Purchasing and Supply Management, 17th Edition by P. Fraser Johnson TEST BANK

TEST BANK for Purchasing and Supply Management, 17th Edition

by P. Fraser Johnson

TABLE OF CONTENTS Chapter 1: Purchasing and Supply Management Chapter 2: Supply Strategy Chapter 3: Supply Organization Chapter 4: Supply Processes and Technology Chapter 5: Make or Buy, Insourcing, and Outsourcing Chapter 6: Need Identification and Specification Chapter 7: Quality Chapter 8: Quantity and Inventory Chapter 9: Delivery Chapter 10: Price Chapter 11: Cost Management Chapter 12: Supplier Selection Chapter 13: Supplier Evaluation and Supplier Relationships Chapter 14: Global Supply Management Chapter 15: Legal and Ethics Chapter 16: Other Supply Responsibilities Chapter 17: Supply Function Evaluation and Trends

Chapter 1: Purchasing and Supply Management 1) Supply decisions can affect .

A) the balance sheet B) the income statement C) neither the income statement nor the balance sheet D) the income statement and the balance sheet E) none of the financial metrics

2) On average, the dollars spent with suppliers as a percent of revenues .

A) is about equal in service and manufacturing organizations B) is greater in manufacturing organizations than in service organizations C) is greater in service organizations than in manufacturing organizations D) depends on the type of manufacturing process E) depends on the type of service delivery system

3) The role of supply management is best captured by the following question: A) How can supply and suppliers help decrease costs and increase revenues?

B) How can supply help suppliers decrease costs?

C) How can supply and suppliers help decrease costs?

D) How can supply help decrease costs and increase revenues?

E) How can supply help decrease costs?

4) To contribute to organizational strategy, the supply department should A) seek opportunities to provide competitive advantage B) set realistic expectations for internal customers C) execute tasks as designed D) standardize and automate transactions E) streamline business processes

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Chapter 1 5) The impact of supply management actions on the balance sheet is measured by the

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A) return on investment effect B) return on inventory effect C) inventory turnover effect D) profit-leverage effect E) return-on-assets effect

6) Evaluation of the supply function’s contribution to organizational goals and strategies can be

viewed in the context of .

A) operational and strategic B) direct and indirect C) strategic and transactional D) both operational and strategic and direct and indirect E) both operational and strategic and strategic and transactional

7) The profit-leverage effect of supply savings means that .

A) the buyer gains leverage over suppliers when purchases are increased B) effective price negotiations with a supplier will lower the supplier’s profits C) a reduction in purchase spend increases profit more than an equivalent increase in

sales D) efficient supply management processes will increase profits E) a reduction in money tied up in inventory improves profits

8) As supply chains have become more global, the risk of supply disruptions has .

A) increased because emerging economies lack the business ethics of developed nations B) increased because of financial and exchange rate fluctuations C) stayed the same because the issues are similar wherever suppliers are located D) decreased because risk is spread among suppliers all over the world E) decreased because there are global standards for labor and safety

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Chapter 1 9) Supply management may indirectly contribute to the organization’s competitive advantage by

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A) reducing prices paid to suppliers B) reducing annual spend C) improving customer satisfaction D) improving supplier lead times E) process standardization

10) For an organization with annual sales of $500 million, purchases of $300 million, and profit

of $50 million, a 5 percent reduction in the cost of purchases would result in a profit-leverage effect of .

A) 10 percent (sales increase of 10 percent would be required to achieve the same percentage increase in profit) B) 15 percent (sales increase of 15 percent would be required to achieve the same percentage increase in profit) C) 30 percent (sales increase of 30 percent would be required to achieve the same percentage increase in profit) D) 60 percent (sales increase of 60 percent would be required to achieve the same percentage increase in profit) E) 75 percent (sales increase of 75 percent would be required to achieve the same percentage increase in profit)

11) The supply function in public sector organizations can differ from those in private sector

organizations in the following area .

A) Size of total spend B) Percentage of total spend C) Regulatory requirements regarding the acquisition process and policies D) Supplier lead times E) There are no differences

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Chapter 1 12) A systems approach to managing the flow of information, materials, and services from tiers

of suppliers through the buying organization to tiers of customers is A) strategic sourcing B) materials management C) procurement management D) supply chain management E) inventory management

.

13) The use of purchasing, procurement, supply, and supply chain management concepts will

vary from organization to organization depending on .

A) the organization’s stage of development and/or sophistication B) the industry in which they operate C) the organization’s competitive position D) the organization’s stage of development and/or sophistication, the industry in which they operate, and the organization’s competitive position E) the organization’s stage of development and/or sophistication and the industry in which they operate

14) Evidence of supply function growth and influence in an organization includes .

A) activities under the management or span of control of supply B) number of purchase orders issued annually C) involvement in corporate activities D) both activities under the management or span of control of supply and number of

purchase orders issued annually E) both activities under the management or span of control of supply and involvement in corporate activities

15) Lean supply management principles can be applied to organizations in the A) manufacturing sector only B) services sector only C) manufacturing and services sectors only D) manufacturing, services, and public sectors E) none of the choices are correct

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Chapter 1 16) Supply is of great consequence in most manufacturing organizations since the costs of

purchased materials and services can greatly exceed labor and other costs. ⊚ true ⊚ false

17) Public institutions' supply policies and processes are similar to private sector organizations. ⊚ true ⊚ false

18) The ability of the supply to secure requirements of better quality, faster, and at a better price

than competitors will improve customer satisfaction. ⊚ true ⊚ false

19) Supply management has evolved from a transaction-based, tactical function to a process-

oriented, strategic function. ⊚ true ⊚ false

20) Since labor and other costs can greatly exceed outlays for purchased materials and services in

service organizations, supply is of little consequence in most service organizations. ⊚ true ⊚ false

21) Sustainability performance focuses exclusively on the impact of the organization’s supply

chain and suppliers on the natural environment. ⊚ true ⊚ false

22) There is one best way for all organizations to organize and manage the supply function,

conduct activities, and effectively integrate suppliers. ⊚ true ⊚ false

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Chapter 1 23) Getting users to reduce their demand for inventoried items is the best method to reduce

investments in inventory. ⊚ true ⊚ false

24) Supply makes a significant contribution to organizational risk management since many

supply decisions have downside risks that might impact the organization’s strategy. ⊚ true ⊚ false

25) The ratio of total purchases to sales (the percentage of dollars paid out to suppliers as a

percentage of sales) can vary significantly from industry to industry. ⊚ true ⊚ false

26) The true test of supply’s contribution is when the chief executive officer and the senior

management team recognize that supply and suppliers are critical to organizational success and competitive advantage. ⊚ true ⊚ false

27) Terms such as purchasing, procurement, supply, and supply chain management are terms that

are used almost interchangeably. ⊚ true ⊚ false

28) Strategic supply focuses on executing current tasks as designed. ⊚ true ⊚ false

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Chapter 1 29) Standing as a preferred customer may provide the advantages favored pricing and service

arrangements. ⊚ true ⊚ false

30) Senior management in most organizations expects the supply function to play a significant

role in corporate sustainability initiatives. ⊚ true ⊚ false

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Chapter 1 Answer Key Test name: Chapter 1 1) D 2) B 3) A 4) A 5) E 6) D 7) C 8) B 9) C 10) C 11) C 12) D 13) D 14) E 15) D 16) TRUE 17) FALSE 18) TRUE 19) TRUE 20) FALSE 21) FALSE 22) FALSE 23) FALSE 24) TRUE 25) TRUE 26) TRUE 27) TRUE 28) FALSE 29) TRUE 30) TRUE

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Chapter 2: Supply Strategy 1) Linking current and future needs with current and future markets is the primary focus of A) internal users of purchased goods and services.

B) each individual buyer.

C) an effective organizational strategy.

D) an effective supply strategy.

E) an effective marketing strategy.

2) If organizational objectives and supply objectives are congruent A) it will be difficult to translate organizational objectives into supply objectives.

B) it will be easy to translate organizational objectives into supply objectives.

C) it is likely that many organizational resources will be made available to supply.

D) it will be easy to define quality, quantity, price, delivery, and service goals.

E) it will be easy to convey objectives to suppliers.

3) Strategies designed to make available the knowledge and capabilities of supply chain

members to others in the buying organization are called A) competitive environment strategies.

B) assurance-of-supply strategies.

C) supply chain support strategies.

D) risk-management strategies.

E) supply chain capabilities strategies.

4) The answer to the question, “How much to buy?” is influenced by A) the level of variability throughout the supply chain.

B) the relative power of each supply chain member.

C) supplier capacity.

D) the number of suppliers for the product or service.

E) trends in inventory management.

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5) Supply strategies that are designed to exploit market opportunities and organizational

strengths to give the buying organization an advantage in the marketplace are known as A) risk-management strategies.

B) assurance-of-supply strategies.

C) competitive advantage strategies.

D) cost-reduction strategies.

E) supply chain support strategies.

6) Strategic planning can be defined as A) an action plan to achieve specific long-term goals and objectives.

B) how each functional area will achieve its specific goals and objectives.

C) an action plan to achieve specific operational and tactical goals.

D) a procedure for allocating resources to appropriate functions in the organization.

E) taking big risks to maximize current period benefits.

7) To effectively manage supply risks, the supply manager must A) inform the corporate risk officer of a potential risk, await instructions, and implement

the directive.

B) identify and classify risks, assess and monitor the potential impact, and develop a risk mitigation strategy.

C) seek input from senior executives in other functional areas, propose a risk mitigation plan, and await instructions from senior management.

D) review the commodity strategy, revise it as needed, and implement the strategy revision.

E) confer with the chief financial officer (CFO), provide all requested data, and implement the CFO’s plan.

8) Linking supply strategy to corporate strategy is A) nonessential in most types of organizations.

B) essential in all organizations, and most have the mechanisms to link them.

C) essential in all organizations, and many lack the mechanisms to link them.

D) essential only in manufacturing, and most have the mechanisms to link them.

E) essential only in the service sector, and most lack the mechanisms to link them.

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9) Normally, most organizational objectives can be summarized under four categories A) marketing, management, financial, and operations.

B) survival, market share, earnings per share, and return on investment.

C) survival, growth, financial, and sustainability.

D) profitability, return on investment, liquidity, and earnings per share.

E) growth, maintenance, new product development, and asset management.

10) Three major challenges exist when setting supply objectives and strategies. They are A) identifying internal stakeholders, building consensus among these stakeholders, and

selling top management on the results.

B) adopting efficient e-procurement systems, designing effective strategic supply processes, and increasing internal compliance with both.

C) effectively interpreting corporate and supply objectives, selecting appropriate actions to achieve objectives, and integrating supply information into organizational strategies.

D) hiring professionals educated specifically in supply management, providing them with technical expertise, and developing leadership skills for the long-term.

E) emphasizing strategic cost management, involving key suppliers early in the process, and measuring the reduction in total cost of ownership.

11) When developing supply strategies, the supply manager must determine A) what to make or buy, what to insource or outsource, and what standard items or what

customized items will be acquired.

B) what to make or buy and what to insource or outsource.

C) what standard items and what customized items will be acquired.

D) what to make or buy.

E) what to insource or outsource.

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12) Organizational objectives and supply objectives typically are expressed A) differently, providing the supply manager multiple opportunities to tap into

organizational resources.

B) differently, making it difficult to translate organizational objectives into supply objectives.

C) the same (survival, growth, financial, and environmental), making it easy to translate organizational objectives into supply objectives.

D) the same factors (quality, quantity, price, delivery, and service), but long-term at the organizational level and short-term at the supply level.

E) in ways that are very specific to the organization, making it difficult to convey objectives to suppliers.

13) Which one of the following is NOT one of the six major supply strategy areas?

A) Competitive advantage strategies B) Competitive environment strategies C) Risk-management strategies D) New-product development strategies E) Cost-reduction strategies

14) The key question in strategic supply management is A) How can supply and supply chains contribute effectively to organizational objectives

and strategy?

B) How can the supply manager develop a network of suppliers that contribute to the supply department’s goals?

C) How can first-tier suppliers contribute to the buying organization's objectives and strategy?

D) How can key suppliers contribute to the buying organization's objectives and strategy?

E) How can supply strategy be kept separate from, but equal to, organizational strategy?

15) Assurance-of-supply strategies consider A) risk of supply shortages.

B) supplier quality issues.

C) supplier capacity constraints.

D) changes in both supply and demand.

E) cost-reduction strategies.

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16) Supply managers should be able to provide information to identify risks to the organization

and be capable of developing strategies to mitigate those risks. ⊚ true ⊚ false

17) Supply chain risks can be classified as operational, financial, and reputational. ⊚ true ⊚ false

18) By identifying and eliminating the causes of variability and risk in the supply chain, the

supply manager may be able to reduce supply chain inventories. ⊚ true ⊚ false

19) Maybe the most fundamental question facing an organization is whether to make or buy. ⊚ true ⊚ false

20) Most operational risks in a supply chain are within the control of the purchaser or supplier. ⊚ true ⊚ false

21) Macroeconomic issues can expose purchasers to financial risks from foreign exchange

fluctuations and inflation. ⊚ true ⊚ false

22) The key decisions and plans in corporate strategy address: What business are we in and how

will we allocate resources among these businesses? ⊚ true ⊚ false

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23) Supply chain support strategies can include processes and information systems to support

communication between buyers and suppliers. ⊚ true ⊚ false

24) The trend is to centralize risk management through a corporate risk management group. ⊚ true ⊚ false

25) The four levels of strategic planning are corporate, business unit, functional, and

departmental. ⊚ true ⊚ false

26) Inappropriate supplier social and environmental practices represent a potential reputational

risk. ⊚ true ⊚ false

27) Competitive environment strategies are designed to anticipate and recognize shifts in the

economy, the organization, people, laws, governmental regulations, and systems availability. ⊚ true ⊚ false

28) Globalization of supply chains has increased the complexity of purchasing responsibilities

and made identification of risks more difficult. ⊚ true ⊚ false

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29) Supply chain sustainability performance must comply with legal obligations and meet the

values and standards of the organization’s stakeholders, including employees, shareholders, and customers. ⊚ true ⊚ false

30) Specialized third-party risk management service providers can be used to supplement internal

risk management capabilities. ⊚ true ⊚ false

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Answer Key Test name: Chapter 2 1) D 2) B 3) C 4) A 5) C 6) A 7) B 8) C 9) C 10) C 11) A 12) B 13) D 14) A 15) D 16) TRUE 17) TRUE 18) TRUE 19) TRUE 20) FALSE 21) TRUE 22) TRUE 23) TRUE 24) TRUE 25) FALSE 26) TRUE 27) TRUE 28) TRUE 29) TRUE 30) TRUE

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Chapter 3: Supply Organization 1) In most organizations, supply–operations coordination is essential to A) outsourcing B) insourcing C) operational excellence D) good supplier relations E) inventory control

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2) For large organizations, specialization within the supply function can involve A) sourcing and commodity management B) materials management C) administration and supply research D) both sourcing and commodity management and materials management E) all of the choices are correct

.

3) The organizational structure (centralized, decentralized, or hybrid) of the supply function

.

A) influences procedures and systems, but not supply processes or internal crossfunctional relationships B) influences internal cross-functional relationships and procedures and systems, but not supply processes C) influences supply processes, but not internal cross-functional relationships or procedures and systems D) influences supply processes, internal cross-functional relationships, and procedures and systems E) has little influence on supply processes, internal cross-functional relationships, or procedures and systems

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4) A purchasing consortium .

A) is a form of collaborative purchasing used only by the public sector to deliver a wider

range of services at a lower total cost B) consists of two or more independent organizations that combine requirements for materials, services, and capital goods to gain better pricing, service, and technology C) consists of two or more divisions of the same organization that combine requirements for materials, services, and capital goods to gain better pricing, service, and technology D) speeds up the purchasing process, but does not usually result in price concessions from suppliers E) results in price concessions from suppliers, but usually does not speed up the purchasing process

5) The objectives of supply are to obtain .

A) materials and services at the right quality, quantity, and price at the right place from

the right source with the right service B) the right materials and services, at the right place, time, price, and terms and conditions C) the right materials and services at the right quality, quantity, place, and time from the right source at the right service D) the right quality materials and services, in the right quantity, at the right time and place, from the right source, at the right service level, and at the right price E) the right quality and quantity materials and services, at the right price and delivered to the right place at the right time from the right source

6) To achieve time, quality, or cost reduction targets, organizations may A) give internal users ownership of tasks and problems B) insource C) outsource D) commit resources to cross-functional teams E) decrease the size of the supply base

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7) Internal business partnerships between supply and other functional areas such as

marketing/sales, finance/accounting, and engineering are .

A) easily developed because all functional areas share goals and metrics B) difficult to develop because supply has little impact on organizational goals C) unimportant because one area has no impact on the others D) desirable because of the interdependencies between and among functions E) not worth the time it takes to develop them

8) Supply should constantly strive to standardize .

A) capital equipment purchases, raw material purchases, maintenance, repair, and

operations (MRO) supplies purchases, and services purchases and supply management processes B) capital equipment purchases, raw material purchases, maintenance, repair, and operations (MRO) supplies purchases, and services purchases C) raw materials purchases D) supply management processes E) raw materials purchases and supply management processes

9) Supply management can play an important role in mergers, acquisitions, and divestitures by

.

A) providing assistance with the price negotiations for the company to be acquired B) providing competitive intelligence about competitors and suppliers C) identifying opportunities of operational synergies D) providing assistance with the price negotiations for the company to be acquired and identifying opportunities of operational synergies E) providing competitive intelligence about competitors and suppliers and identifying opportunities of operational synergies

10) Centralization of the supply has the advantage of .

A) business unit autonomy in supply decisions B) speed of response C) greater buying specialization D) greater buying specialization and speed of response E) business unit autonomy in supply decisions and speed of response

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11) Standardization of supply processes can result in .

A) added administrative costs B) shortened process cycle times and lower transaction costs C) limited ability to handle nonstandard items D) making it difficult to share information across the organization E) limited ability to handle nonstandard items and add administrative costs

12) Close to 70 percent of the value of any given requirement is established during A) delivery and inventory management B) price negotiations C) supplier evaluation and selection D) identification of potential suppliers E) recognition and description of need

.

13) Which factors have a major influence on supply’s level in the organization?

A) The credentials of the supply personnel; the geographical location of the supply base;

the ratio of purchased material and services costs to total costs or total income B) The credentials of the supply personnel; industry sector; the nature of the products or services acquired C) Industry sector; the geographical location of the supply base; the ratio of purchased material and services costs to total costs or total income D) The extent to which supply and suppliers can provide competitive advantage; the ratio of purchased material and services costs to total costs or total income E) The nature of the products or services acquired; the extent to which supply and suppliers can provide competitive advantage; the ratio of purchased material and services costs to total costs or total income

14) To add the greatest value to the design of new products and services, the following functions

should work together during the design stage .

A) the primary user, design, engineering, supply, and all other relevant functional areas such as accounting/finance, marketing, and operations B) the primary user, design, engineering, supply, and accounting C) the primary user, design, engineering, and supply D) the primary user and supply E) the primary user and specifier

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15) Supply’s contribution to the organization’s competitive position depends on its ability to

.

A) reduce costs B) enhance revenues C) manage assets D) reduce costs, enhance revenues, and manage assets E) reduce costs and manage assets

16) The supply process and structure for managing indirect spend is typically similar to the

process and structure for managing direct spend. ⊚ true ⊚ false

17) A supportive organizational culture, structure, and systems are critical success factors for a

team-based workplace. ⊚ true ⊚ false

18) Supply’s objective to provide an uninterrupted flow of materials, supplies, and services to

operate the organization conflicts with the objective to keep inventory investment and loss at a minimum. ⊚ true ⊚ false

19) Standardization of products, services, and/or processes can help lower total cost of

ownership, but it reduces opportunities to share knowledge across functional and organizational boundaries. ⊚ true ⊚ false

20) Hybrid supply structures can capture the benefits of both centralized and decentralized

organizational structures. ⊚ true ⊚ false

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21) Some of the disadvantages of centralization are narrow job specialization, focus on corporate

requirements, and a lack of business unit focus. ⊚ true ⊚ false

22) Some of the advantages of decentralization are the coordination of supply policies and

procedures and the ability to manage and negotiate requirements with common suppliers. ⊚ true ⊚ false

23) The supply organization structure must be aligned with the corporate organization structure. ⊚ true ⊚ false

24) Research has found that supply management can play an important role in mergers,

acquisitions, and divestitures. ⊚ true ⊚ false

25) Potential barriers to purchasing consortia include confidentiality, inequality in the sharing of

benefits, and loss of control. ⊚ true ⊚ false

26) Buying at the lowest price for goods and services is the best way to accomplish supply

objectives at the lowest total operating costs. ⊚ true ⊚ false

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27) In a decentralized purchasing structure, tasks that are more effectively handled at the

department or divisional level include establishing policies, procedures, controls, and systems. ⊚ true ⊚ false

28) Centralization refers to a supply organization that is physically located at corporate

headquarters from which all or most organizational spending decisions are made. ⊚ true ⊚ false

29) Supply should obtain needed goods and services at the lowest total cost of ownership

because, in the long term, this often has a cost impact that is greater than the original purchase price. ⊚ true ⊚ false

30) The executive to whom the chief purchasing officer (CPO) reports can be a good indication

of the status of purchasing and the degree to which it is emphasized within the organization. ⊚ true ⊚ false

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Answer Key Test name: Chapter 3 1) C 2) E 3) D 4) B 5) D 6) D 7) D 8) A 9) E 10) C 11) B 12) E 13) E 14) A 15) D 16) FALSE 17) TRUE 18) TRUE 19) FALSE 20) TRUE 21) TRUE 22) FALSE 23) TRUE 24) TRUE 25) TRUE 26) FALSE 27) FALSE 28) TRUE 29) TRUE 30) TRUE

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Chapter 4 Chapter 4: Supply Processes and Technology 1) Electronic data interchange (EDI) can provide .

A) secure transmission of large amounts of data, but with slow turnaround B) slow processing of large amounts of data, but with greater accuracy C) longer process cycle time, but with greater accuracy D) secure and rapid transmission of small amounts of data E) secure transmission, greater accuracy, and shorter process cycle time for all data

2) Effectively and efficiently applying technology to the supply management process will

.

A) lower the total cost of doing business B) lead to increased clerical effort from additional data entry C) lead to damaged buyer-supplier relationships from impersonal communication D) inhibit negotiation planning because of time spent accessing and analyzing data E) decrease operating performance because of the volume of available information

3) Poor internal compliance with the supply process .

A) has nothing to do with the process itself B) may indicate that internal customers do not trust the process or suppliers C) indicates that staff in other functional areas are not qualified for their jobs D) is caused by top management’s failure to mandate compliance E) has nothing to do with organizational structure

4) Efficient and effective supply processes are needed because of .

A) the large volume of items and dollar value B) severe consequences of poor performance C) the potential contribution to organizational objectives D) the large volume of items, dollar value, severe consequences of poor performance, the

potential contribution to organizational objectives, and the need for an audit trail E) the need for an audit trail, severe consequences of poor performance, and the potential contribution to organizational objectives

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Chapter 4 5) Making the procure-to-pay (P2P) process as seamless as possible can .

A) reduce order cycle times and shorten supplier lead times B) increase administrative costs and improve the satisfaction of internal customers and

suppliers C) reduce administrative costs and decrease the satisfaction of internal customers and suppliers D) reduce order cycle times, increase administrative costs, and improve satisfaction of internal customers and suppliers E) reduce order cycle times, decrease administrative costs, and improve the satisfaction of internal customers and suppliers

6) Traveling requisitions are used for .

A) recurring requirements and standard parts B) salespeople on business trips C) service parts orders D) maintenance, repair, and operations parts (MRO) orders E) service parts orders, recurring requirements and standard parts, and maintenance,

repair, and operations parts (MRO) orders

7) Blanket purchase orders .

A) cover multiple purchase requirements on one order B) are difficult to prepare C) reduce costs by decreasing the number of purchase orders issued D) reduce costs by decreasing the number of purchase orders issued and cover multiple

purchase requirements on one order E) reduce costs by decreasing the number of purchase orders issued, cover multiple purchase requirements on one order, and are difficult to prepare

8) Improving the efficiency and effectiveness of the process for small value orders can be

achieved through .

A) vendor/supplier managed inventory systems B) eliminating all small value orders completely C) vendor/supplier managed inventory systems and the use of purchasing cards D) the use of purchasing cards and online marketplaces E) vendor/supplier managed inventory systems, the use of purchasing cards, and eliminating all small value orders completely

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Chapter 4 9) Online reverse auctions are best suited for situations where .

A) specifications are clearly defined B) there is a competitive supply market with qualified suppliers willing to participate C) the buyer is prepared to switch suppliers if necessary D) specifications are clearly defined, there is a competitive supply market with qualified

suppliers willing to participate, and the buyer is prepared to switch suppliers if necessary E) specifications are clearly defined and there is a competitive supply market with qualified suppliers willing to participate

10) Expediting .

A) is a routine order tracking process B) may be caused by the buyer or the supplier C) is caused by buyer behavior only D) is caused by supplier behavior only E) may be the result of legal noncompliance

11) One purpose of a requisition is .

A) to request or requisition supplies from external suppliers B) to give users a way to authorize buyers to acquire goods and services C) to allow the finance department to approve the expenditure D) to clarify the description of need before communicating with potential suppliers E) to solicit price quotes for goods or services from suppliers

12) Information flows involving supply are .

A) mostly inward to the supply group from other internal functions B) mostly inward to the supply group from external sources C) inward and outward to supply involving internal functions and external sources D) mostly outward from supply to internal functions and external sources E) mostly inward and outward between supply and external sources

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Chapter 4 13) The payment process .

A) and the supply process should be aligned in policy and practice B) should always be owned and managed by accounts payable C) should always be owned and managed by supply D) must include paper invoices to avoid legal liability E) must be electronic to keep transaction costs at a minimum

14) The greatest opportunity to affect value in the purchasing process is during A) identification of potential sources B) supplier selection C) need recognition and description D) preparation and placement of the purchase order E) follow-up and expediting

.

15) If the buyer has a clear and unambiguous description or specification, and wants to find out

which supplier can deliver the best value when and where needed, they will typically issue a .

A) request for quotation (RFQ) B) request for proposal (RFP) C) request for information (RFI) D) request for bid (RFB) E) request for price (RFP)

16) Purchases through marketplaces represents a significant percentage of total purchases at most

organizations. ⊚ true ⊚ false

17) The application of pressure on a supplier to meet the original delivery promise, to deliver

ahead of schedule, or to speed up delivery of a delayed order is called expediting. ⊚ true ⊚ false

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Chapter 4 18) A request for proposal is used when there is a clear and unambiguous description of need. ⊚ true ⊚ false

19) Small dollar value purchase orders can be efficiently and effectively managed by

implementing an e-procurement system. ⊚ true ⊚ false

20) Third-party marketplaces are seldom used because of difficulties in integrating them with e-

procurement systems. ⊚ true ⊚ false

21) A master service agreement (MSA) is a type of open-ended purchase order. ⊚ true ⊚ false

22) The first step in optimizing the supply process is to build consensus with suppliers around the

opportunities to add value to the organization. ⊚ true ⊚ false

23) Maverick buying occurs when a member of the supply department uses an innovative

approach on a cost reduction project. ⊚ true ⊚ false

24) An online reverse auction may require significant upfront preparation and cost. ⊚ true ⊚ false

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Chapter 4 25) A requisition is a gatekeeping tool to manage the flow of information through the finance

department approval process. ⊚ true ⊚ false

26) The terms and conditions included in a purchase order from an organizations can vary from

purchase to purchase. ⊚ true ⊚ false

27) The costs of radio frequency identification (RFID) tags and the ability to capture reliable data

are both barriers to the adoption of RFID systems. ⊚ true ⊚ false

28) Pareto analysis usually reveals that 10–15 percent of transactions account for 40–50 percent

of spend. ⊚ true ⊚ false

29) It can be difficult to develop a global database to consolidate volumes and sourcing strategy

because differences in technical standards and government regulations exist across countries. ⊚ true ⊚ false

30) A process is a set of activities that has a beginning and an end, occurs in a specific sequence,

and has inputs and outputs. ⊚ true ⊚ false

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Chapter 4 Answer Key Test name: Chapter 4 1) E 2) A 3) B 4) D 5) E 6) A 7) C 8) C 9) D 10) B 11) D 12) C 13) A 14) C 15) A 16) FALSE 17) TRUE 18) FALSE 19) TRUE 20) FALSE 21) FALSE 22) FALSE 23) FALSE 24) TRUE 25) FALSE 26) TRUE 27) TRUE 28) FALSE 29) TRUE 30) TRUE

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Chapter 5 Chapter 5: Make or Buy, Insourcing, and Outsourcing 1) Supply managers believe they can add the most value to the outsourcing decision by

.

A) advising the outsourcing team on relevant contractual terms and conditions B) identifying opportunities for insourcing or outsourcing and aiding in the selection of sources C) reviewing the analysis conducted by the outsourcing team D) being available if the internal users want their assistance E) managing the contract once the decision has been implemented

2) In a service triad .

A) the service supplier and buyer are the coproducers of the service, excluding the

customer from the service encounter B) the buyer is dependent on the customer for the satisfactory fulfillment of its service demands C) the customer is dependent on the buyer for customer service innovation and organizational learning D) the service supplier and customers are the coproducers of the service, excluding the buyer from the service encounter E) the buyer, service supplier, and customers are the coproducers of the service

3) Outsourcing .

A) decisions are based on cost–benefit analysis B) occurs primarily in large manufacturing firms, but rarely occurs in service firms C) may reduce operating costs, improve focus on core competencies, and gain access to

world-class capabilities D) usually results in increased hiring to attain expertise that the organization does not already possess E) is a low-risk initiative because the firm can always revert back to performing the function in-house

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Chapter 5 4) In an outsourcing decision, developing and negotiating the outsourcing contract A) is not an area where supply managers believe they can add value B) is of less strategic importance than identifying opportunities for outsourcing C) is the biggest area where supply managers can affect organizational strategy D) is the biggest area where supply managers can affect the outsourcing process E) is best left to the function most directly affected by the outsourcing decision

.

5) An organization may decide to continue to produce a good or service in-house rather than

outsource .

A) to control quality of customer service and to reduce risk B) because forecasts show demand uncertainty C) because forecasts show technological uncertainty D) because forecasts show demand and technological uncertainty E) because of a lack of technical expertise in-house

6) Outsourcing of services is .

A) decreasing in volume and scope B) increasing in volume and scope C) decreasing in volume but increasing in scope D) increasing in volume but decreasing in scope E) about the same in volume and scope over the last decade

7) Concerns about outsourcing include .

A) a lack of buyer production capacity B) transitioning from supplier’s operations to internal operations C) layoffs, exposure to supplier’s risks, and loss of control D) losing long-term buyer-supplier relationships E) buyer technological expertise

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Chapter 5 8) The type(s) of procurement outsourcing contracts are .

A) procure-to-pay (P2P), source-to-contract (S2C), and source-to-pay (S2P) B) procure-to-pay (P2P) and source-to-contract (S2C) only C) procure-to-pay (P2P) only D) source-to-contract (S2C) only E) source-to-pay (S2P) only

9) When a team has decided that a task or function currently performed by company employees

is a core competency, the team will probably recommend A) outsourcing B) insourcing C) offshoring D) continuing to buy E) continuing to make

.

10) Deciding what represents a core competency in an organization is .

A) a decision best left to the organization’s Board of Directors B) a decision best left to the chief executive officer (CEO) C) often a fairly complex decision and a function of many factors D) always the same for companies in the same industry E) a fairly easy decision once organizational goals and objectives are known

11) Which of the following have contributed to the growth of logistics outsourcing?

A) Increased transportation regulations B) Truck driver shortages C) Deregulation of the transportation industry D) new supply chain technologies that provide real time data for shipment status E) Increased transportation regulations and truck driver shortages

12) The decision to make or buy a good or service is .

A) typically made by the chief supply officer and their executive team B) a one-time decision never to be reconsidered C) a decision of strategic importance that deserves careful evaluation D) primarily an operational decision E) the same as deciding to insource or outsource

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Chapter 5 13) A procurement outsourcing contract that covers approval workflow, material acquisition,

purchase order, expediting, material and invoice receipt, invoice payment, financial performance, compliance management, policies and procedures, and performance and results reporting is called .

A) procure-to-pay (P2P) B) procure-to-contract (P2C) C) source-to-contract (S2C) D) source-to-pay (S2P) E) third party logistics contract (3PLC)

14) Insourcing should be considered when .

A) assurance of supply is a problem B) the supplier has developed a unique process to produce the product or service C) assurance of supply is a problem and there is an opportunity to reduce costs

significantly D) there is an opportunity to reduce costs significantly and the supplier has developed a unique process to produce the product or service E) assurance of supply is a problem, the supplier has developed a unique process to produce the product or service, and there is an opportunity to reduce costs significantly

15) Subcontracts can only occur .

A) if there is a prime contractor bidding out part of a job B) in government procurement C) when a lead contractor is behind schedule D) if substitution is required after the specification has been set E) when purchasing a good, not a service

16) Some of the reasons an organization may decide to make rather than buy are: greater supply

assurance, stringent quality requirements, and very small quantity requirements. ⊚ true ⊚ false

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Chapter 5 17) Some of the reasons an organization may decide to buy rather than make are: a significant

customer demands it, the availability of a highly capable supplier locally, and a lack of buyer technological expertise. ⊚ true ⊚ false

18) Subcontracts are a special class of the make or buy, used exclusively in construction

procurement. ⊚ true ⊚ false

19) A recent North American trend is to outsource a number of services that were traditionally

performed in-house. ⊚ true ⊚ false

20) Subcontracts are not useful when the work is difficult to define, has a long-time horizon, and

is relatively expensive. ⊚ true ⊚ false

21) The chief purchasing officer (CPO) identifies opportunities for insourcing and outsourcing

and is responsible for supplier selection. ⊚ true ⊚ false

22) Insourcing and outsourcing occur when a company reverses previous make or buy decisions. ⊚ true ⊚ false

23) Currently, organizations tend toward making rather than buying. ⊚ true ⊚ false

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Chapter 5 24) The procurement of direct or core spend is more likely to be outsourced than procurement of

indirect or noncore spend. ⊚ true ⊚ false

25) Outsourcing is prevalent in both the private and public sectors, but primarily for services. ⊚ true ⊚ false

26) Growth in outsourcing in the logistics area can be attributed, in part, to growing regulation of

transportation companies. ⊚ true ⊚ false

27) The gray zone in make or buy refers to the range of options between 50 percent make to 50

percent buy. ⊚ true ⊚ false

28) The increase in outsourcing has resulted in an increase in the percentage of revenue paid out

to suppliers. ⊚ true ⊚ false

29) Service triads favor contracts that focus on the outcome of the service rather than controlling

for how it is delivered. ⊚ true ⊚ false

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Chapter 5 30) It is possible for some activities in a function to be core competencies that are made or

insourced, and for some activities in the same function to be noncore and bought or outsourced. ⊚ true ⊚ false

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Chapter 5 Answer Key Test name: Chapter 5 1) B 2) D 3) C 4) B 5) A 6) B 7) C 8) A 9) E 10) C 11) C 12) C 13) A 14) C 15) A 16) TRUE 17) TRUE 18) FALSE 19) TRUE 20) FALSE 21) FALSE 22) TRUE 23) FALSE 24) FALSE 25) FALSE 26) FALSE 27) FALSE 28) TRUE 29) TRUE 30) TRUE

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Chapter 6 Chapter 6: Need Identification and Specification 1) Purchasing by specification typically occurs when .

A) a high degree of supplier expertise is required and difficult to define B) the seller will be responsible for performance when the buyer specifies performance C) the internal user’s preferences are impossible to overcome D) the buyer wants the supplier to decide how to make the most suitable product E) a supplier holds a needed patent

2) A criterion in establishing whether a purchase is strategic can be .

A) determined by the chief executive officer (CEO) B) determined by performing Pareto analysis to determine if the purchase is an “A” item C) determined by the customer D) determined by the supplier E) defined by specification

3) New technology .

A) seldom contributes to competitive advantage or operational efficiency B) seldom enables competitive advantage from product/service differentiation at lower

cost C) can enable competitive advantage from product/service differentiation at lower cost D) frequently enables competitive advantage from product/service differentiation, but typically at higher cost E) frequently enables operational efficiencies, but seldom enables competitive advantage

4) Traditional criteria for supply management are .

A) quality, quantity, delivery, and cost B) quality, quantity, price, and service C) quality, quantity, delivery, price, and service D) quality, quantity, delivery, price, and specification E) quality, quantity, delivery, price, risk, and service

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Chapter 6 5) A corporate travel department determines that employees have been staying in 12 different

car rental agencies. The director of corporate travel mandates that travelers may only use two designated car rental agencies. This action is an example of .

A) simplification B) standardization C) buying by brand D) buying by brand or equal E) specification by physical characteristics

6) Supply chain risk can be classified as .

A) operational B) financial C) reputational D) operational and financial E) operational, financial, and reputational

7) To assist in determining what represents acceptable value, a buyer is likely to A) specify a suitable inspection program B) identify the function of a good or service C) purchase a branded item D) disallow supplier substitutions for the specified item E) involve engineering in need identification and specification

.

8) Early supply involvement means .

A) colocation of engineering and purchasing/supply staff B) supply managers lead new product development teams C) internal customers are encouraged to regularly interact with suppliers D) internal customers are empowered to evaluate and select suppliers E) supply considerations are included during need identification and specification

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Chapter 6 9) A request for quotation that asks for a “brand or equal”

.

A) is one way internal users ensure that they will get the brand they prefer B) is the least risky and lowest cost approach to attaining “best value” C) requires the buyer to assume the costs of developing detailed specifications D) shifts responsibility for establishing equality or superiority to the bidder E) shifts responsibility for establishing equality or superiority to the specifier

10) The disadvantages of buying with specifications include .

A) the seller will be responsible for performance B) specifications can add costs C) the potential for disqualifying or discouraging potential suppliers D) specifications can add costs and the potential for disqualifying or discouraging

potential suppliers E) the seller will be responsible for performance and specifications can add costs

11) When a specification is widely known, commonly recognized, and readily available to every

buyer, it is called a(n) .

A) individual specification B) common specification C) standard specification D) universal specification E) market grade specification

12) An advantage of buying by performance or function over other specification methods is that

it provides .

A) the potential for equitable competition by ensuring that the suppliers are quoting for exactly the same material or service B) an opportunity to purchase identical requirements from several different sources of supply C) an opportunity for the potential supplier to establish how to make the most suitable product/service D) evidence that the buyer has carefully defined the need and how it may be satisfied E) a standard for measuring and checking materials as supplied

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Chapter 6 13) Packaging .

A) are intangible assets B) can have significant disposal, environmental, and transportation implications C) typically represent opportunities for simplification D) typically represent opportunities for standardization E) typically represent opportunities for simplification and standardization

14) Description by brand .

A) should always be discouraged by the buyer B) is the least risky and lowest cost approach to attaining "best value" C) may be a necessity because of customer or user preference for certain branded items D) indicates a supplier has unduly influenced someone in the buyer’s organization E) may be a preference of an internal user, but it is never a necessity

15) Supply’s growing involvement in the acquisition of services may be explained by the

.

A) high dollar value on services and the opportunities to reduce costs B) declining technical knowledge of internal users of services C) growing respect for supply managers as equals in the organization D) need for more of a personal relationship with the service supplier E) fact that price and service-delivery requirements are complex

16) A specification is a loose description of a requirement that leaves room for supplier

enhancements and contributions. ⊚ true ⊚ false

17) It is not common practice to specify the procedure and results necessary to meet quality

standards as part of the specification. ⊚ true ⊚ false

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Chapter 6 18) The term specification represents a narrower and commonly accepted form of description. ⊚ true ⊚ false

19) Simplification can be applied to purchases already standardized. ⊚ true ⊚ false

20) Specification is a technical concept that means agreement on the definite sizes, design, and

quality of a product or service. ⊚ true ⊚ false

21) Sustainability criteria include environmental and social considerations. ⊚ true ⊚ false

22) The price of a semiprocessed material—such as steel sheets instead of ingots, frozen pork

bellies instead of hogs, cocoa butter instead of beans—tends to move in the same direction as the price of the basic raw material. ⊚ true ⊚ false

23) Capital items are bought and sold in the regular course of business. ⊚ true ⊚ false

24) For repetitive requirements, a system or process of acquisition can be designed. ⊚ true ⊚ false

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Chapter 6 25) The inability to inventory services can make quality assurance more difficult. ⊚ true ⊚ false

26) Buying capital equipment differs from other types of purchases because determination of

final cost includes estimates over the life of the equipment. ⊚ true ⊚ false

27) Quality as a term covers functionality: “Does it do the job we want done?” and conformance

to specification: “Does it fit the specification agreed to?” ⊚ true ⊚ false

28) Performance is a method of description by brand. ⊚ true ⊚ false

29) The acquisition of maintenance, repair, and operations (MRO) requirements is more relevant

for manufacturing organizations, compared to service and public sector organizations. ⊚ true ⊚ false

30) Equipment, real estate, construction, and information technology are examples of capital

acquisitions. ⊚ true ⊚ false

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Chapter 6 Answer Key Test name: Chapter 6 1) B 2) B 3) C 4) C 5) A 6) E 7) B 8) E 9) D 10) D 11) C 12) C 13) B 14) C 15) A 16) FALSE 17) FALSE 18) TRUE 19) TRUE 20) FALSE 21) TRUE 22) TRUE 23) FALSE 24) TRUE 25) TRUE 26) TRUE 27) TRUE 28) FALSE 29) FALSE 30) TRUE

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Chapter 7 Chapter 7: Quality 1) Examples of prevention costs include .

A) testing costs B) inspection costs C) warranty costs D) machine, tool, material, and labor assessment costs E) testing and inspection costs

2) The real costs of quality .

A) tend to rise significantly with the cost of prevention B) are incurred in the quality control department C) rise significantly as defects increase in the finished product D) are easily identified by the accounting department E) are frequently overstated in an organization

3) Some estimates place the total costs of quality to be A) insignificant to the cost of the final product B) 10–20 percent of the final product cost

.

C) 20–30 percent of the final product cost D) 30–40 percent of the final product cost E) 40–50 percent of the final product cost

4) Deming’s 14 points include the importance of .

A) setting numeric quotas B) using slogans and targets for the workforce as a means of improving quality C) annual rating or merit systems D) institute training on the job E) dual sourcing as a means of improving quality costs

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Chapter 7 5) A formal service quality evaluation process .

A) is performed exactly the same as it is for goods B) evaluates the ability to perform the promised service dependably and accurately C) is relatively simple and applicable for all types of services D) is most easily done on the buyer's premises E) is impossible to quantify if the service is highly intangible

6) Lean is a management philosophy that focuses on .

A) prevention, appraisal, and internal failure costs B) data to reduce variation and waste C) statistical process control (SPC) techniques D) maximizing customer value while eliminating waste E) the voice of the customer

7) A supplier certification program .

A) may enable the buyer and seller to lower costs and improve quality B) adds cost to the supplier but provides benefits to the buyer C) may improve quality, but at best will not raise costs D) always improves product or service quality E) typically costs more to implement than the value of the quality improvement

8) In statistical process control (SPC), special or assignable causes of variation .

A) are intrinsic to the process and will always be there unless the process is changed B) are used to determine the upper (UCL) and lower (LCL) control limits on a control

chart C) are outside, nonrandom problems such as breakdown of machinery, material variation, or human error D) are of secondary importance in quality control procedures used to detect and eliminate variation E) can be present in a process that is fully capable of meeting specifications consistently

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Chapter 7 9) Quality function deployment .

A) seeks to understand what value represents to the customer B) is a system for deploying quality at supplier facilities C) provides direction on the appropriate level of product performance and which features

should be included D) seeks to understand what value represents to the customer and provides direction on the appropriate level of product performance and which features should be included E) seeks to understand what value represents to the customer and is a system for deploying quality at supplier facilities

10) A six sigma (6σ) approach to quality .

A) means there are no more than 25 defects per million opportunities B) was developed by Japanese companies in the 1950s C) focuses on preventing defects by using data to reduce variation and waste D) has no connection to the concept of zero defects E) has soft goals such as happier customers and employees

11) Determination of the "best buy" is based on .

A) trade-offs among stakeholders (e.g., marketing, operations, and supply) B) the internal user or specifier’s perceptions C) suitability for a given use D) a balance between price and quality E) technical considerations only

12) A sampling technique in which every element in the population has an equal chance of being

selected is called .

A) additive sampling B) sequential sampling C) random sampling D) 100 percent testing E) cumulative sampling

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Chapter 7 13) Process variation that are intrinsic to the process are A) prevention costs B) internal failure costs C) external failure costs D) common, nonassignable causes of variation E) special or assignable causes of variation

.

14) If a process is stable and predictable .

A) the probability of it meeting customer specifications can be predicted B) the process averages a varying number of standard deviations C) common causes have been eliminated through process change D) it produces the same exact result each time the activity is performed E) random causes have been detected and eliminated

15) ISO 9001 provides a tested framework for a systematic approach to consistently delivering

product that satisfies customers’ expectations by .

A) dictating how quality requirements should be met in every organization B) dictating scope and flexibility for quality system implementation C) providing a set of standardized requirements a quality system must meet D) assuming all national cultures will meet quality requirements the same way E) assuming all business sectors will meet quality requirements the same way

16) The process capability index (Cp) combines process spread and tolerance into one index and

indicates whether process variation is satisfactory. ⊚ true ⊚ false

17) Operator action is required when process output exceeds the upper control limit (UCL) or

dips below the lower control limit (LCL). ⊚ true ⊚ false

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Chapter 7 18) Appraisal costs include the costs of inspection, testing, and measuring product or service

quality. ⊚ true ⊚ false

19) Prevention costs include warranty costs and managerial time handling customer complaints. ⊚ true ⊚ false

20) Lean supply management (LSM) aims to provide efficient and effective flow of goods,

services, information, and finances from suppliers to customers. ⊚ true ⊚ false

21) Kaizen is a Japanese term for continuous improvement. ⊚ true ⊚ false

22) Six Sigma is a comprehensive quality system that seeks to translate customer requirements

into specifications. ⊚ true ⊚ false

23) Reliability is the mathematical probability that a product will function for a stipulated period

of time. ⊚ true ⊚ false

24) A process is deemed to be capable when there are only assignable or special causes of

variation. ⊚ true ⊚ false

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Chapter 7 25) ISO 14001 focuses on compliance with federal, state, and provincial environmental laws and

regulations. ⊚ true ⊚ false

26) Total quality management (TQM) is a philosophy and system of management focused on

long-term success through customer satisfaction. ⊚ true ⊚ false

27) The six sigma (6σ) approach to quality uses the five step methodology of: define, measure,

analyze, improve, and control (DMAIC). ⊚ true ⊚ false

28) Lean is a management philosophy focused on maximizing customer value while minimizing

waste. ⊚ true ⊚ false

29) The upper and lower control limits on a process control chart are set using customer

specifications. ⊚ true ⊚ false

30) It is not reasonable to expect a supplier to simultaneously improve quality and lower costs. ⊚ true ⊚ false

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Chapter 7 Answer Key Test name: Chapter 7 1) D 2) C 3) D 4) D 5) B 6) D 7) A 8) C 9) D 10) C 11) A 12) C 13) D 14) A 15) C 16) TRUE 17) TRUE 18) TRUE 19) FALSE 20) TRUE 21) TRUE 22) FALSE 23) TRUE 24) FALSE 25) FALSE 26) TRUE 27) TRUE 28) TRUE 29) FALSE 30) FALSE

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Chapter 8 Chapter 8: Quantity and Inventory 1) Demand for tires at an automobile manufacturer is an example of A) buffer demand B) dependent demand C) independent demand D) anticipation demand E) scheduled demand

.

2) A company manufactures 1,500 cylinders per week, each requiring a pressure gauge. The

purchase price of the pressure gauge is $5.20. The company chief financial officer estimated annual holding costs at 25 percent per year, while the cost of placing an order was estimated at $75.00. Assuming that the plant operates 45 weeks per year, the EOQ for the pressure gauge is .

A) 3,000 units B) 2,929 units C) 2,791 units D) 2,725 units E) 1,500 units

3) Which statement is most accurate when deciding how much and when to buy?

A) Determine the price premium to attain the desired order quantity.

B) Balance purchase price, volume, carrying costs, and the cost of stock-outs.

C) Use the forecast future demand, lead times, and prices to determine optimal order

volume.

D) Managers seldom make purchase decisions until they are absolutely sure of the volume required.

E) The costs of placing orders and holding inventory are so low they do not significantly affect the decision of how much to buy.

4) Independent demand items are .

A) derived demand B) determined by the production schedule C) determined directly by customer orders D) derived demand and determined directly by customer orders E) derived demand and determined by the production schedule

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Chapter 8 5) The three main inputs of a material requirements planning (MRP) system are .

A) required human resources, machine resources, and available resources B) required manufacturing resources, human resources, and master production schedule C) inventory records, annual sales forecast, and a master production schedule D) bill of material, a master production schedule, and the inventory record E) Pareto analysis results, inventory records, and a master production schedule

6) On an annual requirement of 150 items spread evenly throughout the year, a purchaser has an

opportunity of buying all 150 units at a price of $175 each, or buying 10 units at a time at a price of $200. If the inventory carrying cost is 20 percent per year and assuming no ordering costs .

A) buying 150 at a time will save the company $3,750 per year B) buying 150 at a time will save the company $1,325 per year C) buying 10 at a time will save the company $2,450 per year D) buying 10 at a time will save the company $2,130 per year

7) Cycle inventories are used to .

A) avoid an anticipated change in supply, demand, or price B) protect against disruptions due to unplanned events C) optimize setup costs D) accommodate different rates or patterns of demand E) avoid an anticipated change in supply, demand, or price, and protect against

disruptions due to unplanned events

8) When a sports drink distribution company predicts demand for its product using average

daily temperature, average daily humidity, and whether it is a weekend or a weekday, this is an example of .

A) a repetitive pattern modeling tool B) a time series forecasting technique C) a deterministic model D) a qualitative forecasting technique E) a causal model

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Chapter 8 9) Anticipation inventories are carried .

A) to cover a well-defined future need B) to stock the distribution pipelines C) to permit activities on either side of a major process D) to protect against machine breakdown E) to protect against uncertainties in supply and demand

10) Decoupling inventories are used to .

A) avoid an anticipated change in supply, demand, or price B) accommodate different rates or patterns of demand C) protect against disruptions due to unplanned events D) reduce the number of setups E) avoid an anticipated change in supply, demand, or price, and to reduce the number of

setups

11) Managing the consumption of services organization-wide .

A) is difficult because multiple contracts may exist at varying prices and terms with the

same suppliers B) is easy because organization-wide services spend data is readily accessible C) is of little concern because annual spend for services are a B or C items in most organizations D) is easy because supply management has historically had responsibility for managing services spend E) is easy because forecasting aggregate demand for services is typically more reliable than forecasting demand for goods

12) Strategies for managing “C” items in ABC analysis include

.

A) B) C) D) E)

carrying minimal inventories reviewing inventory levels frequently concentrating requirements with one or a few suppliers carrying inventories and concentrating requirements with one or a few suppliers reviewing inventory levels frequently and carrying minimal inventories

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Chapter 8 13) Closed-loop MRP .

A) is a system which closes the loop between the supplier and the purchaser B) requires a check between the master production schedule and inventory C) allows a unit manager to sequence jobs done in that department D) provides a feedback loop between capacity and the master production schedule E) requires a feedback loop between purchasing and accounting

14) Strategies for managing "A" items in ABC analysis are .

A) minimizing inventories B) using procurement cards C) reviewing inventory levels frequently D) using procurement cards and reviewing inventory levels frequently E) minimizing inventories and reviewing inventory levels frequently

15) When the carrying cost of inventory is expressed as a percentage .

A) the higher it is, the lower the economic order quantity B) it is usually the same as the cost of capital for the organization C) it is multiplied by the labor and material cost to calculate the per unit carrying cost D) it is multiplied by the unit variable manufacturing cost to calculate the per unit

carrying cost E) it is multiplied by the total unit cost, including allocated fixed costs, to calculate the per unit carrying cost

16) If there were 400 requests for a particular item in a month and 372 were immediately

satisfied, the service level for that month would be 93 percent. ⊚ true ⊚ false

17) Ordering raw material from a supplier in full truck loads only is an example of cycle

inventory. ⊚ true ⊚ false

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Chapter 8 18) JIT requires frequent deliveries of relatively small quantities in compliance with quality

standards. ⊚ true ⊚ false

19) Stock-out costs may be higher in a buyer’s market compared to a seller’s market. ⊚ true ⊚ false

20) For the supply function, time-based strategies that impact competitive advantage relate to

using the appropriate forecasting technique(s) and supporting materials requirement planning (MRP) systems with accurate bills of material (BOM). ⊚ true ⊚ false

21) The Delphi technique is a method of qualitative forecasting. ⊚ true ⊚ false

22) In fixed-quantity inventory models, a fixed economic order quantity is ordered when the

reorder point is reached. ⊚ true ⊚ false

23) The "bullwhip effect" is a term that refers to the build-up of inventory in a supply chain

resulting from fluctuations in demand. ⊚ true ⊚ false

24) Usage of independent demand items is determined directly by customer orders. ⊚ true ⊚ false

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Chapter 8 25) Inventories can be classified by either form or function, but not both. ⊚ true ⊚ false

26) Kanban systems are most useful for high-volume parts used on a regular basis. ⊚ true ⊚ false

27) Holding extra inventory to protect against a supply disruption from a supplier strike is an

example of cycle inventory. ⊚ true ⊚ false

28) There are two basic MRP inputs: master production schedule and structured bill of material. ⊚ true ⊚ false

29) Supply chain inventory management involves calculating economic order quantity levels for

requirements from suppliers. ⊚ true ⊚ false

30) Any cost associated with having, as opposed to not having, inventory is included in inventory

carrying costs, including 1. capital costs 2. inventory service costs 3. storage space costs 4. inventory risk costs. ⊚ true ⊚ false

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Chapter 8 Answer Key Test name: Chapter 8 1) B 2) C 3) B 4) C 5) D 6) B 7) C 8) E 9) A 10) B 11) A 12) D 13) D 14) E 15) D 16) TRUE 17) TRUE 18) TRUE 19) TRUE 20) FALSE 21) TRUE 22) TRUE 23) TRUE 24) TRUE 25) FALSE 26) TRUE 27) FALSE 28) FALSE 29) FALSE 30) TRUE

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Chapter 9 Chapter 9: Delivery 1) Fuel efficiency and energy consumption considerations .

A) affect decisions related to 3PL outsourcing B) encourage shippers to focus on increasing LTL shipments C) lead to single sourcing D) result in lower use of third-party logistics providers E) are a factor in transportation strategy development in many organizations

2) Motor carriers can be divided into the following categories .

A) Containers on flatcars (COFC) and truck trailers on flatcars (TOFC) B) Less-than-truckload (LTL) and truckload (TL) C) Truckload (TL) and small parcel, ground D) Less-than-truckload (LTL), truckload (TL), and small parcel, ground E) Containers on flatcars (COFC) and truck trailers on flatcars (TOFC), less-than-

truckload (LTL), truckload (TL), and small parcel, ground

3) Organizations operating under a just-in-time system prefer to ship by A) rail B) same day air C) intermodal D) truck E) same day air and truck

.

4) Compared to other modes of transportation, motor carriers provide the advantage of

.

A) energy efficiency B) low variable operating costs C) flexibility of point-to-point service D) low variable operating costs and flexibility of point-to-point service E) flexibility of point-to-point service and energy efficiency

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Chapter 9 5) A transportation and logistics strategy should include consideration of .

A) freight documentation requirements B) reassessment of the possibilities of using different transport modes C) sustainability factors D) reassessment of the possibilities of using different transport modes and sustainability

factors E) reassessment of the possibilities of using different transport modes and freight documentation requirements

6) Compared to motor carriers, rail .

A) is relatively inflexible and slow B) has higher damage rates C) is less attractive for hauling large tonnage over long distances D) is less attractive for hauling large tonnage over long distances and has higher damage

rates E) is relatively inflexible and slow and has higher damage rates

7) Intermodal freight can be classified as .

A) containers on flatcars (COFC) B) trailers on flatcars (TOFC) C) containers on marine vessel (COMV) D) containers on flatcars (COFC) and containers on marine vessel (COMV) E) containers on flatcars (COFC) and trailers on flatcars (TOFC)

8) Integrated carriers, such as UPS and Federal Express, are able to capture a larger market

share because they .

A) utilize their own aircraft B) have extensive ground networks C) have accurate, real-time logistics tracking systems D) utilize their own aircraft, have extensive ground networks, and have accurate, realtime logistics tracking systems E) have extensive ground networks and have accurate, real-time logistics tracking systems

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Chapter 9 9) Marine transportation is .

A) best suited for hauling large tonnage over long distances B) disadvantaged because of the need for suitable networks, which are dependent on

government support C) not well suited for hauling commodities D) disadvantaged because of the need for suitable networks, which are dependent on government support and not well suited for hauling commodities E) best suited for hauling large tonnage over long distances and disadvantaged because of the need for suitable networks, which are dependent on government support

10) Demurrage charges .

A) may indicate poor delivery scheduling on the part of the buying organization B) are never legitimate because delays are typically caused by the carrier’s actions C) are insignificant and can easily be justified in the buying organization D) discourage the buyer from using a particular carrier E) are growing because of the lengthy delays in most supply chains

11) The selection of the FOB point is important to the purchaser, because it determines

.

A) who pays the carrier B) when legal title to goods being shipped passes to the buyer C) freight costs D) who routes the freight and when legal title to goods being shipped passes to the buyer E) who pays the carrier, when legal title to goods being shipped passes to the buyer, and freight cost

12) A straight bill of lading .

A) is a negotiable instrument that can be used when goods are purchased on credit B) is used to indicate that cargo was loaded onto a named vessel in good condition C) is used when the goods have been paid for in advance of shipment and requires

delivery D) is used when the goods have been paid for in advance of shipment and requires delivery and is a negotiable instrument that can be used when goods are purchased on credit E) is a negotiable instrument that can be used when goods are purchased on credit and is used to indicate that cargo was loaded onto a named vessel in good condition

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Chapter 9 13) Decreasing total business logistics costs as a percentage of the U.S. GDP may be attributed to

.

A) deregulation of the transportation sector B) an increased globalization of supply chains C) improved logistics technology systems D) deregulation of the transportation sector and improved logistics technology systems E) deregulation of the transportation sector and an increased globalization of supply chains

14) With deregulation of the transportation industry and the development of intermodal service,

the focus for the transport buyer is .

A) selecting the best mode of transport B) procuring logistics services at the lowest rates C) the carrier’s ability to handle multiple parts of the logistics process D) bringing all logistics activities under the management of the Vice President of Supply E) shifting responsibility for shipper-carrier relationships to the carrier

15) Transportation rates .

A) are lower for LTL than TL shipments B) are established primarily by government regulation C) typically decrease as delivery speed increases D) are established primarily through negotiation E) typically do not change when smaller shipments are consolidated

16) The delivery decision for specific order includes mode selection and carrier selection. ⊚ true ⊚ false

17) Supply’s role in logistics may include direct functional responsibility and the acquisition of

logistics services. ⊚ true ⊚ false

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Chapter 9 18) Two effective logistics cost reduction strategies are partnership agreements with logistics

services providers and freight consolidation. ⊚ true ⊚ false

19) Rail is the most flexible mode of transportation and accounts for approximately 80 percent of

transportation expenditures by U.S. firms. ⊚ true ⊚ false

20) A shipper transports property or people by any means of conveyance. ⊚ true ⊚ false

21) Third-party logistics service providers (3PLs) are carriers that always own assets (trucks,

airplanes, railcars) and act as intermediaries between trading partners, for example, shippers and carriers. ⊚ true ⊚ false

22) Compared to rail carriers, motor carriers are better suited for hauling large tonnage over long

distances. ⊚ true ⊚ false

23) Transportation costs decrease as distance, quantity, and speed increase. ⊚ true ⊚ false

24) Less-than-truckload (LTL) shipments are typically for short haul distances compared to

Truckload (TL) shipments. ⊚ true ⊚ false

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Chapter 9 25) The cost per hundredweight (cwt) is generally higher for Truckload (TL) shipments

compared to less-than-truckload (LTL) shipments. ⊚ true ⊚ false

26) Logistics is the management of inventory in motion and at rest. ⊚ true ⊚ false

27) Air transport is best suited for products of high value and/or extremely perishable. ⊚ true ⊚ false

28) Logistics costs can be divided into three categories: inventory carrying costs, administrative

costs, and transportation (with transportation costs accounting for the bulk of the costs). ⊚ true ⊚ false

29) Regulations that controlled rates, routes, carrier services, and geographic coverage have been

largely eliminated for most modes of transportation through deregulation. ⊚ true ⊚ false

30) The freight bill is the key document in the movement of goods. ⊚ true ⊚ false

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Chapter 9 Answer Key Test name: Chapter 9 1) E 2) D 3) D 4) C 5) D 6) E 7) E 8) D 9) E 10) A 11) D 12) C 13) D 14) C 15) D 16) TRUE 17) TRUE 18) TRUE 19) FALSE 20) FALSE 21) FALSE 22) FALSE 23) FALSE 24) TRUE 25) FALSE 26) TRUE 27) TRUE 28) TRUE 29) TRUE 30) FALSE

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Chapter 10 Chapter 10: Price 1) The lowest price that ensures a continuous supply of the proper quality where and when

needed and allows the supplier to make a reasonable profit is commonly known as A) a market price B) a fair price C) a cost-based price D) a buyer’s market price E) a seller’s market price

.

2) The cost approach to pricing .

A) is the favored approach to pricing mechanism for most suppliers B) means prices are adjusted to ensure the selling organization recoups all costs C) means prices are set to cover direct costs, contribute to indirect costs, and provide a

profit D) implies that prices are set based on the cost the market will bear E) implies that cost analysis is the only technique to be used to negotiate prices

3) Labor and material costs are typically A) direct costs B) semivariable costs C) fixed costs D) indirect costs E) semivariable costs and fixed costs

.

4) If the delivery date is several months away and there is substantial chance of price escalation,

a supplier may feel that there is far too much risk of loss to agree to sell under a A) cost-plus-fixed-fee (CPFF) B) cost-plus-incentive-fee (CPIF) C) firm-fixed-price plus incentive fee (FFPIF) D) firm-fixed-price (FFP) E) cost-no-fee (CNF)

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Chapter 10 5) This type of bond guarantees that work will be done according to specifications, in the time

specified, and if another supplier does rework or completes the order, purchasing is indemnified for these extra costs .

A) bid bond B) lien bond C) performance bond D) payment bond E) surety bond

6) When using competitive bidding to determine price, the purchaser should ensure that the

bidders are .

A) qualified to make the item or service in accordance with the buyer’s specifications, able to deliver it by the desired date, sufficiently reliable, and numerous enough to ensure a truly competitive price B) qualified to make the item or service in accordance with the buyer’s specifications, able to deliver it by the desired date, and sufficiently reliable C) qualified to make the item or service in accordance with the buyer’s specifications and able to deliver it by the desired date D) sufficiently reliable and numerous enough to ensure a truly competitive price E) qualified to make the item or service in accordance with the buyer’s specifications and numerous enough to ensure a truly competitive price

7) Items for which prices are comparatively low and the cost of price reduction efforts may

exceed any price savings realized are .

A) parts, components, and packaging B) raw materials C) services D) maintenance, repair, and operating (MRO) supplies E) capital assets

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Chapter 10 8) A cash discount allows .

A) the seller to secure prompt payment, but has no benefits for the buyer B) the buyer to pay a lower price per unit, but has no benefits for the seller C) the seller to demand payment in cash on demand (C.O.D.) upon receipt of goods D) the buyer to always calculate the discount based on the delivery date E) the seller to secure prompt payment and the buyer to pay a lower price per unit

9) Costs incurred in the operation of a production plant or process or service organization, but

normally cannot be related directly to any given unit of production or service provided, are called .

A) direct costs B) indirect costs C) variable costs D) semivariable costs E) fixed costs

10) The lowest bid may not receive the order if .

A) the buyer discovers the lowest bidder is not preferred by the user or specifier B) the lowest bid is higher than the buyer believes justifiable C) there is reason to believe the bidders colluded D) the lowest bid is higher than the buyer believes justifiable or there is reason to believe

the bidders colluded E) the buyer discovers the lowest bidder is not preferred by the user or specifier, the lowest bid is higher than the buyer believes justifiable, or there is reason to believe the bidders colluded

11) A prime function of an organized commodity exchange is to furnish an established

marketplace where .

A) commodity prices can be controlled B) the forces of supply and demand operate freely C) sellers of the same commodity can come together to set prices D) products that are difficult to grade can be traded E) there are only a limited number of buyers and sellers

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Chapter 10 12) A cash discount of 1/15, N/30 (1 percent cash discount if payment is made in 15 days, with

the gross amount due in 30 days) is the equivalent of what approximate interest rate?

A) 10 percent B) 18 percent C) 24 percent D) 32 percent E) 40 percent

13) The fairest possible means of treating all suppliers alike in a competitive bidding situation is

to

.

A) allow all bidders to submit their bids online B) establish a policy of firm bidding C) allow for negotiation after all bids are received D) provide prospective suppliers target cost E) none of the choices are correct

14) If identical bids are received, the buyer might choose to A) reject all bids B) initiate an investigation C) negotiate with one or more suppliers D) reject all bids and negotiate with one or more suppliers E) reject all bids and initiate an investigation

.

15) Hedging is a way to .

A) attempt to minimize commodity price and currency exchange risks B) ensure lowest price C) minimize collusive bidding D) set trade discounts E) evaluate quantity discounts

16) Government data and commodity exchanges can be useful sources for price trends. ⊚ true ⊚ false

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Chapter 10 17) The purchasing manager indexes (PMIs) are lagging economic indicators derived from

monthly surveys of purchasing managers about forecasted company conditions. ⊚ true ⊚ false

18) Direct costs can be specifically and accurately assigned to a given unit of production or a

specific identifiable task performed by a service provider. ⊚ true ⊚ false

19) Fixed costs generally remain the same regardless of the number of units produced. ⊚ true ⊚ false

20) An escalator clause provides for either an increase or decrease in price if costs change. ⊚ true ⊚ false

21) An exception to firm bidding allows the buyer and bidders the flexibility to clarify and define

specifications and prices after the initial bids are received, and then bidders submit best-andfinal-offers (BAFOs). ⊚ true ⊚ false

22) Accepting a price discount for ordering larger quantities leads to increased levels of

anticipation inventory. ⊚ true ⊚ false

23) In general, competitive bidding is the most efficient means of obtaining a fair price for items

bought. ⊚ true ⊚ false

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Chapter 10 24) Farmers turn to marketing and production contracts when they perceive the efficacy of spot

markets to be inadequate in handling their risks, and processors turn to contracts as a way to encourage farmers to produce specific products at desired times. ⊚ true ⊚ false

25) Canceling a contract for a technicality when market prices are falling is considered an

unacceptable and unethical practice. ⊚ true ⊚ false

26) Prices may not be directly related to costs in the market approach. ⊚ true ⊚ false

27) Governments can play an active role in establishing prices or regulating how buyers and

sellers are allowed to behave in agreeing on prices. ⊚ true ⊚ false

28) Online reverse auctions are useful means of price determination for customized items. ⊚ true ⊚ false

29) The process for bidding in the public sector is generally similar to the private sector, although

there are a few important differences. ⊚ true ⊚ false

30) A payment bond guarantees that if the bidder wins the bid it will accept the purchase

contract. ⊚ true ⊚ false

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Chapter 10 Answer Key Test name: Chapter 10 1) B 2) C 3) A 4) D 5) C 6) A 7) D 8) E 9) B 10) D 11) B 12) C 13) B 14) D 15) A 16) TRUE 17) FALSE 18) TRUE 19) TRUE 20) TRUE 21) TRUE 22) TRUE 23) TRUE 24) TRUE 25) TRUE 26) TRUE 27) TRUE 28) FALSE 29) TRUE 30) FALSE

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Chapter 11 Chapter 11: Cost Management 1) When estimating the cost structure of a manufacturing supplier .

A) labor rates are typically uniform across different plant locations B) direct labor costs are the easiest costs to estimate C) material costs are difficult to estimate D) equipment depreciation is typically the largest cost element in overhead E) prices of raw materials are not commonly accessible

2) After identifying and implementing supply cost savings, the supply manager should

.

A) validate the savings with finance/accounting, evaluate potential implications for changes to the budget, and notify the budget holder so they can use the savings for other expenses or projects B) validate the savings with finance/accounting and evaluate potential implications for changes to the budget C) notify the budget holder so they can use the savings for other expenses or projects D) validate the savings with finance/accounting E) evaluate potential implications for changes to the budget

3) The goal of value engineering and value analysis is to .

A) analyze the value-added from engineering services and production B) analyze functions to satisfy all needed quality requirements at any cost C) perform a function at the same or an improved level while reducing costs D) define value of a function in technically accurate and precise language E) perform a function at an improved level at the same cost

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Chapter 11 4) Portfolio analysis is .

A) a method of multiple sourcing, a method of identifying substitute materials, and the

categorization of spend map based on the risks to acquire in the marketplace and value B) a method of multiple sourcing and the categorization of spend map based on the risks to acquire in the marketplace and value C) the categorization of spend map based on the risks to acquire in the marketplace and value D) a method of multiple sourcing E) a method of identifying substitute materials

5) When cost analysis is applied to a supplier’s price, the buyer

.

A) relies on supplier information about areas where it can cut costs B) recognizes that little cost data is available for most cost elements C) identifies and analyzes each cost element for cost reduction opportunities D) identifies a cost reduction target with no insight into specific cost elements E) cannot expect any assistance from the supplier

6) Cost management for services .

A) is confined to internal demand analysis and consumption management B) includes demand management and supplier cost structure analysis C) is confined to supplier cost structure analysis D) focuses primarily on better design of the service E) is only possible when the service is highly tangible

7) Cost management tools and techniques that may provide data for negotiations with internal

organizational stakeholders and/or externally with suppliers include .

A) activity-based costing, the learning curve, and total cost of ownership B) activity-based costing and total cost of ownership C) activity-based costing D) the learning curve E) total cost of ownership

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Chapter 11 8) Purchases categorized as leverage items in portfolio analysis have the following

characteristic(s) .

A) switching suppliers is difficult B) supplier technology is important C) standard specification or commodity-type items D) standard specification or commodity-type items and supplier technology is important E) standard specification or commodity-type items, switching suppliers is difficult, and supplier technology is important

9) A purchasing approach to minimize the acquisition costs and rely on competition to keep

prices low is best suited for .

A) bottleneck items B) strategic items C) noncritical/routine items D) leverage/commodity items E) bottleneck items and strategic items

10) In portfolio analysis, cost analysis can be used in the acquisition of strategic goods or

services to identify opportunities to .

A) avoid, eliminate, or reduce costs in buyer and supplier cost structures B) divide the spend for the item or service among multiple suppliers C) avoid, eliminate, or reduce costs in supplier switching costs D) avoid, eliminate, or reduce costs in the supplier’s cost structure E) avoid, eliminate, or reduce costs in the buyer’s cost structure

11) In portfolio analysis, the goal when purchasing bottleneck items is to A) reduce or eliminate customization B) assure quality at expected levels C) assure lowest total cost of ownership D) minimize acquisition time and cost E) minimize price per unit

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Chapter 11 12) Life cycle costing (LCC) .

A) focuses on purchase price that is typically the highest percentage of LCC B) shows the phases of product evolution from growth to maturity C) includes all relevant costs expected in the first three years of ownership D) can be applied to all types of purchases except capital acquisitions E) may include costs that are 10-15 years in the future, which can be highly uncertain

13) Purchasers can use activity-based costing to .

A) eliminate nonvalue-adding activities B) increase activity occurrences C) reduce the cost driver rate D) eliminate nonvalue-adding activities, reduce activity occurrences, and reduce the cost

driver rate E) eliminate nonvalue-adding activities, increase activity occurrences, and reduce the cost driver rate

14) Common method(s) of analyzing total costs of ownership (TCO) include .

A) standard cost models B) unique cost models C) unique cost models and segregating costs on the basis of pretransaction, transaction,

and posttransaction costs D) standard cost models and segregating costs on the basis of pretransaction, transaction, and posttransaction costs E) standard cost models, unique cost models, and segregating costs on the basis of pretransaction, transaction, and posttransaction costs

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Chapter 11 15) Target costing starts with .

A) the supplier’s price, and works to determine the supplier’s true cost structure B) the selling price of an organization’s end product minus the operating profit to

establish the target cost C) the supplier’s price, and works to determine the selling price of the buying organization’s end product or service D) the buyer’s lowest reasonable price target, and works to a negotiated price agreed on by the buyer and the supplier E) the selling price of an organization’s end product minus actual manufacturing, overhead, and materials costs to determine operating profit

16) Qualifying sources is an example of a pretransaction cost phase in the total cost of ownership

model. ⊚ true ⊚ false

17) Best practice in managing supply cost savings includes a formal process to validate the

savings with finance/accounting and evaluate potential changes to the budget. ⊚ true ⊚ false

18) Although associated with a number of factors, the learning curve normally is most closely

identified with the analysis of material costs. ⊚ true ⊚ false

19) The position of strength assessment focuses on all parties in the negotiation. ⊚ true ⊚ false

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Chapter 11 20) When planning a negotiation strategy, if the estimated range of acceptable results for both

buyer and seller indicates there is no zone of overlap, the negotiator must determine if the gap can be closed. ⊚ true ⊚ false

21) In portfolio analysis, strategic items are characterized by high risk and high value. ⊚ true ⊚ false

22) An externally focused process of analyzing costs in terms of the overall supply chain is

called strategic cost management. ⊚ true ⊚ false

23) Negotiation will normally not be used unless the dollar amount of the purchase is quite large

because of the expense and time involved. ⊚ true ⊚ false

24) In portfolio analysis, bottleneck goods and services are both more valuable to the buying

organization and riskier to acquire. ⊚ true ⊚ false

25) Value engineering (VE) and value analysis (VA) use the same methods, but VE is performed

in the design stage and VA is performed in the redesign stage. ⊚ true ⊚ false

26) In value engineering and value analysis, value can be expressed as: Function ÷ Cost. ⊚ true ⊚ false

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Chapter 11 27) All negotiations have an economic as well as a psychological dimension. ⊚ true ⊚ false

28) Supply chain finance is concerned with the management of financial flows in the supply

chain using technology solutions provided by financial institutions and/or financial technology companies. ⊚ true ⊚ false

29) Target costing may result in reductions in corporate overhead costs, distribution costs, and

inventory carrying costs. ⊚ true ⊚ false

30) Life cycle costing can be used to justify the acquisition of expensive equipment on the basis

of lower operating costs over the life of the asset. ⊚ true ⊚ false

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Chapter 11

Answer Key Test name: Chapter 11 1) D 2) B 3) C 4) C 5) C 6) B 7) A 8) C 9) C 10) A 11) A 12) E 13) D 14) E 15) B 16) TRUE 17) TRUE 18) FALSE 19) TRUE 20) TRUE 21) TRUE 22) TRUE 23) TRUE 24) FALSE 25) TRUE 26) TRUE 27) TRUE 28) TRUE 29) FALSE 30) TRUE

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Chapter 12 Chapter 12: Supplier Selection 1) If the decision has been made that a new requirement cannot be made in-house and no

existing supplier is adequate, then .

A) one option exists: search the marketplace for an untried/unknown, new supplier B) two options exist: search the marketplace for a new supplier or convince an existing supplier to develop the capability C) three options exist: search the marketplace for a new supplier, convince an existing supplier to develop the capability, or engage in reverse marketing D) three options exist: search the marketplace for a new supplier, engage in reverse marketing, or redesign/respecify the requirement so that it is procurable E) three options exist: search the marketplace for a new supplier, convince an existing supplier to develop the capability, or inform the internal user the item cannot be purchased

2) Distributors, wholesalers, and retailers .

A) typically cannot deliver at a lower cost than the manufacturer B) may provide valuable services and a better price than the manufacturer C) typically carry a very limited supply in an effort to keep inventory costs low D) typically do not provide much value in a modern supply chain E) never add enough value to a buyer to make it worth doing business with them

3) A request for quotation (RFQ) .

A) asks the supplier to declare at what price and what terms they are prepared to supply B) signals that the purchaser has identified a supplier as a potential source of supply and

asks for information C) permits the supplier to fit the specifications for supply to its strengths D) signals that the purchaser has identified a supplier as a potential source of supply and asks for information, and asks the supplier to declare at what price and what terms they are prepared to supply E) asks the supplier to declare at what price and what terms they are prepared to supply and permits the supplier to fit the specifications for supply to its strengths

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Chapter 12 4) The supplier selection decision .

A) should always be preceded by a formal supplier evaluation and rating B) can be seen as a decision-making process undertaken in an environment of certainty C) should be based on quantifiable factors such as price and delivery and ignore social

and environmental issues D) can be depicted by a decision tree identifying options, evaluation criteria, and probabilities of success and failure E) is based on a uniform set of weighted criteria that can be applied to every purchase

5) Arguments that favor single sourcing include .

A) the order is small and deliveries are easy to schedule B) the order is small and volatility in the supply market C) to obtain greater flexibility D) deliveries are easier to schedule and are most cost efficient E) the order is small and to obtain greater flexibility

6) The ability to source with offshore suppliers was made more practical due to .

A) better educated supply managers making supply decisions B) greater openness to global trade on the part of economically developing countries C) transformations in communication and transportation D) end customer pressure to do business globally E) greater diversity in legal frameworks around the world

7) The traditional supplier evaluation criteria are A) price and quality B) price, quality, and delivery C) quality, quantity, delivery, price, and service D) price, quality, delivery, and sustainability E) quality, quantity, delivery, price, and location

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Chapter 12 8) Which of the following statements supports multiple sourcing?

A) Concerns exist about supplier capacity for future volume.

B) The order is small.

C) There is a patent involved.

D) An ongoing long-term contract exists with a preferred supplier.

E) Supply is plentiful and supply assurance is important.

9) Research has found that diverse suppliers .

A) are more expensive, but government regulations require that private sector

organizations are required to include diverse suppliers in RFQs B) are more in tune with the needs of minority end customers, flexible at offering lower volume orders, and provide more responsive order lead times C) are more in tune with the needs of minority end customers D) have lower costs E) are flexible at offering lower volume orders and provide more responsive order lead times

10) Buyers’ perceptions of risk in supplier selection decisions .

A) vary depending on the level of data available in each case B) vary depending on the level of customization of product or service C) are generally the same for A, B, and C items D) are generally the same for strategic and non-strategic items E) are generally the same for new and current suppliers of the same items

11) SA8000 certification is for .

A) quality management B) social sustainability C) environmental sustainability D) logistics management E) management of innovation

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Chapter 12 12) Large suppliers .

A) usually represent very high risk to the purchaser B) should not usually be considered for longer term contracts C) tend to have a strong financial base D) are most suited for small dollar value “C” requirements E) usually provide the greatest responsiveness and flexibility

13) The preferred hierarchy of environmental supply chain strategies is 1. source reduction 2. reuse 3. recycle 4. incinerate 5. landfill 6. reuse 7. recycle 8. source reduction 9. incinerate 10. landfill 11. recycle 12. reuse 13. source reduction 14. incinerate 15. landfill 16. reuse 17. reclaim 18. recycle 19. incinerate 20. landfill 21. reclaim 22. reuse 23. recycle 24. incinerate 25. landfill

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Chapter 12 14) Best results from supplier visits come from .

A) developing, in advance, a general outline of the kinds of information sought B) gathering, in advance, all reasonably available information, both general and specific,

about the company C) preparing a detailed report of the findings after the visit D) developing, in advance, a general outline of the kinds of information sought; and gathering, in advance, all reasonably available information, both general and specific, about the company E) developing, in advance, a general outline of the kinds of information sought; gathering, in advance, all reasonably available information, both general and specific, about the company; and preparing a detailed report of the findings after the visit

15) Reverse marketing is .

A) when the buying organization has decided to stop making something in-house and

identifies a supplier from its existing supply base B) when the supply department sells internal users on a specific supplier that the user was opposed to initially C) an aggressive, purchaser-initiated approach to finding and developing world class suppliers D) when the marketing department tries to convince the supply department to stop buying from a specific supplier E) an aggressive, marketing-initiated approach to finding and developing world class suppliers

16) A strategic purchase is mission critical, meaning that it may help or hinder attainment of the

organization’s strategic goals and objectives. ⊚ true ⊚ false

17) A request for information (RFI) signals that the buyer has identified the supplier as the

source of supply and represents a commitment for future business. ⊚ true ⊚ false

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Chapter 12 18) In addition to the societal benefits of assisting underrepresented groups, supplier initiatives

can also have several commercial benefits for buyers. ⊚ true ⊚ false

19) Assurance of supply is an argument that favors multiple sourcing. ⊚ true ⊚ false

20) Supplier development initiatives may be focused on 1. persuading an existing supplier to expand into new areas that meet the needs of the

buying organization 2. locating a new, untried/unknown company and identifying potential areas of business. ⊚ true ⊚ false

21) When using a request for proposal (RFP), the assumption is that specifications are

nonstandard and difficult to describe. ⊚ true ⊚ false

22) Historically, the advantages of global sourcing were more dependable service, greater

flexibility, and detailed knowledge of the buyer’s specific requirements. ⊚ true ⊚ false

23) A request for quotation (RFQ) allows more latitude to the supplier than a request for proposal

(RFP) to fit the bid to its strengths. ⊚ true ⊚ false

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Chapter 12 24) The use of just-in-time, stockless buying, or systems contracting favors the use of single

sourcing. ⊚ true ⊚ false

25) The practice of buying directly from manufacturers and bypassing distributors is referred to

as single sourcing. ⊚ true ⊚ false

26) Near shoring refers to suppliers located in regions that are close in terms of travel time and

time zones. ⊚ true ⊚ false

27) Supply risks can be categorized as operational and strategic. ⊚ true ⊚ false

28) Most small organizations use formal supplier codes of conduct to set social sustainability

standards and expectations for their suppliers. ⊚ true ⊚ false

29) Social sustainability in supply chain management includes product and process issues that

affect human safety and welfare, community development, and protection from harm. ⊚ true ⊚ false

30) In the context of supplier selection decisions, the term “local” can be defined differently

depending on the organization and its scope of operations. ⊚ true ⊚ false

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Chapter 12

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Chapter 12 Answer Key Test name: Chapter 12 1) D 2) B 3) A 4) D 5) A 6) C 7) C 8) A 9) B 10) B 11) B 12) C 13) A 14) E 15) C 16) TRUE 17) FALSE 18) TRUE 19) TRUE 20) TRUE 21) TRUE 22) FALSE 23) FALSE 24) TRUE 25) FALSE 26) TRUE 27) FALSE 28) FALSE 29) TRUE 30) TRUE

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Chapter 13 Chapter 13: Supplier Evaluation and Supplier Relationships 1) The supplier evaluation process that includes: 1. factors or criteria for evaluation 2. the importance of each factor 3. a system for rating each supplier on each factor, is called a(n) A) qualitative evaluation B) weighted point evaluation C) executive roundtable evaluation D) categorical evaluation E) informal evaluation

2) One of the main concerns about buyer–supplier partnerships is A) B) C) D) E)

.

.

if the relationship will violate antitrust laws if cooperative relationships will get better results than competition if internal users will go along with the idea if it is possible to partner with offshore suppliers if there will be any long-term benefits

3) Buyer–supplier partnerships .

A) reflect the trend toward vertical integration B) are designed to maximize efficiency in buyer-supplier operations C) improve buyer-supplier communication at the expense of internal relationships D) result in early supplier and supply involvement in design and description E) result in significant quality improvements and total cost increases

4) An example of a semiformal supplier evaluation tool is .

A) conversations with others in the organization about how a supplier is doing B) measuring parts per million defects C) cost reduction reports D) rating on-time delivery performance as poor, fair, good, or excellent E) an annual discussion between top executives in the buying organization and those of

the supplier

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Chapter 13 5) Supply chain management is .

A) externally focused from supply management to suppliers B) externally focused from supply management to suppliers, and from suppliers to their

suppliers C) internally focused from supply management to internal users/customers D) internally focused from supply management to senior management E) internally focused to align with other functions and externally focused upstream through the supplier network and downstream through the customer network

6) When evaluating suppliers, the most judgment is usually required when measuring

performance for A) service B) quality C) quantity D) delivery E) cost

.

7) On the purchasing-supplier satisfaction model, if the perceptions of buyer and supplier fall

along the “fairness or stability” diagonal line, this means .

A) both parties are satisfied with the relationship B) both parties are at least equally well-off C) both parties are unsatisfied with the relationship D) one party is satisfied and one party is dissatisfied E) one party is better off in the relationship than the other party

8) Research on the “dark side of buyer–supplier relationships” has identified the following

potential problem(s) with overcommitting to supplier partnerships in the long-term .

A) loss of objectivity B) ineffective decision making C) loss of objectivity and costly investments in the relationship D) loss of objectivity and ineffective decision making E) loss of objectivity, ineffective decision making, and costly investments in the relationship

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Chapter 13 9) Buyer–supplier partnerships are

.

A) discouraged because of the rapid rate of technological change and growth in global trade B) most appropriate with the product or services acquired is fairly standard C) stable, long-term business relationships, supported by business processes, not personalities D) evaluated annually based on cost, quality, delivery, and service E) a method of extracting supplier concessions for cost, quality, delivery, and service

10) Strategic alliances .

A) ensure access to raw materials deemed critical to national security B) do not require any contribution from top management C) are informal buyer–supplier relationships D) support the idea that supplier relationships contribute to organizational success E) are only possible when there is no intellectual property or technology involved

11) Trends in supply management include .

A) switching suppliers frequently through online auctions to get price discounts B) greater concentration of the supplier selection decision in procurement C) limiting the number of suppliers and focusing on results from key suppliers D) increasing the number of suppliers and developing closer relationships E) negotiating shorter term contracts with fewer suppliers to increase leverage

12) If the supplier perceives a buyer–supplier relationship is in the desirable region on the

purchaser–supplier satisfaction matrix, but there are problems, the supplier is most likely to .

A) insist on unreasonable length of contract B) be willing and able to make rapid price, delivery, and quality adjustments in response to requests from the purchaser C) refuse to send shipments as promised D) insist on unreasonable length of contract and refusal to send shipments as promised E) insist on unreasonable length of contract, refusal to send shipments as promised, and willingness and ability to make rapid price, delivery, and quality adjustments in response to requests from the purchaser

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Chapter 13 13) A buyer–supplier relationship is formed around leverage items in portfolio analysis to attain

the desired levels of quality, quantity, delivery, price, and service at the lowest total cost of ownership. This is called .

A) an operational partnership B) a strategic alliance C) co-location D) a multi-tiered partnership E) a preferred partnership

14) If the buyer perceives a buyer–supplier relationship is in the undesirable region on the

purchaser–supplier satisfaction matrix, and problems persist, the buyer is most likely to .

A) refuse to pay bills B) refuse to accept shipments C) share information to find a mutual solution D) refuse to pay bills, refuse to accept shipments, and share information to find a mutual solution E) refuse to pay bills and refuse to accept shipments

15) A goal of supply chain management is to .

A) gain competitive advantage by acquiring confidential information about chain

members B) drive down prices through competitive bidding C) redistribute inventory as far down the supply chain as possible D) reduce uncertainty and risks between and among members of the supply chain E) increase competition by increasing the number of suppliers in the supply chain

16) Taking negative measures to shift the satisfaction level in the buyer–seller relationship may

achieve short-term objectives, but may negatively affect the relationship in the long-term. ⊚ true ⊚ false

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Chapter 13 17) Monitoring changes in market trends and technologies can help protect purchasers from the

“dark side” of buyer–supplier relationships. ⊚ true ⊚ false

18) Early supply and supplier involvement (ESI) pulls the buyer and the supplier into need

recognition and description stages of the purchasing process. ⊚ true ⊚ false

19) An unwillingness to single source and enter into a buyer–supplier partnership is indefensible

in a progressive purchasing and supply management organization. ⊚ true ⊚ false

20) As the buyer–supplier network grows in size and complexity, the need to have a more

informal system for evaluating current sources also increases. ⊚ true ⊚ false

21) Buyer–supplier relationships fall somewhere on a continuum from transactional to

collaborative. ⊚ true ⊚ false

22) The typical process for developing a weighted point evaluation system is to: 1. identify the factors or criteria for evaluation 2. determine the importance of each factor 3. establish a system for rating each supplier on each factor. ⊚ true ⊚ false

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Chapter 13 23) Purchasers integrate systems or processes with acceptable suppliers and preferred suppliers

to avoid unnecessary duplication and speed up transactions. ⊚ true ⊚ false

24) Refusal to accept shipments is an example of a negative, or “crunch” technique, used to shift

position on the buyer–supplier satisfaction matrix. ⊚ true ⊚ false

25) Supplier goodwill cannot be quantified or measured so it is the supply manager’s best

estimate as to how much supplier goodwill has been generated. ⊚ true ⊚ false

26) Unilateral price increase without notice is an example of “stroking” or a positive tool for the

supplier to shift position on the buyer–supplier satisfaction matrix. ⊚ true ⊚ false

27) Strategic supply management is founded on the conviction that a significant competitive edge

can be gained from the suppliers because an organization has developed and its supply systems and supplier relationships. ⊚ true ⊚ false

28) Evaluation and rating systems that assign values such as excellent, very good, good, fair, and

poor to performance are known as categorical rating systems. ⊚ true ⊚ false

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Chapter 13 29) Early supplier involvement only extends to an organization’s first tier suppliers because it is

the responsibility of these suppliers to manage subsequent tiers of suppliers. ⊚ true ⊚ false

30) Supply management is critical to effectively managing supply chains, but demand

management is not. ⊚ true ⊚ false

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Chapter 13 Answer Key Test name: Chapter 13 1) B 2) C 3) D 4) E 5) E 6) A 7) B 8) E 9) C 10) D 11) C 12) B 13) A 14) E 15) D 16) TRUE 17) TRUE 18) TRUE 19) FALSE 20) FALSE 21) FALSE 22) TRUE 23) FALSE 24) TRUE 25) FALSE 26) FALSE 27) TRUE 28) TRUE 29) FALSE 30) FALSE

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Chapter 14 Chapter 14: Global Supply Management 1) Which of the following discourages countertrade?

A) Well-developed domestic economy B) Shortage of foreign exchange C) Shortage of available credit D) Desire to promote labor-intensive exports E) Need to develop export markets for new products

2) Maquiladoras in Mexico .

A) cannot be owned by non-Mexicans B) are different from foreign trade zones C) are reconfiguring to focus on labor-intensive assembly D) are designed to take advantage of low Mexican labor costs E) are best suited to sophisticated manufacturing and product design

3) When purchasing from offshore suppliers, buyers might expect delays resulting from

.

A) transportation in the supplier’s country B) domestic customs clearance C) the time the goods are in port D) transportation in the supplier’s country and domestic customs clearance E) transportation in the supplier’s country, domestic customs clearance, and the time the goods are in port

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Chapter 14 4) Special economic zones of China (SEZs) .

A) are located in Hong Kong B) allow foreign and domestic trade and investment to be conducted, with the

authorization of the Chinese central government C) use tax and business incentives to attract foreign investment and technology as a means of supporting economic growth D) are located in Hong Kong and use tax and business incentives to attract foreign investment and technology as a means of supporting rapid economic growth E) are located in Hong Kong, use tax and business incentives to attract foreign investment and technology as a means of supporting rapid economic growth, and allow foreign and domestic trade and investment to be conducted, with the authorization of the Chinese central government

5) When comparing the total cost of ownership from an international supplier to that of a

domestic supplier, the international supplier’s .

A) lower labor costs are easily eroded by additional shipping and insurance costs B) lower labor costs offset the high cost of inefficient equipment and processes C) prices are carefully controlled by the U.S. government to prevent dumping D) lower labor rates must be considered in the context of productivity and quality E) price will be higher if the U.S. dollar is strengthening on the exchange rate

6) The structure of a global purchasing organization is influenced by .

A) the location of the company’s operations B) the overall organizational structure C) the location of key suppliers D) the structure of the purchasing function E) the location of the company’s operations, the overall organizational structure, the

location of key suppliers, and the structure of the purchasing function

7) The most-cited reason for international trade is A) better quality B) better overall value C) more advanced technology D) lower total costs E) lower price

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Chapter 14 8) The United Nations' Convention for the International Sale of Goods (CISG) .

A) gives legal advantages to less economically developed countries B) is an attempt to apply a set of uniform commercial laws to global trade in goods C) gives legal advantages to more economically developed countries D) allows multinational companies to circumvent long-standing trade practices E) replaces most regional trade treaties with a common body of law

9) Global supply activities can be coordinated through .

A) regional purchasing offices B) a global commodity management organization C) international purchasing offices D) regional purchasing offices and a global commodity management organization E) regional purchasing offices, a global commodity management organization, and

international purchasing offices

10) Compared to domestic sourcing, when sourcing offshore more lead time may be needed

because of .

A) inland transportation delays in the supplier’s country, delays in domestic customs, and delays in handling freight at ports B) inland transportation delays in the supplier’s country C) time needed to arrange payment documentation D) delays in domestic customs E) delays due to heightened security requirements at North American ports

11) The world’s leading exporter of manufactured goods is A) China B) Germany C) United States D) Japan E) the European Union

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Chapter 14 12) In international buying, the type of entity that normally assists in locating suppliers and

handling documentation is a(n) A) sales agent B) import broker C) import merchant D) trading company E) foreign import agent

.

13) If the purchaser wants the supplier to assume all responsibilities for all costs associated with

transportation to the named place of destination, including duties and other costs payable upon import, the following Incoterm should be used .

A) Free alongside ship (FAS) B) Free on Board (FOB) C) Delivered Duty Paid (DDP) D) Cost and Freight (CFR) E) Any of the answer choices.

14) The Foreign Corrupt Practices Act (FCPA) .

A) allows U.S. firms to prosecute foreign nationals on bribery charges B) attempts to persuade other nations to adopt U.S. rules regarding payments to officials C) allows foreign nationals to offer payments to U.S. government officials to expedite

trade agreements D) allows U.S. firms to make payments to facilitate the performance of normal duties E) allows U.S. firms to make payments to facilitate normal duties and to make payments to obtain special advantages

15) When sourcing offshore, a buyer .

A) will always state the price in U.S. dollars B) must have extensive knowledge and analysis of the country C) normally will let domestic suppliers counter the global supplier’s offer D) may assume that quality control systems and processes are universal E) will account for unknown risks by adding 10 percent to total cost assessments

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Chapter 14 16) It is more difficult to compare total cost of ownership from an offshore source to that of a

domestic one. ⊚ true ⊚ false

17) Some organizations have found that when entering a new market, purchasing products and/or

services after trying to sell into the market, provides several advantages. ⊚ true ⊚ false

18) Duty drawbacks permit a refund of duties paid on imported materials that are later exported. ⊚ true ⊚ false

19) When purchasing goods or services from an offshore supplier, the most conservative risk

management approach is to price in the buyer’s domestic currency. ⊚ true ⊚ false

20) For the Incoterm CFR (Cost and Freight), the seller clears the goods for export, is responsible

for delivering the goods on board at the port of shipment, pays the costs associated with transport of the goods to the port of destination, and procures and pays for marine insurance in the buyer’s name for the shipment. ⊚ true ⊚ false

21) Improvements in transportation and communications infrastructure have reduced the lead

time for offshore purchases. ⊚ true ⊚ false

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Chapter 14 22) Commercial letters of credit (CLCs) are the most actively used structured payment

instruments in global trade. ⊚ true ⊚ false

23) It is common for international trade disputes to be settled through international litigation

partly because the costs of arbitration exceed the costs of litigation. ⊚ true ⊚ false

24) A document which is drawn by the buyer’s bank at the buyer’s request, and guarantees that

the bank will pay the agreed-on amount when all prescribed conditions, such as satisfactory delivery, have been completed, is called a sight draft. ⊚ true ⊚ false

25) The USMCA and ASEAN are examples of Free Trade Agreements which were designed to

facilitate trade between and among member countries. ⊚ true ⊚ false

26) A foreign trade zone (FTZ) in the United States is similar in purpose to a maquiladora in

Mexico. ⊚ true ⊚ false

27) The governing convention on shipping terms and responsibilities involved in international

transportation is called International Commercial Terms (Incoterms). ⊚ true ⊚ false

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Chapter 14 28) Countertrade historically has been very uncommon in the sale by U.S. firms of armaments to

other nations, but very common in civilian procurement projects. ⊚ true ⊚ false

29) Typically, international purchasing offices (IPOs) are used when the company has an

established presence in the same geographic region where important suppliers are located. ⊚ true ⊚ false

30) The growth in international trade has come from an increase in the international sale of goods

but not services. ⊚ true ⊚ false

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Chapter 14 Answer Key Test name: Chapter 14 1) A 2) D 3) E 4) C 5) D 6) E 7) B 8) B 9) E 10) A 11) A 12) B 13) C 14) D 15) B 16) TRUE 17) FALSE 18) TRUE 19) TRUE 20) FALSE 21) TRUE 22) TRUE 23) FALSE 24) FALSE 25) TRUE 26) TRUE 27) TRUE 28) FALSE 29) FALSE 30) FALSE

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Chapter 15 Chapter 15: Legal and Ethics 1) When there are no liens against the goods and no violation of a patent, there is a(n)

.

A) warranty of title and against infringement B) express warranty C) implicit warranty D) implied warranty of merchantability E) implied warranty of fitness for a particular purpose

2) Electronic or digital signatures for contractual purposes .

A) are valid in most countries B) are valid in very few countries C) are legal in the European Union (EU) and apply across all boundaries D) are invalid because they cannot be authenticated with current technology E) are invalid in the United States because the UCC expressly prohibits them

3) Organizations manage supplier sustainability practices through the use of .

A) corporate codes of conduct B) industry standards C) supplier audits and industry standards D) third-party certifications and supplier audits E) corporate codes of conduct, industry standards, supplier audits, and third-party

certifications

4) Gifts and gratuities .

A) given to buyers by suppliers may lead to the perception of bias or subjectivity in the

supply process B) no matter how small, cannot be justified in a well-run supply organization, and should never be accepted C) of even a nominal nature, inevitably lead to commercial bribery D) are acceptable if the buyer receives them from an international supplier rather than a domestic one E) can be accepted as long as the buyer’s supervisor is informed of the action

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Chapter 15 5) A valid contract is based on .

A) competent parties, legal subject matter or purpose, and an offer and an acceptance B) competent parties and legal subject matter or purpose C) competent parties D) legal subject matter or purpose E) an offer and an acceptance

6) According to the law of agency, the legal authority of a buyer .

A) is the same as that of a salesperson B) includes apparent authority C) includes apparent authority and includes implied authority D) includes implied authority and is the same as that of a salesperson E) is the same as that of a salesperson, includes apparent authority, and includes implied

authority

7) The U. S. Sarbanes-Oxley Act .

A) requires listing off-balance sheet items such as long-term purchase agreements B) has no impact on the supply management process C) affects internal accounting procedures of privately-held companies D) requires the Chief Purchasing Officer to sign off on every contract E) requires supply management to report directly to the Chief Financial Officer

8) An offer .

A) cannot be modified or revoked before acceptance B) generally includes advertisements and price lists C) cannot be modified or revoked before acceptance and generally includes

advertisements and price lists D) may be made by either a buyer or a seller E) may be made by either a buyer or a seller and generally includes advertisements and price lists

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Chapter 15 9) Under U.S. product liability law, relevant product defects are .

A) sourcing defects, design defects, and manufacturing defects B) design defects, manufacturing defects, and marketing defects C) sourcing defects, manufacturing defects, and marketing defects D) design defects, specification defects, and manufacturing defects E) specification defects, sourcing defects, and marketing defects

10) The legal issues of who owns intellectual capital are .

A) of great concern to creators of intellectual capital, but few other people B) of little concern because international intellectual property laws already apply C) eased by advancements in the duplication and transfer of information D) eased by the passage of World Trade Organization directives E) of great concern globally because there is no uniform body of law

11) Acceptance of goods occurs when .

A) the buyer behaves as if the seller no longer owns the goods B) the buyer fails to reject after a reasonable opportunity to inspect C) the goods have been in possession of the buyer for 30 days D) the buyer behaves as if the seller no longer owns the goods and the buyer fails to

reject after a reasonable opportunity to inspect E) the buyer behaves as if the seller no longer owns the goods, the buyer fails to reject after a reasonable opportunity to inspect, and the goods have been in possession of the buyer for 30 days

12) In the event the seller delivers goods or the tender of delivery fails in any way to conform to

the contract, the buyer has the option to .

A) reject the whole shipment, accept the whole shipment, or accept part of the shipment and reject the balance B) reject the whole shipment or accept the whole shipment C) reject the whole shipment D) accept the whole shipment E) accept part of the shipment and reject the balance

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Chapter 15 13) Which two of the following are necessary for a valid contract?

I. A description of the scope of work II. Legal subject matter and purpose III. An offer IV. A counteroffer A) I1 and II B) I1 and III C) I1 and IV D) II and III E) II and IV

14) According to the UCC, an oral agreement .

A) is never legally binding B) may be revoked if the buyer sends a notice of objection within 30 days of receipt of

the goods C) normally must include some written notation if the price of the order exceeds the limit established by the statute of frauds D) that is partially performed (for example, one of ten lots is delivered) is automatically canceled under the doctrine of force majeure E) is not valid unless and until some form of documentation is signed by both parties

15) The acts that the agent is directly authorized to perform come under what type of authority?

A) Apparent authority B) Express authority C) Implied authority D) Direct authority E) Implicit authority

16) Sustainability performance includes measuring the social and environmental impacts of the

supply chain. ⊚ true ⊚ false

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Chapter 15 17) A company’s boilerplate or framework agreement provides only the basic items necessary

for a valid offer and depends on the provisions of the UCC for proper legal coverage. ⊚ true ⊚ false

18) People within an organization who spend company money on the basis of apparent authority

are commonly referred to as maverick buyers. ⊚ true ⊚ false

19) Mediation is when opposing parties in a contractual dispute between buyer and seller are

brought together to attempt to work out a settlement or agreement that both parties accept or reject. ⊚ true ⊚ false

20) U.S. publicly traded companies are not required to confirm that their supply chains are free

of conflict minerals or to confirm due diligence on conflict minerals’ source and chain of custody. ⊚ true ⊚ false

21) In many organizations, standards of conduct for purchasing personnel stress the need to avoid

all appearances of impropriety. ⊚ true ⊚ false

22) Express authority includes the acts that the agent is expressly and directly authorized to

perform. ⊚ true ⊚ false

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Chapter 15 23) The Uniform Commercial Code governs the purchase of services, including 1. contracts solely for services 2. contracts wherein services and goods are bundled and the service portion equals more

than 50 percent of the value of the contract. ⊚ true ⊚ false

24) If a supplier fails to deliver goods which meet the contract agreement, the buyer is under no

duty to accept the shipment. ⊚ true ⊚ false

25) One services contracting method is a Service Level Agreement (SLA) which is a document

that details the means, method, organization, and processes along with material requirements. ⊚ true ⊚ false

26) The authority of the sales representative is not the same as that of a supply manager. ⊚ true ⊚ false

27) Reciprocity, the practice of requiring a supplier to purchase a set amount from the buying

firm, is legal in the United States, but is illegal in almost every country in the world. ⊚ true ⊚ false

28) The EPA’s Environmentally Preferable Purchasing (EPP) Program supports the development

of standards for the manufacture and purchase of goods and services that are environmentally preferable and the use of those standards for the private sector only. ⊚ true ⊚ false

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Chapter 15 29) Payment made to a supplier does not automatically constitute an acceptance of the goods. ⊚ true ⊚ false

30) When an employee who is not a legal agent of the company agrees to buy something from a

salesperson and the item is received and the company pays the invoice, the employee is exercising express authority. ⊚ true ⊚ false

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Chapter 15 Answer Key Test name: Chapter 15 1) A 2) A 3) E 4) B 5) A 6) C 7) A 8) D 9) B 10) E 11) D 12) A 13) A 14) C 15) B 16) TRUE 17) FALSE 18) TRUE 19) TRUE 20) FALSE 21) TRUE 22) TRUE 23) FALSE 24) TRUE 25) TRUE 26) TRUE 27) FALSE 28) FALSE 29) TRUE 30) FALSE

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Chapter 16 Chapter 16: Other Supply Responsibilities 1) The effective, efficient, and profitable recovery and disposal of scrap, surplus, obsolete, and

waste materials and assets generated within the firm is called A) green procurement B) eco-efficient disposal C) corporate social responsibility (CSR) program D) investment recovery E) an environmentally preferable purchasing program

.

2) Coordinating inbound and outbound transportation .

A) has little application in an effective and efficient supply organization B) is done by cross-functional teams in most organizations C) provides the basic elements of a global supply network D) helps to reduce costs and improve utilization of related assets and resources E) is used extensively in the United States but has not migrated to other geographic

regions such as Europe and Asia

3) Production planning .

A) requires coordinating the delivery, storage, and disposal of MRO materials B) cannot involve supply because of fears of undue influence from suppliers C) relies heavily on forecasts from purchasing and supply management D) is a discrete activity with little coordination with other functions E) focuses on short-, medium-, and long-term schedules to control inventory and

production

4) Receiving involves .

A) inspection B) physical handling of goods C) inspection and physical handling of goods D) inspection, physical handling of goods, and processing of information E) inspection, physical handling of goods, and approval of payment to the supplier

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Chapter 16 5) Warehousing and inventory storage .

A) can either be an internal function or outsourced to a third-party logistics firm B) typically reports to the finance department C) is seldom outsourced D) typically has little communication with supply management E) may have direct responsibility for organizational purchasing decisions

6) The bill of lading contains the following information .

A) quantity shipped, origin of the shipment, and material specifications B) quantity shipped and origin of the shipment C) quantity shipped and material specifications D) origin of the shipment E) material specifications

7) Closed-loop supply chains .

A) require reverse logistics capabilities B) are a strategic, cross-functional initiative C) require the cooperation of suppliers D) are a strategic, cross-functional initiative and require the cooperation of suppliers E) are a strategic, cross-functional initiative, require the cooperation of suppliers, and

require reverse logistics capabilities

8) When handling scrap material in the production process, it can be segregated by A) type B) type and color C) type and alloy D) color and alloy E) type, alloy, and color

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Chapter 16 9) Accounts payable .

A) should always be separate from purchasing as a good business practice B) is legally prohibited from reporting to supply by federal regulations C) cannot report to supply because of Generally Accepted Accounting Practices (GAAP)

Rule #462 D) may be part of the supply department to ensure on-time payment to suppliers and to reduce transaction costs E) may legally report to supply, but it may convey the perception of conflict of interest to suppliers

10) Environmental matters can be incorporated into the supplier selection process by A) assessing the impact customers have on the environment B) assessing the environmental impact of purchases on processes and products C) identifying opportunities for recyclable components D) assessing the environmental impact of purchases on processes and products and

identifying opportunities for recyclable components E) assessing the environmental impact of purchases on processes and products, identifying opportunities for recyclable components, and assessing the impact customers have on the environment

11) The most effective means for disposition of assets is A) third-party sellers and brokers B) postings on internal company systems C) auctions D) e-auctions E) Internet postings

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Chapter 16 12) Supply can simultaneously achieve cost reductions and make improvements in environmental

performance by .

A) recovering valuable materials and assets with efficient materials recovery programs B) reducing the use of hazardous materials through more timely and accurate materials tracking and reporting systems C) reducing the obsolescence and waste of maintenance, repair, and operating (MRO) supplies through better materials and inventory management D) decreasing the use and waste of chemicals, solvents, and paints through chemical service partnerships E) recovering valuable materials and assets with efficient materials recovery programs, reducing the use of hazardous materials through more timely and accurate materials tracking and reporting systems, reducing the obsolescence and waste of maintenance, repair, and operating (MRO) supplies through better materials and inventory management, and decreasing the use and waste of chemicals, solvents, and paints through chemical service partnerships

13) The many by-products of the production process, such as fly from cotton spinning; warp ends

from weaving; ferrous and nonferrous metal from boring, drilling, and stamping machines; flash metal from the foundry process; or paper cuttings from the binding process are examples of .

A) scrap B) obsolete C) rejected D) surplus E) waste

14) Efforts to deal with hazardous waste include a focus on all of the following EXCEPT

.

A) highly visible sources of pollution, for example smoke stacks B) increasing the use of hazardous materials in carefully controlled environments C) less visible uncontrolled sites, for example buried waste D) recycling E) substitution of non-hazardous materials for hazardous materials

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Chapter 16 15) The role and importance of investment recovery in an organization is driven in large part by

the

.

A) internal level of knowledge about disposal channels and suppliers B) Chief Executive Officer’s perspective on environmental issues C) salespeople who encourage inclusion of buy-back programs D) projected dollar value of the potential revenue recovery or cost reduction E) external pressure from the general public and social media campaigns

16) The first step in the internal supply chain is receiving. ⊚ true ⊚ false

17) The packing slip is produced by the supplier and provides information such as a description

of the goods and quantity. ⊚ true ⊚ false

18) As more people believe that it makes economic sense to practice environmentally sound

operations, business and government may be able to work together for common goals. ⊚ true ⊚ false

19) The total cost of hazardous waste for a company are limited to only direct clean-up costs and

disposal costs of the materials. ⊚ true ⊚ false

20) The packing slip is the contract between the shipper and carrier. ⊚ true ⊚ false

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Chapter 16 21) An organization’s enterprise resource planning (ERP) system may be used to develop a

national or global database for company personnel at different locations to post and purchase obsolete and surplus materials. ⊚ true ⊚ false

22) Production planning relies heavily on forecasts from the supply department to anticipate

demand for products and services. ⊚ true ⊚ false

23) Logistics activities occur throughout manufacturing companies and are not a major

consideration for firms in the services sector. ⊚ true ⊚ false

24) If material has been declared surplus, the best option is to sell it. ⊚ true ⊚ false

25) Something that has been declared obsolete in one organization may be perfectly acceptable

and useable in another. ⊚ true ⊚ false

26) Examination of activities and plant processes in the collection and handling of scrap can

potentially lead to cost savings through reduced material handling expenses and lower fees. ⊚ true ⊚ false

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Chapter 16 27) Escalator clauses in contracts for scrap disposal are unnecessary because the prices of

primary metals seldom fluctuate. ⊚ true ⊚ false

28) The method of material and equipment disposal that provides the maximum return is to use

elsewhere within the organization on an “as is” basis. ⊚ true ⊚ false

29) Waste is material or supplies that have been changed during the production process and,

through carelessness, faulty production methods, poor handling, or other causes, have been spoiled, broken, or otherwise rendered unfit for further use or reclamation. ⊚ true ⊚ false

30) To ensure maximum return for its investment, the process and procedures for selling scrap

and surplus must cover a broad range of activities including segregation and storage, weighing and measuring, delivery, negotiation, supplier selection, and payment. ⊚ true ⊚ false

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Chapter 16 Answer Key Test name: Chapter 16 1) D 2) D 3) E 4) D 5) A 6) B 7) E 8) C 9) D 10) D 11) A 12) E 13) A 14) B 15) D 16) TRUE 17) TRUE 18) TRUE 19) FALSE 20) FALSE 21) TRUE 22) FALSE 23) FALSE 24) FALSE 25) TRUE 26) TRUE 27) FALSE 28) TRUE 29) TRUE 30) TRUE

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Chapter 17 Chapter 17: Supply Function Evaluation and Trends 1) Trends in supply organization and leadership include .

A) more chief purchasing officers without previous supply experience, greater emphasis

on teams and project-based work, and greater differentiation between strategic and tactical supply roles B) more chief purchasing officers without previous supply experience and greater emphasis on project-based work C) greater emphasis on teams and project-based work and greater differentiation between strategic and tactical supply roles D) more chief purchasing officers without previous supply experience and greater differentiation between strategic and tactical supply roles E) more chief purchasing officers without previous supply experience and greater emphasis on teams and project-based work

2) Studies conducted in supply research include A) customers B) competitors C) customers and competitors D) supply processes E) customers, competitors, and supply processes

.

3) Some North American companies are re-examining their global sourcing strategies, and

favoring “reshoring,” or sourcing at home, because .

A) "Buy America" and "Buy Canada" legislation dictate the move B) wages in China have increased close to the same levels as North America C) lower energy costs in China are greatly offset by rapidly rising Chinese wages D) Western currencies have appreciated against the Chinese yuan E) transportation costs have increased and the Covid-19 global pandemic exposed supply chain bottlenecks

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Chapter 17 4) Supply management’s role in sustainability initiatives includes

.

A) substituting renewable energy for carbon-based energy, accountability for the social practices of their suppliers, including worker safety, payment of living wages, and child labor, eliminating waste anywhere in the supply chain, and setting clear standards for suppliers related to social conditions in their plants and subcontracting facilities B) substituting renewable energy for carbon-based energy and setting clear standards for suppliers related to social conditions in their plants and subcontracting facilities C) accountability for the social practices of their suppliers, including worker safety, payment of living wages, and child labor and substituting renewable energy for carbon-based energy D) setting clear standards for suppliers related to social conditions in their plants and subcontracting facilities and accountability for the social practices of their suppliers, including worker safety, payment of living wages, and child labor E) eliminating waste anywhere in the supply chain

5) When cross-functional teams are used to conduct research, it is best if .

A) no member is stronger than any other, and the leadership role is rotated B) the team has total autonomy to decide objectives and set expectations C) performance evaluation and reward systems foster individual contributions D) each member’s job is rearranged to allocate time and resources for teamwork E) team members are randomly selected from departments

6) The supply function can play a central role in environmental sustainability in the following

area(s)

.

A) measuring suppliers’ environmental sustainability performance B) gathering data and managing suppliers to support compliance with regulations and measuring suppliers’ environmental sustainability performance C) communicating environmental sustainability expectations to suppliers and measuring suppliers’ environmental sustainability performance D) gathering data and managing suppliers to support compliance with regulations, communicating environmental sustainability expectations to suppliers and measuring suppliers’ environmental sustainability performance E) gathering data and managing suppliers to support compliance with regulations and communicating environmental sustainability expectations to suppliers

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Chapter 17 7) An example of an effectiveness-oriented metric of supply management performance

.

A) calculates operating cost as a percentage of total dollar volume of purchases B) measures direct and indirect contributions to final customer satisfaction C) calculates the average dollar cost of a purchase order D) calculates operating cost as a percentage of sales E) measures price reductions from the previous contract

8) The budget that covers all the expenses incurred for the supply function including salaries

and wages; space, equipment, and information technology costs; travel and entertainment, educational, postage, telephone, cell phone, and office supplies expenditures, is called the .

A) capital budget B) cash flow budget C) administrative or operating budget D) materials purchase budget E) organizational budget

9) Purchasing process benchmarking attempts to .

A) analyze a firm's own internal trends B) provide industrywide standards for overall firm performance C) determine what results have been achieved by purchasing and supply activities D) determine how an organization achieves results in purchasing and supply E) provide baseline metrics to compare companies’ supply performance

10) Products that make the most sense to consider for sourcing and manufacturing in developed

regions

.

A) have low labor content and are difficult and expensive to transport B) are low value and inexpensive to manufacture C) are easy to transport and require the use of general-purpose equipment D) are low value, inexpensive to manufacture, and require the use of complex equipment and skilled workers for manufacturing and assembly E) are low value, inexpensive to manufacture, and have low labor content

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Chapter 17 11) The goal of research on purchased materials, products, or services is to .

A) rationalize the supply base by thoroughly reviewing all sources B) reduce price by reviewing past predictions and variances from actual prices C) analyze volume trends over time compared to forecasted availability D) increase competitiveness by redesigning, standardizing, or substituting E) assess performance of the commodity manager to make internal improvements

12) Social sustainability issues in supply management include .

A) worker safety B) hazardous waste disposal C) bribery of local government officials D) hazardous waste disposal and bribery of local government officials E) hazardous waste disposal, bribery of local government officials, and worker safety

13) Circular sourcing aims to .

A) substitute renewable energy for carbon-based energy B) reduce negative environmental impacts across the life cycle of products and services

through the formation of integrated closed-loop supply chains C) increase supply chain transparency D) gather data to ensure compliance with environmental regulations E) hold organizations accountable for the social practices of their suppliers

14) Research on the supply management process focuses on A) increasing efficiency by eliminating unnecessary steps B) conducting cost analysis to identify unnecessary costs C) improving buyer–supplier relationships D) deciding whether to single or multiple source E) developing a strategy to reduce cost or ensure supply

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Chapter 17 15) Measurement challenges for internal validation of supply savings include .

A) inability to convert savings into profit and changes in markets, technologies, and

volumes B) inability to convert savings into profit, changes in markets, technologies, and volumes, and willingness to recognize cumulative savings C) inability to convert savings into profit D) changes in markets, technologies, and volumes E) willingness to recognize cumulative savings

16) Supply management’s contribution may be measured along the following dimensions:

strategic, operational, direct, and indirect. ⊚ true ⊚ false

17) The investigation of the financial health of current and potential suppliers prevents the

development of risk minimization strategies. ⊚ true ⊚ false

18) Value of the product or service is the most widely used method to decide where

organizations direct their supply research efforts. ⊚ true ⊚ false

19) Value engineering is done on purchased items used in the ongoing production process, while

value analysis is done in the design stage where items are being specified. ⊚ true ⊚ false

20) Supply metrics can be grouped into two broad categories: quality and cost. ⊚ true ⊚ false

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Chapter 17 21) Many of the more valuable contributions made by supply and suppliers can be the most

difficult to measure. ⊚ true ⊚ false

22) Supplier performance management systems should be designed to capture and communicate

the failures of suppliers so penalties can be assessed. ⊚ true ⊚ false

23) The typical operations purchase budget has a planning horizon of one year or less. ⊚ true ⊚ false

24) Industry benchmarking allows an individual company to compare itself to its major

competitor. ⊚ true ⊚ false

25) The supply planning process starts with information derived from the annual sales forecast,

production/service delivery forecasts, and general economic forecast. ⊚ true ⊚ false

26) Performance benchmarking measures how an organization achieves results. ⊚ true ⊚ false

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Chapter 17 27) Cost management categories that might be measured include: 1. delivery costs 2. inventory holding costs 3. costs of quality 4. purchase cost savings. ⊚ true ⊚ false

28) Efficiency metrics, which emphasize price, may lead to behavior that drives up total cost of

ownership. ⊚ true ⊚ false

29) In most organizations, current supply performance metrics and evaluation methods are highly

effective at validating supply’s results and getting supply recognition as a major contributor to organizational success. ⊚ true ⊚ false

30) Triple bottom line reporting refers to an organization’s social, environmental, and financial

performance. ⊚ true ⊚ false

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Chapter 17 Answer Key Test name: Chapter 17 1) A 2) D 3) E 4) A 5) D 6) D 7) B 8) C 9) D 10) A 11) D 12) A 13) B 14) C 15) A 16) TRUE 17) FALSE 18) TRUE 19) FALSE 20) FALSE 21) TRUE 22) FALSE 23) TRUE 24) FALSE 25) TRUE 26) FALSE 27) FALSE 28) TRUE 29) FALSE 30) TRUE

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