Trial exam questions+answers logistics and supply chain management 2 Khaoula Marai

1. ANSWERSTO END-OF-CHAPTERQUESTIONS
CHAPTER 2: THE SUPPLYCHAIN MANAGEMENTCONCEPT
1. Discuss the differencesbetweensupplychainand supplychain management.
A supplychainreferstothe activitiesassociatedwiththe flow andtransformationof goodsfromthe
raw material stage,throughtothe enduser,as well asthe associatedinformationflows.Supply
chainsare not a newconceptinthe sense thatthrough the yearsorganizationshave beendependent
on suppliersandorganizationshave servedcustomers.Althoughanyorganizationcanbe partof a
supplychain,supplychainmanagementrequiresovertmanagementeffortsbythe organizationsin
the supplychain.Moreover,supplychainmanagementcannotbe successful unlessthe participating
companies adoptanenterprise-to-enterpriseperspective.
2. Discuss the SCOR and GSCFmodelsof supplychain management.
The SCOR model identifiesfive keyprocesses—plan,source,make,deliver,andreturn—associated
withsupplychainmanagement. Eachof the five processesindicatesthe importantrole of logisticsin
supplychainmanagement. There are eightrelevantprocessesinthe GSCFmodel—customer
relationshipmanagement,customerservicemanagement,demandmanagement,orderfulfillment,
manufacturingflowmanagement,supplierrelationshipmanagement,productdevelopment
management,andreturnsmanagement. Logisticsalsoplaysanimportantrole inthe supplychain
processesinthe GSCFmodel.
3. What are four key attributes ofsupply chain management?
The chapter discussedsix keyattributesof supplychainmanagement:customerpower;along-term
orientation;leveragingtechnology;enhancedcommunicationacrossorganizations;inventory
control;interorganizational coordination.
4. Why do contemporary supplychains needto be fast and agile?
First,“fast” encompassesatime/speedcomponent,while “agile”focusesonanorganization’sability
to respondtochangesin demandwithrespecttovolume andvariety.Fastandagile are important
attributesof contemporarysupplychainsinpartbecause customerneedsandwantscanchange
relativelyquickly.Failure tobe fastand agile canresultindecreasedmarketshare,reduced
profitability,lowerstockprice,and/ordissatisfiedcustomersforsupplychain participants.
5. What is the difference betweenrelational andtransactional exchanges?Whichismore
relevantfor supplychain management?Why?
Relational exchangestendtoemphasize along-termorientation,while transactional exchangeshave
a short-termorientation.Unlike transactional exchanges,relational exchangesare characterizedby
attributessuchas trust,commitment,anddependence,amongothers.Supplychainmanagement
suggeststhatsupplychainsexisttoimprove the long-termperformance of the individual companies
and the supplychainas a whole.Relational exchangesalsohave along-termorientation.Asaresult,
relational exchangesare more relevantthantransactional exchangestosupplychainmanagement.

2. 6. This chapter suggeststhat technologyhas beenat the center of changestaking place that
affectthe supplychain. Do you agree or disagree?Why?
Althoughstudentscansupporteitherside of the argument,the textdoesargue thattechnologyhas
beenat the centerof changestakingplace that affectthe supplychain.Inparticular,increasesin
computingpowerandthe Internethave beenbehindmuchof thischange.
7. Discuss the impact of the Internet on supplychain management.
The Internetcan facilitate supplychaineffectivenessandefficiencybyprovidingopportunitiesto
simultaneouslyimprovecustomerservice andreduce logisticscosts.The Internetallowsone supply
chainparty to have virtuallyinstantaneousvisibilitytothe same data as doothersupplychain
participants.Thiscanultimatelyresultinlowerinventoriesandimprovedprofitabilitythroughoutthe
supplychain.
8. Discuss some of the ways that inventorycan be reducedin the supplychain.
Ways to reduce inventoryinthe supplychaininclude,butare notlimitedto,smaller,more frequent
orders;the use of premiumtransportation;demand-pull (thinkof Dell Computers),asopposedto
supply-push,replenishment;the eliminationorconsolidationof slower-movingproducts.
9. Do you agree that supplychain collaboration can be classifiedastransactional, tactical
informationsharing, or strategic in nature? Why?
Studentscouldargue thatsupplychaincollaborationisnottransactional,tactical informationsharing
or strategicinnature,but the textarguesfor thisclassificationscheme.
10. How might regulatoryand political conditionsact as barriers to supplychain management?
Withrespectto regulatoryconditions,anumberof today’ssupplychainarrangementswereillegal
until the early1980s. At a minimum,companiesshouldbe aware of regulatoryconsiderationsbefore
pursuingsupplychainarrangements.Political conditionssuchaswar and governmentalstabilitycan
alsoact as barriersto supplychainmanagement.War,forexample,couldeasilydisruptwell-
establishedsupplychains. Governmentpoliciesthateitherdiscourageinterorganizational
coordinationordiscourage doingbusinesswithcertaincountrieswhichwouldhave anegative
impacton supplychainefficiency.
11. Why is top managementcommitmentnecessaryfor successful supplychainmanagement?
Top managementhasthe abilitytoallocate the necessaryresourcesforsupplychainendeavorsand
top managementhasthe powertostructure,or restructure,corporate incentive policiesto focuson
achievingorganizational orinterorganizational(asopposedtofunctional) objectives.
12. Some companiesare hesitant to use frequentshoppercards because the data providedcould
violate the customer’sprivacy. Do you agree or disagree?Why?
Althougheitheranswerisacceptable,the questionof datausage versuscustomerprivacyhas
generatedimpassioneddiscussionsbystudents.Onthe one hand,the frequentshoppercardscan
provide aplethoraof data aboutthe shoppinghabitsof particularconsumers,potentiallyallowing
storesto achieve customizedmarketingforindividual customers.Atthe same time,frequent

3. shoppercardscould violate customerprivacyinthe sense thatcertaincustomersmightbe
uncomfortable thatstoreshave accesstosuch detaileddataaboutthem, particularlyif the data
includesfrequentpurchasesof potentially“embarrassing”products(e.g.,laxatives).
13. Discuss the bestof breedand single integratorapproaches.
In a single integratorapproach,all relevantsoftwareapplications(e.g.,inventorymanagement,
transportationmanagement,warehouse management,etc.) are providedbyasingle vendor. One
advantage of thisapproach isthat there shouldbe coordinationacrossthe variousapplications.
Alternatively,abestof breedapproachchoosesthe bestapplicationforaparticularfunctionandthis
approach oftenrequiresadditional software packagestocoordinate the differentapplications.
14. Do you think corporate culturesare relevant for supplychain management?Why or why not?
Again,eitheranswerisadequate.However,the textindicatesthatincompatible corporate cultures
couldpresentpotential obstaclestoeffective andefficientsupplychainmanagement.Inaddition,
manifestationsof corporate cultures, suchascompanyrituals,companybrochures,andthe like,can
provide importantcluesaboutthe abilityof potentialsupplychainpartiestoworktogether.
15. Why is supplychain integrationso difficultinglobal supplychains?
Integrationchallengesin global supplychainsincludecultural,economic,technological,political,
spatial,andlogistical differences. Global supplychainstranslate intobothlonger,andmore
unpredictable,leadtimesforshipments,whichincreasesthe chancesthatcustomerdemandmight
not be fulfilleddue toa potential out-of-stocksituation.
16. Discuss the three primary methods that organizations can use to integrate their supplychains.
One methodisvertical integration,inwhichone organizationownsmultiple participantsinthe
supplychain.Sherwin-Williams,forexample,isapaintmanufacturerandalsoownsretail paint
stores.A secondmethodinvolvesformal contractsamongvariousparticipants,suchasoccurs with
franchising.The thirdmethodfocusesoninformal agreementsamongvariousorganizationsto
pursue commongoalsand objectives.Thisoptionprovidesagreatdeal of flexibility—whichcanhave
bothpositive andnegative aspects.
17. Discuss the factors that distinguishcontemporarythird-party logisticsfrom earliertypesof
third-party logistics.
For one,there tendtobe formal contracts(generally3–5years) betweenprovidersandusers.
Contemporarythird-partylogisticsalsotendstobe characterizedbya relational focus,anemphasis
on mutual benefits,andthe availabilityof customized(asopposedtostandardized) offerings.In
short,contemporarythird-partylogisticshasadecidedlylong-termoutlook,asopposedto“shopping
around”for the bestdeal at the presenttime.
18. What are some reasonsfor using third-party logisticsservices? Whatare some reasons that
third-party logisticsarrangementsaren’t always successful?
The decisiontouse third-partylogisticsservicescanbe drivenbystrategicconsiderationsinthe
sense thatan organizationbelievesthatone ormore aspectsof itssupplychainneedstobe

4. transformed. Alternatively,the decisiontouse 3PLservicescouldbe more tactical innature;an
organizationmighthave aninefficientdistributionnetworkaswell asaninabilitytocontrol costs,
amongother reasons. Reasonsforunsuccessful3PLarrangementsincludeunreasonableand
unrealisticexpectationsandalackof flexibility.
19. Do you agree or disagree with the sentimentthat fourth-party logisticscompanies(lead
logisticsproviders) merelyadd unnecessarycost and few service improvementstosupplychains?
Why?
Eitheranswerisacceptable.Because fourth-partylogisticsisarelativelynew concept,itmaybe too
earlyto have a goodideaas to the ultimate role(s) thatthese intermediarieswill playineffective and
efficientsupplychains.Theirusefulnesscouldbe limitedif theycontinue tobe bestsuitedtolarge
companieswithglobal supplychains.
20. Discuss the various typesof supplychain software.
Some software packagesfocusonspecificfunctional areassuchasreverse logistics,transportation,
warehousing,orinventorymanagement.Othersoftware packagesfocusonspecificsupplychain
processessuchas suchas customerrelationshipmanagementorcollaborative planning,forecasting,
and replenishment.Still otherpackagesattempttosimultaneouslyoptimizesupplychainprocesses
across organizations.

5. PART III
EXAMINATION QUESTIONS
CHAPTER 2: THE SUPPLYCHAIN MANAGEMENTCONCEPT
Multiple Choice Questions
1. Accordingto ProfessorMentzerandcolleagues,the supplychainconceptoriginatedinwhat
discipline?
a. marketing
b. operations
c. logistics
d. production
(c; p. 33)
2. The supplychainmanagementphilosophyemergedin whichdecade?
a. 1960s
b. 1970s
c. 1980s
d. 1990s
(d;p. 33)
3. A ____________ encompassesall activitiesassociatedwiththe flow andtransformationof
goodsfrom the raw material stage,throughtothe enduser,as well asthe associatedinformation
flows.
a. productionline
b. supplychain
c. marketingchannel
d. warehouse
(b;p. 34)
4. Althoughnearlyanyorganizationcanbe part of a supplychain, supplychainmanagement
requires:
a. the involvementof third-partylogisticscompanies
b. overt managementeffortsby the organizationsin a supply chain

6. c. the participationof world-classorganizations
d. at leastone organizationtobe a multinational company
(b;p. 35)
5. Two of the mostprominentsupplychainmanagementframeworksare the Supply-Chain
OperationsReference (SCOR) modelandthe ____ model.
a. Council of SupplyChainManagementProfessionals(CSCMP)
b. SupplyChainEfficiency(SCE)
c. Global Supply ChainForum (GSCF)
d. PennState University(PSU)
(c; p. 35)
6. Whichof the followingisnotone of the processesinthe SCORmodel?
a. sell
b. plan
c. make
d. return
(a; p.35)
7. The currentGlobal SupplyChainForum(GSCF) model identifies____________ keyprocesses
associatedwithsupplychainmanagement.
a. five
b. six
c. seven
d. eight
(d;p. 35)
8. Whichof the followingare notkeyattributesof supplychainmanagement?
a. inventorycontrol
b. leveragingtechnology
c. customerpower
d. a long-termorientation

7. e. all are key attributes
(e;p. 36)
9. Contemporarysupplychainsshouldbe fastand____________.
a. lean
b. agile
c. interactive
d. relevant
(b;p. 37)
10. Contemporarysupplychainsshouldbe agileand____________.
a. fast
b. lean
c. interactive
d. relevant
(a; p.37)
11. An organization’sabilitytorespondtochangesindemandwithrespectto volume andvariety
refersto____.
a. responsiveness
b. leanness
c. agility
d. relevancy
(c; p. 37)
12. What is a perfectorder?
a. simultaneousachievementofrelevantcustomer metrics
b. an order that arrivesontime
c. an orderthat arrivesundamaged
d. an order that iseasyfor the receivertofill
(a; p.38)
13. Which of the followingisnotassociatedwithrelational exchanges?

8. a. independence
b. trust
c. commitment
d. sharedbenefits
(a; p.38)
14. Positive,long-termrelationshipsbetweensupplychainparticipantsreferto:
a. co-opetition
b. tailoredlogistics
c. partnerships
d. supplychainmanagement
(c; p. 38)
15. Accordingto the text,____________ has beenat the centerof the changestakingplace that
affectthe supplychain.
a. logistics
b. warehousing
c. technology
d. customerpower
(c; p. 38)
16. The twokeyfactors that have sparkedmuchof the technological change affecting supplychains
are ____________ and ____________.
a. EDI; ERP
b. Computingpower;ERP
c. EDI; Internet
d. Computingpower; Internet
(d;p. 38)
17. The bullwhipeffect:
a. isan ineffective waytomotivate warehouse employees
b. appliestorodeosandhas nothingtodo withsupplychainmanagement

9. c. referstothe “swaying”motionassociatedwithtriple trailers
d. refersto variabilityin demand ordersamong supplychain participants
(d;p. 39)
18. The variabilityindemandordersamongsupplychainparticipants:
a. cannot be controlled
b. refersto the bullwhipeffect
c. can be controlledwithelectronicorderplacement
d. is more pronouncedinrelational exchanges
(b;p. 39)
19. Which of the followingisnotaway to reduce inventorylevels?
a. supply-pushreplenishment
b. smaller,more frequentorders
c. use of premiumtransportation
d. eliminationof slowermovingproducts
(a; p.39)
20. Cooperative supplychain relationshipsdevelopedtoenhance the overallbusinessperformance
of bothpartiesisa definitionof:
a. third-partylogistics
b. supplychain collaboration
c. dovetailing
d. relationshipmarketing
(b;p. 41)
21. Supplychaincollaborationcanbe classifiedastransactional,strategic,or____ in nature.
a. operational
b. superorganizational
c. managerial
d. tactical informationsharing
(d;p. 41)

10. 22. ____ collaborationsofferthe bestopportunityfor improvingsupplychainperformance.
a. Transactional
b. Strategic
c. Tactical informationsharing
d. Operational
(b;p. 41)
23. Which of the followingisfalse?
a. top managementcommitmentisessential if supplychainefforts are tohave anychance of
success
b. some companiesare uncomfortable withthe conceptof customerpowerinsupplychains
c. seniormanagement commitmentto supply chain managementoccurs in one of every two
organizations
d. some companies are hesitanttoenterintolong-termrelationshipsbecausesuchrelationships
mightbe perceivedaslimitingacompany’soperational flexibility
e. all are true statements
(c; p. 42)
24. Which of the followingisnotabarrierto supplychainmanagement?
a. regulatoryandpolitical considerations
b. lack of top managementcommitment
c. reluctance toshare,or use,relevantdata
d. incompatible corporate cultures
e. all are barriers
(e;pp.42–44)
25. Data mining:
a. isillegal inthe UnitedStates
b. is synonymouswithmarginal analysis
c. looks for patterns and relationshipsinrelevantdata
d. can onlybe done bygrocerystores
(c; p. 43)

11. 26. Lookingforpatternsand relationshipsinrelevantdata refersto:
a. data warehousing
b. marginal analysis
c. correlationanalysis
d. data mining
(d;p. 43)
27. In a(n) ____ approach, all relevantsoftware applicationsare providedbyasingle vendor.
a. single integrator
b. captive customer
c. informationoutsourcing
d. customercentric
(a; p.43)
28. ____ refersto“howwe dothingsaroundhere”and reflectsanorganization'svision,values,and
strategicplans.
a. Supplychainmanagement
b. Organizational behavior
c. A missionstatement
d. Corporate culture
(d;p. 43)
29. Which of the followingisnotaroutine occurrence inglobal supplychains?
a. documentationerrors
b. incomplete shipments
c. packagingerrors
d. failure tofolloworderguidelines
e. all of the above are routine occurrences
(e;p. 44)
30. Supplychainscan be integratedbyhavingvariouspartiesenterintoandcarry out long-term
mutuallybeneficial agreements.These agreementsare knownby several names.Whichof the
followingisnotone of these names?

12. a. partnerships
b. strategicalliances
c. third-partyarrangements
d. contract logistics
e. all of the above are correct
(e;p. 44)
31. There are three primarymethodsthatorganizationscanpursue whenattemptingtointegrate
theirsupplychains.Whichof the followingisnotone of them?
a. vertical integration
b. intensive distribution
c. formal contracts
d. informal agreements
(b;p. 45)
32. All of the followingare factorsthatdistinguishcontemporarythird-partylogisticsfromearlier
effortsexcept:
a. there tendstobe a formal contract incontemporary3PL
b. contemporary3PL focusesoncustomizedofferings
c. contemporary 3PL has a transactional focus
d. contemporary3PL focusesonmutual benefits
(c; p. 46)
33. Which of the followingstatementsistrue?
a. 3PL servicesare not usedoutside of WesternEurope andNorthAmerica
b. The decisiontouse third-partylogisticscanonlybe strategicinnature
c. Contemporary3PL begantoemerge inthe 1970s
d. A common cause of 3PL failure is unreasonable and unrealisticexpectations
e. None of the above are true
(d;pp. 46-47)
34. What is a fourth-partylogisticsprovider?

13. a. a third-partylogisticsproviderthathasbeeninexistence foratleast25 years
b. a third-partylogisticsproviderthathasachievedISO9000 certification
c. a logisticsintermediarythatspecializesinone logisticsactivity(e.g.,transportation,
warehousing)
d. a general contractor that coordinatesthe activitiesof third-party logisticsproviders
(d;p. 47)
35. Which of the followingstatementsaboutsupplychainsoftware isfalse?
a. many supplychain software packages are developedforspecific,ratherthan general,
applications
b. supplychainsoftware packagescanfocuson specificfunctionalactivitiessuchastransportation
and warehousing
c. supplychainsoftware packagescanfocuson specificsupplychainprocessessuchascustomer
relationshipmanagement
d. supplychainsoftware packagescanattemptto simultaneouslyoptimize supplychainprocesses
across organizations
e. all are true
(a; p.48)

14. True-False Questions
1. The supplychainconceptoriginatedinthe logisticsliterature.(True;p.33)
2. Customersare not includedaspartof supplychains.(False;p.34)
3. Supplychainmanagementrequiresovertmanagementefforts bythe organizationswithinthe
supplychain.(True;p.35)
4. Two of the more prominentsupplychainmanagementframeworksare the Supply-Chain
OperationsReference (SCOR) andGlobal SupplyChainForum(GSCF) models.(True;p.35)
5. The SCORmodel identifiesfourkeyprocessesassociatedwithsupplychainmanagement.(False;
p. 35)
6. Because customerneedsandwantschange relativelyquickly,supplychainsshouldbe fastand
lean.(False;p.37)
7. Withrespectto supplychains,relevancyfocusesonanorganization’sabilitytorespondto
changesindemandwithrespecttovolume andvariety.(False;p.37)
8. A perfectordersimultaneouslyachievesrelevantcustomermetrics.(True;p.38)
9. Supplychainsshouldemployalong-termorientationwithvariousparticipants.(True;p.38)
10. Relational exchangescannotbe successfulwithoutinformationsharingamongvarious
participants.(True;p.38)
11. Powerretailershave beenatthe centerof changestakingplace thataffect the supplychain.
(False;p.38)
12. The Internethasbeenreferredtoasthe greatestforce of commodizationknowntoman,for
bothgoods andservices.(True;p.39)
13. Enhancedcommunicationsacrossorganizationsinasupplychainisonlydependenton the
technological capabilitiesof the organizations.(False;p.39)
14. Variabilityindemandordersamongsupplychainparticipantsisknownasthe bubbleeffect.
(False;p.39)
15. Inventorycontrol insupplychainmanagementisattemptingtomove from“stopsandstarts” to
continuousflow.(True;p.39)
16. Supplychaindisruptions(e.g.,terroristattacks,natural disasters) have causedsomesupply
chainsto reassesstheiremphasisoninventoryreduction.(True;p.40)
17. As a general rule, supplychaincollaborationiswidelyandsuccessfullyapplied.(False;p.41)
18. Tactical informationsharingoffersthe bestopportunityforimprovingsupplychainperformance.
(False;p.41)

15. 19. Regulatoryconsiderationspresentabiggerobstacle than political considerationstosupplychain
management.(False;p.42)
20. The overall global climateforbusinesshasshiftedtowardallowingmore cooperationamong
firms—whichshouldhelpsupplychainmanagement.(True;p.42)
21. Top managementissometimeshesitanttofullycommittosupplychainmanagement.(True;p.
42)
22. Actual seniormanagementcommitmenttosupplychainmanagementoccursinone of everytwo
organizations.(False;p.42)
23. One cause of the bullwhipeffectisasymmetrical informationamongsupplychainparticipants.
(True;p. 43)
24. Data warehousingisatechnique thatlooksforpatternsandrelationshipsinthe relevantdata.
(False;p.43)
25. Althoughcustomerloyaltyprograms(e.g.,frequentshoppercards) canprovide highlydetailed
data to companies,there are some whobelievethatthese programspotentiallyviolate acustomer’s
rightto privacy.(True;p. 43)
26. Today,computerhardware isa largerbarrierthan computersoftware tointerorganizational
collaboration.(False;p.43)
27. A best-of-breedapproachchoosesthe bestsoftware applicationforaparticularfunction.(True;
p. 43)
28. Corporate culturesshouldnotbe consideredwhendesigningasupplychain.(False;p.43)
29. Supplychainintegrationtendsto be more challenginginglobal,asopposedtodomestic,supply
chains.(True;p. 44)
30. An individual firmcanonlybe involvedinone supplychainata time.(False;p.44)
31. Vertical integrationisone of the methodsthatorganizationscanpursue whenattemptingto
integrate theirsupplychains.(True;p.46)
32. Contemporarythird-partylogisticshasexistedsince about1975. (False;p. 46)
33. Contemporarythird-partylogisticstendstobe characterizedbystandardized,asopposedto
customized, offerings.(False;p.46)
34. Indicationsare thatthird-partylogisticswill becomeincreasinglyimportantinpartsof the world
such as EasternEurope and Asia.(True;p. 46)
35. Shipmentroutingandreverse logisticsare commonactivitiesdemandedby third-partylogistics
customers.(False;p.46)
36. The decisiontouse third-partylogisticscompaniescanbe drivenbystrategicortactical
considerations.(True;pp.46-47)

16. 37. A fourth-partylogisticsprovidershouldbe viewedasa companywhose primarypurpose isto
insure thatthird-partylogisticsprovidersare workingtowardrelevantsupplychaingoals.(True;p.
47)
38. The fourth-partylogisticsconceptappearstobe bestsuitedtosmall companiesthatneed
logistical assistanceinonlyone or twofunctional areas.(False;p.47)
39. As a general rule,supplychainsoftwarepackageslooktocoordinate andintegrate functions,
processes,and/orsystemsacrossmultiple supplychainparticipants.(True;p.47)
40. The supplychainsoftware markethasbeencharacterizedbyagreat deal of consolidationin
recentyears.(True;p. 48)

17. PART IV
CASE SOLUTIONS
CASE 2-1 JOHNSONTOY COMPANY
Question1: Fromthe standpointof anindividualconcernedwithaccountingcontrols,discussand
evaluate JohnsonToyCompany’spresentpoliciesforhandlingreturneditems.
The controlsare poor fromthe standpointof accuracy of financial records,becausetheyprovide
poor informationtomanagement.
Question2: Answerquestion1,butfrom the standpointof an individual interestedinmarketing.
Marketingpeople tendtofavorlessstringentcontrolsinthe sense thattheyprovidemore flexibility
whenbargainingwith retailers.
Question3: Propose apolicyforhandlingreturnsthatshouldbe adoptedbythe JohnsonToy
Company.Be certainto listcircumstancesunderwhichexceptionswouldbe allowed.Shoulditapply
to the Jungle Jimdolls?
One student’sanswerisreproducedhere.
I. HIGH VOLUME CUSTOMERS (definedaspurchasing$75,000 of merchandise from
Johnson’speryear)
A. Functionallydamagedgoodsmaybe returnedtoJohnson’splantatJohnson’sexpense withafull
refund.
B. High volume customerswill receiveastraight2% deductionoff of the wholesale sellingprice to
coverdefectives—whetherdefectivesare classifiedascosmeticallydamagedorslow movingitems,
exceptwhenunable tosell due tospecial circumstances(seeSectionIII).
II. LOW VOLUME CUSTOMERS
A. Functionallydamagedgoodsmaybe returnedtoJohnson’splantviaJohnson’ssalespersonwith
a full refund.
B. Low volume customerswill NOTreceiveanautomaticdeductionfordefectives.Instead,the
damage or defectmustbe defined:
1. Cosmeticallydamagedgoods(classifiedasfunctionableandsellable):a25% discountgranted
uponinspectionbyJohnson’ssalesperson.
2. Slowmovingitems:NORETURNS
3. Non-movingitems(forreasonsotherthanphysical damage):see special circumstances,Section
III)
III. SPECIALCIRCUMSTANCESWhenproduct isnot resellable forreasonsotherthanbeing
functionallydamagedorjusta slowmoverinthe off season,suchas whenthe productreceivesbad

18. press(asin the case of Jungle JimandJoggerDolls),Johnsonwill allow returnof all suchnon-
resellable itemsunderthe followingconditions:
A. Retailermustpayfor the returnedmerchandise toreachJohnson’splant.
B. Retailer’saccountwill be creditedforthe full amountof saidpurchase.
C. Creditisto be usedwithin30 days of receiptof returnedgoodsat Johnson’splant;creditwill be
voidafter30 days.
No mentionwasmade asto whetheritshouldapplytothe Jungle Jimdolls.The firmmighttryto
enforce itbutcustomersmightcomplainthatit shouldnotbe appliedretroactively.
Question4: Shouldthispolicy,if adopted,be printedanddistributedtoall of the retailerswho
handle JohnsonToyCompanyproducts?Whyor whynot? If it shouldnotbe distributedtothem,
whoshouldreceive copies?
Yes,retailersshouldknowexactlywhatthe returnspolicywill be.One elementof acustomerservice
policyisto letcustomersknowinadvance whatthe policyis.
Question5: Assume thatitis decidedtoprepare astatementonreturnsto be distributedtoall
retailersandthatit shouldbe lessthana single double-spacedpage.Prepare suchastatement.
The answerprovidedforquestion3wouldsuffice hereaswell.
Question6: Onthe basisof the policyinyour answertoquestion3,developinstructionsforthe
JohnsonToyCompanydistributionandaccountingdepartmentswithrespecttotheirrolesand
proceduresinthe handlingof returns.
One couldtake the informationasdevelopedin answers3and5, anddraft a memoto be sentto
boththe distributionandaccountingdepartments,tellingthemof the new policies,andtheirrolesin
carryingthemout. The accountingdepartmentshouldbe toldtodevelopadditional proceduresthat
will protectagainstfraud.Inaddition,otherdepartmentsinthe firmshouldreceivesome
informationconcerningthe returns,because theymaycontaininformationthatshouldinterest
marketing,qualitycontrol andproductionscheduling.
Question7: Assume thatyouare Cheryl Guridi,the firm’slogisticsmanager.Doyouthinkthatthe
returnspolicyfavoredbythe logisticsmanagerwoulddifferfromwhatwouldbe bestforthe firm?
Why or whynot?
Yes,the returnspolicyfavoredbythe logisticsmanagerwill favoratightreturn policysothat her
departmentdoesnothave tobe responsible forkeepingtrackof returnedinventories,andfor
shippingdamagedgoods.The firmwouldprobablypreferalooserreturnpolicysothatit couldbe
usedas a bargainingtool to increase sales.
Question8: Until the policyyourecommendinyouranswertoquestion3 takeseffect,how would
youhandle the immediate problemof retailerswantingtoreturnunsoldJungle Jimthe Joggerdolls?
There are several approachestothisquestion.Some studentshave providedveryspecificpolicies.
Othershave saidthat because the policywasnotineffectwhenthe Jungle Jimdollswentout,it

19. shouldnotapplyto theirsituation.Thislattergroupfavoredapolicyof “almostanything”thatwould
keepretailershappy.Theyargued—withsupportfromthe case material—thatthere were anumber
of valuedlong-termrelationshipswithretailersthatshouldnotbe harmed.

20. CASE 2-2 WYOMOGROCERYBUYERS’ COOPERATIVE
Question1: Co-opmemberspresentlypayforgoods“onthe basisof cost to the co-opplus23% to
coverwarehousingandtransportationfromthe warehousestothe members’retailstores.”Isthisa
fairway to coverwarehousingcosts?Canyouthinkof a betterway?If so,describe it.
Thissystemprobablyfavorsthe storesthathave smallerordersizesandhighertransportationcosts
to reach.“Better”may or may not be the issue;itisonlyif one thinksthat the ratesshouldbe cost-
oriented.
Question2: Answerthe problemposedinquestion1withrespecttotransportationcosts.
The previousanswerisapplicablehere.If one wantedratesorientedtowardtransportationcosts,
theymightdevise amethodthattakesintoaccount tonnagescarriedanddistancestraveled.
Question3: Towardthe endof the case, Brightdescribedhow some manufacturerspaybribestoget
shelf space inretail stores.Shouldretailersacceptsuchbribes?Whyor whynot?
The bribesare paidintwoways.One is a giftof additional merchandisetobe sold,whichmerely
lessensthe store’scostof goodspurchased.Thisissometimescalleda“stockingallowance.”The
otherway iscash paidto salariedemployees,whichtheywouldprobablypocket.The firstmethodis
a fairlycommonpractice;the secondmethodwouldbe viewedbymanyaswrong andthus shouldbe
discouraged.
Question4: The case says,“Storeswere responsible forplacingorderswiththe co-op,althoughaco-
op representative wouldcall onaweeklybasis,andone of her/hisfunctionswastohelpsome store
operatorscomplete theirorderforms.”Isthisafunctionthatthe co-opshouldbe performing?Why
or whynot?
It’sa wayfor the co-opto helpsome of itsmembersandit alsohelpstokeepcertainstoresloyal to
the co-op. Unlessthe co-op’sboardadoptsa policyagainstthe practice,thenthere’snothingwrong
withit.The practice can be viewedasa formof customerservice.
Question5: The case mentionsthatsome of the largerstoresthat belongedtothe co-opsometimes
threatenedtoformtheirownco-op.Assume thatyouare hiredbysome of themto studythe
feasibilityof suchamove.Listthe varioustopicsthat youwouldinclude inyourstudy.
One couldlookat all the elementsinthe distributionsystemneededtoserve the largerco-ops:
warehousing,transportation,inventories,ordermanagement,etc.Thenone woulddetermine the
costs servingthe largerco-opsandcompare these coststo whatis presentlyofferedbyWyomo.This
isan area where quantitydiscountsare important:canthe new co-opearnlarge enoughdiscounts
on whatit buysto have some majorsavings?
Question6: Howwouldyouvote on Hardy’smotion?Why?
A studentcanvote eitherway,althoughfreezingthe numberof SKUsmayforce the larger members
to leave the co-op.
Question7: Woulditmake a difference whetheryourepresentedalarge orsmall store?Why?

21. Small storeswouldprobablyfavorthe resolution,unlesstheyrealizedthatexpansionwasnecessary
for the survival of the co-op.If theylose theirlargermembers,manycostsperunitmayincrease.
Question8: Are there otherstrategiesthatthe co-opmightpursue toovercome thisproblem?If so,
describe.
Theycouldget additional productspace forsome productlines,orarrange to have some large
volume ordersdelivereddirectlytostores,bypassingthe warehouse.