Chapter 6

Procurement Methods
Multiple Choice Questions
Q1. Procurement methods have considerable impact on _________.
a. product pricing
b. inventory level
c. warehouse space
d. transportation modes
e. all the above

Q2. Inventories are maintained for meeting production requirements,

supporting the operations, extending customer service and hedge
against future __________.
a. uncertainties
b. production schedules
c. cost reduction
d. profit goals
e. none of the above

Q3. Effective implementation of VMI depends on smoothly addressing

the concerns of __________.
a. defining incentive programs based on partnership and not on sales volume
b. building partnerships with management commitment
c. conduct simulations and pilots before actual implementation
d. organize training sessions before launching VMI program
e. all the above

Q4. The modern approach to control inventories is not focused on

__________.
a. flow
b. flexibility
c. adaptability
d. balancing
e. integration
Q5. The inventory carrying cost is consisting of the cost of the funds invested
in inventory, handling cost, ___________, damage and obsolescence cost and
opportunity cost.
a. insurance cost
b. promotional cost
c. marketing cost
d. production cost
e. all the above

Q6. AITS in inventory controls means __________.

a. all inventory transport system
b. automated inventory tracking and system
c. alternative inventory trading system
d. adoption of inventory tracing in storage
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 e. administration of inventory transfer system

Q7. The procurement policy decisions are concerned with managing the
inventory ___________ across the various distribution network.
a. independently or interdependently
b. collectively
c. using erp
d. in transit
e. none of the above

Q8. Inventory should be held only when the ___________ of holding the
inventory exceeds the ___________ of carrying the inventory.
a. cost; benefits
b. benefits; cost
c. average level; optimum level
d. benefits; purpose
e. all the above

Q9. The purchasing is a process covering many steps such as sending

enquiries, request for quotations, soliciting quotation, __________,
issuing purchase order, shipping advice, invoice, and finally issuing
payments.
a. setting specifications
b. stratification
c. administration
d. negotiations
e. noting stock levels

Q10. EOQ is an inventory decision model, based on __________.

a. differential calculus
b. maxima and minima
c. Just-in-Time
d. linear programming
e. queuing technique

Q11. The Economic Order Quantity (EOQ) is the number of units that a
company should add to inventory with each order to minimize the total
costs of inventory which covers holding costs, ___________, and
shortage costs.
a. opportunity cost
b. damage cost
c. pilferage
d. shrinkage cost
e. order costs

Q12. The EOQ model is based on the following assumptions; demand is

constant, and ____________.
a. inventory is depleted at a fixed rate until it reaches zero
b. inventory is replenished instantly
c. inventory safety stock remains constant
d. inventory prices fluctuates in market

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 e. all the above

Q13. Cost of inventory under the EOQ model involves a tradeoff between
inventory _______ costs and _______ costs.
a. damage; holding
b. holding; order
c. opportunity; loss; damage
d. shrinkage; holding
e. shrinkage; order

Q14. The EOQ model finds the quantity that minimizes the sum of
___________ costs.
a. order and holding
b. replenishment and transportation
c. storage and damage
d. insurance and opportunity loss
e. all the above

Q15. To go as per the EOQ formula will be rarely possible because

__________.
a. ordered quantity modified due to available standard pack size
b. quantity discount offered by the suppliers
c. availability of funds will with buyer
d. anticipated shortage of material in the market
e. all the above

Q16. JIT (Just-in-Time) cuts waste by supplying parts just at the time of
assembly process and ensure improvement in __________.
a. auality
b. productivity
c. reduces assembly time
d. improvement in supplier’s relationship
e. improvement in plant layout

Q17. At the heart of JIT lies the ___________, which means

___________ in Japanese language.
a. Kanban; card
b. Kaizan; continuous improvement
c. Muda; waste
d. Shitsuke; sustain
e. Pokayoke; no mistakes

Q18. JIT is used primarily for ___________ manufacturing processes.

a. Low-volume job order
b. intermittent
c. high-volume repetitive flow
d. customized product
e. all the above

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Q19. Vendor Managed inventory, Just-in-time distribution and Efficient
Consumer Response (ECR) all refer to ___________ concepts, but
applied to ___________ industries.
a. Similar; different
b. different; similar
c. different; different
d. similar; similar
e. none of the above

Q20. In Vendor Managed Inventory the ownership of inventory lies with

__________.
a. purchaser
b. both seller and purchase
c. third party
d. seller
e. insurance company

Answers:
1.(b) 2.(a) 3.(e) 4.(c) 5.(a) 6.(b) 7.(a) 8.(b) 9.(d) 10.(a) 11.(e) 12.(a) 13.(b)
14.(a) 15.(e) 16.(b) 17.(a) 18.(c) 19.(a) 20.(d)

VENDOR MANAGEGED INVENTORY (VMI)

Today, most of the firms are concentrating on the "core competences." They want to
outsource minor tasks and activities when it is cost effective to do so. For a distributor,
an example of one of these tasks is the replenishment of less-expensive products. For a
manufacturer, it may be the procurement of MRO (maintenance, repairs, and
operations) inventory. A popular way to outsource these procurement activities is a
vendor-managed inventory (VMI) agreement. Under a VMI, a supplier takes full
responsibility for maintaining stock of its products at a customer's facility. VMI differ
from traditional inventory management in that the customer is billed for material when
it is delivered, not when it is consumed or issued.

For example, the grocery and apparel industries tend to use ECR, whereas the
automobile industry tends to use VMI and JIT Distribution. VMI reduces stock outs and
reduces inventory in the supply chain. Some features of VMI include:

Shortening of the supply chain

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 Centralized forecasting
Frequent communication on inventory position
Inventory fill up in a prioritized order
Relationship with downstream distribution channels
Result Inventory and stock out reduction

In general, the supply chain is not synchronized to consumer demand. Hence, to secure
high service levels, both the wholesaler and the retail chain feel the need to buffer
against supply disruption. This in turn, distorts the demand that is communicated to the
supply factories. The objective of VMI is to find an effective way for the vendor to take
responsibility of the wholesaler’s inventory. This way the need for double buffering
against supply disruptions could be eliminated and the basis for planning supply request
from manufacturers could be improved.

In its simplest form, Vendor Managed Inventory is the process where the vendor
assumes the task of generating purchase orders to replenish a customer’s inventory.
VMI covers many types of supply chain initiatives. These different ‘VMI’ activities can
vary substantially in purpose and application.
VMI is about improving visibility of demand and product flow in a supply chain,
facilitating a more timely and accurate replenishment process between a supplier
(vendor) and an inventory site (customer, distributor, distribution center, etc…).

The application of VMI can be at any point within a supply chain:

Manufacturer – Wholesale Distributor – Retail

Manufacturer - End Customer/ OEM
Manufacturer – Internal Inventory Sites

VMI in Retail Industry

In Organised Retail Chain Industry, VMI is a process where the supplier
(manufacturer) maintains the inventory and fulfills orders of the retail
stores based on demand information sent by the retail store. During
this process the supplier is guided by mutually agreed objectives for
inventory levels, fill rates and transaction costs. The inventory data is
typically segmented into various groups such as inventory on hand, on
order, committed, back ordered and so forth. This transaction is the
back bone of VMI and is sent by the retail stores on a prearranged daily
schedule. The decision to order is based on this data. The business
process supported by this data is relatively simple. The manufacturer
(supplier) reviews the information that has been sent in by the retail
store to determine if an order is needed. This review of the data varies
by supplier and the software being used. The supplies (manufacturers)
undergo the following steps:

• Data verification for accuracy and meaningfulness (Software verifies it

automatically).

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 • Software calculates a reorder point for each item based on its
movement data and any overrides contributed by the retail store or
manufacturer. These overrides might include information such as
projects, seasonality, new items and so forth.

• Software compares the quantity available at the retail store with the
reorder point for each item at each location to determine whether
material is needed.

• Order quantities are then calculated taking into considerations the

carton quantities and transaction costs in completing the order process.

Further VMI transaction informs the retail stores what product to

expect from the supplier (manufacturer). There are two transactions
being used for this function. The most frequently used is the purchase
order acknowledgment. This document contains the product numbers
and quantities ordered by the supplier on the retailer’s behalf. A few
distributors skip this and rely on the advance shipping notice to alert
them to the order and shipment. This document differs in both timing
and content. This document is sent after the shipment has been made
and contains information on the part numbers shipped as well as
additional information such as carrier and waybill information.

The VMI system imparts advantages to both manufacturer and the

retailer stores in terms of lower inventories levels, better planning and
lower administrative costs

For VMI partnership to be successful and fruitful, when establishing an agreement, the
supplier and customer must agree on:

The specific products that will be covered under the VMI agreement
"Acceptable availability" of these products at the customer's site and the
corresponding investment required by the customer.
Mutually acceptable ‘service level’ agreement
How often the stock of these products will be replenished.
Automatic return of material not required by the customer.

The advantages for a customer participating in a VMI program covers:

Eliminating of transaction cost

Reduced inventory capital costs
Establishing an extremely reliable source of supply for products
Customer does not pay for the inventory until it is sold or used.
Elimination in inventory stock outs
Better financial planning
Elimination in ordering errors

The advantages for a supplier in a VMI program covers:

Securing all of a customer's business for products it supplies.

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 Better planning of its own inventory replenishment needs
Better capacity utilization of its plant
Better demand management
Customer focused approach leading to competitive advantage
Supply chain visibility
Better planning

The risks involved for supplier in participating VMI program are high administrative cost
as it is assuming responsibility for replenishment activity that was previously carried out
by the customer's buyers.

The real world implementations of VMI can be broken into three main categories:

collaboration,
automation, and
cost transfer

A Collaborative Planning model consists of sharing data, and jointly developing forecasts
and/or production schedules amongst supplier chain partners. This collaborative process
occurs at the tactical or item level. The ‘buyer’ collaborates with the supplier on
demand/usage plans in order to develop an agreed upon consensus forecast of future
demand that both companies will use to drive their business. This strictly collaborative
model is applicable to supply chains were a few, distinct items (SKU’s) generate
substantial volumes of business. In this environment it is valuable for people to review
and arrive at consensus on forecasting and replenishment plans for each SKU.

In business environments, where thousands of SKU’s have to be managed daily,

collaboration at the tactical (item) level is impractical, costly and error prone. The more
effective collaborative process is at the strategic level, where overall service and
inventory investment goals are agreed upon, along with the constraints within each
company. The collaborative stage is critical in establishing the goals and key
performance indicators for the VMI relationship. Periodically, this stage is reviewed for
current performance and adjusted or reconfirmed the goals and constraints. When the
collaboration and planning stages are done properly, the execution stage becomes
automated with very few exceptions, requiring less human interaction on a daily basis.
Furthermore, the Execution stage can provide suppliers with valuable information
beyond a purchase order quantity, enabling improvements to the order fulfillment and
inventory allocation processes.

In many instances a VMI relationship is the first time supply chain partners both have
access to, and are measuring performance using the same metrics. When two
companies are focused on the same goals and have access to the same key
performance metrics, a true supply chain partnership emerges, resulting in a better
performing supply chain.

VMI delivers tangible results throughout the supply chain. As the concepts and practices
of ‘lean’ extend beyond the manufacturing floor down through the supply chain, VMI is
the enabling process to drive out costs and time. For success of VMI implementation the
following are the keys:

Set, review and maintain performance goals

Manage all SKU’s through VMI to minimize transactions
Ensure data accuracy
Utilize automated replenishment system
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 Organise periodic performance reviews
Use the metrics to find cost and inefficiencies

VMI can be made to work, but the problem is not just one of logistics. VMI often
encounters resistance from the sales force and distributors. The issues are roles, skills,
trust and power shifts.

ONLINE PROCUREMENT
e-Procurement system allows businesses use the Internet for acquiring the necessary
goods and services. There are three main categories of e-Procurement systems. One
type focuses on improving the transactions and the decision-making capabilities of the
company. Businesses may deal with hundreds of transactions weekly, but these
applications simplify the process and help to build stronger relationships between buyers
and suppliers. The second category of e-procurement system involves managing assets.
Systems in this category provide inventory management, maintenance scheduling, in-
house product availability, as well as other similar services. These applications are
useful for businesses that need to keep a close watch on the quality of materials in
stock. The third category includes systems designed to optimize a company's production
operations. Many of these applications deal with the entire production cycle, including
the procurement of materials when the inventory runs low, the management of supplier
contracts, and the production scheduling. Because of the differences between the
systems, it is important for companies to choose the one that is most appropriate for
their industry. For example an automobile manufacturing company is likely to use
systems from the third category. The applications would allow them to maintain
minimum level of inventory but they also need to have a system which helps them plan
and forecast their production. However, companies such as automotive repair shops,
would be more likely to use e-Procurement systems from the second category. Since
they need to keep track not only of their inventory of car parts, but also of helping them
set repair schedules.

To the businesses, e-Procurement system imparts benefits such as saving money on

purchases, improving the timeliness of the purchasing process, and eliminating waste.
In addition to these benefits, companies can also improve the efficiency of their supply
chain. Additionally, using e-Procurement to enhance supply chain relationships can
make it easier for accounting departments to track and keep a record of payments and
invoices.

e-Procurement systems don't automatically boost supply chain efficiency. However, the
company must select a system that has the capabilities necessary to achieve those
benefits first. For example, the system must include applications to assist with contract
management, including storing pricing information, maintaining sales terms, and
helping negotiations. By having all of this information in one place, the purchasing
process is expedited. E-Procurement allows buyer to easily compare suppliers (on
price) so that the best one can be chosen to meet that company's particular needs.
However, choosing the right supplier depends on more than just price; it also involves
product availability, customer service, industry reputation, and quality.

E-procurement is more than just a system for making purchases online. A properly
implemented system connects companies and their business processes directly with
suppliers while managing all interactions between them. This includes management of
correspondence, bids, questions and answers, previous pricing, and multiple emails sent
to multiple participants. A good e-Procurement system helps a firm organize its
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interactions with its most crucial suppliers. It provides those who use it with a set of
built-in monitoring tools to help control costs and assure maximum supplier
performance. It provides an organized way to keep an open line of communication with
potential suppliers during a business process. The system allows managers to confirm
pricing, and leverage previous agreements to assure each new price quote is more
competitive than the last.

e-Procurement helps with the decision-making process by keeping relevant information

neatly organized. e-Procurement process is template-driven which makes all
transactions standardized and trackable. Keeping track of all bids means leveraging
firm’s knowledge to obtain better pricing. Well-managed e-procurement helps reduce
inventory levels. e-Procurement system allows multiple access levels and permissions
and help managers to organize administrative users by roles, groups, or tasks.

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Chapter 7
E-Procurement

Multiple Choice Questions

Q1. e-Procurement can deliver significant __________ cost

savings to businesses companies and marketplaces.
a. buy-side
b. sell-side
c. transportation
d. storage
e. inventory

Q2. Scope of E-procurement covers __________.

a. e-catalogue ordering
b. online ordering
c. web tendering
d. reverse auction
e. all the above

Q3. The optimization of supply chain cost requires streamlined,

collaborative business processes and a supporting technology
infrastructure that enables synchronization of information and
_________ across the supply chain.
a. material flow
b. information flow
c. quality
d. product development
e. production schedules

Q4. Benefits of E-procurement __________.

a. transaction convenience
b. global reach
c. transparency and paperless
d. cost saving
e. all the above

Q5. e-Procurement, which is done for the ___________.products

helps in reducing time and the cost of transaction.
a. customized
b. standard
c. significant value
d. critical
e. essential

1
Q6. e-Procurement process is ___________ resulting into
___________ and _______ saving.
a. complex; time; cost
b. factual; time;, cost
c. radical; time and cost
d. paperless; time;, cost
e. all the above

Q7. e-Procurement is perhaps the most direct and effective way for
an organization to leverage the ___________ to reduce costs,
improve productivity and boost profits.
a. internal strengths
b. web
c. core competencies
d. software skills
e. back end processes

Q8. E-procurement automates and streamlines the process by

creating a web-based, _________ environment that pushes product
selection and order initiation to the computer of buyer while
maintaining corporate trading agreements, workflows and
authorization rules.
a. programming
b. self-service
c. budgeting
d. cost cutting
e. vendor controlling

Q9. With adoption of e-Procurement the purchase department now

focuses on activities such as supply source development, negotiation
and __________.
a. vendor management
b. inventory stratification
c. vendor segmentation
d. value mapping
e. customer satisfaction

Q10. e-Sourcing helps in compression of __________ cycle.

a. replenishment
b. procurement
c. manufacturing
d. distribution
e. service

2
Q11. e-Procurement is outsourced to a third-party service provider
the _________ have no possibilities of creeping into.
a. seller’s en-efficiencies
b. dummy quotes
c. buyer’s culture
d. sellers influence
e. seller’s pressure

Q12. e-Procurement process exhibits following features except

__________.
a. transparent
b. non-biased
c. market centric
d. paperless
e. quick

Q13. The following are the features of reverse auction process

except the one ___________..
a. easy process
b. global reach
c. transparency
d. time managed
e. suppliers knows each other

Q14. There are three process cycles in procurement such as

identifying, evaluating vendors and calling the suppliers for
submitting bids. All these processes are _______ in an e-
procurement process.
a. not-covered
b. simplified
c. sometimes overlooked
d. one of them by-passed
e. none of the above

Q15. Against the benefits, e-procurement has certain constraints,

such as __________.
a. internet infrastructure
b. reluctance for acceptance of new system
c. different time zones
d. all the above
e. none of the above

Answers:
1.(a) 2.(e) 3.(a) 4.(e) 5.(b) 6.(d) 7.(b) 8.(b) 9.(d) 10.(b) 11.(b) 12.(c)
13.(e) 14.(b)

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Chapter 8

Strategic Sourcing
Multiple Choice Questions

Q1. Strategic Sourcing is a process aimed at obtaining maximum

advantage on the following by leveraging company’s buying power
__________.
a. cost
b. technology
c. process
d. quality
e. all the above

Q2. Strategic sourcing recognizes that people, including

___________ suppliers, are a valuable part of an organization and
focuses on reducing waste or non-value-added costs.
a. innovative
b. loyal
c. large
d. integrated
e. few

Q3. Strategic sourcing is a disciplined, systematic process for

reducing the total costs of __________ purchased materials,
products and services while maintaining or improving levels of
quality, service and technology.
a. externally
b. collectively
c. centrally
d. inspected
e. imported

Q4. Strategic Sourcing studies are ___________ initiatives.

a. tedious and time-consuming
b. cost effective
c. valid and acceptable
d. convincing
e. all the above

1 
 
Q5. The process used for strategic procurement is designed to
ensure that the organization’s needs, issues and ___________ are
effectively managed.
a. sources
b. risks
c. plans
d. facilities
e. inventory

Q6. Today the procurement function of most of the high-technology

companies cover interaction with important ___________ that goes
into planning, sourcing, making and delivering a final product.
a. business processes
b. business goals
c. customers
d. suppliers
e. none of the above

Q7. Strategic Procurement exists whenever an organisation seeks to

acquire a project, a service, a product, or a commodity that has high
___________ significance or importance to it.
a. usage
b. value
c. output
d. technology
e. customer

Q8. The relationships with suppliers are more ___________ in

strategic procurement as compared to traditional buying process.
a. integrated
b. personal
c. challenging
d. external
e. limited

Q9. In the strategic procurement process, the products justify

the__________, which buying company would spend on the study of
the product and the industry further to develop long term
relationship with the supplier.
a. convenience and approach
b. technology used and investments
c. issues and challenges
d. time and expenses
e. losses and delays

2 
 
Q10. Orientations observed to get materials from suppliers
___________.
a. buying (discreet)
b. procurement
c. supply chain
d. all the above
e. none of the above

Q11. Strategic sourcing exhibits following feature ___________.

a. emphasis on value
b. lowing of price
c. avoid stock outs
d. customer satisfaction
e. commercial and follow up skills

Q12. Strategic sourcing process provides the guidelines to handle

key sourcing decisions such as __________.
a. outsourcing
b. low cost country sourcing
c. accelerated sourcing
d. collaborative sourcing
e. all the above

Q13. The biggest single issue in strategic procurement is ________

relying on a group of single suppliers.
a. trust and reliability
b. quality and speed
c. technology and infrastructure
d. demand variability
e. adaptability

Q14. Traditioinal buying process is __________.

a. knowledge based buying
b. discreet buying behaviour
c. emphasis on value creation
d. life time contracting
e. cross functional approach

Q15. The important trends observed in procurement practices across the

various industries are as; global sourcing, compressing supply chain cycle,
__________; green procurement, real-time value-added partnerships,
emphasis on outsourcing to focus on core competencies.
a. eliminating middlemen
b. multi sourcing
c. multi tasking
d. discreet buying
e. standardization

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Answers:
1.(e) 2.(a) 3.(a) 4.(e) 5.(b) 6.(a) 7.(b) 8.(a) 9.(d) 10.(d) 11.(a) 12.(e)
13.(a) 14.(b) 15.(a)

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Chapter 10

Distribution Decisions
Multiple Choice Questions

Q1. In distribution there are two categories of issues and

decisions which need to be handled while designing the
distribution strategy. These are management of marketing
channels and ___________.
a. physical supplies
b. channel members
c. distribution centers
d. transportation nodes
e. none of the above

Q2. Channels of distribution are concerned not only with the

physical movement of goods but also with their promotion,
selling and marketing ___________.
a. functions
b. organizing
c. planning
d. control
e. all the above

Q3. Channels of distribution helps movement of goods from one

place to create utility such as __________.
a. place
b. time
c. possession
d. all the above
e. none of the above

Q4. The alternative to ___________ distribution is to establish

own retail stores for example Bata Ltd that has established its
own retail stores throughout the country to sell their products
to the consumers.
a. indirect
b. direct
c. franchise
d. online
e. none of the above

1
Q5. Depending on the product and markets there are channel
distribution structures such as __________.
a. intensive
b. selective
c. exclusive
d. all the above
e. none of the above

Q6. Distribution involves getting the product from the

manufacturer to the ultimate consumer and thus distributor
adds efficiency by __________.
a. breaking bulk
b. consolidation and distribution
c. carrying inventory
d. credit financing
e. all the above

Q7. Channels related decisions are dependent on the buying

behavior of the customers and the factors to be considered are
__________.
a. customer involvement (time devoted) in purchasing
b. number of brands compared
c. comparable substitutes
d. available similar products nearby
e. all the above

Q8. Distribution cost as a percentage of the product price

_________ as the unit prices of the product decreases.
a. increase
b. decreases
c. remains same
d. can’t say
e. all the above

Q9. The trend in distribution management is the concept of

________ marketing wherein the producer, wholesalers and
retailers are united into one integrated channel.
a. horizontal
b. vertical
c. co-operative
d. direct
e. indirect

Q10. In fact logistics ________ have to be tuned to the needs

of the channel members to reduce the loss of sales opportunity.
a. programs
b. speed
2
 c. cost
d. promotion
e. mission

Q11. The consumer goods companies have a ___________

channel structure because the end customers are very large in
numbers, they are spread over the wide geographical areas,
the unit price of the product is low and the frequency of
purchase is more.
a. short and dense
b. long and dense
c. short and sparse
d. long and sparse
e. none of the above

Q12. Basic functions of middlemen are categorized into

__________.
a. exchange
b. logistical
c. facilitating
d. all the above
e. none of the above

Q13. Flows in distribution channel are, except __________.

a. product
b. negotiation and ownership
c. information
d. cost
e. promotion

Q14. The place and the time utility of the product are not
possible without the close coordination between channel
__________ and the logistics __________.
a. task; operation
b. operation; task
c. programme; task
d. task; plan
e. plan; operation

Q15. The distribution is the heart of the logistical system and

there are many obvious reasons why distribution center needs
a critical focus for its management of the operations for
__________.
a. maximizing space occupancy
b. operating cost effectiveness
c. enhancing the assets productivity
d. inventory and transportation cost optimization

3
 e. all the above

Q16. Logistics program variants are __________.

a. delivery frequency and time
b. lot size and packaging (loose/packed/unitized)
c. transportation mode
d. customer service norms
e. all the above

Q17. Factors influencing decision on planning optimum

numbers of warehouse ___________.
a. market size, product and demand pattern
b. area coverage by each warehouse
c. customer service level
d. establishment, transportation and operating cost
e. all the above

Q18. Logistics performance parameters are __________.

a. order processing cycle
b. inventory norms
c. transportation cost
d. all the above
e. none of the above

Q19. The channel structure helps in ___________.as it passed

from the manufacturer to the customers.
a. transfer of ownership title
b. control of WIP
c. calculating working capital requirements
d. deciding storage area
e. deciding transit damages

Q20. Information flow in the channel structure is the basic

input to logistics to activate the _________ flow from the
manufacturer to the customer via channel members.
a. activities
b. materials
c. credits
d. cash
e. service

Answers:
1.(a) 2.(e) 3.(d) 4.(a) 5.(d) 6.(e) 7.(e) 8.(a) 9.(b) 10.(a) 11.(b) 12.(d)
13.(d) 14.(a) 15.(e) 16.(e) 17.(d) 18.(d) 19.(a) 20.(b)

4
Chapter 11

Decisions on Transportation and Freight

Multiple Choice Questions

Q1. Transportation is the most ___________ element of

logistics operation.
a. visible
b. uncontrollable
c. rational
d. operational
e. standard

Q2. The transportation serves two purposes one is the product

movement and the other one the ___________ product
storage.
a. field
b. pipeline
c. in-transit
d. excise paid
e. damaged

Q3. In-transit storage is not ____________ for the longer

period.
a. customer satisfying
b. cost effective
c. system efficient
d. optimizing
e. integrative

Q4. The guiding principle for choosing the transportation mode

is, the ___________ cost per unit weight/volume of the
product moved over the unit distance.
a. optimum
b. least
c. standard
d. average
e. competitive

Q5. Selection of particular mode is dependent on the

___________ of transportation infrastructure in the region.
a. availability
b. cost
c. speed
d. size
e. quality

1
Q6. Road transportation offers a number of advantages such as
__________.
a. door to door service
b. flexibility
c. reliability and speed
d. reach to remote places
e. all the above

Q7. Trucking industry in the country it is predominantly in the

___________ private sector and bulk of truck operators are
___________ truck owners.
a. Unorganized; single
b. Organized; multiple
c. Unorganized; multiple
d. Organized; single
e. none of the above

Q8. The bulk cargo is transported through railways because of

___________ advantage over other modes.
a. speed
b. reliability
c. cost
d. convenience
e. door-to-door service

Q9. Air transportation is a costly affair and it is used only for

highly ______________ commodities and items, whose life is
short and value is high.
a. respiring and transpiring
b. costly
c. important
d. strategic
e. bulky

Q10. Logistics is _________ based activity to move goods from

one place to other place.
a. cost
b. customer
c. supplier
d. transport mode
e. information

Q11. Reduce freight vehicle mileage and increase load factors

the strategy is __________.
a. use proper mode
b. improve scheduling and routing
c. less loading of vehicle
d. choose long routes
e. change transport modes
.

2
Q12. Reduce total freight, transport by relying on ___________
products from facilities closer to their destination markets.
a. local
b. imported
c. diverse
d. customized
e. all the above

Q13. The selection of transportation mode depends on the

product characteristics and the ___________ requirements.
a. customer location
b. customer service
c. customer paying capacity
d. customer relationship
e. none of the above

Q14. Reliability of transportation means ability of the carrier to

deliver the shipment in good condition, in the
___________.delivery time frame to the customer.
a. stipulated
b. shorter
c. longer
d. standard
e. average

Q15. Freight cost is influenced by __________.

a. volumes and distance
b. product type, shape and Density
c. product handling
d. market dynamics
e. all the above

Q16. Hub and Spoke Network in transportation tends to

__________.
a. minimize freight
b. minimizes delivery time
c. enables reliability in delivery
d. optimizes the number the of distribution centers
e. all the above

Q17. In the business context Milk-run is a tested and proven

method of optimizing a service provider’s trucking operations
in ___________ activities.
a. collection or dispatch
b. storage
c. production
d. handling
e. round the route

3
Q18. Milk-run supports a firm in ___________ inventory
availability in automotive and electronic industries.
a. speedy
b. safety stocks
c. JIT
d. advance
e. damage free

Q19. For the conservation of fuel and ___________ the

transportation time, the route planning exercise is of utmost
importance to the carrier owner.
a. optimizing
b. saving
c. increasing
d. equalizing
e. all the above

Q20. Containerisation ensures usage of ___________

transportation and safe door-to-door transportation of the
cargo.
a. multi-route
b. multi-modal
c. multi-product
d. sea route
e. none of the above

Answers:
1.(a) 2.(c) 3.(b) 4.(b) 5.(a) 6.(e) 7.(a) 8.(c) 9.(a) 10.(e) 11.(b) 12.(a) 13.(b) 14.(a)
15.(e) 16.(d) 17.(a) 18.(c) 19.(b) 20.(b)

4
 Chapter 12

Inventory Management

Multiple Choice Questions

Q1. Inventory levels are affected by level of customer

service, ___________ and flexibility in business operations.
a. demand variations
b. warehousing layout
c. type of handling equipment
d. transportation modes
e. storage pattern

Q2. Managing the inventory is the most important function

of supply chain to achieve trade-off between ____________.
a. suppliers and customers location
b. cost and customer service
c. raw materials and finish goods cost
d. transportation mode and cost
e. none of the above

Q3. _________ in effective inventory management will

always give a competitive edge to the business, regardless
of its nature.
a. accuracy
b. timeliness
c. efficiency
d. documentation
e. optimization

Q4. Inventory generally constitutes the second largest item

after ________ in the financial balance sheet of the
manufacturing company.
a. fixed liability
b. fixed asset
c. investments
d. contingent liability
e. none of the above

Q5. Inventory related cost comprising of the following

elements ___________.
a. capital invested
b. storage and material handling
c. transportation, insurance and obsolescence
d. exchange rate fluctuation
e. all the above
1
Q6. The benefits of inventory reduction are not reflected in
__________.
a. profit margins
b. return on investment
c. economic value addition
d. customer value
e. economies of scale

Q7. Inventory turns may be enhanced by using __________.

a. MRP
b. ERP
c. DRP
d. JIT
e. all the above

Q8. The distribution side is primarily concerned with the

finished goods inventories, which again are divided into
__________.
a. non excise paid goods
b. excise paid goods
c. pipeline inventory
d. channel inventory
e. all the above

Q9. The investments in inventory cannot be used for other

___________.purpose or ___________.assets.
a. unproductive; creating
b. productive; creating
c. productive; engineering
d. unproductive; reengineering
e. business; re-organising

Q10. Inventory carries the risk of damage, theft, pilferage or

______.
a. obsolesce
b. exploitation
c. expansion
d. explosion
e. extension

Q11. The manufacturer’s inventory commitments are closely

related to the investments made in anticipation of the
expected returns, _______, complexity and width of
distribution network, unit value of the product and the
nature of demand.
a. meeting competition
b. lead time of inputs
c. expected pricing
2
 d. compliance
e. meeting commitments

Q12. For the seasonal products the wholesaler purchases the

inventory in advance in anticipation of the future sales,
which ___________ his risk factor.
a. increases
b. decreases
c. even out
d. average out
e. postpone

Q13. The inventory commitments of the wholesaler are not

of _________ as compared to manufacturer.
a. longer duration
b. shorter duration
c. greater commitment
d. market driven
e. futuristic

Q14. Retailer faces ___________ duration risk for inventory

as compared to manufacturer and wholesaler.
a. shorter
b. longer
c. extended
d. multiple
e. none of the above

Q15. Retailers risk for inventory is spread over the

___________ product. Hence, his commitment to inventory is
not ________.
a. high value; deep
b. low value; deep
c. large range; deep
d. fast moving; deep
e. slow moving; deep

Q16. The long lead times for inventory makes the

manufacturer ___________.and vulnerable to unforeseen
changes and inaccurate demand forecasts.
a. flexible
b. inflexible
c. lean
d. responsive
e. committed

3
Q17. The safety stocks act as buffers for the lack of
___________.in the supply chain.
a. flexibility
b. inflexibility
c. planning
d. forecasting
e. rigidity

Q18. KANBAN is basically an information system to support

_______ inventory for manufacturing operations.
a. buffer
b. pipeline
c. Just in time
d. excise paid
e. retail

Q19. In order to implement the desired inventory

management policies, control procedures need to be
devised. These procedures may cover review period, review
frequency, __________, safety stock level etc.
a. inventory type
b. reorder point
c. goods in transit
d. allowance for transit damages
e. stocking points

Q20. DRP operates in an _________ environment, where

customer demand at various distribution points/locations
determines inventory requirements.
a. independent
b. dependent
c. inter dependent
d. focused
e. volatile

Q21. In risk pooling of inventory management firm adopts

_________ system which can aggregate the demand and
takes care of the fluctuations in various markets by
averaging out the variations.
a. centralized
b. decentralize
c. variable
d. fixed
e. market

4
Q22. ABC classification is used to develop inventory
__________.
a. planning policies
b. set count frequencies for cycle counting
c. slot inventory for optimized order picking
d. inventory management activities
e. all the above

Q23. ABC analysis is a technique for inventory control. The

basic assumption is that ________ value is attached to
___________ stocks.
a. same; different
b. different; same
c. different; different
d. same; same
e. high; low

Q24. For managing the inventory of ‘A’ class items the

actions required ___________.
a. continuous follow up
b. no safety stocks
c. accurate forecast
d. central procurement
e. all the above

Q25.The severity of “Bullwhip Effect” increase as one move

closer to the __________.
a. retailer
b. wholesaler
c. procurement
d. production
e. customer

Q26. The methods intended to reduce uncertainty,

variability, and lead-time are __________.
a. vendor-managed inventory (VMI)
b. just-in-time replenishment (JIT)
c. strategic partnership
d. all the above
e. none of the above

5
Q27. Distribution Requirement Planning (DRP)is one of
latest IT tools for controlling the inventory in the
distribution system of the organization. It allocates the
inventory from mother warehouse to the various distribution
centers based on the following ___________.
a. demand pattern
b. safety stock provision
c. order quantity and Reorder point
d. average performance cycle length
e. all the above

Q28. Prerequisites of successful JIT system are __________.

a. buyer–seller partnership
b. online communication and information sharing
c. commitment to zero defects from both the sides
d. frequent and small lot size shipments
e. all the above

Q29. The main barriers to the successful operation of JIT

system are Organization culture, Technology differentials at
buyer and supplier ends, ___________, Reluctance to
information sharing.
a. organization structure
b. centralized suppliers
c. organized suppliers
d. product mix proliferation
e. technology used

Q30. In Vendor Managed Inventory the ownership of

inventory is with __________.
a. buyer
b. both buyer and seller
c. seller
d. middleman
e. all the above

Answers:
1.(a) 2.(b) 3.(c) 4.(b) 5.(e) 6.(e) 7.(e) 8.(e) 9.(b) 10.(a) 11.(b)
12.(b) 13.(a) 14.(a) 15.(c) 16.(b) 17.(a) 18.(c) 19.(b) 20.(c) 21.(a)
22.(a) 23.(c) 24.(e) 25.(c) 26.(d) 27.(e) 28.(e) 29.(a) 30.(c)

6
Chapter 15

Strategic Alliance

Multiple Choice Questions

Q1. Supply chain aims at delivering a set of goods or

services to an end-customer by ___________ of/to supply
chain partners, who share the common goal.
a. aligning the capabilities
b. extending activities
c. monitoring the processers
d. using the network
e. all the above

Q2. Alliance partners in supply chain are not the ones

amongst the following listed below ___________.
a. suppliers
b. vendors
c. retailers
d. distributors
e. employees

Q3. Outsourcing brings about the ____________ in supply

chain operations as there a real-time information sharing
amongst supply chain partners and customers. However,
there are many other issues in supply chain collaboration
with vendors and these are __________.
a. intelligence
b. soft skills
c. buoyancy
d. responsiveness
e. image

Q4. ‘Bullwhip effect’, results into either in excess inventory

or stock outs in supply chain. This is due to time lag in
_________ progression in upstream from market, resulting
into its distortion.
a. process
b. information
c. activity
d. schedule
e. all the above

1
Q5. Supply chain collaboration to bring fruits should be
focused on ________ sharing.
a. facilities
b. manpower
c. information
d. network
e. assets

Q6. Alliance is cooperation or collaboration which aims for

a _______ where each partner hopes that the benefits
from the alliance will be greater than those from individual
efforts.
a. synergy
b. inventory management
c. speed to market
d. cost reduction
e. survival

Q7. Alliance in supply chain often involves, __________,

economic specialization, shared expenses, and shared risk.
a. material handling
b. effective storage
c. access to knowledge and expertise
d. quick transportation
e. none of the above

Q8. Strategic alliances in supply chain are except the one

__________.
a. third party
b. fourth party logistics
c. retailer-supplier partnerships
d. stand alone
e. distributor integration

Q9. Strategic alliances necessarily do not bring partners

the following benefits ___________.
a. market access
b. access to management skills
c. access technology, and intellectual property
d. access to partner's capital
e. price skimming

Q10. Supply chain improvement areas available to firms

through strategic alliance relationships ___________.
a. managing supply channel conflict
b. on-time product delivery
c. improved supply chain productivity
d. prompt response to complaints
e. all the above

2
Q11. There are following categories of 3PL providers, except
__________.
a. stand alone
b. practitioners
c. integrator
d. customer adapter
e. customer developer

Q12. One who provides entire logistic services and offers

logistic solutions to the customer problems is called as
__________.
a. integrator
b. wholesaler
c. 4PL
d. standalone
e. assembler

Q13. Broader objective, the corporations had in mind for

going in for 3PL services are __________.
a. reduction in risk and liability
b. value added services
c. process improvement
d. wider market coverage
e. all the above

Q14. Fourth Party Logistics Provider is a supply chain

integrator that ________ the resources, capabilities, and
technology of its own organization with those of
complementary service providers to deliver comprehensive
supply chain solutions.
a. purchases and implements
b. assembles and manages
c. synchronizes
d. integrates
e. co-ordinates

Q15. Fourth Party Logistics provider is _______ of all 3 PL

service providers.
a. integrator
b. coordinator
c. aligner
d. all the above
e. none of the above

Q16. Fourth party logistics service provider operates with

__________.
a. IT platform
b. assets
c. inventory solutions
3
 d. transport fleets
e. warehouses

Q17. Network arrangement can be termed as 4PL, provided

it fulfills the following requirement ___________.
a. covers the entire supply chain of the customer
b. collaboration between logistics service providers on the resources
sharing basis.
c. alliances to be led by integrator with IT based and not asset
based
d. flexible arrangement
e. all the above

Q18. 4PL does not work in following ways ___________.

a. increases revenue
b. increased assets
c. reduces cost
d. reduces working capital
e. reduces fixed capital

Q19. 4PL supply chain solution includes three phases of

work, re-organizing ________ and execution.
a. transition
b. reduction
c. reframing
d. transformation
e. re-engineering

Q20. The strategic alliance relationship depends on the

following, except __________.
a. advanced information systems
b. top management commitment
c. trust amongst the partners
d. inventory ownership
e. financial measures

Answers:
1.(a) 2.(e) 3.(d) 4.(b) 5.(c) 6.(a) 7.(c) 8.(d) 9.(e) 10.(e) 11.(b)
12.(a) 13.(e) 14.(b) 15.(a) 16.(a) 17.(e) 18.(b) 19.(d) 20.(e)