Supply Chain Management: Strategy, Planning, and Operation, 7e (Chopra)

Chapter 10 Coordination in a Supply Chain

10.1 True/False Questions

1) Supply chain coordination requires each stage of the supply chain to take into account the
impact its actions have on other stages.
Answer: TRUE
Diff: 1
Topic: 10.1: Lack of Supply Chain Coordination and its Impact on Performance
AACSB: Application of knowledge
Objective: LO 10.1: Describe supply chain coordination and the bullwhip effect, and their
impact on supply chain performance.

2) A lack of coordination occurs either because different stages of the supply chain have
objectives that conflict or because information moving between stages gets delayed and
distorted.
Answer: TRUE
Diff: 2
Topic: 10.1: Lack of Supply Chain Coordination and its Impact on Performance
AACSB: Application of knowledge
Objective: LO 10.1: Describe supply chain coordination and the bullwhip effect, and their
impact on supply chain performance.

3) The bullwhip effect enables different stages of the supply chain to have a consistent estimate
of what demand looks like.
Answer: FALSE
Diff: 2
Topic: 10.1: Lack of Supply Chain Coordination and its Impact on Performance
AACSB: Application of knowledge
Objective: LO 10.1: Describe supply chain coordination and the bullwhip effect, and their
impact on supply chain performance.

4) Supply chain coordination improves if all stages of the chain take actions that are aligned and
together increase total supply chain surplus.
Answer: TRUE
Diff: 1
Topic: 10.1: Lack of Supply Chain Coordination and its Impact on Performance
AACSB: Application of knowledge
Objective: LO 10.1: Describe supply chain coordination and the bullwhip effect, and their
impact on supply chain performance.

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5) With an uncoordinated supply chain each stage tries to maximize its own profits, resulting in
actions that often diminish total supply chain profits.
Answer: TRUE
Diff: 1
Topic: 10.1: Lack of Supply Chain Coordination and its Impact on Performance
AACSB: Application of knowledge
Objective: LO 10.1: Describe supply chain coordination and the bullwhip effect, and their
impact on supply chain performance.

6) The bullwhip effect moves a supply chain away from the efficient frontier by increasing cost
and decreasing responsiveness.
Answer: TRUE
Diff: 1
Topic: 10.2: Obstacles to Coordination in a Supply Chain
AACSB: Application of knowledge
Objective: LO 10.2: Identify obstacles to coordination in a supply chain.

7) The bullwhip effect reduces the profitability of a supply chain by making it simpler to provide
a given level of product availability.
Answer: FALSE
Diff: 1
Topic: 10.2: Obstacles to Coordination in a Supply Chain
AACSB: Application of knowledge
Objective: LO 10.2: Identify obstacles to coordination in a supply chain.

8) Incentive obstacles refer to situations where incentives offered to different stages or

participants in a supply chain lead to actions that increase variability and reduce total supply
chain profits.
Answer: TRUE
Diff: 1
Topic: 10.2: Obstacles to Coordination in a Supply Chain
AACSB: Application of knowledge
Objective: LO 10.2: Identify obstacles to coordination in a supply chain.

9) Improperly structured sales force incentives are a significant obstacle to coordination in the
supply chain.
Answer: TRUE
Diff: 2
Topic: 10.2: Obstacles to Coordination in a Supply Chain
AACSB: Application of knowledge
Objective: LO 10.2: Identify obstacles to coordination in a supply chain.

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10) Measuring performance based on sell-through is often justified on the grounds that the
manufacturer's sales force does not control sell-in.
Answer: FALSE
Diff: 3
Topic: 10.2: Obstacles to Coordination in a Supply Chain
AACSB: Application of knowledge
Objective: LO 10.2: Identify obstacles to coordination in a supply chain.

11) The lack of information sharing between the retailer and manufacturer leads to a large
fluctuation in manufacturer orders.
Answer: TRUE
Diff: 1
Topic: 10.2: Obstacles to Coordination in a Supply Chain
AACSB: Information technology
Objective: LO 10.2: Identify obstacles to coordination in a supply chain.

12) Pricing obstacles refer to situations in which the pricing policies for a product lead to an
increase in variability of orders placed.
Answer: TRUE
Diff: 1
Topic: 10.2: Obstacles to Coordination in a Supply Chain
AACSB: Application of knowledge
Objective: LO 10.2: Identify obstacles to coordination in a supply chain.

13) Lot size based quantity discounts reduce the bullwhip effect within the supply chain.
Answer: FALSE
Diff: 2
Topic: 10.2: Obstacles to Coordination in a Supply Chain
AACSB: Application of knowledge
Objective: LO 10.2: Identify obstacles to coordination in a supply chain.

14) Trade promotions and other short-term discounts offered by a manufacturer result in large
orders during the promotion period followed by very small orders after that.
Answer: TRUE
Diff: 1
Topic: 10.2: Obstacles to Coordination in a Supply Chain
AACSB: Application of knowledge
Objective: LO 10.2: Identify obstacles to coordination in a supply chain.

15) Behavioral obstacles are often related to the way the supply chain is structured and reduce
the bullwhip effect.
Answer: FALSE
Diff: 2
Topic: 10.2: Obstacles to Coordination in a Supply Chain
AACSB: Application of knowledge
Objective: LO 10.2: Identify obstacles to coordination in a supply chain.

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16) Sharing of POS data helps reduce the bullwhip effect because it allows each stage of the
supply chain to use orders from the previous stage to forecast future demand.
Answer: FALSE
Diff: 2
Topic: 10.3: Managerial Levers to Improve Coordination
AACSB: Information technology
Objective: LO 10.3: Discuss managerial levers that help improve coordination in a supply chain.

17) When a single stage controls replenishment decisions for the entire chain, the problem of
multiple forecasts is magnified and coordination within the supply chain follows.
Answer: FALSE
Diff: 2
Topic: 10.3: Managerial Levers to Improve Coordination
AACSB: Application of knowledge
Objective: LO 10.3: Discuss managerial levers that help improve coordination in a supply chain.

18) A reduction of lot sizes increases the amount of fluctuation that can accumulate between any
pair of stages of a supply chain, thus increasing the bullwhip effect.
Answer: FALSE
Diff: 2
Topic: 10.3: Managerial Levers to Improve Coordination
AACSB: Application of knowledge
Objective: LO 10.3: Discuss managerial levers that help improve coordination in a supply chain.

19) Tying allocation to past sales removes any incentive a retailer may have to inflate orders, as a
result dampening the bullwhip effect.
Answer: TRUE
Diff: 1
Topic: 10.3: Managerial Levers to Improve Coordination
AACSB: Application of knowledge
Objective: LO 10.3: Discuss managerial levers that help improve coordination in a supply chain.

20) Managers can encourage the bullwhip effect by devising pricing strategies that encourage
retailers to order in smaller lots and reduce forward buying.
Answer: FALSE
Diff: 1
Topic: 10.3: Managerial Levers to Improve Coordination
AACSB: Application of knowledge
Objective: LO 10.3: Discuss managerial levers that help improve coordination in a supply chain.

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21) Information distortion can be dampened by practices that assign replenishment responsibility
across the supply chain to a single entity.
Answer: TRUE
Diff: 2
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

22) Dollar General switches to VMI for two different producers of beef jerky. It is likely that the
overall inventory level of beef jerky in the store will increase over levels before they went to
VMI.
Answer: FALSE
Diff: 2
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

23) A Computer Processing Factory Rationing (CPFR) system is used to assign inventory in a
supply chain when supply is disrupted.
Answer: FALSE
Diff: 1
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

24) A Computer Processing Factory Rationing (CPFR) is dependent on technology.

Answer: FALSE
Diff: 1
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

25) Retail event collaboration is a special case of CPFR.

Answer: TRUE
Diff: 2
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

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10.2 Multiple Choice Questions

1) Information distortion is exaggerated by the fact that

A) supply chains today produce a large amount of product variety.
B) supply chains today produce a small amount of product variety.
C) the telephone effect is extreme in situations where technology is in use.
D) different stages of supply chains send excessive data.
Answer: A
Diff: 2
Topic: 10.1: Lack of Supply Chain Coordination and its Impact on Performance
AACSB: Information technology
Objective: LO 10.1: Describe supply chain coordination and the bullwhip effect, and their
impact on supply chain performance.

2) The situation in which fluctuations in orders increase as they move up the supply chain from
retailers to wholesalers to manufacturers to suppliers is known as
A) market fluctuations.
B) the whiplash effect.
C) the bullwhip effect.
D) the butterfly effect.
Answer: C
Diff: 2
Topic: 10.1: Lack of Supply Chain Coordination and its Impact on Performance
AACSB: Application of knowledge
Objective: LO 10.1: Describe supply chain coordination and the bullwhip effect, and their
impact on supply chain performance.

3) The bullwhip effect causes

A) maximization of supply chain surplus.
B) improved accuracy of demand information within the supply chain.
C) different stages of the supply chain to have a very different estimate of what demand looks
like.
D) less need for aggregate planning.
Answer: C
Diff: 2
Topic: 10.1: Lack of Supply Chain Coordination and its Impact on Performance
AACSB: Application of knowledge
Objective: LO 10.1: Describe supply chain coordination and the bullwhip effect, and their
impact on supply chain performance.

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4) The lack of coordination within a supply chain will result in a decrease in
A) manufacturing cost.
B) inventory cost.
C) replenishment lead time.
D) level of product availability.
Answer: D
Diff: 2
Topic: 10.1: Lack of Supply Chain Coordination and its Impact on Performance
AACSB: Application of knowledge
Objective: LO 10.1: Describe supply chain coordination and the bullwhip effect, and their
impact on supply chain performance.

5) The lack of coordination within a supply chain will result in an increase in

A) profitability.
B) inventory accuracy.
C) replenishment lead time.
D) level of product availability.
Answer: C
Diff: 2
Topic: 10.1: Lack of Supply Chain Coordination and its Impact on Performance
AACSB: Application of knowledge
Objective: LO 10.1: Describe supply chain coordination and the bullwhip effect, and their
impact on supply chain performance.

6) Long-term boom and bust cycles that mimic the bullwhip effect include
A) calendars and greeting cards.
B) the length of hemlines.
C) university textbooks.
D) memory chips for personal computers.
Answer: D
Diff: 2
Topic: 10.1: Lack of Supply Chain Coordination and its Impact on Performance
AACSB: Application of knowledge
Objective: LO 10.1: Describe supply chain coordination and the bullwhip effect, and their
impact on supply chain performance.

7) The bullwhip effect decreases

A) product availability.
B) manufacturing cost.
C) replenishment lead time.
D) transportation cost.
Answer: A
Diff: 2
Topic: 10.1: Lack of Supply Chain Coordination and its Impact on Performance
AACSB: Application of knowledge
Objective: LO 10.1: Describe supply chain coordination and the bullwhip effect, and their
impact on supply chain performance.
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8) The bullwhip effect decreases
A) transportation cost.
B) profitability.
C) replenishment lead time.
D) shipping and receiving cost.
Answer: B
Diff: 2
Topic: 10.1: Lack of Supply Chain Coordination and its Impact on Performance
AACSB: Application of knowledge
Objective: LO 10.1: Describe supply chain coordination and the bullwhip effect, and their
impact on supply chain performance.

9) The bullwhip effect

A) positively impacts performance at every stage.
B) hurts the relationships between different stages of the supply chain.
C) enhances the relationships between different stages of the supply chain.
D) results in improved on-time order delivery.
Answer: B
Diff: 2
Topic: 10.1: Lack of Supply Chain Coordination and its Impact on Performance
AACSB: Application of knowledge
Objective: LO 10.1: Describe supply chain coordination and the bullwhip effect, and their
impact on supply chain performance.

10) The bullwhip effect moves a supply chain

A) away from the efficient frontier by increasing cost and decreasing responsiveness.
B) away from the efficient frontier by decreasing cost and increasing responsiveness.
C) toward the efficient frontier by increasing cost and decreasing responsiveness.
D) toward the efficient frontier by increasing cost and increasing responsiveness.
Answer: A
Diff: 1
Topic: 10.1: Lack of Supply Chain Coordination and its Impact on Performance
AACSB: Application of knowledge
Objective: LO 10.1: Describe supply chain coordination and the bullwhip effect, and their
impact on supply chain performance.

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Copyright © 2019 Pearson Education, Inc.
11) Situations where incentives offered to different stages or participants in a supply chain lead
to actions that increase variability and reduce total supply chain profits are referred to as
A) incentive obstacles.
B) information processing obstacles.
C) operational obstacles.
D) behavioral obstacles.
Answer: A
Diff: 1
Topic: 10.1: Lack of Supply Chain Coordination and its Impact on Performance
AACSB: Application of knowledge
Objective: LO 10.1: Describe supply chain coordination and the bullwhip effect, and their
impact on supply chain performance.

12) Incentives that focus only on the local impact of an action result in decisions that
A) do not maximize total supply chain profits.
B) maximize total supply chain profits.
C) minimize total supply chain profits.
D) minimize total supply chain cost.
Answer: A
Diff: 2
Topic: 10.1: Lack of Supply Chain Coordination and its Impact on Performance
AACSB: Application of knowledge
Objective: LO 10.1: Describe supply chain coordination and the bullwhip effect, and their
impact on supply chain performance.

13) The lack of supply chain coordination on various measures of performance has costs
associated with it. Which of the following is one of these costs?
A) Quality
B) Reliability
C) Manufacturing
D) Pricing
Answer: C
Diff: 1
Topic: 10.1: Lack of Supply Chain Coordination and its Impact on Performance
AACSB: Application of knowledge
Objective: LO 10.1: Describe supply chain coordination and the bullwhip effect, and their
impact on supply chain performance.

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14) The lack of supply chain coordination on various measures of performance has costs
associated with it. Which of the following is NOT one of these costs?
A) Inventory
B) Reliability
C) Transportation
D) Quality
Answer: D
Diff: 1
Topic: 10.1: Lack of Supply Chain Coordination and its Impact on Performance
AACSB: Application of knowledge
Objective: LO 10.1: Describe supply chain coordination and the bullwhip effect, and their
impact on supply chain performance.

15) The impact of the lack of coordination on supply chain processes decreases for the following
measure.
A) Manufacturing cost
B) Level of product availability
C) Transportation cost
D) Replenishment lead time
Answer: B
Diff: 2
Topic: 10.1: Lack of Supply Chain Coordination and its Impact on Performance
AACSB: Application of knowledge
Objective: LO 10.1: Describe supply chain coordination and the bullwhip effect, and their
impact on supply chain performance.

16) Stefan's compensation plan rewards his hard work by paying him ten cents per mile driven
while he delivers orders to the downstream members of his supply chain. Some managers view
this reward as counterproductive since there is a temptation to take the longest route between two
points rather than making more deliveries. This obstacle to supply chain coordination falls into
the category of
A) incentive obstacles.
B) information processing obstacles.
C) operational obstacles.
D) behavioral obstacles.
Answer: A
Diff: 1
Topic: 10.2: Obstacles to Coordination in a Supply Chain
AACSB: Information technology
Objective: LO 10.2: Identify obstacles to coordination in a supply chain.

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17) Improperly structured sales force incentives
A) help create stable demand.
B) have very little effect on the timing of customer orders.
C) tend to create spikes in customer orders.
D) ensure that orders are quickly and accurately entered and communicated to other affected
supply chain processes.
Answer: C
Diff: 1
Topic: 10.2: Obstacles to Coordination in a Supply Chain
AACSB: Application of knowledge
Objective: LO 10.2: Identify obstacles to coordination in a supply chain.

18) The sales typically measured by a manufacturer are

A) the quantity sold to final customers (sell-through).
B) the quantity sold to distributors or retailers (sell-in).
C) the quantity reported by the salesperson.
D) based on the quantity of supplies purchased from key suppliers.
Answer: B
Diff: 2
Topic: 10.2: Obstacles to Coordination in a Supply Chain
AACSB: Application of knowledge
Objective: LO 10.2: Identify obstacles to coordination in a supply chain.

19) Situations where demand information is distorted as it moves between different stages of the
supply chain, leading to increased variability in orders within the supply chain are referred to as
A) incentive obstacles.
B) information processing obstacles.
C) operational obstacles.
D) behavioral obstacles.
Answer: B
Diff: 1
Topic: 10.2: Obstacles to Coordination in a Supply Chain
AACSB: Information technology
Objective: LO 10.2: Identify obstacles to coordination in a supply chain.

20) Customer Rick places orders with retailer Negan, who orders from Dwight, who orders from
Simon, who orders from Regina. Simon is a whiz at statistics and makes his forecast for the
coming year based on the orders he receives from Dwight. Simon's process is creating a(n)
A) incentive obstacle.
B) operational obstacle.
C) information processing obstacle.
D) behavioral obstacle.
Answer: C
Diff: 2
Topic: 10.2: Obstacles to Coordination in a Supply Chain
AACSB: Information technology
Objective: LO 10.2: Identify obstacles to coordination in a supply chain.
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21) The fact that each stage in a supply chain forecasts demand based on the stream of orders
received from the downstream stage results in
A) forecasts based on actual consumer demand patterns.
B) a reduction in demand as we move up the supply chain from the retailer to the manufacturer.
C) a magnification of fluctuations in demand as we move up the supply chain from the retailer to
the manufacturer.
D) an increase in forecast accuracy.
Answer: C
Diff: 2
Topic: 10.2: Obstacles to Coordination in a Supply Chain
AACSB: Application of knowledge
Objective: LO 10.2: Identify obstacles to coordination in a supply chain.

22) The lack of information sharing between the retailer and manufacturer
A) improves supply chain coordination.
B) minimizes the fluctuation in manufacturer orders.
C) leads to a large fluctuation in manufacturer orders.
D) leads to smaller fluctuations in suppliers' orders.
Answer: C
Diff: 2
Topic: 10.2: Obstacles to Coordination in a Supply Chain
AACSB: Information technology
Objective: LO 10.2: Identify obstacles to coordination in a supply chain.

23) Actions taken in the course of placing and filling orders that lead to an increase in variability
are referred to as
A) incentive obstacles.
B) information processing obstacles.
C) operational obstacles.
D) pricing obstacles.
Answer: C
Diff: 2
Topic: 10.2: Obstacles to Coordination in a Supply Chain
AACSB: Application of knowledge
Objective: LO 10.2: Identify obstacles to coordination in a supply chain.

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24) When a firm places orders in lot sizes that are much larger than the lot sizes in which
demand arises,
A) variability of orders is minimized up the supply chain.
B) variability of orders is magnified up the supply chain.
C) suppliers gain better visibility of consumer demand.
D) suppliers gain a more stable demand pattern.
Answer: B
Diff: 1
Topic: 10.2: Obstacles to Coordination in a Supply Chain
AACSB: Application of knowledge
Objective: LO 10.2: Identify obstacles to coordination in a supply chain.

25) Geoff receives course transfer requests on a continual basis from student advisors throughout
the week. His policy has always been to sign the accumulated course transfer requests on Friday
afternoons. Once he signs them, they are forwarded to his assistant and then on to the student
advisor for that student's major. The Friday afternoon procedure is creating a(n):
A) incentive obstacles.
B) information processing obstacles.
C) operational obstacles.
D) pricing obstacles.
Answer: C
Diff: 2
Topic: 10.2: Obstacles to Coordination in a Supply Chain
AACSB: Application of knowledge
Objective: LO 10.2: Identify obstacles to coordination in a supply chain.

26) Situations in which the pricing policies for a product lead to an increase in variability of
orders placed are referred to as
A) incentive obstacles.
B) information processing obstacles.
C) operational obstacles.
D) pricing obstacles.
Answer: D
Diff: 1
Topic: 10.2: Obstacles to Coordination in a Supply Chain
AACSB: Application of knowledge
Objective: LO 10.2: Identify obstacles to coordination in a supply chain.

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27) Forward buying results in
A) a stabilized buying pattern.
B) small orders during the promotion period followed by very small orders after that.
C) small orders during the promotion period followed by large orders after that.
D) large orders during the promotion period followed by very small orders after that.
Answer: D
Diff: 2
Topic: 10.2: Obstacles to Coordination in a Supply Chain
AACSB: Application of knowledge
Objective: LO 10.2: Identify obstacles to coordination in a supply chain.

28) Problems in learning within organizations that contribute to the bullwhip effect are referred
to as
A) incentive obstacles.
B) information processing obstacles.
C) pricing obstacles.
D) behavioral obstacles.
Answer: D
Diff: 2
Topic: 10.2: Obstacles to Coordination in a Supply Chain
AACSB: Application of knowledge
Objective: LO 10.2: Identify obstacles to coordination in a supply chain.

29) Operational improvements that reduce lot sizes can dampen the bullwhip effect by
A) decreasing the uncertainty of demand during the lead time.
B) decreasing the amount of fluctuation that can accumulate between any pair of stages of a
supply chain.
C) discouraging retailers from artificially inflating their orders in the case of a shortage.
D) allocating the available supply based on past retailer sales.
Answer: B
Diff: 2
Topic: 10.3: Managerial Levers to Improve Coordination
AACSB: Application of knowledge
Objective: LO 10.3: Discuss managerial levers that help improve coordination in a supply chain.

30) Managers can improve coordination within the supply chain by

A) holding product in inventory but off official inventory records.
B) listing product in inventory without actually holding the physical goods.
C) aligning goals and incentives.
D) decreasing product visibility.
Answer: C
Diff: 2
Topic: 10.3: Managerial Levers to Improve Coordination
AACSB: Application of knowledge
Objective: LO 10.3: Discuss managerial levers that help improve coordination in a supply chain.

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31) All transportation decisions should be evaluated based on their effect on
A) transportation costs.
B) fuel costs.
C) total costs.
D) sales revenue.
Answer: C
Diff: 2
Topic: 10.3: Managerial Levers to Improve Coordination
AACSB: Application of knowledge
Objective: LO 10.3: Discuss managerial levers that help improve coordination in a supply chain.

32) Coordination requires every stage of the supply chain to focus on

A) the functional revenues for each supply chain member.
B) the functional profits for each supply chain member.
C) the functional costs for each supply chain member.
D) supply chain surplus.
Answer: D
Diff: 2
Topic: 10.3: Managerial Levers to Improve Coordination
AACSB: Application of knowledge
Objective: LO 10.3: Discuss managerial levers that help improve coordination in a supply chain.

33) The practice of combining shipments for several retailers on the same truck is known as
A) a milk run.
B) a less than truckload shipment.
C) a truckload shipment.
D) an ASN.
Answer: A
Diff: 2
Topic: 10.3: Managerial Levers to Improve Coordination
AACSB: Application of knowledge
Objective: LO 10.3: Discuss managerial levers that help improve coordination in a supply chain.

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34) A manufacturer with significant market power should use
A) two-part tariffs and volume discounts to achieve coordination.
B) lot-size-based quantity discounts to achieve coordination.
C) forward-buying with retail coupons to achieve coordination.
D) liquidators and reverse-buying to achieve coordination.
Answer: A
Diff: 3
Topic: 10.3: Managerial Levers to Improve Coordination
AACSB: Application of knowledge
Objective: LO 10.3: Discuss managerial levers that help improve coordination in a supply chain.

35) Which of these changes will serve to break order synchronization?

A) Have each customer order once a week on Mondays rather than the 1st and 15th of each
month.
B) Have each customer order on their date, with 20% of your customers ordering each day of the
week.
C) Have each customer order on Mondays or Fridays rather than Monday through Friday.
D) Have each customer order on the last day of the month.
Answer: B
Diff: 2
Topic: 10.3: Managerial Levers to Improve Coordination
AACSB: Application of knowledge
Objective: LO 10.3: Discuss managerial levers that help improve coordination in a supply chain.

36) If demand is uncertain, a manufacturer can incentivize retailers to provide high levels of
product availability by using
A) high fixed costs.
B) buyback contracts.
C) low fixed costs.
D) zero-cost contracts.
Answer: B
Diff: 3
Topic: 10.3: Managerial Levers to Improve Coordination
AACSB: Application of knowledge
Objective: LO 10.3: Discuss managerial levers that help improve coordination in a supply chain.

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37) Allocating existing supply based on past retailer sales rather than current retailer orders is
known as
A) spurn and fern.
B) yearn and kern.
C) churn and burn.
D) turn and earn.
Answer: D
Diff: 2
Topic: 10.3: Managerial Levers to Improve Coordination
AACSB: Application of knowledge
Objective: LO 10.3: Discuss managerial levers that help improve coordination in a supply chain.

38) One appropriate measure to reduce replenishment lead times is to

A) reduce flexibility.
B) increase the planning horizon.
C) order electronically.
D) average the aggregate plans from each supply chain member.
Answer: C
Diff: 2
Topic: 10.3: Managerial Levers to Improve Coordination
AACSB: Application of knowledge
Objective: LO 10.3: Discuss managerial levers that help improve coordination in a supply chain.

39) Mickey the manager reviewed his company's customers' orders for the past year and
compared the variability of those orders with the variability of the orders he placed with his
suppliers. This comparison allowed him to estimate his own company's contribution to
A) the forecast.
B) supply chain surplus.
C) market demand.
D) the bullwhip effect.
Answer: D
Diff: 2
Topic: 10.3: Managerial Levers to Improve Coordination
AACSB: Application of knowledge
Objective: LO 10.3: Discuss managerial levers that help improve coordination in a supply chain.

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40) One of the best ways to solve coordination problems is
A) through teams comprised of different members of the supply chain.
B) through investments in cutting edge information technology.
C) by institution penalties for supply chain members that don't cooperate.
D) by implementing a supply chain resource planning module.
Answer: A
Diff: 2
Topic: 10.3: Managerial Levers to Improve Coordination
AACSB: Application of knowledge
Objective: LO 10.3: Discuss managerial levers that help improve coordination in a supply chain.

41) The full benefit of coordination is achieved when

A) all adjacent pairs of supply chain partners are coordinated.
B) the entire supply chain network is coordinated.
C) the POS data is shared with the manufacturer.
D) the POS data is shared with the retailer.
Answer: B
Diff: 2
Topic: 10.3: Managerial Levers to Improve Coordination
AACSB: Application of knowledge
Objective: LO 10.3: Discuss managerial levers that help improve coordination in a supply chain.

42) Which method would serve to reduce the information distortion in a supply chain consisting
of a fabricator, manufacturer, supplier, and a retailer?
A) Make both the fabricator and retailer responsible for all decisions regarding product
inventories at the retailer.
B) Make the manufacturer responsible for all decisions regarding product inventories at the
retailer.
C) Make the supplier responsible for all decisions regarding product inventories at the retailer.
D) Make the customer responsible for all decisions regarding product inventories at the retailer.
Answer: B
Diff: 2
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

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43) One replenishment system that assigns replenishment responsibility to a single entity in a
supply chain is
A) coordinated stocking.
B) a sell-in to sell-through system.
C) owner-managed inventory.
D) a continuous replenishment program.
Answer: D
Diff: 2
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

44) One replenishment system that assigns replenishment responsibility to a single entity in a
supply chain is
A) vendor managed inventory.
B) coordinated stocking.
C) a sell-in to sell-through system.
D) owner-managed inventory.
Answer: A
Diff: 2
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

45) Vendor managed inventory and continuous replenishment systems both serve to
A) minimize channel confusion.
B) minimize information distortion.
C) maximize information quality.
D) maximize information flow.
Answer: B
Diff: 2
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

19
Copyright © 2019 Pearson Education, Inc.
46) In a continuous replenishment program, the wholesaler or manufacturer replenishes a retailer
regularly based on
A) the POS data of the wholesaler.
B) the forecast of the retailer.
C) the POS data of the retailer.
D) the forecast of the manufacturer.
Answer: C
Diff: 2
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

47) In most instances, CRP systems are driven by

A) the withdrawal of inventory from distributor warehouses.
B) the withdrawal of materials from supplier warehouses.
C) the withdrawal of goods customer pantry shelves.
D) the withdrawals of inventory from retailer warehouses.
Answer: D
Diff: 2
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

48) In a CRP system, inventory at the retailer is owned by

A) the retailer.
B) the supplier.
C) the customer.
D) no one.
Answer: A
Diff: 2
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

20
Copyright © 2019 Pearson Education, Inc.
49) The replenishment decision in a VMI system is owned by the
A) manufacturer.
B) retailer.
C) customer.
D) cloud.
Answer: A
Diff: 2
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

50) Quite often in a VMI system, the inventory is

A) owned by the retailer before it is shipped by the supplier.
B) owned by the supplier until it is sold by the retailer.
C) sold by the supplier before it is owned by the retailer.
D) sold by the retailer before it is shipped by the supplier.
Answer: B
Diff: 2
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

51) In a VMI system, the ________ must share demand information with the ________.
A) manufacturer; customer
B) customer; retailer
C) retailer; manufacturer
D) manufacturer; designer
Answer: C
Diff: 2
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

52) If retailers sell products from competing manufacturers in a VMI system,

A) inventory at the manufacturer will be lower than optimal.
B) inventory at the manufacturer will be higher than optimal.
C) sales at the retailer will be lower than optimal.
D) inventory at the retailer will be higher than optimal.
Answer: D
Diff: 2
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.
21
Copyright © 2019 Pearson Education, Inc.
53) What is the responsibility of a designated category leader?
A) The category leader manages replenishment decisions for all suppliers.
B) The category leader manages purchasing decisions for all retailers.
C) The category leader manages purchasing decisions for all customers.
D) The category leader manages replenishment decisions for all retailers.
Answer: A
Diff: 2
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

54) A fundamental aspect of successful collaboration is

A) sharing product designs.
B) identification and resolution of exceptions.
C) no stock outs.
D) a duplication of effort.
Answer: B
Diff: 1
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

55) Successful collaborative planning, forecasting and replenishment must be built on a

foundation of
A) a common logistics carrier and data synchronization.
B) a single forecasting approach and a common logistics carrier.
C) data synchronization and established standards for exchanging information.
D) established standards for exchanging information and a single forecasting approach.
Answer: C
Diff: 2
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

22
Copyright © 2019 Pearson Education, Inc.
56) The most common form of collaboration observed in practice is
A) store replenishment.
B) retail event.
C) collaborative assortment.
D) distribution center replenishment.
Answer: D
Diff: 2
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

57) Trading partners collaborate on store-level POS forecasts in

A) store replenishment collaboration.
B) DC replenishment collaboration.
C) retail event collaboration.
D) collaborative assortment planning.
Answer: A
Diff: 2
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

58) When implementing a CPFR system, a fundamental aspect of successful collaboration is

A) shielding data that should not be shared.
B) establishing cross functional, customer-specific teams.
C) retail event collaboration.
D) planning for succession along all levels of management and supervision.
Answer: B
Diff: 2
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

59) In a CPFR system, a gap between forecasts made by two sides is termed a(n)
A) discrepancy.
B) mismatch.
C) opportunity.
D) exception.
Answer: D
Diff: 2
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.
23
Copyright © 2019 Pearson Education, Inc.
60) As forecasts become firm, they are converted to
A) production plans.
B) third stage forecasts.
C) actual orders.
D) forecast feedback.
Answer: C
Diff: 2
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

61) A high fashion retailer should rely on

A) historical data to forecast next season's demand.
B) interpretation of industry trends and customer tastes to forecast next season's demand.
C) store-level POS data to forecast next season's demand.
D) distribution center withdrawals to forecast next season's demand.
Answer: B
Diff: 2
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

62) The local hominy man is anticipating a bumper crop this year, so he arranges with a chain of
grocery stores to stock up on his hominy as part of a Homina Homina Hominy campaign to lure
customers in to the stores during September for cans of the divinely salty, yet nutritious
vegetable. This approach is an example of
A) DC replenishment collaboration.
B) store replenishment collaboration.
C) retail event collaboration.
D) assortment planning collaboration.
Answer: C
Diff: 2
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

24
Copyright © 2019 Pearson Education, Inc.
63) Retailers of all sizes can explore CPFR as a strategic option, but in order to be scalable,
________ is needed.
A) a process
B) labor
C) money
D) technology
Answer: D
Diff: 2
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

64) A CPFR used for ________ relies less on historical data and more on interpretation of
industry trends, macroeconomics factors, and customer tastes.
A) seasonal goods
B) commodities
C) heavy equipment
D) high tech products
Answer: A
Diff: 2
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

65) Implementation of a CPFR requires implementation of appropriate technology and

A) replenishment at rates roughly double pre-implementation levels.
B) implementation of cross-functional, customer-specific teams.
C) revision of standard operating procedures for all organizational processes.
D) reduction of SKUs by 20%-30%.
Answer: A
Diff: 2
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

25
Copyright © 2019 Pearson Education, Inc.
10.3 Essay Questions

1) What is the bullwhip effect and how does it relate to lack of coordination in the supply chain?
Answer: Many firms have observed the bullwhip effect in which fluctuations in orders increase
as they move up the supply chain from retailers to wholesalers to manufacturers to suppliers. The
bullwhip effect distorts demand information within the supply chain, with different stages having
a very different estimate of what demand looks like. The result is a loss of supply chain
coordination. This leads to increased inventories, poorer product availability, and a drop in
profits. The bullwhip effect negatively impacts performance at every stage and thus hurts the
relationships between different stages of the supply chain. There is the tendency to assign blame
to other stages of the supply chain because each stage feels it is doing the best it can. The
bullwhip effect thus leads to a loss of trust between different stages of the supply chain and
makes any potential coordination efforts more difficult. It follows that the bullwhip effect and
the resulting lack of coordination have a significant negative impact on the supply chain's
performance. The bullwhip effect moves a supply chain away from the efficient frontier by
increasing cost and decreasing responsiveness. The bullwhip effect reduces the profitability of a
supply chain by making it more expensive to provide a given level of product availability.
Diff: 2
Topic: 10.1: Lack of Supply Chain Coordination and its Impact on Performance
AACSB: Application of knowledge
Objective: LO 10.1: Describe supply chain coordination and the bullwhip effect, and their
impact on supply chain performance.

2) What is the impact of lack of coordination on the performance of the supply chain?
Answer: A lack of coordination occurs either because different stages of the supply chain have
objectives that conflict or because information moving between stages gets delayed and
distorted. Different stages of a supply chain may have objectives that conflict if each stage has a
different owner. As a result, each stage tries to maximize its own profits, resulting in actions that
often diminish total supply chain. Information is distorted as it moves within the supply chain
because complete information is not shared between stages. This distortion is exaggerated by the
fact that supply chains today produce a large amount of product variety. The lack of supply chain
coordination leads to increased inventories, poorer product availability, and a drop in profits.
Diff: 2
Topic: 10.1: Lack of Supply Chain Coordination and its Impact on Performance
AACSB: Application of knowledge
Objective: LO 10.1: Describe supply chain coordination and the bullwhip effect, and their
impact on supply chain performance.

26
Copyright © 2019 Pearson Education, Inc.
3) Describe the impact of forecasts based on orders rather than actual customer demand.
Answer: When stages within a supply chain make forecasts that are based on orders they
receive, any variability in customer demand is magnified as orders move up the supply chain to
manufacturers and suppliers. In supply chains that exhibit the bullwhip effect, the fundamental
means of communication between different stages are the orders that are placed. Each stage
views its primary role within the supply chain as one of filling orders placed by its downstream
partner. Thus, each stage views its demand to be the stream of orders received and produces a
forecast based on this information. In such a scenario, a small change in customer demand
becomes magnified as it moves up the supply chain in the form of customer orders. Consider the
impact of a random increase in customer demand at the retailer. The retailer may interpret part of
this random increase to be a growth trend. This interpretation will lead the retailer to order more
than the observed increase in demand because the retailer expects growth to continue into the
future and thus orders to cover for future anticipated growth. The increase in the order placed
with the wholesaler is thus larger than the observed increase in demand at the retailer. Part of the
increase is a one-time increase. The wholesaler, however, has no way to interpret the order
increase correctly. The wholesaler simply observes a jump in the order size and infers a growth
trend. The growth trend inferred by the wholesaler will be larger than that inferred by the retailer
(recall that the retailer had increased the order size to account for future growth). The wholesaler
will thus place an even larger order with the manufacturer. As we go further up the supply chain,
the order size will be magnified. Now assume that periods of random increase are followed by
periods of random decrease in demand. Using the same forecasting logic as earlier, the retailer
will now anticipate a declining trend and reduce order size. This reduction will also become
magnified as we move up the supply chain.

The fact that each stage in a supply chain forecasts demand based on the stream of orders
received from the downstream stage results in a magnification of fluctuations in demand as we
move up the supply chain from the retailer to the manufacturer.
Diff: 2
Topic: 10.2: Obstacles to Coordination in a Supply Chain
AACSB: Application of knowledge
Objective: LO 10.2: Identify obstacles to coordination in a supply chain.

27
Copyright © 2019 Pearson Education, Inc.
4) Describe the impact of behavioral obstacles on supply chain coordination.
Answer: Behavioral obstacles refer to problems in learning within organizations that contribute
to the bullwhip effect. These problems are often related to the way the supply chain is structured
and the communication between different stages. Some of the behavioral obstacles are as
follows:
Each stage of the supply chain views its actions locally and is unable to see the impact of its
actions on other stages.
Different stages of the supply chain react to the current local situation rather than trying to
identify the root causes.
Based on local analysis, different stages of the supply chain blame each other for the
fluctuations, with successive stages in the supply chain becoming enemies rather than partners.
No stage of the supply chain learns from its actions over time because the most significant
consequences of the actions any one stage takes occur elsewhere. The result is a vicious cycle
where actions taken by a stage create the very problems that the stage blames on others.
A lack of trust between supply chain partners causes them to be opportunistic at the expense of
overall supply chain performance. The lack of trust also results in significant duplication of
effort. More important, information available at different stages is either not shared or is ignored
because it is not trusted.
Diff: 2
Topic: 10.2: Obstacles to Coordination in a Supply Chain
AACSB: Application of knowledge
Objective: LO 10.2: Identify obstacles to coordination in a supply chain.

5) How does cooperation and trust improve performance in a supply chain partnership?
Answer: Cooperation and trust within the supply chain help improve performance for the
following reasons:
A more natural aligning of incentives and objectives is achieved. When stages trust each other,
they are more likely to take the other party's objective into consideration when making decisions.
Action-oriented managerial levers to achieve coordination become easier to implement. Sharing
of information is natural between parties that trust each other. Similarly, operational
improvements are easier to implement and appropriate pricing schemes are easier to design if
both parties are aiming for the common good.
An increase in supply chain productivity results, either by elimination of duplicated effort or by
allocating effort to the appropriate stage. For example, a manufacturer receives material from a
supplier without inspecting it as long as the supplier shares process control charts.
A greater sharing of detailed sales and production information results. This sharing allows the
supply chain to coordinate production and distribution decisions. As a result, the supply chain is
better able to match supply and demand, resulting in better coordination.
Diff: 2
Topic: 10.2: Obstacles to Coordination in a Supply Chain
AACSB: Application of knowledge
Objective: LO 10.2: Identify obstacles to coordination in a supply chain.

28
Copyright © 2019 Pearson Education, Inc.
6) How do improperly structured incentives lead to a lack of coordination in the supply chain?
Answer: Incentive obstacles refer to situations where incentives offered to different stages or
participants in a supply chain lead to actions that increase variability and reduce total supply
chain profits. Incentives that focus only on the local impact of an action result in decisions that
do not maximize total supply chain profits. Buying decisions based on maximizing profits at a
single stage of the supply chain lead to ordering policies that do not maximize supply chain
profits.
Improperly structured sales force incentives are a significant obstacle to coordination in the
supply chain. In many firms, sales force incentives are based on the amount the sales force sells
during an evaluation period of a month or a quarter. The sales typically measured by a
manufacturer are the quantity sold to distributors or retailers (sell-in), not the quantity sold to
final customers (sell-through). Measuring performance based on sell-in is often justified on the
grounds that the manufacturer's sales force does not control sell-through. This leads to spikes in
orders that do not reflect actual customer needs.
Diff: 2
Topic: 10.3: Managerial Levers to Improve Coordination
AACSB: Application of knowledge
Objective: LO 10.3: Discuss managerial levers that help improve coordination in a supply chain.

7) What is a disadvantage of vendor managed inventory?

Answer: One drawback of VMI arises because retailers often sell products from competing
manufacturers that are substitutes in the customer's mind. For example, a customer may
substitute detergent manufactured by P&G by detergent manufactured by Unilever. If the retailer
has a VMI agreement with both manufacturers, each manufacturer will ignore the impact of
substitution when making inventory decisions. As a result, inventories at the retailer will be
higher than optimal. In such a setting, the retailer may be better positioned to decide on the
replenishment policy.
Diff: 2
Topic: 10.4: Some practical approaches to improve supply chain coordination
AACSB: Application of knowledge
Objective: LO 10.4: Understand some practical approaches to improve coordination in a supply
chain.

29
Copyright © 2019 Pearson Education, Inc.