 Factors Influencing Distribution Network Design 
  
6) Which of the following would not be the result of a poor/inappropriate distribution 
network? 
1. A) High profitability 
2. B) Low level of customer service 
3. C) High cost 
4. D) Poor profitability 
5. E) None of the above are true. 
Answer: A 
Diff: 1 
Topic: 4.2 Factors Influencing Distribution Network Design 
  
7) On which dimensions should the performance of a distribution network be evaluated 
at the highest level? 
1. A) Profitability of individual supply chain components 
2. B) Efficiency of overall supply chain network 
3. C) Customer needs that are met 
4. D) Cost of meeting customer needs 
5. E) C and D only 
Answer: E 
Diff: 3 
Topic: 4.2 Factors Influencing Distribution Network Design 
  
8) Which of the following are measures of customer service that are influenced by the 
structure of the distribution network? 
1. A) Response time 
2. B) Product variety 
3. C) Product availability 
4. D) Customer experience 
5. E) all of the above 
Answer: E 
Diff: 1 
Topic: 4.2 Factors Influencing Distribution Network Design 
  
9) Which of the following are measures of customer service that are influenced by the 
structure of the distribution network? 
1. A) Returnability 
2. B) Order visibility 
3. C) Customer experience 
4. D) Product availability 
5. E) all of the above 
Answer: E 
Diff: 2 
Topic: 4.2 Factors Influencing Distribution Network Design 
  
10) Which of the following is not a measure of customer service that is influenced by 
the structure of the distribution network? 
1. A) Returnability 
2. B) Customer experience 
3. C) Customer maturity 
4. D) Product availability 
5. E) All of the above are measures of customer service. 
Answer: C 
Diff: 1 
Topic: 4.2 Factors Influencing Distribution Network Design 
  
11) The number of different products/configurations that a customer desires from the 
distribution network is 
1. A) response time. 
2. B) product variety. 
3. C) product availability. 
4. D) customer experience. 
5. E) order visibility. 
Answer: B 
Diff: 1 
Topic: 4.2 Factors Influencing Distribution Network Design 
  
12) The probability of having a product in stock when a customer order arrives is 
1. A) response time. 
2. B) product variety. 
3. C) product availability. 
4. D) customer experience. 
5. E) order visibility. 
Answer: C 
Diff: 1 
Topic: 4.2 Factors Influencing Distribution Network Design 
  
13) The ease with which the customer can place and receive their order as well as other 
aspects of value that the sales staff provides is 
1. A) customer experience. 
2. B) order visibility. 
3. C) product availability. 
4. D) response time. 
5. E) returnability. 
Answer: A 
Diff: 1 
Topic: 4.2 Factors Influencing Distribution Network Design 
  
14) The ability of the customer to track their order from placement to delivery is 
1. A) customer experience. 
2. B) order visibility. 
3. C) product availability. 
4. D) response time. 
5. E) returnability. 
Answer: B 
Diff: 1 
Topic: 4.2 Factors Influencing Distribution Network Design 
  
15) The costs incurred in bringing material into a facility are 
1. A) sourcing transportation costs. 
2. B) outbound transportation costs. 
3. C) crossbound transportation costs. 
4. D) inbound transportation costs. 
5. E) none of the above 
Answer: D 
Diff: 1 
Topic: 4.2 Factors Influencing Distribution Network Design 
  
  
16) The costs incurred in sending material out of a facility are 
1. A) sourcing transportation costs. 
2. B) outbound transportation costs. 
3. C) crossbound transportation costs. 
4. D) inbound transportation costs. 
5. E) none of the above 
Answer: B 
Diff: 1 
Topic: 4.2 Factors Influencing Distribution Network Design 
17) Outbound transportation costs per unit tend to be 
1. A) about the same as inbound costs. 
2. B) higher than inbound costs. 
3. C) lower than inbound costs. 
4. D) neither higher or lower than inbound costs. 
5. E) none of the above 
Answer: B 
Diff: 2 
Topic: 4.2 Factors Influencing Distribution Network Design 
  
18) As the number of facilities in a supply chain increases 
1. A) the inventory and resulting inventory costs also increase. 
2. B) the inventory and resulting inventory costs decrease. 
3. C) the inventory increases and resulting inventory costs decrease. 
4. D) the inventory decreases and resulting inventory costs increase. 
5. E) the inventory and resulting inventory costs remain the same. 
Answer: A 
Diff: 2 
Topic: 4.2 Factors Influencing Distribution Network Design 
  
19) As the response time desired by the customer decreases, the required number of 
facilities in the distribution network 
1. A) decreases. 
2. B) remains the same. 
3. C) increases. 
4. D) increases and then decreases. 
5. E) none of the above 
Answer: C 
Diff: 2 
Topic: 4.2 Factors Influencing Distribution Network Design 
  
  
20) As the number of facilities in a supply chain increases, total transportation cost 
1. A) decreases. 
2. B) remains the same. 
3. C) increases. 
4. D) increases to a point and then decreases. 
5. E) decreases to a point and then increases. 
Answer: E 
Diff: 3 
Topic: 4.2 Factors Influencing Distribution Network Design 
  
21) As the number of facilities in a supply chain increases, total facility costs 
1. A) decrease. 
2. B) remain the same. 
3. C) increase. 
4. D) increase to a point and then decrease. 
5. E) decrease to a point and then increase. 
Answer: C 
Diff: 2 
Topic: 4.2 Factors Influencing Distribution Network Design 
22) Total logistics costs for a supply chain network are a sum of 
1. A) inventory and facility costs. 
2. B) inventory, facility, and distributor costs. 
3. C) facility, transportation, and distributor costs. 
4. D) inventory, transportation, and facility costs. 
5. E) none of the above 
Answer: D 
Diff: 2 
Topic: 4.2 Factors Influencing Distribution Network Design 
  
23) As the number of facilities in a supply chain network increases, total logistics costs 
will 
1. A) decrease. 
2. B) decrease at first and then increase. 
3. C) increase. 
4. D) increase at first and then decrease. 
5. E) neither increase or decrease. 
Answer: B 
Diff: 2 
Topic: 4.2 Factors Influencing Distribution Network Design 
AACSB: Analytic Skills 
Learning Outcome: Compare common approaches to supply chain design 
  
  
24) Which of the following are key decisions in the design of a distribution network? 
1. A) Will product be delivered to the customer location or picked up from a pre-ordained 
site? 
2. B) Will product flow through a production facility? 
3. C) Will product flow through an intermediary (or intermediate location)? 
4. D) all of the above 
5. E) A and C only 
Answer: E 
Diff: 2 
Topic: 4.3 Design Options for a Distribution Network 
  
25) Which of the following is not a distinct distribution network design that may be used 
to move products from factory to customer? 
1. A) Manufacturer storage with direct shipping 
2. B) Manufacturer storage with distributor pickup 
3. C) Distributor storage with package carrier delivery 
4. D) Distributor storage with last mile delivery 
5. E) Manufacturer/distributor storage with customer pickup 
Answer: B 
Diff: 2 
Topic: 4.3 Design Options for a Distribution Network 
26) Which of the following is not a distinct distribution network design that may be used 
to move products from factory to customer? 
1. A) Manufacturer storage with direct shipping 
2. B) Manufacturer storage with direct shipping and in-transit merge 
3. C) Distributor storage with package carrier delivery 
4. D) Distributor storage with manufacturer pickup 
5. E) Retail storage with customer pickup 
Answer: D 
Diff: 2 
Topic: 4.3 Design Options for a Distribution Network 
  
27) In which distribution network design is product shipped directly from the 
manufacturer to the end customer, bypassing the retailer (who takes the order and 
initiates the delivery request)? 
1. A) Manufacturer storage with direct shipping 
2. B) Manufacturer storage with direct shipping and in-transit merge 
3. C) Distributor storage with package carrier delivery 
4. D) Distributor storage with last mile delivery 
5. E) Manufacturer/distributor storage with customer pickup 
Answer: A 
Diff: 1 
Topic: 4.3 Design Options for a Distribution Network 
  
  
28) Which distribution network is also referred to as drop-shipping with product 
delivered directly from the manufacturer to the customer location? 
1. A) Manufacturer storage with direct shipping 
2. B) Manufacturer storage with direct shipping and in-transit merge 
3. C) Distributor storage with package carrier delivery 
4. D) Distributor storage with last mile delivery 
5. E) Manufacturer/distributor storage with customer pickup 
Answer: A 
Diff: 2 
Topic: 4.3 Design Options for a Distribution Network 
  
29) Which of the following is an advantage of manufacturer storage with direct 
shipping? 
1. A) Transportation costs are low because the average outbound distance to the end 
consumer is small and package carriers are used to shipping the product. 
2. B) Supply chains save on the fixed cost of facilities, because the need for other 
warehousing space in the supply chain has been eliminated. 
3. C) Response times tend to be small because the order has to be transmitted from the 
retailer to the manufacturer. 
4. D) Order tracking is easy to implement because of the complete integration of 
information systems at both the retailer and the manufacturer. 
5. E) The handling of returns is likely to be simple and inexpensive, improving customer 
satisfaction. 
Answer: B 
Diff: 2 
Topic: 4.3 Design Options for a Distribution Network 
30) Which of the following would be a disadvantage of manufacturer storage with direct 
shipping? 
1. A) The ability to reduce cost of inventory by centralizing inventories at the manufacturer. 
2. B) The manufacturer has to postpone customization until after the customer order has 
been placed. 
3. C) Supply chains have to eliminate other warehousing space to save on the fixed cost of 
facilities. 
4. D) Response times tend to be large because the order has to be transmitted from the 
retailer to the manufacturer and shipping distances are on average longer from the 
manufacturer's centralized site. 
5. E) Provides a good customer experience when a single order containing products from 
several manufacturers is delivered in partial shipments. 
Answer: D 
Diff: 2 
Topic: 4.3 Design Options for a Distribution Network 
  
  
31) Which distribution network design is similar to pure drop-shipping, except that 
pieces of the order coming from different locations are combined so that the customer 
gets a single delivery? 
1. A) Manufacturer storage with direct shipping 
2. B) Manufacturer storage with direct shipping and in-transit merge 
3. C) Distributor storage with package carrier delivery 
4. D) Distributor storage with manufacturer pickup 
5. E) Retail storage with customer pickup 
Answer: B 
Diff: 2 
Topic: 4.3 Design Options for a Distribution Network 
  
32) The main advantage of in-transit merge over drop-shipping is 
1. A) the ability to reduce cost of inventory by centralizing inventories at the manufacturer. 
2. B) supply chains save on the fixed cost of facilities, because the need for other 
warehousing space in the supply chain has been eliminated. 
3. C) somewhat lower transportation cost and improved customer experience. 
4. D) order tracking is easy to implement because of the complete integration of 
information systems at both the retailer and the manufacturer. 
5. E) the handling of returns is likely to be simple and inexpensive, improving customer 
satisfaction. 
Answer: C 
Diff: 2 
Topic: 4.3 Design Options for a Distribution Network 
33) The major disadvantage of in-transit merge compared to drop-shipping is 
1. A) transportation costs are high because the average outbound distance to the end 
consumer is large and package carriers are used to shipping the product. 
2. B) response times tend to be large because the order has to be transmitted from the 
retailer to the manufacturer and shipping distances are on average longer from the 
manufacturer's centralized site. 
3. C) order tracking becomes harder to implement because it requires complete integration 
of information systems at both the retailer and the manufacturer. 
4. D) the additional effort during the merge itself. 
5. E) the handling of returns is likely to be difficult and more expensive, hurting customer 
satisfaction. 
Answer: D 
Diff: 1 
Topic: 4.3 Design Options for a Distribution Network 
  
  
34) Which distribution network design is being used when inventory is not held by 
manufacturers at the factories, but is held by distributors/retailers in intermediate 
warehouses and package carriers are used to transport products from the intermediate 
location to the final customer? 
1. A) Manufacturer storage with direct shipping 
2. B) Manufacturer storage with direct shipping and in-transit merge 
3. C) Distributor storage with package carrier delivery 
4. D) Distributor storage with manufacturer pickup 
5. E) Retail storage with customer pickup 
Answer: C 
Diff: 1 
Topic: 4.3 Design Options for a Distribution Network 
AACSB: Analytic Skills 
Learning Outcome: Compare common approaches to supply chain design 
  
35) Which of the following is an advantage of distributor storage with carrier delivery? 
1. A) Inventory cost is higher than with manufacturer storage. 
2. B) Product variety is lower than with manufacturer storage. 
3. C) Order visibility for the customer is easier than with manufacturer storage. 
4. D) Higher cost to provide the same level of product availability as manufacturer storage. 
5. E) Cost of facilities and handling is somewhat higher than manufacturer storage. 
Answer: C 
Diff: 2 
Topic: 4.3 Design Options for a Distribution Network 
  
36) Which of the following is a disadvantage of distributor storage with carrier delivery? 
1. A) Information infrastructure is simpler than manufacturer storage. 
2. B) Response time is faster than with manufacturer storage. 
3. C) Returnability is easier than with manufacturer storage. 
4. D) Product variety is lower than with manufacturer storage. 
5. E) Transportation cost is lower than with manufacturer storage. 
Answer: D 
Diff: 2 
Topic: 4.3 Design Options for a Distribution Network 
37) Which distribution network design is being used when the distributor/retailer delivers 
the product to the customer's home instead of using a package carrier? 
1. A) Manufacturer storage with direct shipping 
2. B) Manufacturer/distributor storage with customer pickup 
3. C) Distributor storage with package carrier delivery 
4. D) Distributor storage with last mile delivery 
5. E) Retail storage with customer pickup 
Answer: D 
Diff: 2 
Topic: 4.3 Design Options for a Distribution Network 
AACSB: Analytic Skills 
Learning Outcome: Compare common approaches to supply chain design 
  
38) Which of the following is an advantage of distributor storage with last mile delivery? 
1. A) More expensive to provide product availability than any other option except retail 
stores. 
2. B) Inventory cost is higher than distributor storage with package carrier delivery. 
3. C) Response time is very quick ranging from same day to next day delivery. 
4. D) Transportation cost is higher than any other distribution option. 
5. E) Returnability is harder and more expensive than a retail network. 
Answer: C 
Diff: 1 
Topic: 4.3 Design Options for a Distribution Network 
  
39) Which of the following is a disadvantage of distributor storage with last mile 
delivery? 
1. A) Transportation cost is higher than any other distribution option. 
2. B) Information cost is similar to distributor storage with package carrier delivery. 
3. C) Customer experience is very good, particularly for bulky items. 
4. D) Returnability is easier to implement than other options. 
5. E) Order traceability is less of an issue and easier to implement than manufacturer 
storage or distributor storage with package carrier delivery. 
Answer: A 
Diff: 3 
Topic: 4.3 Design Options for a Distribution Network 
  
40) Which distribution network design is being used when inventory is stored at the 
manufacturer or distributor warehouse but customers place their orders online or on the 
phone and then come to designated pickup points to collect their orders? 
1. A) Manufacturer storage with direct shipping 
2. B) Manufacturer/distributor storage with customer pickup 
3. C) Distributor storage with package carrier delivery 
4. D) Distributor storage with last mile delivery 
5. E) Retail storage with customer pickup 
Answer: B 
Diff: 2 
Topic: 4.3 Design Options for a Distribution Network 
AACSB: Analytic Skills 
Learning Outcome: Compare common approaches to supply chain design 
41) Which of the following is an advantage of manufacturer/distributor storage with 
customer pickup? 
1. A) Facility costs can be very high if new facilities have to be built. 
2. B) Transportation cost is lower than the use of package carriers, especially if using an 
existing delivery network. 
3. C) Order visibility is difficult but essential. 
4. D) Product variety is similar to other manufacturer or distributor storage options. 
5. E) Significant investment in information infrastructure required. 
Answer: B 
Diff: 2 
Topic: 4.3 Design Options for a Distribution Network 
  
42) Which of the following is a disadvantage of manufacturer/distributor storage with 
customer pickup? 
1. A) Customer experience is lower than other options because of the lack of home 
delivery. 
2. B) Response time is similar to package carrier delivery with manufacturer or distributor 
storage. 
3. C) Returnability is somewhat easier given that pickup location can handle returns. 
4. D) Product availability is similar to other manufacturer or distributor storage options. 
5. E) Facilities costs are lower if existing facilities are used. 
Answer: A 
Diff: 3 
Topic: 4.3 Design Options for a Distribution Network 
  
43) Which distribution network design is being used when inventory is stored locally at 
retail stores and customers walk into the retail store or place an order online or on the 
phone and pick it up at the retail store? 
1. A) Manufacturer storage with direct shipping 
2. B) Manufacturer/distributor storage with customer pickup 
3. C) Distributor storage with package carrier delivery 
4. D) Distributor storage with last mile delivery 
5. E) Retail storage with customer pickup 
Answer: E 
Diff: 1 
Topic: 4.3 Design Options for a Distribution Network 
  
44) Which of the following is an advantage of retail storage with customer pickup? 
1. A) Inventory cost is higher than all other options. 
2. B) Transportation cost is lower than all other options. 
3. C) Facilities and handling costs are higher than other options. 
4. D) Product variety is lower than all other options. 
5. E) Product availability is more expensive to provide than all other options. 
Answer: B 
Diff: 2 
Topic: 4.3 Design Options for a Distribution Network 
45) Which of the following is a disadvantage of retail storage with customer pickup? 
1. A) Returnability is easier than other options given that pickup location can handle 
returns. 
2. B) Inventory cost is higher than all other options. 
3. C) Transportation cost is lower than all other options. 
4. D) Facilities and handling costs are lower than other options. 
5. E) Product variety is higher than all other options. 
Answer: B 
Diff: 2 
Topic: 4.3 Design Options for a Distribution Network 
  
  
46) Distributors add value to a supply chain between a supply stage and a customer 
stage 
1. A) if there is a small number of customers requiring a large amount of product. 
2. B) if there is a large number of customers requiring a large amount of product. 
3. C) if there are many small players at the customer stage, each requiring a small amount 
of the product at a time. 
4. D) if there are a few large players at the customer stage, each requiring a large amount 
of the product at a time. 
5. E) Distributors do not add value to a supply chain. 
Answer: C 
Diff: 2 
Topic: 4.3 Design Options for a Distribution Network 
  
47) Improvement in supply chain performance at the result of distributors occurs for 
which of the following reasons? 
1. A) Reduction in transportation cost because of LTL shipments from manufacturers to 
distributor. 
2. B) Reduction in outbound transportation cost because the distributor combines products 
from many customers into a single outbound shipment. 
3. C) Reduction in inventory costs because distributor disaggregates safety inventory 
rather than aggregating at each retailer. 
4. D) A more stable order stream from distributor to manufacturer (compared to erratic 
orders from each retailer) allows manufacturers to lower cost by planning production 
more effectively. 
5. E) By carrying inventory closer to the point of sale, manufacturers are able to provide a 
better response time than distributors can. 
Answer: D 
Diff: 3 
Topic: 4.3 Design Options for a Distribution Network 
  
48) Which of the following statements about distribution networks is true? 
1. A) The ownership structure of the distribution network can have as big an impact as the 
type of distribution network. 
2. B) The choice of a distribution network has very long-term consequences. 
3. C) The choice of an exclusive distribution strategy may be advantageous. 
4. D) All of the above are true. 
5. E) None of the above are true. 
Answer: D 
Diff: 3 
Topic: 4.3 Design Options for a Distribution Network 
  
49) ________ is a cost factor performance characteristic of Retail Storage at Consumer 
Pickup Sites that is higher than all other options. 
1. A) Transportation 
2. B) Inventory 
3. C) Information 
4. D) Facilities and Handling 
Answer: B 
Diff: 3 
Topic: 4.3 Design Options for a Distribution Network 
Learning Outcome: Compare common approaches to supply chain design 
  
50) ________ is a service factor performance characteristic of Retail Storage at 
Consumer Pickup Sites that is lower than all other options. 
1. A) Response time 
2. B) Product variety 
3. C) Product availability 
4. D) Time to market 
Answer: B 
Diff: 3 
Topic: 4.3 Design Options for a Distribution Network 
Learning Outcome: Compare common approaches to supply chain design 
  
51) ________ is a service factor performance characteristic of Manufacturer or 
Distributor Storage with Customer Pickup that is lower than other options because of 
the lack of home delivery. Experience is very sensitive to capability of pickup location. 
1. A) Response time 
2. B) Product variety 
3. C) Customer experience 
4. D) Time to market 
Answer: C 
Diff: 1 
Topic: 4.3 Design Options for a Distribution Network 
Learning Outcome: Compare common approaches to supply chain design 
  
52) ________ is a cost factor performance characteristic of Manufacturer or Distributor 
Storage with Customer Pickup that is lower than the use of package carriers, especially 
if using an existing delivery network. 
1. A) Transportation 
2. B) Inventory 
3. C) Information 
4. D) Facilities and Handling 
Answer: A 
Diff: 1 
Topic: 4.3 Design Options for a Distribution Network 
Learning Outcome: Compare common approaches to supply chain design 
  
53) ________ is the amount of time it takes for a customer to receive an order. 
1. A) Time to market 
2. B) Product Availability 
3. C) Returnability 
4. D) Response Time 
Answer: D 
Diff: 1 
Topic: 4.2 Factors Influencing Distribution Network Design 
Learning Outcome: Compare common approaches to supply chain design 
  
54) Changing the distribution network design DOES NOT affect the following supply 
chain costs 
1. A) transportation. 
2. B) inventories. 
3. C) information. 
4. D) sourcing. 
Answer: D 
Diff: 2 
Topic: 4.2 Factors Influencing Distribution Network Design 
AACSB: Analytic Skills 
Learning Outcome: Compare common approaches to supply chain design 
  
55) Facility costs decrease as the number of facilities is reduced. Which company 
employs a network design like this? 
1. A) Barnes and Noble 
2. B) Books-A-Million 
3. C) Starbucks 
4. D) Amazon 
Answer: D 
Diff: 2 
Topic: 4.2 Factors Influencing Distribution Network Design 
AACSB: Reflective Thinking Skills 
Learning Outcome: Compare common approaches to supply chain design 
  
56) Which is NOT considered a primary part of Total Logistics Costs for a supply chain 
network? 
1. A) Inventory 
2. B) Manufacturing 
3. C) Transportation 
4. D) Facility cost 
Answer: D 
Diff: 2 
Topic: 4.2 Factors Influencing Distribution Network Design 
Learning Outcome: Compare common approaches to supply chain design 
  
4.3   Essay Questions 
  
1) Explain the measures of customer service that are influenced by the structure of the 
distribution network. 
Answer: Response time is the time between when a customer places an order and 
receives delivery. 
Product variety is the number of different products/configurations that a customer 
desires from the distribution network. 
  
Availability is the probability of having a product in stock when a customer order arrives. 
Customer experience includes the ease with which the customer can place and receive 
their order. It also includes purely experiential aspects, such as the possibility of getting 
a cup of coffee and the value that the sales staff provides. 
Order visibility is the ability of the customer to track their order from placement to 
delivery. 
Returnability is the ease with which a customer can return unsatisfactory merchandise 
and the ability of the network to handle such returns. 
Diff: 2 
Topic: 4.2 Factors Influencing Distribution Network Design 
  
2) Explain how the design of the distribution network affects the cost of the four supply 
chain drivers. 
Answer: As the number of facilities in a supply chain increases, the inventory and 
resulting inventory costs also increase. To decrease inventory costs, firms try to 
consolidate and limit the number of facilities in their supply chain network. 
  
Outbound transportation costs per unit tend to be higher than inbound costs because 
inbound lot sizes are typically larger. Increasing the number of warehouse locations 
decreases the average outbound distance to a customer and makes outbound 
transportation distance a smaller fraction of total distance traveled by the product. Thus, 
as long as inbound transportation economies of scale are maintained, increasing the 
number of facilities decreases total transportation cost. Facility costs decrease as the 
number of facilities is reduced, because a consolidation of facilities allows a firm to 
exploit economies of scale. As the number of facilities increases, total logistics costs 
first decrease and then increase. Each firm should have at least the number of facilities 
that minimize total logistics costs. 
As a firm wants to further reduce the response time to its customers, it may have to 
increase the number of facilities beyond the point that minimizes logistics costs. A firm 
should add facilities beyond the cost-minimizing point only if managers are confident 
that the increase in revenues because of better responsiveness is greater than the 
increase in costs because of the additional facilities. In general, no distribution network 
will outperform others along all dimensions. Thus, it is important to ensure that the 
strengths of the distribution network fit with the strategic position of the firm. 
Diff: 3 
Topic: 4.2 Factors Influencing Distribution Network Design 
  
3) Explain the six distinct distribution network designs that may be used to move 
products from factory to customer. 
Answer: In manufacturer storage with direct shipping, product is shipped directly from 
the manufacturer to the end customer, bypassing the retailer (who takes the order and 
initiates the delivery request). This option is also referred to as drop-shipping with 
product delivered directly from the manufacturer to the customer location. 
  
Manufacturer storage with direct shipping and in-transit merge is similar to pure drop-
shipping, except that pieces of the order coming from different locations are combined 
so that the customer gets a single delivery. 
  
Distributor storage with package carrier delivery is being used when inventory is not 
held by manufacturers at the factories, but is held by distributors/retailers in 
intermediate warehouses, and package carriers are used to transport products from the 
intermediate location to the final customer. 
  
Distributor storage with last mile delivery is being used when the distributor/retailer 
delivers the product to the customer's home instead of using a package carrier. 
  
Manufacturer/distributor storage with customer pickup is being used when inventory is 
stored at the manufacturer or distributor warehouse but customers place their orders 
online or on the phone and then come to designated pickup points to collect their 
orders. 
  
Retail storage with customer pickup is being used when inventory is stored locally at 
retail stores and customers walk into the retail store or place an order online or on the 
phone and pick it up at the retail store. 
Diff: 2 
Topic: 4.3 Design Options for a Distribution Network 
  
  
4) Explain how distributors add value to a supply chain and improve its performance. 
Answer: Distributors add value to a supply chain between a supply stage and a 
customer stage if there are many small players at the customer stage, each requiring a 
small amount of the product at a time. The value added increases if distributors carry 
products from many manufacturers. Improvement in supply chain performance occurs 
for the following reasons: 
     Reduction in inbound transportation cost because of TL shipments from 
manufacturers to distributor. 
     Reduction in outbound transportation cost because the distributor combines 
products from many manufacturers into a single outbound shipment. 
     Reduction in inventory costs because distributor aggregates safety inventory rather 
than disaggregating at each retailer. 
     A more stable order stream from distributor to manufacturer (compared to erratic 
orders from each retailer) allows manufacturers to lower cost by planning production 
more effectively. 
     By carrying inventory closer to the point of sale, distributors are able to provide a 
better response time than manufacturers can. 
     Distributors are able to offer one-stop shopping with products from several 
manufacturers. 
Diff: 3 
Topic: 4.3 Design Options for a Distribution Network 
5) Total logistics costs are the sum of inventory, transportation, and facility costs for a 
supply chain network. What occurs as the number of facilities increases? 
Answer: Total logistics costs first decrease and then increase as the number of facilities 
increases. Each firm should have at least the number of facilities that minimize total 
logistics costs. For example, Amazon has more than one warehouse primarily to reduce 
its logistics costs (and improve response time). If a firm wants to reduce the response 
time to its customers further, it may have to increase the number of facilities beyond the 
point that minimizes logistics costs. A firm should add facilities beyond the cost-
minimizing point only if managers are confident that the increase in revenues because 
of better responsiveness is greater than the increase in costs because of the additional 
facilities. 
Diff: 3 
Topic: 4.2 Factors Influencing Distribution Network Design 
AACSB: Reflective Thinking Skills 
Learning Outcome: Compare common approaches to supply chain design 
 
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