SCM 300 | SCM300 Exam 2: Global Supply
Operations Updated and Latest Questions and
Correct Answers with Rationale - Arizona State
University
1. Which Incoterm requires the seller to assume the highest level of responsibility, including
delivery to the buyer’s location and payment of all duties?
A. EXW (Ex Works)
B. FOB (Free on Board)
C. DDP (Delivered Duty Paid)
D. CIF (Cost, Insurance, and Freight)
Correct Answer: C
Expert Explanation: DDP represents the maximum obligation for the seller because they
must handle all transportation costs and risks. This includes paying for import duties and
taxes at the destination country. Conversely, EXW places the minimum burden on the
seller, requiring the buyer to manage everything from the factory door. FOB and CIF are
typically used for maritime transport and involve different risk transfer points. Choosing
DDP simplifies the process for the buyer but increases the seller’s logistical complexity.
2. When evaluating global sourcing locations, which factor is most likely to contribute to the
‘hidden costs’ of offshoring?
A. Direct labor wages
B. Raw material prices
C. Pipeline inventory costs
D. Factory rental rates
Correct Answer: C
Expert Explanation: Offshoring often leads to longer lead times, which increases the
amount of inventory held in transit or ‘the pipeline.’ These pipeline inventory costs are
frequently overlooked when companies focus solely on low direct labor wages. While raw
material and factory costs are visible, the capital tied up in slow-moving ocean freight can
be significant. Managing these hidden costs is essential for an accurate Total Cost of
Ownership analysis. Firms must balance cheap labor against the financial burden of
extended supply chains.
3. A company wants to ship high-value, perishable electronics from South Korea to the United
States. Which mode of transportation is most appropriate?
A. Ocean Freight
,B. Intermodal Trucking
C. Rail Transport
D. Air Freight
Correct Answer: D
Expert Explanation: Air freight is the preferred choice for high-value items that are
sensitive to time or environmental conditions. Although it is the most expensive mode, the
speed of delivery reduces the risk of obsolescence and theft. Ocean freight is too slow for
perishable or extremely high-value electronics due to the long transit times. Rail and
trucking are not feasible for transpacific shipments without being part of an intermodal
chain. Therefore, air transport optimizes the trade-off between speed and security for this
specific scenario.
4. What is the primary function of a Free Trade Zone (FTZ)?
A. To eliminate all environmental regulations for manufacturing
B. To allow goods to be landed, handled, and re-exported without customs intervention
C. To provide a marketplace where only domestic goods are sold
D. To subsidize the labor costs of foreign workers
Correct Answer: B
Expert Explanation: Free Trade Zones are designated geographic areas where goods can
be processed without immediate payment of duties or taxes. This allows companies to
delay or even avoid tariffs if the final product is re-exported to another country. It is a
strategic tool used by managers to improve cash flow and operational efficiency. FTZs do
not exempt companies from environmental laws or labor regulations. By utilizing these
zones, firms can optimize their global logistics and manufacturing strategies.
5. Which document serves as a contract of carriage between the shipper and the carrier, as
well as a receipt for goods?
A. Bill of Lading
B. Packing List
C. Certificate of Origin
D. Commercial Invoice
Correct Answer: A
Expert Explanation: The Bill of Lading is one of the most critical documents in
international trade and logistics. It functions as a receipt for the cargo and outlines the
terms of the transportation agreement. Furthermore, it often serves as a document of title,
meaning whoever holds it has the right to the goods. Commercial invoices and packing lists
, describe the items but do not act as contracts with the carrier. Without a properly executed
Bill of Lading, legal ownership and shipping disputes cannot be easily resolved.
6. What is a major disadvantage of using a single-sourcing strategy in a global supply chain?
A. Inability to build strong supplier relationships
B. Higher administrative costs for managing multiple contracts
C. Increased vulnerability to supply chain disruptions
D. Lower levels of quality consistency
Correct Answer: C
Expert Explanation: Single sourcing makes a company highly dependent on one partner,
increasing the risk of total stoppage if that supplier fails. Events like natural disasters or
political instability in the supplier’s region can halt the entire production line. While it
allows for better volume discounts and relationship building, the risk management aspect
is compromised. Multi-sourcing provides a safety net by distributing orders across
different geographical locations. Strategic managers must weigh the efficiency of single
sourcing against the resilience of multiple suppliers.
7. How does ‘Intermodalism’ contribute to global supply chain efficiency?
A. By using only one mode of transport for the entire journey
B. By utilizing standardized containers that move seamlessly across different transport
modes
C. By increasing the number of times cargo is manually handled
D. By eliminating the need for freight forwarders
Correct Answer: B
Expert Explanation: Intermodalism relies on standardized containers (TEUs) that can be
moved from ships to trains to trucks without unloading the contents. This standardization
significantly reduces handling time, labor costs, and the risk of damage or theft. It allows
supply chain managers to combine the cost-effectiveness of ocean freight with the speed of
trucking. Without intermodal standards, global trade would be much slower and more
prone to errors. Consequently, it is a cornerstone of modern logistics and operational
efficiency.
8. A company is shifting production from China to Mexico to be closer to its US customers.
This strategy is known as:
A. Nearshoring
B. Offshoring
C. In-sourcing
Operations Updated and Latest Questions and
Correct Answers with Rationale - Arizona State
University
1. Which Incoterm requires the seller to assume the highest level of responsibility, including
delivery to the buyer’s location and payment of all duties?
A. EXW (Ex Works)
B. FOB (Free on Board)
C. DDP (Delivered Duty Paid)
D. CIF (Cost, Insurance, and Freight)
Correct Answer: C
Expert Explanation: DDP represents the maximum obligation for the seller because they
must handle all transportation costs and risks. This includes paying for import duties and
taxes at the destination country. Conversely, EXW places the minimum burden on the
seller, requiring the buyer to manage everything from the factory door. FOB and CIF are
typically used for maritime transport and involve different risk transfer points. Choosing
DDP simplifies the process for the buyer but increases the seller’s logistical complexity.
2. When evaluating global sourcing locations, which factor is most likely to contribute to the
‘hidden costs’ of offshoring?
A. Direct labor wages
B. Raw material prices
C. Pipeline inventory costs
D. Factory rental rates
Correct Answer: C
Expert Explanation: Offshoring often leads to longer lead times, which increases the
amount of inventory held in transit or ‘the pipeline.’ These pipeline inventory costs are
frequently overlooked when companies focus solely on low direct labor wages. While raw
material and factory costs are visible, the capital tied up in slow-moving ocean freight can
be significant. Managing these hidden costs is essential for an accurate Total Cost of
Ownership analysis. Firms must balance cheap labor against the financial burden of
extended supply chains.
3. A company wants to ship high-value, perishable electronics from South Korea to the United
States. Which mode of transportation is most appropriate?
A. Ocean Freight
,B. Intermodal Trucking
C. Rail Transport
D. Air Freight
Correct Answer: D
Expert Explanation: Air freight is the preferred choice for high-value items that are
sensitive to time or environmental conditions. Although it is the most expensive mode, the
speed of delivery reduces the risk of obsolescence and theft. Ocean freight is too slow for
perishable or extremely high-value electronics due to the long transit times. Rail and
trucking are not feasible for transpacific shipments without being part of an intermodal
chain. Therefore, air transport optimizes the trade-off between speed and security for this
specific scenario.
4. What is the primary function of a Free Trade Zone (FTZ)?
A. To eliminate all environmental regulations for manufacturing
B. To allow goods to be landed, handled, and re-exported without customs intervention
C. To provide a marketplace where only domestic goods are sold
D. To subsidize the labor costs of foreign workers
Correct Answer: B
Expert Explanation: Free Trade Zones are designated geographic areas where goods can
be processed without immediate payment of duties or taxes. This allows companies to
delay or even avoid tariffs if the final product is re-exported to another country. It is a
strategic tool used by managers to improve cash flow and operational efficiency. FTZs do
not exempt companies from environmental laws or labor regulations. By utilizing these
zones, firms can optimize their global logistics and manufacturing strategies.
5. Which document serves as a contract of carriage between the shipper and the carrier, as
well as a receipt for goods?
A. Bill of Lading
B. Packing List
C. Certificate of Origin
D. Commercial Invoice
Correct Answer: A
Expert Explanation: The Bill of Lading is one of the most critical documents in
international trade and logistics. It functions as a receipt for the cargo and outlines the
terms of the transportation agreement. Furthermore, it often serves as a document of title,
meaning whoever holds it has the right to the goods. Commercial invoices and packing lists
, describe the items but do not act as contracts with the carrier. Without a properly executed
Bill of Lading, legal ownership and shipping disputes cannot be easily resolved.
6. What is a major disadvantage of using a single-sourcing strategy in a global supply chain?
A. Inability to build strong supplier relationships
B. Higher administrative costs for managing multiple contracts
C. Increased vulnerability to supply chain disruptions
D. Lower levels of quality consistency
Correct Answer: C
Expert Explanation: Single sourcing makes a company highly dependent on one partner,
increasing the risk of total stoppage if that supplier fails. Events like natural disasters or
political instability in the supplier’s region can halt the entire production line. While it
allows for better volume discounts and relationship building, the risk management aspect
is compromised. Multi-sourcing provides a safety net by distributing orders across
different geographical locations. Strategic managers must weigh the efficiency of single
sourcing against the resilience of multiple suppliers.
7. How does ‘Intermodalism’ contribute to global supply chain efficiency?
A. By using only one mode of transport for the entire journey
B. By utilizing standardized containers that move seamlessly across different transport
modes
C. By increasing the number of times cargo is manually handled
D. By eliminating the need for freight forwarders
Correct Answer: B
Expert Explanation: Intermodalism relies on standardized containers (TEUs) that can be
moved from ships to trains to trucks without unloading the contents. This standardization
significantly reduces handling time, labor costs, and the risk of damage or theft. It allows
supply chain managers to combine the cost-effectiveness of ocean freight with the speed of
trucking. Without intermodal standards, global trade would be much slower and more
prone to errors. Consequently, it is a cornerstone of modern logistics and operational
efficiency.
8. A company is shifting production from China to Mexico to be closer to its US customers.
This strategy is known as:
A. Nearshoring
B. Offshoring
C. In-sourcing
