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CHAPTER 7: DEMAND MANAGEMENT, ORDER MANAGEMENT

AND CUSTOMER SERVICE

Multiple Choice Questions (correct answers are bolded}

I. The creation across the supply chain and its markets ofa coordinated flow of demand is the
definition of _ _

a. order cycle
b. order management
c. demand management
d. supply chain management

2. Which of the following is not a basic type of demand forecasting model?

a. exponential smoothing
b. cause and effect
c. judgmental
d. time series
e. all of the above are basic types of forecasting models

3. Surveys and analog techniques are examples of _ _ forecasting.

a. cause and effect

b. time series
c. exponential smoothing
d. judgmental

4. An underlying assumption of _ _ forecasting is that future demand is dependent on past

demand.

a. trial and error

b. time series
c. judgmental
d. cause and effect

5. Which forecasting technique assumes that one or more factors are related to demand and
that this relationship can be used to estimate future demand?

a. exponential smoothing
b. judgmental
c. cause and effect
d. time series

6. Which forecasting technique tends to be appropriate when there is little or no historical

data?

a. exponential smoothing
b. judgmental
c. time series

d. cause and effect

7. Which of the following is true?

a. computer software for demand forecasting dates back over 40 years

b. one challenge to collaborative planning, forecasting, and replenishment is
getting supply chain partners to share data
c. the Excel software package generates forecasts that have very 1.ittle error
d. SAP is the most widely used software package for demand forecasting
e. all of the above
 a. exponential smoothing
b. judgmental
c. time series

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d. cause and effect

7. Which of the following is true?

a. computer software for demand forecasting dates back over 40 years

b. one challenge to collaborative planning, forecasting, and replenishment is
getting supply chain partners to share data
c. the Excel software package generates forecasts that have very little error
d. SAP is the most widely used software package for demand forecasting
e. all of the above are true

8. _ _ refers to the management of various activities associated with the order cycle.

a. logistics
b. order processing
c. demand management
d. order management

9. The order cycle is __.

a. the time that it takes for a check to clear

b. the time that it takes from when a customer places an order until the selling firm
receives the order
c. also called the replenishment cycle
d. also called the vendor cycle

IO. The order cycle is composed of each ofthe following except:

a. order retrieval
b. order delivery
c. order picking and assembly
d. order transmittal

11. Which of the following is false?

a. some organizations have expanded the order management concept to include the
length of time it takes an organization to receive payment for an order
b. the order cycle should be analyzed in terms of total cycle time and cycle time
variability
c. order management has been profoundly impacted by advances in information
systems
d. the various activities associated with an order cycle are not uniformly agreed upon
e. all of the above are true

12. Order transmittal is _ _

a. the same thing as an order cycle

b. the series of events that occur between the time a customer places an order
and the time the seller receives the order

c. the series of events that occur between the time a customer perceives the need for
something and the time the seller receives the order
d. the series of events between the time a customer places an order and the time the
order cycle begins

13. In general, there are - - posslblb ways 18 IPM&ildl bfd@f§_

 52 / 118

c. the series of events that occur between the time a customer perceives the need for
something and the time the seller receives the order
d. the series of events between the time a customer places an order and the time the
cycle begins

genera~ there are _ _ possible ways to transmit orders.

a. three
b. four
c. five
d. six

lbich of the following is not a possible method of order transmittal?

a. in-person
b. mail
C. fax
d. electronic
e. all of the above are methods of order transmittal

15. _ _ refers to the time from when the seller receives an order until an appropriate
location is authorized to fill the order.

a. order processing
b. order cycle
c. order management
d. order transmittal

16. Classifying orders according to pre-established guidelines so that a company can

prioritize how orders are to be filled refers to _ _.

a. ABC analysis
b. order management
c. order processing
d. order triage

17. Order picking and assembly is:

a. the final stage of the order cycle

b. the most important component of the order cycle
c. the order cycle component that follows order processing
d. the order cycle component that follows order transmittal

18. The text suggests that _ _ often represents the best opportunity to improve the
effectiveness and efficiency of an order cycle.

a. order transmittal
b. order picking and assembly
c. order delivery
d. order processing

19. Which of the following is not a characteristic of contemporary voice-based order picking
systems?

a. easily disrupted by other noises

b. better voice quality than earlier systems
C. more powerfu, 'bPM mlisF lY§lST§
d. less costly than ear 1er systems
 d. order processing

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19. Which of the following is not a characteristic of contemporary voice-based order picking
systems?

a. easily disrupted by other noises

b. better voice quality than earlier systems
c. more powerful than earlier systems
d. less costly than earlier systems
e. all of the above are characteristics of voice-based order picking systems

20. Which of the following is not a characteristic of advances in order pick technology?

a. fewer picking errors

b. higher pick rates
c. reduced employee turnover
d. fewer employee accidents
e. all of the above are characteristics

21. The final phase of the order cycle is called order _ _.

a. picking and assembly

b. dellvery
c. receiving
d. replenishment

22. The time span within which an order must arrive refers to __ .

a. transit time reliability

b. order delivery
c. delivery window
d. transit time

23. A commonly used rule of thumb is that it costs approximately __ times as much to get
a new customer as it does to keep an existing customer.

a. three
b. four
c. five
d. six

24. An unhappy customer will tell _ _ other people about her/his unhappiness.

a. seven
b. nine
c. twelve
d. fifteen

25. The ability of logistics management to satisfy users in terms of time, dependability,
communication, and convenience is the definition of _ _.

a. customer service
b. the order cycle
c. a perfect order
d. customer satisfaction

26. Which of the following is not a dimension of customer service?

a. time
 54 / 118

a. customer service
b. the order cycle
c. a perfect order
d. customer satisfaction

26. Which of the following is not a dimension of customer service?

a. time
b. convenience
c. dependability
d. communication
e. all of the above are dimensions

27. The percentage of orders that can be completely and immediately filled from existing
stock is the rate.

a. optimal inventory
b. order cycle
c. perfect order
d. order fill

28. What component of customer service focuses on the ease of doing business with a seller?

a. convenience
b. dependability
c. time
d. communication

29. What are multichannel marketing systems?

a. channels that have multiple intermediaries between the producer and the consumer
b. separate marketing channels that serve an Individual customer
c. channels that do business in multiple countries
d. channels that combine horizontal and vertical marketing systems

30. Which of the following statements is false?

a. goals tend to be broad, generalized statements regarding the overall results that the
firm is trying to achieve
a. objectives are more specific than goals
c. a central element to the establishment of customer service goals and objectives is
determining the customer's viewpoint
d. goals should be specific, measurable, achievable, and cost effective
e. all of the above statements are true

31. _ _ refers to a process that continuously identifies, understands, and adapts outstanding
processes inside and outside an organization.

a. environmental scanning
b. quality management

c. benchmarking
d. continuous improvement

32. _ _ is the process of taking corrective action when measurements indicate that the goals
and objectives of customer service are not being achieved.

a. benchmarking
b. leadership
c. control
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c. benchmarking
d. continuous improvement

32. _ _ is the process of taking corrective action when measurements indicate that the goals
and objectives of customer service are not being achieved.

a. benchmarking
b. leadership
c. control
d. managing

33. Which statement about measuring customer service is true?

a. firms should choose those aspects of customer service that are easiest to measure
b. firms should choose those aspects of customer service that they think are most
important
c. firms should use as many customer service measures as they can
d. it ls possible for organizations to use only one customer service metric
e. all of the above are false

34. _ _ refers to the allocation of revenues and costs to customer segments or individual
customers to calculate the profitability of the segments or customers.

a. customer profitability analysis

b. net present value
c. customer lifetime value
d. activity-based costing

35. Which of the following statements is false?

a. good or excellent service recovery can actually result in increased customer loyalty
b. approximately 40% of customers who experience a problem with purchases of
less than $5 will not do business with that company again
c. one service recovery guideline involves fair treatment for customers
d. service recovery refers to a process for returning a customer to a state of
satisfaction after a service or product has failed to live up to expectations
e. all of the above are true

True-False Questions

1. Demand management is important because efficient and effective supply chains have
learned to match both supply and demand. (True)

2. In make-to-order situations, finished goods are produced after receiving a customer

order. (True)

3. Simple moving averages and weighted moving averages are examples of judgmental
forecasting. (False)

4. Judgmental forecasting is appropriate when there is little or no historical data. (True)

5. Forecasting accuracy refers to the relationship between the actual and forecasted
demand. (True)

6. To date, most implementations of collaborative planning, forecasting, and

replenishment (CPFR) have resulted in increased sales revenues and increased safety
stock. (False)

7. In general terms, order management refers to how a firm handles incoming orders.
(True)
4. Judgmental forecasting is appropriate when there is little or no historical data. (True)

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5. Forecasting accuracy refers to the relationship between the actual and forecasted
demand. (True)

6. To date, most implementations of collaborative planning, forecasting, and

replenishment (CPFR) have resulted in increased sales revenues and increased safety
stock. (False)

7. ln general terms, order management refers to how a firm handles incoming orders.
(True)

8. The order cycle is usually the time from when a customer places an order to when the
firm receives the order. (False)

9. There are four possible ways to transmit orders. (False)

10. Order information is checked for completeness and accuracy in the order processing
component of the order cycle. (True)

11. The order triage function refers to correcting mistakes that may occur with order
picking. (False)

12. A commonsense approach is to fill an order from the facility location that is closest to
the customer, with the idea that this should generate lower transportation costs as well as
a shorter order cycle time. (True)

13. Order processing often represents the best opportunity to improve the effectiveness
and efficiency of the order cycle. (False)

14. Travel time accounts for a majority ofan order picker' s total pick time. (True)

15. Pick-to-light technology is an order picking technique that has grown in popularity in
recent years. (True)

16. Order retrieval is the final phase of the order cycle. (False)

17. A key change in the order delivery component of the order cycle is that more and
more shippers are emphasizing both the elapsed transit time and transit time variability.
(True)

18. It costs about five times as much to get a new customer as it does to keep an existing
customer. (True)

19. Unhappy customers tell six people about their unhappiness. (False)

20. Consumers are demanding about the same levels of service today as in years past.
(False)

21. The increased use ofvendor quality-control programs necessitates higher levels of
customer service. (True)

22. Dependability consists of consistent order cycles, safe delivery, and consistent
delivery. (True)

23. Companies today will not accept slower order cycles in exchange for higher order
cycle consistency. (False)

24. Order fill rate is the pJIE@blhii@ 61 bid@:§ lllil &f 00 Ebfi$l@lb,y and immediately
customer service. (True)

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22. Dependability consists of consistent order cycles, safe delivery, and consistent
delivery. (True)

23. Companies today will not accept slower order cycles in exchange for higher order
cycle consistency. (False)

24. Order fill rate is the percentage of orders that can be completely and immediately
filled from existing stock. (True)

25. Text messaging and the Internet have lessened the need for telephone interaction and
face-to-face contact between seller and customer. (False)

26. The convenience component of customer service focuses on the ease of doing
business with a seller. (True)

27. Today's customer likes to have multiple purchasing options at her/his disposal, and
organizations have responded by developing hybrid marketing channels, that is, separate
marketing channels to serve an individual customer. (False)

28. Goals are the means by which objectives are achieved. (False)

29. Objectives should be specific, measurable, achievable, and cost effective. (True)

30. Continuous improvement refers to a process that continuously identifies, understands,

and adapts outstanding processes found inside and outside an organization. (False)

31. Benchmarking should only involve numerical comparisons ofrelevant metrics.

(False)

32. The nature of the product can affect the level of customer service that should be
offered. (True)

33. A product just being introduced needs a different level of service support than one
that is in a mature or declining market stage. (True)

34. Leadership is the process of taking corrective action when measurements indicate that
the goals and objectives of customer service are not being achieved. (False)

35. The customer service metrics that are chosen should be relevant and important from
the customer's perspective. (True)

36. It is possible for organizations to use only one customer service metric to measure
customer service. (True)

37. Customer profitability analysis explicitly recognizes that all customers are not the
same, and some customers are more valuable than others to an organization. (True)

38. Customer profitability analysis is grounded in traditional accounting cost allocation

methods. (False)

39. About 25% of customers who experience a problem with purchases of less that $5
will not do business with that company again. (False)

40. Satisfactory service recovery tends to increase a customer's willingness to recommend

the offending organization; unsatisfactory service recovery magnifies the initial failure.
(True)
 58 / 118

39. About 25% of customers who experience a problem with purchases of less that $5
will not do business with that company again. (False)

40. Satisfactory service recovery tends to increase a customer's willingness to recommend

the offending organization; unsatisfactory service recovery magnifies the initial failure.
(True)

CHAPTER 8: INVENTORY MANAGEMENT

Multi.pie Choice Questions (correct answers are bolded)

I. _ _ refers to stocks of goods and materials that are maintained for many purposes, the
most common being to satisfy normal demand patterns.

a. logistics
b. supply chain management
 59 / 118 ,II

CHAPTER 8: INVENTORY MANAGEMENT

Multiple Choice Questions (correct answers are bolded)

I. _ _ refers to stocks of goods and materials that are maintained for many purposes, the
most common being to satisfy normal demand patterns.

a. logistics
b. supply chain management
c. inventory
d. production

2. Holding high levels of inventory result in _ _ inventory carrying costs and _ _ stockout
costs.

a. high; high
b. high; low
c. low; high
d. low; low

3. _ _ stock refers to inventory that is needed to satisfy normal demand during the course of
an order cycle.

a. base
b. speculative
c. pipeline
d. safety

4. _ _ stock refers to inventory that is held in addition to cycle stock to guard against
uncertainty in demand and/or lead time.

a. base
b. pipeline
c. speculative
d. buffer

S. _ _ stock refers to inventory that is en route between various nodes in a logistics system.

a. base
b. safety
c. speculative
d. cycle
e. none of the above

6. _ _ stock refers to inventory that is held for several reasons, to include seasonal demand,
projected price increases, and potential shortages of product.

a. base
b. safety
c. pipeline

d. speculative

7. stock is carried to stimulate demand.

a. base
b. psychic
c. speculative
d. attractive
e. none of the abov
 b. safety
c. pipeline

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d. speculative

7. stock is carried to stimulate demand.

a. base
b. psychic
c. speculative
d. attractive
e. none of the above

8. Inventory costs in the United States in the twenty-first century represent approximately
_ _ of total logistics costs.

a. one-fifth
b. one-fourth
c. one-third
d. one-half

9. All of the following statements are true, except:

a. the importance of individual carrying costs factors (categories) is generally

consistent from product to product
b. inventory carrying costs consist of a number of different components or factors
c. in general, companies prefer to carry less inventory as carrying costs increase
d. in genera~ inventory carrying costs are expressed in percentage terms
d. all ofthe above are true

10. Inventory carrying costs in the United States in the twenty-first century have ranged
between _ _ and _ _ percent.

a.4;9
b. 9; 14
C. 14; 19
d. 19; 24

11. Inventory shrinkage _ _ .

a. is another name for inventory turnover

b. refers to the fact that more items are recorded entering than leaving
warehousing facilities
c. refers to situations where the size and/or volume of inventory is decreased over
time
d. refers to a technique of stabilizing unit loads by using shrink wrap packaging

12. Each of the following is a component of inventory carrying cost except:

a. accounting cost
b. storage cost
c. shrinkage cost
d. interest cost

e. all of the above are components

13. In the United States, _ _has traditionally provided a convenient starting point when
estimating the interest charges associated with maintaining inventory.

a. Gross Domestic isum WWb

b. Consumer Price Iri ex
 61 / 118 I

e. all of the above are components

13. In the United States, _ _has traditionally provided a convenient starting point when
estimating the interest charges associated with maintaining inventory.

a. Gross Domestic Product growth

b. Consumer Price Index
c. the prime rate of interest
d. the yield on US Treasury bills

14. Which of the following is not a component of ordering (order) costs?

a. costs of preparing invoices

b. costs of receiving orders
c. costs of verifying inventory availability
d. costs of conducting a credit check
e. all are components of ordering (order) costs

15. Which of the following situations is likely the most damaging (costly) with respect to a
stockout?

a. the customer buys a substitute product that yields a higher profit for the seller
b. the customer buys a substitute product that yields a lower profit for the seller
c. the customer goes to a competitor for a purchase
d. the customer says, "Call me when it's in"

16. Which of the following statements is false?

a. with respect to stockouts, a delayed sale is virtually costless to a company because

of the customer's brand loyalty
b. the higher the average cost for a stockout, the more inventory (safety stock) that
should be held
c. tradeoffs exist between carrying costs and stockout costs
d. stockouts can be more costly than having too many items in stock
e. all of the above are true

17. Under conditions of certainty, a reorder point is equal to _ _.

a. average daily demand times the length of the replenishment cycle

b. safety stock plus an EOQ
c. base stock plus safety stock
d. base stock minus safety stock

18. The economic order quantity (EOQ) deals with calculating the proper order size with
respect to _ _ costs and _ _ costs.

a. ordering; stockout
b. stockout; carrying
c. accounting; carrying
d. carrying; ordering

19. The economic order quantity (EOQ) determines _ _.

a. the point at which a company should reorder

b. the point at which carrying costs equal ordering costs
c. the point at which the sum of carrying costs and ordering costs is maximized
d. the relevant inventory flow for a particular time period
e. none of the above

20. Which of the following is not an assumption associated with the basic economic order
 62 / 118

19. The economic order quantity (EOQ) determines _ _.

a. the point at which a company should reorder

b. the point at which carrying costs equal ordering costs
c. the point at which the sum of carrying costs and ordering costs is maximized
d. the relevant inventory flow for a particular time period
e. none of the above

20. Which of the following is not an assumption associated with the basic economic order
quantity (EOQ) model?

a. no inventory in transit
b. an infinite planning horizon
c. stockouts are pennitted
d. a constant and known replenishment or lead time
e. all are basic assumptions with the basic EOQ model

21. Concerning the EOQ model, if demand or annual usage increases by I 0%, then the EOQ
will
--
a. it depends on the particular product
b. increase
c. decrease
d. stay unchanged

22. Concerning the EOQ mode~ if the ordering costs increase by I 0% and the product value
increases by I0%, then the EOQ will _ _.

a. stay unchanged
b. increase
c. decrease
d. it depends on the particular product

23. Inventory flow diagrams illustrate that safety stock can prevent two problem areas, _ _
and - -

a. decreased rate of demand; longer-than-normal replenishment

b. increased rate of demand; shorter-than-normal replenishment
c. decreased rate of demand; shorter-than-normal replenishment
d. increased rate of demand; longer-than-nonnal replenishment

24. _ _ recognizes that all inventories are not of equal value to a firm and thus all
inventories should not be managed in the same way.

a. vendor-managed inventory
b. suboptimization
c. marginal analysis
d. ABC analysis of inventory

25. ABC analysis of inventory _ _ .

a. applies activity-based costing to managing inventory

b. recognizes that inventories are not of equal value to a firm
c. is synonymous with vendor-managed inventory
d. is an alternative to the EOQ model

26. Dead inventory (dead stock) refers to a product for which there is no sales during a _ _
month period.

a. three
b. six
c. twelve
 63 / 118

25. ABC analysis of inventory _ _.

a. applies activity-based costing to managing inventory

b. recognizes that inventories are not of equal value to a firm
c. is synonymous with vendor-managed inventory
d. is an alternative to the EOQ model

26. Dead inventory (dead stock) refers to a product for which there is no sales during a ·- -
month period.

a. three
b. six
c. twelve
d. twenty-four

27. All of the following are suggestions for dealing with dead stock (inventory), except _ _.

a. aggressive marketing
b. donate to charities
c. make to order
d. throw it away
e. all of the above are suggestions

28. Inventory turnover can be calculated by _ _.

a. dividing the cost of goods sold by average inventory

b. dividing average inventory by the costs of goods sold
c. multiplying average inventory by I .5
d. adding beginning and ending inventory and then dividing by two
e. none of the above

29. _ _ items refer to those that are used or distributed together.

a. me-too
b. substitute
c. co-branded
d. complementary

30. _ _ products refer to those that customers view as being able to fill the same need or
want as another product.

a. copycat
b. me-too
c. substitute
d. co-branded

31 . Which of the following is not an example of a lean inventory approach?

a. just-in-time
b. collaborative planning, forecasting, and replenishment
c. efficient consumer response
d. quick response
e. all of the above are lean inventory approaches

32. Which of the following statements about the lean approach and nT is false?

a. JIT tends to focus on product movement from manufacturer to retailer

 64 / 118 ■

a. just-in-time
b. collaborative planning, forecasting, and replenishment
c. efficient consumer response
d. quick response
e. all of the above are lean inventory approaches

32. Which of the following statements about the lean approach and nT is false?

a. JIT tends to focus on product movement from manufacturer to retailer

b. organizations should give careful consideration before adopting a lean philosophy
c. the lean approach views inventory as waste
d. trucking is an important mode of transportation in TIT systems
e. all of the above are true

33. Which of the following statements about service parts logistics is false?

a. customer expectations for service parts logistics continues to increase

b. some organizations outsource their service parts logistics to companies that
specialize in this area
c. service parts logistics creates a variety of potential challenges for logisticians
d. the worldwide economic slowdown of 2008 and 2009 caused a decreased
emphasis on service parts logistics
e. all of the above are true

34. Under _ _, the size and timing of replenishment orders are the responsibility of the
manufacturer.

a. quick response
b. supply chain management
c. vendor-managed inventory
d. efficient consumer response

35. Which of the following is not a potential benefit to vendor-managed inventory?

a. reduced order errors

b. improved demand forecasts
c. reduced inventories
d. fewer stockouts
e. all are VMI benefits

True-False Questions

I. Inventories are stocks of goods and materials that are maintained for many purposes.
(True)

2. Different organizational functions, such as marketing and production, tend to have

similar inventory management objectives. (False)

3. Inventory carries its greatest costs after value has been added through manufacturing
and processing. (True)

4. Buffer stock is also referred to as cycle stock. (False)

5. Safety stock refers to inventory that is held in addition to cycle stock to guard against
uncertainty in demand and/or lead time. (True)

6. Pipeline stock is inventory that is en route between various fixed facilities in a logistics
system. (True)

7. Psychic stock is associated %ilb Weil §(8[5§ flrnsl

 65 / 118

4. Buffer stock is also referred to as cycle stock. (False)

5. Safety stock refers to inventory that is held in addition to cycle stock to guard against
uncertainty in demand and/or lead time. (True)

6. Pipeline stock is inventory that is en route between various fixed facilities in a logistics
system. (True)

7. Psychic stock is associated with retail stores. (True)

8. Inventory tends to be one of the largest assets (in terms of dollar value) on a
company's balance sheet. (True)

9. As a general rule, companies prefer to carry less inventory as the carrying cost
percentage decreases. (False)

10. The range of inventory carrying costs in the United States in the twenty-first century
has been between 22 and 27 percent. (False)

11 . Inventory shrinkage refers to the fact that products lose value through time. (False)

12. Obsolescence costs are one component of inventory carrying costs. (True)

13. The trade-off that exists between carrying costs and ordering costs is that they
respond in opposite ways to the number of orders or size of orders. (True)

14. Not having enough items can be as bad as, and sometimes worse than, having too
many items. (True)

15. The higher the average cost ofa stockout, the more likely a company is going to want
to hold some amount of inventory (safety stock) to protect against stockouts. (True)

16. A reorder point is equal to average daily demand divided by the length of the
replenishment cycle. (False)

17. One requirement of a fixed order quantity system is that the inventory must be
constantly monitored. (True)

18. A fixed order quantity system is more susceptible to stockouts than is a fixed order
interval system. (False)

19. The EOQ is the point at which carrying costs equal ordering costs. (True)

20. One assumption of the basic EOQ model is a continuous, constant, and known rate of
demand. (True)

2 I. The EOQ can only be calculated with respect to the number of units to be ordered.
(False)

22. inventory flow diagrams graphically depict the demand for, and replenishment of,

inventory. (True)

23. Safety stock can prevent against two problem areas: An increased rate of demand and
longer-than-normal replenishment. (True)

24. Marginal analysis recognizes that all inventories should not be managed in the same
way. (False)

25. In terms of ABC analysis of inventory, no more than 25% of items should be
classified as "A's." (False)

26. Dead stock (inventory, fofoi§ lb bibddtl fol OO@Efi iii@i@ &fiJ !Sues during a 12-month
 66 / 118 I

inventory. (True)

23. Safety stock can prevent against two problem areas: An increased rate of demand and
longer-than-normal replenishment. (True)

24. Marginal analysis recognizes that all inventories should not be managed in the same
way. (False)

25. In terms of ABC analysis of inventory, no more than 25% of items should be
classified as "A's." (False)

26. Dead stock (inventory) refers to product for which there is no sales during a 12-month
period. (True)

27. One way of dealing with dead stock (inventory) is for companies to simply throw it
away. (True)

28. The number of times that inventory is sold in one year is referred to as average
inventory. (False)

29. Inventory turnover can be calculated by dividing costs of goods sold by average
inventory. (True)

30. High inventory turnover indicates that a company is taking longer to sell its
inventory. (False)

31. Complementary products can be defined as inventories that can be used or distributed
together, such as razor blades and razors. (True)

32. Many grocery chains target in-stock rates of90 percent for individual stores so that
sufficient substitutes exist for a customer to purchase a substitute item rather than go to a
competing store. (False)

33. Lean manufacturing focuses on the elimination of waste. (True)

34. Because of smaller, more frequent orders and closer supplier location, trucking tends
to be an important mode of transportation in the just-in-time approach. (True)

35. Efficient consumer response (ECR) and collaborative planning, forecasting, and
replenishment (CPFR) are examples of lean inventory approaches. (False)

36. A confluence of events, such as increasing global sourcing, suggests that

organizations should carefully consider the potential trade-offs before adopting a lean
inventory philosophy. (True)

37. Service parts logistics has decreased in importance in recent years. (False)

38. One logistical challenge with service parts logistics is that it can be extremely
difficult to forecast the demand for the necessary parts. (True)

39. In vendor-managed inventory, the size and timing of replenishment orders are the
responsibility of the manufacturer. (True)

40. Vendor-managed inventory can only be applied to consumer, and not industrial,
products. (False)
 67 I 11a

39. In vendor-managed inventory, the size and timing of replenishment orders are the
responsibility of the manufacturer. (True)

40. Vendor-managed inventory can only be applied to consumer, and not industrial,
products. (False)

CHAPTER 9: DISTRIBUTION CENTER, WAREHOUSE, AND PLANT LOCATION

Multiple Choice Questions (correct answers are bolded)

I. The initial focus in facility location is on a _ _.

a. city
b. county