Chapter 5 Network Design in the Supply Chain

5.2 Multiple Choice Questions

1) Supply chain network design decisions include
A) only the location of manufacturing, storage, or transportation-related facilities.
B) only the allocation of capacity and roles to each facility.
C) both the location of manufacturing, storage, or transportation-related facilities and the
allocation of capacity and roles to each facility.
D) neither the location of manufacturing, storage, or transportation-related facilities nor the
allocation of capacity and roles to each facility.
E) none of the above
2) Supply chain network design decisions classified as facility role are concerned with
A) what processes are performed at each facility.
B) where facilities should be located.
C) how much capacity should be allocated to each facility.
D) what markets each facility should serve and which supply sources should feed each facility.
E) none of the above
3) Supply chain network design decisions classified as facility location are concerned with
A) what processes are performed at each facility.
B) where facilities should be located.
C) how much capacity should be allocated to each facility.
D) what markets each facility should serve and which supply sources should feed each facility.
E) none of the above
4) Supply chain network design decisions classified as capacity allocation are concerned
with
A) what processes are performed at each facility.
B) where facilities should be located.
C) how much capacity should be allocated to each facility.
D) what markets each facility should serve and which supply sources should feed each facility.

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E) none of the above
5) Supply chain network design decisions classified as market and supply allocation are
concerned with
A) what processes are performed at each facility.
B) where facilities should be located.
C) how much capacity should be allocated to each facility.
D) what markets each facility should serve and which supply sources should feed each facility.
E) none of the above
6) Decisions concerning the role of each facility are significant because
A) they determine the amount of flexibility the supply chain has in demanding change.
B) they determine the amount of flexibility the supply chain has in changing the way it meets
demand.
C) they determine the amount of capacity the supply chain has in changing the way it meets
demand.
D) they determine the amount of inventory the supply chain has in demanding change.
E) None of the above are true.
7) Facility location decisions have a long-term impact on a supply chain's performance
because
A) it is very expensive to shut down a facility or move it to a different location.
B) it is not expensive to shut down a facility or move it to a different location.
C) it is advisable to shut down a facility or move it to a different location.
D) it is cost effective to shut down a facility or move it to a different location.
E) none of the above
8) Capacity allocation decisions have a significant impact on supply chain performance
because
A) capacity decisions tend to be permanent.
B) capacity decisions tend to be changed frequently.
C) capacity decisions do not tend to stay in place for several years.

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D) capacity decisions tend to stay in place for several years.
E) none of the above
9) Allocating too much capacity to a location results in
A) permanent damage.
B) poor utilization, and as a result, higher costs.
C) high utilization, and as a result, higher costs.
D) poor utilization, and as a result, lower costs.
E) high utilization, and as a result, lower costs.
10) Allocating too little capacity results in
A) temporary damage.
B) good responsiveness if demand is not satisfied or low cost if demand is filled from a distant
facility.
C) good responsiveness if demand is not satisfied or high cost if demand is filled from a
distant facility.
D) poor responsiveness if demand is not satisfied or low cost if demand is filled from a distant
facility.
E) poor responsiveness if demand is not satisfied or high cost if demand is filled from a distant
facility.
11) The allocation of supply sources and markets to facilities has a significant impact on
performance because
A) it cannot affect total production, inventory, and transportation costs incurred by the supply
chain to satisfy customer demand.
B) it cannot affect customer demand.
C) it affects total production, inventory, and transportation costs incurred by the supply chain
to satisfy customer demand.
D) it cannot satisfy customer demand.
E) none of the above
12) The allocation of supply sources and markets to facilities should be reconsidered on a
regular basis so that

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A) the allocation can be held constant as market conditions or plant capacities expand.
B) the allocation can be changed as market conditions or plant capacities stagnate.
C) the allocation can be held constant as market conditions or plant capacities change.
D) the allocation can be changed as market conditions or plant capacities change.
E) none of the above
13) Network design decisions have a significant impact on performance because they
A) determine the supply chain configuration.
B) determine the supply chain conflagration.
C) set constraints within which inventory, transportation, and information can be used to either
decrease supply chain cost or increase responsiveness.
D) set constraints within which inventory, transportation, and information can be used to either
increase supply chain cost or decrease responsiveness.
E) A and C only
14) Customer order entry is
A) the point in time when the customer has access to choices and makes a decision regarding a
purchase.
B) the customer informing the retailer of what they want to purchase and the retailer allocating
product to the customer.
C) the process where product is prepared and sent to the customer.
D) the process where the customer receives the product and takes ownership.
E) none of the above
15) Which of the following is not a factor influencing network design decisions in supply
chains?
A) Strategic factors B) Tactical factors C) Macroeconomic factors
D) Political factors E) Infrastructure factors
16) Firms focusing on cost leadership tend to
A) locate facilities close to the market they serve.
B) locate facilities very far from the market they serve.

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C) find the lowest cost location for their manufacturing facilities.
D) select a high-cost location to be able to react quickly.
E) none of the above
17) Firms focusing on responsiveness tend to
A) locate facilities close to the market they serve.
B) locate facilities very far from the market they serve.
C) find the lowest cost location for their manufacturing facilities.
D) select a high-cost location to be able to react slowly.
E) none of the above
18) Which of the following is not one of Kasra Ferdows' classifications of possible
strategic roles for various facilities in a global supply chain network?
A) Offpost facility B) Source facility C) Server facility
D) Contributor facility E) Outpost facility
19) A facility that serves the role of being a low-cost supply source for markets located
outside the country where the facility is located is
A) an offshore facility. B) a source facility. C) a server facility.
D) a contributor facility. E) an outpost facility.
20) A facility that also has low cost as its primary objective, but its strategic role is
broader than that of an offshore facility is
A) an offshore facility. B) a source facility. C) a server facility.
D) a contributor facility. E) an outpost facility.
21) A facility built because of tax incentives, local content requirement, tariff barriers, or
high logistics cost to supply the region from elsewhere with the objective to supply the
market where it is located is
A) an offshore facility. B) a source facility. C) a server facility.
D) a contributor facility. E) an outpost facility.
22) A facility located primarily to obtain access to knowledge or skills that may exist
within a certain region is
A) an offshore facility. B) a source facility. C) a server facility.

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D) a contributor facility. E) an outpost facility.
23) A facility that serves the market where it is located but also assumes responsibility
for product customization, process improvements, product modifications, or product
development is
A) an offshore facility. B) a source facility. C) a server facility.
D) a contributor facility. E) an outpost facility.
24) A facility that creates new products, processes, and technologies for the entire
network is
A) an offshore facility. B) a source facility. C) a server facility.
D) a lead facility. E) an outpost facility.
25) Production technology displays significant economies of scale,
A) many high-capacity locations are the most effective.
B) few high-capacity locations are the most effective.
C) few high-capacity locations are the least effective.
D) few low-capacity locations are the most effective.
E) few low-capacity locations are the least effective.
26) If facilities have lower fixed costs,
A) a few high-capacity facilities are preferred because this helps lower transportation costs.
B) a few local facilities are preferred because this helps lower transportation costs.
C) many high-capacity facilities are preferred because this helps lower transportation costs.
D) many local facilities are preferred because this helps lower transportation costs.
E) one central facility is preferred because this helps lower transportation costs.
27) If the production technology is very inflexible and product requirements vary from
one country to another, a firm has to set up
A) local facilities to serve the market in each country.
B) a few high-capacity facilities to serve the market in each country.
C) many local facilities because this helps lower transportation costs.
D) a few high-capacity facilities because this helps lower transportation costs.

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E) many high-capacity facilities because this helps lower transportation costs.
28) If the technology is flexible,
A) it becomes more difficult to consolidate manufacturing in a few large facilities.
B) it becomes more difficult to distribute manufacturing in many local facilities.
C) it becomes easier to consolidate manufacturing in a few large facilities.
D) it becomes easier to consolidate manufacturing in many local facilities.
E) the firm should have one central facility.
29) Duties that must be paid when products and/or equipment are moved across
international, state, or city boundaries are referred to as
A) taxes. B) tax incentives. C) tariffs.
D) incentives. E) none of the above
30) If a country has very high tariffs,
A) companies either do not serve the local market or set up manufacturing plants within the
country to save on duties.
B) companies do not serve the local market.
C) companies set up manufacturing plants within the country to save on duties.
D) companies will not serve the local market or set up manufacturing plants within the country
to save on duties.
E) companies will serve the local market by setting up regional manufacturing plants.
31) Developing countries often create free trade zones where
A) duties and tariffs are imposed as long as production is used primarily for export.
B) duties and tariffs are imposed as long as production is used primarily for import.
C) duties and tariffs are relaxed as long as production is used primarily for export.
D) duties and tariffs are relaxed as long as production is used primarily for import.
E) duties and tariffs are increased as long as production is used primarily for export.
32) Building some over-capacity in the supply chain network and making the capacity
flexible allows a firm to alter production flows within the supply chain to
A) produce less in facilities that have a lower cost based on current exchange rates.

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B) produce more in facilities that have a lower cost based on current exchange rates.
C) produce more in facilities that have a higher cost based on current exchange rates.
D) produce less in facilities that have the same cost based on current exchange rates.
E) None of the above are accurate.
33) Total logistics costs are a sum of the
A) inventory and facility costs. B) transportation and facility costs.
C) inventory and transportation costs. D) inventory, transportation, and facility costs.
E) inventory, transportation, and faculty costs.
34) The facilities in a supply chain network must
A) at least maximize total logistics cost.
B) at least equal the number that maximizes total logistics cost.
C) at least equal the number that minimizes total logistics cost.
D) at least minimize total logistics cost.
E) none of the above
35) When faced with a network design decision, the goal of a manager is to design a
network that
A) maximizes the firm's profits.
B) minimizes the firm's costs.
C) satisfies customer needs in terms of demand and responsiveness.
D) maximizes the firm's profits while satisfying customer needs in terms of demand and
responsiveness.
E) none of the above
36) Which of the following is not a phase in the design of a global supply chain network?
A) Define a supply chain strategy B) Define the regional facility configuration
C) Select desirable sites D) Location choices
E) Implement supply chain strategy
37) Which of the following is the first phase in the design of a global supply chain
network?

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A) Define a supply chain strategy B) Define the regional facility configuration
C) Select desirable sites D) Location choices
E) Implement supply chain strategy
38) The objective of the first phase of network design is to
A) maximize total profits, taking into account the expected margin and demand in each
market.
B) select a precise location and capacity allocation for each facility.
C) select a set of desirable sites within each region where facilities are to be located.
D) identify regions where facilities will be located, their potential roles, and their approximate
capacity.
E) specify what capabilities the supply chain network must have to support a firm's
competitive strategy.
39) The objective of the second phase of network design is to
A) maximize total profits, taking into account the expected margin and demand in each
market.
B) select a precise location and capacity allocation for each facility.
C) select a set of desirable sites within each region where facilities are to be located.
D) identify regions where facilities will be located, their potential roles, and their approximate
capacity.
E) specify what capabilities the supply chain network must have to support a firm's
competitive strategy.
40) The objective of the third phase of network design is to
A) maximize total profits, taking into account the expected margin and demand in each
market.
B) select a precise location and capacity allocation for each facility.
C) select a set of desirable sites within each region where facilities are to be located.
D) identify regions where facilities will be located, their potential roles, and their approximate
capacity.
E) specify what capabilities the supply chain network must have to support a firm's
competitive strategy.

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41) It is very important that long-term consequences be thought through when making
facility decisions, because
A) network designers can use this fact to influence the role of the new facility and the focus of
people working there.
B) facilities last a long time and have an enduring impact on a firm's performance.
C) it is astounding how often tax incentives drive the choice of location.
D) the location of a facility has a significant impact on the extent and form of communication
that develops in the supply chain network.
E) the quality of life at selected facility locations has a significant impact on performance.
42) The implications of culture should not be glossed over because
A) tariffs and tax incentives should be carefully considered.
B) facilities last a long time and have an enduring impact on a firm's performance.
C) it is astounding how often tax incentives drive the choice of location.
D) the location of a facility has a significant impact on the extent and form of communication
that develops in the supply chain network.
E) the quality of life at selected facility locations has a significant impact on performance.
43) The quality of life at selected facility locations has a significant impact on
performance because
A) network designers can use this fact to influence the role of the new facility and the focus of
people working there.
B) facilities last a long time and have an enduring impact on a firm's performance.
C) it is astounding how often tax incentives drive the choice of location.
D) the location of a facility has a significant impact on the extent and form of communication
that develops in the supply chain network.
E) it influences the work force available and their morale.
44) Managers making facility location decisions should carefully consider tariffs and tax
incentives, because
A) network designers can use this fact to influence the role of the new facility and the focus of
people working there.
B) facilities last a long time and have an enduring impact on a firm's performance.

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C) it is astounding how often tax incentives drive the choice of location.
D) the location of a facility has a significant impact on the extent and form of communication
that develops in the supply chain network.
E) it influences the work force available and their morale.
45) Which of the following is NOT a classification for Supply Chain Network Design
Decisions?
A) Facility role B) Inventory allocation
C) Facility location D) Market and supply allocation
46) Firms that focus on cost leadership tend to find the lowest-cost location might
A) locate far from their customers.
B) locate in a higher cost area to provide faster response.
C) have many facilities to take advantage of economies of scale.
D) increase inventory levels to reduce stockouts.
47) Macroeconomic factors influencing network design decisions would typically NOT
include
A) tarriffs. B) exchange rates.
C) shipping costs. D) available production technologies.
48) ________ costs increase as the number of facilities in a supply chain increases.
A) Inventory B) Transportation
C) Retail operation D) Information
49) Capital, growth strategy, existing networks and global competition mostly affect
which of the four Global Network Design Decisions?
A) Phase I - Supply Chain Strategy B) Phase II - Regional Facility Configuration
C) Phase III - Desirable Sites D) Phase IV - Location Choices
50) The availability of suppliers, transportation services, communication, utilities, and
warehousing infrastructure mostly affect which of the four Global Network Design
Decisions?
A) Phase I - Supply Chain Strategy B) Phase II - Regional Facility Configuration
C) Phase III - Desirable Sites D) Phase IV - Location Choices

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51) Tariffs, economies of scale and aggregate factor costs mostly affect which of the four
Global Network Design Decisions?
A) Phase I - Supply Chain Strategy B) Phase II - Regional Facility Configuration
C) Phase III - Desirable Sites D) Phase IV - Location Choices
52) Available infrastructure, skill needs and response time mostly affect which of the
four Global Network Design Decisions?
A) Phase I - Supply Chain Strategy B) Phase II - Regional Facility Configuration
C) Phase III - Desirable Sites D) Phase IV - Location Choices
53) Managers should keep certain issues in mind when making network design decisions
for a supply chain. Which of these would NOT be on that list?
A) Quality of life
B) Tarriffs and tax incentives
C) Cultural implications
D) The life span of most facilities is getting shorter and shorter.

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