Chapter 2 Supply Chain Performance: Achieving Strategic Fit and Scope

True/False 1. A companys competitive strategy defines the set of customer needs that it seeks to satisfy through its products and services. Ans er: !rue "ifficulty: #asy

2. !he value chain emphasi$es the close relationship %et een all the functional strategies ithin a company. Ans er: !rue "ifficulty: &oderate '. A companys product development strategy defines the set of customer needs that it seeks to satisfy through its products and services. Ans er: False "ifficulty: &oderate (. A companys product development strategy specifies the portfolio of ne products that it ill try to develop. Ans er: !rue "ifficulty: #asy ). A companys supply chain strategy specifies ho the market ill %e segmented and ho the product ill %e positioned* priced* and promoted. Ans er: False "ifficulty: #asy +. A companys supply chain strategy determines the nature of procurement and transportation of materials as ell as the manufacture and distri%ution of the product. Ans er: !rue "ifficulty: #asy ,. !he degree of supply chain responsiveness should %e consistent ith the implied uncertainty. Ans er: !rue "ifficulty: #asy -. !he degree of supply chain responsiveness does not need to %e consistent ith the implied uncertainty. Ans er: False "ifficulty: &oderate .. !o achieve complete strategic fit* a firm must ensure that all functions in the value chain have consistent strategies that support the competitive strategy. Ans er: !rue "ifficulty: &oderate

1/. !o achieve complete strategic fit* a firm must ensure that all functions in the value chain have diverse strategies that support functional goals. Ans er: False "ifficulty: &oderate 11. 0ecause demand and supply characteristics change* the supply chain strategy must change over the product life cycle if a company is to continue achieving strategic fit. Ans er: !rue "ifficulty: #asy 12. !he supply chain strategy must %e esta%lished at the %eginning of the product life cycle and not changed if a company is to continue achieving strategic fit. Ans er: False "ifficulty: #asy 1'. !o retain strategic fit* supply chain strategy must %e ad1usted over the life cycle of a product and as the competitive landscape changes. Ans er: !rue "ifficulty: &oderate 1(. !he intercompany scope of strategic fit is essential today %ecause the competitive playing field has shifted from company versus company to supply chain versus supply chain. Ans er: !rue "ifficulty: &oderate 1). !he intercompany scope of strategic fit is no longer relevant today %ecause the competitive playing field has shifted from company versus company to supply chain versus supply chain. Ans er: False "ifficulty: #asy 1+. !he intercompany scope of strategic fit re2uires firms to evaluate every action in the conte3t of the entire supply chain. Ans er: !rue "ifficulty: &oderate 1,. !here is a close connection %et een the design and management of supply chain flo s and the success of a supply chain. Ans er: !rue "ifficulty: #asy Multiple Choice 1. A companys competitive strategy a. defines the set of customer needs that it seeks to satisfy through its products and services. %. specifies the portfolio of ne products that it ill try to develop. c. specifies ho the market ill %e segmented and ho the product ill %e positioned* priced* and promoted.

d.

determines the nature of procurement and transportation of materials as ell as manufacture and distri%ution of the product. e. determines ho it ill o%tain and maintain the appropriate set of skills and a%ilities to meet customer needs. Ans er: a "ifficulty: &oderate 2. A companys product development strategy a. defines the set of customer needs that it seeks to satisfy through its products and services. %. specifies the portfolio of ne products that it ill try to develop. c. specifies ho the market ill %e segmented and ho the product ill %e positioned* priced* and promoted. d. determines the nature of procurement and transportation of materials as ell as manufacture and distri%ution of the product. e. determines ho it ill o%tain and maintain the appropriate set of skills and a%ilities to meet customer needs. Ans er: % "ifficulty: #asy

'. A companys marketing and sales strategy a. defines the set of customer needs that it seeks to satisfy through its products and services. %. specifies the portfolio of ne products that it ill try to develop. c. specifies ho the market ill %e segmented and ho the product ill %e positioned* priced* and promoted. d. determines the nature of procurement and transportation of materials as ell as manufacture and distri%ution of the product. e. determines ho it ill o%tain and maintain the appropriate set of skills and a%ilities to meet customer needs. Ans er: c "ifficulty: &oderate (. A companys supply chain strategy a. defines the set of customer needs that it seeks to satisfy through its products and services. %. specifies the portfolio of ne products that it ill try to develop. c. specifies ho the market ill %e segmented and ho the product ill %e positioned* priced* and promoted. d. determines the nature of procurement and transportation of materials as ell as manufacture and distri%ution of the product. e. determines ho it ill o%tain and maintain the appropriate set of skills and a%ilities to meet customer needs. Ans er: d "ifficulty: #asy ). 4hich of the follo ing determines the nature of procurement of ra materials* transportation of materials to and from the company* manufacture of the product or operation to provide the service* and distri%ution of the product to the customer along ith follo 5up service6 a. Competitive strategy

%. Product development strategy c. &arketing and sales strategy d. Supply chain strategy e. none of the a%ove Ans er: d "ifficulty: #asy +. 4hich of the follo ing defines the set of customer needs that a company seeks to satisfy through its products and services6 a. Competitive strategy %. Product development strategy c. &arketing and sales strategy d. Supply chain strategy e. none of the a%ove Ans er: a "ifficulty: &oderate ,. 4hich of the follo ing specifies ho the market ill %e segmented and ho the product ill %e positioned* priced* and promoted6 a. Competitive strategy %. Product development strategy c. &arketing and sales strategy d. Supply chain strategy e. none of the a%ove Ans er: c "ifficulty: &oderate -. 4hich of the follo ing specifies the portfolio of ne products that a company ill try to develop6 a. Competitive strategy %. Product development strategy c. &arketing and sales strategy d. Supply chain strategy e. all of the a%ove Ans er: % "ifficulty: #asy .. A supply chain strategy includes a. supplier strategy. %. operations strategy. c. logistics strategy. d. all of the a%ove e. none of the a%ove Ans er: d "ifficulty: &oderate 1/. A supply chain strategy involves decisions regarding a. inventory. %. transportation. c. operating facilities. d. information flo s.

e. all of the a%ove Ans er: e "ifficulty: &oderate 11. A supply chain strategy involves decisions regarding all of the follo ing except a. inventory. %. transportation. c. ne product development. d. operating facilities. e. information flo s. Ans er: c "ifficulty: &oderate 12. 4hich of the follo ing is a key to the success or failure of a company6 a. !he competitive strategy and all functional strategies must fit together to form a coordinated overall strategy. %. #ach functional strategy must support other functional strategies and help a firm reach its competitive strategy goal. c. !he different functions in a company must appropriately structure their processes and resources to %e a%le to e3ecute strategies successfully. d. All of the a%ove are keys to success. e. 7one of the a%ove are a key to success. Ans er: d "ifficulty: &oderate 1'. 4hich of the follo ing is not a key to the success or failure of a company6 a. !he competitive strategy and all functional strategies must fit together to form a coordinated overall strategy. %. #ach functional strategy must support other functional strategies and help a firm reach its competitive strategy goal. c. !he different functions in a company must appropriately structure their processes and resources to %e a%le to e3ecute strategies successfully. d. All of the a%ove are keys to success. e. 7one of the a%ove are a key to success. Ans er: d "ifficulty: &oderate 1(. 4hich of the follo ing is not a key to the success or failure of a company6 a. !he competitive strategy and all functional strategies must fit together to form a coordinated overall strategy. %. !he competitive strategy and all functional strategies operate independently of each other. c. !he different functions in a company must appropriately structure their processes and resources to %e a%le to e3ecute strategies successfully. d. #ach functional strategy must support other functional strategies and help a firm reach its competitive strategy goal. e. All of the a%ove are keys to success. Ans er: % "ifficulty: &oderate 1). 4hich of the follo ing are %asic steps to achieving strategic fit6

a. 8nderstanding the customer and supply uncertainty. %. 8nderstanding the supply chain capa%ilities. c. Achieving strategic fit. d. All of the a%ove are %asic steps to achieving strategic fit. e. 7one of the a%ove are a %asic step to achieving strategic fit. Ans er: d "ifficulty: &oderate 1+. Customer demand from different segments varies along hich of the follo ing attri%utes6 a. !he 2uantity of product needed in each lot. %. !he response time that customers are illing to tolerate. c. !he variety of products needed. d. !he service level re2uired. e. all of the a%ove Ans er: e "ifficulty: #asy 1,. !he uncertainty of customer demand for a product is the a. rate of strategic uncertainty. %. demand uncertainty. c. implied demand uncertainty. d. average forecast error. e. none of the a%ove Ans er: % "ifficulty: &oderate 1-. !he uncertainty that e3ists due to the portion of demand that the supply chain is re2uired to meet is the a. rate of strategic uncertainty. %. demand uncertainty. c. implied demand uncertainty. d. average forecast error. e. none of the a%ove Ans er: c "ifficulty: &oderate 1.. 4hich of the follo ing customer needs ill cause implied uncertainty of demand to increase6 a. 9ange of 2uantity re2uired increases %. :ead time decreases c. ;ariety of products re2uired increases d. 9e2uired service level increases e. all of the a%ove Ans er: e "ifficulty: #asy 2/. 4hich of the follo ing customer needs ill cause implied uncertainty of demand to decrease6 a. 9ange of 2uantity re2uired increases %. :ead time decreases

c. ;ariety of products re2uired increases d. 9e2uired service level increases e. none of the a%ove Ans er: e "ifficulty: &oderate 21. 4hich of the follo ing customer needs ill cause implied uncertainty of demand to increase6 a. Product margin %. :ead time decreases c. Average stockout rate d. Average forced season end markdo n e. none of the a%ove Ans er: % "ifficulty: &oderate 22. 4hich of the follo ing characteristics of customer demand have a correlation ith implied uncertainty6 a. Product margin %. Average forecast error c. Average stockout rate d. Average forced season end markdo n e. all of the a%ove Ans er: e "ifficulty: &oderate 2'. 4hich of the follo ing is not a characteristic of customer demand correlated ith implied uncertainty6 a. Product margin %. 8npredicta%le and lo yields c. Average stockout rate d. Average forced season end markdo n e. 7one of the a%ove are correlated ith implied uncertainty Ans er: % "ifficulty: &oderate 2(. 4hich of the follo ing supply chain capa%ilities ill cause supply uncertainty to increase6 a. Fre2uent %reakdo ns %. 8npredicta%le and lo yields c. Poor 2uality d. :imited supply capacity e. all of the a%ove Ans er: e "ifficulty: #asy 2). 4hich of the follo ing supply chain capa%ilities ill cause supply uncertainty to increase6 a. #volving production process %. <nfle3i%le supply capacity c. :imited supply capacity

d. 8npredicta%le and lo yields e. all of the a%ove Ans er: e "ifficulty: #asy 2+. 4hich of the follo ing supply chain capa%ilities ill cause supply uncertainty to decrease6 a. #volving production process %. <nfle3i%le supply capacity c. :imited supply capacity d. 8npredicta%le and lo yields e. none of the a%ove Ans er: e "ifficulty: &oderate 2,. 4hich of the follo ing is not a supply chain capa%ility that ill impact supply uncertainty6 a. #volving production process %. <nfle3i%le supply capacity c. :imited supply capacity d. Product margin e. 8npredicta%le and lo yields Ans er: d "ifficulty: &oderate 2-. !he first step in achieving strategic fit %et een competitive and supply chain strategies is to a. understand the supply chain and map it on the responsiveness spectrum. %. understand customers and supply chain uncertainty. c. match supply chain responsiveness ith the implied uncertainty of demand. d. ensure that all functional strategies ithin the supply chain support the supply chains level of responsiveness. e. none of the a%ove Ans er: % "ifficulty: =ard 2.. !he second step in achieving strategic fit %et een competitive and supply chain strategies is to a. understand the supply chain and map it on the responsiveness spectrum. %. understand customers and supply chain uncertainty. c. match supply chain responsiveness ith the implied uncertainty of demand. d. ensure that all functional strategies ithin the supply chain support the supply chains level of responsiveness. e. none of the a%ove Ans er: a "ifficulty: =ard '/. !he final step in achieving strategic fit %et een competitive and supply chain strategies is to a. understand the supply chain and map it on the responsiveness spectrum.

%. understand customers and supply chain uncertainty. c. match supply chain responsiveness ith the implied uncertainty of demand. d. com%ine customer and supply chain uncertainty and map it on the implied uncertainty spectrum. e. all of the a%ove Ans er: c "ifficulty: &oderate '1. Supply chain responsiveness includes the a%ility to do hich of the follo ing6 a. 9espond to ide ranges of 2uantities demanded %. &eet short lead times c. =andle a large variety of products d. &eet a very high service level e. all of the a%ove Ans er: e "ifficulty: #asy '2. Supply chain responsiveness includes the a%ility to do hich of the follo ing6 a. =andle supply uncertainty %. 0uild highly innovative products c. &eet short lead times d. &eet a very high service level e. all of the a%ove Ans er: e "ifficulty: #asy ''. Supply chain responsiveness includes the a%ility to do hich of the follo ing6 a. =andle supply uncertainty %. 8nderstand customers and supply chain uncertainty c. &atch supply chain responsiveness ith the implied uncertainty of demand d. #nsure that all functional strategies ithin the supply chain support the supply chains level of responsiveness e. none of the a%ove Ans er: a "ifficulty: &oderate '(. Supply chain responsiveness includes the a%ility to do hich of the follo ing6 a. 8nderstand customers and supply chain %. &eet a very high service level c. &atch supply chain responsiveness ith the implied uncertainty of demand d. #nsure that all functional strategies ithin the supply chain support the supply chains level of responsiveness e. none of the a%ove Ans er: % "ifficulty: &oderate '). Supply chain responsiveness includes the a%ility to do hich of the follo ing6 a. 8nderstand customers and supply chain %. &atch supply chain responsiveness ith the implied uncertainty of demand c. &eet short lead times

d. #nsure that all functional strategies ithin the supply chain support the supply chains level of responsiveness e. all of the a%ove Ans er: c "ifficulty: &oderate '+. !he cost of making and delivering a product to the customer is referred to as a. supply chain responsiveness. %. supply chain efficiency. c. cost5responsiveness efficient frontier. d. implied uncertainty. e. none of the a%ove Ans er: % "ifficulty: #asy ',. !he curve that sho s the lo est possi%le cost for a given level of responsiveness is referred to as the a. supply chain responsiveness curve. %. supply chain efficiency curve. c. cost5responsiveness efficient frontier. d. responsiveness spectrum. e. none of the a%ove Ans er: c "ifficulty: &oderate '-. A firm that is not on the cost5responsiveness efficient frontier can improve a. %oth responsiveness and cost performance. %. only responsiveness. c. only cost performance. d. responsiveness* %ut not cost performance. e. neither responsiveness nor cost performance. Ans er: a "ifficulty: #asy '.. A firm that is on the cost5responsiveness efficient frontier can improve a. responsiveness only %y increasing cost and %ecoming less efficient. %. cost performance only %y reducing responsiveness. c. %oth responsiveness and cost performance %y improving processes and changing technology to shift the efficient frontier. d. all of the a%ove e. neither responsiveness nor cost performance. Ans er: d "ifficulty: &oderate (/. A graph ith t o a3es ith implied uncertainty along the hori$ontal a3is and responsiveness along the vertical a3is is referred to as the a. implied uncertainty spectrum. %. responsiveness spectrum. c. uncertainty>responsiveness map. d. $one of strategic fit. e. none of the a%ove

Ans er: c "ifficulty: &oderate (1. !he relationship here increasing implied uncertainty from customers and supply sources is %est served %y increasing responsiveness from the supply chain is kno n as the a. implied uncertainty spectrum. %. responsiveness spectrum. c. uncertainty>responsiveness map. d. $one of strategic fit. e. none of the a%ove Ans er: d "ifficulty: &oderate (2. !o achieve complete strategic fit* a firm must a. consider all functional strategies ithin the value chain. %. ensure that all functions in the value chain have consistent strategies that support the competitive strategy. c. ensure that all su%strategies ithin the supply chain such as manufacturing* inventory* and purchasing %e consistent ith the supply chains level of responsiveness. d. all of the a%ove e. none of the a%ove Ans er: d "ifficulty: =ard ('. !he drive for strategic fit should come from a. the supply chain manager. %. the strategic planning department. c. the highest levels of the organi$ation* such as the C#?. d. middle management. e. sales and marketing. Ans er: c "ifficulty: =ard ((. !he important points to remem%er a%out achieving strategic fit are a. there is one best supply chain strategy for all competitive strategies. %. there is no right supply chain strategy independent of the competitive strategy. c. there is a right supply chain strategy for a given competitive strategy. d. all of the a%ove e. % and c only Ans er: e "ifficulty: =ard (). !he prefera%le supply chain strategy for a firm that sells multiple products and serves customer segments ith very different needs is to a. set up independent supply chains for each different product or customer segment. %. set up a supply chain that meets the needs of the highest volume product or customer segment.

c. d.

tailor the supply chain to %est meet the needs of each products demand. set up a supply chain that meets the needs of the customer segment ith the highest implied uncertainty. e. set up a supply chain that meets the needs of product ith the highest implied uncertainty. Ans er: c "ifficulty: =ard (+. 4hich of the follo ing ould not %e a demand and supply characteristic to ard the %eginning stages of a products life cycle6 a. "emand is very uncertain and supply may %e unpredicta%le. %. "emand has %ecome more certain and supply is predicta%le. c. &argins are often high and time is crucial to gaining sales. d. Product availa%ility is crucial to capturing the market. e. Cost is often of secondary consideration. Ans er: % "ifficulty: &oderate (,. 4hich of the follo ing ould %e a demand and supply characteristic to ard the %eginning stages of a products life cycle6 a. "emand has %ecome more certain and supply is predicta%le. %. &argins are lo er due to an increase in competitive pressure. c. Product availa%ility is crucial to capturing the market. d. Price %ecomes a significant factor in customer choice. e. none of the a%ove Ans er: c "ifficulty: &oderate (-. 4hich of the follo ing ould not %e a demand and supply characteristic in the later stages of a products life cycle6 a. "emand has %ecome more certain and supply is predicta%le. %. &argins are lo er due to an increase in competitive pressure. c. Product availa%ility is crucial to capturing the market. d. Price %ecomes a significant factor in customer choice. e. All of the a%ove are characteristics of the later stages. Ans er: c "ifficulty: &oderate (.. !he functions and stages that devise an integrated strategy ith a shared o%1ective are referred to as a. competitive strategy. %. supply chain strategy. c. scope of strategic fit. d. scope of marketing strategy. e. scope of product development strategy. Ans er: c "ifficulty: &oderate )/. !he most limited scope over hich strategic fit is considered is one operation ithin a functional area in a company. !his is referred to as a. intracompany intraoperational scope.

%. intracompany intrafunctional scope. c. intracompany interoperational scope. d. intercompany interfunctional scope. e. agile intercompany scope. Ans er: a "ifficulty: #asy )1. !he scope of strategic fit that includes all operations ithin a function in a company is a. intracompany intraoperational scope. %. intracompany intrafunctional scope. c. intracompany interoperational scope. d. intercompany interfunctional scope. e. agile intercompany scope. Ans er: % "ifficulty: #asy )2. !he scope of strategic fit here all functional strategies are developed to support %oth each other and the competitive strategy in order to ma3imi$e company profit is a. intracompany intraoperational scope. %. intracompany intrafunctional scope. c. intracompany interoperational scope. d. intercompany interfunctional scope. e. agile intercompany scope. Ans er: c "ifficulty: #asy )'. !he scope of strategic fit that re2uires that each company evaluate its actions in the conte3t of the entire supply chain is a. intracompany intraoperational scope. %. intracompany intrafunctional scope. c. intracompany interoperational scope. d. intercompany interfunctional scope. e. agile intercompany scope. Ans er: d "ifficulty: #asy )(. A firms a%ility to achieve strategic fit hen partnering ith supply chain stages that change over time is referred to as a. intracompany intraoperational scope. %. intracompany intrafunctional scope. c. intracompany interoperational scope. d. intercompany interfunctional scope. e. agile intercompany scope. Ans er: e "ifficulty: #asy Essay/Problems 1. "iscuss the t o keys to the success or failure of a company.

Answer: A companys success or failure is thus closely linked to the follo ing keys: 1. !he competitive strategy and all functional strategies must fit together to form a coordinated overall strategy. #ach functional strategy must support other functional strategies and help a firm reach its competitive strategy goal. 2. !he different functions in a company must appropriately structure their processes and resources to %e a%le to e3ecute these strategies successfully. Difficulty: =ard 2. :ist and e3plain the three %asic steps to achieving strategic fit. Answer: !here are three %asic steps to achieving strategic fit: 1. Understanding the customer and supply chain uncertainty. First a company must understand the customer needs for each targeted segment and the uncertainty the supply chain faces in satisfying these needs. !hese needs help the company define the desired cost and service re2uirements. !he supply chain uncertainty helps the company identify the e3tent of disruption and delay the supply chain must %e prepared for. 2. Understanding the supply chain capabilities. !here are many types of supply chains* each of hich is designed to perform different tasks ell. A company must understand hat its supply chain is designed to do ell. 3. Achieving strategic fit. <f a mismatch e3ists %et een hat the supply chain does particularly ell and the desired customer needs* the company ill either need to restructure the supply chain to support the competitive strategy or alter its strategy. Difficulty: &oderate '. :ist the attri%utes along hich customer demand from different segments can vary. Answer: <n general* customer demand from different segments may vary along several attri%utes as follo s: !he 2uantity of the product needed in each lot !he response time that customers are illing to tolerate !he variety of products needed !he service level re2uired !he price of the product !he desired rate of innovation in the product Difficulty: &oderate (. :ist the a%ilities included in supply chain responsiveness. Answer: Supply chain responsiveness includes a supply chains a%ility to do the follo ing: 9espond to ide ranges of 2uantities demanded &eet short lead times =andle a large variety of products 0uild highly innovative products

 &eet a very high service level =andle supply uncertainty Difficulty: &oderate ). "iscuss the impact of the product life cycle on strategic fit %et een implied demand uncertainty and supply chain responsiveness. Answer: As products go through their life cycle* the demand characteristics and the needs of the customer segments %eing served change. Supply characteristics also change as the product and production technologies mature. =igh5tech products are particularly prone to these life cycle s ings over a very compressed time span. A product goes through life cycle phases from the introductory phase* hen only the leading edge of customers is interested in it and supply is uncertain* all the ay to the point at hich the product %ecomes a commodity* the market is saturated* and supply is predicta%le. !hus* if a company is to maintain strategic fit* its supply chain strategy must evolve as its products enter different phases. As products mature* the corresponding supply chain strategy should* in general* move from %eing responsive to %eing efficient. !he key point here is that demand and supply characteristics change over a products life cycle. 0ecause demand and supply characteristics change* the supply chain strategy must also change over the product life cycle if a company is to continue achieving strategic fit. Difficulty: &oderate +. #3plain scope of strategic fit. Answer: Scope of strategic fit refers to the functions and stages that devise an integrated strategy ith a shared o%1ective. <t is a key issue relating to strategic fit in terms of supply chain stages* across hich the strategic fit applies. At one e3treme* every operation ithin each functional area devises its o n independent strategy ith the o%1ective of optimi$ing its individual performance. <n this case* the scope of strategic fit is restricted to an operation in a functional area ithin a stage of the supply chain. At the opposite e3treme* all functional areas ithin all stages of the supply chain devise strategy 1ointly ith a common o%1ective of ma3imi$ing supply chain profit. <n this case* the scope of strategic fit e3tends to the entire supply chain. #3panding the scope of strategic fit improves supply chain performance. !he scope of strategic fit can %e represented on a t o5dimensional grid. =ori$ontally* the scope of strategic fit is considered across different supply chain stages* starting from suppliers and moving all the ay along the chain to the customer. ;ertically* the scope is applied to the fit achieved across different functional strategies* competitive* product development* supply chain* and marketing.