Chapter 7 Section 9 Answers 6gg2p

CHAPTER 7: DEMAND MANAGEMENT, ORDER MANAGEMENT AND CUSTOMER SERVICE 1. What is the relationship between demand management, order management, and customer service? There is a key link between order management and demand forecasting, in that a firm does not simply wait for orders to arrive in order to learn what is happening. Forecasts are made of sales and of the inventories that must be stocked so that the firm can fill orders in a satisfactory manner. There is also a key link between order management and customer service because many organizations analyze customer service standards in of the four stages of the order cycle. 2. Discuss the three basic demand forecasting models. Judgmental forecasting involves using judgment or intuition and is preferred in situations where there is limited or no historical data, such as with a new product introduction. Judgmental forecasting techniques include surveys and the analog technique. An underlying assumption of time-series forecasting is that future demand is solely dependent on past demand. Time-series forecasting techniques include simple moving averages and weighted moving averages. Cause and effect forecasting assumes that one or more factors are related to demand and that the relationship between cause and effect can be used to estimate future demand. Simple regression and multiple regression are examples of cause and effect forecasting. 4. Define and describe the order cycle. Why is it considered an important aspect of customer service? The order cycle is the elapsed time from when a customer places an order until the customer receives the order. It is an important aspect of customer service in part because the order cycle is frequently used to determine the parameters of customer service goals and objectives. The order cycle is also being used by some firms as a competitive weapon (generally the shorter the better), and technological advances now make it extremely easy (and fast) for customers to determine the exact status of their order(s).

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5. What are some causes of order cycle variability? What are the consequences of order cycle variability? Order cycle variability can occur in each stage of the order cycle. For example, order transmittal by mail sometimes results in the mailed item never reaching its intended destination; variability, in the form of unreliable transit times, can occur during order delivery. One consequence of order cycle variability might be an increase in inventory levels to guard against stockouts. If inventory levels are not increased, then stockouts could occur because of order cycle variability, or a company might be forced to use expedited transportation to make sure orders arrive on time.

6. List and discuss the three elements of the dependability dimension of customer service. The three elements are consistent order cycles, safe delivery, and complete delivery. As pointed out earlier, inconsistent order cycles necessitate higher inventory requirements. Safe delivery brings loss and damage considerations into play; lost or damaged product can cause a variety of negative ramifications for a customer, such as an out of stock situation. One way of measuring the completeness of delivery involves the order fill rate or the percentage of orders that can be completely and immediately filled from existing stock; incomplete deliveries generally translate into unhappy customers. 7. Describe some of the key issues associated with measuring customer service. Ideally, an organization might want to collect measurement data from internal (e.g., credit memos) and external sources (e.g., actual customers). A second key issue associated with customer service measurement is determining what factors to measure. In addition, the metrics that are chosen to measure customer service should be relevant and important from the customer’s—and not the service provider’s—perspective.

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Multiple Choice Questions 1. The creation across the supply chain and its markets of a coordinated flow of demand is the definition of: a. order cycle b. order management c. demand management d. supply chain management (c; p. 113) 2. Which of the following is not a basic type of demand forecasting model? a. exponential smoothing b. cause and effect c. judgmental d. time series e. all are basis types of forecasting models (a; p. 113) 3. Surveys and analog techniques are examples of ____ forecasting. a. cause and effect b. time series c. exponential smoothing d. judgmental (d; p. 113) 4. Which forecasting technique tends to be appropriate when there is little or no historical data? a. exponential smoothing b. judgmental c. time series d. cause and effect (b; p. 114) 5. ____ refers to the management of various activities associated with the order cycle. a. Logistics b. Order processing c. Demand management d. Order management (d; p. 115) 3

6. The order cycle is: a. the time that it takes for a check to clear b. the time that it takes from when a customer places an order until the selling firm receives the order c. also called the replenishment cycle d. also called the vendor cycle (c; p. 115) 7. The order cycle is composed of each of the following except: a. order picking and assembly b. order delivery c. order retrieval d. order transmittal (c; p. 116) 8. Order transmittal is: a. the same thing as an order cycle b. the series of events that occur between the time a customer places an order and the time the seller receives the order c. the series of events that occur between the time the customer perceives the need for something and the time the seller receives the order d. the series of events between the time a customer places an order and the time the order cycle begins (b; p. 116) 9. In general, there are ____ possible ways to transmit orders. a. six b. five c. four d. three (b; p. 116) 10. Which of the following is not a possible method of order transmittal? a. in-person b. mail c. fax d. electronic e. all are methods of order transmittal (e; p. 116)

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11. Ordering by ____ can be fast and convenient, but order errors are generally not detected until the order is delivered. a. telephone b. mail c. fax d. electronic (a; p. 116) 12. ____ refers to the time from when the seller receives an order until an appropriate location is authorized to fill the order. a. Order processing b. Order cycle c. Order management d. Order transmittal (a; p. 116) 13. Order processing typically involves each of the following activities except: a. Checking the buyer’s ability to purchase b. entering the order into the system c. determining inventory location d. crediting the salesperson with the sale e. all are activities (e; p. 118) 14. Classifying orders according to pre-established guidelines so that a company can prioritize how orders are to be filled refers to ____. a. order management b. order processing c. order triage d. ABC analysis (c; p. 118) 15. Order picking and assembly is: a. the most important component of the order cycle b. the way a customer decides what he needs to purchase c. the component that follows order processing d. the most computerized part of the order cycle (c; p. 118)

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16. The final phase of the order cycle is called order ____________. a. picking and assembly b. delivery c. receiving d. replenishment (b; p. 119) 17. Which of the following is not a dimension of customer service? a. time b. convenience c. dependability d. communication e. all of the above are dimensions (e; p. 121) 18. The percentage of orders that can be completely and immediately filled from existing stock is the ____ rate. a. order cycle b. perfect order c. order fill d. optimal inventory (c; p. 121) 19. What component of customer service focuses on the ease of doing business with a seller? a. convenience b. dependability c. time d. communication (a; p. 122)

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True-False Questions 1. Demand management is important because effective and efficient supply chains have learned to match both supply and demand. (True; p. 112) 2. In make-to-order situations, finished goods are produced after receiving a customer order. (True; p. 113) 3. Judgmental forecasting is appropriate when there is little or no historical data. (True; p. 113) 4. There are four possible ways to transmit orders. (False; p. 116) 5. Each possible method of order transmittal has advantages and disadvantages, and each performs differently with respect to the cost of ordering and the time to order. (True; p. 116) 6. Order information is checked for completeness and accuracy in the order processing component of the order cycle. (True; pp. 116-118) 7. Order picking and assembly follows the order processing component of the order cycle. (True; p. 118) 8. Order processing often represents the best opportunity to improve the effectiveness and efficiency of the order cycle. (False; pp. 118-119) 9. Dependability consists of consistent order cycles, safe delivery, and consistent delivery. (True; p. 121) 10. Companies today will not accept slower order cycles in exchange for higher order cycle consistency. (False; p. 121) 11. Order fill rate is the percentage of orders that can be completely and immediately filled from existing stock. (True; p. 121) 12. Text messaging and the Internet have lessened the need for telephone interaction and face-to-face between seller and customer. (False; p. 122) 13. The convenience component of customer service focuses on the ease of doing business with a seller. (True; p. 122)

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