Supply Chain Management, 5e (Chopra/Meindl)

Chapter 4 Designing Distribution Networks and Applications to e-Business

4.1 True/False Questions

1) Distribution occurs between every pair of stages in the supply chain.

Answer: T!"
Diff: #
Topic: 4.1 The ole of Distribution in the $upply %hain
&earning 'utco(e: %o(pare co((on approaches to supply chain esign

#) %o(panies in the sa(e inustry often select very ifferent istribution networ*s+ because the
choice of the istribution networ* can be use to achieve a variety of supply chain ob,ectives
ranging fro( low cost to high responsiveness.
Answer: T!"
Diff: #
Topic: 4.1 The ole of Distribution in the $upply %hain
&earning 'utco(e: %o(pare co((on approaches to supply chain esign

-) %o(panies in the sa(e inustry shoul always select si(ilar istribution networ*s+ because
their ob,ectives will be si(ilar.
Answer: FA&$"
Diff: #
Topic: 4.1 The ole of Distribution in the $upply %hain

4) A custo(er oes not necessarily want the highest level of perfor(ance along all i(ensions of
custo(er service+ incluing response ti(e+ prouct variety+ prouct availability+ custo(er
eperience+ orer visibility+ an returnability.
Answer: T!"
Diff: 1
Topic: 4.# Factors nfluencing Distribution 0etwor* Design
&earning 'utco(e: %o(pare co((on approaches to supply chain esign

) 'utboun transportation costs per unit ten to be lower than inboun costs+ because inboun
lot si2es are typically larger.
Answer: FA&$"
Diff: 1
Topic: 4.# Factors nfluencing Distribution 0etwor* Design
&earning 'utco(e: %o(pare co((on approaches to supply chain esign

3) Transportation costs are high with ropshipping because the average outboun istance to the
en consu(er is large an pac*age carriers are use to shipping the prouct.
Answer: T!"
Diff: 1
Topic: 4.# Factors nfluencing Distribution 0etwor* Design

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%opyright 5 #61- 7earson "ucation+ nc. publishing as 7rentice 8all
9) The (ain avantage of intransit (erge over ropshipping is the so(ewhat lower
transportation cost an i(prove custo(er eperience.
Answer: T!"
Diff: #
Topic: 4.- Design 'ptions for a Distribution 0etwor*
&earning 'utco(e: %o(pare co((on approaches to supply chain esign

) The (ain
elivery costavantage of aa faster
an provie istribution networ*
response with networ*s.
than other local storage is that it can lower the
Answer: T!"
Diff: #
Topic: 4.- Design 'ptions for a Distribution 0etwor*
&earning 'utco(e: %o(pare co((on approaches to supply chain esign

;) The (ain avantage of a istribution networ* with local storage is that it can lower the
inventory an facility costs.
Answer: FA&$"
Diff: #
Topic: 4.- Design 'ptions for a Distribution 0etwor*

16) The (a,or

inventory isavantage
an facility costs. of a istribution networ* with local storage is the increase
Answer: T!"
Diff: 1
Topic: 4.- Design 'ptions for a Distribution 0etwor*
&earning 'utco(e: %o(pare co((on approaches to supply chain esign

11) A istribution networ* esigner nees to consier prouct characteristics as well as networ*
re<uire(ents when eciing on the appropriate elivery networ*.
Answer: T!"
Diff: -
Topic: 4.- Design 'ptions for a Distribution 0etwor*
&earning 'utco(e: %o(pare co((on approaches to supply chain esign

1#) 'nly niche co(panies will en up using a single istribution networ*.
Answer: T!"
Diff: 1
Topic: 4.- Design 'ptions for a Distribution 0etwor*
&earning 'utco(e: %o(pare co((on approaches to supply chain esign

1-) Distributors a value to a supply chain between a supply stage an a custo(er stage if there
are (any s(all players at the custo(er stage+ each re<uiring a s(all a(ount of the prouct at a
ti(e.
Answer: T!"
Diff: #
Topic: 4.- Design 'ptions for a Distribution 0etwor*

&earning 'utco(e: %o(pare co((on approaches to supply chain esign

4#
%opyright 5 #61- 7earson "ucation+ nc. publishing as 7rentice 8all
14) As long as inboun transportation econo(ies of scale are (aintaine+ increasing the nu(ber
of facilities ecreases total transportation cost.
Answer: T!"
Diff: 1
Topic: 4.# Factors nfluencing Distribution 0etwor* Design
AA%$=: Analytic $*ills
&earning 'utco(e: %o(pare co((on approaches to supply chain esign
1) %usto(ers always want the highest level of perfor(ance along all the i(ensions response
ti(e+ prouct variety an returnability.
Answer: FA&$"
Diff: #
Topic: 4.# Factors nfluencing Distribution 0etwor* Design
AA%$=: Analytic $*ills
&earning 'utco(e: %o(pare co((on approaches to supply chain esign

13) Fir(s that target custo(ers who can tolerate a long response ti(e re<uire only a few
locations that (ay be far fro( the custo(er.
Answer: T!"

Diff:
Topic:1 4.# Factors nfluencing Distribution 0etwor* Design
&earning 'utco(e: %o(pare co((on approaches to supply chain esign

19) A ecrease in the response ti(e custo(ers esire increases the nu(ber of facilities re<uire
in the networ*.
Answer: T!"
Diff: 1
Topic: 4.# Factors nfluencing Distribution 0etwor* Design
&earning 'utco(e: %o(pare co((on approaches to supply chain esign

4-
%opyright 5 #61- 7earson "ucation+ nc. publishing as 7rentice 8all
4.# >ultiple %hoice Questions

1) The steps ta*en to (ove an store a prouct fro( the supplier stage to a custo(er stage in the
supply chain is referre to as
A) transportation.
=) retailing.
%) wholesaling.
D) istribution.
") (anufacturing.
Answer: D
Diff: 1
Topic: 4.1 The ole of Distribution in the $upply %hain
AA%$=: Analytic $*ills
&earning 'utco(e: %o(pare co((on approaches to supply chain esign

#) Distribution is a *ey river of the overall profitability of a fir( because

A) the aition of istributors only as cost to the supply chain.
=) it irectly i(pacts both the supply chain cost an the custo(er eperience.
%) it slows own the responsiveness of the supply chain.
D) it cannot be evelope as a part of supply chain strategy.
") Distribution is not a *ey river of profitability.
Answer: =
Diff: #
Topic: 4.1 The ole of Distribution in the $upply %hain
AA%$=: Analytic $*ills
&earning 'utco(e: %o(pare co((on approaches to supply chain esign

-) The choice of the istribution networ* can be use to achieve supply chain ob,ectives such as
A) low cost.
=) high responsiveness.
%) high cost.
D) high responsibility.
") A an = only

Answer:
Diff: # "
Topic: 4.# Factors nfluencing Distribution 0etwor* Design
AA%$=: Analytic $*ills
&earning 'utco(e: %o(pare co((on approaches to supply chain esign

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4) %o(panies in the sa(e inustry often select very ifferent istribution networ*s because
A) so(e co(panies are poorly run.
=) ifferent co(panies try to avoi using the sa(e approach.
%) ifferent co(panies have ifferent ob,ectives for their supply chain.
D) all of the above
") none of the above
Answer: %
Diff: #
Topic: 4.# Factors nfluencing Distribution 0etwor* Design

) A poor/inappropriate istribution networ* can

A) lea to high profitability.
=) hurt the level of service custo(ers receive while increasing cost.
%) have a significant negative i(pact on the profitability of a fir(.
D) all of the above
") = an % only
Answer: D
Diff: #
Topic: 4.# Factors nfluencing Distribution 0etwor* Design

3) ?hich of the following woul not be the result of a poor/inappropriate istribution networ*@
A) 8igh profitability
=) &ow level of custo(er service
%) 8igh cost
D) 7oor profitability
") 0one of the above are true.
Answer: A
Diff: 1
Topic: 4.# Factors nfluencing Distribution 0etwor* Design

9) 'n which i(ensions shoul the perfor(ance of a istribution networ* be evaluate at the
highest level@
A) 7rofitability of iniviual supply chain co(ponents
=) "fficiency of overall supply chain networ*
%) %usto(er nees that are (et
D) %ost of (eeting custo(er nees
") % an D only
Answer: "
Diff: -
Topic: 4.# Factors nfluencing Distribution 0etwor* Design

4
%opyright 5 #61- 7earson "ucation+ nc. publishing as 7rentice 8all
) ?hich of the following are (easures of custo(er service that are influence by the structure
of the istribution networ*@
A) esponse ti(e
=) 7rouct variety
%) 7rouct availability
D) %usto(er eperience
") all of the above
Answer: "
Diff: 1
Topic: 4.# Factors nfluencing Distribution 0etwor* Design

;) ?hich of the following are (easures of custo(er service that are influence by the structure
of the istribution networ*@
A) eturnability
=) 'rer visibility
%) %usto(er eperience
D) 7rouct availability
") all of the above
Answer: "
Diff: #
Topic: 4.# Factors nfluencing Distribution 0etwor* Design
16) ?hich of the following is not a (easure of custo(er service that is influence by the
structure of the istribution networ*@
A) eturnability
=) %usto(er eperience
%) %usto(er (aturity
D) 7rouct availability
") All of the above are (easures of custo(er service.
Answer: %
Diff: 1
Topic: 4.# Factors nfluencing Distribution 0etwor* Design

11) The nu(ber of ifferent proucts/configurations that a custo(er esires fro( the istribution
networ* is
A) response ti(e.
=) prouct variety.
%) prouct availability.
D) custo(er eperience.
") orer visibility.
Answer: =
Diff: 1
Topic: 4.# Factors nfluencing Distribution 0etwor* Design

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1#) The probability of having a prouct in stoc* when a custo(er orer arrives is
A) response ti(e.
=) prouct variety.
%) prouct availability.
D) custo(er eperience.
") orer visibility.
Answer: %
Diff: 1
Topic: 4.# Factors nfluencing Distribution 0etwor* Design

1-) The ease with which the custo(er can place an receive their orer as well as other aspects
of value that the sales staff provies is
A) custo(er eperience.
=) orer visibility.
%) prouct availability.
D) response ti(e.
") returnability.
Answer: A
Diff: 1
Topic: 4.# Factors nfluencing Distribution 0etwor* Design

14) The ability of the custo(er to trac* their orer fro( place(ent to elivery is
A) custo(er eperience.
=) orer visibility.
%) prouct availability.
D) response ti(e.
") returnability.
Answer: =
Diff: 1
Topic: 4.# Factors nfluencing Distribution 0etwor* Design

1) The costs incurre in bringing (aterial into a facility are

A) sourcing transportation costs.
=) outboun transportation costs.
%) crossboun transportation costs.
D) inboun transportation costs.
") none of the above
Answer: D
Diff: 1
Topic: 4.# Factors nfluencing Distribution 0etwor* Design

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%opyright 5 #61- 7earson "ucation+ nc. publishing as 7rentice 8all
13) The costs incurre in sening (aterial out of a facility are
A) sourcing transportation costs.
=) outboun transportation costs.
%) crossboun transportation costs.
D) inboun transportation costs.
") none of the above
Answer: =
Diff: 1
Topic: 4.# Factors nfluencing Distribution 0etwor* Design

19) 'utboun transportation costs per unit ten to be

A) about the sa(e as inboun costs.
=) higher than inboun costs.
%) lower than inboun costs.
D) neither higher or lower than inboun costs.
") none of the above
Answer: =
Diff: #
Topic: 4.# Factors nfluencing Distribution 0etwor* Design

1) As inventory
A) the the nu(ber ofresulting
an facilities inventory
in a supply chain
costs increases
also increase.
=) the inventory an resulting inventory costs ecrease.
%) the inventory increases an resulting inventory costs ecrease.
D) the inventory ecreases an resulting inventory costs increase.
") the inventory an resulting inventory costs re(ain the sa(e.
Answer: A
Diff: #
Topic: 4.# Factors nfluencing Distribution 0etwor* Design

1;) As the response ti(e esire by the custo(er ecreases+ the re<uire nu(ber of facilities in
the istribution networ*
A) ecreases.

=) re(ains the sa(e.

%) increases.
D) increases an then ecreases.
") none of the above
Answer: %
Diff: #
Topic: 4.# Factors nfluencing Distribution 0etwor* Design

4
%opyright 5 #61- 7earson "ucation+ nc. publishing as 7rentice 8all
#6) As the nu(ber of facilities in a supply chain increases+ total transportation cost
A) ecreases.
=) re(ains the sa(e.
%) increases.
D) increases to a point an then ecreases.
") ecreases to a point an then increases.
Answer: "
Diff: -
Topic: 4.# Factors nfluencing Distribution 0etwor* Design

#1) As the nu(ber of facilities in a supply chain increases+ total facility costs
A) ecrease.
=) re(ain the sa(e.
%) increase.
D) increase to a point an then ecrease.
") ecrease to a point an then increase.
Answer: %
Diff: #
Topic: 4.# Factors nfluencing Distribution 0etwor* Design

##) Total logistics

A) inventory costs for
an facility a supply chain networ* are a su( of
costs.
=) inventory+ facility+ an istributor costs.
%) facility+ transportation+ an istributor costs.
D) inventory+ transportation+ an facility costs.
") none of the above
Answer: D
Diff: #
Topic: 4.# Factors nfluencing Distribution 0etwor* Design

#-) As the nu(ber of facilities in a supply chain networ* increases+ total logistics costs will
A) ecrease.
=) ecrease at first an then increase.

%)
D) increase.
increase at first an then ecrease.
") neither increase or ecrease.
Answer: =
Diff: #
Topic: 4.# Factors nfluencing Distribution 0etwor* Design
AA%$=: Analytic $*ills
&earning 'utco(e: %o(pare co((on approaches to supply chain esign

4;
%opyright 5 #61- 7earson "ucation+ nc. publishing as 7rentice 8all
#4) ?hich of the following are *ey ecisions in the esign of a istribution networ*@
A) ?ill prouct be elivere to the custo(er location or pic*e up fro( a preoraine site@
=) ?ill prouct flow through a prouction facility@
%) ?ill prouct flow through an inter(eiary or inter(eiate location)@
D) all of the above
") A an % only
Answer: "
Diff: #
Topic: 4.- Design 'ptions for a Distribution 0etwor*

#) ?hich of the following is not a istinct istribution networ* esign that (ay be use to
(ove proucts fro( factory to custo(er@
A) >anufacturer storage with irect shipping
=) >anufacturer storage with istributor pic*up
%) Distributor storage with pac*age carrier elivery
D) Distributor storage with last (ile elivery
") >anufacturer/istributor storage with custo(er pic*up
Answer: =
Diff: #
Topic: 4.- Design 'ptions for a Distribution 0etwor*

#3) ?hich of the following is not a istinct istribution networ* esign that (ay be use to
(ove proucts fro( factory to custo(er@
A) >anufacturer storage with irect shipping
=) >anufacturer storage with irect shipping an intransit (erge
%) Distributor storage with pac*age carrier elivery
D) Distributor storage with (anufacturer pic*up
") etail storage with custo(er pic*up
Answer: D
Diff: #
Topic: 4.- Design 'ptions for a Distribution 0etwor*

#9) n which istribution networ* esign is prouct shippe irectly fro( the (anufacturer to the

en custo(er+ bypassing

A) >anufacturer storage the
withretailer
irect who ta*es the orer an initiates the elivery re<uest)@
shipping
=) >anufacturer storage with irect shipping an intransit (erge
%) Distributor storage with pac*age carrier elivery
D) Distributor storage with last (ile elivery
") >anufacturer/istributor storage with custo(er pic*up
Answer: A
Diff: 1
Topic: 4.- Design 'ptions for a Distribution 0etwor*

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#) ?hich istribution networ* is also referre to as ropshipping with prouct elivere
irectly fro( the (anufacturer to the custo(er location@
A) >anufacturer storage with irect shipping
=) >anufacturer storage with irect shipping an intransit (erge
%) Distributor storage with pac*age carrier elivery
D) Distributor storage with last (ile elivery
") >anufacturer/istributor storage with custo(er pic*up
Answer: A
Diff: #
Topic: 4.- Design 'ptions for a Distribution 0etwor*

#;) ?hich of the following is an avantage of (anufacturer storage with irect shipping@
A) Transportation costs are low because the average outboun istance to the en consu(er is
s(all an pac*age carriers are use to shipping the prouct.
=) $upply chains save on the fie cost of facilities+ because the nee for other warehousing
space in the supply chain has been eli(inate.
%) esponse ti(es ten to be s(all because the orer has to be trans(itte fro( the retailer to
the (anufacturer.
D) 'rer trac*ing is easy to i(ple(ent because of the co(plete integration of infor(ation
syste(s at both the retailer an the (anufacturer.
") The hanling of returns is li*ely to be si(ple an inepensive+ i(proving custo(er
satisfaction.
Answer: =
Diff: #
Topic: 4.- Design 'ptions for a Distribution 0etwor*

-6) ?hich of the following woul be a isavantage of (anufacturer storage with irect
shipping@
A) The ability to reuce cost of inventory by centrali2ing inventories at the (anufacturer.
=) The (anufacturer has to postpone custo(i2ation until after the custo(er orer has been
place.
%) $upply chains have to eli(inate other warehousing space to save on the fie cost of
facilities.

D)
the esponse ti(es
(anufacturer ten
an to be large
shipping because
istances are the
on orer haslonger
average to be trans(itte fro( the retailer to
fro( the (anufacturerBs
centrali2e site.
") 7rovies a goo custo(er eperience when a single orer containing proucts fro( several
(anufacturers is elivere in partial ship(ents.
Answer: D
Diff: #
Topic: 4.- Design 'ptions for a Distribution 0etwor*

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-1) ?hich istribution networ* esign is si(ilar to pure ropshipping+ ecept that pieces of the
orer co(ing fro( ifferent locations are co(bine so that the custo(er gets a single elivery@
A) >anufacturer storage with irect shipping
=) >anufacturer storage with irect shipping an intransit (erge
%) Distributor storage with pac*age carrier elivery
D) Distributor storage with (anufacturer pic*up
") etail storage with custo(er pic*up
Answer: =
Diff: #
Topic: 4.- Design 'ptions for a Distribution 0etwor*

-#) The (ain avantage of intransit (erge over ropshipping is

A) the ability to reuce cost of inventory by centrali2ing inventories at the (anufacturer.
=) supply chains save on the fie cost of facilities+ because the nee for other warehousing
space in the supply chain has been eli(inate.
%) so(ewhat lower transportation cost an i(prove custo(er eperience.
D) orer trac*ing is easy to i(ple(ent because of the co(plete integration of infor(ation
syste(s at both the retailer an the (anufacturer.
") the hanling of returns is li*ely to be si(ple an inepensive+ i(proving custo(er
satisfaction.
Answer: %
Diff: #
Topic: 4.- Design 'ptions for a Distribution 0etwor*

--) The (a,or isavantage of intransit (erge co(pare to ropshipping is

A) transportation costs are high because the average outboun istance to the en consu(er is
large an pac*age carriers are use to shipping the prouct.
=) response ti(es ten to be large because the orer has to be trans(itte fro( the retailer to the
(anufacturer an shipping istances are on average longer fro( the (anufacturerBs centrali2e
site.
%) orer trac*ing beco(es harer to i(ple(ent because it re<uires co(plete integration of
infor(ation syste(s at both the retailer an the (anufacturer.
D) the aitional effort uring the (erge itself.

") the hanling of returns is li*ely to be ifficult an (ore epensive+ hurting custo(er
satisfaction.
Answer: D
Diff: 1
Topic: 4.- Design 'ptions for a Distribution 0etwor*

41#
%opyright 5 #61- 7earson "ucation+ nc. publishing as 7rentice 8all
-4) ?hich istribution networ* esign is being use when inventory is not hel by
(anufacturers at the factories+ but is hel by istributors/retailers in inter(eiate warehouses an
pac*age carriers are use to transport proucts fro( the inter(eiate location to the final
custo(er@
A) >anufacturer storage with irect shipping
=) >anufacturer storage with irect shipping an intransit (erge
%) Distributor storage with pac*age carrier elivery
D) Distributor storage with (anufacturer pic*up
") etail storage with custo(er pic*up
Answer: %
Diff: 1
Topic: 4.- Design 'ptions for a Distribution 0etwor*
AA%$=: Analytic $*ills
&earning 'utco(e: %o(pare co((on approaches to supply chain esign

-) ?hich of the following is an avantage of istributor storage with carrier elivery@
A) nventory cost is higher than with (anufacturer storage.
=) 7rouct variety is lower than with (anufacturer storage.
%) 'rer visibility for the custo(er is easier than with (anufacturer storage.
D) 8igher cost to provie the sa(e level of prouct availability as (anufacturer storage.
") %ost of facilities an hanling is so(ewhat higher than (anufacturer storage.
Answer: %
Diff: #
Topic: 4.- Design 'ptions for a Distribution 0etwor*

-3) ?hich of the following is a isavantage of istributor storage with carrier elivery@
A) nfor(ation infrastructure is si(pler than (anufacturer storage.
=) esponse ti(e is faster than with (anufacturer storage.
%) eturnability is easier than with (anufacturer storage.
D) 7rouct variety is lower than with (anufacturer storage.
") Transportation cost is lower than with (anufacturer storage.
Answer: D
Diff: #
Topic: 4.- Design 'ptions for a Distribution 0etwor*
-9) ?hich istribution networ* esign is being use when the istributor/retailer elivers the
prouct to the custo(erBs ho(e instea of using a pac*age carrier@
A) >anufacturer storage with irect shipping
=) >anufacturer/istributor storage with custo(er pic*up
%) Distributor storage with pac*age carrier elivery
D) Distributor storage with last (ile elivery
") etail storage with custo(er pic*up
Answer: D
Diff: #
Topic: 4.- Design 'ptions for a Distribution 0etwor*
AA%$=: Analytic $*ills

&earning 'utco(e: %o(pare co((on approaches to supply chain esign

41-
%opyright 5 #61- 7earson "ucation+ nc. publishing as 7rentice 8all
-) ?hich of the following is an avantage of istributor storage with last (ile elivery@
A) >ore epensive to provie prouct availability than any other option ecept retail stores.
=) nventory cost is higher than istributor storage with pac*age carrier elivery.
%) esponse ti(e is very <uic* ranging fro( sa(e ay to net ay elivery.
D) Transportation cost is higher than any other istribution option.
") eturnability is harer an (ore epensive than a retail networ*.
Answer: %
Diff: 1
Topic: 4.- Design 'ptions for a Distribution 0etwor*

-;) ?hich of the following is a isavantage of istributor storage with last (ile elivery@
A) Transportation cost is higher than any other istribution option.
=) nfor(ation cost is si(ilar to istributor storage with pac*age carrier elivery.
%) %usto(er eperience is very goo+ particularly for bul*y ite(s.
D) eturnability is easier to i(ple(ent than other options.
") 'rer traceability is less of an issue an easier to i(ple(ent than (anufacturer storage or
istributor storage with pac*age carrier elivery.
Answer: A
Diff: -
Topic: 4.- Design 'ptions for a Distribution 0etwor*
46) ?hich istribution networ* esign is being use when inventory is store at the
(anufacturer or istributor warehouse but custo(ers place their orers online or on the phone
an then co(e to esignate pic*up points to collect their orers@
A) >anufacturer storage with irect shipping
=) >anufacturer/istributor storage with custo(er pic*up
%) Distributor storage with pac*age carrier elivery
D) Distributor storage with last (ile elivery
") etail storage with custo(er pic*up
Answer: =
Diff: #
Topic: 4.- Design 'ptions for a Distribution 0etwor*
AA%$=: Analytic $*ills
&earning 'utco(e: %o(pare co((on approaches to supply chain esign

41) ?hich of the following is an avantage of (anufacturer/istributor storage with custo(er

pic*up@
A) Facility costs can be very high if new facilities have to be built.
=) Transportation cost is lower than the use of pac*age carriers+ especially if using an eisting
elivery networ*.
%) 'rer visibility is ifficult but essential.
D) 7rouct variety is si(ilar to other (anufacturer or istributor storage options.
") $ignificant invest(ent in infor(ation infrastructure re<uire.
Answer: =
Diff: #

Topic: 4.- Design 'ptions for a Distribution 0etwor*

414
%opyright 5 #61- 7earson "ucation+ nc. publishing as 7rentice 8all
4#) ?hich of the following is a isavantage of (anufacturer/istributor storage with custo(er
pic*up@
A) %usto(er eperience is lower than other options because of the lac* of ho(e elivery.
=) esponse ti(e is si(ilar to pac*age carrier elivery with (anufacturer or istributor storage.
%) eturnability is so(ewhat easier given that pic*up location can hanle returns.
D) 7rouct availability is si(ilar to other (anufacturer or istributor storage options.
") Facilities costs are lower if eisting facilities are use.
Answer: A
Diff: -
Topic: 4.- Design 'ptions for a Distribution 0etwor*

4-) ?hich istribution networ* esign is being use when inventory is store locally at retail
stores an custo(ers wal* into the retail store or place an orer online or on the phone an pic*
it up at the retail store@
A) >anufacturer storage with irect shipping
=) >anufacturer/istributor storage with custo(er pic*up
%) Distributor storage with pac*age carrier elivery
D) Distributor storage with last (ile elivery
") etail storage with custo(er pic*up
Answer: "
Diff: 1
Topic: 4.- Design 'ptions for a Distribution 0etwor*

44) ?hich of the following is an avantage of retail storage with custo(er pic*up@
A) nventory cost is higher than all other options.
=) Transportation cost is lower than all other options.
%) Facilities an hanling costs are higher than other options.
D) 7rouct variety is lower than all other options.
") 7rouct availability is (ore epensive to provie than all other options.
Answer: =
Diff: #
Topic: 4.- Design 'ptions for a Distribution 0etwor*

4) ?hich of the following is a isavantage of retail storage with custo(er pic*up@
A) eturnability is easier than other options given that pic*up location can hanle returns.
=) nventory cost is higher than all other options.
%) Transportation cost is lower than all other options.
D) Facilities an hanling costs are lower than other options.
") 7rouct variety is higher than all other options.
Answer: =
Diff: #
Topic: 4.- Design 'ptions for a Distribution 0etwor*

41
%opyright 5 #61- 7earson "ucation+ nc. publishing as 7rentice 8all
43) Distributors a value to a supply chain between a supply stage an a custo(er stage
A) if there is a s(all nu(ber of custo(ers re<uiring a large a(ount of prouct.
=) if there is a large nu(ber of custo(ers re<uiring a large a(ount of prouct.
%) if there are (any s(all players at the custo(er stage+ each re<uiring a s(all a(ount of the
prouct at a ti(e.
D) if there are a few large players at the custo(er stage+ each re<uiring a large a(ount of the
prouct at a ti(e.
") Distributors o not a value to a supply chain.
Answer: %
Diff: #
Topic: 4.- Design 'ptions for a Distribution 0etwor*

49) (prove(ent in supply chain perfor(ance at the result of istributors occurs for which of the
following reasons@
A) euction in transportation cost because of &T& ship(ents fro( (anufacturers to istributor.
=) euction in outboun transportation cost because the istributor co(bines proucts fro(
(any custo(ers into a single outboun ship(ent.
%) euction in inventory costs because istributor isaggregates safety inventory rather than
aggregating at each retailer.
D) A (ore stable orer strea( fro( istributor to (anufacturer co(pare to erratic orers fro(
each retailer) allows (anufacturers to lower cost by planning prouction (ore effectively.
") =y carrying inventory closer to the point of sale+ (anufacturers are able to provie a better
response ti(e than istributors can.
Answer: D
Diff: -
Topic: 4.- Design 'ptions for a Distribution 0etwor*

4) ?hich of the following state(ents about istribution networ*s is true@

A) The ownership structure of the istribution networ* can have as big an i(pact as the type of
istribution networ*.
=) The choice of a istribution networ* has very longter( conse<uences.
%) The choice of an eclusive istribution strategy (ay be avantageous.
D) All of the above are true.
") 0one of the above are true.
Answer: D
Diff: -
Topic: 4.- Design 'ptions for a Distribution 0etwor*

413
%opyright 5 #61- 7earson "ucation+ nc. publishing as 7rentice 8all
4;) CCCCCCCC is a cost factor perfor(ance characteristic of etail $torage at %onsu(er 7ic*up
$ites that is higher than all other options.
A) Transportation
=) nventory
%) nfor(ation
D) Facilities an 8anling
Answer: =
Diff: -
Topic: 4.- Design 'ptions for a Distribution 0etwor*
&earning 'utco(e: %o(pare co((on approaches to supply chain esign

6) CCCCCCCC is a service factor perfor(ance characteristic of etail $torage at %onsu(er

7ic*up $ites that is lower than all other options.
A) esponse ti(e
=) 7rouct variety
%) 7rouct availability
D) Ti(e to (ar*et
Answer: =
Diff: -
Topic: 4.- Design 'ptions for a Distribution 0etwor*
&earning 'utco(e: %o(pare co((on approaches to supply chain esign
1) CCCCCCCC is a service factor perfor(ance characteristic of >anufacturer or Distributor
$torage with %usto(er 7ic*up that is lower than other options because of the lac* of ho(e
elivery. "perience is very sensitive to capability of pic*up location.
A) esponse ti(e
=) 7rouct variety
%) %usto(er eperience
D) Ti(e to (ar*et
Answer: %
Diff: 1
Topic: 4.- Design 'ptions for a Distribution 0etwor*
&earning 'utco(e: %o(pare co((on approaches to supply chain esign

#) CCCCCCCC is a cost factor perfor(ance characteristic of >anufacturer or Distributor $torage

with %usto(er 7ic*up that is lower than the use of pac*age carriers+ especially if using an
eisting elivery networ*.
A) Transportation
=) nventory
%) nfor(ation
D) Facilities an 8anling
Answer: A
Diff: 1
Topic: 4.- Design 'ptions for a Distribution 0etwor*
&earning 'utco(e: %o(pare co((on approaches to supply chain esign

419
%opyright 5 #61- 7earson "ucation+ nc. publishing as 7rentice 8all
-) CCCCCCCC is the a(ount of ti(e it ta*es for a custo(er to receive an orer.
A) Ti(e to (ar*et
=) 7rouct Availability
%) eturnability
D) esponse Ti(e
Answer: D
Diff: 1
Topic: 4.# Factors nfluencing Distribution 0etwor* Design
&earning 'utco(e: %o(pare co((on approaches to supply chain esign

4) %hanging the istribution networ* esign D'"$ 0'T affect the following supply chain
costs
A) transportation.
=) inventories.
%) infor(ation.
D) sourcing.
Answer: D
Diff: #
Topic: 4.# Factors nfluencing Distribution 0etwor* Design
AA%$=: Analytic $*ills
&earning 'utco(e: %o(pare co((on approaches to supply chain esign
) Facility costs ecrease as the nu(ber of facilities is reuce. ?hich co(pany e(ploys a
networ* esign li*e this@
A) =arnes an 0oble
=) =oo*sA>illion
%) $tarbuc*s
D) A(a2on
Answer: D
Diff: #
Topic: 4.# Factors nfluencing Distribution 0etwor* Design
AA%$=: eflective Thin*ing $*ills
&earning 'utco(e: %o(pare co((on approaches to supply chain esign

3) ?hich is NO consiere a pri(ary part of Total &ogistics %osts for a supply chain
networ*@
A) nventory
=) >anufacturing
%) Transportation
D) Facility cost
Answer: D
Diff: #
Topic: 4.# Factors nfluencing Distribution 0etwor* Design
&earning 'utco(e: %o(pare co((on approaches to supply chain esign

41
%opyright 5 #61- 7earson "ucation+ nc. publishing as 7rentice 8all
4.- "ssay Questions

1) "plain the (easures of custo(er service that are influence by the structure of the
istribution networ*.
Answer: esponse ti(e is the ti(e between when a custo(er places an orer an receives
elivery.
7rouct variety is the nu(ber of ifferent proucts/configurations that a custo(er esires fro(
the istribution networ*.
Availability is the probability of having a prouct in stoc* when a custo(er orer arrives.
%usto(er eperience inclues the ease with which the custo(er can place an receive their
orer. t also inclues purely eperiential aspects+ such as the possibility of getting a cup of
coffee an the value that the sales staff provies.

'rer visibility is the ability of the custo(er to trac* their orer fro( place(ent to elivery.
eturnability is the ease with which a custo(er can return unsatisfactory (erchanise an the
ability of the networ* to hanle such returns.
Diff: #
Topic: 4.# Factors nfluencing Distribution 0etwor* Design

#) "plain how the esign of the istribution networ* affects the cost of the four supply chain
rivers.
Answer: As the nu(ber of facilities in a supply chain increases+ the inventory an resulting
inventory costs also increase. To ecrease inventory costs+ fir(s try to consoliate an li(it the
nu(ber of facilities in their supply chain networ*.

'utboun transportation costs per unit ten to be higher than inboun costs because inboun lot
si2es are typically larger. ncreasing the nu(ber of warehouse locations ecreases the average
outboun istance to a custo(er an (a*es outboun transportation istance a s(aller fraction
of total istance travele by the prouct. Thus+ as long as inboun transportation econo(ies of
scale are (aintaine+ increasing the nu(ber of facilities ecreases total transportation cost.
Facility costs ecrease as the nu(ber of facilities is reuce+ because a consoliation of facilities
allows a fir( to eploit econo(ies of scale. As the nu(ber of facilities increases+ total logistics
costs first ecrease an then increase. "ach fir( shoul have at least the nu(ber of facilities that
(ini(i2e total logistics costs.

As a fir( wants to further reuce the response ti(e to its custo(ers+ it (ay have to increase the
nu(ber of facilities beyon the point that (ini(i2es logistics costs. A fir( shoul a facilities
beyon the cost(ini(i2ing point only if (anagers are confient that the increase in revenues
because of better responsiveness is greater than the increase in costs because of the aitional
facilities. n general+ no istribution networ* will outperfor( others along all i(ensions. Thus+
it is i(portant to ensure that the strengths of the istribution networ* fit with the strategic
position of the fir(.
Diff: -
Topic: 4.# Factors nfluencing Distribution 0etwor* Design

41;
%opyright 5 #61- 7earson "ucation+ nc. publishing as 7rentice 8all
-) "plain the si istinct istribution networ* esigns that (ay be use to (ove proucts fro(
factory to custo(er.
Answer: n (anufacturer storage with irect shipping+ prouct is shippe irectly fro( the
(anufacturer to the en custo(er+ bypassing the retailer who ta*es the orer an initiates the
elivery re<uest). This option is also referre to as ropshipping with prouct elivere irectly
fro( the (anufacturer to the custo(er location.

>anufacturer storage with irect shipping an intransit (erge is si(ilar to pure ropshipping+
ecept that pieces of the orer co(ing fro( ifferent locations are co(bine so that the custo(er
gets a single elivery.

Distributor storage with pac*age carrier elivery is being use when inventory is not hel by
(anufacturers at the factories+ but is hel by istributors/retailers in inter(eiate warehouses+
an pac*age carriers are use to transport proucts fro( the inter(eiate location to the final
custo(er.

Distributor storage with last (ile elivery is being use when the istributor/retailer elivers the
prouct to the custo(erBs ho(e instea of using a pac*age carrier.

>anufacturer/istributor storage with custo(er pic*up is being use when inventory is store at
the (anufacturer or istributor warehouse but custo(ers place their orers online or on the
phone an then co(e to esignate pic*up points to collect their orers.

etail storage with custo(er pic*up is being use when inventory is store locally at retail stores
an custo(ers wal* into the retail store or place an orer online or on the phone an pic* it up at
the retail store.
Diff: #
Topic: 4.- Design 'ptions for a Distribution 0etwor*

4#6
%opyright 5 #61- 7earson "ucation+ nc. publishing as 7rentice 8all
4) "plain how istributors a value to a supply chain an i(prove its perfor(ance.
Answer: Distributors a value to a supply chain between a supply stage an a custo(er stage if
there are (any s(all players at the custo(er stage+ each re<uiring a s(all a(ount of the prouct
at a ti(e. The value ae increases if istributors carry proucts fro( (any (anufacturers.
(prove(ent in supply chain perfor(ance occurs for the following reasons:
 euction in inboun transportation cost because of T& ship(ents fro( (anufacturers to
istributor.
 euction in outboun transportation cost because the istributor co(bines proucts fro(
(any (anufacturers into a single outboun ship(ent.
 euction in inventory costs because istributor aggregates safety inventory rather than
isaggregating at each retailer.
 A (ore stable orer strea( fro( istributor to (anufacturer co(pare to erratic orers fro(
each retailer) allows (anufacturers to lower cost by planning prouction (ore effectively.
 =y carrying inventory closer to the point of sale+ istributors are able to provie a better
response ti(e than (anufacturers can.
 Distributors are able to offer onestop shopping with proucts fro( several (anufacturers.
Diff: -
Topic: 4.- Design 'ptions for a Distribution 0etwor*

) Total logistics costs are the su( of inventory+ transportation+ an facility costs for a supply

chain
Answer:networ*. ?hat occurs
Total logistics costsasfirst
the ecrease
nu(ber of facilities
an increases@
then increase as the nu(ber of facilities
increases. "ach fir( shoul have at least the nu(ber of facilities that (ini(i2e total logistics
costs. For ea(ple+ A(a2on has (ore than one warehouse pri(arily to reuce its logistics costs
an i(prove response ti(e). f a fir( wants to reuce the response ti(e to its custo(ers further+
it (ay have to increase the nu(ber of facilities beyon the point that (ini(i2es logistics costs. A
fir( shoul a facilities beyon the cost(ini(i2ing point only if (anagers are confient that
the increase in revenues because of better responsiveness is greater than the increase in costs
because of the aitional facilities.
Diff: -
Topic: 4.# Factors nfluencing Distribution 0etwor* Design
AA%$=: eflective Thin*ing $*ills
&earning 'utco(e: %o(pare co((on approaches to supply chain esign

4#1
%opyright 5 #61- 7earson "ucation+ nc. publishing as 7rentice 8all