Supply Chain Management, 6e, Global Edition (Chopra/Meindl)
Chapter 15 Sourcing Decisions in a Supply Chain
15.1 True/False Questions
1) Sourcing processes include the selection of suppliers, design of supplier contracts, product
design collaboration, procurement of material, and evaluation of supplier performance.
Answer: TRUE
Diff: 2
Topic: 15.1 The Role of Sourcing in a Supply Chain
AACSB: Application of knowledge
Objective: LO 15.1: Understand the role of sourcing in a supply chain.
2) A good supplier scoring and assessment process will primarily track performance along the
price dimension when evaluating a supplier.
Answer: FALSE
Diff: 2
Topic: 15.1 The Role of Sourcing in a Supply Chain
AACSB: Application of knowledge
Objective: LO 15.1: Understand the role of sourcing in a supply chain.
3) Design collaboration ensures that any design changes are communicated effectively to all
parties involved with designing and manufacturing the product.
Answer: TRUE
Diff: 2
Topic: 15.1 The Role of Sourcing in a Supply Chain
AACSB: Application of knowledge
Objective: LO 15.1: Understand the role of sourcing in a supply chain.
4) The goal of procurement is to enable orders to be placed and delivered on schedule at the
lowest possible price.
Answer: TRUE
Diff: 2
Topic: 15.1 The Role of Sourcing in a Supply Chain
AACSB: Application of knowledge
Objective: LO 15.1: Understand the role of sourcing in a supply chain.
5) Effective sourcing processes within a firm can improve profits for the firm and total supply
chain surplus in a variety of ways.
Answer: TRUE
Diff: 2
Topic: 15.1 The Role of Sourcing in a Supply Chain
AACSB: Application of knowledge
Objective: LO 15.1: Understand the role of sourcing in a supply chain.
1
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,6) As the replenishment lead time from a supplier grows, the amount of safety inventory that
needs to be held by the buyer also grows in direct proportion to the replenishment lead time.
Answer: FALSE
Diff: 3
Topic: 15.4 Total Cost of Ownership
AACSB: Application of knowledge
Objective: LO 15.3: Identify dimensions of supplier performance that affect total cost.
7) A reliable supplier has low variability of lead time, whereas an unreliable supplier has high
variability.
Answer: TRUE
Diff: 2
Topic: 15.4 Total Cost of Ownership
AACSB: Application of knowledge
Objective: LO 15.3: Identify dimensions of supplier performance that affect total cost.
8) As the replenishment lot size grows, the cycle inventory at the firm grows, thus increasing the
cost of holding inventory.
Answer: TRUE
Diff: 2
Topic: 15.4 Total Cost of Ownership
AACSB: Application of knowledge
Objective: LO 15.3: Identify dimensions of supplier performance that affect total cost.
9) Quantity discounts lower the unit cost and tend to increase the required batch size.
Answer: FALSE
Diff: 1
Topic: 15.4 Total Cost of Ownership
AACSB: Application of knowledge
Objective: LO 15.3: Identify dimensions of supplier performance that affect total cost.
10) The value of better information coordination will be linked to the amount of variability
introduced into the supply chain as a result of the bullwhip effect.
Answer: TRUE
Diff: 3
Topic: 15.4 Total Cost of Ownership
AACSB: Application of knowledge
Objective: LO 15.3: Identify dimensions of supplier performance that affect total cost.
11) Supplier viability can be especially important if the supplier is providing mission-critical
products and it would be easy to find a replacement for them.
Answer: FALSE
Diff: 2
Topic: 15.4 Total Cost of Ownership
AACSB: Application of knowledge
Objective: LO 15.3: Identify dimensions of supplier performance that affect total cost.
2
Copyright © 2016 Pearson Education, Ltd.
, 12) Having multiple sources ensures a degree of competition and also the possibility of a backup,
should a source fail to deliver.
Answer: TRUE
Diff: 2
Topic: 15.5 Supplier Selection-Auctions and Negotiations
AACSB: Application of knowledge
Objective: LO 15.1: Understand the role of sourcing in a supply chain.
13) Unless adding a supplier with a unique and valuable capability clearly adds to total cost, the
firm's supply base may be too small.
Answer: TRUE
Diff: 2
Topic: 15.5 Supplier Selection-Auctions and Negotiations
AACSB: Application of knowledge
Objective: LO 15.3: Identify dimensions of supplier performance that affect total cost.
14) To improve overall profits, the supplier must design a contract that requires the buyer to
share in some of the supplier's demand uncertainty.
Answer: FALSE
Diff: 2
Topic: 15.6 Sharing Risk and Reward in the Supply Chain
AACSB: Application of knowledge
Objective: LO 15.4: Describe the benefits of sharing risk and reward.
15) Buyback contracts counter double marginalization by lowering the cost of overstocking for
the retailer.
Answer: TRUE
Diff: 1
Topic: 15.6 Sharing Risk and Reward in the Supply Chain
AACSB: Application of knowledge
Objective: LO 15.4: Describe the benefits of sharing risk and reward.
16) Revenue-sharing contracts counter double marginalization by decreasing the cost per unit
charged to the retailer, thus effectively decreasing the cost of understocking.
Answer: FALSE
Diff: 2
Topic: 15.6 Sharing Risk and Reward in the Supply Chain
AACSB: Application of knowledge
Objective: LO 15.4: Describe the benefits of sharing risk and reward.
17) Quantity flexibility contracts counter double marginalization by giving the retailer the ability
to modify the order based on improved forecasts closer to the point of sale.
Answer: TRUE
Diff: 1
Topic: 15.6 Sharing Risk and Reward in the Supply Chain
AACSB: Application of knowledge
Objective: LO 15.4: Describe the benefits of sharing risk and reward.
3
Copyright © 2016 Pearson Education, Ltd.
Chapter 15 Sourcing Decisions in a Supply Chain
15.1 True/False Questions
1) Sourcing processes include the selection of suppliers, design of supplier contracts, product
design collaboration, procurement of material, and evaluation of supplier performance.
Answer: TRUE
Diff: 2
Topic: 15.1 The Role of Sourcing in a Supply Chain
AACSB: Application of knowledge
Objective: LO 15.1: Understand the role of sourcing in a supply chain.
2) A good supplier scoring and assessment process will primarily track performance along the
price dimension when evaluating a supplier.
Answer: FALSE
Diff: 2
Topic: 15.1 The Role of Sourcing in a Supply Chain
AACSB: Application of knowledge
Objective: LO 15.1: Understand the role of sourcing in a supply chain.
3) Design collaboration ensures that any design changes are communicated effectively to all
parties involved with designing and manufacturing the product.
Answer: TRUE
Diff: 2
Topic: 15.1 The Role of Sourcing in a Supply Chain
AACSB: Application of knowledge
Objective: LO 15.1: Understand the role of sourcing in a supply chain.
4) The goal of procurement is to enable orders to be placed and delivered on schedule at the
lowest possible price.
Answer: TRUE
Diff: 2
Topic: 15.1 The Role of Sourcing in a Supply Chain
AACSB: Application of knowledge
Objective: LO 15.1: Understand the role of sourcing in a supply chain.
5) Effective sourcing processes within a firm can improve profits for the firm and total supply
chain surplus in a variety of ways.
Answer: TRUE
Diff: 2
Topic: 15.1 The Role of Sourcing in a Supply Chain
AACSB: Application of knowledge
Objective: LO 15.1: Understand the role of sourcing in a supply chain.
1
Copyright © 2016 Pearson Education, Ltd.
,6) As the replenishment lead time from a supplier grows, the amount of safety inventory that
needs to be held by the buyer also grows in direct proportion to the replenishment lead time.
Answer: FALSE
Diff: 3
Topic: 15.4 Total Cost of Ownership
AACSB: Application of knowledge
Objective: LO 15.3: Identify dimensions of supplier performance that affect total cost.
7) A reliable supplier has low variability of lead time, whereas an unreliable supplier has high
variability.
Answer: TRUE
Diff: 2
Topic: 15.4 Total Cost of Ownership
AACSB: Application of knowledge
Objective: LO 15.3: Identify dimensions of supplier performance that affect total cost.
8) As the replenishment lot size grows, the cycle inventory at the firm grows, thus increasing the
cost of holding inventory.
Answer: TRUE
Diff: 2
Topic: 15.4 Total Cost of Ownership
AACSB: Application of knowledge
Objective: LO 15.3: Identify dimensions of supplier performance that affect total cost.
9) Quantity discounts lower the unit cost and tend to increase the required batch size.
Answer: FALSE
Diff: 1
Topic: 15.4 Total Cost of Ownership
AACSB: Application of knowledge
Objective: LO 15.3: Identify dimensions of supplier performance that affect total cost.
10) The value of better information coordination will be linked to the amount of variability
introduced into the supply chain as a result of the bullwhip effect.
Answer: TRUE
Diff: 3
Topic: 15.4 Total Cost of Ownership
AACSB: Application of knowledge
Objective: LO 15.3: Identify dimensions of supplier performance that affect total cost.
11) Supplier viability can be especially important if the supplier is providing mission-critical
products and it would be easy to find a replacement for them.
Answer: FALSE
Diff: 2
Topic: 15.4 Total Cost of Ownership
AACSB: Application of knowledge
Objective: LO 15.3: Identify dimensions of supplier performance that affect total cost.
2
Copyright © 2016 Pearson Education, Ltd.
, 12) Having multiple sources ensures a degree of competition and also the possibility of a backup,
should a source fail to deliver.
Answer: TRUE
Diff: 2
Topic: 15.5 Supplier Selection-Auctions and Negotiations
AACSB: Application of knowledge
Objective: LO 15.1: Understand the role of sourcing in a supply chain.
13) Unless adding a supplier with a unique and valuable capability clearly adds to total cost, the
firm's supply base may be too small.
Answer: TRUE
Diff: 2
Topic: 15.5 Supplier Selection-Auctions and Negotiations
AACSB: Application of knowledge
Objective: LO 15.3: Identify dimensions of supplier performance that affect total cost.
14) To improve overall profits, the supplier must design a contract that requires the buyer to
share in some of the supplier's demand uncertainty.
Answer: FALSE
Diff: 2
Topic: 15.6 Sharing Risk and Reward in the Supply Chain
AACSB: Application of knowledge
Objective: LO 15.4: Describe the benefits of sharing risk and reward.
15) Buyback contracts counter double marginalization by lowering the cost of overstocking for
the retailer.
Answer: TRUE
Diff: 1
Topic: 15.6 Sharing Risk and Reward in the Supply Chain
AACSB: Application of knowledge
Objective: LO 15.4: Describe the benefits of sharing risk and reward.
16) Revenue-sharing contracts counter double marginalization by decreasing the cost per unit
charged to the retailer, thus effectively decreasing the cost of understocking.
Answer: FALSE
Diff: 2
Topic: 15.6 Sharing Risk and Reward in the Supply Chain
AACSB: Application of knowledge
Objective: LO 15.4: Describe the benefits of sharing risk and reward.
17) Quantity flexibility contracts counter double marginalization by giving the retailer the ability
to modify the order based on improved forecasts closer to the point of sale.
Answer: TRUE
Diff: 1
Topic: 15.6 Sharing Risk and Reward in the Supply Chain
AACSB: Application of knowledge
Objective: LO 15.4: Describe the benefits of sharing risk and reward.
3
Copyright © 2016 Pearson Education, Ltd.
