Test Database

Chapter 4 – Designing Channel Networks

True or False

1. A distribution channel includes only those organizations involved in finished goods delivery.

a. True

b. False

2. A channel network consists of supplier and distribution organizations.

a. True

b. False

3. The objective of every supply and distribution channel is to maximize the overall value generated.

a. True

b. False

4. There is a close relationship between channel network design and the success of the overall channel network.

a. True

b. False

5. When designing a supply and distribution channel, the role of each channel entity is significant because it will determine the level of flexibility the channel possesses to respond to demand changes.

a. True

b. False

6. If a company’s production technology enables significant economies of scale, designing a distribution channel with many locations is the most effective decision.

a. True

b. False

7. If facilities have lower fixed costs, the creation of a distribution network with many facilities is preferred because this helps to lower transportation costs.

a. True

b. False

8. Inventory and facility costs decrease as the number of facilities in a distribution channel increase

a. True

b. False

9. Transportation costs increase as the number of facilities is increased.

a. True

b. False

10. Outbound transportation costs per unit tend to be lower than inbound costs because outbound lot sizes are typically larger.

a. True

b. False

Multiple Choice

11. Market penetration intensity describes

a. How many echelons deep in the delivery network producers or intermediaries must go to deliver goods to customers.

b. The level of integration forward or horizontally a company chooses to pursue in the delivery channel.

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c. The number of intermediaries needed to bring products to the customer.

d. How the manufacturing process choice affects the scope and depth of the partnership existing with primary and deeper echelons.

12. Distribution intensity describes

a. How many echelons deep in the delivery network producers or intermediaries must go to deliver goods to customers.

b. The level of integration forward or horizontally a company chooses to pursue in the delivery channel.

c. The number of intermediaries needed to bring products to the customer.

d. How the manufacturing process choice affects the scope and depth of the partnership existing within primary and deeper echelons.

13. Supply integrative intensity describes

a. How many echelons deep in the supply channel a manufacturer will seek to go in the planning and acquisition of inventory.

b. How far back in the supply channel a company is able to control product sourcing.

c. How the process choice affects the scope and depth of channel supply partners.

d. The level of integration forward or horizontally a company chooses to pursue in the delivery channel.

14. The number of different products/configurations that a customer desires from the distribution network refers to

a. Response time.

b. Product variety.

c. Product availability.

d. Customer experience

15. An example of forward vertical integration in a distribution channel would be when a company:

a. Invests in a company selling related products

b. Acquires a distributor of its products

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c. Forms a strategic alliance with a key supplier

d. Joins an industry advocacy association

16. Change is one of the constants of channel design management. Which of the following reasons for supply and distribution channels best responds to this factor?

a. Customer service

b. Relocation

c. Flexibility and scalability

d. Decentralization

17. A company needs to move product closer to the customer marketplace to reduce lead times. Which of the following reasons for supply and distribution channels best responds to this factor?

a. Rationalization

b. Decentralization

c. Product diversification

d. Relocation

18. Which of the following channel design considerations focuses on determining the capabilities of channel facilities to meet expected performance targets?

a. Capacity allocation

b. Supply and distribution integrative intensity

c. Logistics cost management

d. Customer delivery performance

19. A supply and distribution channel consisting of a loose arrangement of business that intermittently and opportunistically coalesce with channel specialists in the buying and selling of goods is defined as a

a. Transaction-based system.

b. Limited channel system.

c. Federated network system.

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d. Partnership and alliance.

20. A supply and distribution channel where two or more firms integrate core competencies and resources in the pursuit of a common strategy is defined as a:

a. Transaction based system.

b. Limited channel system.

c. Federated network system.

d. Partnership and alliance.

21. The process of moving products from the producer to the customer is best termed

a. Transportation

b. Retailing

c. Wholesaling

d. Distribution

22. The number of different products or configurations desired from the distribution channel is

a. Response timeb. Product varietyc. Product availabilityd. Customer experience

23. The cost incurred to bring inventory into a facility are termed

a. Sourcing transportation costsb. Outbound transportation costsc. Cross-docking costsd. Inbound transportation costs

24. As the number of facilities in a channel network increase

a. Inventory and resulting inventory costs increaseb. Inventory and resulting inventory costs decrease

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c. Inventory increases and resulting inventory costs decreased. Inventory decreases and resulting inventory costs increase

25. Which of the following process types would have the lowest distribution intensity?

a. Projectb. Job shopc. Batchd. Continuous

26. Which of the following is an advantage of the producer storage with direct delivery option?

a. Transportation costs are low because the average outbound distance to the end consumer is small and package carriers are used to ship the prod-uct.

b. Supply chains save on the fixed cost of facilities, because the need for other warehousing space in the supply chain has been eliminated.

c. Response times tend to be small because the order has to be transmitted from the retailer to the manufacturer.

d. Order tracking is easy to implement because of the complete integration of information systems at both the retailer and the manufacturer.

27. A channel system in which dependencies between buyers and sellers are characterized as temporary, opportunistic, and can be dissolved at a moment’s notice is described as a

a. Transaction-based systemb. Limited channel systemc. Federated network systemd. Partnership or alliance system

28. For a make-to-order manufacturer of specialized products, when architecting strategic supply chain performance goals which one of the following performance drivers would be of low importance?

a. Customer focusb. Channel designc. Transportationd. Inventory

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29. The channel network model that would contain the very widest product variety would most likely be the

a. Producer storage with direct delivery

b. Producer storage with drop ship

c. Producer with extended channel network

d. Aggregator with extended channel network

30. Channel planners focused on achieving high customer responsiveness will most likely

a. Locate facilities close to the markets they serveb. Locate facilities according to low cost criteriac. Locate facilities in a high cost area to better serve the marketd. Locate facilities to maximize on low transportation costs

31. Using the location break-even analysis method using which of the following as the main criterion for the selection of a location

a. Delivery timeb. Lead timec. Costd. Transportation

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Answer Key1. F2. T3. T4. T5. T6. F7. T8. F9. F10. F11. a12. c13. b14. b15. b16. c17. b18. a19. b20. d21. d22. b23. d24. a25. a26. b 27. b28. d29. d30. a31. c