Supply Chain Management, 6e (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: TRUE
Diff: 2
Topic: 4.1 The Role of Distribution in the Supply Chain
AACSB: Application of knowledge
Objective: LO 4.1: Identify the key factors to be considered when designing a
distribution network.

2) Companies in the same industry often select very different distribution networks,
because the choice of the distribution network can be used to achieve a variety of supply
chain objectives ranging from low cost to high responsiveness.
Answer: TRUE
Diff: 2
Topic: 4.1 The Role of Distribution in the Supply Chain
AACSB: Application of knowledge
Objective: LO 4.1: Identify the key factors to be considered when designing a
distribution network.

3) A customer does not necessarily want the highest level of performance along all
dimensions of customer service, including response time, product variety, product
availability, customer experience, order visibility, and returnability.
Answer: TRUE
Diff: 1
Topic: 4.2 Factors Influencing Distribution Network Design
AACSB: Application of knowledge
Objective: LO 4.1: Identify the key factors to be considered when designing a
distribution network.

4) Outbound transportation costs per unit tend to be lower than inbound costs, because
inbound lot sizes are typically larger.
Answer: FALSE
Diff: 1
Topic: 4.2 Factors Influencing Distribution Network Design
AACSB: Application of knowledge
Objective: LO 4.1: Identify the key factors to be considered when designing a
distribution network.
5) Transportation costs are high with drop-shipping because the average outbound
distance to the end consumer is large and package carriers are used to shipping the
product.
Answer: TRUE
Diff: 1
Topic: 4.2 Factors Influencing Distribution Network Design
AACSB: Application of knowledge
Objective: LO 4.1: Identify the key factors to be considered when designing a
distribution network.

6) As long as inbound transportation economies of scale are maintained, increasing the

number of facilities decreases total transportation cost.
Answer: TRUE
Diff: 1
Topic: 4.2 Factors Influencing Distribution Network Design
AACSB: Application of knowledge
Objective: LO 4.1: Identify the key factors to be considered when designing a
distribution network.

7) Customers always want the highest level of performance along all the dimensions
response time, product variety and returnability.
Answer: FALSE
Diff: 2
Topic: 4.2 Factors Influencing Distribution Network Design
AACSB: Application of knowledge
Objective: LO 4.1: Identify the key factors to be considered when designing a
distribution network.

8) A decrease in the response time customers desire increases the number of facilities
required in the network.
Answer: TRUE
Diff: 1
Topic: 4.2 Factors Influencing Distribution Network Design
AACSB: Analytical thinking
Objective: LO 4.1: Identify the key factors to be considered when designing a
distribution network.

9) The main advantage of in-transit merge over drop-shipping is the somewhat lower
transportation cost and improved customer experience.
Answer: TRUE
Diff: 2
Topic: 4.3 Design Options for a Distribution Network
AACSB: Application of knowledge
Objective: LO 4.2: Discuss the strengths and weaknesses of various distribution options.
10) The main advantage of a distribution network with local storage is that it can lower
the delivery cost and provide a faster response than other networks.
Answer: TRUE
Diff: 2
Topic: 4.3 Design Options for a Distribution Network
AACSB: Application of knowledge
Objective: LO 4.2: Discuss the strengths and weaknesses of various distribution options.

11) The major disadvantage of a distribution network with local storage is the increased
inventory and facility costs.
Answer: TRUE
Diff: 1
Topic: 4.3 Design Options for a Distribution Network
AACSB: Application of knowledge
Objective: LO 4.2: Discuss the strengths and weaknesses of various distribution options.

12) A distribution network designer needs to consider product characteristics as well as

network requirements when deciding on the appropriate delivery network.
Answer: TRUE
Diff: 3
Topic: 4.3 Design Options for a Distribution Network
AACSB: Application of knowledge
Objective: LO 4.2: Discuss the strengths and weaknesses of various distribution options.

13) Only niche companies will end up using a single distribution network.
Answer: TRUE
Diff: 1
Topic: 4.3 Design Options for a Distribution Network
AACSB: Application of knowledge
Objective: LO 4.2: Discuss the strengths and weaknesses of various distribution options.

14) Distributors add value to a supply chain between a supply stage and a customer stage
if there are many small players at the customer stage, each requiring a small amount of
the product at a time.
Answer: TRUE
Diff: 2
Topic: 4.3 Design Options for a Distribution Network
AACSB: Application of knowledge
Objective: LO 4.2: Discuss the strengths and weaknesses of various distribution options.
15) For physical products, i.e., products that cannot be downloaded, customer requests
take longer to fulfill through online sales than in a retail store setting.
Answer: TRUE
Diff: 2
Topic: 4.4 Online Sales and the Distribution Network
AACSB: Application of knowledge
Objective: LO 4.3: Understand how online sales have affected the design of distribution
networks in different industries.

16) It is much easier to return a product to an online retailer than to a traditional bricks
and mortar seller.
Answer: FALSE
Diff: 2
Topic: 4.4 Online Sales and the Distribution Network
AACSB: Application of knowledge
Objective: LO 4.3: Understand how online sales have affected the design of distribution
networks in different industries.

17) Compared to a business with many retail outlets, an online seller with aggregated
inventories tends to have lower per unit transportation costs across the entire supply
chain.
Answer: FALSE
Diff: 2
Topic: 4.4 Online Sales and the Distribution Network
AACSB: Application of knowledge
Objective: LO 4.3: Understand how online sales have affected the design of distribution
networks in different industries.

18) It is more common for a manufacturer to not own the distribution network.
Answer: TRUE
Diff: 2
Topic: 4.5 Distribution Networks in Practice
AACSB: Application of knowledge
Objective: LO 4.2: Discuss the strengths and weaknesses of various distribution options.

19) Consumers prefer purchasing commoditized products at a one-stop shop.

Answer: TRUE
Diff: 2
Topic: 4.5 Distribution Networks in Practice
AACSB: Application of knowledge
Objective: LO 4.2: Discuss the strengths and weaknesses of various distribution options.
20) To extract the maximum benefit from the online channel for physical goods, firms
should keep it separate from their existing supply chain networks.
Answer: FALSE
Diff: 2
Topic: 4.5 Distribution Networks in Practice
AACSB: Application of knowledge
Objective: LO 4.2: Discuss the strengths and weaknesses of various distribution options.

4.2 Multiple Choice Questions

1) The steps taken to move and store a product from the supplier stage to a customer
stage in the supply chain are referred to as
A) transportation.
B) retailing.
C) wholesaling.
D) distribution.
Answer: D
Diff: 1
Topic: 4.1 The Role of Distribution in the Supply Chain
AACSB: Application of knowledge
Objective: LO 4.1: Identify the key factors to be considered when designing a
distribution network.

2) Where does distribution occur in the supply chain?

A) Between every pair of stages
B) Everywhere downstream from production
C) Between production and the retailer
D) Between suppliers and retailers
Answer: A
Diff: 2
Topic: 4.1 The Role of Distribution in the Supply Chain
AACSB: Application of knowledge
Objective: LO 4.1: Identify the key factors to be considered when designing a
distribution network.

3) Distribution is a key driver of the overall profitability of a firm because

A) the addition of distributors only adds cost to the supply chain.
B) it directly impacts both the supply chain cost and the customer experience.
C) it slows down the responsiveness of the supply chain.
D) it cannot be developed as a part of supply chain strategy.
Answer: B
Diff: 2
Topic: 4.1 The Role of Distribution in the Supply Chain
AACSB: Application of knowledge
Objective: LO 4.1: Identify the key factors to be considered when designing a
distribution network.
4) Companies in the same industry often select very different distribution networks
because
A) some companies are poorly run.
B) different companies try to avoid using the same approach.
C) different companies have different objectives for their supply chain.
D) all of the above
Answer: C
Diff: 2
Topic: 4.2 Factors Influencing Distribution Network Design
AACSB: Application of knowledge
Objective: LO 4.1: Identify the key factors to be considered when designing a
distribution network.

5) Which of the following would not be the result of a poor/inappropriate distribution

network?
A) High profitability
B) Low level of customer service
C) High cost
D) Poor profitability
Answer: A
Diff: 1
Topic: 4.2 Factors Influencing Distribution Network Design
AACSB: Application of knowledge
Objective: LO 4.1: Identify the key factors to be considered when designing a
distribution network.

6) The number of different products/configurations that a customer desires from the

distribution network is
A) response time.
B) product variety.
C) product availability.
D) customer experience.
Answer: B
Diff: 1
Topic: 4.2 Factors Influencing Distribution Network Design
AACSB: Application of knowledge
Objective: LO 4.1: Identify the key factors to be considered when designing a
distribution network.
7) The probability of having a product in stock when a customer order arrives is
A) response time.
B) product variety.
C) product availability.
D) customer experience.
Answer: C
Diff: 1
Topic: 4.2 Factors Influencing Distribution Network Design
AACSB: Application of knowledge
Objective: LO 4.1: Identify the key factors to be considered when designing a
distribution network.

8) The ease with which the customer can place and receive their order as well as other
aspects of value that the sales staff provides is
A) customer experience.
B) order visibility.
C) product availability.
D) response time.
Answer: A
Diff: 1
Topic: 4.2 Factors Influencing Distribution Network Design
AACSB: Application of knowledge
Objective: LO 4.1: Identify the key factors to be considered when designing a
distribution network.

9) The ability of the customer to track their order from placement to delivery is
A) customer experience.
B) order visibility.
C) product availability.
D) response time.
Answer: B
Diff: 1
Topic: 4.2 Factors Influencing Distribution Network Design
AACSB: Application of knowledge
Objective: LO 4.1: Identify the key factors to be considered when designing a
distribution network.
10) The costs incurred in bringing material into a facility are
A) sourcing transportation costs.
B) outbound transportation costs.
C) crossbound transportation costs.
D) inbound transportation costs.
Answer: D
Diff: 1
Topic: 4.2 Factors Influencing Distribution Network Design
AACSB: Application of knowledge
Objective: LO 4.1: Identify the key factors to be considered when designing a
distribution network.

11) The costs incurred in sending material out of a facility are

A) sourcing transportation costs.
B) outbound transportation costs.
C) crossbound transportation costs.
D) inbound transportation costs.
Answer: B
Diff: 1
Topic: 4.2 Factors Influencing Distribution Network Design
AACSB: Application of knowledge
Objective: LO 4.1: Identify the key factors to be considered when designing a
distribution network.

12) Outbound transportation costs per unit tend to be

A) about the same as inbound costs.
B) higher than inbound costs.
C) lower than inbound costs.
D) neither higher or lower than inbound costs.
Answer: B
Diff: 2
Topic: 4.2 Factors Influencing Distribution Network Design
AACSB: Application of knowledge
Objective: LO 4.1: Identify the key factors to be considered when designing a
distribution network.

13) As the number of facilities in a supply chain increases

A) the inventory and resulting inventory costs also increase.
B) the inventory and resulting inventory costs decrease.
C) the inventory increases and resulting inventory costs decrease.
D) the inventory decreases and resulting inventory costs increase.
Answer: A
Diff: 2
Topic: 4.2 Factors Influencing Distribution Network Design
AACSB: Application of knowledge
Objective: LO 4.1: Identify the key factors to be considered when designing a
distribution network.