True or False #6

Question 1

Decisions made during the supply chain design phase regarding significant investments in the supply chain, such as the number and size of plants to build, the number of trucks to purchase or lease, and whether to build or lease warehouse space, cannot be altered in the short term.

Answer 1

True

Question 2

Long-term contracts for both warehousing and transportation requirements will be more effective if the demand and price of warehousing do not change in the future or if the price of warehousing goes up.

Answer 2

True

Question 3

The degree of demand and price uncertainty has a significant influence on the appropriate portfolio of long- and short-term warehousing space that a firm should carry.

Answer 3

True

Question 4

If price and demand vary over time in a global network, flexible production capacity can be reconfigured to maximize profits in the new environment.

Answer 4

True

Question 5

A firm may choose to build a flexible global supply chain even in the presence of little demand or supply uncertainty if certainty exists in exchange rates or prices.

Answer 5

False

Question 6

The present value of a stream of cash flows is what that stream is worth in today’s dollars.

Answer 6

True

Question 7

The present value of future cash flows is found by using a discount factor.

Answer 7

True

Question 8

The rate of return k is also referred to as the present value of capital.

Answer 8

False

Question 9

A negative NPV for an option indicates that the option will lose money for the supply chain.

Answer 9

True

Question 10

The decision with the lowest NPV will provide a supply chain with the highest financial return.

Answer 10

False

Question 11

In reality, demand and prices are highly uncertain and are likely to fluctuate during the life of any supply chain decision.

Answer 11

True

Question 12

For a global supply chain, exchange rates and inflation are unlikely to vary over time in different locations.

Answer 12

False

Question 13

If uncertainty is ignored, a manager will always sign long-term contracts because they are typically cheaper and avoid all flexible capacity because it is more expensive.

Answer 13

True

Question 14

During network design, managers need a methodology that allows them to estimate the certainty in their forecast of demand and price and then incorporate this certainty into the decision-making process.

Answer 14

False

Question 15

Decision trees with DCFs can be used to evaluate supply chain design decisions given uncertainty in prices, demand, exchange rates, and inflation.

Answer 15

True