Chapter 13—Supply Chain Process Integration

TRUE/FALSE

1. According to the text, IBM had made sizeable investments in India growth markets and created a new
procurement center in New Delhi.

ANS: F PTS: 1
BUSPROG: Analytic LO: 13-1 Bloom’s: Comprehension Difficulty: Easy

2. An important initial step in the supply chain integration model is for a firm to extend process
integration to 2nd tier supply chain partners and beyond
.
ANS: F PTS: 1
BUSPROG: Analytic LO: 13-1 Bloom’s: Comprehension Difficulty: Easy

3. The ultimate goal in supply chain management is to create value for the services and products
provided to end customers, which, in turn, will benefit the firms in the supply chain network.
ANS: T PTS: 1
BUSPROG: Analytic LO: 13-1 Bloom’s: Comprehension Difficulty: Easy

4. Lack of internal or external collaboration will create quality, cost, delivery timing, and other
customer service problems that are detrimental to supply chains.

ANS: T PTS: 1
BUSPROG: Analytic LO: 13-2 Bloom’s: Knowledge Difficulty: Easy

5. Holding on to old-fashioned company practices and purchasing habits will help to made the firm run
efficient and smooth.

ANS: F PTS: 1
BUSPROG: Analytic LO: 13-2 Bloom’s: Comprehension Difficulty: Easy

6. The development of functional silos within an organization is considered a key component to

achieving successful supply chain process integration.

ANS: F PTS: 1
BUSPROG: Analytic LO: 13-2 Bloom’s: Comprehension Difficulty: Easy

7. External process integration can be an extremely challenging task because it can potentially
cause a change in one or more organizational cultures.

ANS: T PTS: 1
BUSPROG: Analytic LO: 13-3 Bloom’s: Comprehension Difficulty: Easy

8. The order fulfillment process relies on forecasting and techniques used to smooth demand variabilities
when disparities exist between demand and supply.

ANS: F PTS: 1
BUSPROG: Analytic LO: 13-3 Bloom’s: Comprehension Difficulty: Easy
 9. iBOTs, are robotic delivery vehicles which can access every storage location within their aisle-both
horizontally and vertically.

ANS: T PTS: 1
BUSPROG: Analytic LO: 13-3 Bloom’s: Comprehension Difficulty: Easy

10. Passive RFID Tags are more expensive than active RFID tags, which have been used for healthcare
and military applications.

ANS: F PTS: 1
BUSPROG: Analytic LO: 13-4 Bloom’s: Knowledge Difficulty: Easy

11. In 2014, supply chain process integration was found to be the most significant predictor of
firm's competitive position.

ANS: T PTS: 1
BUSPROG: Analytic LO: 13-4 Bloom’s: Comprehension Difficulty: Easy

12. Cloud systems provide less visibility for global supply chains.

ANS: F PTS: 1
BUSPROG: Analytic LO: 13-4 Bloom’s: Comprehension Difficulty: Easy

13. Information visibility is critical for importers, shippers, and logistics providers.

ANS: T PTS: 1
BUSPROG: Analytic LO: 13-4 Bloom’s: Comprehension Difficulty: Easy

14. According to the textbook, there are four key supply chain business processes: Purchasing,
Manufacturing, Distribution, and Returns.

ANS: F PTS: 1
BUSPROG: Analytic LO: 13-5 Bloom’s: Knowledge Difficulty: Easy

15. Manufacturing flow management is the key process that helps balance customer demand and the firm's
output capabilities.

ANS: F PTS: 1
BUSPROG: Analytic LO: 13-5 Bloom’s: Comprehension Difficulty: Easy

16. One of the key supply chain business processes is order fulfillment, which seeks to forecast demand
and coordinate purchasing and distribution in an effort to balance customer demand with the firm's
manufacturing capacity.

ANS: F PTS: 1
BUSPROG: Analytic LO: 13-5 Bloom’s: Comprehension Difficulty: Easy

17. The batching of orders is unlikely to increase the likelihood of the bullwhip effect occurring.

ANS: F PTS: 1
BUSPROG: Analytic LO: 13-6 Bloom’s: Comprehension Difficulty: Easy
 18. When demand exceeds a supplier's finished goods available, a supplier may allocate product in
proportion to what buyers ordered. This rationing often results in shortage gaming by the suppliers’
customers.

ANS: T PTS: 1
BUSPROG: Analytic LO: 13-6 Bloom’s: Comprehension Difficulty: Easy

19. Two methods for managing supply chain risk include utilizing a supply chain IT system and
identifying backup suppliers.

ANS: T PTS: 1
BUSPROG: Analytic LO: 13-7 Bloom’s: Knowledge Difficulty: Easy

20. The most basic security system should include procedures and policies for securing offices,
manufacturing plants, warehouses and other physical facilities.

ANS: T PTS: 1
BUSPROG: Analytic LO: 13-7 Bloom’s: Knowledge Difficulty: Easy

MULTIPLE CHOICE

1. The global process integration software market is expected to:

a. Double by the end of 2018
b. Grow by about $100 billion from 2017 to 2021
c. Remain constant through 2018
d. Decrease slightly by the end of 2017
ANS: B PTS: 1
BUSPROG: Analytic LO: 13-1 Bloom’s: Comprehension Difficulty: Easy

2. Which of the following is important for external process integration to be successful?

a. Successful internal process integration
b. Willing and competent trading partners
c. Both A & B
d. None of these
ANS: C PTS: 1
BUSPROG: Analytic LO: 13-1 Bloom’s: Comprehension Difficulty: Easy

3. The coordination and sharing of information and resources to jointly manage a process is referred to
as:
a. Differentiation
b. Process integration
c. Simplification
d. Reverse logistics
ANS: B PTS: 1
BUSPROG: Analytic LO: 13-1 Bloom’s: Knowledge Difficulty: Easy

4. Which of the following has made external integration more difficult to achieve?
a. Problems with internal integration efforts
b. Identifying key trading partners
c. Lack of software applications to coordinate the effort
d. Increased number of franchise operators
 ANS: A PTS: 1
BUSPROG: Analytic LO: 13-1 Bloom’s: Knowledge Difficulty: Easy

5. Failing to see the big picture and acting only in regard to single firm in the supply chain can be
referred to as:
a. Silo mentality
b. Balking
c. Shortage gaming
d. Cross-selling
ANS: A PTS: 1
BUSPROG: Analytic LO: 13-2 Bloom’s: Knowledge Difficulty: Easy

6. Influencing and increasing the capabilities of a firms own employees, as well as those of their trading
partners, will help to eliminate which of the following obstacles to process integration?
a. Risk Pooling
b. Lack of trust
c. Shortage Gaming
d. Lack of Knowledge
ANS: C PTS: 1
BUSPROG: Analytic LO: 13-2 Bloom’s: Comprehension Difficulty: Easy

7. Which of the following is an obstacle to successful process integration?

a. Passive integration
b. Stockpiling
c. Lack of trust
d. Transaction costs
ANS: C PTS: 1
BUSPROG: Analytic LO: 13-2 Bloom’s: Comprehension Difficulty: Easy

8. Which of the following is NOT one of the Eight Key Supply Chain Business Processes?
a. Order Fulfillment
b. Customer Relationship Management
c. Returns Management
d. Warehouse Management
ANS: D PTS: 1
BUSPROG: Analytic LO: 13-3 Bloom’s: Knowledge Difficulty: Easy

9. Building, maintaining and strengthening beneficial relationships with suppliers and customers is
accomplished through the use of:
a. Data warehouses
b. External process integration
c. Expediting
d. All of the above
ANS: B PTS: 1
BUSPROG: Analytic LO: 13-3 Bloom’s: Comprehension Difficulty: Easy

10. Which of the following is a vital element in developing a strong supply chain through the practice of
process integration?
a. Developing and implementing a strong information technology system that allows for fast
and easy information exchanges between supply chain partners
 b. Partner collaborations on methods to improve processes within the supply chain
c. Partnerships, which value information sharing and partner collaborations
d. All of the above
ANS: D PTS: 1
BUSPROG: Analytic LO: 13-3 Bloom’s: Comprehension Difficulty: Easy

11. Mapping the network of primary trading partners is something that should be done to:
a. Review and establish supply chain strategies
b. Obtain point-of-sale information from customers
c. Help the firm decide which businesses to include in its supply chain management efforts
d. Assess and improve internal integration of key supply chain processes
ANS: C PTS: 1
BUSPROG: Analytic LO: 13-3 Bloom’s: Knowledge Difficulty: Easy

12. Decisions regarding the types of parts purchased, suppliers used and the manufacturing process
employed, should be decided in which phase of the supply chain integration model:
a. Review and establish supply chain strategies
b. Identify critical supply chain trading partners
c. Align supply chain strategies with key supply chain process objectives
d. Assess and improve internal integration of key supply chain processes
ANS: A PTS: 1
BUSPROG: Analytic LO: 13-3 Bloom’s: Comprehension Difficulty: Easy

13. Which of the following identifies the key customers, determines their needs, and then develops
products and/or services to meet those needs?
a. Collaborative Management
b. Customer Relationship Management
c. Product Development and Commercialization
d. Demand Management
ANS: B PTS: 1
BUSPROG: Analytic LO: 13-3 Bloom’s: Comprehension Difficulty: Easy

14. The phase of the supply chain integration model concerned with identifying the important processes
linking each of the supply chain partners is:
a. Review and establish supply chain strategies
b. Identify critical supply chain trading partners
c. Align supply chain strategies with key supply chain process objectives
d. Assess and improve internal integration of key supply chain processes
ANS: C PTS: 1
BUSPROG: Analytic LO: 13-3 Bloom’s: Comprehension Difficulty: Easy

15. Supply relationship management personnel routinely communicate with:

a. Production personnel to obtain feedback on supplier and purchased item performance
b. Marketing personnel for customer feedback
c. Suppliers for new product development and performance feedback
d. All of the above
ANS: D PTS: 1
BUSPROG: Analytic LO: 13-4 Bloom’s: Comprehension Difficulty: Easy
16. ____________________ tends to reduce safety stocks among supply chain members, generating even
less variability in supply chain orders?
a. Information visibility
b. Internal quality standards
c. Forward Integration
d. All of the above
ANS: A PTS: 1
BUSPROG: Analytic LO: 13-4 Bloom’s: Comprehension Difficulty: Easy

17. Having connectivity and visibility to all partners in a firm’s supply chain can be accomplished through
the use of:
a. Legacy MRP systems
b. Score-carding systems
c. Cloud-based communication systems
d. Mobile Marketing
ANS: C PTS: 1
BUSPROG: Analytic LO: 13-4 Bloom’s: Comprehension Difficulty: Easy

21. Higher inventories, higher costs, longer response times, and lost customers can result from?
a. Lack of trust between trading partners
b. Lack of supply chain visibility
c. Lack of vendor managed inventories
d. Reactive initiatives
ANS: B PTS: 1
BUSPROG: Analytic LO: 13-4 Bloom’s: Knowledge Difficulty: Easy

19. Which of the key supply chain business processes refers to meeting customer requirements by
synchronizing the firm's marketing, production and distribution plans:
a. Customer relationship management process
b. Order fulfillment process
c. Customer demand organization process
d. Supply chain synchronization process
ANS: B PTS: 1
BUSPROG: Analytic LO: 13-5 Bloom’s: Comprehension Difficulty: Easy

20. A customer approaches a firm with a question regarding her order status and shipping date; the
information the firm provides is an example of which of the eight key supply chain business processes:
a. Supply management process
b. Demand management process
c. Customer service management process
d. Order fulfillment process
ANS: C PTS: 1
BUSPROG: Analytic LO: 13-5 Bloom’s: Comprehension Difficulty: Easy

21. According to the text, all of the following are considered key supply chain business processes
EXCEPT:
a. Manufacturing flow management process
b. Knowledge management process
c. Supplier relationship management process
d. Product development and commercialization
 ANS: B PTS: 1
BUSPROG: Analytic LO: 13-5 Bloom’s: Knowledge Difficulty: Easy

22. Substance disposal and recycling are part of which supply chain business process:
a. Customer relationship management process
b. Returns management
c. Customer service management process
d. Product development and commercialization process
ANS: B PTS: 1
BUSPROG: Analytic LO: 13-5 Bloom’s: Knowledge Difficulty: Easy

23. Which of the following is a contributor to the bullwhip effect?

a. Smaller order sizes
b. Using actual demand data
c. Forward buying
d. Vendor managed inventory
ANS: C PTS: 1
BUSPROG: Analytic LO: 13-6 Bloom’s: Comprehension Difficulty: Easy

24. When salespeople need to fill end-of-quarter or end-of-year sales quotas they might use ___________,
which creates greater use of safety stock causing the bullwhip effect.
a. Stockpiling
b. Bullwhip ordering
c. Order fulfillment
d. Order batching
ANS: D PTS: 1
BUSPROG: Analytic LO: 13-6 Bloom’s: Comprehension Difficulty: Easy

25. Price fluctuations that are the result of special product promotions, quantity discounts, and other
special pricing discounts by suppliers’ result in:
a. Shortage Gaming
b. Quantity Batching
c. Buy-Back Gaming
d. Forward Buying
ANS: D PTS: 1
BUSPROG: Analytic LO: 13-6 Bloom’s: Comprehension Difficulty: Easy

26. Information technology advances, for example, have made cyber attacks:
a. Less common
b. More common
c. Nearly impossible
d. Limited to franchises
ANS: B PTS: 1
BUSPROG: Analytic LO: 13-7 Bloom’s: Knowledge Difficulty: Easy

27. Which of the following would be considered a Supply Chain Risk Management activity?
a. Increasing safety stock
b. Diversify the supply base
c. Develop a formal risk management program
d. All of the above
 ANS: D PTS: 1
BUSPROG: Analytic LO: 13-7 Bloom’s: Knowledge Difficulty: Easy

28. Security activities such as; Use of security badges and guards, conducting background check on
applicants and using antivirus software and passwords, would be classified as:
a. Basic Initiatives
b. Reactive Initiatives
c. Proactive Initiatives
d. Advanced Initiatives
ANS: A PTS: 1
BUSPROG: Analytic LO: 13-7 Bloom’s: Knowledge Difficulty: Easy

SHORT ANSWER

1. List and describe THREE obstacles to process integration along the supply chain.

ANS:
a. Silo Mentality  the inability to see the supply chain from a big picture perspective.
Single departments act alone without regard for the firm, or partner firms within the
supply chain.
b. Lack of supply chain visibility  the inability to easily share or retrieve trading partner
information in real-time as desired by the supply chain participants.
c. Lack of trust  Supply chain partners may be unwilling to work together or share
information due to the fear that their partners will either take advantage of them, share
the information with competitors, or use the information unethically.
d. Lack of knowledge  Lack of skills in working with the process and information system.
Also, a lack of knowledge regarding the benefits of supply chain management among
both management and the other employees. This lack of knowledge and/or skill is
problematic when either the firm or its partners suffer from it.

The following activities, which cause the bullwhip effect, can also be considered obstacles to supply
chain integration:
e. Demand Forecast Updating  Using varying customer orders to create an updated
forecasts, production schedules, and purchased requirements
f. Order Batching  Ordering in large amounts in order to decrease order and
transportation costs
g. Price fluctuations  Price incentives may cause erratic buying patterns when buyers
attempt to stock up on inventory in order to take advantage of low costs, even though
demand remains low/constant
h. Rationing and Shortage Gaming  shorting buyer orders when demand exceeds supply.
This may cause buyers to over-inflate order sizes in an attempt to meet their demand
during these times of short supply.

PTS: 5
BUSPROG: Communication LO: 13-2 Bloom’s: Comprehension Difficulty: Moderate

2. What is RFID technology and how will it aid in management of the supply chain?

ANS:
 RFID stands for radio-frequency identification. These microchip devices can be attached to pallets or
cases to relay information on the products’ whereabouts as they move through a supply chain. Using
RFID tags, a firm can access real-time inventory information and allow companies to immediately
replenish inventories when they are running low. This type of technology will allow supply chain
managers to track inventory throughout the supply chain, collect information concerning demand, aid
in keeping store shelves filled with product, and potentially decrease theft.

PTS: 5
BUSPROG: Communication LO: 13-4 Bloom’s: Comprehension Difficulty: Moderate

3. List FIVE of the eight supply chain business processes.

ANS:
a. Customer relationship management
b. Customer service management
c. Demand management
d. Order fulfillment
e. Manufacturing flow management
f. Supplier relationship management
g. Product development and commercialization
h. Returns management

PTS: 5
BUSPROG: Communication LO: 13-5 Bloom’s: Knowledge Difficulty: Easy

4. List and explain TWO of the causes of the bullwhip effect.

ANS:
a. Demand Forecast Updating  Using varying customer orders to create an updated
forecasts, production schedules, and purchased requirements
b. Order Batching  Ordering in large amounts in order to decrease order and
transportation costs
c. Price fluctuations  Price incentives may cause erratic buying patterns when buyers
attempt to stock up on inventory in order to take advantage of low costs, even though
demand remains low/constant
d. Rationing and Shortage Gaming  shorting buyer orders when demand exceeds supply.
This may cause buyers to over-inflate order sizes in an attempt to meet their demand
during these times of short supply.

PTS: 5
BUSPROG: Communication LO: 13-6 Bloom’s: Comprehension Difficulty: Moderate

5. How can corruption be managed on a global scale?

ANS:
Firms should be aware of Transparency International, which annually publishes its Corruption
Perceptions Index to publicize the degree of corruption existing in many countries. Companies
need to take steps to thwart corruption by reducing business connections with countries who
continue to appear on the list.

PTS: 5
BUSPROG: Communication LO: 13-7 Bloom’s: Application Difficulty: Moderate
ESSAY

1. List and describe FIVE of the eight key supply chain business processes.

ANS:
a. Customer Relationship Management  A process which seeks to identify and segment
customers so that new products and services will meet their ever-changing needs. Also,
it allows organizations to measure customer profitability and target very small customer
segments such that they will be able to market to the small customer segments in more
meaningful ways.

b. Customer Service Management  This process seeks to aid the customer by providing
them information about order status, shipping dates, product availability, and other
common customer service needs. Also, this process seeks to find new ways to service
customers in the future.

c. Demand Management  This process attempts to balance customer demand with the
organization's capacity. This is done through demand forecasting and coordination of
production, purchasing, and distribution.

d. Order Fulfillment  Meeting customer requirements by synchronizing the firm's

marketing, production, and distribution plans.

f. Manufacturing Flow Management  A process which attempts to satisfy customer

demand by determining the required levels of flexibility and velocity from the
manufacturing process.

g. Supplier Relationship Management  This process seeks to develop relationships with

key suppliers. Modern supply chains say this is an important step in operating
efficiently, and ultimately meeting the needs of the customer.

h. Product Development and Commercialization  Ineffective and efficient product

development. Looking to suppliers and customers for information that will allow good
products to get to market quickly.

i. Returns Management  The management of material usage, product recalls, packaging

requirements, and returned product. This process is responsible for both managing those
things in the present as well as trying to achieve related organizational effectiveness and
efficiency in the future.

PTS: 10
BUSPROG: Communication LO: 13-5 Bloom’s: Comprehension Difficulty: Difficult

2. The textbook states that "the bullwhip effect can be a pervasive and expensive problem along the
supply chain." Answer the following questions in relation to the bullwhip effect:
a. Briefly describe the bullwhip effect.
b. List 2 key activities that cause the bullwhip effect. How do they exacerbate the problems
associated with the bullwhip effect?
c. How can process integration help prevent/minimize the bullwhip effect?
d. List 2 other key activities that can act as deterrents against the bullwhip effect. How do
they minimize and/or eliminate the problems associated with the bullwhip effect?

ANS:
a. Briefly describe the bullwhip effect.
The bullwhip effect is characterized by the amplified forecasts in order sizes that
become prevalent as you move farther down the supply chain. The amplifications and
subsequent demand variations cause problems with capacity planning, inventory control,
and workforce production scheduling. Some of the end results may be product shortages
which may upset customers, or high inventories which increase total supply chain costs.

b. List 2 key activities that cause the bullwhip effect. How do they exacerbate the problems
associated with the bullwhip effect?
1. Demand Forecast Updating  Using varying customer orders to create updated
forecasts, production schedules, and purchase requirements. These fluctuating
forecasts, increasing leadtimes, and growing safety stocks contribute to the
bullwhip effect.
2. Order Batching  Ordering in large amounts in order to decrease order and
transportation costs. This type of ordering amplifies demand variability, which in
turn contributes to the bullwhip effect.
3. Price Fluctuations  Price incentives may cause erratic buying patterns when
buyers attempt to stock up on inventory in order to take advantage of low costs,
even though demand remains low/constant. This type of ordering amplifies
demand variability, which in turn contributes to the bullwhip effect.
4. Rationing and Shortage Gaming  shorting buyer orders when demand exceeds
supply. This may cause buyers to over-inflate order sizes in an attempt to meet
their demand during these times of short supply. This obviously inflates demand,
contributes to demand variability, which in turn contributes to the bullwhip effect.

c. How can process integration help prevent/minimize the bullwhip effect?

Many of the problems which cause the bullwhip effect are related to poor
communication between the supply chain partners, the manufacturing firm, and the
customers. Developing a supply chain with close relationships between suppliers and
buyers, equipped with effective and efficient communication systems allow supply chain
partners the ability to plan more accurately for the actual demands of the system. It is
also important for the supply chain partners to continually develop these relationships
and strive for continuous improvement.

d. List 2 other key activities that can act as deterrents against the bullwhip effect. How do
they minimize and/or eliminate the problems associated with the bullwhip effect?
1. Vendor Managed Inventory Systems  VMI systems empower suppliers to
manage inventories for their customers based on information supplied directly to
the supplier via the customer's system. This not only allows for increased
visibility, it also allows for suppliers to act at a time closer to the actual moment
of need.
2. Increasing Information Visibility  Developing information systems which allow
organizations and their supply chain members to more accurately assess the needs
of the system/customers will allow for more effective planning and in turn provide
a more efficient use of resources.
3. Decreasing Order Sizes  smaller order sizes help supply chain members more
accurately track changes in demand. Such orders will be more frequent, and
allows forecasts to be more accurate.
4. Maintaining a policy of Everyday Low Prices  this helps to minimize or
eliminate price fluctuations which may cause irregular buying patterns, or create
an enlarged sense of demand variability.
5. Reducing the length of the supply chain can reduce the bullwhip effect by
reducing the number of occasions when forecasts are calculated.
 6. Reducing lead times from order to delivery will allow organizations to order in a
just-in-time manner, and allows for more small order quantities.
7. Attempting to limit shortage gaming by allocating product for sale to buyers based
on demand histories.

PTS: 10
BUSPROG: Communication LO: 13-6 Bloom’s: Comprehension Difficulty: Difficult

3. The textbook lists the following activities as Supply Chain Risk Management activities:
a. Increasing safety stock and forward buying
b. Identify backup suppliers and logistics services
c. Diversify the supply base
d. Utilize a supply chain IT system
e. Develop a formal risk management program

For each also provide the downside of utilizing that particular strategy.

ANS:
a. Increasing safety stock and forward buying
Whatever the disruption, late shipments, damaged or destroyed goods, stolen goods, etc.
additional inventory will help in buying time until the disruption can be addressed.
Downside: Cost of purchasing and holding inventory

b. Identify backup suppliers and logistics services

If your suppliers are disrupted or if your shipments are disrupted, having an alternative
source of supplies and delivery can help eliminate the possible negative effects or at
least decrease the disruption.
Downside: Cost of researching and negotiating an agreement. Also, your present
suppliers may feel slighted.

c. Diversify the supply base

Having multiple suppliers allows a company to manage risk since it is less likely that all
suppliers will experience disruptions at the same time.
Downside: Having multiple suppliers requires more effort when attempting to develop
close supplier relationships. A truly globally diverse supply base will also introduce
different types of risk associated with global purchasing and logistics.

d. Utilize a supply chain IT system

A good supply chain IT system increases supply chain visibility, which in turn allows
companies to see problems early, or possibly even before they occur. This provides the
company time for a quick response.
Downside: The cost to purchase, implement, and train employees on a new IT system
can be high. Also, the compatibility both internally and externally may be an issue.

e. Develop a formal risk management program

Anticipating, assessing, and planning responses for supply chain risks allows companies
to be prepared for common disruptions, but they also help in dealing with unanticipated
disruptions. This will hopefully help the company minimize risk exposure, alert
employees what to watch for, and also provide a plan of action.
Downside: The time, effort, and cost to develop a comprehensive risk management
program can be a seem like an intimidating commitment.

PTS: 10
BUSPROG: Communication LO: 13-7 Bloom’s: Application Difficulty: Difficult