Testbank Chapter 6 GSCM

Supply Chain Management, 6e, Global Edition (Chopra/Meindl)
Chapter 6 Designing Global Supply Chain Networks

6.1 True/False Questions

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.
Answer: TRUE
Diff: 2
Topic: 6.1 The Impact of Globalization on Supply Chain Networks
AACSB: Application of knowledge
Objective: LO 6.1: Identify factors that need to be included in total cost when making global
sourcing decisions.

2) 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.
Answer: TRUE
Diff: 1
Topic: 6.1 The Impact of Globalization on Supply Chain Networks
AACSB: Application of knowledge
Objective: LO 6.2: Define uncertainties that are particularly relevant when designing global
supply chains.

3) If price and demand vary over time in a global network, flexible production capacity can be
reconfigured to maximize profits in the new environment.
Answer: TRUE
Diff: 2
Topic: 6.1 The Impact of Globalization on Supply Chain Networks
AACSB: Application of knowledge
Objective: LO 6.2: Define uncertainties that are particularly relevant when designing global
supply chains.

4) 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.
Answer: FALSE
Diff: 2
Topic: 6.1 The Impact of Globalization on Supply Chain Networks
AACSB: Application of knowledge
Objective: LO 6.2: Define uncertainties that are particularly relevant when designing global
supply chains.




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,5) Offshoring typically lowers labor, working capital and fixed costs but increases risk and
freight costs.
Answer: FALSE
Diff: 3
Topic: 6.3 Risk Management in Global Supply Chains
AACSB: Application of knowledge
Objective: LO 6.1: Identify factors that need to be included in total cost when making global
sourcing decisions.

6) 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.
Answer: FALSE
Diff: 1
Topic: 6.3 Risk Management in Global Supply Chains
AACSB: Application of knowledge
Objective: LO 6.3: Explain different strategies that may be used to mitigate risk in global supply
chains.

7) The present value of a stream of cash flows is what that stream is worth in today's dollars.
Answer: TRUE
Diff: 1
Topic: 6.4 Discounted Cash Flows
AACSB: Application of knowledge
Objective: LO 6.1: Identify factors that need to be included in total cost when making global
sourcing decisions.

8) The rate of return k is also referred to as the present value of capital.
Answer: FALSE
Diff: 1
Topic: 6.4 Discounted Cash Flows
AACSB: Application of knowledge
Objective: LO 6.1: Identify factors that need to be included in total cost when making global
sourcing decisions.

9) A negative NPV for an option indicates that the option will lose money for the supply chain.
Answer: TRUE
Diff: 2
Topic: 6.4 Discounted Cash Flows
AACSB: Analytical thinking
Objective: LO 6.1: Identify factors that need to be included in total cost when making global
sourcing decisions.




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, 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.
Answer: TRUE
Diff: 1
Topic: 6.4 Discounted Cash Flows
AACSB: Application of knowledge
Objective: LO 6.1: Identify factors that need to be included in total cost when making global
sourcing decisions.

11) 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).
Answer: FALSE
Diff: 3
Topic: 6.5 Evaluating Network Design Decisions Using Decision Trees
AACSB: Application of knowledge
Objective: LO 6.3: Explain different strategies that may be used to mitigate risk in global supply
chains.

12) The value of flexibility increases with an increase in uncertainty.
Answer: TRUE
Diff: 1
Topic: 6.5 Evaluating Network Design Decisions Using Decision Trees
AACSB: Application of knowledge
Objective: LO 6.3: Explain different strategies that may be used to mitigate risk in global supply
chains.

13) In reality, demand and prices are highly uncertain and are likely to fluctuate during the life of
any supply chain decision.
Answer: TRUE
Diff: 2
Topic: 6.5 Evaluating Network Design Decisions Using Decision Trees
AACSB: Application of knowledge
Objective: LO 6.2: Define uncertainties that are particularly relevant when designing global
supply chains.

14) 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.
Answer: TRUE
Diff: 1
Topic: 6.5 Evaluating Network Design Decisions Using Decision Trees
AACSB: Application of knowledge
Objective: LO 6.2: Define uncertainties that are particularly relevant when designing global
supply chains.



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