,
,PRINCIPLES OF SUPPLY CHAIN MANAGEMENT: A
BALANCED APPROACH, 7th Edition
Answers to Questions/Problems
Chapter One
Discussion Questions
1. Define the term supply chain management in your own words, and list its most
important activities.
Ans.: The Supply-Chain Council’s definition of supply chain management is
“[m]anaging supply and demand, sourcing raw materials and parts, manufacturing and
assembly, warehousing and inventory tracking, order entry and order management,
distribution across all channels, and delivery to the customer.
These are also the most important activities, however integration of key supply chain
processes might also be included in there.
2. Can a small business like a local sandwich or bicycle shop benefit from practicing
supply chain management? What would they most likely concentrate on?
Ans.: Yes, any organization can implement at least some of the important concepts. A
good place to start is the rationalization or reduction of the supply base. Small businesses
might also want to concentrate on customers as a starting point.
3. Describe and draw a supply chain for a bicycle repair shop and list the important supply
chain members.
Ans.: This will vary from student to student, but should include for instance parts
suppliers, bicycle suppliers and other suppliers (ie, helmet suppliers) and services (ie,
repair services) as 1st-tier suppliers and bicycle owners as 1st-tier customers.
4. Can a bicycle repair shop have more than one supply chain? Explain.
Ans.: Yes. Every repair item the firm stocks has potentially a different supply chain
associated with it.
5. What roles do “collaboration” and “trust” play in the practice of supply chain
management?
Ans.: This is essential for process integration. Sharing information and determining
joint strategies is part of the integration/collaboration process, and to do this, trust must be
present between the customer/focal firm/supplier.
, 6. Why don’t firms just become more vertically integrated (eg. buy out suppliers and
customers), instead of trying to manage their supply chains?
Ans.: This could cause a loss of focus and keep managers/employees from doing their
core competencies, resulting in loss of performance.
7. What types of organizations would benefit the most from practicing supply chain
management? What sorts of improvements could be expected?
Ans.: Firms with many suppliers, many complex products, large inventories and many
customers (in other words, firms with many supply chains). Gains would be lower
purchasing costs, lower carrying costs, better product quality, and better customer service.
8. What are the benefits of supply chain management?
Ans.: Reduction of the bullwhip effect, better buyer/supplier relationships, better
quality, lower costs, better customer service, higher demand, more profits.
9. Can nonprofit, educational, or government organizations benefit from supply chain
management? How?
Ans.: Yes. All services and organizations can benefit in terms of at least better
customer service, better inventory management, and cheaper purchase prices.
10. What does the term, “third-tier supplier” mean? What about “third-tier customer”?
What about the “focal firm”? Provide examples.
Ans.: First-tier suppliers are the focal firm’s direct suppliers. 2nd-tier suppliers are the
focal firm’s suppliers’ direct suppliers. 3rd-tier suppliers are the focal firm’s suppliers’
suppliers’ suppliers. Company A sells wood to Company B. Company B sells furniture to
Company C. Company C sells the furniture to Wal-Mart. Company A is Wal-Mart’s 3rd-
tier supplier. Similarly, the focal firm’s customers’ customers’ customers are their 3rd-tier
customers. The focal firm just refers to the firm in question, or in the topic of discussion.
11. What is the bullwhip effect and what causes it? How would you try to reduce the
bullwhip effect?
Ans.: The magnification of safety stock and erratic buying behavior as customers along
the supply chain forecast demand and add safety stock to their forecasts and production
schedules causes the bullwhip effect. As we move further back up the supply chain then,
more and more of the output is in the form of safety stocks. Reducing the need to forecast
(by agreeing on a future purchase quantity or using CPFR) is one way to reduce the
bullwhip effect.
12. When did the idea and term, supply chain management, first begin to be thought about
and discussed? Which two operations management practices became the origin of
,PRINCIPLES OF SUPPLY CHAIN MANAGEMENT: A
BALANCED APPROACH, 7th Edition
Answers to Questions/Problems
Chapter One
Discussion Questions
1. Define the term supply chain management in your own words, and list its most
important activities.
Ans.: The Supply-Chain Council’s definition of supply chain management is
“[m]anaging supply and demand, sourcing raw materials and parts, manufacturing and
assembly, warehousing and inventory tracking, order entry and order management,
distribution across all channels, and delivery to the customer.
These are also the most important activities, however integration of key supply chain
processes might also be included in there.
2. Can a small business like a local sandwich or bicycle shop benefit from practicing
supply chain management? What would they most likely concentrate on?
Ans.: Yes, any organization can implement at least some of the important concepts. A
good place to start is the rationalization or reduction of the supply base. Small businesses
might also want to concentrate on customers as a starting point.
3. Describe and draw a supply chain for a bicycle repair shop and list the important supply
chain members.
Ans.: This will vary from student to student, but should include for instance parts
suppliers, bicycle suppliers and other suppliers (ie, helmet suppliers) and services (ie,
repair services) as 1st-tier suppliers and bicycle owners as 1st-tier customers.
4. Can a bicycle repair shop have more than one supply chain? Explain.
Ans.: Yes. Every repair item the firm stocks has potentially a different supply chain
associated with it.
5. What roles do “collaboration” and “trust” play in the practice of supply chain
management?
Ans.: This is essential for process integration. Sharing information and determining
joint strategies is part of the integration/collaboration process, and to do this, trust must be
present between the customer/focal firm/supplier.
, 6. Why don’t firms just become more vertically integrated (eg. buy out suppliers and
customers), instead of trying to manage their supply chains?
Ans.: This could cause a loss of focus and keep managers/employees from doing their
core competencies, resulting in loss of performance.
7. What types of organizations would benefit the most from practicing supply chain
management? What sorts of improvements could be expected?
Ans.: Firms with many suppliers, many complex products, large inventories and many
customers (in other words, firms with many supply chains). Gains would be lower
purchasing costs, lower carrying costs, better product quality, and better customer service.
8. What are the benefits of supply chain management?
Ans.: Reduction of the bullwhip effect, better buyer/supplier relationships, better
quality, lower costs, better customer service, higher demand, more profits.
9. Can nonprofit, educational, or government organizations benefit from supply chain
management? How?
Ans.: Yes. All services and organizations can benefit in terms of at least better
customer service, better inventory management, and cheaper purchase prices.
10. What does the term, “third-tier supplier” mean? What about “third-tier customer”?
What about the “focal firm”? Provide examples.
Ans.: First-tier suppliers are the focal firm’s direct suppliers. 2nd-tier suppliers are the
focal firm’s suppliers’ direct suppliers. 3rd-tier suppliers are the focal firm’s suppliers’
suppliers’ suppliers. Company A sells wood to Company B. Company B sells furniture to
Company C. Company C sells the furniture to Wal-Mart. Company A is Wal-Mart’s 3rd-
tier supplier. Similarly, the focal firm’s customers’ customers’ customers are their 3rd-tier
customers. The focal firm just refers to the firm in question, or in the topic of discussion.
11. What is the bullwhip effect and what causes it? How would you try to reduce the
bullwhip effect?
Ans.: The magnification of safety stock and erratic buying behavior as customers along
the supply chain forecast demand and add safety stock to their forecasts and production
schedules causes the bullwhip effect. As we move further back up the supply chain then,
more and more of the output is in the form of safety stocks. Reducing the need to forecast
(by agreeing on a future purchase quantity or using CPFR) is one way to reduce the
bullwhip effect.
12. When did the idea and term, supply chain management, first begin to be thought about
and discussed? Which two operations management practices became the origin of
