Test Bank For
Purchasing and Supply Chain Management 8e Robert B. Handfield, Larry C. Giunipero, Robert M.
Monczka, James L.
Patterson
Chapter 1-20
Chapter 1
1. If a firm can’t easily raise the price of its products , maintaining long-term profits requires actively managing costs.
a. True
b. False
2. For most US firms, offshoring is the most reliable source of manufactured components which consistently meet high quality standards.
a. True
b. False
3. Today’s emphasis on supplier quality has focused on preventing defects early in the materials-sourcing process rather than detecting defects at the time of receipt.
a. True
b. False
4. Today’s customers are very resistant to price increases and, in fact, often demand discounts.
a. True
b. False
5. Supply chain software can be grouped into two general categories: planning and execution.
a. True
b. False
6. A firm’s supply chain is only as strong as its least-competitive supplier.
a. True
b. False
7. On average, in the manufacturing sector, more than half of every sales revenue dollar goes back to suppliers.
a. True
b. False
8. Supply chain management rarely requires coordination of activities that extend across organizational boundaries.
a. True
b. False
9. Well-trained, highly-skilled employees are essential for any company’s success.
a. True
b. False
10. During the Quiet Years (1947-Mid-1960s) of purchasing and supply chain management evolution, firms faced stable competition and had access to abundant material. These conditions diminished the overall importance of purchasing.
a. True
b. False
11. Supply management involves activities not found in traditional purchasing.
a. True
b. False
12. Strategic purchasing practices are essential for helping companies maintain their competitive positions in rapidly changing business environments.
a. True
b. False
13. Few of the product features that become part of a firm’s final products originate with suppliers.
a. True
b. False
14. Today’s consumers are used to enjoying variety of product offerings, low prices, and customized services.
a. True
b. False
15. The traditional approach to purchasing and supply management is to build relationships with suppliers and work jointly to reduce costs and improve quality.
a. True
b. False
16. The increase in volatility, uncertainty, complexity, and ambiguity associated with long supply chains has led to an interest in reshoring and nearshoring.
a. True
b. False
17. One of purchasing’s responsibilities is sourcing indirect goods and services required by internal groups.
a. True
b. False
18. According to Michael Porter, a firm’s value chain is composed of primary and support activities that, when configured properly, can lead to competitive advantage.
a. True
b. False
19. The routine ordering and follow-up of basic operational supplies is a strategic responsibility.
a. True
b. False
20. D A distribution manager would be responsible for addressing product damage that occurred in handling materials at the receiving dock.
a. True
b. False
21. Purchasing and supply management have a major impact on product and service quality.
a. True
b. False
22. There are a definitive and prescriptive set of supply chain measures that provide one best way to measure supply chain performance.
a. True
b. False
23. The formal organization chart portrays the entirety of the workings of an organization.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
24. For which of the of the following indices does a rating over 50 indicate economic expansion?
a. Consumer Price Index
b. Producer Price Index
c. Inflation Rate
d. Purchasing Manager’s Index
25. All of the following are key knowledge areas for purchasers EXCEPT.
a. Supplier relationship management
b. Data and analytics
c. Production quality control
d. Total cost analysis
26. Which of the following involves generating the materials release, contacting a supplier directly concerning charges, and monitoring the status of inbound shipments?
a. Order processing
b. Material control
c. Logistics planning
d. Customer service
27. Which of the following functional groups is responsible for managing the downstream movement of materials between locations in the supply chain?
a. Purchasing Managers
b. Inventory managers
c. Distribution managers
d. Purchasing managers
28. Which of the following resources is LEAST likely to be shared between a buyer and supplier?
a. Dedicated capacity
b. Information
c. Technology
d. Skilled labor force
29. All of the following are examples of technology impacting supply chain management over the past two decades EXCEPT
a. social media that allows buyers to gain knowledge of a seller’s personal preferences.
b. cloud based data storage systems providing access to timely data.
c. artificial intelligence (AI) that provides purchasers with trainable digital assistants.
d. simulation software that increases the effectiveness of job safety training.
30. Which of the following activities involves physically getting a product ready for distribution to the customer?
a. Material control
b. Quality control
c. Shipping
d. Scheduling
31. An item provided by suppliers and used directly during production or service delivery is known as _____.
a. a direct material
b. an indirect material
c. an indirect service
d. an internal material
e. a managed inventory
32. Which of the following is the process of taking demand data and developing a supply, production, and logistics network capable of satisfying demand requirements?
a. Quality control
b. Supply planning
c. Material control
d. Customer service
33. Which of the following is NOT a functional activity performed by purchasing practitioners?
a. Identify suppliers
b. Perform supply market research
c. Writing quality specifications
d. Establish supplier contracts
34. Which of the following refers to the formal process of assessing and selecting the structure and formal system of communication, division of labor, coordination, control, authority, and responsibility required to achieve organizational goals and objectives?
a. Supply chain orientation
b. Human resource management
c. Demand planning
d. Organizational design
35. Which of the following is an example of a purchased direct item for a manufacturing firm?
a. Raw materials
b. Executive travel
c. Janitorial supplies
d. Advertising and media
36. Which of the following organizations is, according to the Institute for Supply Management, responsible for the identification, acquisition, access, positioning, and management of resources an organization needs to attain its strategic objective?
a. Supply management
b. Procurement
c. Logistics
d. Distribution
37. Which of the following is NOT a typical process involved in supply chain management?
a. Customer-order fulfillment
b. Supplier evaluation and selection
c. Demand and supply planning
d. Cash flow management
38. Which of the following is an example of a purchased indirect item for a manufacturing firm?
a. Parts and components
b. Employee healthcare contracts
c. Raw materials
d. Sub-assemblies
39. Which of the following states that success requires effectively managing the linked group of firms from first-level suppliers to customers.?
a. Supply chain orientation
b. Value chain orientation
c. Traditional purchasing perspective
d. Extended enterprise concept
40. All of the following information technology (IT) innovations directly support end-to-end supply chains EXCEPT___
a. cloud-based data storage systems
b. mobile devices permitting Zooming for virtual meetings
c. machine learning (ML) automation of routine buying functions
d. statistical process control increasing the product quality and reliability
41. Supply management strives to avoid which types of relationships between buying companies and specialty suppliers?
a. Collaborative
b. Adversarial
c. Integrated
d. Responsive
42. During which period in the evolution of purchasing and supply chain management was the practice of combining related functions such as purchasing, inventory control, receiving, and stores under the authority of one individual in a firm?
a. Period 2 (1900-1939)
b. Period 3 (1940-1946)
c. Period 4 (1947-mid 1960s)
d. Period 5 (mid 1960s – late 1970s)
43. Which of the following activities is part of the purchasing professional’s historical role?
a. Sending requests for competitive bids to suppliers
b. Awarding long-term contracts to world-class suppliers
c. Meeting corporate wide performance measures
d. Facilitating collaboration with
44. Which of the following is a factor driving increased emphasis on supply chain management?
a. Increased domestic sourcing to obtain lower prices
b. The high cost and lack of available information resources among supply chain entities.
c. The elevated level of competition in both domestic and international markets that favors fast, agile, and flexible organizations.
d. Less demanding customer expectations.
45. Which of the following is an example of a demand planning activity?
a. Forecasts of anticipated sales
b. Cash flow JIT inventory
c. Completed and delivered orders
d. Reaction to changing customer expectations
46. According to Michael Porter, which of the following is composed of a firm’s primary and secondary activities that can lead to competitive advantage when configured properly?
a. A supply chain
b. A production process
c. A value chain
d. A marketing channel
47. Which period in the evolution of purchasing and supply chain management saw the development of basic purchasing procedures and ideas?
a. Period 1 (1850-1900)
b. Period 2 (1900-1939)
c. Period 3 (1940-1946)
d. Period 4 (1947-mid 1960s)
48. All of the following are roadblocks between measurement and improved performance EXCEPT _____.
a. relevant performance metrics
b. debate over correct metrics
c. constantly changing metrics
d. retention of old data
49. Which of the following is a feature of the new model of progressive purchasing?
a. Restricting supplier communication to negotiation of contract deliverables.
b. Opting for short-term contracts over long-term contracts whenever possible.
c. Focusing primarily on price optimization for essential purchased products
d. Conducting worldwide Internet searches for the best sources of supply.
50. Which of the following is an event likely to contribute supply management volatility, uncertainty, complexity, or ambiguity (VUCA)?
a. Historically stable prices for goods and services
b. Abundant raw materials
c. Stable political climate
d. Prevalence of counterfeit goods
51. Which of the following technologies seeks to improve forecast accuracy, optimize production scheduling, reduce working capital costs, shorten cycle times, cut transportation costs, and improve customer service?
a. Statistical process control software
b. Cost analysis software
c. Planning software
d. Scheduling software
52. All of the following are the four enablers of purchasing and supply chain management EXCEPT
a. sufficient cash flow and cash reserves
b. capable human resources
c. proper organizational design
d. real-time collaborative technology capabilities
53. Which of the following could be described as a set of three or more organizations linked directly by one or more of the upstream or downstream flows of products, services, finances, and information from a source to a customer?
a. Process sequence
b. Manufacturing system
c. Value chain
d. Supply chain
54. During which period in the evolution of purchasing and supply chain management did the need for purchaser-supplier collaboration emerge as a way of maintaining market viability?
a. Period 4 (1947-mid 1960s)
b. Period 5 (mid 1960s – late 1970s)
c. Period 6 (late 1970s-1999)
d. Period 7 (2000-today)
55. Which of the following activities helps to ensure that customers receive material when and where they require it and represents the key link between the producer and the external customer?
a. Order processing
b. Inbound transportation
c. Customer service
d. Supply planning
56. A United States firm that replaces an Asian supplier with one located in Canada or Mexico is engaging in which of the following?
a. Insourcing
b. Outsourcing
c. Reshoring
d. Nearshoring
e. Offshoring
Indicate whether the statement is true or false.
1. Contract management should be used to trigger proactive sourcing events only after a contract expires.
a. True
b. False
2. Purchasing can positively or negatively affect the long-term growth and performance of both stakeholders and business units.
a. True
b. False
3. Nearly all firms establish blanket purchase orders with their suppliers.
a. True
b. False
4. For routine items, the purchase requisition may contain all the required information for purchasing to move forward.
a. True
b. False
5. Purchasing’s right to evaluate and select suppliers means that sales representatives are not allowed to talk with nonpurchasing personnel.
a. True
b. False
6. Internal customers may not always be able to express exactly what it is they will need at a future point in time, making creation of accurate product requirements forecasting difficult.
a. True
b. False
7. In drafting a purchase order, purchasing must include significant detail regarding policies because a purchase order is a legally binding document.
a. True
b. False
8. The authority to review and challenge specifications is within purchasing’s realm of responsibility for managing demand even though internal stakeholders sometime dispute this right.
a. True
b. False
9. Buyers frequently use material purchase releases to order items covered by blanket purchase orders.
a. True
b. False
10. If a supplier’s components are defective, then purchasing must collaborate with that supplier to finds ways to improve the supplier’s quality.
a. True b. False
11. The buyer should assume that the purchasing cycle ends with the receipt of an ordered item or the selection of a supplier.
a. True
b. False
12. Capital equipment purchasing involves buying assets that are intended for use for durations of less than one year.
a. True
b. False
13. For a standard item with straightforward requirements, the negotiation process is an efficient method for purchasing.
a. True
b. False
14. The objectives of a world-class purchasing organization stop short of going beyond the goals minimizing price and delivery time.
a. True
b. False
15. Monitoring MRO inventory is challenging for most organizations.
a. True
b. False
16. Managing the purchase of semifinished components is not a critical purchasing responsibility because components rarely affect product quality and cost.
a. True
b. False
17. Most suppliers prefer to arrange shipment of goods to a purchaser and include the transportation cost as part of the purchase cost.
a. True
b. False
18. Organizations are constantly looking for people who have the necessary skills to focus on the narrow range of tasks essential to purchasing.
a. True
b. False
19. When purchasing works directly with internal stakeholders to anticipate future requirements, such as during newproduct development, purchasing is acting reactively.
a. True
b. False
20. Material discrepancies are often caused by incorrect quantity shipments.
a. True
b. False
21. Responsibility for concealed damage is usually simple to establish.
a. True
b. False
22. If a requested item is complex or requires an untested or new production process, purchasing should include additional information such as technical drawings, samples, and blueprints with the RFQ to assist the supplier.
a. True
b. False
23. Enterprises are relying on internal sources for information and design activity while increasing their use of external sources for materials and products.
a. True
b. False
24. Buyers use competitive bidding when price is a minor consideration and the required item or service has complex specifications.
a. True
b. False
25. The process that buyers use to select suppliers does not vary widely depending on the required item and the relationship that a buyer has with their suppliers.
a. True
b. False
26. Historically, most organizations have paid close attention to MRO items.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
27. Purchasing organizations that fail to respond to the needs of internal customers raise the risk that those internal customers will attempt to negotiate supplier contracts, an undesirable practice known as _____.
a. maverick buying
b. strategic sourcing
c. internal sourcing
d. outsourcing
28. Which of the following product types have received no processing by the supplier?
a. Product components
b. Raw materials
c. MRO items
d. Capital equipment
29. Which of the following should be included when negotiating a blanket purchase order so that a buyer can terminate the contract in the event of persistently poor quality or delivery problems?
a. An evergreen clause
b. An escape clause
c. A contingency clause
d. A quality assurance stipulation
30. Which of the following is a payment method by which a supplier’s bank account receives an automatic funds transfer from the purchaser’s bank account?
a. RFQ
b. EFT
c. MRO
d. PO
31. Effective supply market intelligence does NOT involve which of the following?
a. updating supply market trends and interpreting their effect on business outcomes.
b. ensuring that the purchasing monthly budget is not exceeded.
c. identifying service technologies to enable company strategies in key areas.
d. developing supply options and contingency plans to reduce risk.
32. Which of the following is NOT a good reason to allow departments other than purchasing to view purchase orders and incoming receipts?
a. Maintain the confidentiality of supplier price and delivery systems.
b. Provide the accounting department with visibility to future accounts payable obligations.
c. Allow requestors to refer to their purchase order number when inquiring about an order’s status.
d. Provide receiving with a record of the order to match against the material’s receipt.
33. Which of the following systems will notify the materials control department or organizational buyer to issue a request to a supplier for inventory replenishment when inventory is depleted to a given level?
a. A reorder point system
b. A traveling purchase requisition system
c. A forecasting system
d. A just-in-time system
34. Which of the following includes anything that does not go directly into an organization’s product?
a. MRO items
b. Production support items
c. Support services
d. Semifinished products and components
35. The purchasing cycle begins with the _____.
a. selection of an appropriate supplier
b. issuance of a purchase order
c. receipt of a supplier’s acknowledgement
d. identification of a need (requirement)
36. Which of the following is NOT one of the characteristics of a mature, well-developed supply strategy?
a. A well-defined process creating strategy and governance by defining, planning, managing, and receiving products and services for a business.
b. Clear alignment with executive vision and internal, user-specific business goals.
c. Established goals and metric for both short- and long-term plans that provide year over year performance improvements.
d. Required use of reliable paper document archiving systems and electronic ordering systems.
37. Which of the following is a situation that occurs when suppliers directly contact end users instead of going through purchasing?
a. Insourcing
b. Outsourcing
c. Target marketing
d. Maverick selling
38. Which of the following is NOT a feature that distinguishes capital equipment from other purchases?
a. Capital equipment purchases do not occur with regular frequency.
b. Capital equipment investment requires large sums of money.
c. For accounting purposes, most capital equipment is not depreciable over the life of the item.
d. Buyers can rarely switch suppliers in the middle of a capital equipment building project because of dissatisfaction.
39. Which of the following is the process of collecting historical data for purchases by commodity for different business lines, except for personnel costs, occupancy, and corporate spend?
a. Demand management
b. Supply analysis
c. Category management
d. Spend analysis
40. Which of the following systems involves physical checking of inventory to verify that system records accurately reflect on-hand inventory?
a. A reorder point system
b. A stock check
c. A just-in-time system
d. A forecasting system
41. Which of the following documents details any shipping or receiving problems detected by the receiving department?
a. A receiving discrepancy report
b. A bill of lading
c. A material packing slip
d. A change notice
42. Which of the following types of suppliers is eligible to receive preference during the supplier selection process because they demonstrated their performance capabilities through previous purchase contracts?
a. Internal supplier
b. New supplier
c. Capable supplier
d. Preferred supplier
43. Which of the following is NOT a required element in a purchase requisition?
a. The quantity and date required
b. The estimated unit cost
c. The operating account to be charged
d. The identification of a supplier by the end user
44. Which of the following is NOT an objective of a world-class purchasing organization?
a. Ensure that hard copies are purchase orders are securely archived.
b. Develop aligned goals with internal stakeholders.
c. Conduct supplier performance management.
d. Establish supply assurance.
45. Which of the following includes materials such as pallets, boxes, and tape, that are required to pack and ship final products?
a. Raw materials
b. Production support items
c. Semifinished products
d. Components
46. Which of the following is NOT an essential input information for effective demand management?
a. An estimate of how much of an item or service will be purchased
b. The required supply base capacity that ensures a stable supply
c. Product and service specification which minimize cost while ensuring required performance
d. A detailed description of how the product or service will be inspected and deployed.
47. Which of the following will give supply chain managers insights into stakeholder requirements, allowing them to compare those requirements to supply base capabilities?
a. Spend analysis
b. Cost management
c. Contract management
d. Category management
48. Which of the following involves defining roles and responsibilities of both parties to a contract and advising when to modify the contract?
a. Contract negotiations
b. Contract management
c. Contract arbitration
d. Contract optimization
49. Which of the following descriptions would be the best choice for standard items for which requirements are well understood?
a. Description by market grade
b. Description by brand
c. Description by performance characteristics
d. Description by specification
50. Which of the following is a responsibility of purchasing in awarding purchasing contracts?
a. Determining the materials and physical dimensions of the purchased product
b. Setting receiving inspection test limits
c. Setting the maximum price that the company will pay
d. Deciding whether to use a negotiation or competitive bidding approach
51. Which of the following do transportation carriers use to record the quantity of goods delivered to a facility?
a. The material packing slip
b. The purchase requisition
c. The bill of lading
d. The bill of materials
52. Which of the following is an open order, effective for one-year, covering repeated purchases of a single item or family of items?
a. An outstanding supplier order
b. A pending order
c. A blanket purchase order
d. A completed purchase order
53. Which of the following could require a supply chain professional to unbundle the price paid for an item and understand the total cost of ownership over the life cycle of a product or service in order to determine if it is competitively priced?
a. Cost management
b. Supplier relationship management
c. Category management
d. Spend management
54. In which type of contract does the price stated in the agreement not change in response to market fluctuations, industry competition, and supply levels?
a. A cost-based contract
b. A preferred-pricing contract
c. A material purchase release
d. A fixed-price contract
55. Why is it important to understand the needs and requirements of user groups when reengineering the procure-to-pay process at an organization?
a. Many user groups have specific issues that prevent them from using the existing system.
b. Most user groups are concerned with obtaining goods and services as quickly as possible.
c. Many user groups would rather pay higher prices in order to get specific component features.
d. Many user groups have product and service needs that change over time.
56. When marketing wants to purchase an advertising campaign, which document should be used to specify the work to be completed, when the work is needed, and what type of service provider is required?
a. An acknowledgement
b. A traveling purchase order
c. A statement of work
d. A sales forecast
57. Which of the following descriptions include characteristics such as materials used, physical dimensions, or requisite manufacturing steps?
a. Description by market grade
b. Description by industry standard
c. Description by specification
d. Description by performance characteristics
58. Which of the following describes the process of using both unit and rate consumption levels to estimate future consumption for an internal customer?
a. Demand management
b. Category management
c. Supply market intelligence
d. Cost management
59. In which type of contract is the supplier reimbursed for all of their actual costs plus an operational margin and overhead amount?
a. A cost-based contract
b. A material purchase release
c. A fixed-price contract
d. A reverse auction
60. Which of the following is NOT a condition under which competitive bidding is effective?
a. When the buyer has a preferred supplier for the item.
b. When the expected purchase volume for the item is high.
c. When the specifications and requirements are clear to the sellers.
d. When adequate time is available for suppliers to evaluate the RFQs.
61. Which of the following descriptions focuses attention on the customer’s desired outcomes rather than on precise product or service configuration?
a. Description by market grade
b. Description by industry standard
c. Description by specification
d. Description by performance characteristics
62. Which of the following is FALSE regarding concealed damage?
a. A user may discover concealed damages after opening a shipping container.
b. Responsibility for concealed damage is often difficult to establish.
c. The carrier may blame the supplier or maintain that the damage occurred after delivery of the material.
d. The bill of lading protects the carrier against charges of concealed damage.
63. Which of the following is NOT one of the conditions under which face-to-face negotiation is effective?
a. When the purchase requires consensus regarding a wide range of performance factors.
b. When the buyer requires early supplier involvement.
c. When the specifications are clear to the seller.
d. When the supplier cannot determine risks and costs.
64. Which of the following documents, provided by the supplier, details the shipment contents as well as a description and quantity of items in the shipment?
a. The material packing slip
b. The purchase requisition
c. The bill of lading
d. The bill of materials
65. Which of the following is NOT a benefit of electronically generating and transmitting purchasing-related documents?
a. A reduced need to ensure high supplier quality levels.
b. An improved communication with suppliers.
c. A reduction in errors.
d. A reduction in the fraction of time that purchasing personnel spend processing purchase orders.
66. The selection, development, and maintenance of suppliers is an essential function of purchasing and is often described as _____.
a. supplier performance management
b. category management
c. supplier performance measurement
d. maverick buying
67. Which of the following is a tactical responsibility of the purchasing process?
a. Supplier relationship management
b. Cost management
c. Records maintenance
d. Demand management
68. Which of the following is the end-to-end process of supplier management throughout the entire sourcing life cycle?
a. P2P
b. CRM
c. Outsourcing
d. SRM
69. Which of the following is an objective of a world-class purchasing organization?
a. Consider only the suppliers who offer the lowest price of goods or services.
b. Select suppliers based on historical needs and requirements.
c. Rely on historical specifications and product requirements as a basis for new supplier selection.
d. Collaborate with internal stakeholder to create criteria for supplier selection.
70. Which if the following is NOT a step in the P2P reengineering process?
a. Secure top management support for the project budget.
b. Find new, alternative suppliers to meet current internal stakeholder needs.
c. Explore existing technological solutions with ERP systems.
d. Monitor, update, and improve the reengineered system.
71. Which of the following descriptions is used when a product or service is proprietary or when there is a perceived advantage to using a particular supplier’s goods or services?
a. Description by market grade
b. Description by specification
c. Description by performance characteristics
d. Description by brand
72. Which of the following is NOT one of the common ways that internal customers should communicate their needs to purchasing?
a. Purchase requisitions
b. Forecasts and customer orders
c. Verbal conversations
d. Routine reordering systems
73. Which of the following is NOT an appropriate performance criterion for use in evaluating suppliers?
a. The ability to develop process and product technology
b. The commitment to quality
c. The management’s capability and commitment
d. The cost performance
74. A production manager attends a conference where they learn about new style of equipment offered by a particular supplier. They are so impressed with the new equipment that they sign an agreement with the supplier’s representative to lease the new equipment for a three-month trial period Which of the following practices is the purchasing manager engaging in?
a. Proactive acquisition
b. Strategic sourcing
c. Tactical purchasing
d. Maverick buying
75. When an internal customer has a sudden, unplanned need for which there is no preexisting supplier identified to provide the required product or service, purchasing should use which of the following approaches?
a. Spot buy
b. Strategic sourcing
c. Sole supplier agreement
d. e-procurement
76. Why is it important to have senior executives acknowledge that purchasing has the responsibility to evaluate and select suppliers?
a. It encourages stakeholders to create streamlined product specifications.
b. It discourages stakeholders from requesting too many services.
c. It allows purchasing to encourage competitive bidding among suppliers.
d. It discourages maverick buying and selling
77. Which of the following purchase categories includes items such as petroleum, coal, lumber, and metals?
a. Semifinished products and components
b. Raw materials
c. MRO items
d. Capital equipment
78. Which of the following helps protect the carrier against wrongful allegations that the carrier damaged, lost, or otherwise tampered with a shipment?
a. The material packing slip
b. The purchase requisition
c. The bill of lading
d. The invoice
79. Which of the following is NOT an objective of supplier performance management?
a. Developing relationships with new suppliers that have the potential for excellent performance.
b. Improving existing suppliers.
c. Developing new suppliers that are not competitive with current suppliers.
d. Ensuring timely and accurate payment of supplier invoices.
80. Which of the following processes is used to determine user requirements, accurately evaluate user needs, and identify suppliers who can meet those requirements?
a. Demand management process
b. Materials budgeting process
c. Forecasting process
d. Purchasing process
c
c
b
Indicate whether the statement is true or false.
1. Once written, policies do not have to be periodically reviewed for clarity and conformance.
a. True
b. False
2. The organization’s policy on communication with suppliers should address all personnel that visit or contact suppliers.
a. True
b. False
3. Routine items available from many different sources are seldom purchased through competitive bidding.
a. True
b. False
4. Although there is a trend toward less reliance on competitive bids, many contracts are still awarded through the competitive bid process.
a. True
b. False
5. The organization’s policy on communication with suppliers should address all personnel that visit or contact suppliers.
a. True
b. False
6. Companies that routinely use or generate hazardous materials are legally required to have a policy that details the requirements and conditions for handing of toxic waste.
a. True
b. False
7. A procedure is ineffective if it includes too many steps or too much detail.
a. True
b. False
8. Organizations do not need to be cautious about liabilities associated with using ideas provided by suppliers interested in doing business with a purchaser.
a. True
b. False
9. Policies are usually documented in writing, but unwritten or informal policies may also exist.
a. True
b. False
10. Although purchasing managers must be familiar with and follow the procedures covering legal contracts, purchasing employees are exempt from this responsibility.
a. True
b. False
11. Policies defining the role of purchasing often serve as a general policy from which more detailed policies evolve.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
12. Minority suppliers face all of the following challenges EXCEPT for which of the following?
a. the lack of access to capital
b. large firm’s efforts to optimize their supply bases
c. bidding preference on government contracts
d. a relatively small size leading to overreliance on large customer firms
13. Which of the following actions is NOT a characteristic of effective policies?
a. Timely and current
b. Action-oriented
c. Unambiguous
d. Detailed and extensive
14. Policies that define the role of purchasing do all of the following EXCEPT for which of the following?
a. detail the authority of purchasing to delegate particular tasks and assignments to other departments
b. describe the areas where purchasing authority does or does not exist
c. outline and describe the limits of purchasing’s overall authority
d. define the reporting mechanism for buyers to report irregular business dealings
15. Which of the following refers to standard operating procedures, together with associated rules and regulation?
a. Standard Practices
b. Rules of Action
c. Policies
d. Procedural Guidelines
16. Examples of irregular business dealings with suppliers include all of the following EXCEPT for which of the following?
a. accepting bribes from suppliers
b. accepting business lunches after contract negotiations have been completed
c. accepting late bids
d. owning a stake in the supplier’s company
17. Which of the following is NOT a component of an environmental management system (EMS) that satisfies ISO 14000 certification requirements?
a. Create an environmental policy.
b. Help design and implement a program aimed at achieving environmental objectives
c. Monitor and measure the effectiveness of corporate environmental programs.
d. Publish data on the corporate environmental program effectiveness.
18. Which of the following is NOT true concerning the purposes of a procedural manual?
a. The manual outlines the broad set of purposes, principles, and rules of action that guide an organization.
b. For experienced personnel, the manual provides clarification and reinforces knowledge about relevant topics.
c. The manual provides consistency and order by documenting the steps and activities required to perform a task.
d. The manual may specify industry best practices that are identified through benchmarking comparisons with leading firms.
19. Which of the following occurs when suppliers are pressured to purchase the buyer’s product as a condition or receiving a purchase contract?
a. Negotiation
b. Reciprocity
c. Competitive bidding
d. Cronyism
20. Which of the following is NOT an example of typical charge-back costs associated with supplier responsibility for defective material shipment?
a. Repackaging for return shipment
b. Return shipping charges
c. Costs associated with lost or delayed production
d. Estimated value of lost revenue
21. Which of the following is NOT a policy defining the conduct of purchasing personnel?
a. Policy on reporting on routine supplier business dealings
b. Policy on former employees representing suppliers
c. Policy on contact with and visits to suppliers
d. Ethics policy
22. All of the following are examples of topics discussed in legal contract procedures EXCEPT for which of the following?
a. essential elements of the contract
b. compliance with contract terms and performance assessments
c. legal definitions
d. analysis of competitive quotations
23. Which of the following is NOT a principle that supports positive buyer-supplier relationships?
a. Requiring that suppliers provide product technical assistance
b. Encouraging suppliers to submit innovative ideas with joint sharing of benefits
c. Providing prompt payment to suppliers
d. Establishing a fair process to award purchase contracts
24. Which of the following is an operating instruction detailing functional duties or tasks?
a. A policy
b. A procedure
c. A work rule
d. A guideline
25. Which of the following statements does NOT describe an advantage of written and implied policies?
a. Policy statements are a means for executive management to communicate its leadership and views.
b. Policies provide a framework for consistent decision-making and action.
c. Policies are easy to communicate throughout a large organization.
d. Policies help ensure that personnel act in a manner consistent with management’s expectations.
26. Which of the following regions or countries has recently experienced an exodus of companies whose business models leverage low-cost labor and materials?
a. Southeast Asia
b. Indonesia
c. Western China
27. Disadvantages of written and implied policies include all of the following EXCEPT:
a. Personnel tend to follow policies only when they feel that managers are watching.
b. Policies do not provide the specific answers needed for many business decisions.
c. Policy development can restrict innovation and flexibility.
d. Policies are often difficult to communicate throughout large organizations.
28. Which of the following is NOT a best practice that should be included in a minority supplier development initiative?
a. Mandate that Tier 1 suppliers have a Tier 2 diversity spending goal and incorporate the terms in contracts.
b. Include minority suppliers in all RFQs, without exception.
c. Give bidding preference only to minority suppliers located nearby the organization’s facilities.
d. Incorporate supplier diversity programs into the corporate procurement organization.
29. Which of the following refers to the set of purposes, principles, and rules of action that guide an organization?
a. Regulation
b. Procedure
c. Guidance
d. Policy
30. A firm attempting to comply with U.S. government environmental regulations should consider their suppliers’ ability to do which of the following?
a. Meet product quality standards.
b. Remain price competitive over time.
c. Maintain sufficient production capacity to meet buyer demand.
d. Properly dispose of hazardous waste.
31. Which of the following questions is not appropriate for inclusion in the minority supplier identification process?
a. Does the supplier satisfy the U.S. government criteria defining a minority business?
b. Is the supplier willing to give us below-market prices?
c. Is the supplier fully qualified?
d. Does the supplier meet our standard performance requirements?
Indicate whether the statement is true or false.
1. Integration does not require that people create a common understanding of the end goal or purpose.
a. True
b. False
2. In forward-thinking enterprises, supply management seldom plays a key role in the development of new products and services.
a. True
b. False
3. Perhaps the greatest benefit of team interaction is that once a team decides, implementing that decision often becomes easier due to group buy-in.
a. True
b. False
4. If team members receive delayed reinforcement, they will exert greater effort than if the reinforcement were given immediately.
a. True
b. False
5. The physical co-location of a supplier engineer at a buying company is becoming part of the normal product development process structure.
a. True
b. False
6. Being an effective team leader means satisfying a demanding set of operating responsibilities while fostering creativity and cohesiveness in the team.
a. True
b. False
7. On cross-functional supplier assessments, performance data should be weighted according to customer performance requirements.
a. True
b. False
8. A shift to a more trusting buyer-supplier relationship typically happens quickly.
a. True
b. False
9. In collaboration, both parties can shape its nature and future direction over time.
a. True b. False
10. Team membership can have negative effects on individual team members.
a. True
b. False
11. Organizations should use teams selectively because of resource limitation.
a. True
b. False
12. A long-term contract does not provide an incentive for a supplier to invest in new plants and equipment.
a. True
b. False
13. Goal setting is a critical cross-functional team requirement.
a. True
b. False
14. Supplier selection for a new part should not occur until the design is complete and ready for production.
a. True
b. False
15. Experience reveals that cross-functional sourcing teams are usually part-time and continuous, making participation difficult for members with other professional duties.
a. True
b. False
16. Some suppliers are not interested in developing closer buyer-supplier relationships.
a. True
b. False
17. Teams can exert pressure to conform to a decision or a position that individual team members do not support. a. True
b. False
18. A primary objective of using teams is to bring together individuals with different perspectives and expertise to perform better on a task compared to individuals or departments acting along.
a. True
b. False
19. The need for confidentiality regarding financial, product, and process information often presents an obstacle to closer supplier relationships.
a. True
b. False
20. External relationship management begins with internal relationship management.
a. True
b. False
21. Perhaps the most important and challenging links exist between supply management and marketing/sales.
a. True
b. False
22. The use of cross-functional sourcing teams guarantees a successful outcome to a project or assignment.
a. True
b. False
23. Many supply management groups are recruiting category manager with very strong technical backgrounds, who are able to collaborate effectively with their engineering counterparts.
a. True
b. False
24. Many companies are encouraging suppliers to provide a permanent on-site representative to help improve the customer order fulfillment process.
a. True
b. False
25. Suppliers of critical nonstandard commodities are involved much later in the product development initiative than those supplying standard commodities.
a. True
b. False
26. Cross-functional sourcing teams that incorporate supplier participation report fewer problems coordinating work activity between the team and key suppliers.
a. True
b. False
27. The effectiveness of the sourcing team leader is one of the weakest predictors of team success.
a. True
b. False
28. According to research, the sharing of technology roadmaps often strongly influence the type of buyer-supplier relationship that resulted in the integration process.
a. True
b. False
29. Suppliers seldom have a major impact on the overall timing and success of a new product.
a. True
b. False
30. Supply managers who have early visibility to product requirements can share critical information with suppliers, thereby preventing delays.
a. True
b. False
31. Supply management usually maintains significant data about individual activity cost that can increase total cost.
a. True
b. False
32. Many firms co-locate supply management personnel at operating locations to improve responsiveness to operation’s needs.
a. True
b. False
33. Successfully using teams does not require extensive planning, resource commitment, or top-management support.
a. True
b. False
34. Interacting as a team requires different skills compared to those required for working as an individual contributor.
a. True
b. False
35. Because operations and supply management are closely related, it is not unusual for supply management to report directly to operations.
a. True
b. False
36. Suppliers are seldom an invaluable source of ideas for product and process improvement.
a. True
b. False
37. Outsourcing products through low-cost country sourcing environments or contract manufacturers is similar to the buyer-seller relationships common between North American companies.
a. True
b. False
38. Cross-functional sourcing teams are an ideal way to promote cross-organizational cooperation.
a. True
b. False
39. Purchasing offices were once filled with people who didn’t dream of advancing to the top rungs of their organization.
a. True
b. False
40. If positive work is never recognized or reinforced through rewards, the positive effort will likely cease.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
41. Which of the following involves professionally managing suppliers and developing close working relationships with different internal groups?
a. Purposeful cooperation
b. Program management
c. Supply integration
d. Relationship management
42. Which of the following is NOT a characteristic that defines a collaborative buyer-supplier relationship?
a. A single or limited number of suppliers for each purchased item
b. A win-win approach to reward sharing
c. An open exchange of information
d. A unilateral dispute resolution by the buyer
43. Which of the following is NOT a benefit of using a cross-functional sourcing team?
a. Reduced time to complete a task
b. Increased innovation
c. Joint ownership of decisions
d. Tendency for groupthink
44. Which of the following is NOT an example of a technology roadmap?
a. Incorporate a new, internationally-recognized accounting standards into the existing accounting system.
b. Project performance specifications for a class of products or processes.
c. Communicate an intention to integrate a new material or component.
d. Develop a product to meet customer requirements that is currently unavailable in the market.
45. Which of the following consists of personnel from different functions and suppliers who are brought together to achieve supply management or supply chain-related tasks?
a. Strategic initiative group
b. External relationship management
c. Cross-functional sourcing team
d. Tactical task force
46. Which of the following is NOT an appropriate use for a cross-functional team?
a. Develop a new product
b. Prepare an RFQ for a routine commodity product
c. Locate a new production facility
d. Develop a commodity or purchase family strategy
47. Which of the following occurs when a team fails to complete its task in the most efficient manner or members are not motivated to employ their resources to create a successful outcome?
a. Groupthink
b. Collaboration
c. Process loss
d. Synergy
48. Which of the following is the process of bringing together different groups, functions, or organizations to work jointly towards a common business purpose?
a. Collaboration
b. Collusion
c. Integration
d. Cooperation
49. Which of the following is NOT an example of how supply management should monitor and anticipate activity in its supply market?
a. Ensuring that cost accounting keeps track of historical prices
b. Forecasting long-term supply and prices for its basic commodities
c. Monitoring technological innovations that impact its primary materials or make substitute materials economically attractive
d. Evaluating not only its existing suppliers but also other potential suppliers
50. Which of the following benefits of the cross-functional team approach includes the ease with which decisions can be implemented due to group buy-in?
a. Joint ownership of decisions
b. Increased innovation
c. Enhanced communication among organizations
d. Reduced time to complete a task
51. Which of the following is NOT a broad category by which organizations reward and recognize teams?
a. Re-assignment to new divisions or locations
b. One-time cash rewards
c. Merit raises awarded during the team member’s annual performance review
d. Non-monetary rewards such as dinners or sports and theater tickets
52. In which of the following design approaches is the supplier given blueprints and told to make the product from those blueprints?
a. Black box design
b. Gray box design
c. Red box design
d. White box design
53. Which of the following is NOT true regarding the importance of establishing sourcing team goals?
a. Teams with established goals often use those goals as a basis for evaluating how well the team is performing.
b. Teams will establish, on average, challenging rather than easy goals.
c. External pressure on a team to set goals usually results in the setting of more challenging goals.
d. Teams establish goals in order to meet leadership expectations.
54. In which of the following design approaches do the supplier’s engineers work cooperatively with the buying company’s engineers to jointly design the product?
a. Black box design
b. Gray box design
c. Red box design
d. White box design
55. Which of the following results in the total group effort being less than the expected sum of the individual parts?
a. Process loss
b. Groupthink
c. Integration
d. Reciprocity
56. Which of the following is a function of the professional’s ability to translate supply market data into compelling insights that solve business problems?
a. Groupthink
b. Reciprocity
c. Process gain
d. Relationship capital
57. Which of the following requires members to use a variety of higher-level skills, provides members regular feedback about performance, and results in an outcome with a significant effect on the organization?
a. A gray box design
b. A statement of work
c. A technology roadmap
d. A meaningful task
58. Which of the following is NOT a common obstacle to closer buyer-seller relationships?
a. Long-term contracts
b. Limited interest by suppliers
c. Legal barriers
d. Resistance to change
59. In which of the following design approaches are suppliers provided with functional specification and asked to complete all technical specifications?
a. Black box design
b. Gray box design
c. Red box design
d. White box design
60. Which of the following is NOT an effective building block for integration?
a. team building
b. relationship management
c. communication
d. self-reliance
61. Which of the following is NOT a potential drawback of using a cross-functional sourcing team?
a. Team process loss
b. Reduced innovation
c. Poor team decisions
d. Groupthink
62. Which of the following refers to the set of performance criteria, products, and processes an organization intends to develop or manufacture?
a. Concurrent engineering
b. Early supplier involvement
c. Process loss
d. Technology roadmap
63. Which of the following is NOT considered to be a relationship management skill?
a. The ability to conduct detailed cost-benefit analysis
b. The ability to listen effectively
c. The ability to communicate
64. Which of the following is the tendency of a rational group or team to arrive at a bad decision when information supporting a more optimal decision is available?
a. Serendipity
b. Collusion
c. Process loss
d. Groupthink
65. Which of the following is defined as the process by which two or more parties adopt a high level of purposeful cooperation to achieve specified goals?
a. Supply base management
b. Collaboration
c. Supply integration
d. Supplier relationship management
66. Which of the following is NOT a means by which management can exert subtle control over a team’s tasks?
a. Authorizing the creation of the sourcing team
b. Selecting the team leader and members
c. Conducting performance reviews and holding teams accountable for performance outcomes
d. Sitting in on brainstorming sessions and idea down-selection
67. Which of the following is NOT an inputs that cross-organizational teams members provide?
a. Information about proprietary information in the absence of an NDA
b. Process knowledge and understanding of how to make it work
c. Product and service knowledge and technology
d. Different perspectives on an issue
68. Which of the following questions is NOT important in considering new or existing suppliers?
a. Is the supplier capable of hitting affordable targets regarding relevant performance criteria?
b. Does the supplier have sufficient marketing funds for promoting its new products?
c. Will the supplier be able to meet product introduction deadlines?
d. Will the supplier be able to increase capacity and production fast enough to meet our market share requirements?
69. Which of the following is NOT a requirement of being an effective team member?
a. An understanding of the team’s task
b. Having the time to commit to the team
c. Having appropriate organizational connections
d. Having the ability to work with others in a group
70. Which of the following is NOT an elements of successful supplier suggestion programs?
a. The savings from the suggestion are often split equally between the supplier and the buying company.
b. The program focuses on total cost improvement, not simply on cutting the supplier’s margins.
c. Successful buying companies provide prompt feedback to the supplier on its ideas and implement good suggestions promptly.
d. The supplier should expect to keep at least 75% of the saving resulting from their suggestion.
71. Which of the following is NOT an example of methods supply management can apply to achieve integration?
a. Cross-functional committees and teams
b. Information systems such as videoconferencing and webmail
c. Co-location of suppliers and customers
d. Restricting steering committee membership to buyers and executives
72. Which of the following helped to transform the role of buyers from industrial bureaucrats to trusted advisors of top executives?
a. Increasing reliance on short lists of familiar suppliers
b. A focus on competitive bidding for supplier selection
c. Technology facilitating rapid data analysis and visibility
d. Decreasing product choices and availability for end users
73. Which of the following benefits of the cross-functional team approach acknowledges that teams with diverse knowledge and skills can quickly identify the cause of problems and propose effective corrective action?
a. Joint ownership of decisions
b. Increased innovation
c. Enhanced communication among organizations
d. Better identification and resolution of problems
c
d
Indicate whether the statement is true or false.
1. Purchasing is becoming more involved with expediting and inventory control.
a. True
b. False
2. The trend today is to move away from a horizontal focus, where work and information are managed across groups and between organizations, toward a vertical focus, where work and information are managed up and down within functional groups.
a. True
b. False
3. If the organization’s strategy is to be responsive to internal customers in various business units, then a more centralized approach should be deployed.
a. True
b. False
4. As the purchasing function becomes more complex, purchasers will not be experts in all categories of spend.
a. True
b. False
5. Expediting adds value to the purchasing process.
a. True
b. False
6. Managing day-to-day supply management operations is substantially the same as managing longer-term responsibilities.
a. True
b. False
7. Progressive organizations recognize that a need for expeditors indicates that suppliers are receiving realistic or stable material release schedules and performing as required.
a. True
b. False
8. Purchasing is becoming more of a tactical function and as opposed to a strategic function.
a. True
b. False
9. If the CPO at corporate headquarters has the authority for the majority of the organization’s purchases, then the organization maintains a decentralized authority structure.
a. True
b. False
10. Spend analysis involves identifying commonly purchased items across an organization’s divisions or business units.
a. True
b. False
11. The mission of a decentralized purchasing structure is to facilitate the consolidation of similar buying requirements and standardize buying processes at the various facilities.
a. True
b. False
12. Purchasing should continually analyze whether a new or existing purchase requirement is sourced internally or externally.
a. True
b. False
13. Supply management involves building and supporting a supply base that relies primarily on an adversarial approach with sellers.
a. True
b. False
14. Effective centralized purchasing should emphasize support, integration, and coordination of different tasks that are common across a business rather than strict control over all the activities within the purchasing process.
a. True
b. False
15. Few of the tasks that qualify as operational support are being streamlined or automated, through the use of epurchasing systems and artificial intelligence (AI).
a. True
b. False
16. Regarding the continuum of complete centralization and complete decentralization of purchasing authority, few organizations lie at these polar extremes, and most organizations lie somewhere in between.
a. True
b. False
17. In organizations where new-product development occurs at the divisional or business unit level, a centralized purchasing structure can support new-product development at earlier stages.
a. True
b. False
18. Short- and long-term purchasing plans are mandatory for items subject to technological, economic, or political change.
a. True
b. False
19. A consortium is a voluntary group where buyers in the same industry join together to leverage their combined spend in markets where they are not dominant buyers.
a. True
b. False
20. Separation of supply management duties into strategic and tactical job assignments implies that tactical responsibilities are more important.
a. True
b. False
21. Decentralized purchasing personnel should gain a greater understanding and appreciation of local operating requirements.
a. True
b. False
22. All observers agree that the use of teams will guarantee greater effectiveness.
a. True
b. False
23. Determining the appropriate location of authority in center-led organizations is accomplished by knowing which activities, processes, and tasks to control centrally and which to assign to operating units.
a. True
b. False
24. When each division or business unit is responsible for developing their own e-purchasing system, it will result in compatible purchasing systems.
a. True
b. False
25. One reason for decentralization is a reduction in duplication effort.
a. True
b. False
26. If purchase requirements differ significantly across business units, a firm should decentralize its purchasing operations.
a. True
b. False
27. The skills required for a strategic focus are the same as those required for an operational focus.
a. True
b. False
28. Center-led organizations have the same authority as purely centralized units.
a. True
b. False
29. The advantage of center-led organizations is their ability to garner savings on common purchases yet allow local purchasing decisions on unique items.
a. True
b. False
30. Transportation is a specialized function within the purchasing organization.
a. True
b. False
31. The supply chain organization of the future will rely on hierarchical and functional boundaries.
a. True
b. False
32. Regional buying groups are most effective where geographic concentration exists within a company.
a. True
b. False
33. The preparation and transfer of material releases to suppliers is part of the operational support process.
a. True
b. False
34. In general, the lower purchasing is in the corporate structure, the greater the role it plays in supporting organizational strategies.
a. True
b. False
35. Separation of supply management duties into strategic and tactical job assignments implies that strategic responsibilities are more important.
a. True
b. False
36. Strategic responsibilities lack the immediacy of tactical duties and are therefore often ignored.
a. True
b. False
37. The ability to respond quickly to user and customer requirements has always been a major justification for centralized purchasing authority.
a. True
b. False
38. The LEAST important factor contributing to purchasing’s position in the organization’s hierarchy is history.
a. True
b. False
39. One objective of value analysis is to enhance value by reducing the cost of an item without sacrificing its quality.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
40. Which of the following is the BEST term to describe the purchase of raw materials, components, finished goods, or services from suppliers, some of whom may be other operating units within the organization?
a. Expediting
b. Negotiating
c. Insourcing
d. Buying
41. Which of the following job tasks involves the systematic monitoring of the supply environment to ensure a continual, economic supply of goods and services?
a. Administration and metrics
b. Operational support and follow-up
c. Sourcing, negotiation, and contract management
d. Market intelligence
42. Which of the following is located at headquarters and staffed by analysts to support operational level activities?
a. A center of excellence
b. A decentralized purchasing structure
c. A corporate purchasing council
d. A Lead division buying group
43. Which of the following is an advantage of decentralized purchasing structures?
a. Enhanced product development support at the business unit level
b. Coordination of purchasing strategies and plans
c. Reduced duplication of purchasing effort
d. Development of specialized expertise
44. Which of the following structures describes a group of buyers who purchase similar items at various facilities and meet periodically at headquarters to discuss common buying strategies?
a. A decentralized purchasing structure
b. A Lead division buying group
c. A corporate purchasing council
d. A center of excellence
45. Which of the following is an advantage of centralized purchasing structures?
a. Speed and responsiveness to local user needs
b. Understanding unique operational requirements
c. New-product development support
d. Reduced duplication of purchasing effort
46. All of the following common organizational mechanisms to enable center-led organizational design EXCEPT.
a. Departmental buying
b. Global sourcing councils
c. Shared services groups
d. Centers of excellence
47. Which of the following is the LEAST likely factor to be considered when implementing an organization’s supply structure?
a. The firm’s overall business strategy
b. The supply structured adopted by competitors
c. Total dollar expenditures
d. Similarity of purchases
48. Which of the job tasks below is responsible for developing the policies and purchasing personnel follow, determining staffing levels, and developing department plans?
a. Administration and metrics
b. Operational support and follow-up
c. Sourcing, negotiation, and contract management
d. Market intelligence
49. Which job task within the purchasing or materials function supports the day-to-day workflow between suppliers and internal customers?
a. Material handling
b. Operational support and follow-up
c. Sourcing, negotiation, and contract management
d. Market intelligence
50. Which of the following is an example of a strategic activity?
a. Managing transactions with suppliers
b. Sourcing items that are unique to the operating unit
c. Managing risk monitoring programs
d. Providing supplier performance feedback
51. Which type of organizational structure combines a centralized approach for purchased items common to several business units and a decentralized approach to unique requirements?
a. A centralized structure
b. A decentralized structure
c. A Center-focused structure
d. A center-led structure
52. Which of the following is useful when a group of operating units buy common items, often because they produce common products?
a. A joint global strategy
b. A decentralized purchasing structure
c. A corporate purchasing council
d. A Lead division buying group
53. Which of the following refers to the assumption that local personnel understand and support the objectives of the business unit and feel personal commitment to a particular operation?
a. Coordination
b. Specialization
c. Collaboration
d. Ownership
54. Which of the following factors will MOST likely contribute to purchasing being placed in a higher position in the organizational hierarchy?
a. A tactical role for P/SM
b. Little input into the corporation’s strategic plans
c. A market-oriented company founder
d. Purchase expenditures are a low percentage of sales
55. Which of the following is a voluntary group where buyers in the same industry join forces to leverage spend on noncritical items?
a. A collaborative
b. A consortium
c. A divisional buying group
d. A global sourcing council
56. All of the following are ways that open information channels on the Internet are widening information availability across the supply chain EXCEPT.
a. Making personal contact with organizational users
b. Posting blogs on industry-specific websites
c. Virtual networking via social media platforms
d. Analyzing user-generated content (UCG)
57. Which of the following is a unique characteristic of a horizontally focused organization?
a. The work is managed up and down within functional groups.
b. The presence of a well-established hierarchy.
c. Rigid boundaries between functional groups.
d. Free exchange of ideas between organizations.
58. Which of the following is most advantageous where geographic concentration exists within a company?
a. Regional buying groups
b. Business unit leaders
c. A corporate purchasing council
59. Which of the following should NOT be included in detailed short- and long-term purchasing plans?
a. Purchasing objectives
b. Proper cost accounting codes
c. Supply market assessment
d. Cost/price analysis
60. Which of the following is the organized study of an item’s function as it relates to value and cost?
a. Purchasing intelligence
b. Functional investigation
c. Value analysis
d. Cost analysis
61. All of the following are benefits provided by organizational teams EXCEPT.
a. Guaranteed success
b. Better decision making
c. A more involved workforce
d. Improved products and services
62. All of the following are reasons why technology will impact the future organizational structures EXCEPT.
a. AI is changing the way employees are selected and trained.
b. Relevant data is available anytime or anywhere on mobile devices.
c. Virtual communication has changed where and how work is performed.
d. Progressive adoption of technology is expanding organizations through increased headcount.
63. Which function monitors the day-to-day management of purchased and work-in-process inventory at each use location?
a. Inventory control
b. Material handling
c. Expediting
d. Warehouse management
64. Which of the following is the process of personally or electronically contacting suppliers to determine the status of past-due or near-past-due shipments?
a. Buying
b. Outsourcing
c. Expediting
d. Negotiating
65. For which of the following structures is the purchasing authority for the majority of purchase expenditures at the business unit, site, or divisional level?
a. A centralized structure
b. A decentralized structure
c. A Center-focused structure
d. A center-led structure
66. Which job task involves identifying company spend and selecting the best suppliers then awarding and managing the
a. Administration and metrics
b. Operational support and follow-up
c. Sourcing, negotiation, and contract management
d. Market intelligence and Analytics
67. All of the following are a features of future P/SM organizations EXCEPT.
a. Flatter hierarchies
b. Social networks
c. Co-location of individuals
d. Supply chain simplicity
68. Which of the following is typically NOT a within the scope of P/SM jobs in most organizations?
a. Demand planning
b. Operational support and follow-up
c. Sourcing, negotiation, and contract management
d. Market intelligence
69. Which of the following is an example of operational activity?
a. Managing relationships with critical suppliers
b. Generating and forward material releases and expediting
c. Developing electronic purchasing systems
d. Managing critical commodities
70. Which of the following is the LEAST likely factor affecting purchasing’s position in the organizational hierarchy?
a. The company’s history
b. The number of purchasing personnel
c. Total spend on goods and services
d. The founder’s philosophy
71. Which of the following refers to the process of assessing and selecting the structure and formal system of communication, division of labor, coordination, control, authority, and responsibility required to achieve organizational goals, including supply management objectives?
a. Cross-functional teaming
b. Organizational design
c. Purchasing authority
d. Supply chain integration
c
Indicate whether the statement is true or false.
1. A supplier catalog allows users to order directly through the Internet using a company procurement card with the delivery made directly to the site the next day.
a. True
b. False
2. Supply-base optimization requires an analysis of the number of suppliers required currently and in the future for each purchased item.
a. True
b. False
3. Objectives drive goals, at high organizational levels and at the functional or department level.
a. True
b. False
4. Longer-term relationships are sought with suppliers that have exceptional performance or unique technological expertise.
a. True
b. False
5. Th problem with secondary data is that they are often outdated and may not provide the specific information the team is seeking.
a. True
b. False
6. An e-RA is an offline, static auction between a buying organization and a group of pre-qualified suppliers who compete against each other to win the business to supply goods or services that have ill-defined specifications for design, quantity, delivery, and related terms and conditions.
a. True
b. False
7. In some cases, a firm may be looking to develop a long-term relationship with a potential supplier, particularly if the supplier is in the “Routine” quadrant of the Strategy Portfolio Matrix and the category of spend is low volume and routine to the company’s business.
a. True
b. False
8. The strategic sourcing process ends when a contract is signed with a supplier.
a. True
b. False
9. Total cost of ownership typically includes costs associated with late delivery, poor quality, or other forms of supplier nonperformance.
a. True
b. False
10. In general, the less important the category, the more critical it is that internal stakeholders will be involved.
a. True
b. False
11. After the buyer-supplier relationship has been established, buyers no longer need to track supplier performance over time.
a. True
b. False
12. When purchasers find that suppliers’ capabilities are not high enough to meet current or future expectations, those suppliers should always be eliminated from the supply base.
a. True
b. False
13. In the final and most advanced stage of supply management strategy development, supply management has assumed a tactical orientation with reporting directly to lower-level management and a simple internal, rather than strong external customer focus.
a. True
b. False
14. Global sourcing can be used to access new markets and gain access to suppliers that are helping global companies
become more competitive.
a. True
b. False
15. Complex logistics and currency fluctuations require measuring all relevant costs before committing to a worldwide source.
a. True
b. False
16. A preferred supplier designation indicates that the selected supplier should receive the business under all possible conditions.
a. True
b. False
17. A longer-term relationship should never include a joint product development relationship with shared development costs and intellectual property.
a. True
b. False
18. In general, the more important the category, the less likely that cross-functional members and user groups will be involved.
a. True
b. False
19. The RFI constitutes a binding agreement by both the supplier and the purchaser.
a. True
b. False
20. As a strategic planning tool, SWOT analysis can provide insight even with limited data.
a. True
b. False
21. Increasing revenues involves either raising prices or increasing volume while keeping prices stable.
a. True
b. False
22. Organizations tend to evolve through four phases as they mature and become more sophisticated in their supply management strategy development.
a. True
b. False
23. SWOT analysis was created to describe the competitive forces in a market economy that help shape an industry.
a. True
b. False
24. Identifying the major suppliers in a market is an important initial step of a supplier analysis, especially for firms doing business globally.
a. True
b. False
25. A category strategy is a decision process used to identify which suppliers can provide products or services, performance measures, and the appropriate level of price, quality, and delivery arrangements that should be negotiated.
a. True
b. False
26. In the initial stages of supply management strategy development, supply management adopts essentially a short-term approach and reacts to complaints from its internal customers when deliveries are late, quality is poor, or costs are too high.
a. True
b. False
27. Senior executives are increasingly aware of the increased risk attributed to the higher probability of product and service flow disruptions sourcing networks.
a. True
b. False
28. One factor that is increasing the risk exposure to supply chain disruption is the decreasing propensity of companies to outsource processes to global suppliers.
a. True
b. False
29. The insourcing/outsourcing decision cannot be applied to virtually every process conducted within the traditional walls of an organization.
a. True
b. False
30. In the moderate development phase of supply management strategy development, supply management councils or lead buyers may be responsible for entire classes of commodities, and company-wide databases by region may be developed to facilitate this coordination.
a. True
b. False
31. Supply base optimization usually refers to increasing the number of suppliers used.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
32. Which of the different supplier evaluation categories assesses leadership’s commitment to continuous process and quality improvement, ability to maintain positive relationships with its workforce, and its willingness to develop a closer working relationship with the buyer?
a. Management capability
b. Process and design capabilities
c. Planning and control systems
d. Financial condition and cost structure
33. Which type of commodity has a high volume of internal consumption, is readily available, is important to the business, and represents a significant proportion of spend?
a. A leverage commodity
b. A portfolio commodity
c. A critical commodity
d. A bottleneck commodity
34. Which of the following is NOT one of the goals for sourcing a routine commodity?
a. Reduce the number of items in this category through substitution.
b. Eliminate small-volume spend.
c. Conduct a detailed negotiation to improve supplier capability.
d. Simplify the procurement process by using electronic tools
35. In supplier analysis, which of the following requires identifying critical performance criteria and identifying relative competitive performance?
a. Benchmarking
b. Value chain analysis
c. Cost analysis
d. Supplier research
36. Which of the following may be used as a decision support tool in which the sourcing team develops a final performance score by assigning a weight to the different categories and develops a numerical score for each supplier?
a. A supplier selection scorecard
b. A reverse auction
c. A portfolio analysis matrix
d. A make-buy analysis
37. Which of the following has the goal of understanding, identifying, and exploiting cost savings opportunities that may have been overlooked by business unit managers, or even by suppliers in bringing the products and services to the appropriate location?
a. Marketing research
b. Make-buy analysis
c. Value chain analysis
d. Cost analysis
38. Which of the following is concerned with both the scope and boundaries of each business and with the basis on which the business unit will achieve and maintain a competitive advantage within an industry?
a. Commodity strategy
b. Category strategy
c. Business unit strategy
d. Supply management strategy
39. In which of the following segments of the supplier segmentation process is the attractiveness of the buyer as a customer significant and important to the supplier despite the historically low volume of business with the buyer?
a. The commodity segment
b. The develop segment
c. The exploit segment
d. The core segment
40. Which of the following provides a clear statement of a project’s goals and objectives and is officially announced shortly after the team’s first few meetings?
a. Project charter
b. Spend analysis
c. Cost analysis
d. Optimization strategy
41. Which of the following is NOT the job of the category manager?
a. Engaging internal stakeholders to fully understand their product and service requirements
b. Scanning the marketplace to understand market trends, cost-drivers, and risks
c. Build a strategy that aligns stakeholder requirements with the realities of the supply market
d. Serving as a liaison between internal stakeholders and suppliers capable of meeting product and service requirements
42. Which of the following is NOT one of the four categories found in a portfolio analysis matrix?
a. Routine
b. Leverage
c. Bottleneck
d. Contingency
43. Which of the following is NOT part of Phase 2, Moderate Development, of supply management strategy development?
a. e-Ras
b. ad-hoc supplier alliances
c. international sourcing
d. global supply chains with external customer focus
44. Which of the following capabilities, assess during a supplier evaluation, include those systems that release, schedule, and control the flow of work in an organization?
a. The logistics system
b. The cost accounting system
c. The traffic management system
d. The planning and control system
45. Which of the following is NOT a component of integrative strategy development?
a. Continuous improvement
b. Performance measurement systems
c. Cross-functional business objectives
d. Centralized control
46. Buying firms use competitive bidding when required items have straightforward specifications and which of the following dominant criterion?
a. Price
b. Delivery
c. Design
d. Specifications
47. Which of the following describes the process of exploring, comparing, and contrasting data from multiple sources before validating it and using it in market intelligence research?
a. Triangulation
b. Analysis
c. Evaluation
d. Assembly
48. Competitive bidding is most effective when all of the following apply EXCEPT:
a. When the buying firm can provide qualified suppliers with clear descriptions of the items or services to be purchased.
b. When volume is high enough to justify the cost and effort.
c. When the firm does not have a preferred supplier.
d. When the item is new or technically complex, with only vague specifications.
49. Which of the following is not one of the forces in Porter’s Five Forces strategy?
a. Buyer bargaining power
b. Switching costs
c. Threat of new entrants
d. Market internal competition
50. Which of the following is NOT one of the steps in the strategic sourcing process?
a. Understand the supply market
b. Classify suppliers and define sourcing approach
c. Develop a scope of work and plan
d. Increase revenues
51. Which type of supplier has demonstrated its performance capabilities through previous purchase contracts and, therefore, receives favorable consideration during the supplier selection process?
a. A commodity supplier
b. A preferred supplier
c. A sole source supplier
d. A marginal supplier
52. Which of the following is required to identify the specific capabilities and financial health of key suppliers that are in the supply base or that may not currently be in the supply base?
a. Price analysis
b. Supplier evaluation scorecard
c. Portfolio analysis
d. Supplier research
53. Which of the following specifies how supply management will support the desired competitive business-level strategy and will compliment other functional strategies?
a. Commodity strategy
b. Category strategy
c. Business unit strategy
d. Supply management strategy
54. Which of the following is NOT a question that should be asked during a spend analysis?
a. What did the business spend on over the past year?
b. Did the business receive the right number of products and services given what it paid for them?
c. What was the on-time delivery performance for each supplier?
d. Which divisions of the business spent their money on products and services that were correctly budgeted for?
55. Which of the following is a factor of the power of buyers in Porter’s Five Forces strategy?
a. Capital markets
b. Diversity of competitors
c. Switching costs
d. Availability of substitutes
56. Which of the following is not an action the team must take in order to create an effective category strategy?
a. Allocate required resources
b. Validate the contributions to company objectives
c. Communicate outcomes through presentations to senior executives
d. Recruit team members from all stakeholder groups
57. Which of the following is a factor of the power of buyers in Porter’s Five Forces strategy?
a. Capital markets
b. Diversity of competitors
c. Price of major inputs
d. Availability of substitutes
58. Which of the following is a factor of the threat of new entrant’s force in Porter’s Five Forces strategy?
a. Capital markets
b. Diversity of competitors
c. Switching costs
d. Availability of substitutes
59. Which type of commodity has unique requirements or niche suppliers and yet is significant to the business?
a. A critical commodity
b. A bottleneck commodity
c. A routine commodity
d. A leverage commodity
60. Face-to-face negotiation is best when all of the following conditions apply EXCEPT:
a. When the item is new or technically complex, which only vague specifications.
b. When the purchase requires agreement about a wide range of performance factors.
c. When the firm does not have a preferred supplier.
d. When the buyer requires the supplier to participate in the development effort.
61. Which of the following is the process of identifying cost considerations beyond unit price, transport, and tooling?
a. Total cost of ownership
b. Price analysis
c. Make-buy analysis
d. Portfolio analysis
62. In which of the following segments of the supplier segmentation process does the buyer do insignificant volume with the supplier and, as a result, the supplier views the buyer as an unimportant customer?
a. The commodity segment
b. The develop segment
c. The nuisance segment
d. The exploit segment
63. Which of the following is NOT part of Phase 1, Basic Beginnings, of supply management strategy development?
a. Quality/cost teams
b. Early sourcing
c. Volume leveraging
d. Supply-base consolidation
64. Which of the following is a solicitation document used by organizations to obtain general information about services?
a. RFP
b. RFI
c. RPQ
d. PO
65. Which of the following is NOT a goal for a strategic category?
a. Develop a competitive advantage.
b. Simplify the procurement process using electronic tools
c. Develop best-in-class suppliers
d. Support and leverage the supplier’s core competencies
66. Which of the following is NOT a Porter’s Five Forces strategy factor of higher levels of competition creating more options for buyers and suppliers?
a. Speed of industry growth
b. Capacity utilization
c. Buyer propensity to substitute
d. Switching costs
67. Which of the following is a tool to structure and segment the supply base for the purpose of classifying suppliers into one of four types?
a. Supplier scorecard
b. Portfolio analysis
c. Price analysis
d. Value chain analysis
68. Which of the following is a simultaneous engineering approach that occurs between buyer and seller?
a. Supplier development
b. Early supplier design involvement
c. Total cost of ownership
d. Supply base optimization
69. Which of the following is the process of determining the appropriate number and mix of suppliers to maintain?
a. Make-buy analysis
b. Price analysis
c. Supply base optimization
d. Portfolio analysis
70. Which of the following is NOT an action companies take to create shareholder value?
a. Lower the prices for goods and services
b. Increase the production volume
c. Reduce the cost of process and waste
d. Reduce the cost of employees (downsize)
71. Which of the following is concerned with both the definition of businesses in which the corporation wishes to participate and is also concerned with the acquisition and allocation of resources to these business units?
a. Business unit strategy
b. Supply management strategy
c. Corporate strategy
d. Functional strategy
72. Which of the following is a factor of the threat of substitute products and services in Porter’s Five Forces strategy?
a. Capital markets
b. Diversity of competitors
c. Switching costs
d. Availability of substitutes
73. Which of the following is NOT a strategy that can increase shareholder value?
a. Raise prices and keep volume constant while keeping costs steady.
b. Keep prices steady and raise volume, while ensuring costs do not increase faster than revenue.
c. Keep prices and volume steady, but lower costs
d. Raise prices and reduce both volume and costs.
74. Which of the following is NOT part of Phase 3, Limited Integration, of supply management strategy development?
a. Total cost of ownership
b. Global sourcing
c. Early supplier involvement
d. Strategic supplier alliances
75. In which of the following segments of the supplier segmentation process do suppliers have a significant portion of the buyer’s spend, but do not view the buyer as an important customer?
a. The commodity segment
b. The develop segment
c. The nuisance segment
d. The exploit segment
76. Which of the following specifies how a group tasked with developing the strategy for the specific category being purchase will achieve goals that support higher level strategies?
a. Commodity strategy
b. Category strategy
c. Business unit strategy
d. Supply management strategy
77. In which of the following segments of the supplier segmentation process does the supplier view the buyer as a key customer because the size of the account is significant to the supplier and the account is also important from a strategic perspective?
a. The commodity segment
b. The develop segment
c. The exploit segment
d. The core segment
78. Which of the following types of data is collected for the purpose of understanding the prevailing market conditions and a potential new supplier’s ability to deliver the product or service effectively?
a. Customer data
b. Internal data
c. Spend analysis data
d. Market research data
79. Which of the following is NOT true in regard to low-cost country sourcing?
a. Low-cost country sourcing can be used to access new markets or to gain access to the same suppliers that are helping global companies to become more competitive.
b. Global sourcing is an opportunity to gain exposure to product and process technology, increase the number of available sources, satisfy countertrade requirements, and establish a presence in foreign markets.
c. Some buyers source globally to introduce competition to domestic suppliers.
d. Firms are typically highly experienced with global business processes and practices, and there are many personnel qualified to develop and negotiate with global suppliers or manage material pipelines.
80. Which of the following is a review of the firm’s entire set of purchases?
a. Cost analysis
b. Price analysis
c. Spend analysis
d. Make-buy analysis
81. Which of the following is a formal request for the suppliers to prepare bids, based on the terms and conditions set by the buyer?
a. RFI
b. RFQ
c. E-RA
d. PO
82. Which of the following is the first step in conducting a spending analysis, from spend dataset?
a. Find the total spend by category.
b. Make a chart of the top ten categories by descending dollar spend.
c. Perform a category sort and use the results to find the number of suppliers by category.
d. Sort the data by category of spending
83. Which of the following is NOT a requirement for an effective supply management strategy?
a. Reducing costs of materials and services
b. Supporting innovation
c. Engaging in low-cost country sourcing
d. Increasing supply chain resilience
84. Which of the following is NOT a way in which supply management contributes to profitability?
a. Keep a single-minded focus on cost savings
b. Develop innovative new material technologies
c. Find improved sustainability solutions to products and services
d. Understand business unit stakeholders’ direct and indirect requirements for success
85. Which of the following is used in regularly scheduled review meetings with suppliers so that deficiencies can be noted, discussed, and acted upon?
a. A supplier scorecard
b. A make-buy analysis
c. A portfolio analysis
d. A cost analysis
86. Which of the following is NOT part of Phase 4, Fully Integrated Supply Chains, of supply management strategy development?
a. Cross-functional sourcing teams
b. Cross-enterprise decision making
c. Quality/cost teams
d. International sourcing
Indicate whether the statement is true or false.
1. Many suppliers lack the sophisticated cost accounting system needed to assign overhead costs to products.
a. True
b. False
2. Local suppliers are less responsive than national supplier to the changing needs of buying firms and must make infrequent and large delivery quantities.
a. True
b. False
3. The degree of effort required for supplier selection is inversely related to the importance of the good or service being purchased.
a. True
b. False
4. A supplier evaluation procedure should be with the same regardless the type of purchasing requirement under evaluation.
a. True
b. False
5. The popularity of JIT and quick replenishment systems facilitate the use of more international suppliers.
a. True
b. False
6. Buying firms usually desire that sellers become dependent on them for business.
a. True
b. False
7. Because some suppliers view cost data as highly proprietary, buyers must develop reverse pricing models to estimate the supplier’s cost structure.
a. True
b. False
8. Purchasing should conduct an in-depth evaluation of potential supply sources for each individual item and service they buy
a. True
b. False
9. Professional purchasers should familiarize themselves with financial ratios because financial ratios can provide quick,
valuable insights into a supplier’s financial health.
a. True
b. False
10. Supplier size becomes a factor when one firm leverages its purchases from a few suppliers.
a. True
b. False
11. Purchasers often perform a preliminary evaluation of potential supplier to reduce the number of suppliers considered for in-depth, formal evaluation.
a. True
b. False
12. A supplier that has been designated as a preferred supplier consistently satisfies the buyer’s standards and responds to unexpected changes.
a. True
b. False
13. Building a diverse supply base often requires an increase in the total number of suppliers.
a. True
b. False
14. Trade shows provide an efficient way to gain exposure to many suppliers.
a. True
b. False
15. Progressive firms are moving in the direction of lengthening their purchase contracts.
a. True
b. False
16. Current or existing suppliers are an excellent source of information regarding potential supply sources.
a. True
b. False
17. In general, buyers have reduced their use the Internet to locate potential sources of supply.
a. True
b. False
18. Historically purchasers have understood the risk/reward tradeoff and managed it effectively to attain lower prices.
a. True
b. False
19. Purchasers should set minimum acceptable performance requirements that suppliers must meet before the can qualify for purchase awards.
a. True
b. False
20. Purchasers should use the same selection criteria when buying an expensive high-technology item or a standard maintenance part.
a. True
b. False
21. Oftentimes selecting a low price supplier, can present greater risk.
a. True
b. False
22. Most purchasing experts agree that there is an optimal way to evaluate and select suppliers.
a. True
b. False
23. The practice of purchasing from competitors limits the amount of information sharing between the two parties.
a. True
b. False
24. Using third-party information is often an effective way to obtain critical information about a potential supplier.
a. True
b. False
25. One argument against rotating buyers frequently between different commodities, goods and services is the potential loss of expertise the buyer has accumulated.
a. True
b. False
26. Progressive purchasing groups focus on anticipating rather than reacting to supplier selection needs.
a. True
b. False
27. Visiting a supplier’s facility often provides the most complete way to ensure accurate assessment of that supplier.
a. True
b. False
28. Carbon footprint reductions are a greater concern for product suppliers, than for service suppliers.
a. True
b. False
29. Purchasers generally prefer suppliers that are growing and profitable.
a. True
b. False
30. Quite often purchasers fail to perform a cursory financial analysis of prospective suppliers.
a. True
b. False
31. Few purchasers expect potential suppliers to have ISO 9000 compliant quality systems.
a. True
b. False
32. The complexity of a required purchase rarely affects the extent to which the buyer evaluates potential supply sources.
a. True
b. False
33. A well-designed supplier evaluation scoring system takes subjective criteria and develops a numerical scale for measurement.
a. True
b. False
34. Only suppliers who satisfy certain entry qualifiers should be considered for further evaluation.
a. True
b. False
35. Suppliers seldom advertise their products and services in trade journals.
a. True
b. False
36. Purchasers should select suppliers, who have the necessary capabilities to do the job, regardless of their size.
a. True
b. False
37. Part of the evaluation process for a long-term supplier-buyer relationship should include the supplier’s willingness to move beyond a transactional relationship.
a. True
b. False
38. The ease and speed of using existing suppliers to fulfill purchase requirement provides the foundation for a long-term sourcing approach.
a. True
b. False
39. Most purchase contracts contain similar legal clauses.
a. True
b. False
40. Progressive supply managers collaborate with their company’s legal team to develop pre-established contract language that can be repurposed during a supplier negotiation.
a. True
b. False
41. Supplier site visits are relatively inexpensive and typically require minimal time and effort on the part of the buyer.
a. True
b. False
42. The products a supplier produces has little impact on its required technology, employee skill level, and capital equipment requirements.
a. True
b. False
43. Databases allow the purchaser to quickly identify potentially qualified suppliers and contain key information on a
supplier’s current products, future plans, and past performance.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
44. Which of the following is the first stage in the supplier evaluation and selection process?
a. Determine the sourcing strategy.
b. Identify the potential suppliers.
c. Identify key sourcing requirements.
d. Recognize the need for supplier selection.
45. Which of the following is NOT an example of one criteria that should be considered when evaluating a supplier’s employee capabilities?
a. Employees commitment to quality and continuous improvement
b. Status of employee morale
c. Disclosure of environmental infractions
d. Level of workforce turnover
46. Which of the following is NOT an example of commonly used environmental criteria?
a. Disclosure of any environmental infractions
b. Attainment of ISO 9000 certification
c. Attainment of ISO 14000 certification
d. Programs to control or reduce the carbon footprint
47. Which type of supplier has had its quality systems extensively audited by the buying firm and is capable of consistently meeting or exceeding the buyer’s quality needs?
a. A certified supplier
b. A preferred supplier
c. A partnered supplier
d. A sole source supplier
48. Which of the following information items is the LEAST likely to be maintained within a supplier information database?
a. Supplier marketing materials
b. List of current products
c. The supplier’s technology roadmaps
d. Past performance of the supplier
49. Which of the following involves sending a preliminary survey to suppliers to ascertain their capabilities?
a. A request for quotation
b. A request for information
c. A purchase order
d. An order release
50. Which of the following BEST describes the process of identifying potential negative events, assessing their likelihood of occurrence, taking steps to preclude the events, and making contingency plans to mitigate the consequence if they do occur?
a. Risk management
b. Environmental scanning
c. Supplier categorization
d. Externality management
51. Which of the following involves identification of the steps, activities, time, and costs for a particular operation?
a. Data analysis
b. Process mapping
c. Problem based optimization
d. Total quality management
52. Which of the following is LEAST important question that should be asked when evaluating a supplier’s management capability?
a. Is there a commitment to TQM and continuous improvement?
b. Does the firm promote a customer-focused philosophy?
c. Are employees willing to contribute to improved operations?
d. Is supply chain management a priority for the organization?
53. Which of the following key financial ratios is calculated by dividing profit after taxes by sales (Profit after taxes/Sales)?
a. The current debt to equity ratio
b. The net profit margin ratio
c. The return on assets ratio
d. The quick ratio
54. Which of the following BEST describes an entity that buys products from an OEM then resells, to buyers?
a. Supplier
b. Preferred supplier
c. Distributor
d. International supplier
55. Which of the following focuses on the continued ability of the supplier’s human, intellectual, and physical capital to meet the buyer’s quality and delivery requirements?
a. Operational risk management
b. Logistical risk management
c. Financial risk management
d. Design risk management
56. What is the term for a program that involves distributors managing their customers’ inventory?
a. Just-in-time inventory
b. Supplier-managed inventory
c. Self-managed inventory
d. Preferred-supplier inventory
57. Which of the following key financial ratios is calculated by dividing the current assets by the current liabilities (Current assets/Current liabilities)?
a. The quick ratio
b. The current ratio
c. The debt-to-equity ratio
d. The fixed asset turnover ratio
58. The following are commonly accepted sources of information regarding supply sources EXCEPT.
a. Trade journals
b. Sales representatives
c. Consumer advertisements
d. Internet searches and social media
59. Which of the following is the last stage in the supplier evaluation and selection process?
a. Determine the sourcing strategy.
b. Limit suppliers in the selection pool.
c. Conduct a detailed review of supplier evaluation criteria.
d. Select supplier and reach agreement.
60. Which of the following is NOT a trend affecting company’s approach to supplier selection?
a. Use competitive bidding as the primary method for awarding contracts.
b. Commit major resources to evaluating supplier’s performance and capabilities.
c. Involve cross-functional teams in supplier evaluation.
d. Use fewer suppliers.
61. Which type of supplier is would MOST likely be selected to provide critical, high-value items to the buying firm?
a. A certified supplier
b. A preferred supplier
c. A partnered supplier
d. A sole source supplier
62. The following are typical entry qualifiers that suppliers must exhibit to proceed to subsequent phases of the selection process EXCEPT.
a. Financial strength
b. Proven manufacturing or service capability
c. Effective marketing strategy
d. Capable and supportive management
63. Which of the following describes a basic competency that suppliers must possess before they can advance to the next phase of the selection process?
a. A core competency
b. A technology roadmap
c. An entry qualifier
d. An Internet website
64. Which type of supplier is able to economically make frequent deliveries and can generally be more responsive to the buying firm’s changing needs?
a. local
b. regional
c. global
d. national
65. Which type of supplier consistently satisfies the performance and service standards defined by the buyer and responds to unexpected changes?
a. A certified supplier
b. A preferred supplier
c. A partnered supplier
d. A sole source supplier
66. Which of the following is a minor departure from an intended level of performance that is easily resolved?
a. A deficiency
b. A performance problem
c. A challenge
d. An unacceptable outcome
67. Which of the following is defined as a discrepancy, nonconformance, or missing requirement that will negatively impact an area of concern in an audit?
a. A deficiency
b. A performance problem
c. A challenge
d. An unacceptable outcome
68. Which of the following is the LEAST likely question to be asked when evaluating a supplier for longer-term relationship potential?
a. Will the supplier engage in joint problem solving and improvement efforts?
b. What is the supplier’s on-time delivery performance?
c. Is the supplier willing to approach the buyer first with innovations?
d. Has the buyer indicated a commitment to a longer-term relationship?
69. Which type of supplier is deemed unable to meet the buying organization’s standards and will not be considered for future business until its problems are corrected?
a. A certified supplier
b. A disqualified supplier
c. A disapproved supplier
d. A partnered supplier
70. Which of the following is defined as the periodic or continual monitoring of suppliers’ fiscal health to ensure their ability to meet the purchaser’s performance requirements?
a. Operational risk management
b. Financial risk management
c. Logistical risk management
d. Quality risk management
71. Which of the following describes the overall objective of the supplier selection process?
a. Identify the lowest-cost provider for the maximum number of required products and services.
b. Minimize the total number of suppliers used by the organization.
c. Maximize the use sole sourcing for critical products and services.
d. Reduce purchase risk and maximize overall value of the selected suppliers.
72. Which of the following is LEAST important dimension in an effective quantitative supplier evaluation survey?
a. The buyer should selectively measure the key variables.
b. The survey process should be as subjective as possible.
c. The survey should be mathematically straightforward.
d. The survey should include performance categories important to the evaluation and selection process.
73. Which of the following the is the group responsible for in-depth management of entire families of purchased goods and services?
a. A commodity team
b. A cost reduction team
c. A subcontract managers group
d. A capital equipment team
74. Which of the following is NOT one of the criteria used to determine whether to buy direct from the OEM or through a distributor?
a. The size of the purchase
b. The OEM’s policies regarding direct sales
c. The storage space available at the purchaser’s facility
d. The distance between the manufacturer and the distributor
75. Which type of sourcing provides the buyer with optimum leverage and power over the supplier?
a. Multiple
b. Sole
c. Single
d. Certified
76. Which of the key financial ratios is calculated by dividing sales by total assets (Sales/Total assets)?
a. The current debt to equity ratio
b. The net profit margin ratio
c. The return on assets ratio
d. The total asset turnover ratio
77. Which of the following is the LEAST likely question to be asked when evaluating a supplier’s production scheduling and control systems?
a. What safeguards are in place to protect the confidentiality of electronic transfers?
b. How does the supplier’s scheduling system support the purchaser’s delivery requirements?
c. What is the supplier’s on-time delivery performance history?
d. What lead time does the supplier’s production scheduling and control system require?
78. All of the following are risks when selecting a supplier in poor financial condition EXCEPT.
a. The supplier will file for bankruptcy protection.
b. The supplier will not have the resources to invest in equipment and/or research projects.
c. The supplier will become financially dependent on the purchaser.
d. The supplier will be willing to share its technical expertise with the buyer.
79. Which of the following is NOT an example of an entry qualifier that a supplier must possess in order to proceed to the next phase of the selection process?
a. A well-established sales and marketing team
b. Financial strength
c. Proven manufacturing or
Adequate facilities
c
c
c
a
b
b
b
b
b
b
Indicate whether the statement is true or false.
1. Delivery activities in a process are considered wasteful.
a. True
b. False
2. Most suppliers are willing to challenge excessive specifications, even if it means losing the bid.
a. True
b. False
3. According to Deming, the best way to deal with defects is to inspect for them and remove defective items from the process.
a. True
b. False
4. According to Genichi Taguchi, deviation from target values always results in some loss of opportunity due to increased scrap, the need for rework, and increased customer dissatisfaction.
a. True
b. False
5. Supplier certification can ensure that nonconforming items are not produced or, if they are produced, do not leave the supplier’s facility.
a. True
b. False
6. When given the proper environment in which to work, most people thrive and strive for excellence in their performance.
a. True
b. False
7. The performance appraisal system in most organizations is not conducive to workmanship excellence as it prioritizes quantity of work over quality of work.
a. True
b. False
8. In the long run, it is far less expensive and more efficient to avoid generating defects than to detect and correct them after the fact.
a. True
b. False
9. ISO 14001 builds on existing government regulations and establishes specific pollutions levels as well as specific test methods.
a. True
b. False
10. Low purchase prices may be important in the short-term, but they often lead to increased costs in the production system over the long run.
a. True
b. False
11. The TQM-focused organization seeks to maximize process variation and product innovation.
a. True
b. False
12. Once a firm optimizes its supply base, it will enjoy quality improvement mainly through developing the capabilities of existing suppliers rather than by switching suppliers.
a. True
b. False
13. The salient point of the Deming philosophy is focus on satisfying the needs of both internal and external customers.
a. True
b. False
14. ISO 14001 certification rarely leads to lowered insurance premiums.
a. True
b. False
15. Working with more suppliers allows a supply manager to concentrate on building trust and effective collaboration that can lead to improved quality in purchased goods and services.
a. True
b. False
16. There is a minimal gap between traditional management and real leadership.
a. True
b. False
17. Within its supply chains, supply management buys current and anticipated supplier capabilities, not just parts and services.
a. True
b. False
18. Buyers should focus only on a supplier’s final output and respect supplier confidentiality regarding supporting inputs, systems, and processes.
a. True
b. False
19. In recent years, the concept of quality means exceeding, rather than simply meeting, customer expectations.
a. True
b. False
20. Companies that commit the necessary resources to certify supplier quality have little incentive to accept ISO 9001 registration as proxy evidence of supplier TQM capability.
a. True
b. False
21. Most product or service specifications that buyers provide to their suppliers are clear, precise, and succinct.
a. True
b. False
22. The most dramatic difference between traditional quality control and TQM is the shift in from process-oriented thinking to product-oriented thinking.
a. True
b. False
23. Deming’s quality philosophy is unpopular with some firms because it does not offer specific, firm-level actions and programs.
a. True
b. False
24. Slogans, signs, and posters are highly effective in improving quality because most quality problems are the result of human behavior.
a. True
b. False
25. One of the primary causes of nonconforming supplier quality is inconsistent buyer-supplier communication that leads to misinterpretation of specifications.
a. True
b. False
26. Suppliers that earn ISO 9001 registration typically demonstrate lower levels of quality than those that are not registered.
a. True
b. False
27. Cost accounting systems frequently aggregate quality costs into overhead accounts where their real impact on finances and operations is masked.
a. True
b. False
28. Compared to historical levels, firms have substantially decreased their reliance on suppliers for raw materials, components, subassemblies, and finished products.
a. True
b. False
29. Supplier certification applies only to a company or organization as a whole, not to specific parts, processes, or sites.
a. True
b. False
30. If suppliers and buyers do not enjoy working with one another, they will have difficulty maintaining the collaborative relationship essential creation and receipt of quality goods and services.
a. True
b. False
31. A process that is stable and in control can be expected to produce outputs that are within the process’ natural tolerance limits.
a. True
b. False
32. Quality is major concern for manufacturing firms, but only a minor concern for service-based firms.
a. True
b. False
33. A grassroots TQM effort that emanates from the lower levels of an organization will fail without active, visible support from top management.
a. True
b. False
34. Inconsistency is the enemy of total quality.
a. True
b. False
35. ISO 9001 follows a product-based approach to quality management that stresses planning, acting, and evaluating results.
a. True
b. False
36. Although ISO 14001 certification has many advantages, it can lead to increased liability for most firms.
a. True
b. False
37. The Cpk value is always larger than the Cp value.
a. True
b. False
38. The cost of quality could be more accurately described as the “cost of poor quality”.
a. True
b. False
39. A comprehensive supplier quality manual is not required to describe the supplier selection and evaluation process.
a. True
b. False
40. An emphasis on finished product rather than on process requires suppliers to verify their process capability to the buyer on an ongoing basis.
a. True
b. False
41. For normally distributed data, 99.7% of all possible process output observation occur with plus-or-minus three standard deviations of the process mean.
a. True
b. False
42. Companies can pick and choose which of Deming’s 14 points they agree with and still achieve significant improvements in quality.
a. True
b. False
43. To be considered capable, a process must produce outputs that fall outside the upper and lower specification limits.
a. True
b. False
44. Designed-in, systematic variation cannot be effectively reduced by labor and must be addressed by management.
a. True
b. False
45. The extensive use of corrective action request encourages suppliers to take the steps necessary to prevent nonconforming defects.
a. True
b. False
46. A supplier manual often delineates the minimum required supplier TQM processes.
a. True
b. False
47. A buyer cannot expect high levels of supplier performance if the buyer imposes frequent changes and expects short lead times.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
48. Which of the following is NOT one of the benefits to the buyer of a supplier achieving ISO 9001 registration?
a. Buying firms do not have to independently develop their own comprehensive supplier certification audits.
b. Other buying firms may develop an interest in doing business with the supplier.
c. The buying firm receives the benefit of a supplier quality certification without having to conduct its own quality certification audits.
d. Third party registration may provide insight into a supplier’s quality system conformance that a buyer might otherwise lack.
49. Which of the following is NOT one of Deming’s 14 points?
a. Institute training.
b. Drive out fear.
c. Optimize the efforts of individuals working alone.
d. Stop making decisions purely based on price.
50. Which of the following describes the relationship between proportion of the final product provided by suppliers and impact on overall product cost and quality?
a. Suppliers who provide a larger proportion of the final product have less of an impact on overall product cost and quality than those who provide a smaller proportion.
b. Suppliers who provide a larger proportion of the final product have a greater impact on overall product cost and quality than those who provide a smaller proportion.
c. Suppliers who provide a smaller proportion of the final product have an insignificant impact on overall product cost and quality compared to those who provide a larger proportion.
d. Suppliers who provide a smaller proportion of the final product have a greater impact on overall product cost and quality than those who provide a larger proportion.
51. Which of the following is NOT an example of a prevention cost?
a. The cost to conduct incoming materials inspection
b. The cost to create quality planning
c. The cost of equipment calibration
The
52. Deming’s 14-point management philosophy is NOT applicable for which of the following:
a. Improving excellence in manufacturing industries
b. Improving customer satisfaction in government and educational organizations
c. Providing a comprehensive quality approach in which all points are mandatory
d. Prescribing specific, firm-level actions and programs
53. Which of the following costs are incurred before the product or service is provided to the customer?
a. prevention costs
b. internal failure costs
c. appraisal costs
d. external failure costs
54. Which of the following is NOT an example of an internal failure cost?
a. The cost of process troubleshooting
b. The cost of equipment calibration
c. The cost to reinspect following defect detection
d. The cost of scrap and process waste
55. Which of the following is one of Deming’s 14 points?
a. Encourage education and self-improvement.
b. Delay actions until later
c. Run the production line by threatenting punishments.
d. Utilize measurement by objective to motivate management.
56. Which of the following is an organized and systematic study that ensures that every element of cost in a part, material, process, or service fulfills its design and operational functions at the lowest possible total cost?
a. CAD/CAM
b. Six Sigma
c. VA/VE
d. Process capability
57. Which of the following is NOT one of the seven wastes identified by the Honda BP process?
a. Overproduction
b. Waste in the work itself
c. Inventory
d. Product advertising and promotion
58. Which of the following is NOT one of the five elements in the Six Sigma performance improvement model?
a. D(efine)
b. M(easure)
c. A(ccess)
d. I(mprove)
59. Which of the following is a program in the formal process of verifying that a supplier’s processes and methods actually produce consistent and conforming quality?
a. Zero defects
b. Process capability
c. Six Sigma
d. Supplier certification
60. Which of the following is defined as the nonconformance in products and services by preventing errors from occurring in the first place?
a. Detection
b. Inspection
c. Prevention
d. Optimization
61. Which of the following is NOT one of the unique features of Deming’s philosophy?
a. Variation is the primary source of quality nonconformance.
b. Although quality is everyone’s responsibility, senior management has the ultimate responsibility for quality improvement.
c. Intrinsic motivation is more powerful than extrinsic motivation.
d. Interacting parts of a system must be treated individually, not as a whole.
62. Which process capability index expresses the relationship between the process’s natural tolerance limits and the product’s specifications using a two-sided approach, regardless of centering?
a. Cpk
b. X-bar
c. Cp
d. LSL
63. Which of the following is NOT one of the eight key principles of total quality management?
a. Define quality in terms of customers and their requirements.
b. Inspect for quality at the end of the production line.
c. Stress objective rather than subjective analysis.
d. Strive for zero defects.
64. Which of the following is one of the most common causes of quality problems originating between the buyer and supplier?
a. An insufficient level of product quality inspection by the supplier.
b. The use of incorrect equipment or processes by the supplier.
c. An unrealistic delivery schedule from the buyer.
d. A vague or arbitrary product or performance specification from the buyer.
65. Which of the following is NOT one of Deming’s 14 points?
a. Create a vision and demonstrate commitment.
b. Utilize fear to motivate workers.
c. Improve constantly and forever.
d. Optimize the efforts of teams.
66. Which of the following includes the direct, out-of-pocket costs measuring quality by checking for possible defects?
a. prevention costs
b. internal failure costs
c. appraisal costs
d. external failure costs
67. Which of the following will NOT be contained in an effective supplier quality manual?
a. Documentation control
b. Approved accounting expenses
c. Metrics and measurement protocols
d. Testing and acceptance procedures
68. Which of the following is NOT a business area in which quality suppliers must satisfy buyer’s expectations?
a. Research and development
b. After-sale service and support
c. Advertising and marketing
d. Conformance to specifications
69. In ISO 9001, which of the following consists of a quality manual, related procedures, and work instructions?
a. Third-party registration
b. A quality management system
c. Supplier certification
d. A process control system
70. Which of the following is the ability of a process to generate outputs that meet engineering specifications and/or customer requirements and refers to “the normal behavior of a process when operating in a state of statistical control”?
a. Process capability
b. Quality at the source
c. Six Sigma
d. Process optimization
71. Which of the following is NOT a positive result of early supplier design involvement?
a. Longer lead-times allowing identification and correction of defects prior to shipping
b. Better quality and product design
c. Better product quality and manufacturability
d. Establishment of better tolerances
72. The amount spent on purchased goods and services by the average North American manufacturing firm represents what percentage of the firm’s cost of goods sold?
a. 10%
b. 25%
c. 55%
d. 80%
73. Which of the following costs are incurred when production processes are designed or modified to avoid the defect occurrence?
a. prevention costs
b. internal failure costs
c. appraisal costs
d. external failure costs
74. Which of the following involves an intense focus on identifying and eliminating common causes of waste?
a. The Honda BP process
b. The ISO 14001 standard
c. The MBNQA criteria
d. The ISO 9001 standard
75. Which of the following is FALSE concerning Deming’s philosophy on numerical quotas and measurement by objective?
a. Workers may game the system to make their individual production and output goals.
b. Numerical-based goals and objectives are often developed arbitrarily.
c. Goals are often short-term in their focus.
d. Output standards tend to support TQM improvements.
76. Which of the following is a potential consequence to the buying firm of a supplier quality lapse?
a. Long-term customer satisfaction
b. Increased market share
c. Decreased costs
d. Negative public relations
77. Which of the following is NOT an example of an appraisal cost?
a. The cost of conducting laboratory testing of prototypes and samples
b. The cost of conducting Production inspection activities
c. The cost of developing a quality management system
d. The cost of conducting supplier quality audits
78. Which concept consists of rework and disposal efforts that increase cost and decrease productivity?
a. Six Sigma
b. Kaizen
c. The hidden factory
d. Continuous improvement
79. Which of the following costs are incurred following production or after the customer takes possession of the product?
a. prevention costs
b. internal failure costs
c. appraisal costs
d. external failure costs
80. Which process capability index requires that the process be closely centered on the nominal specification target value?
a. Cpk
b. X-bar
c. Cp
d. LSL
81. According to Philip Crosby, which of the following is the only true performance standard that defines total quality?
a. Zero defects
b. Six Sigma
c. Optimization
82. Which of the following results in waste because a valuable equipment or labor resource is not producing output?
a. Idle time
b. Inventory
c. Delivery
d. Overproduction
83. Which of the following occurs whenever value is added to a product or service as it moves through transformation processes in the supply chain?
a. Six sigma
b. Process capability
c. Quality at the source
d. Supply base rationalization
84. Which of the following is one of the dimensions used in developing a clear understanding of the buyer’s expectations and requirements?
a. The ability of the buyer to succinctly identify, define, quantify, or specify its technical and sourcing requirements.
b. The supplier’s ability to effectively communicate its requirements.
c. The compatibility of the buyer’s and supplier’s respective corporate culture.
d. The ability of the supplier to succinctly identify, clearly define, quantify, or specify its technical and sourcing requirements.
85. Which of the following is one of the eight key principles of total quality management?
a. Strive for zero defects.
b. Define quality in terms of production requirements.
c. Focus on input rather than process.
d. Stress subjective rather than objective analysis.
86. Which of the following is designed to provide information about process performance under stable operating conditions?
a. A make-buy analysis
b. A process capability study
c. A Six Sigma project
d. A cost analysis
87. According to Armand Fiegenbaum, which of the following is defined as the total composite of product and service characteristics of marketing, engineering, manufacturing, and maintenance through which the product or service in use will meet or exceed the expectations of the customer?
a. Productivity
b. Process capability
c. Supply base optimization
d. Quality
88. Which of the following means that continuous improvement must be built into every single process in the organization?
a. Banzai
b. Kaizen
c. Poka yoke
d. Horenso
89. Which of the following represents the ability to meet or exceed customer expectations in critical performance areas on a consistent basis?
a. Kaizen
b. Supplier quality
c. Strategic sourcing
d. Process capability
90. Which process capability index considers how far the process mean varies from the corresponding specification value?
a. Cpk
b. LSL
c. USL
d. Cp
91. Which of the following is FALSE concerning Deming’s philosophy on fear in the workplace?
a. Employees may be fearful of making a mistake and being reprimanded for it.
b. Fear-free organizations are common because it only takes a short time to develop an organizational culture that promotes change.
c. Middle managers may be fearful of letting go of their traditional power based on command and control.
d. People are creatures of habit and do not like to make changes in their routines.
92. Which series of standards is designed to promote environmental protection and active pollution prevention?
a. MBNQA
b. ISO 9001
c. ISO 14001
d. Six Sigma
93. In a typical supply chain relationship, suppliers do NOT expect the buyer to do which of the following?
a. Minimize product design changes once production begins.
b. Co-locate buying, engineering, and quality staff into the supplier’s facility.
c. Share early access and visibility to new-product requirements.
d. Provide visibility to future purchase volume requirements.
94. Which of the following is NOT an example of an external failure cost?
a. The cost to honor product warranties
b. The cost to replace defective product sold to customers
c. The cost to settle liability lawsuits
d. The cost to conduct quality planning
95. Which of the following is NOT a factor that influences how much attention supply management should commit to managing supplier quality?
a. The physical distance between the supplier and buyer facilities
b. The ability of a supplier to affect a buyer’s total quality
c. The ability of a buying firm to practice world-class quality
d. The buyer’s ability to collect and analyze quality-related data
96. How frequently must ISO 9001 registration be accomplished in order to retain current registration?
a. Annually
b. Every two years
c. Every three years
d. Every five years
97. Which of the following is NOT one of the eight key principles of total quality management?
a. Pursue quality at the source.
b. Emphasize prevention rather than detection of defects.
c. Focus on process rather than output.
d. Stress subjective rather than objective analysis.
98. Which of the following is NOT a benefit of collecting and analyzing supplier performance data?
a. Identification of continuous performance improvement opportunities
b. Feedback that supports corrective action and future development
c. Determination of the effectiveness of improvement initiatives
d. Identification of consistently low-competitive suppliers
99. Which of the following is NOT a benefit of a properly prepared supplier quality manual?
a. A supplier manual effectively communicates needs and requirements of both the buyer and supplier.
b. A supplier manual reduces the probability of misunderstandings between buyer and supplier.
c. A supplier manual provides the buyer with leverage to negotiate lower prices from the supplier.
d. A supplier manual ensures that the supplier understands the buyer’s relevant policies, quality requirements, and vocabulary.
100. Which of the following would NOT be included in a supplier manual’s guidelines regarding relative responsibilities for supplier quality incidents?
a. The party responsible for the cost associated with the incident.
b. The party responsible for addressing the impact of incident’s timing on downstream business activities.
c. The party that must allocate resources to rectify the problems associated with the incident
d. The way in which the incident’s cost will be documented in internal accounting processes
Indicate whether the statement is true or false.
1. Direct buyer involvement in a supplier’s operations is the most challenging part of the supplier development process.
a. True
b. False
2. Sustainability reflects exclusively on the growing role of strategic environmental practices among an organization’s suppliers.
a. True
b. False
3. Supplier performance measurement differs from the process used for initial supplier selection, mainly because supplier performance measurement is a continuous process rather than a one-time event.
a. True
b. False
4. Scenario planning starts with creation of strategies and plans that would permit managers to respond quickly in the event that a particular risk scenario does occur.
a. True
b. False
5. It is generally both quick and easy to pursue supplier development directly with suppliers.
a. True
b. False
6. The full awareness of causes and effects related to supply chain fraud are usually recognized outside the accounting professions.
a. True
b. False
7. Many buyers have now concluded that supply risk decreases if they use a small number of suppliers with whom they develop close, collaborative working relationships.
a. True
b. False
8. The administration cost of maintaining 100 suppliers will be dramatically lower than the cost of maintaining 10 highly qualified suppliers.
a. True
b. False
9. One traditional method of addressing supply base risk is maintaining small inventory quantities.
a. True
b. False
10. Because multiple sourcing often involves the use of different materials and processes, it can add quality variability to the product.
a. True
b. False
11. For supplier development to succeed, the supplier must believe that it is in their own best interests to accept the buyer’s direction and assistance.
a. True
b. False
12. All supplier measurement systems have at least some degree of subjectivity.
a. True
b. False
13. The supplier performance index (SPI) is a reliable indicator that gives a complete and accurate supplier performance assessment.
a. True
b. False
14. Buyers, regardless of their level of experience, are encouraged to engage in currency hedging activities.
a. True
b. False
15. When evaluating supply base risk, one must evaluate every sourcing decision differently.
a. True
b. False
16. The cost-based supplier performance measurement system is the least subjective and most thorough.
a. True
b. False
17. In a noncompetitive situation, a supplier can hold the buyer hostage by arbitrarily raising prices, particularly when switching costs are high.
a. True
b. False
18. Supplier rationalization and optimization should be a one-time activity.
a. True
b. False
19. There is only one commonly used approach to rationalizing the supply base.
a. True
b. False
20. Weighted-point supplier evaluation systems are inflexible because users cannot change assigned performance categories and category weights.
a. True
b. False
21. When using the cost-based supplier evaluation system, the actual cost per nonconformance can be difficult to calculate because traditional cost accounting systems are not generally designed to capture this type of data.
a. True
b. False
22. Short-term purchase contracts that award small business volumes to multiple suppliers reduce overall production costs and incentivize supplier process improvement investment.
a. True
b. False
23. The suppliers retained in a rationalized and optimized supply base are rarely capable of providing additional products and services that add value to the buyer-supplier relationship.
a. True
b. False
24. The buyer and supplier should agree on the equitable distribution of both costs and benefits from a supplier development project.
a. True
b. False
25. A buyer should delay reporting a supplier’s poor performance until the next annual performance review.
a. True
b. False
26. Buyers rarely rely on their suppliers for assistance in reducing the costs of goods or services.
a. True
b. False
27. Supply base rationalization and optimization frequently include the elimination of suppliers who are unwilling to meet current and expected supply management performance objectives.
a. True
b. False
28. All organizations should pursue supplier development.
a. True
b. False
29. The categorical approach to supplier evaluation is appropriate for smaller organizations because it is easy and comparatively inexpensive to implement.
a. True
b. False
30. The decision regarding what to measure and how to weight performance categories is central to all supplier measurement systems designs.
a. True
b. False
31. By selecting a supplier with multiple production facilities, buyers can minimize the supply disruption risk associated with the use of a single supplier.
a. True
b. False
32. Scenario analysis considered forecasting that explores and prepares for a few possible future scenarios that could have significant negative impact on an organization’s costs and operations.
a. True
b. False
33. The probability and level of supply base risk can increase with the retention of multiple suppliers.
a. True
b. False
34. The early phases of supply base rationalization and optimization usually achieve an absolute reduction in the total number of suppliers.
a. True
b. False
35. Risks such as those arising from war and piracy are typically covered by standard insurance policies.
a. True
b. False
36. Buyers cannot move too aggressively when rationalizing the supply base.
a. True
b. False
37. Suppliers are often unwilling to accept outside help from supplier development activities, either because of pride, or because they do not see the value in quality or delivery performance improvement.
a. True
b. False
38. Insurance coverage is rarely required for international shipments.
a. True
b. False
39. A smaller supplier with limited growth capacity might be forced to eliminate some customers to meet a large customer’s increased requirements.
a. True
b. False
40. Maintaining a large supply base adds to acquisition costs without a corresponding increase in value-added because a wide range of supply management activities must be duplicated.
a. True
b. False
41. Supplier performance, which is adequate for today’s needs, will be competitive in tomorrow’s marketplace.
a. True
b. False
42. A single source will have difficulty delivering cost and quality improvement over the life regardless of how well a buyer manages that supplier.
a. True
b. False
43. The main reason for currency hedging is protecting the buyer in the event of a major swing in the value of a future purchase.
a. True
b. False
44. Design changes together with reuse and recycle programs can reduce overall material usage.
a. True
b. False
45. The elimination of marginal suppliers and suppliers of small-volume purchases is usually the last phase of the rationalization process.
a. True
b. False
46. If a supplier’s products and services that routine to the buyer, the supplier is a good candidate for development.
a. True
b. False
47. Supply chain fraud victims are unlikely to publicly disclose their victimization due to potential embarrassment and negative public relations impact.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
48. Which of the following is NOT a material-procurement related activity that can improve an organization’s supply chain sustainability?
a. Replace materials with a high water or energy footprint with a “greener” alternative.
b. Encourage engineering stakeholders to design for reuse and recycle of process waste materials.
c. Find buyers for waste materials and used capital equipment.
d. Secure the lowest possible price for raw materials from offshore suppliers.
49. Which of the following is NOT a possible risk of maintaining fewer suppliers?
a. Supplier dependency
b. Supply disruption
c. Absence of competition
d. Maintaining an all-foreign supply base
50. Which of the following does NOT accurately describe the modern business environment?
a. Firms must continuously improve supplier performance.
b. Firms must regularly assess supplier risks.
c. Firms must continuously invest in their own vertically-integrated production capabilities.
d. Firms must proactively organize resources across a network of supply chain partners.
51. Which of the following requires the systematic evaluation of the performance of individual suppliers and ultimate placement into one of three categories?
a. The “improve or else” approach
b. The competency staircase approach
c. The strategic sourcing approach
d. The triage approach
52. Which of the following allows a buying company to react more quickly when risk events occur by establishing appropriate plans and responses in advance of the actual events?
a. Hedging
b. Multiple sourcing
c. Scenario analysis
d. Use of third-party intermediaries
53. Which of the following is an important part of supplier management?
a. Initial measurement of supplier performance shortly after selection.
b. Evaluation of supplier performance at the conclusion of short-term agreements.
c. Continuous measurement of supplier performance.
d. Continuous modification of supplier quality control.
54. Which of the following is NOT a general category of supply base risk?
a. Political risk
b. Market risk
c. Sourcing risk
d. Hiring risk
55. Which of the following is NOT a buyer-specific barrier to supplier development?
a. The supplier’s management agrees to improvement but fails to implement the proposals.
b. The importance of the purchased item does not justify supplier development.
c. A lack of buyer’s executive support for supplier development.
d. No immediate or observable benefit to the buyer.
56. Which of the following is NOT an advantage of a cost-based supplier evaluation system?
a. It is a flexible system.
b. It utilizes a total cost approach.
c. It allows for objective supplier ranking.
d. It has the greatest potential for long-range improvement.
57. Which of the following is NOT an advantage of a categorical supplier evaluation system?
a. It is easy to implement.
b. It requires minimal data.
c. It offers a total cost approach.
d. It is good for firms with limited resources.
58. Which of the following is the process of identifying how many and which suppliers a buyer will maintain?
a. Supply base optimization
b. Supply base rationalization
c. Strategic sourcing
d. Six Sigma
59. In overcoming the barriers to supplier development, which of the following is NOT one of the approaches typically used?
a. Direct-involvement activities
b. Single sourcing
c. Incentives and rewards
d. Warnings and penalties
60. Which of the following identifies those 20 percent of suppliers receiving the bulk of purchase spend or that minority of suppliers that causes the most quality problems?
a. The twenty/eight rule
b. The competency staircase approach
c. The strategic sourcing approach
d. The triage approach
61. Buyers who optimize and rationalize their supply base should NOT expect to see a reduction in which of the following?
a. The average duration of supplier contracts
b. Excessive delivery times
c. Defective goods
d. Noncompetitive prices for purchased goods and services
62. Which of the following is NOT a typical supplier development activity?
a. Providing incentives to suppliers for improved performance.
b. Promoting competition among suppliers.
c. Raising prices paid for purchased goods and services.
d. Providing necessary capital.
63. Which of the following is NOT a common contingency management tool, deployable at the tactical level to help supply managers identify, analyze, reduce, and monitor supply base risk?
a. Single sourcing
b. Automated visibility and early warning systems
c. Scenario analysis
d. Use of third-party intermediaries
64. Which of the following is NOT an element of market risk in a supply base?
a. The number of buyers competing for the same goods
b. Increasingly shorter product life cycles
c. Regional political risk
d. The threat of emerging, disruptive technologies
65. Which of the following is a normalization factor for the supplier performance index (SPI) that eliminates high-dollar lot bias?
a. Cp
b. MRO
c. Q adjustment factor
d. Cpk
66. Which of the following is NOT a mechanism of a fraud control system?
a. A clear separation of powers
b. A policy of ensuring that purchasing personnel never work alone or remotely
c. A routine system of audits
d. Ongoing, routine computer or artificial intelligence monitoring of routine and specialized transactions.
67. Which of the following supplier evaluation systems seeks to quantify the total cost of doing business with a given supplier because the lowest purchase price does not always provide the lowest total cost for an item or service?
a. Cost-based systems
b. Categorical systems
c. Weighted-point systems
d. Six Sigma systems
68. In a supply base, which of the following consists of factors such as country stability, party and government stability, military actions, and terrorism?
a. Political risk
b. Market risk
c. Sourcing risk
d. Financial risk
69. Which of the following is a disadvantage of a cost-based supplier evaluation system?
a. It is the least reliable type of supplier evaluation system.
b. It is the most complex type of supplier evaluation system and, therefore, has the highest implementation costs.
c. It is the most subjective type of supplier evaluation system.
d. It tends to focus on unit price.
70. The supplier performance index (SPI) equals total purchases plus nonperformance costs divided by which of the following?
a. Total purchases
b. External failure costs
c. Prevention costs
d. Internal failure costs
71. Which of the following is a disadvantage of a weighted-point supplier evaluation system?
a. It is the least reliable type of supplier evaluation systems.
b. It requires the use of a cost accounting system.
c. It has a high cost to implement.
d. It tends to focus on unit price.
72. Which of the following provides all suppliers, including those with substandard performance to date, with a chance to remain in the supply base?
a. The “improve or else” approach
b. The competency staircase approach
c. The strategic sourcing approach
d. The triage approach
73. Which of the following is NOT likely to increase the risk of supply disruption for a buyer company?
a. Labor strikes
b. Cross-sourcing
c. Acts of nature
d. Production problems at upstream suppliers
74. Which of the following is a disadvantage of a categorical supplier evaluation system?
a. It is the least reliable type of supplier evaluation system.
b. It requires the availability of a sophisticated cost accounting system.
c. It tends to focus on unit price.
d. It requires computer resources
75. Which of the following is NOT one of the formal approaches to supply base rationalization?
a. The twenty/eight rule
b. An “improve or else” approach
c. Global sourcing
d. A triage approach
76. Which of the following is NOT an advantage of a weighted-point supplier evaluation system?
a. It allows for supplier ranking.
b. It allows different personnel to contribute.
c. It allows for objective supplier ranking.
d. It utilizes a total cost approach.
77. According to the Institute for Supply Management, which of the following is defined as the ability to meet current needs without hindering the ability to meet the corresponding needs of future generations?
a. Sustainability
b. Social responsibility
c. Standardization
d. Scenario analysis
78. According to the Institute for Supply Management, which of the following is a framework of measurable corporate policies, procedures, and resulting behavior designed to benefit the workplace, individuals, organization, and community?
a. Sustainability
b. Social responsibility
c. Standardization
d. Supplier development
79. Which of the following is NOT a typical qualitative service factor in supplier performance measurement systems?
a. Problem resolution ability
b. Technical ability
c. Process capability
d. Ongoing process reporting
80. Which of the following requires suppliers to successfully navigate a successive series of performance milestones in order to remain in the supply base?
a. The triage approach
b. The competency staircase approach
c. The “improve or else” approach
d. The twenty/eight rule
81. Which of the following is NOT an example of purchasing fraud?
a. Bid rigging
b. Unauthorized substitutions
c. Collusion
d. Falsified pricing
82. Which of the following does NOT improve as a buyer-supplier relationship is optimized?
a. Marketing
b. Cost
c. Quality
d. Delivery
83. Which of the following is NOT a benefit provided by a full-service supplier?
a. Engineering services
b. Testing services
c. Tooling capability
d. Accounting services
84. Which of the following is NOT an action that a company could take to ensure that one of their suppliers was using sustainable business practices?
a. Ensure that the supplier’s facilities operate in compliance with local environmental regulations.
b. Ensure that the supplier’s workplace operations include appropriate worker safety protocols.
c. Ensure that upstream suppliers do not operate with environmentally irresponsible practices.
d. Ensure that downstream suppliers increase efficiency and reduce production costs.
85. Which of the following can be defined as how supply chain members communicate and collaborate utilizing risk management tools to mitigate and minimize risk across the supply chain?
a. SPI
b. TCO
c. SCRM
d. ECCHR
86. If a buyer’s currency is utilized, which of the following bears the currency risk and should add additional contingency costs to its unknown risk?
a. The buyer
b. The third-party intermediary
c. The insurance provider
d. The supplier
87. In which of the following does a buyer select or develop suppliers with multiple or redundant capabilities?
a. Single sourcing
b. Cross-sourcing
c. Global sourcing
d. Strategic sourcing
88. In supplier measurement, the basic logic of the cost-based system is built around the calculation of which of the following?
a. The process capability index
b. The cost accounting system
c. The Q adjustment factor
d. The supplier performance factor
89. Which of the following is an internal situation in which a buyer has an undisclosed financial interest in the supplier or when goods and services are purchased for the buyer’s personal use?
a. Buyer conflict of interest
b. Falsified counts
c. Fictitious invoices
d. Loss in transit
90. Which of the following involves a detailed analysis of the supply base to ensure that only the most capable and highest performing suppliers are kept in the supply base after it is rationalized?
a. Supply base optimization
b. Outsourcing
c. Strategic sourcing
d. Supply base reduction
91. Which of the following is the primary objective of future-oriented supplier management development processes?
a. Progressive reduction in the price paid for goods and services.
b. Progressive shortening of lead and delivery times.
c. Continuous improvement of supplier capabilities.
d. Continuous transfer of development technology from buyer to supplier.
92. Which of the following is NOT a supplier-specific barrier to supplier development?
a. No immediate benefit to supplier development is evident in the buying organization.
b. A lack of commitment by supplier’s management.
c. Poor implementation of improvements.
d. A lack of skilled engineering resources.
93. Which of the following is any action undertaken by a buyer to improve a supplier’s performance or capabilities to meet the buyer’s short- and long-term supply needs?
a. Supply base rationalization
b. Supply base optimization
c. Supplier development
d. The twenty/eight rule
94. Which of the following is NOT one of the elements of financial risk in a supply base?
a. Inventory carrying costs
b. Currency exchange rates
c. Hard vs. soft currencies
d. Legal systems
95. Which of the following is NOT one of the advantages of a rationalized and optimized supply base?
a. Buying from world-class suppliers
b. Use of full-service suppliers
c. Absence of competition
d. Reduction of supply base risk
96. Which of the following is NOT one of the typical uses of supplier measurement data?
a. Supporting supply base rationalization and optimization.
b. Determining a supplier’s future purchase volume based on its past performance.
c. Deciding where to locate supplier facilities.
d. Identifying those suppliers that are not performing at expected levels so that remedial action can be taken.
97. Which of the following is NOT one of the management uses for the data derived from a comprehensive cost-based supplier evaluation system?
a. The system provides the necessary information that allows a buyer to justify buying from a preferred supplier despite a higher unit price.
b. The system allows a buyer to communicate the cost of specific nonperformance events to the originating supplier, helping identify improvement opportunities.
c. The system quantifies non-conformance costs that can result in a chargeback to the offending supplier for unplanned costs.
d. The system allows customized assignment of cost accounting codes depending on how much money is left in the annual budget.
d
a
a
c
a
c
d
c 96. c 97. d
Indicate whether the statement is true or false.
1. Foreign-sourced goods held within an FTZ are subject to state and local inventory taxes.
a. True
b. False
2. U.S. purchasers constrained by low quality domestic suppliers pursue offshore sourcing to achieve improved endproduct quality.
a. True
b. False
3. The increased supply risk associated with offshore sourcing should be assessed prior to contracting.
a. True
b. False
4. Although price differentials often become the primary criterion behind offshore sourcing decisions, supplier ability to meet quality and delivery standards should also be considered.
a. True
b. False
5. In developing countries, legal issues are governed mainly by personal relations and trust.
a. True
b. False
6. A country that imposes tariffs is supporting its own interests, often to the detriment of other nations.
a. True
b. False
7. The 1947 General Agreements on Tariffs and Trade was an acknowledgement of the devastating effects tariffs have on international trade.
a. True
b. False
8. Trade consulates may have trade experts who are eager to do business with American buyers.
a. True
b. False
9. Education and training are methods to overcome barriers to worldwide sourcing because they generate support for the process and overcome fear of change.
a. True
b. False
10. Countries cannot benefit from buy-back or compensation trading if they lack foreign exchange, even if they are rich in natural resources.
a. True
b. False
11. Efforts to overcome worldwide sourcing barriers will fail without support by top organizational management.
a. True
b. False
12. Trade shows are a cumbersome way to gather information on many suppliers at one time.
a. True
b. False
13. Cultural differences can present significant challenges to successful offshoring efforts.
a. True
b. False
14. The United States is currently a world leader for product and process technology.
a. True
b. False
15. Americans must seek to understand other cultures to be successful in global sourcing.
a. True
b. False
16. Buyers should respect the impact of geographic distances on their ability to plan and manage a worldwide supply chain.
a. True
b. False
17. Real-time video conferencing is effective for coordinating global supply management work efforts.
a. True
b. False
18. The cost/price benefits obtained by sourcing in developing countries enables organizations to remain competitive in a global environment.
a. True
b. False
19. Many U.S. political leaders believe the dramatic increase in Chinese outsourcing over the past decade has resulted in the loss of American manufacturing jobs.
a. True
b. False
20. Tariffs are an excellent long-term strategy to achieve equity with major trading partners.
a. True
b. False
21. General Electric was an example of the reshoring boom when it returned some if its appliance manufacturing to Louisville, Kentucky.
a. True
b. False
22. The higher prices resulting from tariffs can present challenges to supply managers.
a. True
b. False
23. In the context of an FTZ, duty exemption means that duties and quota charges will be placed on reexported goods.
a. True
b. False
24. Offshoring involves non-U.S. companies contracting with independent suppliers located within the geographic boundaries of the United States.
a. True
b. False
25. Use of a full-service trading company can lower the total cost for international purchases compared with performing individual purchasing activities separately.
a. True
b. False
26. It is reasonable to assume that offshore companies can satisfy all a buyer’s requirements and expectations.
a. True
b. False
27. Duty deferral allows importers to pay duties and tariffs on imported goods when those goods are withdrawn from the
a. True
b. False
28. An inverted tariff exempts goods reexported from the FTZ from duties or quota charges.
a. True
b. False
29. Worldwide sourcing can provide incentive to domestic suppliers to improve their quality and price competitiveness.
a. True
b. False
30. Comparing only the unit purchase price between a domestic versus an offshore supplier can lead to a poor purchase decision.
a. True
b. False
31. Effective implementation of offshoring, nearshoring, and reshoring strategies must align with and support organizational goals.
a. True
b. False
32. Activities considered to be unethical or illegal in the United States may be accepted business practices in other countries.
a. True
b. False
33. FTZs allow importing companies to delay, decrease, or even eliminate duty payments on foreign-sourced goods that enter the zone site.
a. True
b. False
34. Some companies choose to source from a supplier in a particular country to establish a market presence in that country.
a. True
b. False
35. Buyers are often reluctant to shift business away from domestic producers to offshore suppliers.
a. True
b. False
36. Developing countries have robust safeguards protecting intellectual privacy.
a. True
b. False
37. If natural resources essential to a company’s production process are located exclusively outside the U.S, worldwide sourcing becomes mandatory.
a. True
b. False
38. The number of customs entries made annually should be included when considering the feasibility of maintaining an FTZ.
a. True
b. False
39. Due to its simplicity, barter is one of the most frequently practiced forms of countertrade today.
a. True
b. False
40. The Foreign Corrupt Practices Act, permits so called “grease payments” to facilitate the flow of commerce through foreign ports of export.
a. True
b. False
41. In international purchasing, buyers and sellers are located in different countries.
a. True
b. False
42. Sourcing from companies based in countries with a strong reputation for high production quality has no effect on endproduct quality.
a. True
b. False
43. Effective global sourcing would only require occasional assessment of proper supply base location.
a. True
b. False
44. Counterpurchase requires a company to fulfill its countertrade obligations by purchasing only items unrelated to its primary business of the seller.
a. True
b. False
45. Companies that relocate sourcing to countries geographically close to the United States, such as Canada and Mexico, practicing a supply management strategy known as nearshoring.
a. True
b. False
46. The trade wars and tariffs resulting from nationalistic sentiments have curtailed global trade in goods and commerce.
a. True
b. False
47. Centralizing operations to support global sourcing enables organizations to realize lower costs of ownership and improved performance to external customers.
a. True
b. False
48. Duty rates between items can vary, even if the product types and quality is substantially similar.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
49. In which of the following ways does an FTZ benefit the importing company?
a. Reduces the shipping cost from overseas suppliers.
b. Exempts importers from tariffs.
c. Allows importing companies to eliminate or decrease duty payments on foreign-sourced goods.
d. FTZs eliminate the need for importers to insure good shipped from overseas producers.
50. Which of the following is a way in which global sourcing differs from international purchasing?
a. Global sourcing involves transactions in different currencies.
b. Global sourcing is narrower in scope than international purchasing.
c. Global sourcing is significantly less complex than international purchasing.
d. Global sourcing requires continually assessing the proper supply base location.
51. Which of the following is NOT a key cost that should be evaluated when considering setting up and maintaining an FTZ site?
a. The number of customs entries currently made manually
b. The annual dollar amount of duty drawbacks for the previous year
c. The average shipping distance from manufacturing location to receiving port
d. The weighted average duty rate of imported merchandise
52. Compared to domestic purchasing, buyers conducting international purchasing must contend with which of the following?
a. Stable currencies
b. Short lead times
c. Fewer regulations
d. Customs requirements
53. Which of the following means that no duties or quota charges will be placed on goods that are re-exported from the FTZ?
a. Inverted tariff
b. Duty deferral
c. Duty exemption
d. Streamlined customs procedures
54. Which of the following is a benefit to organizations of worldwide sourcing?
a. Exposure to currency fluctuations
b. Reduced shipping costs
c. Shorter lead times
d. Access to technology
55. Imposition of tariffs is most likely to encourage which of the following supply management strategies for domestic buyers who engaged in offshoring?
a. Farshoring
b. Reshoring
c. Outsourcing
d. Nearshoring
56. Company B operates in a country with a history of excellence producing a product essential to its operations. Recent tariffs and subsidies have dramatically reduced the price of the domestically produced product compared to the one Company B currently purchases from offshore suppliers. Which of the following supply management strategies should Company B consider?
a. Reshoring
b. Nearshoring
c. Offshoring
d. Outsourcing
57. Which of the following requires a selling firm to purchase a specified amount of goods from a country that purchased its products?
a. Remanufacture
b. Barter
c. Counterpurchase
d. Buy-back
58. A global sourcing strategist seeks to position their supply base to achieve which of the following?
a. Maximum market penetration
b. Minimum production and raw materials costs
c. Minimum shipping time, customs costs, and tariffs
d. Maximum effectiveness supporting organizational goals
59. Which of the following is a payment mechanism that can only be changed or canceled by agreement of all parties?
a. An irrevocable letter of credit
b. A buy-back
c. An optional commission
d. A barter trade agreement
60. Which of the following is LEAST likely to be evaluated as part of a total worldwide sourcing cost analysis?
a. Domestic administrative expenses
b. Unit price
c. Inventory carrying costs
d. Transportation costs
61. Which of the following is a motivation for the imposition of tariffs by country A on country B?
a. Country B industries are establishing a seller presence in Country A’s market.
b. Country A is the only source of raw materials critical to Country B’s industries.
c. Key industries in country A need to source technology from country B’s industries.
d. Country B forbids country A’s industries from establishing a seller presence in country B.
62. Which of the following statements regarding countertrade is FALSE?
a. Countertrade is frequently used to offset the effects of currency fluctuations.
b. Countertrade may include items that are available from many sources or are not perceived as high quality or technologically superior compared to other available products.
c. Companies can expect countertrade demands from a country when that country’s goods have a low or nondifferentiated perception in the world marketplace.
d. Items involving large dollar amounts, such as military contracts, are prime candidates for countertrade.
63. Which of the following is a potential disadvantage of having an international purchasing office?
a. Operational support from development through contract management
b. Import and export facilitation
c. Resolution of delivery performance problems
d. Cost of additional personnel and facilities
64. Which of the following is LEAST likely to create cost differentials between countries?
a. Government subsidies
b. Lower labor rates
c. International shipping rates
d. Fixed currency exchange rates
65. Which of the following subdivisions of an FTZ is typically housed in a port or an industrial part that is available to multiple companies?
a. A general-purpose zone
b. A subzone
c. A special-purpose zone
d. A product transit zone
66. Which of the following agreements requires the seller to purchase some agreed-upon percentage of goods from a country over a specified period but allows a company to fulfill its contract requirement with any company or industry in the country it is selling products?
a. Offset
b. Barter
c. Counterpurchase
d. Buy-back
67. Which of the following is NOT a strategy that US company finance departments can use to manage international currency requirements?
a. Require that all payments be made in U.S. dollars.
b. Identify the currency a firm should use for payment based on projections of currency fluctuations.
c. Provide advice about hedging and currency forecasts.
d. Act as a clearinghouse for offshore currencies to make payment for offshore purchases.
68. Which of the following is NOT a strategy used in effective global strategy?
a. Intra-shoring
b. Offshoring
c. Reshoring
d. Nearshoring
69. Which of the following is NOT an element of a country’s culture?
a. Religion
b. Social institutions
c. Infrastructure
d. Language
70. Which of the following is a broad term that refers to all international and domestic trade where buyer and seller have a partial exchange of goods for goods?
a. Countertrade
b. Incoterms
c. Hedging
d. Options
71. Which of the following is a challenge that tariffs pose to supply managers?
a. Longer lead-times for globally-sourced manufactured products
b. Lower prices for domestically produced goods
c. Higher prices for globally-sourced products
d. Reduced access to domestic technology
72. Which of the following is legislation passed by the U.S. Congress in 1977 to prevent companies from making questionable or illegal payments to foreign government officials, politicians, and political parties?
a. The Foreign Corrupt Practices Act
b. The Sherman Antitrust Act
c. The Unfair Labor Practices Act
d. The Clayton Act
73. Which of the following involves contracting with an independent supplier located outside U.S. geographic boundaries for goods and services?
a. Reshoring
b. Nearshoring
c. Offshoring
d. Outsourcing
74. Which of the following is NOT a barrier to worldwide sourcing?
a. Decreased supply risk
b. Longer lead times
c. Lack of skills
d. Currency fluctuations
75. Which of the following is NOT a reason why a political leader would initiate a tariff against another country?
a. The country insists on unfair trade practices.
b. The country insists on currency practices which unfairly advantage their industries.
c. The country has instituted tariffs against the political leader’s own country.
d. The country has the only supply of a critical natural resource.
76. Which of the following is an internalized, shared belief that affects the way people think?
a. Behavior
b. Culture
c. Values
d. Ethics
77. Which of the following occurs when a selling company agrees to accept goods unrelated to the transaction from the buying country as partial payment for the transaction?
a. Switch trading
b. A buy-back
c. An offset
d. Barter
78. Company A utilizes a raw material not available domestically. Natural disasters and high fuel costs have decreased the reliability of acquiring material from distant suppliers. Which of the following supply management strategies could Company A adopt to acquire the raw material?
a. Reshoring
b. Nearshoring
c. Offshoring
d. Outsourcing
79. Which of the following involves contracting with a supplier outside the organization to provide products or services formerly performed inside the organization?
a. Reshoring
b. Outsourcing
c. Offshoring
d. Nearshoring
80. Which of the following is NOT a reason why organizations source worldwide?
a. To obtain access to the only source available
b. To increase profitability by adopting the buying patterns of competitors
c. To implement socially responsible business practices
d. To establish a market presence in another country’s market
81. Which of the following is issued by the purchaser’s bank in conjunction with an affiliate bank in the seller’s country to assure the seller that the funds necessary to pay for the transaction are available?
a. A letter of credit
b. A hedging contract
c. A tariff
d. A bill of lading
82. Which of the following describe the responsibilities of the buyer and seller in international transportation arrangements?
a. Incoterms
b. Freight Duties
c. Geneva Convention
d. Transportation Tariffs
83. Which of the following is an element of total cost for worldwide sourcing?
a. Product advertising
b. Domestic taxes
c. Corporate sales expenses
d. Customs broker fees
84. Which of the following BEST describes making commercial purchase transactions conducted between a buyer and a seller located in different countries?
a. Global sourcing
b. Nearshoring
c. Offshoring
d. International purchasing
85. Which of the following describes the practice of relocating sourcing to countries geographically closer to the United States?
a. Reshoring
b. Nearshoring
c. Offshoring
d. Outsourcing
86. Which of the following is true regarding the effect of tariffs on individual industries?
a. Tariffs increase consumer prices but have negligible impact on businesses and industries.
b. Tariffs tend to benefit most industries.
c. Tariffs may help one industry but harm another.
d. Tariffs rarely benefit any industry.
87. All of the following are advice offered by Dick Locke regarding language and communication EXCEPT.
a. If a supplier is using English as a second language, the buyer should be responsible for preventing communication problems.
b. U.S. based companies should always pay in U.S. dollars when dealing with worldwide suppliers.
c. An interpreter should be available to assist with all but the most informal meetings.
d. Parties should document, in writing, the conclusions and decisions made in a meeting before adjourning.
88. Which of the following is a potential negative effect of tariffs for buyers and end consumers?
a. Shorter lead times for goods
b. Increased prices for goods
c. Decreased automation investment by offshore goods producers
d. An increase in domestic jobs
89. When both parties make payment at an agreed rate within a range or band, they are using a______?
a. hedging agreement
b. payment clause
c. currency adjustment clause
d. speculation agreement
90. Which of the following would a political leader intend to accomplish by imposing a 25% tariff on an imported manufactured product?
a. Decreasing the price buyers and consumers pay for the item
b. Decreasing the domestic demand for the product
c. Encouraging lower prices from offshore manufacturers
d. Incentivizing domestic producers to increase capacity
91. All of the following are common methods for overcoming barriers to worldwide sourcing EXCEPT.
a. Selecting offshore suppliers that have U.S.-based support personnel.
b. Using third-party or external agents to facilitate worldwide sourcing.
c. Publicizing success stories showcasing worldwide purchasing benefit.
d. Ensure that low-level, “grassroots” employees support worldwide sourcing.
92. Which of the following is a process that involves the exchange of goods for goods?
a. Offset
b. Barter
c. Counterpurchase
d. Buy-back
93. Countries that have ratified the United Nations Convention on Contracts for the International Sale of Goods (CISG) are referred to as which of the following?
a. Contracting states
b. Compliant states
c. Signatory countries
d. Participating countries
94. Which of the following is NOT a reason why a country imposes countertrade demands?
a. Some countries lack the hard currency required to purchase imported goods.
b. Countertrade provides a means of selling products in markets to which a company may have otherwise lacked access.
c. Developing nations often require Western multinationals to accept goods as partial payment for sales within their countries.
d. The country may need assistance to produce its goods and services.
95. Which of the following FTZ subdivisions is approved for a specific use or company?
a. A general-purpose zone
b. A subzone
c. A special-purpose zone
d. A product transit zone
96. Which of the following involves proactively integrating and coordinating materials, processes, designs, technologies, and suppliers across worldwide purchasing, engineering, and operating locations?
a. Global sourcing
b. International Nearshoring
c. Global Offshoring
d. International purchasing
97. Which of the following is LEAST likely activity undertaken by an international purchasing office (IPO)?
a. Conduct marketing-related activities.
b. Manage countertrade requirements.
c. Solicit quotes and proposals from global suppliers.
d. Negotiate supply contracts with global suppliers.
98. Trade wars and tariffs encourage which of the following supply management strategies?
a. Reshoring
b. Nearshoring
c. Offshoring
d. Outsourcing
99. Under which of the following incoterm does the seller prepare the goods at its location and place them at a named place (factory or warehouse) for pickup?
a. Ex Works
b. Delivered duty paid
c. Carriage Paid to
d. Delivered at Place
100. A U.S. firm moves sourcing of aluminum fasteners for their North American facilities from China to a supplier in Mexico. This is an example of which of the following supply management strategies?
a. Reshoring
b. Nearshoring
c. Offshoring
d. Outsourcing
101. Which of the following represents the sum of the understandings that govern human interaction in a society?
a. Values
b. Beliefs
c. Culture
d. Language
102. Which of the following is NOT an advantage of using an FTZ in supply management?
a. Improved product quality
b. Streamlined customs procedures
c. Duty exemption
d. Reduction in taxes
103. A domestic raw material essential to Acme, Inc’s operations has become prohibitively expensive. Which of the following supply management strategies should the company consider?
a. Reshoring
b. Nearshoring
c. Offshoring
d. Outsourcing
104. Which of the following is NOT something typically encountered in international purchasing?
a. Long lead times
b. Numerous rules and regulations
c. Common currency
d. Time zone difference
105. Which of the following occurs when a firm physically builds a plant and then agrees to take a portion of the plant’s output as payment?
a. Switch trading
b. Buy-back
c. Offset
d. Barter
106. Which of the following describe the overarching purpose of FTZs?
a. To attract foreign business and investment into the United States.
b. To increase the price of imported goods relative to their U.S. domestically-produced counterparts.
c. To reduce the cost of consumer goods and services in the United States.
d. To facilitate entry of U.S. companies into foreign markets.
107. Which of the following is based on values and attitudes and affects how people act?
a. Behavior
b. Culture
c. Values
d. Beliefs
108. Lower labor, production, and shipping costs coupled with free trade would favor which of the following supply management strategies?
a. Reshoring
b. Nearshoring
c. Offshoring
d. Outsourcing
109. Which of the following is a secure location approved by the appropriate U.S. Customs and Border Protection (CBP) office where goods can be displayed, repurposed, imported or later re-exported
a. Foreign trade zone
b. International purchasing office
c. Duty-free port
d. Special-purpose zone
110. Which of the following is NOT an activity commonly performed by a global sourcing expert?
a. Process routine purchasing and commodity orders for worldwide operations.
b. Coordinate purchasing, engineering, and operating at multiple locations worldwide
c. Integrate materials and processes across worldwide purchasing locations
d. Synchronize purchasing, design, and production efforts operating locations worldwide
111. Which of the following is NOT an example of organizational resources that affect global sourcing success?
a. Budget support for travel
b. A large corporate headquarters staff
c. Access to qualified personnel
d. Availability of required information and data
112. Which of the following is NOT a factor that drives an organization’s global sourcing success?
a. Availability of critical resources
b. Information sharing with suppliers
c. Decentralized decision-making
d. Real-time communication methods
c
Indicate whether the statement is true or false.
1. With a target pricing approach, the cost of a new product is an input to the design process, not a design process outcome.
a. True
b. False
2. The value of money spent at a time in the future is independent of the cost of capital.
a. True
b. False
3. Under traditional pricing approaches the selling price is the sum of the product cost plus the profit.
a. True
b. False
4. A cost-based approach to supplier pricing a warranted when the seller contributes high added value to a product through labor and/or specialized expertise.
a. True
b. False
5. The major benefits of cost-reduction efforts are realized when supply management is involved early in new product development cycles.
a. True
b. False
6. The market-share model is also known as the penetration pricing model. It is an aggressive pricing approach for efficient producers because price is a direct function of cost.
a. True
b. False
7. Economic conditions seldom determine whether a market is more favorable to the seller or the purchaser.
a. True
b. False
8. Strategic cost management approaches are consistent throughout the stages of the product life cycle.
a. True
b. False
9. Target pricing is used in the final stages of a new product development cycle to establish a contract price between a buyer and a seller.
a. True
b. False
10. Identification of all costs is an essential step for establishing joint improvement targets.
a. True
b. False
11. The opportunity cost of accepting a supplier’s cash discount is almost always higher than the opportunity cost of declining the discount.
a. True
b. False
12. With the increased amount of outsourcing occurring in every global company today, the majority of the cost of goods sold is driven by suppliers that operate outside of a company’s physical boundaries.
a. True
b. False
13. The steel, automobile, and appliance industries in the United States are all examples of monopolies.
a. True
b. False
14. Volume variability is the main risk in target and cost-based pricing.
a. True
b. False
15. When a buyer’s market exists, demand exceeds supply and prices generally decrease.
a. True
b. False
16. A should-cost model can help the buyer to better understand elements of overhead and other components that can undermine price inflation.
a. True
b. False
17. Although a quantity discount has a positive effect on the purchase price, a buyer should be cautious regarding the net impact on the total item cost.
a. True
b. False
18. A collaborative cost-based approach to determining price is appropriate for nearly all purchased items.
a. True
b. False
19. As a product reaches its end of life, supply management must consider the potential value of environmental incentives to remanufacture, recycle, and refurbish products approaching obsolescence.
a. True
b. False
20. In many cases, the price charged by a seller has little relationship to actual costs.
a. True
b. False
21. A seller’s cost structure affects price because, ultimately, the seller must price at a level that covers all variable costs of production plus fixed costs and profit.
a. True
b. False
22. A major benefit of multiple sourcing is the lower price suppliers charge for higher volumes.
a. True
b. False
23. Some sellers rely on a detailed analysis of internal cost structures to establish price, while others price at a level comparable to their competition.
a. True
b. False
24. The price supplier pay to upstream suppliers has no direct impact on the purchase price to companies buying their products.
a. True
b. False
25. In competitive markets with many potential suppliers, low-value generics should emphasize total delivered price.
a. True
b. False
26. The strategic cost-reduction objective is the difference between the supplier’s price and the target cost.
a. True
b. False
27. If total costs are less than target costs, the design must change or costs must be reduced.
a. True
b. False
28. Most large firms base evaluate suppliers exclusively on the cost elements of unit price, transportation, and equipment. a. True
b. False
29. The price paid for purchased products and services has no direct impact on the end customer’s perception of value provided by the organization.
a. True
b. False
30. The top management of an organization seldom uses break-even analysis as a strategic planning tool.
a. True
b. False
31. Purchasers impact price at the time they set specifications for products and services they are purchasing. a. True
b. False
32. Using the target pricing approach, the allowable cost is the selling price minus profit.
a. True
b. False
33. Price analysis focuses simply on a seller’s price with little or no consideration given to the actual cost of production.
a. True
b. False
34. When supply exceeds demand, a seller’s market exists, and prices generally move downward.
a. True
b. False
35. In setting target prices and costs, a new-product development team must be mindful that the target cost cannot be exceeded.
a. True
b. False
36. Building a TCO model is an easy task.
a. True
b. False
37. The Producer Price Index (CPI) tracks material price movements from quarter-to-quarter and tracks the percentage increase in material commodity prices based on a sample of industrial purchasers.
a. True
b. False
38. Under penetration pricing, the product is disaggregated into major subsystems, each of which has its own target cost.
a. True
b. False
39. Traditional pricing practices have supported cooperative efforts to make improvements to designs, processes, and products.
a. True
b. False
40. Break-even analysis uses both cost and revenue data for a time to identify the point at which revenue equals cost.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
41. In the framework for strategic cost management, which of the following are high-value products or services that can be sourced through traditional bidding approaches that require identification of what is a competitive price?
a. Critical products
b. Generics
c. Commodities
d. Custom-made product
42. Which of the following is usually the most difficult and time-consuming step in the process of building a total cost of
ownership model?
a. Determine the cost of elements for each buying category.
b. Determine how to measure each cost element.
c. Develop a cost timeline.
d. Gather data and quantify costs
43. Company X restricted the allowable cost of a new product to the projected market selling price minus profit. Which of the following pricing models was Company X using?
a. Traditional pricing
b. Target pricing
c. Promotional pricing
d. Competitive pricing
44. Which of the following is a life cycle cost management activity appropriate during the product design and development phase?
a. Perform a risk assessment.
b. Investigate opportunities for volume leveraging.
c. Develop a remanufacturing approach
d. Engage in value engineering.
45. In which of the following models does the supplier establish a price that will provide a profit margin that is a predetermined percentage of the quoted price?
a. The margin pricing model
b. The cost markup pricing model
c. The total cost analysis model
d. The penetration pricing model
46. Which of the following models presents pricing for individual products and services that is set to enhance the sales of an overall product line rather than ensure the profitability of individual products?
a. The price volume model
b. The promotional pricing model
c. The revenue pricing model
d. The competition pricing model
47. In should-cost modeling, which of the following are any components NOT under the direct control of the buying or supplying company that have a significant influence on the outcome being modeled?
a. Direct costs
b. Assumption variables
c. Overhead costs
d. Transportation modes
48. In which of the following analysis methods is a purchaser required to use internal engineering cost estimates combined with public financial documents, to identify key cost data about the seller?
a. Reverse price analysis
b. Penetration pricing
c. Total cost analysis
d. Competition pricing
49. Which of the following is NOT an essential characteristic of data used to develop cost models?
a. Valid
b. Sufficiently detailed
c. Historically accurate
d. Reliable
50. Which of the following is NOT an advantage of collaborative cost management?
a. The buying company gets a lower price.
b. The supplier gets a higher margin.
c. The buying company is free to find the supplier offering the lowest price.
d. The supplier benefits from a guarantee of future business.
51. Which of the following is NOT a specific question a team engaged in cost modeling might ask to obtain a more granular understanding of a supplier’s process?
a. What is the average rate for marketing material publication?
b. What is the labor rate for machinists in different regions?
c. What are the major material elements that go into this product?
d. What are import quotas, fees, and other costs?
52. Which of the following statements regarding cost-savings sharing is FALSE?
a. Cost-sharing approaches require joint identification of the full cost to produce an item.
b. Profit is a function of the productive investment committed to the purchased item and a supplier’s asset return requirements.
c. The cost-based approach provides a supplier with incentive to pursue continuous performance improvement to realize cost savings.
d. Profit is a direct function of cost.
53. If an organization is following should-cost modeling, which of the following describes components over which the company has direct control or influence?
a. Assumption variables
b. Decision variables
c. Commodity prices
d. Variable costs
54. In TCO, which of the following includes the costs associated with bringing the product, service, or capital equipment to the customer’s location?
a. Acquisition costs
b. Purchase price
c. Usage cost
d. End-of-life costs
55. In which of the following models does the supplier simply take its estimate of total costs and add a market percentage to obtain profit?
a. The margin pricing model
b. The cost markup pricing model
c. The total cost analysis model
d. The penetration pricing model
56. Which of the following is NOT an appropriate candidate for a cost-based pricing approach?
a. An item in which the seller contributes high added value through direct or indirect labor.
b. A complex item customized to specific requirements.
c. Commodity-like items.
d. Products requiring supplier-provided design and engineering support.
57. Which of the following is the final step in the process of building a total cost of ownership model?
a. Determine the cost of elements for each buying category.
b. Determine how to measure each cost element.
c. Bring costs to present value.
d. Develop a cost timeline.
58. Which of the following is an analytical tool that identifies the primary external forces that cause prices to increase or decrease?
a. Market analysis
b. Total cost analysis
c. Make-buy analysis
d. Target price analysis
59. In should-cost modeling, which of the following refers to the integrity and transparency of a cost model?
a. Auditability
b. Profitability
c. Efficiency
d. Consistency
60. Which of the following strategies applies the price/cost equation across multiple processes spanning two or more organizations in the supply chain?
a. Price analysis
b. Total cost analysis
c. Target costing
d. Make-buy analysis
61. In should-cost modeling, which of the following provides a high-level view of the supply chain and breaks down the supplier’s primary cost elements into the material, labor, overhead, transportation freight, inventory cost, and maintenance costs?
a. The producer price index
b. A value stream map
c. Product specifications
d. A target price
62. Which of the following cost-management strategies is appropriate for unique products?
a. Buyer-supplier collaborative cost reduction efforts
b. Leveraging of preferred suppliers
c. Requirement standardization
d. Evaluation of total delivered cost
63. When managing life cycle costs, which of the following is the appropriate target costing effort at a product’s end of life?
a. Establish a contract baseline
b. Determine a final cost target
c. Find an initial cost target
d. Engage in cost/price continuous improvement
64. Which of the following will a buyer in a collaborative supplier relationship NOT consider when assessing whether or not the price for an item or service is fair?
a. Evaluate the supplier’s actual cost to produce the product or service.
b. Use historical data to determine an appropriate price.
c. Work with the supplier to establish innovative pricing approaches.
d. Assess the competitive market conditions to determine if the supplier’s price is fair.
65. In which of the following market structures are characterized by low barriers for new supplier entry into the market, assuming almost-identical products, which drives product prices to be a function solely of supply and demand?
a. Monopoly
b. Perfect competition
c. Oligopoly
d. Communist economy
66. Which of the following is NOT a recommended practice when building a TCO model?
a. Focus on small costs first.
b. Use a TCO to evaluate large purchases that justify the cost and time needed to undertake the TCO.
c. Obtain senior management buy-in before embarking on a full-fledged TCO.
d. Obtain a realistic estimate of the life cycle.
67. For which of the following is a product’s allowable cost strictly a function of what a market segment is willing to pay minus the profit goals for the product?
a. Penetration pricing
b. Target pricing
c. Market-share pricing
d. Revenue pricing
68. Which of the following type of analysis identifies the point at which revenue equals cost and the expected profit or loss for different production volumes?
a. Make-buy analysis
b. Break-even analysis
c. Market-share analysis
d. Total cost analysis
69. Company Y set the selling price of their newly-developed product equal to the product cost plus profit. Which of the following pricing models was Company X using?
a. Traditional pricing
b. Target pricing
c. Promotional pricing
d. Competitive pricing
70. In which of the following models are prices set to achieve a high profit on each unit by selling to supply managers who are willing to pay for products or services of perceived higher value?
a. The market skimming model
b. The revenue pricing model
c. The price volume model
d. The promotional pricing model
71. In which of the following models do suppliers lower prices during market slowdowns, raise concerns about capacity utilization, cover fixed costs, and retain skilled labor?
a. The price volume model
b. The promotional pricing model
c. The revenue pricing model
d. The competition pricing model
72. Due to the risk of confidentiality violation, successful target and cost-based pricing requires a high degree of which of the following between buyers and sellers?
a. Technological innovation
b. Cross-training
c. Cultural similarity
d. Mutual trust
73. Which of the following indicates whether or not a seller can lower its cost as a result of repetitive production of the item?
a. Process capability analysis
b. Market analysis
c. Learning-curve analysis
d. Break-even analysis
74. Which of the following is NOT a question a buyer should ask when analyzing a seller’s pricing strategy?
a. Does the seller have a long-term pricing strategy?
b. Is the seller a price leader or a price follower?
c. How many employees does the seller’s plant employ?
d. Is the seller using a cost-based pricing approach or a market-based pricing approach?
75. Which of the following is the process of analyzing each cost element that contributes to the final price of an item or service?
a. Price analysis
b. Cost analysis
c. Target costing
d. Make-buy analysis
76. Suppose you’re a supply manager assembling data for a cost model. Your company’s internal operations personnel will have unique insights into which of the following “hidden” costs that should be included in model?
a. Inspection costs
b. Competitor raw materials costs
c. Promotional pricing discounts
d. Producer price index values
77. Global competition is driven by the need to produce products which meet the following:
a. Cost-savings
b. Service
c. Value
d. All of the above
78. Which of the following is NOT a supplier cost detail that should included in a request for information?
a. Equipment setup time
b. Scrap rates
c. Producer price index values
d. Material handling costs
79. In TCO for a product, which of the following includes all costs associated with converting the purchased part or material into the finished product and supporting it through its useable life?
a. Acquisition costs
b. Purchase price
c. Usage cost
d. End-of-life costs
80. Which of the following is the first step in the process of building a total cost of ownership model?
a. Determine the cost of elements for each buying category.
b. Determine how to measure each cost element.
c. Map the process and develop TCO categories.
d. Develop a cost timeline.
81. In which of the following models is pricing based on the fact that long-run profitability depends on the market share obtained by the supplier?
a. The price volume model
b. The sole source model
c. The market skimming model
d. The market-share model
82. A buyer and supplier have formed a collaborative partnership to identify process improvements and reduce costs across their supply chain. Which activity would be least likely to help improve the outcome of the partnership?
a. An on-site supplier development activity
b. A value engineering analysis
c. A joint, cost-improvement brainstorming activity
d. A competitive bidding initiative
83. Which of the following subtracts from capital equipment end-of-life costs?
a. Scrap
b. Inventory
c. Conversion
d. Salvage
84. Collaborative cost management is inappropriate for which of the following conditions?
a. The seller contributes high added value to the purchased item.
b. The product requires conversion from a raw material.
c. The product quality benefits from supplier engineering support.
d. The marketplace determines the product’s price.
85. In which of the following pricing approaches are the financial benefits from a supplier improvement effort shared between the buyer and supplier?
a. Traditional pricing
b. Target pricing
c. Promotional pricing
d. Cost-savings sharing pricing
86. Which of the following is defined as the cost of the next best alternative?
a. Usage cost
b. Acquisition cost
c. Opportunity cost
d. Deferred cost
87. Suppose you’re a buyer working with a new product development team. The team’s engineers have designated a particular purchased product as critical. Which of the following strategies would enable you to manage the cost of this critical purchased product?
a. Standardize the product requirements.
b. Perform collaborative cost-reduction activities with the supplier.
c. Automate purchasing activities to reduce purchasing involvement.
d. Leverage the preferred suppliers.
88. Which of the following is defined as the present value of all costs associated with a product, service, or capital equipment incurred over its expected life?
a. Cash flow analysis
b. Total cost of ownership
c. Make-buy analysis
d. Revenue price analysis
89. Which of the following total cost of ownership categories includes the amount paid to the supplier for the product or service?
a. Acquisition costs
b. Purchase price
c. Usage cost
d. End-of-life costs
90. Which of the following is an approach to estimating the different components that comprise the supplier’s per unit price for a good or service?
a. The should-cost model
b. The rate-of-return model
c. The competition pricing model
d. The market skimming model
91. Which of the following is NOT an effective collaborative method for closing the gap between a supplier’s price and the target cost?
a. Quality function deployment
b. Value engineering
c. Standardization
d. Competitive bidding
92. Under which of the following models does a supplier analyze the market to find the combination of price per unit and quantity of sales that maximizes its profit, while assuming that lower prices will increase sales volume?
a. The price volume model
b. The sole source model
c. The market skimming model
d. The market-share model
93. Which of the following strategies is based on determining the highest price that can be offered to the buyer that will still be lower than the price offered by competitors?
a. The penetration pricing model
b. The market-share model
c. The revenue pricing model
d. The competition pricing model
94. Which of the following models emphasizes obtaining current revenue to pay for operating costs rather than profit?
a. The price volume model
b. The promotional pricing model
c. The revenue pricing model
d. The competition pricing model
95. Which of the following is NOT an assumption typically used in break-even analysis?
a. Fixed costs are insignificant compared to variable costs.
b. Fixed costs remain constant over the period and volumes considered.
c. Variable costs fluctuate in a linear fashion.
d. Revenues vary directly with volume.
96. In which of the following market models is the seller likely to accept a lower price to increase the mass market appeal of a product, allowing for substantially higher sales volumes?
a. The price volume model
b. The sole source model
c. The market skimming model
d. The market-share model
97. Which of the following total supply chain costs is NOT important when considering global sourcing in a TCO model?
a. Import and export costs
b. Marketing and advertising costs
c. Logistics-related costs
d. Labor and inspection costs
98. Which of the following is the main risk associated with target pricing?
a. Volume variability
b. Skilled labor costs
c. Tariffs
d. Raw material costs
99. A buyer hoping to manage costs for a commodity product should use which of the following cost-management strategies?
a. Standardize the product requirements.
b. Perform collaborative cost-reduction activities with the supplier.
c. Automate purchasing activities to reduce purchasing involvement.
d. Leverage the preferred suppliers.
100. Which of the following is NOT one of the four broad categories of total ownership cost?
a. Purchase price
b. Acquisition costs
c. Administrative overhead costs
d. Usage costs
101. Value is defined as the sum of quality, technology, service, and cycle time divided by which of the following?
a. Price
b. Tariffs
c. Interest
d. Profit
102. Which of the following is NOT one of the categories of products addressed by the strategic cost management matrix?
a. Commodities
b. One-time purchases
c. Critical products
d. Generics
103. Which of the following is NOT an opportunity for supplier cost reductions?
a. Process capability
b. Plant utilization
c. Exclusion of supplier’s labor unions
d. The learning-curve effect
104. Which of the following total cost of ownership categories includes cost of obsolescence, disposal, and clean-up?
a. Acquisition costs
b. Purchase price
c. Usage cost
d. End-of-life costs
105. Which of the following involves comparing supplier prices to external price benchmarks without direct knowledge of supplier costs?
a. Cost analysis
b. Make-buy analysis
c. Target costing
d. Price analysis
c
b
d
Indicate whether the statement is true or false.
1. If, during the performance of a purchase contract, learning occurs at a supplier and the buyer does not take this learning into account, then the supplier will reap the financial benefits from learning. a. True
b. False
2. Processes rarely cross functional boundaries.
a. True
b. False
3. Projects have particular characteristics that distinguish them from other forms of work.
a. True
b. False
4. Gantt charts are particularly useful for larger projects because they are easy to use and keep up to date.
a. True
b. False
5. A supplier using a new production process for the first time can benefit from learning curve analysis.
a. True
b. False
6. Buyers and suppliers working together in collaborative relationships can mutually share the benefits of learning curves and productivity improvements.
a. True
b. False
7. A key factor in quantity discount analysis is the incremental cost of each additional unit at different quantity levels.
a. True
b. False
8. The workforce factor of the learning curve encompasses the ability of the worker on the job to learn and improve through repetitive effort.
a. True
b. False
9. Offering a supplier a longer-term contract with guaranteed volumes encourages the supplier to invest in equipment that improves product quality and supports lower production costs.
a. True
b. False
10. Because there is a strong correlation between effective planning and successful project outcomes, the planning phase of a project is critical.
a. True
b. False
11. Increasing the value of an item or service at the lowest cost without sacrificing quality is the primary objective of value analysis.
a. True
b. False
12. In PERT networks, the longest (in time) path of continuous activities is the critical path.
a. True
b. False
13. Activities without any slack in a PERT network are, by definition, on the critical path.
a. True
b. False
14. Because processes rarely move across functional boundaries, it is poor practice to involve groups connected with the process to participate in process mapping.
a. True
b. False
15. Learning-curve analysis is a major reason why purchasers consolidate purchase volumes with fewer suppliers.
a. True
b. False
16. Developing new products concurrently rather than sequentially saves time and money and also allows stakeholders to agree on major issues early in the process.
a. True
b. False
17. In a CPM or PERT project, a network is a graphical representation of the chronological and sequential relationships between individual activities.
a. True
b. False
18. Value stream mapping streamlines processes by identifying unnecessary steps and resources.
a. True
b. False
19. Value analysis techniques are difficult to apply to services, so value analysis is traditionally applied to tangible products.
a. True
b. False
20. All processes and products can benefit from the increased efficiency resulting from worker learning on the job.
a. True
b. False
21. Process mapping is poorly suited for process redesign and reengineering.
a. True
b. False
22. Because a project has a defined scope with agreed-upon tasks, project success is difficult to measure compared to the success of other work types.
a. True
b. False
23. The three time estimates used in PERT charts are (1) most likely, (2) pessimistic, and (3) optimistic.
a. True
b. False
24. Non-value-adding actions in a process are those that must be done to make the product but create no value for the customer.
a. True
b. False
25. Activities on the critical path in a PERT have maximum slack.
a. True
b. False
26. Successful learning curve analysis requires accurate data collection, especially during the latter stages of production.
a. True
b. False
27. If a process crosses functional boundaries, there is a risk that no one will take ownership and responsibility for the process as a whole.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
28. In which step of the DMAIC process are root causes of process defects most likely to be found?
a. Define
b. Measure
c. Analyze
d. Control
29. Which of the following is NOT one of the six phases of a project?
a. Precompletion
b. Project definition
c. Preliminary studies
d. Performance
30. Which of the following describes the reduction in direct-labor costs due to the experience producers gain as production volumes increase?
a. Leverage
b. Learning curve
c. Knowledge curve
d. Product life cycle
31. Which of the following visually displays the tasks and times associated with a project and consists of a horizontal bar chart with activities listed vertically and times/dates displayed horizontally?
a. A PERT tool
b. A Gantt chart
c. A TCO chart
d. A CPM tool
32. In a PERT network, which of the following is the soonest time that a project can finish given the expected activity
time?
a. Late start
b. Late finish
c. Early start
d. Early finish
33. A particular process historically demonstrates a 70% learning curve. What percentage reduction in average directlabor hours would be expected for a doubling in production volume?
a. A 10% reduction
b. A 20% reduction
c. A 30% reduction
d. A 40% reduction
34. Which of the following is NOT a factor that contributes to the cost reductions predicted by the learning curve?
a. The ability of the worker on the job to improve through repetitive effort
b. Management’s effort to pursue productivity gains
c. Modifications to the production process
d. Additional maintenance hours
35. In a PERT network, which of the following is the final time that an activity can finish without delaying the entire project?
a. Late start
b. Late finish
c. Early start
d. Early finish
36. Which of the following is NOT a characteristic of the post-completion phase of a project?
a. Identify a budget, personnel, and resource requirements for future projects.
b. Confirm that the final project meets the expectations of management or customers.
c. Reassign project personnel to other positions or other projects.
d. Restore any used equipment and facilities to their original status.
37. A set of steps or actions that make up the activity and must occur one after the other is termed a process.
a. continuous
b. sequential
c. concurrent
d. standardized
38. Which of the following is an action or resource that creates value for the customer?
a. Value-adding
b. Necessary non-value-adding
c. Non-value-adding
d. Essential value-adding
39. Which of the following is a way to achieve continuous performance improvement in an item, or product, without lowering the quality or performance standards below customer expectations?
a. Value analysis
b. Cost analysis
c. Price analysis
d. Make-buy analysis
40. Which of the following is the first step in the DMAIC process?
a. Define
b. Measure
c. Analyze
d. Control
41. In a PERT network, which of the following is NOT one of the times shown on the chart?
a. Early start
b. Late start
c. On time start
d. Early finish
42. Which of the following is a scenario where learning curve analysis is appropriate?
a. When a buyer is selecting a single source supplier.
b. When a supplier is improving the quality of a product produced by a mature manufacturing process.
c. When a supplier is phasing out a product or process.
d. When a supplier uses a new production process for the first time.
43. According to Ohno, which of the following is a category of waste that produces items for which there are no orders?
a. Overproduction
b. Waiting time
c. Excess inventory
d. Unnecessary movement
44. According to Ohno, which of the following is a category of waste that makes incorrect product(s)?
a. Overproduction
b. Waiting time
c. Defect
d. Unnecessary movement
45. According to Ohno, which of the following is a category of waste that uses more steps than necessary to produce a product?
a. Overproduction
b. Overprocessing
c. Excess inventory
d. Unnecessary movement
46. Which of the following techniques is applicable to projects where there is a single known time for each activity with no variance?
a. Make-buy analysis
b. The PERT
c. Post-completion analysis
d. The CPM
47. For learning curve analysis to be effective, which of the following must be documented during the early stages of
production?
a. Product design specifications
b. Finished quality data
c. Delivery cycle data
d. Cost and labor data
48. In value stream mapping, which of the following is a flow diagram that depicts the process and shows the times and resources used at each step and the time delay between each step?
a. A current state map
b. A future/ideal state map
c. A variation map
d. An anticipated state map
49. Which of the following is FALSE regarding when to use the learning curve?
a. Learning curve analysis is appropriate when a supplier uses a new production process.
b. Learning-curve analysis is appropriate when a supplier produces any item for the first time.
c. The learning curve is appropriate when a supplier produces a technically complex item for the first time.
d. All processes and items can benefit from or exhibit improvement from learning.
50. According to Ohno, which of the following is a category of waste that includes any wasted man or machine motion?
a. Overproduction
b. Waiting time
c. Defect
d. Unnecessary movement
51. Which step in the DMAIC process must be preceded by problem identification and improvement implementation?
a. Improve
b. Measure
c. Analyze
d. Control
52. Which of the following is NOT a network rule when using the PERT/CPM technique?
a. Networks can start and finish at multiple events.
b. Two or more activities cannot share graphically the same beginning and ending events.
c. Identify each unique activity within a project by a capital letter that corresponds only to that activity.
d. Branch direction indicates the general progression in time from left to right.
53. The longest path (in time) through a PERT network is termed the_______.
a. expedited path
b. project slack
c. -optimal path
d. critical path
54. In which step of the DMAIC process is an action taken to correct the root causes of identified problems?
a. Improve
b. Measure
c. Analyze
d. Control
55. According to Ohno, which of the following is a category of waste that retains unnecessary product between process steps?
a. Overproduction
b. Waiting time
c. Excess inventory
d. Unnecessary movement
56. Which of the following terms refers to the longer-term factors of production that systematically reduce production costs?
a. Experience curve
b. Infinity curve
c. Learning curve
d. Probabilistic curve
57. For which step of the DMAIC process is accurate data collection critical?
a. Define
b. Measure
c. Analyze
d. Control
58. Which of the following is LEAST likely question that value analysis teams would ask to determine if opportunities exist for item, product, or service improvement?
a. Are there additional uses for this product?
b. Should we discontinue this product or service?
c. Can we use a better production method to produce the item?
d. Are packaging-cost reductions possible?
59. Which of the following are actions that are mandatory to make a product, but create no value for the customer?
a. Necessary non-value-adding
b. Non-value-adding
c. Value-adding
d. Essential value-adding
60. Which of the following is a tool that reduces procedures to their component parts or activities and helps identify then eliminate waste or delays within a procedure?
a. Process mapping
b. Productivity analysis
c. TCO
d. DMAIC
61. Which of the following process actions and resources consumed, contribute no value to the customer, but become part of the final price of the product or service?
a. Value-adding
b. Non-value adding
c. Necessary non-value adding
d. Essential value-adding
62. In a PERT network, which of the following is soonest point in time that an activity can begin?
a. Late start
b. On time start
c. Early start
d. Early finish
63. Which of the following is NOT one of the critical steps to process mapping?
a. Utilize all sequential activities whenever possible as concurrent activities are wasteful.
b. Identify the time associated with each part of a process and identify how much of that time is waste.
c. Replace sequential activities with concurrent activities whenever possible.
d. Search for better ways and methods to perform the tasks comprising a process.
64. In a PERT network, which of the following is the final point in time that an activity can begin without delaying the entire project?
a. Late start
b. On time start
c. Early start
d. Early finish
65. Which of the following is NOT a item that should be considered before initiating a project?
a. Make sure the objectives and outcomes are championed by senior executive management.
b. Conduct subjective measurements.
c. Establish an effective governance process with a cross-functional team.
d. Break down the project into phased deliverables.
66. A set of activities or steps that can be performed at the same time during the main flow of work- is termed a process
a. intermittent
b. continuous
c. standardized
d. concurrent
67. In value stream mapping, which of the following is a flow diagram that depicts process improvements to optimize the value and minimize the non-value-added streams?
a. A current state map
b. A future/ideal state map
c. A variation map
d. An anticipated state map
68. When referring to learning improvement, which of the following represents a reduction in the cumulative average number of labor hours as production doubles from the previous level?
a. Critical knowledge path
b. Improvement time
c. Reduction rate
d. Learning rate
69. Value analysis techniques are primarily applied to existing products and services. Which of the following is the
application of value principles during product or service design?
a. Total cost of ownership
b. Price analysis
c. Value engineering
d. Value analysis
70. Which of the following is a consequence of incorrectly applying learning curve analysis?
a. Overestimation of raw materials costs
b. Underestimation of shipping costs
c. Overestimation of inspection and testing costs
d. Underestimation of true production costs
71. Which of the following is NOT one of the five stages of the systematic approach to value analysis?
a. Gather information
b. Speculate
c. Recommend and execute
d. Implement
72. In which step of the DMAIC process is the project charter created?
a. Define
b. Measure
c. Analyze
d. Control
73. Which of the following is NOT an activity that supports Lean Six Sigma principles?
a. Value engineering
b. PERT analysis
c. Root cause analysis
d. Waste elimination
74. Which of the following is a process of visually presenting the flow of materials and information to identify wasted time and actions in a manufacturing or service process?
a. PERT/CPM analysis
b. QDA
c. Value stream mapping
d. DMAIC
75. Which of the following is the definition for a series of tasks that require the completion of specific objectives within a certain time frame, has defined start-stop dates, and consumes resources?
a. Process
b. Team charter
c. Project
d. Value map
76. Which of the following is a technique used to examine the incremental changes in cost between quantities within a supplier’s price quotation?
a. Price analysis
b. Market-share pricing
c. Competition pricing
Quantity discount analysis
c
a
b
d
b
d
c
d
d
a
b
c
c
Indicate whether the statement is true or false.
1. The first step in the purchasing cycle involves the buyer identifying their own specific needs and requirements for the item or service being purchased.
a. True
b. False
2. A win-lose negotiation approach aims to use collaboration to expand the resources available to both buyer and seller. a. True
b. False
3. Negotiation is a fairly simple process that relatively few supply managers engage in.
a. True
b. False
4. Research referenced by Karrass showed that e-mail-based negotiations typically take less time to complete than those conducted face-to-face.
a. True
b. False
5. Most people tend to fill in the gaps when a discussion encounters silence.
a. True
b. False
6. Good negotiators know that reaching a consensus concludes the negotiation.
a. True
b. False
7. A tactic used during one negotiation is likely to be equally successful in another negotiation with the same counterpart.
a. True
b. False
8. Using information effectively during negotiation should not include open and complete sharing with the other party.
a. True
b. False
9. Effective negotiators are unwilling to make counterproposals.
a. True
b. False
10. Overuse of coercive power rarely results in retaliation when the power structure shifts unfavorably in the future.
a. True
b. False
11. The desirability of negotiation settlements must be assessed versus the other viable alternative that existed at the time that the settlement was proposed.
a. True
b. False
12. Negotiators with a short timeframe to make a deal frequently fail to prepare adequately before beginning negotiations.
a. True
b. False
13. In a win-win negotiation, one party can only gain at the expense of the other.
a. True
b. False
14. A negotiator should share their BATNA with the other party because the final settlement will not vary much from that
a. True
b. False
15. Nearly all purchase requirements are best achieved by the buyers and sellers conducting a thorough, detailed, timeconsuming negotiation.
a. True
b. False
16. Reliance on electronic media such as e-mail and texting as the main communication mode has no measurable impact on the dynamics and effectiveness of the negotiation.
a. True
b. False
17. It is not important for the negotiator to establish a thoughtful BATNA for each negotiation issue prior to the start of negotiation.
a. True
b. False
18. To reach a successful settlement, a negotiator should attempt to focus on the other party’s stated position, not on their underlaying interests.
a. True
b. False
19. Stereotyping the cultural characteristics of different countries or regions holds little risk in international buyer-supplier negotiations.
a. True
b. False
20. Everyone negotiates something every day.
a. True
b. False
21. It is easy to develop common ground in a negotiation even if one does not know what the other party is seeking.
a. True
b. False
22. A procurement negotiation is particularly important because it affects stakeholders throughout the organization who will be affected by negotiation outcomes.
a. True
b. False
23. The way a negotiator approaches concession making is a vital part of successful negotiation strategies.
a. True
b. False
24. An experienced negotiator rarely needs to practice or rehearse complex negotiating points before beginning formal negotiations.
a. True
b. False
25. Understanding the other party requires thoroughly assessing their relative strengths and weaknesses.
a. True
b. False
26. Knowledgeable negotiators do not need to perform research and analysis to understand their counterparts.
a. True
b. False
27. Before starting negotiations, the negotiating parties must believe realistically that they can reach an agreement.
a. True
b. False
28. Deciding on the physical location for negotiations is rarely considered an important part of the negotiation planning process.
a. True
b. False
29. The issues most critical to a supplier are likely to also be those most critical to the buyer.
a. True
b. False
30. A negotiator’s power may shift toward the other party if the negotiator shares the underlying interest behind their position.
a. True
b. False
31. Negotiation with a supplier in another country requires substantially more planning time and effort than negotiation with a domestic supplier.
a. True
b. False
32. E-negotiators generally ask more questions and make fewer assumptions than face-to-face negotiators.
a. True
b. False
33. Parties may behave differently when negotiating electronically than when negotiating face-to-face.
a. True
b. False
34. In e-negotiation, social norms and behaviors of both parties are readily apparent.
a. True
b. False
35. Buyer-supplier negotiations are nearly always straightforward, so only rudimentary preparation and planning are required.
a. True
b. False
36. It is nearly always in the buyer’s best interest to offer large concessions.
a. True
b. False
37. Successful negotiators realize that the negotiation process involves relationships between people, not just between organizations.
a. True
b. False
38. Excessive formality in negotiation can restrict the parties and prevent the effective exchange of ideas and solutions.
a. True
b. False
39. Packing negotiating issues together can compromise an entire negotiation if the parties cannot agree on a single issue within the package.
a. True
b. False
40. Negotiation plays a critical role in communicating the buyer’s specific sourcing requirements to their supply base.
a. True
b. False
41. When a negotiator is attempting to create common ground with the other party, they can automatically assume that the other party thinks the same way that they do.
a. True
b. False
42. The bargaining zone is a key aspect of negotiations because any proposal or counterproposal offered outside of the bargaining zone range will likely be rejected by the other party.
a. True
b. False
43. Referent power is the least successful in negotiation in cases where the referents are aware that a counterpart identifies with them.
a. True
b. False
44. Effective negotiators find it acceptable to give away a concession without getting something of equal or greater value in return.
a. True
b. False
45. In order to successfully execute the best and final offer tactic, the person making the best and final offer must be prepared to end the negotiation if the other party declines the offer.
a. True
b. False
46. If issues other than price are important, or if competitive bidding cannot satisfy the buyer’s requirements, then negotiation is appropriate.
a. True
b. False
47. An important part of negotiation involves each party attempting to persuade the other party to do something that is in their own best interests.
a. True
b. False
48. When planning an upcoming negotiation, a negotiator must prioritize the potential issues to be negotiated into needs and wants, ensuring that they know what must be achieved during the negotiation and what can be exchanged for something else of value.
a. True
b. False
49. One limitation to the interpreters during international negotiation is that the interpreter’s verbal communication might not convey the significance of unspoken actions, signals, and customs invisible to nonnative negotiators.
a. True
b. False
50. Negotiators who interact face-to-face are more likely to avoid an impasse than their e-negotiation counterparts in similar circumstances.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
51. Which of the following negotiation tactics involves taking a time-out?
a. Low ball
b. High ball
c. Trail balloon
d. Caucus
52. Real-time video conferencing has which of the following advantages over emails and other non-real-time enegotiation methods?
a. Video conferencing conveys facial expressions and other non-verbal cues.
b. Video conferencing allows negotiators to determine which of their counterparts have decision-making authority.
c. Real-time communication, either electronic or physical, minimizes the time negotiators can take to consider their responses.
d. Video conferencing makes status differences apparent.
53. Which of the following is a principle that states that we look to the behavior of others to determine what is desirable, appropriate, or correct?
a. Social proof
b. Authority
c. Reciprocation
d. Scarcity
54. What type of power comes from interpersonal appeal based on socially acceptable individual qualities and attributes?
a. Referent power
b. Legitimate power
c. Expert power
d. Reward power
55. Which of the following is a principle that says people like to avoid changing their beliefs and actions?
a. Consistency
b. Authority
c. Reciprocation
d. Scarcity
56. Which of the following is a negotiation tactic that involves not immediately responding when the other party makes an offer in hope that absence of a response will encourage further offers or concessions from the other party?
a. Price increase
b. Best and final offer
c. Trail balloon
d. Silence
57. Which of the following is the most significant obstacle to successful international negotiations?
a. Miscommunication due to language
b. Time orientation
c. Cultural differences
d. Limited on-the-ground authority of the negotiator
58. Which of the following is NOT likely to result from abuse of power by negotiators?
a. Lower long-term supplier risk
b. Damaged supplier relationships
c. Retaliation by abused parties
d. Eventual diminution of power with overuse
59. Which of the following is defined as the negotiator’s opening offer which represents their optimistic value of the issue being negotiated?
a. Interest
b. Need
c. Position
d. Want
60. Which of the following is NOT an effective e-negotiation practice?
a. Use a blended negotiation modality, starting with an initial face-to-face meeting or video conference to build essential rapport with the other party.
b. Establish common ground and interests to build mutual trust.
c. Use “emoticons” to offset the lack of nonverbal awareness in written communications.
d. Forward e-mailed negotiations to the other party’s immediate supervisor for verification.
61. Which of the following is a negotiation tactic that often signals the end of a negotiation on a given issue?
a. Price increase
b. Best and final offer
c. Trail balloon
62. Experienced negotiators offer concessions that can be described as which of the following?
a. Concessions having a high value to them, but a low value to the other party.
b. Concessions having a low value to them and a low value to the other party.
c. Concessions having a high value to them and a high value to the other party.
d. Concessions having a low value to them, but a high value to the other part.
63. Which of the following is the area of overlapping positions among issues, between the negotiators?
a. Concurrent zone
b. Agreement possibility
c. Positive position
d. Bargaining zone
64. In which of the following integrative agreements do parties work closely together to find new and creative ways to expand resources or generate value through a negotiated agreement?
a. Expand the pie
b. Logroll
c. Find a bridge solution
d. Use non-specific compensation
65. Which of the following is an advantage of e-negotiating versus face-to-face negotiations?
a. Easier establishment of a cordial relationship.
b. Easier interpretation of visual cues.
c. Absence of nonverbal cues.
d. More time to reflect before responding.
66. Which of the following is the first step a buyer or supplier should take in the negotiation planning process?
a. Develop specific objectives
b. Analyze their own strengths and weaknesses
c. Critically analyze their negotiating counterpart
d. Recognize the needs of their negotiating counterpart
67. Which of the following conditions will maximize the settlement zone?
a. A low maximum buyer price
b. A high supplier target price
c. A low supplier minimum price
d. A low buyer target price
68. Which of the following is NOT an activity that a company planning to negotiate with a supplier in a foreign country must perform?
a. Find and reserve a meeting venue.
b. Arrange for appropriate translation services.
c. Obtain the proper documentation to enter the supplier’s country.
d. Make travel arrangements.
69. In which of the following integrative agreements does one party achieve his or her objective on an issue while the other receives something else of value as a reward for going along?
a. Expand the pie
b. Logroll
c. Find a bridge solution
d. Use non-specific compensation
70. Which of the following is NOT a reason for negotiating with suppliers?
a. The total contract value or volume is large.
b. The purchased item is a widely available, commodity-like item.
c. The purchase involves the utilization of capital-intensive plant and equipment.
d. The purchase involves a special or collaborative relationship.
71. In which of the following countries should you become comfortable with long periods of silence during negotiations?
a. India
b. Brazil
c. Mexico
d. Japan
72. Which of the following occurs as the result of negotiators being immersed in a place in which their established norms have been confronted and may no longer apply?
a. Reciprocation
b. Consistency
c. Culture shock
d. Win-win negotiations
73. Suppose you are hosting negotiators from a foreign supplier. You should ensure that vegetarian meals are available for your supplier’s negotiators if the supplier is from which of the following countries?
a. India
b. Brazil
c. Mexico
d. Japan
74. Which of the following is NOT a retaliatory action supplier would take against buyers who exercise coercive power during negotiations?
a. Collaborate on a new development project.
b. Raise prices substantially during times of economic recovery.
c. Reduce customer services to the offending buyer.
d. Disrupt service continuity to the offending buyer.
75. Which of the following is the third step of the Triangle Talks?
a. Apply strategy to win the negotiation.
b. Find out what they want and make them feel heard.
c. Know exactly what you want.
d. Propose action in a way they can accept
76. Which of the following is a movement away from a negotiating position that offers something of value to the other party or the purpose of gaining something else of value?
a. Reward
b. Concession
c. Tactic d. Strategy
77. Which of the following is a negotiation tactic in which the negotiator insists on negotiating in a location that is more favorable to them?
a. Planned concession
b. Best and final offer
c. Venue
d. Silence
78. A buyer and a supplier located in different countries are likely to have which of the following in common?
a. A common language
b. Similar cultures
c. Mutually understandable laws and government regulations
d. A desire to promote their organization’s objectives
79. How has the growth in global sourcing over the past 20 years affected the need for international cultural awareness?
a. The need for cultural awareness has diminished due to global cultural homogenization.
b. The growth of global sourcing has had negligible impact on the need for cultural awareness because business and organization leaders have historically needed to exhibit a high level of cultural awareness regardless of the nature of their supply chain.
c. The need for cultural awareness has increased due to the increased need to negotiate and collaborate with partners worldwide.
d. The need for cultural awareness has increased due to the increasing trend towards reshoring.
80. Which of the following negotiation types means that one or more parties are competing over a fixed sum value with the winner taking all or the larger share?
a. Win-win
b. Win-lose
c. Lose-lose
d. Integrative bargaining
81. Which of the following forms of electronic media is NOT likely to change the dynamics and effectiveness of a negotiation?
a. Website blog
b. Instant messaging
c. Emails
d. Text messaging
82. Which of the following is a negotiation tactic that involves one party, often the seller, offering an unusually low price to receive a buyer’s business?
a. Low ball
b. High ball
c. Trail balloon
d. Planned concession
83. Which of the following is NOT an acceptable reason for walking away from negotiations that have reached a deadlock?
a. Either party’s BATNA is preferrable to the options available through negotiation.
b. One or both parties need more time to consider their respective positions and interests.
c. One of the parties did not have an effective concession strategy in place at the start of negotiations.
d. The negotiating parties were so far apart in their positions that an agreement was not forthcoming.
84. Which of the following is a negotiation tactic that signals that it is now the other party’s turn to reciprocate and make a concession on an important issue?
a. Planned concession
b. Best and final offer
c. Trail balloon
d. Silence
85. Which of the following helps the negotiator to determine and visually compare their own strengths and weaknesses to those of the other party or parties?
a. Triangle Talk
b. Force field analysis
c. Reciprocation
d. Fact finding
86. Which of the following is NOT a reason the outcomes of electronic negotiations can be less satisfying than face-toface negotiations?
a. Electronic negotiations tend to be more impersonal.
b. Electronic negotiations do not allow for sufficient rapport between parties.
c. Electronic communication allows parties to be more aggressive and less diplomatic.
d. Electronic communications can be thoroughly read and considered by negotiators before they respond.
87. Which of the following negotiation techniques is a test of acceptability?
a. Low ball
b. High ball
c. Trail balloon
d. Caucus
88. A negotiator recognized as having attained a high level of knowledge about a particular subject, will exercise which of the following types of power?
a. Referent power
b. Legitimate power
c. Expert power
d. Reward power
89. In which of the following countries would punctuality be the most critical for successful negotiations?
a. India
b. Brazil
c. Mexico
d. Germany
90. Which of the following is NOT an effective general guideline for making successful concessions?
a. Try to get the other party to reveal their needs and objectives first.
b. Be the first to concede on a major issue, but not the first to concede on a minor issue.
c. Make the other party work hard for every concession you make.
d. Do not reveal your deadline to the other party.
91. In an international negotiation, which of the following will apply?
a. The negotiator’s preexisting values
b. The negotiator’s desire to meet their organization’s objective
c. The negotiator’s beliefs
d. The negotiator’s decision-making schema
92. Which of the following is the ability to influence another person or organization to do something?
a. Planning
b. Strategy
c. Power
d. Positions
93. Which of the following is the negotiator’s unspoken motivation or reason that underlies the negotiation position?
a. Interest
b. Need
c. Position
d. Want
94. Which of the following is a method or scheme for making or doing something to achieve a desired end?
a. Want
b. Objective
c. Plan
d. Position
95. In which of the following countries are social activities that would normally be conducted during evening hours in the United States instead conducted during the day?
a. Russia
b. India
c. Mexico
d. Saudi Arabia
96. Which of the following is a principle that states that people feel an obligation to give something back of equal or greater value to someone who has given them something of perceived value?
a. Social proof
b. Authority
c. Reciprocation
d. Scarcity
97. Which of the following is the first step of Triangle Talk?
a. Know exactly what they want
b. Propose action in a way they can accept
c. Apply tactics to win the negotiations
d. Know exactly what you want
98. Which of the following is an item or topic to be resolved in negotiations?
a. Fact
b. Issue
c. Position
d. Interest
99. Which of the following is also known as the negotiator’s bottom line, or reservation point at which it is more advantageous for the negotiator to walk away from the current negotiation and implement their next best option?
a. BATNA
b. Position
c. Interest
d. Need
100. Which of the following is a negotiation tactic that involves taking an abnormally high position on an issue?
a. Price increase
b. High ball
c. Trail balloon
d. Caucus
101. In which of the following does one party get a lower price as the parties work jointly to reduce the seller’s costs or the joint transaction costs of doing business together?
a. Expand the pie
b. Cut the costs for compliance
c. Find a bridge solution
d. Use non-specific compensation
102. Which of the following are action plans designed to help achieve a desired result?
a. Arguments
b. Questions
c. Strategies
d. Tactics
103. Which of the following negotiation types seeks to expand the value of resources or outcomes available to all parties through cooperative negotiation?
a. Win-win
b. Win-lose
c. Lose-lose
d. Integrative bargaining
104. Which of the following is defined as ready access to relevant and useful information that can be used to influence another party through cogent presentation of facts, data, information, and persuasive arguments?
a. Informational power
b. Reward power
c. Coercive power
d. Legitimate power
105. In which of the following integrative agreements do parties identify more than one issue where disagreement exists and then agree to trade off these issues so that each party has one of its top-priority issues satisfied?
a. Expand the pie
b. Logroll
c. Find a bridge solution
d. Use non-specific compensation
106. Which of the following is an outcome that the negotiator must have for the negotiation to be successful?
a. Interest
b. Need
c. Position
d. Want
107. Which of the following is NOT a question a buyer is likely to have asked a seller with whom they have worked in the past?
a. Were we satisfied with the outcomes of previous negotiations?
b. In what areas did we disagree?
c. What was the relative balance of power between us and the supplier?
d. Did we get a lower price than our competitors paid?
108. Which of the following is NOT a personal characteristic of an effective international negotiator?
a. Willingness to acquire a thorough knowledge of the contract agreement
b. An honest and polite attitude
c. A willingness to familiarize themselves with foreign culture and customs
d. A sense of urgency and appreciation for timely completion
109. Which of the following includes the ability to punish the other party, either physically, emotionally, or mentally?
a. Coercive power
b. Legitimate power
c. Expert power
d. Referent power
110. In negotiation, which of the following is a reality or truth that the parties can state and successfully verify?
a. Fact
b. Issue
c. Position
d. Interest
111. Which of the following involves inventing new options that satisfy each party’s needs?
a. Expand the pie
b. Cut the costs for compliance
c. Find a bridge solution
d. Use non-specific compensation
112. Which of the following is an overall approach to reaching a mutually beneficial agreement with a supplier that holds different points of view from the buyer?
a. Strategy
b. Power
c. Concession
d. Tactic
113. Which of the following is not a behavior displayed by effective negotiators during the negotiation process?
a. Willingness to revise goals when presented with new, reliable information refuting their earlier position.
b. View issues independently without linking them in any particular sequence.
c. Establish lower and upper ranges for each issue.
d. Conclude negotiations in the shortest possible time.
114. Which of the following is a principle that states that we are more likely to accept the arguments of we recognize as an official or other person in power than we are from someone we consider to be a peer?
a. Social proof
b. Authority
c. Reciprocation
d. Scarcity
115. Which of the following means that one party can offer something of perceived value to the other party?
a. Referent power
b. Reward power
c. Expert power
d. Informational power
116. Which of the following is NOT a way in which effective negotiators differ from average negotiators?
a. Effective negotiators explore more viable options per issue.
b. Effective negotiators are more likely to focus on common ground than differences between parties.
c. Effective negotiators make fewer counterproposals.
d. Effective negotiators rarely, if ever, make concessions.
117. Which of the following is an aspiration or vision to work toward in the future?
a. Need
b. Objective
c. Plan
d. Position
118. Which of the following is a principle that says we work well and are more agreeable with people with whose company we enjoy and who also enjoy our company?
a. Liking
b. Authority
c. Reciprocation
d. Scarcity
119. In which of the following countries are long-term interpersonal relationships the least useful for successful negotiations?
a. Russia
b. India
c. Mexico
d. Vietnam
120. In which of the following countries is the use of a skilled interpreter vital for successful supplier negotiations?
a. Brazil
b. India
c. Mexico
d. Vietnam
121. Which of the following is NOT an appropriate definition of negation for supply chain management?
a. A negotiation is an interactive communication process that takes place whenever one party wants something from another or vice versa.
b. Negotiation is the process of communicating back and forth for the purpose of reaching a joint agreement about differing needs or ideas.
c. Negotiating is the final goal of the sales process.
d. Negotiation is a technique buyers use to get the lowest price from suppliers.
122. Which of the following will reduce the chance that emailed negotiation correspondence is not misconstrued or misinterpreted?
a. Copy the recipient’s immediate supervisor on all correspondence.
b. Include redundant punctuation and capitalizations to emphasize points.
c. Avoid sharing relevant personal information.
d. Proofread the entire message before sending it out.
123. Negotiating in which of the following countries is most likely to require a creative approach with financing solutions?
a. France
b. Japan
c. Mexico
d. Germany
124. Which of the following is NOT one of the reasons why negotiators frequently fall short of their goals or reach an impasse?
a. They neglect the other party’s problems.
b. They focus too much on price.
c. They focus too much on common ground.
d. They focus on interests rather than on positions.
125. Which of the following is the second step of the Triangle Talk?
a. Apply strategy to win the negotiation.
b. Find out what they want and make them feel heard.
c. Know exactly what you want.
d. Propose action in a way they can accept
126. Which of the following is a negotiated outcome that the negotiator would like to have as opposed to what must be achieved?
a. Interest
b. Need
c. Position
d. Want
127. Which of the following statements is FALSE regarding the nature of power between negotiators?
a. Power always possesses a negative connotation.
b. Effective use of power can dramatically affect negotiation outcomes.
c. Use of power can result in a negotiation stalemate
d. The positive or negative nature of power depends upon how it is used.
128. Which of the following refers to power ascribed to the official job position or title held by an individual, rather than characteristics of the individual?
a. Coercive power
b. Legitimate power
c. Expert power
d. Referent power
c
b
d
c 112. a 113. d 114. b 115. b 116. d 117. b 118. a 119. a
120. d
121. d
122. d
123. c
124. d
125. b
126. d
127. a
128. b
Indicate whether the statement is true or false.
1. It is important to ensure that an arbitrator’s opinion will not be binding on both parties to the dispute.
a. True
b. False
2. Buyers who enter into a long-term contract with a supplier will find it difficult to switch suppliers once the contract has been executed.
a. True
b. False
3. To a consultant, the most important clause of the consulting contract is the assurance of payment.
a. True
b. False
4. If a fixed price contract includes an escalation clause, then all price changes must be keyed to well-established, widelypublished index.
a. True
b. False
5. If suppliers are unwilling to disclose labor and material cost data, buyers can develop cost models to improve their negotiating position using material/labor ratios available from industry databases.
a. True
b. False
6. In the firm fixed-price contract, the price stated in the agreement does not change, even if market prices, supply levels, and economic conditions change.
a. True
b. False
7. Once a contract has been negotiated and signed, the main portion of the work between contracting parties is over.
a. True
b. False
8. The simplest method of resolving contractual disagreements is straightforward, face-to-face negotiation between the two parties involved.
a. True
b. False
9. In a firm fixed price contract, if the supplier negotiates a high contract price in anticipation of rising costs that do not occur, then the buyer will pay an above-market price for the contacted goods or services.
a. True
b. False
10. In systems outsourcing, acceptance test criteria can be determined only after the contract has been issued because operating conditions can only be specified after the system is fully operational.
a. True
b. False
11. It is typically easy to renegotiate contract terms, even if the contract has been signed and a period of time has passed.
a. True
b. False
12. The more complex the nature of the contract is and the greater the dollar amount involved, the higher the likelihood of a future dispute over interpretation of terms and conditions.
a. True
b. False
13. Under a fixed-price contract, unstable market prices can place risk on purchasing or supplying organizations depending on the direction of price change.
a. True
b. False
14. When hiring an outside consultant to perform contract services, it is important to bear in mind that the consultant is the organization’s agent, not its employee.
a. True
b. False
15. Firm fixed-price contacts are advisable in cases where the goods or services procured are expensive, complex, and important to the buyer organization.
a. True
b. False
16. The assignment and contracting clause of a contract stipulates whether the supplier can assign its rights per the contract to another party.
a. True
b. False
17. Incentive and cost-sharing arrangements should be excluded from long-term contracts.
a. True
b. False
18. For maximum effectiveness, cost-based contracts should include productivity improvement requirements that will generate cost reduction over the life of the contract.
a. True
b. False
19. There is a short-term incentive for suppliers to be inefficient in cost-based contracts because cost-based contracts reward the suppliers with higher prices regardless of performance.
a. True
b. False
20. Acceptance of a short-term contract often gives the buyer access to the supplier’s detailed cost and price information in exchange for the abbreviated contract term.
a. True
b. False
21. Technical sections of a contract are straightforward and rarely a source of misinterpretation of contract terms and conditions.
a. True
b. False
22. As the contract total dollar value per unit cost of the contract decreases, purchasers are forced to spend more effort creating effective pricing mechanisms.
a. True
b. False
23. If there is a risk that a large contingency fee might be included in the contract, a cost-based contract is unlikely to be appropriate.
a. True
b. False
24. Because contact attachments frequently include essential technical details, it is a good idea to double-check all attachments prior to finalizing the contract.
a. True
b. False
25. If price adjustment mechanisms are included in a long-term contract, the initial price for the purchased good or service is used as the base for adjustments over the contract term.
a. True
b. False
26. To avoid construction schedule delays, contract administrators for construction projects employ penalty clauses, referred to as “liquidated damages”.
a. True
b. False
27. Because fixed price contracts require extensive auditing from the purchasing side, they are the most difficult for purchasing to manage.
a. True
b. False
28. Most contracts are developed from previously used contracts modified to fit the current situation.
a. True
b. False
29. Seeking a litigated solution should be an automatic step in dispute resolution rather than a last resort in resolving contractual disputes.
a. True
b. False
30. From a buyer’s perspective, a compelling reason to consider a short-term contract is a reduction in the risk of supply disruption.
a. True
b. False
31. Systems contracts can fail if buyers get locked into price structures that do not adequately reflect changes that occur once the contract is executed.
a. True
b. False
32. In the absence of a contract, transactions are covered by the Uniform Commercial Code.
a. True
b. False
33. Consultants are normally viewed as employees, not as independent contractors.
a. True
b. False
34. Long-term contracts can help the buyer obtain exclusive access to proprietary supplier technology, potentially giving the buyer a short-term competitive advantage.
a. True
b. False
35. MRO item suppliers with automated online catalogs provide users with the ability to buy directly from blanket orders and national contracts from their desktops.
a. True
b. False
36. For arbitration clauses to be binding, the clause must be present in both purchaser’s and supplier’s forms.
a. True
b. False
37. An escalation clause within a fixed-price contact allows for increases or decreases in the base price.
a. True
b. False
38. Cost-sharing contracts are particularly advantageous when raw material prices are decreasing.
a. True
b. False
39. In order to be successful, a long-term contract should focus exclusively on the needs of the buyer.
a. True
b. False
40. In most cases, the alternatives to court adjudication are slower than litigation.
a. True
b. False
41. The least appropriate method of drafting a new contract is to start with a sample of past contracts for similar situations.
a. True
b. False
42. A carefully worded and prepared contract is proof against future disputes or disagreements.
a. True
b. False
43. The longer the purchase agreement term, the lower the likelihood that a firm's fixed price contract will be agreeable to the supplier.
a. True
b. False
44. In global commerce, most participants assume that the terms of one market are acceptable in another regardless of cultural or legal differences.
a. True
b. False
45. A complicating issue with many outsourced system contracts is the offshoring of contract-related work to countries such as India.
a. True
b. False
46. Copyright ownership is automatically determined unless the consultant and client companies execute an agreement specifically assigning copyright to one company or the other.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
47. Which of the following is NOT a primary question that must be asked when considering the risks of long-term contracts?
a. What is the potential for opportunism?
b. Is this the right supplier to engage in a long-term contract?
c. Is the supplier offering a competitive price and delivery schedule?
d. Is there a fair distribution of risk and gains between buyer and supplier?
48. Suppose two companies are disputing a contract. The principals are major stakeholders are both displaying high levels of emotion in all contract-related discussions. Which of the following conflict resolution methods is least likely to be successful for the parties involved?
a. Mediation
b. Arbitration
c. Litigation
d. Negotiation
49. Which of the following is a new intellectual property developed as the result of the interaction between the enterprise and the consulting company?
a. Residual
b. Service
c. Good
d. Output
50. Which of the following refers to the volatility of pricing conditions for major product elements such as raw materials and labor?
a. The supplier’s ability to impact costs
b. Component market uncertainty
c. Process or technology uncertainty
d. The total dollar value of the purchase
51. In which of the following approaches to a systems supplier’s level of service does the client company essentially turn over the entire outsourced service at a given point in time?
a. Modular
b. Turnkey
c. Shared
d. Startup
52. Which of the following is not a measurable objective generally included in long-term buyer-supplier contracts?
a. Cost-savings sharing
b. Productivity improvements
c. Quality standards
d. Supplier marketing
53. Which of the following is defined as a purchase that is made on a non-recurring or limited basis with little or no intention of developing an ongoing relationship with the supplier?
a. Just-in-time contract
b. Spot contract
c. Short-term contract
d. Limited-scope contract
54. Which of the following is NOT one of the basic levels of service that a systems supplier can provide to the buyer?
a. Startup
b. Turnkey
c. Modular
d. Shared
55. Which of the following is NOT a disadvantage of long-term contracts for the buyer or supplier?
a. Supplier volume uncertainty
b. Volume leveraging
c. The buyer is unreasonable
d. The buyer selected the wrong supplier
56. Which of the following is NOT a term or condition which should be included in payment clauses, down payments, and installment payments for consulting contracts?
a. Payment on delivery of the final report
b. Late-payment penalties
c. Inclusion of an arbitration agreement
d. Type and nature of services rendered
57. Which of the following specifies that business units within a corporate organization must buy from specific supplier during the term of the agreement?
a. A corporate agreement
b. An open-ended order
c. A blanket order
d. An online MRO catalog
58. Which clause of a contract generally specifies who is responsible for injuries and damages sustained over the course of the contract and any damages to be paid?
a. Force majeure
b. Definitions
c. Scope of agreement
d. Liability
59. Which of the following contract clauses defines whether one or both parties can end the contract prior to its stipulated end date?
a. Force majeure
b. Definitions
c. Effective date and termination
d. Liability
60. Which of the following contact clauses states whether the buyer can expect to receive preferential treatment over the
supplier’s other customers?
a. Most favored customer
b. Technology improvements
c. Effective date and termination
d. Liability
61. Which of the following is a way in which the “rent-a-judge” conflict-resolution mechanism differs from binding arbitration?
a. The outcome is decided by an impartial or neutral third party.
b. The cost is typically significantly lower than that of litigation.
c. Legal precedents and rules of evidence are applicable.
d. The time to settlement is usually lower compared to litigation.
62. Which of the following contact clauses specifies how or its prices will be adjusted over the course of the contract?
a. Force majeure
b. Payment
c. Purchase orders
d. Liability
63. Which of the following specifies that the buyer will buy a certain amount of goods and services for the duration of the agreement?
a. A pricing agreement
b. An evergreen clause
c. A national contract
d. A blanket order
64. Which of the following is the simplest method of resolving a contractual dispute between a buyer and a supplier?
a. Face-to-face negotiation
b. Binding arbitration
c. Minitrial
d. Rent-a-judge
65. In dispute-resolution between buyers and suppliers, which of the following objectives is most likely if the buyer and supplier have a long-term relationship?
a. Obtain the lowest possible per-unit price in the contract.
b. Preserve the buyer-supplier relationship.
c. Resolve the dispute as quickly as possible.
d. Ensure that the other party assumes the majority of the risk.
66. Which of the following is one of the leading causes for the failure of systems contracts?
a. Buyers agree to contracts with unnecessary services.
b. Contractors become complacent.
c. Buyers get locked into price structures that do not accommodate changes that occur after the agreement is signed.
d. Contractors do not have plans to address the practical needs of the buyer’s stakeholders.
67. In a firm fixed-price contract, which of the following changes in the market price for the purchased good or service results in the purchaser bearing the burn of the financial loss?
a. The market price rises above the stated contract price.
b. The market price falls below the stated contract price.
c. The market price stays roughly the same as the stated contract price.
d. Changes in market price relative to the contract price have no financial consequences for parties to a firm fixed-price contract.
68. Which of the following contract types should be used in cases where the parties cannot accurately predict labor or material cost or use quantities prior to the execution of the purchase agreement?
a. Fixed-price with escalation
b. Firm fixed-price
c. Cost sharing
d. Fixed-price with redetermination
69. Which of the following is based on the notion that, as purchase volume increases, cost structures change?
a. Time and materials contracts
b. Short-term contracts
c. Long-term contracts with incentive
d. Spot contracts
70. Which of the following contract clauses ensures that all information shared between the parties is not shared with other customers or suppliers?
a. Most favored customer
b. Technology improvements
c. Effective date and termination
d. Confidentiality
71. In which of the following does the court refer a pending lawsuit between the parties to a private, neutral party who conducts a “trial” using protocols simulating those of a real trial?
a. Mediation
b. Arbitration
c. Litigation
d. Rent-a-judge
72. Which of the following is the first step in the typical sequence of events for an owner/purchaser seeking bids from prospective construction contractors?
a. The owner/purchaser determines a base of preferred contractor bidders.
b. The buyer holds a pre-bid meeting with interested bidders.
c. Bidders submit questions in writing to the purchaser.
d. Bidders are queried regarding their interest in preparing a competitive bid.
73. Which of the following is a form of presentation involving an exchange of information between manager from each organization involved in the dispute?
a. Mini-trial
b. Arbitration
c. Litigation
d. Rent-a-judge
74. Which contract clause describes how an issue will be addressed if a portion of the agreement is void or unenforceable
and which court of law will resolve the difference?
a. Force majeure
b. Severability
c. Scope of agreement
d. Liability
75. The United States has federal programs to incentivize business with at least which percentage of ownership by minorities such as African Americans, Hispanic Americans, Native Americans, and Asian-Pacific Americans?
a. 31%
b. 51%
c. 71%
d. 91%
76. Which of the following third-party contract resolution methods is the fastest-growing means of conflict resolution among contracting parties, both in the United States and abroad?
a. Outside arbitrator
b. Rent-a-judge
c. Litigation
d. Minitrial
77. Which of the following is an agreement that typically covers many different items that can be purchased under a single purchase order number, thereby minimizing repetitive paperwork in the purchasing department for relatively low-cost items?
a. An annual contract
b. A national contract
c. A blanket order
d. A corporate agreement
78. Which of the following considerations would discourage a company involved in a contract dispute from pursuing a court settlement?
a. Plentiful funding allocated for contract disputes
b. Ready access to credible experts and witnesses
c. Possession of trade secrets that would be disclosed during a trial
d. Failure of prior mediation attempts
79. Which of the following contract clauses specifies whether the buyer can share the technology of other market products with the supplier and how the supplier should act on this information?
a. Force majeure
b. Technology improvements
c. Effective date and termination
d. Liability
80. Which of the following contract clauses stipulates whether the supplier can transfer its rights described in the agreement to the party?
a. Force majeure
b. Definitions
c. Purchase orders
d. Liability
81. Which of the following is NOT a risk that long-term contracts present to suppliers?
a. The buyer could become unreasonable.
b. The supplier must forgo other business.
c. The supplier’s volume is uncertain.
d. The buyer becomes complacent and loses motivation to maintain or improve performance.
82. Which contract clause establishes where bills, invoices, and other documents should be sent, as well as the key contact person at the buying and selling companies to whom contract-related questions should be addressed?
a. Statistics
b. Notices
c. Scope of agreement
d. Liability
83. Which of the following clauses assumes the contract will be renewed every year unless the supplier is otherwise notified that this is not the case?
a. An evergreen clause
b. A due diligence clause
c. A penalty clause
d. An escape clause
84. Which of the following contract clauses describes the course of events the occur if there are unforeseen calamities such as natural disasters that prevent a supplier from fulfilling its obligations to the buyer?
a. Force majeure
b. Definitions
c. Scope of agreement
d. Liability
85. Which of the following type of contract generally runs for a 12-month period and may or may not come up for renewal at the end of the year?
a. A national contract
b. An annual contract
c. A blanket order
d. An open-ended agreement
86. In which of the following approaches to a system supplier’s level of service does the outsource service supplier take on only two or three small functions from the client, using a stepping stone approach?
a. Modular
b. Turnkey
c. Shared
d. Incremental
87. Which of the following is NOT a critical pricing issue that purchasers should consider when negotiating a systems contract?
a. Payment method
b. Payment timing
c. Workload scheduling
d. Contractor client base
88. Which of the following is NOT an element that allows for contingencies that may arise over the course of long-term contracts?
a. Initial price
b. Price-adjustment mechanisms
c. Supplier performance improvements
d. Binding arbitration
89. In which of the following approaches to a system supplier’s level of service does the service provider and the client company jointly access resources and exercise operational control over the outsourced service?
a. Modular
b. Turnkey
c. Shared
d. Incremental
90. Which of the following is NOT a reason that suppliers prefer long-term contracts?
a. The supplier receives better scheduling information, helping their production improve efficiency.
b. The expectation of continued future volumes allows suppliers to make detailed projections of volumes and delivery dates, allowing the supplier to better budget the flow of funds.
c. The supplier can realize lower administrative costs over the term of the contract.
d. The supplier can afford to pay its workforce higher wages to increase productivity.
91. Which of the following contract clauses defines what participants and activities are covered by the contract, including the geographical limitations, validity of prior contracts, preferential treatment by the supplier, and other elements?
a. Force majeure
b. Definitions
c. Scope of agreement
d. Liability
92. For arbitration to become an enforceable part of the buyer-supplier agreement, which of the following must be true?
a. Both buying and selling organization’s forms must contain arbitration clauses.
b. Only the seller’s forms must contain an arbitration clause.
c. Only the buyer’s forms must contain an arbitration clause.
d. Arbitration is not enforceable even if it is included in both buyer’s and seller’s forms.
93. In a firm fixed-price contract, which of the following changes in the market price for the purchased goods or service results in the supplier bearing the burn of the financial loss?
a. The market price rises above the stated contract price.
b. The market price falls below the stated contract price.
c. The market price stays roughly the same as the stated contract price.
d. Changes in market price relative to the contract price have no financial consequences for parties to a firm fixed-price contract.
94. Which of the following is NOT something a systems outsourcing team should consider before committing to an outsourcing contract?
a. The physical location of the contractor’s headquarters
b. The length of the proposed agreement
c. The role of the company’s growth or downsizing
d. The service provider defaults or contract amendments
95. An open-ended order is similar to which of the following with the exception that an open-ended order allows the addition of items not specified in the original order?
a. A blanket order
b. A national buying agreement
c. A pricing agreement
d. A corporate agreement
96. Which of the following contract clauses defines all of the important terms contained within the contract, allowing everyone to understand exactly what each term means?
a. Force majeure
b. Definitions
c. Scope of agreement
d. Supply and delivery
97. Which of the following alternatives to litigation would be best if the dispute between the parties is significant and highly complex?
a. Minitrial
b. Negotiation
c. Mediation
d. Arbitration
98. Which of the following is NOT a major issue to be considered with respect to e-commerce contracts?
a. Parity between electronic and paper records
b. Enforceability of shrink wrap and box top agreements
c. Attribution procedures
d. The relative locations of the supplier’s and buyer’s facilities
99. Which of the following best describes the relationship between the length of the purchase agreement term and the likelihood that a firm fixed-price contract will be acceptable to the buyer or supplier?
a. The shorter the term, the more likely the supplier will find a fixed-price contract acceptable.
b. The longer the term, the more likely the supplier will find a fixed-price contract acceptable.
c. The longer the term, the more likely the buyer will find a fixed-price contract acceptable.
d. There is no relationship between fixed-price contract term length and acceptability to either buyer or supplier.
100. Which of the following occurs in situations where a buyer is allowed to automatically discount the published purchase price by a negotiated percentage for all purchases from a given price list during the contract period?
a. A pricing agreement
b. An international contract
c. An open-ended order
d. A national contract
101. Which of the following conflict-resolution options affords the disputing parties the LEAST privacy?
a. Mediation
b. Arbitration
c. Litigation
d. Negotiation
102. Which of the following is NOT a characteristic of dispute settlement in the U.S. legal system?
a. It involves a high level of uncertainty regarding dispute outcome.
b. It is costly compared to the value of the disputed issues.
c. It requires long times to settle disputes.
d. It is the preferred dispute settlement method for most buyers and sellers.
103. Which of the following is NOT one of the potential benefits of using a long-term contract?
a. Assurance of supply
b. Volume leveraging
c. Access to cost and price information
d. Supplier opportunism
104. Which of the following is NOT one of the factors to consider when deciding which dispute-resolution mechanism to use?
a. The status of the relationship between disputing parties
b. The type of outcome desired by the purchaser
c. The type of contract leading to the dispute
d. The level of emotion displayed by principals
105. Which of the following is NOT a goal consultants should consider when negotiating a short-term consulting contract for their services?
a. Maintenance of working independence and freedom
b. Assurance of work
c. The long-term financial viability of the client
d. Avoidance of liability
106. Which of the following is defined as the submission of a disagreement to one or more impartial persons with the understanding that the disputing parties will abide by their decision?
a. Negotiation
b. Arbitration
c. Litigation
d. Mediation
107. Disputing parties with limited funding and tight timelines would be the LEAST likely to pursue which of the following methods of conflict resolution?
a. Mediation
b. Arbitration
c. Litigation
d. Negotiation
108. Which of the following is defined as a contract purchase that is routinely made over a relatively limited time horizon, typically one year or less?
a. Short-term contract
b. Alliance
c. Spot-contract
d. Partnership
109. Which of the following represents the progression (first-to-last) of dispute resolution methods used by buyers and sellers who agree to dispute prevention?
a. Litigation, arbitration, mediation, negotiation
b. Negotiation, arbitration, litigation, mediation
c. Arbitration, mediation, litigation, negotiation
d. Negotiation, mediation, arbitration, litigation
110. Which of the following is NOT a common characteristic of legal alternatives for settling buyer-seller disputes?
a. The reside in the polar opposites of doing nothing and escalating conflict.
b. They are less formal and more private that court battles.
c. They permit disputing parties to have more active participation and control over the dispute resolution process.
d. Most of them were developed in the private sector.
111. Which of the following is an intervention between conflicting parties to promote reconciliation, settlement, or compromise?
a. Negotiation
b. Arbitration
c. Litigation
d. Mediation
112. Which of the following contracts is designed to provide access to expensive computer networks and software that single companies are often unable to afford on their own?
a. A turnkey contract
b. A systems contract
c. A firm fixed price contract
d. An evergreen contract
113. Which contract clause stipulates that any benefits attributed to a party other than the buyer or supplier identified in the contract must be enforced?
a. Force majeure
b. Severability
c. Third party rights
d. Liability
114. Which contract clause stipulates the judicial court where any disputes will be settled.
a. Force majeure
b. Definitions
c. Governing law
d. Liability
115. Which of the following contract clauses would you reference to determine what relationship the Agreement had with outstanding offers to purchase that the buyer has made to the supplier?
a. Force majeure
b. Definitions
c. Scope of agreement
d. Liability
116. Which of the following contracts is nonbinding on either the purchaser or the supplier and typically provides
discounts to corporate buyers based on total volume for the corporation a whole rather than for individual subunits?
a. An annual contract
b. A national buying agreement
c. A corporate agreement
d. A firm fixed-price contract
117. Which of the following is a contract purchase that is made on a continuing basis for a specified or indefinite timeperiod?
a. Short-term contract
b. Spot contract
c. Long-term contract
d. Alliance
118. Which of the following is NOT an example of a contingency element of a long-term contract?
a. Price-adjustment mechanisms
b. Delivery dates and time
c. Supplier performance improvement
d. Evergreen clauses
119. Which of the following contract clauses provides guidelines for what types of data and measures the supplier must provide to the buyer regularly?
a. Statistics
b. Definitions
c. Scope of agreement
d. Liability
120. Which of the following is the most basic contractual pricing mechanism?
a. Fixed price with escalation
b. Firm fixed price
c. Cost plus incentive fee
d. Cost sharing
121. Which of the following clauses allows the buyer and, in some cases, the supplier, to terminate the contract if either party fails to live up to the contractual requirements?
a. An evergreen clause
b. A due diligence clause
c. A penalty clause
d. An escape clause
112. b
113. c
114. c
115. a
116. b
117. c
118. b
119. a
120. b
121. d
Indicate whether the statement is true or false.
1. The most common ethical infraction on the part of buyers is accepting gifts from a supplier.
a. True
b. False
2. Under the UCC, the buyer carries the risk of loss until the title passes to the seller.
a. True
b. False
3. Ethics identify common principles that distinguish appropriate versus inappropriate actions, moral duty, and obligations.
a. True
b. False
4. The UCC covers most commonly-encountered contractual mistakes.
a. True
b. False
5. Inventors must file patent applications in the country where protection is desired if they want their patent protection to apply outside the United States.
a. True
b. False
6. When a company hires an individual to perform a purchasing job, the purchasing agency relationship is created
between employer and employee.
a. True
b. False
7. Executive management sets the ethical code of behavior within a firm.
a. True
b. False
8. Because people make agreements every day, every agreement can be considered to be a contract.
a. True
b. False
9. Honest mistakes by one party are generally sufficient to void the contract.
a. True
b. False
10. In the UCC, the notion of damages is grounded in the remedy of the offended party being “made whole”.
a. True
b. False
11. Contract law governs the relationships between principals and agents.
a. True
b. False
12. The UCC calls for full compensation for a party that is a victim of breach of contract. For this reason, the victim’s attorney fees are collectible.
a. True
b. False
13. A contract can exist only if there is an agreement that results from acceptance of an offer?
a. True
b. False
14. Ownership of the goods can transfer from supplier to buyer before the purchaser accepts them.
a. True
b. False
15. Suppliers seldom attempt to influence the decisions of supply professionals.
a. True
b. False
16. The penalties for patent infringement are generally mild, so standard purchasing agreements rarely contain an effective patent indemnification clause.
a. True
b. False
17. The Federal Trade Commission Act makes price discrimination illegal and prohibits sellers from making exclusive arrangements with purchasers.
a. True
b. False
18. Both buyers and sellers can arbitrarily cancel their contracts with impunity.
a. True
b. False
19. The purchasing agent is, in most cases, a general agent for the buying firm with broad authority to change prices, terms, and conditions.
a. True
b. False
20. The UCC allows the purchaser to reject entire shipments, but not discrete parts of shipments, for cause.
a. True
b. False
21. If the primary purpose of the contract is legal, but some contract terms are not, then the contract itself may or may not be legal depending on the seriousness of the illegal terms.
a. True
b. False
22. Contracts between multiple parties disallow the shifting of risk among entities and are rarely used in supply chain relationships.
a. True
b. False
23. A good rule of thumb is that purchasing professionals must always act in the best interests of their employer.
a. True
b. False
24. Purchasing managers are exempt from personal liability for damages and illegal activities performed with the authority of their firm.
a. True
b. False
25. An author does not need to apply for a copyright – it is automatically granted.
a. True
b. False
26. A firm should not encourage suppliers to report instances of unethical behavior by anyone within the buying firm.
a. True
b. False
27. In cases where the contract is in writing, the written contractual document is prioritized over previous oral evidence.
a. True
b. False
28. Both copyright and patent law require formal applications.
a. True
b. False
29. The UCC serves as a “gap filler” and provides guidance in cases where parties themselves do not supply a contract term.
a. True
b. False
30. From a legal perspective, purchasing managers have no fiduciary obligation to act in the best interests of their employers.
a. True
b. False
31. Because it is not necessary for both parties to a contract to enter into the contract of their own free will, use of coercion to reach an agreement and signing is acceptable.
a. True
b. False
32. If an individual exceeds both actual and apparent authority, they may be held directly liable by the supplier and other third party.
a. True
b. False
33. If both parties mutually agree to terminate a contract, what they are doing is creating a new contract with the intent of nullifying the first one.
a. True
b. False
34. Purchasing activities are concerned with the laws regarding contracts and the laws regarding agency, most of which address contract law.
a. True
b. False
35. Trade secrets might include resources such as formulas, supplier and customer lists, procedures, and training programs.
a. True
b. False
36. When the purchaser rejects the goods delivered by the supplier because the goods are do not conform to contract requirements, the purchaser must notify the supplier with 24 hours.
a. True
b. False
37. The Foreign Corrupt Practices Act forbids price fixing and limiting the supply of a commodity.
a. True
b. False
38. The term “FOB” defines the point at which the supplier becomes responsible for freight charges and where the purchaser assumes title to the shipment.
a. True
b. False
39. Cancellation by mutual consent does not automatically trigger legal action because it indicates cancellation of a
previously agreed-upon contract.
a. True
b. False
40. In agreeing to perform purchasing duties for their employer, a purchasing manager implies they will not make mistakes in the performance of their duties.
a. True
b. False
41. It is illegal for sellers to exaggerate the benefits of their products and services during their sales pitch.
a. True
b. False
42. Depending on the circumstances, a purchase order can be an offer, acceptance, or counteroffer.
a. True
b. False
43. Accepting a supplier’s outside gifts and favors in exchange for special treatment is not a form of corruption.
a. True
b. False
44. It is not advisable for buyers to routinely permit suppliers to breach purchase contracts.
a. True
b. False
45. In general, sales representatives are general agents, authorized to solicit orders and change prices, terms, and conditions.
a. True
b. False
46. A breach of contract frequently entitles the offended party to damages or remedies.
a. True
b. False
47. If the terms of the buyer’s purchase order and the supplier’s acceptance conflict, then all terms of the purchase order and acceptance, including conflicting terms, become part of the resulting contract.
a. True
b. False
48. Firms attempting to recover lost profits from a breach of contract must produce verifiable evidence that they would have made the claimed profits.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
49. During a meeting with a supplier, a buyer tells the supplier, “I’ll buy from you if you buy from me.” The buyer is engaging in which type of unethical behavior?
a. Reciprocity
b. Personal buying
c. Accepting supplier favors
d. Disclosure of confidential/proprietary information
50. Which of the following is defined as the total amount of greenhouse gases emitted directly or indirectly by the organization?
a. The organization’s pollution impact
b. The organization’s energy efficiency
c. The organization’s carbon footprint
d. The organization’s sustainable tactics
51. Which of the following describes who is responsible for the selection of a carrier, payment of the freight bill, and the method in which the title of goods passes between the purchaser and the supplier?
a. Freight bills
b. Bills of lading
c. Prepaid shipments
d. Delivery terms
52. Which of the following describes the strategy in which items are sourced in a responsibility and sustainable way and that workers making them are safe and treated fairly as part of the sourcing process?
a. Sustainable sourcing
b. Sustainable procurement
c. Ethical sourcing
d. Responsible sourcing
53. Which ISM standard of ethical supply management recommends that purchasing professionals avoid behaviors or actions that may negatively affect, or appear to impact, supply management decisions?
a. Conflict of Interest
b. Influence
c. Impropriety
d. Impropriety
54. Which of the following is FALSE regarding U.S. federal Antitrust laws?
a. They promote fair conduct of business.
b. They preserve competition in markets.
c. Most of the laws apply to the conduct of the buyer.
d. They address competitive practices of interstate commerce.
55. Which of the following is NOT a general suggestion that can help purchasing managers to protect their organizations against warranty problems?
a. Write a complete purchase order.
b. Document all private negotiations with supplier representatives.
c. Send and save emails, texts, and scan written documents
d. Specifically discuss warranties with the seller.
56. According to the World Resource Institute’s Greenhouse Gas Protocol, which emissions Scope includes indirect emissions from purchased energy?
a. Scope 1
b. Scope 2
c. Scope 3
d. Scope 4
57. Which of the following U.S. Federal law strengthens, clarifies price discrimination issues, with a focus on limiting the power of large buyers?
a. Anti-Boycott Legislation
b. The Federal Trade Commission Act
c. The Robinson-Patman Act
d. The Foreign Corrupt Practices Act
58. Which of the following is FALSE regarding the acceptance and rejection of goods?
a. Once the purchaser accepts the goods, there is only one recourse – to make a claim against the supplier.
b. The purchaser has the right to send the rejected goods back even if the supplier does not consent to this action.
c. The UCC specifies that the purchaser does not have the legal right to withhold payment from the supplier once acceptance has been made.
d. Purchasers have a legitimate right to inspect contracted goods before accepting or rejecting them.
59. Which of the following determines the nature of enforceable agreements and creates legal rights between parties?
a. Agency law
b. Contract law
c. Civil law
d. Litigation
60. Which of the following is an attempt by the United Nations to facilitate international trade by removing legal barriers?
a. UCC
b. CISG
c. FTCA
d. FCPA
61. Which of the following is NOT one of the benefits that the UCC provides to buyers?
a. If a seller makes an offer in writing, the seller must honor it for the contractually stated time period.
b. Verbal agreements, even if confirmed in writing and if no objection is made, are invalid.
c. The conflict between a buyer’s purchase order terms and a seller’s acknowledgement terms will generally be resolved according to the two firms’ prior conduct.
d. Regarding warranties, the purchasing manager can legally rely on the supplier to provide the item needed to do the job.
62. According to the World Resource Institute’s Greenhouse Gas Protocol, which emissions Scope includes emissions from the company’s supply chain?
a. Scope 1
b. Scope 2
c. Scope 3
d. Scope 4
63. Which of the following is true regarding purchasing ethics and legal behavior?
a. A professional purchasing manager can defer detailed understanding of purchasing law to the company’s legal department.
b. Good ethical practices will not minimize legal entanglements.
c. Purchasing professionals can obey all applicable purchasing law and still engage in unethical behavior.
d. There may be a fine line between behavior that is legal and behavior that is both legal and ethical.
64. In a legal context, which of the following is the person for whom agents carry out their authority?
a. A principal
b. A manager
c. A director
d. An authority
65. Which type of warranty is described by the UCC as any affirmation of fact or promise made by the seller to the buyer that purchased goods conform to affirmation or promise?
a. An implied warranty
b. An express warranty
c. A general warranty
d. A specific warranty
66. Which of the following is defined as the power that somebody has to affect other people’s thinking or actions by means of argument, example, or force of personality?
a. Personal buying
b. Reciprocity
c. Sharp practice
d. Influence
67. Upon acceptance of goods by the buyer which of the following is correct?
a. The supplier’s rights increase and the purchaser’s rights decrease.
b. Both the purchaser’s and supplier’s rights increase.
c. The supplier’s rights decrease and the purchaser’s rights increase.
d. Both the purchaser’s and supplier’s rights decrease.
68. Which of the following is NOT a requirement to receive trade secret protection under the law?
a. Almost everyone outside the company is aware of the trade secret.
b. The organization must take steps to minimize or preclude the distribution of sensitive information.
c. The trade secret is economically valuable.
d. The trade secret is not generally known.
69. Which of the following is defined as the ability to meet current needs without hindering the ability to meet the needs of future generations in terms of economic, environmental, and social challenges?
a. Ethics
b. Sustainability
c. Social responsibility
d. Influence
70. An engineer, impressed by the technical capabilities of a particular supplier’s equipment, commits to purchasing several units. what kind of authority is rhe engineer exercising?
a. Implied
b. Actual
c. Apparent
71. Which of the following refers to the supplier’s guarantee that the goods being exchanged do not illegally violate another party’s patent protection?
a. Warranty of title
b. Express warranty
c. Warranty of infringement
d. Implied warranty of merchantability
72. Which of the following occurs when a purchasing department purchases materials for the personal needs of its employees?
a. Personal buying
b. Reciprocity
c. Sharp practices
d. Conflict of interest
73. According to the UCC, which of the following is NOT one of the buyer’s rights?
a. The right to reject defective goods that the seller cannot repair within a reasonable time.
b. The right to unilaterally cancel a purchase contract for any reason.
c. The right to revoke acceptance of goods if the buyer discovers latent defects.
d. The right to sue for breach of contract.
74. If the carrier has refused to pay a freight claim, then how much time does the claimant have from the time the claim was disallowed to file for legal relief in the courts?
a. 10 days
b. 30 days
c. 9 months
d. 2 years
75. On which of the following is the freight bill presented on the effective day of delivery?
a. FOB origin shipments
b. Collect shipments
c. Prepaid shipments
d. FOB destination shipments
76. Which of the following U.S. Federal laws broadened the Sherman Act, making price discrimination illegal as well as exclusive purchaser and distributor contract?
a. Anti-Boycott Legislation
b. Federal Trade Commission Act
c. Robinson-Patman Act
d. Clayton Antitrust Act
77. Which of the following is a person or entity who has been authorized to act on behalf of another person or entity?
a. A principal
b. A manager
c. An agent
d. A representative
78. Which of the following is money that the plaintiff was hoping to gain from the contract?
a. Reliance
b. Expectancy
c. Due diligence
d. Restitution
79. On which of the following is the freight bill presented on the effective date of the shipment?
a. FOB origin shipments
b. Collect shipments
c. Prepaid shipments
d. FOB destination shipments
80. Which of the following describes a purchase made by an individual in an organization who is not an agent?
a. An authorized purchase
b. A spot purchase
c. A continuing purchase
d. A maverick purchase
81. A particular company has a policy prohibiting both marketing and purchasing personnel from distributing gifts to their customers and suppliers, respectively. Which action is the company taking to support ethical behavior?
a. A preventative measure
b. A statement of ethics
c. Ethical training
d. Consistent behavior
82. The United Nations Development Program defines which of the following as making sure that the products and services purchased are as sustainable as possible with the lowest environmental impact and most positive results?
a. Sustainable sourcing
b. Sustainable procurement
c. Ethical sourcing
d. Responsible sourcing
83. Which of the following is something of value in the formation that gives the contract legal validity?
a. Apparent authority
b. Actual authority
c. Acceptance
d. Consideration
84. Which of the following is NOT a rule of ethical behavior in purchasing?
a. Buyers must commit their attention and energies to the organization’s benefit rather than personal enrichment at the expense of the organization.
b. A buyer must act ethically toward suppliers or potential suppliers.
c. Buyer must do whatever is necessary to reduce prices with suppliers
d. Buyers must uphold the ethical standards set forth by both their organizations and the purchasing profession.
85. Which of the following refers to the power of an agent to do all of the tasks reasonably necessary to accomplish the duties assigned by the principal in the job description?
a. Apparent authority
b. Actual authority
c. Fiduciary authority
d. Implied authority
86. Which of the following is money the plaintiff lost because they were relying on the contract, depending on the defendant to live up to their obligations under the contract?
a. Reliance
b. Expectancy
c. Due diligence
d. Restitution
87. Which of the following describes the legal requirement to act in the best interest of their employee while carrying out their duties in a faithful, ethical, and conscientious manner?
a. Apparent responsibility
b. Moral obligation
c. Fiduciary obligation
d. Accountable position
88. Which ISM standard of ethical supply management encourages purchasing professionals to ensure that any personal business and other activities do not conflict with the lawful interests of their employers?
a. Conflict of Interest
b. Influence
c. Impropriety
d. Reciprocity
89. Which of the following is the level of authority perceived by the seller to be available to the purchasing manager?
a. Apparent authority
b. Actual authority
c. Fiduciary authority
d. Implied authority
90. Which of the following is a set of promises between two or more parties the performance of which the law expects and the violation of which the law provides remedies?
a. An offer
b. An agreement
c. A breach
d. A contract
91. Which of the following occurs when either party fails to perform the obligations due under contract – without a valid or legal justification?
a. Damages
b. Cancellation
c. Restitution
d. Breach of contract
92. Which of the following is NOT a category of contract cancellation?
a. Cancellation for default
b. Cancellation for convenience of the purchaser
c. Cancellation by mutual assent
d. Cancellation for incurred damages
93. Which of the following is defined as the power to affect other people’s thinking or actions by means of argument, example, or force of personality?
a. Influence
b. Ethics
c. Reciprocity
d. Impropriety
94. Which of the following is an attempt by the United Nations to facilitate international trade by removing legal barriers?
a. The Robinson-Patman Act
b. The International Anti-Bribery Act
c. Anti-Boycott Legislation
d. Contracts for the International Sale of Goods
95. Which of the following indicates that the purchaser is responsible for payment of transportation costs and assumes title of the goods at the supplier’s shipping dock?
a. FOB origin
b. FOB delivered
c. FOB carrier
d. FOB destination
96. Which of the following involves the buyer seeking a court order forcing the seller to deliver the goods?
a. Arbitration
b. Specific performance
c. An implied warranty of merchantability
d. An express warranty
97. Which of the following can be defined as a failure of one of the parties to live up to the terms and conditions of the contract?
a. Cancellation for default
b. Cancellation for the convenience of the seller
c. Cancellation by mutual assent
d. Cancellation for the convenience of the purchaser
98. In 1999, which of the following adapted the existing “paper and pencil” contract law concepts to the electronic age, making electronic records equivalent to written documents and electronic signatures the same as handwritten signatures for legal purposes?
a. UETA
b. RFI
c. HSPD-12
d. UCC
99. A buyer approaches a supplier and states that they want to purchase 500 units of Product XYZ at a price of $10 per unit. The buyer has made which of the following?
a. A specific offer
b. A conditional offer
c. A negotiation basis
d. Due diligence
100. Which of the following ISM principles of sustainability and social responsibility management admonishes purchasing professionals to protect all persons in the supply chain from the risk of injury, danger, failure, error, harm, and/or loss of life?
a. Financial integrity
b. Global citizenship
c. Health and safety
d. Human rights
101. Which of the following is a proposal or expression by one person that they are willing to do something for certain terms?
a. An offer
b. A clause
c. Acceptance
d. Consideration
102. Which if the following ISM principles of sustainability and social responsibility management recommends that purchasing professionals make available full and complete information necessary for collaboration, cooperation, and collective decision-making?
a. Financial integrity
b. Global citizenship
c. Health and safety
d. Transparency
103. Which of the following is a U.S. law intended to prevent companies and individuals from bribing non-U.S. government officials to obtain or retain businesses?
a. The Foreign Corrupt Practices Act
b. The Export Administration Act
c. Anti-Boycott Legislation
d. Contracts for the International Sale of Goods
104. Which of the following is NOT a form of sharp practice?
a. Willful use of misinformation
b. Exaggerating problems
c. Sharing information on competitive quotations
d. Knowingly withholding information during a negotiation
105. Which of the following, , is defined as a promise or representation made by the seller that, if necessary, can be legally enforced?
a. A statement of fact
b. A verbal agreement
c. A warranty
d. The buyer’s right of rejection
106. Which of the following are damages that result if the terms of the contract are not fulfilled and must be defined prior to a breach under the terms of the contract?
a. General damages
b. Consequential damages
c. Liquidated damages
d. Incidental damages
107. Which of the following is any misrepresentation by a buyer that falls just short of actual fraud?
a. Graft
b. Sharp practice
c. Bribery
d. Conflict of interest
108. Which of the following is NOT an area of activity that could lead to personal liability for purchasing managers?
a. Consultation with their organization’s legal department regarding contract wording.
b. Misusing proprietary information
c. Violation of antitrust laws
d. Violation of the lawful protection of items owned by others, such as patent infringement
109. When the seller, at the time of contracting, has reason to know of any particular purpose for which the goods are required, and the buyer is relying on the seller’s skill to furnish suitable goods, then there is an implied warranty of which of the following?
a. Merchantability
b. Infringement
c. Fitness for use
d. Quality
110. Which of the following is NOT one of the essential elements of an enforceable contract?
a. An offer
b. Acceptance
c. Consideration
d. Due diligence
111. Which of the following laws apply to business transactions that are not part of any specific country’s laws and regulations?
a. Maritime laws
b. U.S. customs and border protection laws
c. Anti-Boycott Legislation
d. Contracts for the International Sale of Goods
112. Which of the following describes the origin of the shipment, provides specific directions for the carrier, delineates the transportation contract terms, and functions as a receipt for the shipment?
a. Bill of lading
b. Implied warranty of transportation
c. Freight bill
d. Implied warranty of merchantability
113. Purchasing managers who perform activities which damage their firm, without appropriate authority are subject to which of the following?
a. Disciplinary action from their supervisor
b. Legal liability
c. Dismissal from their positions
d. Re-assignment to a different business unit
114. Which of the following ISM principles of sustainability and social responsibility management encourages purchasing professionals to conduct all financial and business dealings and decision-making with honesty?
a. Financial integrity
b. Global citizenship
c. Health and safety
d. Human rights
115. Which ISM standard of ethical supply management conduct recommends that purchasing professionals prevent the intent and appearance of unethical or compromising conduct in relationships, actions, and communications?
a. Conflict of Interest
b. Influence
c. Impropriety
d. Reciprocity
116. Which of the following stems from the instructions to the purchasing manager via the job description provided by the employer?
a. Apparent authority
b. Actual authority
c. Fiduciary authority
d. Implied authority
117. Which of the following is NOT one of the actions a firm can take to enhance ethical behavior?
a. Monitoring employee conversations with security cameras.
b. Developing a statement of ethics
c. Reporting unethical behavior
d. Rotating commodities and limiting authority
118. A supplier’s sales representative acting as a sales agent is authorized by the supplier firm to do which of the following?
a. Solicit orders
b. Change prices
c. Alter contract terms
d. Modify the terms & conditions of the sale
119. Which of the following is NOT a measure that can prevent unethical behavior among purchasing professionals?
a. Rotate buyers among different items and commodities.
b. Cap a buyer’s purchase authority at a maximum dollar amount.
c. Require a buyer to justify supplier selection decisions based on solid purchasing criteria.
d. Ensure that buyers develop expertise by focusing on particular supplier groups.
120. Which of the following refers to the standard terms and conditions that are usually preprinted on the back of forms used by the purchaser and seller?
a. Boilerplate
b. Consideration
c. Request for proposal
d. Purchase order
121. Which of the following is an area covered by laws of countries outside of the U.S.?
a. U.S. imports Contract law
b. Export control
c. Currency control
122. Which of the following involves giving preferential treatment to suppliers who are also customers of the buying organization?
a. Personal buying
b. Reciprocity
c. Sharp practices
d. Conflicts of interest
123. The best way that purchasing executives can discourage unethical behavior is which of the following?
a. Monitor conversations and emails of individual buyers as well as buyer-supplier meetings.
b. Create an anonymous system for buyers to report unethical behavior of their peers.
c. Periodically audit purchasing contracts are negotiated by buyers.
d. Create an atmosphere encouraging both buyers and suppliers to report unethical behavior by anyone in your firm.
124. In large contracts up-front provisions stipulate the mechanism to be used in determining any costs and damages to the injured party in the event of a breach of contract?
a. Mutual assent
b. Restitution
c. Liquidated damages
d. Expectancy
125. Which of the following U.S. Federal laws addresses unfair trade practices that allow large firms to gain advantage over smaller rivals, predatory competition, restraint of trade, or false advertising?
a. The Sherman Antitrust Act
b. The Federal Trade Commission Act
c. The Robinson-Patman Act
d. The Foreign Corrupt Practices Act
126. Which of the following takes place when the offeree incurs a legal detriment in response to the offeror’s offer?
a. Rejection
b. Anticipatory breach
c. Acceptance
d. Consideration
127. The Certified Institute of Purchasing and Supply in London defines which of the following as the process that considers the environmental, social, and economic impacts of procurement decisions?
a. Sustainable sourcing
b. Sustainable procurement
c. Ethical sourcing
d. Ethical sourcing
128. When a purchasing manager signs a contract on their organization’s behalf, they are acting as which of the following?
a. A special agent
b. A principal
c. A general representative
d. A general agent
129. According to the UCC, which of the following is NOT one of the seller’s rights?
a. If the buyer refuses to pay for the goods received, sue the buyer for the purchase price of the goods.
b. Recover the reasonable costs and expenses incurred if goods must be resold.
c. Receive compensation for additional costs and expenses incurred by reason of the buyer’s wrongful conduct.
d. Recover the full cost of producing and restocking the goods, even if the goods are resold.
130. Which of the following is money the plaintiff actually paid to the defendant in connection with the contract in the event of a contract breach?
a. Reliance
b. Restitution
c. Due Diligence
d. Expectancy
131. Which of the following is designed to afford protection for persons who create original works such as books, software, songs, and films?
a. Patent
b. Trademarks
c. Trade secret
d. Copyright
132. Which of the following is defined as the body of law that refers to how business firms enter into contracts with others, execute those contracts, and remedy problems that arise in the process?
a. Civil law
b. Agency law
c. Commercial law
d. Criminal law
133. Which ISM standard of ethical supply management encourages purchasing professionals to develop their skills and expand their knowledge?
a. Conflict of Interest
b. Influence
c. Professional competence
d. Reciprocity
134. Which of the following addresses the importation of goods into the United States seeking to enhance national security while protecting commerce?
a. U.S. Customs and Border Protector Laws
b. The Export Administration Act
c. Anti-Boycott Legislation
d. Contracts for the International Sale of Goods
135. Which of the following indicates that the supplier is responsible is responsible for transportation, and the purchaser assumes title of the goods at his or her own shipping dock.
a. FOB origin
b. FOB delivered
c. FOB carrier
d. FOB destination
136. Which of the following ISM principles of sustainability and social responsibility management encourages purchasing professionals to act for the benefits of citizens worldwide, locally, and elsewhere, fulfilling ethical and moral obligations?
a. Financial integrity
b. Global citizenship
c. Health and safety
d. Human rights
137. Which of the following is equal to the difference between the value of the purchased good at the time of actual delivery and the value of the goods at the time of specified delivery?
a. General damages
b. Consequential damages
c. Liquidated damages
d. Incidental damages
138. Which of the following essentially indicates that the supplier warrants that it has title to the goods and that said goods are not stolen or subject to any security interest or liens?
a. A warranty of infringement
b. An implied warranty of merchantability
c. A warranty of title
d. An implied warranty of fitness for use
139. Which of the following include expenses generally incurred in inspection, receipt, transportation, and the care and custody of goods appropriately rejected by the purchaser?
a. General damages
b. Consequential damages
c. Liquidated damages
d. Incidental damages
140. Which of the following deals with the role of managers as representatives of their organizations and acting on their organization’s behalf?
a. Agency law
b. Contract law
c. Civil law
d. Litigation
141. According to the World Resource Institute’s Greenhouse Gas Protocol, which emissions Scope includes direct emissions from sources that are owned or controlled by the company?
a. Scope 1
b. Scope 2
c. Scope 3
142. Which of the following is the idea that organizations and institutions have an obligation to society that extends beyond compliance with regulations in considering the broader effects of their actions?
a. Ethics
b. Influence
c. Corporate social responsibility
d. Mutual assent
143. Which of the following doctrines holds that if one or more parties made a promise, even orally, they cannot renege on that promise if the other party acted in reliance on the promise?
a. Caveat emptor
b. Promissory estoppel
c. Anticipatory breach
d. Consideration
144. In order to be valid, freight claims must be filed within which what period of the actual or reasonable date of delivery?
a. 10 days
b. 30 days
c. 9 months
d. 2 years
145. Which of the following is FALSE regarding the risks of unethical behavior by a purchaser?
a. The buyer pays too little for a purchased good or service.
b. Unethical behavior presents a personal risk to a buyer’s professional reputation.
c. A buyer who performs an unethical act runs the risk that the act is also illegal.
d. Sellers quickly become aware of buyers who are open to offers made outside of authorized channels.
146. Under the UCC, which of the following applies to contracts worth more than $500 or any contract that cannot be fully performed in one year?
a. Boilerplate
b. Consideration
c. Statute of Frauds
d. Implied Authority
147. Which practice has grown in popularity among major corporations needing to reduce their impact on the environment?
a. Use of recycled paper
b. Use of fleet vehicles
c. Consolidation of operations
d. Replacement of paper documents with electronic documents
148. Which of the following is NOT one of the articles in the current UCC?
a. International Contracts
b. Bulk Sales
c. General Provisions
d. Secured Transactions
149. Which of the following U.S. federal laws prohibits actions that are “in restraint of trade” or actions that attempt to monopolize a market?
a. The Sherman Antitrust Act
b. The Clayton Antitrust Act
c. The Robinson-Patman Act
d. The Foreign Corrupt Practices Act
150. When a supplier deals with a buyer who acts as a general agent for their firm, the supplier has a right to rely on the buyer’s statements provided they are in which of the following forms?
a. Written form only
b. Verbal form only
c. Written and verbal forms
d. A buyer acting as a general agent is not authorized to represent the buying firm.
d
a
a
b 123. d
c
b
d
c
d
a 141. a 142. c 143. b 144. c
145. a
146. c
147. a
148. a
149. a
150. c
Indicate whether the statement is true or false.
1. When firms produce goods in anticipation of future customer order, they are operating in a just-in-time environment. a. True
b. False
2. Suppliers seldom offer quantity discounts to encourage larger orders from purchasers. a. True
b. False
3. A higher-than-anticipated level of finished-goods inventory indicates that customer demand is increasing.
a. True
b. False
4. Even though just-in-time production is the norm, most firms hold some level of preproduction inventory. a. True
b. False
5. The underlying goal of lean – to eliminate all forms of uncertainty and waste – are relevant to all organizations, regardless of the specific planning and control tools that are used.
a. True
b. False
6. It is more difficult to carry safety stock to cover supplier quality problems than to correct the root cause of a problem.
a. True
b. False
7. Supply chains are insensitive to changes in markets, including changes in the availability of material supply as well as price changes.
a. True
b. False
8. To the buyer, the advantage of consignment is the ability to defer ownership and avoid committing working capital and incurring carrying charges.
a. True
b. False
9. Very few organizations use distributors to provide at inventory requirements such as maintenance, repair, and operating supplies.
a. True
b. False
10. Decisions in lean must be based on the opinions of influential individuals as well as on facts and data.
a. True
b. False
11. Purchasers should not accept any of the blame for delivery uncertainty.
a. True
b. False
12. The average amount of inventory in a system can be reduced ty shortening the material pipeline in terms of time between suppliers and buyers.
a. True
b. False
13. Most cost accounting systems are capable of identifying and assigning the true costs required to maintain physical inventory.
a. True
b. False
14. If suppliers cannot meet delivery schedules, then general uncertainty increases.
a. True
b. False
15. It is difficult to quantify the total costs required to order and carry physical inventory.
a. True
b. False
16. Production inventory consumes a minor portion of inventory investment.
a. True
b. False
17. Lean is an easy approach to implement.
a. True
b. False
18. The easiest inventory-related cost to quantify and track is unit cost.
a. True
b. False
19. The true cost of MRO inventory is rarely captured because firms do not track MRO items as closely as production inventory.
a. True
b. False
20. According to Shook, lean is a philosophy that seeks to shorten the time between when the customer orders and the shipment to the customer by eliminating waste.
a. True
b. False
21. Even if Work-in-Process builds up at a workstation, schedulers should not be required to reroute the flow of material to another work center.
a. True
b. False
22. In a pull system, an upstream work center or operation will create output regardless of whether a downstream center directly requests that output.
a. True
b. False
23. Using an RFID system, if a supplier quality and lead time are reliable, planners can time the arrival of components just before production of the final part number.
a. True
b. False
24. Ordering costs are the sum of the costs associated with the release of a material order.
a. True
b. False
25. Work-in-Process is an incomplete good because it has not yet been transformed into a saleable finished good.
a. True
b. False
26. Carrying costs are independent of inventory, making these costs fixed.
a. True
b. False
27. Anything less than perfect quality leads to waste.
a. True
b. False
28. The term ”continuous improvement” refers to progressive improvements that ensure a process is moving forward.
a. True
b. False
29. A good starting point for inventory investment management is to make sure there is agreement between physical and electronic inventory.
a. True
b. False
30. Unnecessary inventory nearly always results from uncertainty.
a. True
b. False
31. A commitment to stable release schedules with realistic supplier lead times is a major step toward eliminating delivery uncertainty.
a. True
b. False
32. The ability to plan material requirements accurately increases progressively as the order-cycle time lengthens.
a. True
b. False
33. Record integrity exists when the physical inventory on hand exceeds the electronic record on hand, regardless of the quantity of inventory.
a. True
b. False
34. From the standpoint of financial accounting, inventory has historically been viewed as a current asset.
a. True
b. False
35. In lean thinking, inspection necessitated by defects is a waste of both time and personnel.
a. True
b. False
36. Specifying customized parts when standardized parts are available adversely affects material inventory because customized parts are nearly always more expensive.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
37. All of the following are categories of inventory EXCEPT.
a. Lean inventory
b. Semifinished inventory
c. MRO supplies inventory
d. In-transit inventory
38. Which of the following describes an order that is delivered on time, accurately, and in a condition that exactly matches the customer’s specifications and expectations?
a. A kanban order
b. An MRO order
c. A consignment order
d. A perfect order
39. Under which conditions would taking advantage of order quantity discounts lower total costs?
a. The supplier sells to your competitors.
b. The per-unit discount exceeds your inventory management costs.
c. The purchase lot cannot be transported in a single shipment.
d. The purchased items are manufactured domestically.
40. Which of the following is an appropriate reason for investing in inventory?
a. Poor quality and process material yield
b. Extended order-cycle times from global sourcing
c. Hedging against marketplace uncertainty
d. Specifying custom items for standard applications
41. A major portion of inventory investment for firms seeking to prevent operational disruptions will be in which type of inventory?
a. Finished goods
b. Production
c. In-transit
d. MRO
42. Which of the following is the easiest inventory-related cost to quantify and track?
a. Unit cost
b. Ordering cost
c. Carrying cost
d. Quality cost
43. In which type of demand is the demand for an item an unrelated to the demand for any other item the is produced?
a. Dependent demand
b. Independent demand
c. Just-in-time
d. Interdependent demand
44. From a financial accounting perspective, inventory has historically been considered which of the following?
a. A current asset
b. A current liability
c. A future asset
d. A future liability
45. Which type of inventory includes completed items or products that are available for shipment or future customer orders?
a. WIP
b. Finished goods
c. MRO
d. Pipeline/in-transit
46. Which type of inventory is enroute to a customer or located in a distribution channel?
a. Pipeline/in-transit
b. MRO
c. WIP
d. Just-in-time
47. For which of the following issues is retention of higher inventory levels a non-ideal response?
a. Inaccurate or uncertain demand forecasts
b. Take advantage of order quantity discounts
c. Fulfill support customer service requirements
d. Hedge against marketplace uncertainty
48. All of the following actions support reduced order-cycle time with suppliers EXCEPT.
a. Expanded global sourcing
b. Expanded electronic capability
c. Supplier development support
d. Order-cycle time measurement
49. Which characteristic of inventory refers to how quickly raw material and work-in-process inventory transform into finished goods acceptable to the customer?
a. Volume
b. Velocity
c. Value
d. Vigor
50. Which of the following details the components or subassemblies and quantity required to produce a final part number or end item?
a. MRP
b. DRP
c. Bill of materials
d. A kanban system
51. Record integrity is the result of activities and procedures designed to ensure that the amount of physical material on hand is equal to the computerized record of which of the following?
a. MRP
b. ROH
c. DRP
d. A kanban system
52. In order to maintain proper levels of service and replacement parts, what type of information is required?
a. Accurate parts forecasts
b. New product demand metrics
c. Raw material consumption rates
53. Effective inventory management is critical for which of the following?
a. Asset management only
b. Expense control only
c. Both asset management and expense control
d. Neither asset management nor expense control
54. Which of the following is NOT a feature defining a lean supply system?
a. A commitment to zero defects by the buyer and seller.
b. Infrequent shipments of large lot sizes with loose quality standards.
c. Collaborative buyer-seller relationships.
d. Electronic data interchange capability with supplier.
55. Which descriptor of a digitized supply chain refers to the presence of a common governance structure that defines how operations are monitored, validated, and translated into specific actions and responses?
a. It is live
b. It is intelligent
c. It is interactive
d. It is global
56. Which of the following systems is a production control approach that uses containers, cards, and visual cues to control the production and movement of goods through the supply chain?
a. MRP
b. DRP
c. A kanban system
d. Lean supply
57. Which of the following costs includes activities such as generating and sending material releases, transportation costs, and costs required to acquire goods?
a. Unit cost
b. Ordering cost
c. Carrying cost
d. Quality cost
58. Which descriptor of a digitized supply chain refers to the ability to connect essential network leverage points through cloud and mobile platforms for analytics?
a. It is live
b. It is intelligent
c. It has velocity
d. It is global
59. Which of the following implies that supply chains should have perfect quality?
a. Make-to-stock
b. Push
c. Striving for excellence
d. Pull
60. Which of the following means that inventory moves through the supply chain continuously with minimal queuing or non-value-adding activity being performed?
a. Pull
b. WIP
c. MRO
d. Flow
61. Which descriptor of a digitized supply chain refers to availability of real-time information?
a. It is live
b. It is intelligent
c. It has velocity
d. It is global
62. Which of the following refers to the unit cost of the inventory?
a. Volume
b. Velocity
c. Value
d. Vigor
63. Downsides of poor forecasting include all of the following EXCEPT.
a. Higher inventory volumes
b. Decreased customer service costs
c. Excessive safety stock levels
d. Higher inventory carrying costs
64. Which of the following accurately describes the relationship between inventory and profitability?
a. Inventory is a liability that should be minimized in order to maximize profitability.
b. Inventory is an asset that should be maximized in order to maximize profitability.
c. Inventory is an asset only if sized to properly meet business needs.
d. Inventory is unrelated to profitability.
65. Which of the following terms refers to the amount of inventory that a firm owns at any given time?
a. Volume
b. Velocity
c. Value
d. Vigor
66. Which of the following is NOT a change that is supporting increased velocity of materials through the supply chain?
a. Supply chains are becoming more virtually vertical.
b. Cloud computing is becoming an important tool for running global supply chains.
c. Labor and manufacturing are becoming regionalized.
d. Global events with potential for supply chain disruption are becoming more predictable.
67. Which of the following systems takes a period-by-period set of master production schedule requirements and produces a time-phased set of material, component, and subassembly requirements timed to support an expected build schedule?
a. MRP
b. DRP
c. Just-in-time
d. A kanban system
68. What is the relationship between inventory and free cash flow?
a. Increasing the number of semifinished units in inventory increases free cash flow.
b. Increasing the working capital held in the form of inventory reduces free cash flow.
c. Increasing the value of the finished goods retained in inventory increases free cash flow.
d. Decreasing the volume of bulk raw materials in inventory decreases free cash flow.
69. Which of the following is NOT one of the functions of a distribution resource planning system?
a. Forecasting finished goods inventory requirements.
b. Establishing correct inventory levels at each stocking location.
c. Determining the timing and replenishment of finished-goods inventories.
d. Producing a time-phased set of material and component requirements timed to support an expected build schedule.
70. Which of the following involves frequent deliveries of smaller quantities directly to the point of use at the purchaser?
a. Lean supply
b. Lean transportation
c. Lean warehousing
d. Lean ordering
71. All of the following are important barriers to lean supply EXCEPT.
a. A centralized supply base
b. Historically non-cooperative buyer-seller relationships
c. A large number of suppliers
d. Poor quality performance
72. Which of the following is NOT one of the benefits of simplified designs?
a. Fewer suppliers
b. Increased number of manual transactions
c. Reduced transactions to support the inventory
d. Fewer part numbers
73. Improving inventory turns can what effect on financial performance indicators?
a. Decreases profit margin
b. Increases asset turnover
c. Decreases total annual sales
d. Increases return on investment
74. All the following are risks associated with holding inventory EXCEPT.
a. Theft
b. Obsolescence
c. Innovation
d. Spoilage
75. Which type of inventory includes the items used to support production and operations, but are not physically part of a finished product?
a. Raw materials
b. WIP
c. Semifinished items
d. MRO
76. According to the APICS Dictionary, which of the following is defined as the process of a supplier placing goods at a customer location without receiving payment until after the buyer uses the goods?
a. A kanban system
b. Just-in-time
c. Consignment
d. MRO
77. Which of the following is NOT a component of carrying cost?
a. The cost of acquiring and disseminating market information
b. The cost of capital
c. The cost of storage
d. The cost of obsolescence, deterioration, and loss
78. Which of the following represents the costs required to operate a business, including the purchase and holding of inventory?
a. Process-support costs
b. Working capital
c. Continuing costs
d. Fixed expenses
79. Which of the following means that customer orders start the work process, which ripples down through the supply chain?
a. Make-to-stock
b. Push
c. MRP
d. Pull
80. A manufacturing firm’s plant is set up to run with continuous, uninterrupted operation. An investment in production inventory would provide a hedge against which of the following?
a. A forecasted drop in customer demand.
b. An overabundance of supplier production
c. A potential union strike at a supplier that is likely to occur
d. An imminent supplier price decrease
81. Which of the following is defined as the product of the average units of inventory multiplied by the unit price multiplied by the annual carrying cost?
a. Unit cost
b. Ordering cost
c. Carrying cost
d. Quality cost
82. All of the following are positive impacts of improved inventory management EXCEPT.
a. Lower earnings per share
b. Higher return on assets
c. Improved cash flow
d. Higher profit margin
83. Which of the following is a reason why historically high-margin industries such as utilities pay little attention to inventory?
a. Their average units of inventory is low due to accurate demand forecasting.
b. The unit price of their inventory items is usually low because their products are commodity items.
c. Their annual percentage carrying cost is usually low because their product do not require specialized storage and handling.
d. Their risk of lost customer sales due to insufficient inventory outweighs the potential savings of inventory reduction.
84. All of the following will lead to increased total inventory carrying cost EXCEPT.
a. Increased annual percentage carrying cost
b. Increased unit price
c. Increased average units of inventory
d. Increase production quality standards
85. Costs related to field failures, rework, and warranty pay-outs are best described as which of the following types of costs?
a. Unit cost
b. Ordering cost
c. Carrying cost
d. Quality cost
86. When firms produce goods in response to existing customer orders, they are operating in which of the following environments?
a. Fabricate-to-stock
b. Make-to-stock
c. Just-in-time
d. Make-to-order
87. Which of the following is NOT an example of WIP inventory?
a. Waiting to be moved to another process.
b. Currently being worked on at a work center.
c. Lining up at a processing center due to a capacity bottleneck or machine breakdown.
d. Availability of finished goods for shipment
88. Which type of inventories includes the items purchased from suppliers or produced internally to direct support production requirements?
a. Work-in-process
b. Raw materials
c. Finished goods
d. Pipeline
89. All of the following are right reasons for investing in inventory EXCEPT.
a. To avoid disruptions in operational performances
b. To offset the effects of unreliable supplier delivery
c. To support customer service requirements
d. To hedge against marketplace uncertainty
90. Which of the following is NOT one of the policies used to improve design simplification and reduce complexity?
a. Increase the number of suppliers.
b. Establish premium pricing for customization.
c. Establish geographic-specific options and standards.
d. Maintain frequently requested options.
91. When firms produce goods in anticipation of future customer orders, they are operating in which of the following environments?
a. Fabricate-to-stock
b. Make-to-stock
c. Just-in-time
d. Make-to-order
92. Which descriptor of a digitized supply chain refers to the connections between multi-enterprise supply chain elements that supports a common, aligned business view and trusting relationships?
a. It is live
b. It is networked
c. It is interactive
d. It is global
93. Which of the following is a repeatable lean transportation schedule that moves goods from supplier to purchaser and then from purchaser to supplier with return material?
a. An MRO system
b. A pull system
c. A closed-loop system
d. A push system
94. All of the following are common signaling methods used in a kanban system EXCEPT.
a. Verbal reporting by workers
b. Color-coding containers
c. Designated storage spaces
d. Electronic notification
95. Which of the following should be removed from MRO inventory in order to decrease inventory cost while still properly supporting operations?
a. General-use repair tools
b. Spare part for critical production equipment
c. Redundant tooling stored in centralized locations
d. Obsolete tooling and parts
c
b
a
b
b
c 94. a 95. d
Indicate whether the statement is true or false.
1. The importance of effectively managing an organization’s indirect spending is progressively decreasing.
a. True
b. False
2. Growth in international trade has increased the amount of freight moving on oceangoing vessels.
a. True
b. False
3. For purchased materials such as bulk raw materials, transport speed is the most important factor in logistics optimization.
a. True
b. False
4. Inbound logistics may also include the shipment of repairable items back to maintenance facilities for refurbishment and return to useable condition.
a. True
b. False
5. A knowledgeable buyer should attempt to control transportation costs internally rather than simply allowing the shipper to pass them along in the form of a delivered price.
a. True
b. False
6. Historically, expenditures for indirect materials and services have received the same level of management attention as direct materials.
a. True
b. False
7. Assigning and maintaining accurate commodity codes for indirect goods and services across an organization is a relatively easy task.
a. True
b. False
8. A two-day shipment by truck can often take a week or more by rail due to the additional handling required.
a. True
b. False
9. An apparently low-cost carrier may actually end up costing far more than a seemingly higher-cost carrier when all associated costs are added.
a. True
b. False
10. A major advantage of a rail carrier is its wide range of items capable of hauling.
a. True
b. False
11. Additional railcars can be added to a freight train with only a minimal increase in its total variable cost.
a. True
b. False
12. The increased level of auditing provided by centralizing professional service procurement allows an organization to increase the accountability of outside consultants.
a. True
b. False
13. Transportation costs typically comprise at least 10% of a product’s total cost.
a. True
b. False
14. A performance-based logistics system drives the logistics service provider’s performance by defining the buyer’s preferred outcomes in terms of provider value-added and overall systems costs.
a. True
b. False
15. Project scopes should be very detailed for all service providers, especially those who have previously performed work for the organization.
a. True
b. False
16. In order to leverage indirect spending, supply management must understand exactly what indirect goods and
services are being purchased by individual SBUs.
a. True
b. False
17. Air carriers haul the largest amount of commercial freight due to their speed advantage over motor and rail carriers.
a. True
b. False
18. Air freight has a high variable-cost-to-fixed-cost ratio due to the high costs of operating a flight.
a. True
b. False
19. It is in the best interests of supply management to provide and manage suppliers’ e-catalogs.
a. True
b. False
20. Full-service providers, in addition to picking up and delivering goods, may consolidate shipments, provide simplified billing, and provide multiple other logistic-related services.
a. True
b. False
21. A recent trend is carriers marketing themselves as simply providers of physical transportation with no associate services.
a. True
b. False
22. More effective control of inbound shipping usually requires purchasing goods under an FOB destination shipping designation.
a. True
b. False
23. The U.S. Bureau of Customs and Border Protection established the so-called 10+2 rule that affects all modes of transportation except ocean container freight.
a. True
b. False
24. Every project should have a detailed scope that concisely describes the project’s parameters, thereby avoiding misunderstandings between the buyer and the service provider.
a. True
b. False
25. The main goal of deregulation in the United States was to make its domestic transportation systems more efficient by increasing competition with the transportation and logistics industry.
a. True
b. False
26. Moving to a centralized process for procuring professional services rarely allows buying companies to leverage their buying power.
a. True
b. False
27. Traditional cost accounting systems are intended to track and consolidate indirect spend across an organization.
a. True
b. False
28. Shipping a high-priced component via air is never a cost-effective option.
a. True
b. False
29. The Surface Transportation Board highly regulates exempt carriers.
a. True
b. False
30. Many buyers are now questioning the sustainability of cost reductions through reverse auctions over time and after the initial cost reductions have been achieved.
a. True
b. False
31. The use of 3PLs is increasingly becoming a viable option for smaller shippers and infrequent shipments.
a. True
b. False
32. Reverse logistics flow involves innovative methods of recovering and recycling products to minimize environmental impacts.
a. True
b. False
33. A shipper should directly negotiate with every carrier it uses, especially if it is a small or infrequent shipper.
a. True
b. False
34. Inland water carriers typically transport finished or semifinished products due to the lengthy in-transit time for water transport.
a. True
b. False
35. As organizations outsource more noncore activities, they realize that many of their necessary transportation and logistics needs should be outsourced to expert logistics service providers.
a. True
b. False
36. A major outcome of transportation deregulation was the availability of pricing information garnered from public tariffs to logistics negotiators.
a. True
b. False
37. Performance-based logistics has been widely adopted by the private sector.
a. True
b. False
38. The greatest competition between domestic transportation modes is between rail and motor carriers.
a. True
b. False
39. Nearly all indirect spend is purchased through the organization’s formal sourcing function or proven supply management processes and strategies.
a. True
b. False
40. Private carriers are rarely utilized to make daily “milk-runs”, picking up smaller amounts of materials from a series of nearby suppliers for the JIT environment.
a. True
b. False
41. A major disadvantage of a rail carrier is its hig- cost relative to motor carriers.
a. True
b. False
42. Suppliers of multiple indirect items often have multiple ship-to and bill-to addresses. This can lead to multiple codes being assigned to the same item.
a. True
b. False
43. A Performance-based logistics agreement is conceptually similar to a Service level agreement.
a. True
b. False
44. It is not necessary for a project’s scope to include nondisclosure statements to protect the buyer’s and supplier’s interests.
a. True
b. False
45. In purchasing professional services, it is rarely important to use a standard contract template developed by the organization’s legal department because there are so many different types of professional service providers.
a. True
b. False
46. Before defining the final scope of the project, top management should receive buy-in from all affected stakeholders.
a. True
b. False
47. Professional service providers should be evaluated on quality, delivery, milestone achievement, cost management, and wavelength.
a. True
b. False
48. While it is important to develop a rationalized supply base, a single-source strategy frequently maximizes the value
a. True
b. False
49. Because of prevalent industry differences, one company’s indirect spend may be considered direct spend at another company.
a. True
b. False
50. Carriers rarely consider the availability of backhauls when quoting one-way freight rates on a particular traffic lane.
a. True
b. False
51. Although transportation mode selection is not required for international ocean shipments, proper carrier selection is still essential.
a. True
b. False
52. It is fairly easy to research, define, and write clear and descriptive statements of work.
a. True
b. False
53. Because of the huge quantities of product involved, only buyers in particular industries will select the pipeline transportation mode.
a. True
b. False
54. One advantage of a preferred supplier list is the ability to generate a list of preferred suppliers based on previous performance criteria.
a. True
b. False
55. Inland water carriers are typically accessible for most shippers because lakes, rivers, and canals are widely dispersed throughout the country.
a. True
b. False
56. Whenever a supplier ships FOB destination, the buyer can lose the ability to track or control its inbound expenses, artificially increasing the value of the buyer’s inventory.
a. True
b. False
57. Motor carriers’ biggest advantage is their low variable cost.
a. True
b. False
58. A single mode of transportation may not be sufficient for a specific shipment.
a. True
b. False
59. By limiting internal requisitioners to approved catalogs of goods and services from preselected suppliers, supply management can decrease maverick spending.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
60. Which of the following is the MOST essential characteristic of the logistics services 3PLs provide to small shippers?
a. Improving Convenience
b. Reducing Complexity
c. Lowering-cost
d. Increasing Reliability
61. Companies improve their indirect spend management by using a properly-selected S2P provider to do all of the following EXCEPT for _____.
a. Electronic requisitioning
b. Automated routing
c. Manual approvals
d. E-purchase orders
62. 3PLs can manage all of the following elements of transportation and logistics EXCEPT for____.
a. Customs brokerage
b. Product quality inspection
c. Export documentation
d. Warehouse operations
63. All of the following are results from past projects that should be included in a centralized professional services database EXCEPT for _____.
a. User satisfaction level
b. Affordability
c. Geographic proximity
d. Level of work quality
64. Which of the following is created by buyers from multiple organizations in the same industry pooling their buying power to reduce prices for their purchased items and services?
a. A zero-based budget
b. A reverse auction
c. A kanban
d. A purchasing consortium
65. In which of the following transportation control methods is the buyer responsible for choosing the carrier, arranging for the physical movement of goods, paying the freight bill, and filing loss and damage claims?
a. FOB destination
b. FOB origin
66. Which of the following is a disadvantage of water carriers over other modes of transportation?
a. It has high costs for larger volumes.
b. It has long lead times
c. It has negotiable rates
d. It is limited to a few items
67. Which of the following describes how easy the professional service provider is to do business with?
a. Wavelength
b. Collaboration
c. Cooperation
d. Preference
68. Which of the following is legally required to serve the public without discrimination based on published rates for specific goods?
a. Common carrier
b. Private carrier
c. Intermodal carrier
d. Contract carrier
69. Which of the following is a disadvantage of using a 3PL for the buyer?
a. buyer concentrates on core business activities.
b. buyer reduces administrative costs.
c. buyer releases capital from the sale of assets.
d. buyer relinquishes control, ownership, and expertise.
70. Savy buyers selecting a 3PL should perform all of the following planning steps EXCEPT for which of the following?
a. Define specific logistics service requirements their measurement methods.
b. Confirm the selection process and predetermine performance metrics.
c. Involve key stakeholders to ensure internal buy-in.
d. Implement ways to move to direct shipments
71. Which of the following is a manufacturer or distributor that controls and manages its own transportation equipment, whether owned or leased?
a. Common carrier
b. Private carrier
c. Intermodal carrier
d. Contract carrier
72. Which of the following provides the seller with a description of the item or service that is being proposed for sourcing?
a. Request for proposal
b. Purchase order
c. Statement of work
73. All of the following are types of information a 3PL should provide to the buyer EXCEPT for ____.
a. The choice of transportation mode
b. The number of carriers providing inbound, intraorganizational, and outbound transportation services
c. The percentage of shipments arranged by suppliers versus by buyers
d. The total transportation expenditures by specific carrier and/or mode of transportation
74. Which of the following refers to a carrier’s ability to provide service over a geographic area?
a. Speed
b. Accessibility
c. Capability
d. Reliability
75. Which of the following is an advantage of using a 3PL for the buying firm?
a. 3PL reduces integration between sales and supply.
b. 3PL reduces dedicated in-house managed staff.
c. 3PL eliminates key business service differentiation.
d. 3PL achieves economics of scale and increases flexibility.
76. Which of the following involves picking smaller amounts of materials from a series of nearby suppliers to be used in a lean or JIT environment?
a. Closed-loop run
b. One-way run
c. Milk-run
d. Distributed run
77. Which of the following is NOT an example of indirect spend?
a. Professional and consulting services
b. Production components
c. Employee travel
d. MRO supplies
78. Which of the following includes the movement of materials between production facilities within the same organization?
a. Inbound logistics
b. Intraorganizational movement
c. Reverse logistics
d. Outbound logistics
79. All of the following are criteria used to measure transportation performance EXCEPT.
a. Speed
b. Accessibility
c. Size
d. Reliability
80. Which of the following is NOT one of the major transportation linkages throughout a typical supply chain?
a. Production planning
b. Inbound logistics
c. Intraorganizational movements
d. Outbound logistics
81. Which of the following includes all shipments moving from the supplier’s facilities to the buyer’s facilities?
a. Inbound logistics
b. Intraorganizational movement
c. Reverse logistics
d. Outbound logistics
82. Which of the following is defined by CSCMP as the part of supply chain management that plans, implements, and controls the efficient, effective flow of goods, services, and information between the points of origin and consumption to meet customers’ requirements?
a. Transportation management
b. Supply management
c. Purchasing management
d. Logistics management
83. In addition to providing physical transportation services, 3PLs and 4PLs provide all of the following services EXCEPT for _____.
a. Consolidate shipments
b. Handle complex overseas shipments
c. Utilize multiple invoices for services
d. Coordinate shipments with other carriers or modes
84. Which of the following represents the link between a company and its customer?
a. Inbound logistics
b. Intra-organizational movement
c. Reverse logistics
d. Outbound logistics
85. The total cost structure of pipelines is similar to which of the following because both rely on equipment and infrastructure with high fixed costs and low variable operating cost?
a. Air carriers
b. Motor carriers
c. Rail carriers
d. Water carriers
86. Which of the following serves the transportation requirements of the party with whom it has a legal agreement and provides only those services for which the shipper has been negotiated?
a. Common carrier
b. Private carrier
c. Intermodal carrier
d. Contract carrier
87. 4PLs and 5PLs rely on all of the following technologies to optimize logistics and distribution networks EXCEPT for ____.
a. Artificial intelligence (AI)
b. Machine learning
c. Data analytics
d. Manual control systems
88. Which of the following is NOT an advantage of centralizing professional service procurement?
a. Improved the working relationship between internal users and the professional service provider.
b. Reduced likelihood of unnecessary changes.
c. Reduced service provider redundancy.
d. Increased accountability of outside consultants to the buyer by the monitoring and auditing of the services provided.
89. Which of the following is the major advantage of water carriers over other modes of transportation?
a. Seasonal availability
b. High flexibility
c. Low-price
d. Direct shipments to major cities
90. Which of the following refers to the accuracy and on-time consistency of the transportation service, arriving neither late nor early?
a. Speed
b. Accessibility
c. Capability
d. Reliability
91. Which of the following is NOT a benefit of reverse auctions to buyers?
a. Reverse auctions streamline the indirect buying process.
b. Reverse auctions reduce procurement cycle time.
c. Reverse auctions expand the buyer’s options.
d. Reverse auctions increase the quality of purchased items.
92. Which of the following is one of the disadvantages of air carriers over other modes of transportation?
a. It is only available seasonally.
b. It cannot be used for large, bulky, or hazardous shipments,
c. It is limited to domestic or regional transportation
d. It involves longer in-transit lead times.
93. All of the following are purposes that SOWs provide to the buyer and service supplier EXCEPT for which of the following?
a. Communicates general requirements and uses to prospective providers.
b. Sets the basis for determining the total cost for the service received.
c. Communicates what to buy, including a list of definitions.
d. Establishes the mix of tangibles and intangibles to be provided.
94. Which of the following requires both the buyer and the logistics service provider to explicitly agree upon the buyer’s desired outcomes and how the logistics service provider can help to meet them?
a. PBL
b. MRO
c. TQM
d. KPI
95. Which of the following refers to a carrier’s ability to provide the proper equipment and provide the appropriate services for a given product movement?
a. Speed
b. Accessibility
c. Capability
d. Reliability
96. Which of the following is a key individual or unit that has a position of authority within and organization and controls substantial amount of the organization’s indirect spending?
a. A purchasing consortium
b. A maverick spender
c. A power spender
d. A kanban
97. Which of the following is defined as any purchased good or service that is not directly included in the product or service delivered to the customer?
a. Indirect spend
b. Maverick spend
c. MRO spend
d. Direct spend
98. Which of the following freight shipment control methods means the supplier retains title to the goods and controls the shipment until it is physically received and off-loaded at the consignee’s dock?
a. FOB destination
b. FOB origin
c. FOB delivered
d. FOB supplier
99. Which of the following ensures a supply of available transportation in markets where only one-way traffic exists?
a. Exempt carriers
b. One-way carriers
c. Common carriers
d. Private carriers
100. Which of the following is NOT a key part of the project’s scope?
a. The service provider’s experience
b. The project’s performance metrics
c. The approved project budget
d. The project milestones and deadlines
101. Which of the following is an advantage of air carriers over other modes of transportation?
a. It is good for emergency situations
b. It is lower cost on longer shipments
c. It can handle most types of freight
d. It is good for high-volume liquids and gases
102. Which of the following is NOT a trend that increases organizations’ need to control their indirect spend?
a. Outsourcing of noncore capabilities
b. Increased services spend
c. Increasing cost pressure
d. Decreasing customer expectations
103. Which of the following types of systems provides automatic status alerts to a buyer or supplier that a particular shipment has been delayed and to what extent does the delay affects other entities in the supply chain?
a. TMS
b. MRP
c. SOW
d. ZBB
104. Which of the following includes material recovery, reuse, remanufacturing, and recycling?
a. Inbound logistics
b. Intraorganizational movement
c. Reverse logistics
d. Outbound logistics
105. Which of the following describes the portion of an organization’s total procurement budget purchased from unauthorized sources?
a. Indirect spend
b. Maverick spend
c. MRO spend
d. Direct spend
c
d
b
Indicate whether the statement is true or false.
1. In a regular reverse auction, prices are anonymous, but the identities of competitors are provided to all sellers. a. True b. False
2. When faced with rising costs, organizations tend to rely more on people to replace systems.
a. True
b. False
3. Compared to social networking, EDI is a highly interactive mode of communication.
a. True
b. False
4. In essence, blog posting encompasses any subscription-based or pay-per-use service that is real-time and over the Internet.
a. True
b. False
5. Increased lead time, increased cycle time, higher costs, and less informed decision making are all potential results of poor supply chain process execution.
a. True
b. False
6. In ERP, each process uses its own database, and information is captured multiple times.
a. True
b. False
7. Web-based EDI is significantly less expensive than traditional, hard-wired EDI.
a. True
b. False
8. The most important benefit of a visibility system is it that it enables early problem detection so that corrective actions can be undertaken in a timely manner.
a. True
b. False
9. Increased inter-file redundancy allows different systems to efficiently cross-reference and use the data contained in the files.
a. True
b. False
10. Information held in data warehouses may be aggregated and includes both time-dependent and historical information.
a. True
b. False
11. EDI relies on general purpose hardware that can be used for multiple purposes.
a. True
b. False
12. Sell-side e-sourcing systems are controlled by buyers and are linked to the buyer’s intra- and extra-nets.
a. True
b. False
13. B2B marketers are using social networking providers such as LinkedIn to facilitate the sales process.
a. True
b. False
14. On the buying side, organizations are focusing on decision-making involving investments in e-SCM systems.
a. True
b. False
15. Software facilitating supply chain partner collaboration operate through point-of-sale systems, RFID, and other information-sharing systems.
a. True
b. False
16. Both MRP and DRP systems are primarily external, therefore, an additional electronic link between suppliers and customers is unnecessary.
a. True
b. False
17. In pre-ERP environments, every functional area had its own set of software applications, all of which ran on different systems.
a. True
b. False
18. A reverse auction extends the traditional bid process, permitting suppliers to configure their bids in multiple alternative ways.
a. True
b. False
19. Contract management and compliance both provide oversight of the front end of the sourcing process.
a. True
b. False
20. Spend analysis seeks to determine what goods and services are purchased, what suppliers provide them, and where the demand for those goods originates within the buyer organization.
a. True
b. False
21. Historically, companies adopted a unified approach to system usage with the goal of enabling inter-function communication in the company.
a. True
b. False
22. In order to support users in making better supply chain systems, databases must provide users with the information they need.
a. True
b. False
23. SRM sourcing modules function interactively to support purchasing managers in making effective decisions regarding supplier selection and contract management.
a. True
b. False
24. When companies map their best estimate of a process flow, they often discover that the actual process is quite different from their estimate.
a. True
b. False
25. Firms face both technological and organizational hurdles when they attempt to increase the level of integration between logistics and other SCM applications.
a. True
b. False
26. Blogs are interactive, so participants can post reactions to a blog or to other respondents’ responses.
a. True
b. False
27. Currently, ERP vendors provide higher levels of functionality than vendors specializing in CRM and SRM.
a. True
b. False
28. Real-time updating refers to the process of downloading all data buckets into the main system on a regularly scheduled basis.
a. True
b. False
29. When companies begin to create an information system around business processes, they rarely find that they must reengineer or change their business processes before they can build appropriate business processes.
a. True
b. False
30. A data warehouse is organized around informational subjects, not specific business processes.
a. True
b. False
31. In ERP, the visibility of specific transactions is accessible to everyone in the organization, regardless of the business process involved.
a. True
b. False
32. Making information visible throughout an organization requires a degree of separation between stakeholder parties.
a. True
b. False
33. SMAC is a new enterprise IT that enhances organization in a way that improves connectivity, collaboration, real-time interaction, and productivity.
a. True
b. False
34. SRM and CRM applications focus on planning and managing the firm’s internal linkages.
a. True
b. False
35. The goal of DRP systems is integration of business function planning and processing as well as avoidance of data interruption.
a. True
b. False
36. A public cloud is a proprietary network or data center that supplies hosted services to a limited number of users.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
37. Which of the following is the new enterprise IT model delivering an organization that is more connective, collaborative, real-time, and productive?
a. RFID
b. SMAC
c. EDI
d. ERP
38. Which of the following systems attempts to allocate fixed logistics capacity in line with business requirements?
a. Transaction processing systems
b. Routine decision-making systems
c. Transportation and warehouse planning systems
d. Network design and execution systems
39. Which of the following is NOT one of the principles underlying blockchain technology?
a. Reversibility of records
b. Distributed database
c. Transparency and pseudonymity
d. Peer-to-peer transmission
40. Which of the following is NOT new technology complimenting e-SCM systems?
a. Advanced graphic design
b. Internet of Things
c. 3D printing
d. QR Codes
41. Which of the following is NOT one of the benefits of the supplier performance module provided by an e-sourcing suite?
a. Input into supplier selection considering total costs.
b. Isolation of supplier process inefficiencies.
c. Improvement of total cycle times.
d. Updates to suppliers’ physical addresses
42. Which of the following is NOT one of the spending reduction strategies that might be implemented as the result of a spend analysis?
a. Grouping of unrelated purchases
b. Reduction in the number of suppliers
c. Reduction of maverick spend
d. Increased use of more efficient contracting methods
43. Which of the following sells services to anyone on the Internet?
a. A semi-private cloud
b. A private cloud
c. A public cloud
d. A blog-oriented cloud
44. Which of the following is NOT one of the traditional supply processes that companies are changing to reduce redundancies, delays, and waste?
a. Supplier evaluation and selection
b. Internal product quality testing
c. Inventory management
d. Codesign efforts
45. Which of the following is NOT a service provided by third-party big data management services?
a. Data collection
b. Data disposal
c. Data storage
d. Data processing
46. Which of the following systems is LEAST likely to be used to integrate external supply chain members?
a. A transportation and warehouse planning system
b. SRM and CRM software systems
c. Network communication systems
d. E-sourcing applications
47. Which of the following systems are focused on managing the entire purchasing cycle?
a. A sell-side system
b. An SRM system
c. A third-party marketplace
d. A buy-side system
48. Which of the following is NOT a function that IS organizations must perform to enable effective corporate decisionmaking?
a. Disseminate raw data
b. Efficiently mine data
c. Effectively filter data using appropriate criteria
d. Accurately analyze data
49. Which of the following does NOT support continued digitization on the supply chain?
a. Emerging new software tools to help supply managers.
b. Increasing opportunities to utilize web-based supply chain solutions.
c. A decreasing number of competent suppliers in a position to offer value in e-SCM.
d. Increased sophistication in making investment decisions in
50. Which of the following is NOT one of the basic components of an EDI system?
a. A standard form
b. A translation capability
c. A basic analog
d. A mail service
51. Which of the following is the determination of dollar amount and volume of expenditures that an organization makes to provide its products and services to support its operations?
a. Spend analysis
b. Market analysis
c. Price forecasting
d. Kanban
52. Within the supply chain, which of the following is the process of sharing critical data required to manage the flow of products, services, and information in real time between suppliers and customers?
a. Information visibility
b. Cloud computing
c. Blogging
d. Networking
53. Which of the following is Internet-based and allows users to share software and other information on demand using computers and mobile devices?
a. ERP
b. Cloud computing
c. EDI
d. A value-added network
54. Which of the following refers to recording and retrieving critical data and then executing and controlling physical and monetary flows?
a. Transaction processing
b. Electronic Data Interchange
c. Strategic decision making
d. Internet-based information technology
55. Which of the following refers to the process of downloading all data buckets into the main system on a regularly scheduled basis?
a. Real-time updating
b. Decision Support System
c. Batch updating
d. Distribution Requirements Planning
56. Which of the following is NOT a function that systems managing global suppliers and customers must perform?
a. Calculate total global logistics costs
b. Disseminate marketing and product information to local markets
c. Increase leverage and component standardization worldwide
d. Improve communication strategies across global business units
57. Which of the following was first developed as a secure digital ledger to record cryptocurrency transactions in a series of blocks?
a. Electronic Data Interchange
b. Artificial Intelligence
c. Blockchain
d. Social media
58. In which of the following are sellers able to see their competitors’ prices, but not their identities?
a. A regular reverse auction
b. A rank reverse auction
c. An e-catalog
d. A third-party marketplace
59. Which of the following systems provides the means for tracking organizational resources, including people, processes, and technology?
a. MRP
b. ERP
c. EDI
d. DSS
60. Which of the following is a proprietary network or data center that supplies hosted services to a limited number of people?
a. A social network
b. A public cloud
c. A mobile cloud
d. A private cloud
61. Which of the following is a communications standard that supports inter-organizational electronic exchange of common business documents and information?
a. MRP
b. DRP
c. RFID
d. EDI
62. Which of the following stores the stock-keeping units needed to identify the thousands of uniquely purchased items within a firm’s system?
a. A bill of materials file
b. An engineering requirements file
c. A part file
d. A forecasted demand file
63. Which of the following systems is often used to search for patterns or relationships in data?
a. A transaction processing system
b. A routine decision-making system
c. A strategic decision-making system
d. A tactical decision-making system
64. Which of the following is generally thought of as a decision support tool for collecting information from multiple sources and making that information available to end-users in a consolidated, consistent manner?
a. An EDI system
b. An e-catalog
c. A data warehouse
d. An e-sourcing system
65. Which of the following e-sourcing business models are controlled by purchasers and tied into their systems?
a. A sell-side system
b. A deliver-side system
c. A buy-side system
d. A third-party marketplace
66. According to Gartner, which of the of following is defined as high volume, high velocity, and/or high variety information assets that require new forms of processing to enable enhanced decision making, insight discovery, and process optimization?
a. cloud data
b. SMAC data
c. quantitative data
d. big data
67. Which of the following systems -initiate and control the movement of materials among supply chain partners?
a. Transaction processing systems
b. Electronic Data Interchange systems
c. Execution systems
d. Network design systems
68. Which of the following is an invitation to suppliers to submit a proposal on a set of specifications provided by a buyer?
a. A PO
b. An RFQ
c. A reverse auction
d. A bill of materials
69. All of the following are examples of business processes around which an ERP system is designed EXCEPT for _____.
a. Selling a product or service
b. Making a product
c. Buying a product
d. Locating warehouse facilities
70. Which of the following is an integrated collection of computer files capable of storing operational data essential for managing a department?
a. An EDI system
b. An e-catalog
c. A database
d. An e-sourcing system
71. Which of the following applications address long-term and strategic questions such as “Where should we locate the
warehouses?” through simulation and optimization modeling?
a. Execution applications
b. Network design applications
c. MRP applications
d. JIT applications
72. Which of the following is a process in which all data files including a specific address are automatically updated within the system?
a. Batch updating
b. Real-time updating
c. Data bucket
d. MRP
73. In which of the following are sellers told their relative position versus their competitors, but not their competitors’ prices or identities?
a. A regular reverse auction
b. A rank reverse auction
c. An e-catalog
d. A third-party marketplace
74. In which of the following systems are decisions automated by default, with only the exceptions being dealt with manually?
a. A transaction processing system
b. A routine decision-making system
c. A strategic decision-making system
d. A tactical decision-making system
75. Which of the following is an independent firm that neither sells nor buys e-business software, but seeks to facilitate the electronic purchasing process through value enhancement?
a. A strategic alliance
b. A partnership
c. A downstream expeditor
d. A third-party marketplace
76. Which of the following technologies can create new content based on the data it has been trained on?
a. General AI
b. Generative AI
c. Deep Learning
d. Machine Learning
77. Which of the following is NOT one of the primary drivers of new e-SCM systems?
a. Lean supply chain
b. Globalization and communication
c. New business processes
d. Replacement of legacy systems
78. Which of the following e-sourcing business models contains the products or services of one or more suppliers?
a. A sell-side system
b. A buy-side system
c. A deliver-side system
d. A third-party marketplace
79. Which of the following is NOT one of the aspects of our web-driven world included in the acronym SMAC?
a. Supplier
b. Mobile
c. Analytics
d. Cloud
d
c
c
c
c
d
c
c
Indicate whether the statement is true or false.
1. There is no guarantee that measuring behavior will result in the desired behavior being adopted.
a. True
b. False
2. A well-designed measurement and evaluation system provides sporadic performance results reporting.
a. True
b. False
3. Actual prices for similar items in different business units are not comparable due to the differing marketing conditions across units.
a. True
b. False
4. There is no single best way to measure performance.
a. True
b. False
5. Measurement rarely motivates behavior toward desired end results.
a. True
b. False
6. Individuals may resist benchmarking results, due to their reluctance to recognize the value of a competitor’s methods of doing business.
a. True
b. False
7. The measurement of activities is a virtually free process.
a. True
b. False
8. Balanced scorecards offset a firms’ tendency to rely primarily on financial measures.
a. True
b. False
9. Historically, evaluating performance has had problems and has been subject to limitations.
a. True
b. False
10. A performance objective must capture the strengths and weaknesses of the firm’s competitive environment.
a. True
b. False
11. The current administrative budget is the most common starting point for new budget establishment.
a. True
b. False
12. A common price performance measure is the difference between the actual price and the planned purchase price.
a. True
b. False
13. It is essential to understand the areas in which performance is inadequate in order to develop effective performance improvement plans.
a. True
b. False
14. 1. If a performance measurement system receives input from an automated or computerized system, it is generally more susceptible to data manipulation than if it receives manual input.
a. True
b. False
15. Purchasing and supply organizations require measures that reflect their ability to contribute to overall corporate goals.
a. True
b. False
16. Cost avoidance measures may not be accepted by upper management because they are perceived as exaggerated.
a. True
b. False
17. Price performance measures are rarely important in spite of the fact that firms are increasingly focusing on cost versus price.
a. True
b. False
18. Well-defined measures use data that are accurate and available.
a. True
b. False
19. Nearly all aspects of performance lend themselves to quantitative measurement.
a. True
b. False
20. Transportation costs cannot be measured as a percentage of cost-of-goods-sold.
a. True
b. False
21. In a joint participation scenario, personnel responsible for each measure participate in measurement development and creation of performance objectives.
a. True
b. False
22. Supply chain managers frequently use the historical approach in order to establish effectiveness-related measures.
a. True
b. False
23. If a product’s price is primarily a function of supply and demand, then purchase price versus market index measures are inappropriate.
a. True
b. False
24. Historical data provide relevant insights into competitor performance capabilities.
a. True
b. False
25. On-time delivery measures show the extent to which suppliers can meet a customer’s schedule requirements.
a. True
b. False
26. It is uncommon for a firm to have additional measures that track different aspects of a firm’s inventory investment.
a. True
b. False
27. Traditionally, salaries constitute the largest share of the purchasing administrative budget.
a. True
b. False
28. The PPM measure predicts the incidence of component failures when those components are actually incorporated into a final product and supplied to external customers.
a. True
b. False
29. Each location of an organization must use the same performance objectives and criteria.
a. True
b. False
30. When establishing measures of performance, supply managers should prioritize efficiency over effectiveness.
a. True
b. False
31. A serious problem in management is that data managers focus on the wrong data.
a. True
b. False
32. An insufficient amount of data is a common problem that organizations encounter when developing measurement systems.
a. True
b. False
33. It is usually feasible to deploy a single, overall productivity measure that represents purchasing and supply chain performance.
a. True
b. False
34. It is often easy to develop measures that direct behavior or activity exactly as intended.
a. True
b. False
35. Measurement systems should rely on quantitative data, not qualitative impressions. a. True
b. False
36. Comparative quality performance indicators among competing suppliers can be assessed by measuring the number of defects per supplier.
a. True
b. False
37. If a company follows the current budget plus adjustment approach, the administrative budget for purchasing is a percentage of some indicator of purchasing’s workload.
a. True
b. False
38. It is rare that measures drive unintended or undesirable behavior.
a. True
b. False
39. Few measures include targets or reference points against which performance outcomes should be evaluated.
a. True
b. False
40. A common misconception is that a performance evaluation system should only measure selected activities.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
41. Which of the following measures BEST demonstrate the impact of purchasing and supply strategies and actions on a firm’s sales and profits?
a. Income measure
b. Target cost
c. Revenue measure
d. Target price
42. Which of the following refers to the extent to which, by choosing a particular course of action, management can meet a previously established goal or standard?
a. Effectiveness
b. Operational benchmarking
c. Support-activity benchmarking
d. Efficiency
43. Which of the following focuses on normalizing currently purchased components, systems, and services?
a. First insight measures
b. Standardization measures
c. Responsiveness measures
d. Flexibility measures
44. Which of the following is the amount of time from concept to first shipment of a product to the external customer?
a. On-time delivery measure
b. Time-to-market target
c. Responsiveness measure
d. First insight measure
45. Which of the following is NOT a phase in the benchmarking process?
a. Planning
b. Integration
c. Cost analysis
d. Maturity
46. Which of the following is a measure that resists inappropriate influence by the personnel being measured?
a. Efficient measure
b. Qualitative measure
c. Non-manipulable measure
d. Quantitative measure
47. Which of the following aspects of performance is best suited to quantitative PSM effectiveness measurement?
a. PSM effectiveness in reducing the average purchase price for an item
b. PSM effectiveness in boosting buyer negotiating skills
c. PSM contribution to revenue growth
d. PSM contribution to building supplier relationships
48. Which of the following is NOT one of the reasons for measuring performance?
a. To support better decision-making
b. To support better communication
c. To motivate and direct behavior
d. To maximize employee turnover
49. Which of the following is NOT one of the common problems encountered when measuring performance?
a. Measures that are short-term focused
b. Too much data and/or the wrong data
c. The risk of driving the wrong performance
d. Excessive detail in the evaluation process
50. Which of the following is the continuous measuring of products, services, processes, activities, and practices against a firm’s best competitors or those companies recognized as industry or functional leaders?
a. Benchmarking
b. TCO
c. TQM
d. Effectiveness
51. Which of the following refers to the relationship between planned and actual resources applied to achieve a previously defined goal?
a. Effectiveness
b. Operational benchmarking
c. Support-activity benchmarking
d. Efficiency
52. Which of the following best describes an increase or decrease in cost that results from a change in purchasing
strategy?
a. Cost change
b. Cost avoidance
c. Target cost
d. Cost reduction
53. Which of the following is NOT one of the benefits of benchmarking?
a. It helps identify the best business or functional practices
b. It determines internal customer needs and wants.
c. It breaks down a reluctance to change.
d. It serves as a source of market intelligence.
54. Which of the following is FALSE regarding measurement and evaluation systems?
a. It can effectively reduce the need for supervision and management.
b. It can promote efficiency in routine purchasing tasks.
c. It can improve the overall effectiveness of purchasing operations.
d. It can serve as a tool to optimize supply chain function.
55. Which of the following measures expresses the maximum allowable number of defects for a particular product, assembly, or service?
a. Effectiveness
b. Efficiency
c. PPM
d. TQM
56. Which of the following represents the difference between a price paid and a potentially higher price incurred if purchasing had not taken specific action?
a. Specific costing
b. Target pricing
c. Total cost analysis
d. Cost avoidance
57. Which of the following is NOT an example of customer order measures?
a. The percentage of on-time delivery
b. The total time from customer order to customer delivery
c. The number of returned orders
d. The number of inventory turns
58. Which of the following is NOT an example of the degree of supply chain linkages achieved via e-transactions?
a. Days/weeks/months of inventory supply
b. Absolute number of suppliers used
c. Percentage of advanced shipping notices sent
d. Percentage of total number of suppliers
59. According to Kaplan and Norton, a balanced scorecard does NOT include which of the following key performance measurement areas?
a. Customer satisfaction perspective
b. Operational excellence perspective
c. Innovation perspective
d. Human resource perspective
60. Which of the following is a process that the purchasing function follows when it performs benchmarking comparisons?
a. Functional benchmarking
b. Strategic benchmarking
c. Operational benchmarking
d. Support-activity benchmarking
61. Which of the following type of behavior indicates that measures are perceived as punitive tools?
a. A general increase in positivity among personnel.
b. An increase in individual and interpersonal functionality
c. An increasing commitment to supporting the PSM system
d. A prevalence of beat-the-system behavior
62. Which of the following is NOT an indicator of whether interpersonal communication is supporting an effective PSM?
a. Responsible personnel clearly understand the performance measure.
b. Responsible personnel are aware of performance expectations.
c. Responsible personnel achieve target cost savings.
d. Responsible personnel understand the role of the measure in the performance evaluation process.
63. All of the following are consequences that should be considered before embarking on measurement activities EXCEPT.
a. The measurement costs relative to their potential benefits.
b. The fact that increased measurement does not always lead to improved performance.
c. The need to achieve a minimal level of negative or dysfunctional behavior.
d. The amount and type of measurement needed to achieve the intended results.
64. Which of the following is -is the LEAST strategic measure used to evaluate PSM?
a. Cost reduction
b. Risk management
c. Revenue contribution
d. Working capital management
65. Which of the following is the process of determining what an external customer is willing to pay for an item and then assigning specific cost goals to the components, assemblies, and systems that make up that item?
a. Specific costing
b. Target pricing
c. Total cost analysis
d. Cost avoidance
66. Which of the following involves a comparison of a firm’s market strategies against another firm?
a. Functional benchmarking
b. Strategic benchmarking
c. Operational benchmarking
d. Support-activity benchmarking
67. Periodic review and audit of the PSM measurement system should NOT be undertaken for which of the following reasons?
a. To add new measures to the measurement system
b. To eliminate unnecessary or obsolete measures
c. To clarify ambiguities in the measurement system
d. To reduce measurement system operating costs.
68. Which of the following measures include tracking actual shipping costs against some pre-established objective on measures such as demurrage and detention costs, and premium freight?
a. PPM improvements
b. Field failure cost reduction
c. Target price reductions
d. Transportation cost reduction
69. Which of the following allows the buying firm to get insight for a defined period of time before the new technology is shared with other organizations?
a. TQM measure
b. First insight measure
c. Responsiveness measure
d. Cycle time measure
d 58. a 59. d
60. c 61. d 62. c
63. c 64. a 65. b
66. b
67. d
68. d
69. b
Indicate whether the statement is true or false.
1. Supply chain executives can usually disregard the limited ability of small suppliers to endure economic downturns.
a. True
b. False
2. In post-pandemic years, U.S. companies building factories in China will be doing so to facilitate access to Chinese markets.
a. True
b. False
3. The reason why China became a critical supplier to the United States can be summarized with the reasoning that costs, like water, eventually flows to the lowest point.
a. True
b. False
4. Looking ahead, the world will opt for higher-priced choices with localized supply chains.
a. True
b. False
5. Offshoring production typically incentivizes the establishment of large production facilities that favor high-volume,
a. True
b. False
6. Prolonged coexistence of old and new technologies can lead to problems, and sometimes disasters until the new technology displaces the old technology.
a. True
b. False
7. Because an accepted purchase order is technically a legal contract, buyers cannot cancel orders without notice or withhold payment for goods produced in fulfillment of the contract.
a. True
b. False
8. One contributor to the disruptive nature of the Covid pandemic is that epidemiologists failed to warn governments, businesses, and the public that future pandemics were a distinct possibility.
a. True
b. False
9. The optimal response of supply chain managers to geopolitical risk depends on the likelihood of long-term geopolitical disruption.
a. True
b. False
10. Organizations that hastily adopt new supply chain strategies will likely be unsuccessful because they cannot adapt to natural disasters or sudden geopolitical shifts.
a. True
b. False
11. There are multiple reasons for supply chain changes in the post-global world such as increasing wages in cheap countries and AI technology, however, all of them lead to more risk
a. True
b. False
12. Supply chain logics can be thought of as a set of organizing principles that guide supply chain design.
a. True
b. False
13. Since the COVID-19 pandemic, the rate of change occurring in global supply chains has been steadily decreasing.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
14. In an era of increasing disruptions, which of the following best describes the relationship large companies should have with their suppliers?
a. Parasitic
b. Predatory
c. Symbiotic
15. Which of the following supply chain strategies made firms particularly vulnerable to the COVID-19 pandemic disruptions?
a. Dependence on domestic raw material suppliers
b. Aggressive reshoring of production operations
c. Reliance on suppliers in distant countries
d. Underinvestment in logistics capabilities
16. Which of the following supply chain strategies is appropriate if the cost and delivery risk of reshoring is low, but the likelihood of long-term risk and geopolitical disruption is high?
a. “Tactical Warfare”
b. “Buy Local”
c. “Grin and Bear It”
d. “Explore Your Options”
17. Which of the following is NOT a way that procurement should expand its role in crisis management?
a. Prioritizing short-term cost savings over local supplier payment.
b. Implementing multi-tier supplier visibility tools.
c. Persuading company executives to invest in monitoring, mitigating, and managing supply chain risks.
d. Making plans to preserve supplier viability.
18. Which of the following supply chain strategies is appropriate if the cost and delivery risk of reshoring and the likelihood of long-term risk and geopolitical disruption are both high?
a. “Tactical Warfare”
b. “Buy Local”
c. “Grin and Bear It”
d. “Explore Your Options”
19. Which of the following best describes the motivation for U.S. companies elected to offshore their production during the 1970s and 1980s?
a. New trade agreements between nation-states
b. A sudden drop in global fuel costs
c. Reduced costs for large-volume freight shipments
d. Improved prediction of natural disasters
20. Which of the following supply chain trends or government policies led to critical shortage of medical supplies in the United States during the Covid pandemic in 2020?
a. Labor costs and government incentives which promoted localized production in the United States.
b. Acceptance of higher costs by medical service third-party payers
c. A significant stockpile of inventory throughout the supply chain.
d. Chinese government mandates restricting international sales through April, 2020.
21. Which of the following best describes the character of a supply chain that balances competing reasons for offshoring and onshoring?
a. Automated
b. Homogeneous
c. Heterogeneous
22. Which of the following is NOT a guideline for fair and ethical terms for contracts buyers offer suppliers?
a. Suppliers should be paid for shipped orders.
b. Buyers should issue payment delays in cases of force majeure.
c. Future procurement practices should focus on order stability for proper planning.
d. Invoices should be factored through established fintech companies to allow buyers to pay suppliers for orders in production.
23. In which of the following organizations did the science of logistics originate?
a. Road-based transportation providers
b. International maritime shipping companies
c. Military organizations
d. Passenger rail providers
24. Which of the following best describes the effect that major disruptions, such as war or pandemics, have on the character and trajectory of supply chains?
a. Major disruptions tend to expand supply chains and favor globalization.
b. Major disruptions tend to shrink supply chains and favor localization.
c. Major disruptions serve as catalysts for change with multiple potential new trends.
d. Major disruptions tend to have minimal effect on supply chains.
25. Which of the following supply chain strategies is appropriate if the cost and delivery risk of reshoring and the likelihood of long-term risk and geopolitical disruption are both low?
a. “Tactical Warfare”
b. “Buy Local”
c. “Grin and Bear It”
d. “Explore Your Options”
26. Which of the following best describes the role of the internet in global business?
a. A useful, but non-essential tool for domestic suppliers
b. A cost-effective complement to analog business systems
c. A critical public utility and foundation for commerce
d. An alternative to analog systems for limited applications
27. Which of the following best describes the capabilities and attitudes of Chinese industrialists prior to 2000?
a. Rudimentary facilities, but eagerness to learn
b. Advanced facilities and confidence in their capabilities
c. Developing technology and infrastructure, but reluctance to cooperate with global partners
d. Obsolete equipment and unwillingness to reinvest
28. Which of the following is NOT a question that supply chain leaders should ask their organization’s CEOs in order to align strategic plans with the supply chain's current state?
a. “What are your needs?”
b. “What are realistic expectations?”
c. “How can we reduce operating costs?”
d. “How can we ensure job security for key labor forces in our supply chain?”
29. Which of the following actions will NOT improve supply chain resiliency?
a. Taking a macro view to understand and plan for disruptive events.
b. Conducting more category strategy reviews.
c. Improving both communication and collaboration with suppliers.
d. Focusing on the impact of global events on first-tier suppliers
30. Which of the following supply chain strategies is appropriate if the cost and delivery risk of reshoring is high, but the likelihood of long-term risk and geopolitical disruption is low?
a. “Tactical Warfare”
b. “Buy Local”
c. “Grin and Bear It”
d. “Explore Your Options”
31. Which of the following best describes how supply chain managers will respond to disruptive events in the postCOVID world?
a. Managers will use models to better predict the timing and nature of disruptive events.
b. Managers will use the concept of flow to prevent disruptive events.
c. Managers will use the concept of flow to manage the effects of the disruptive events.
d. Managers will rarely need to respond because the rate of occurrence of disruptive events is likely to decrease sharply.
32. Which of the following is NOT a predictor of the move towards localization and specialization in North America?
a. Higher education is becoming more online
b. Business having managers work virtually
c. The increasing demand for natural resources
d. The reduction in Chinese labor costs
33. Which of the following is NOT a characteristic of a firm with supply chain immunity?
a. The firm’s supply chain is agile and quick to respond to economic changes and potential disruptions.
b. The firm’s supply chain can contract with multiple local sources of supply.
c. The firm’s supply chain can make significant use of low-cost offshore suppliers.
d. The firm can deploy a monitoring system to provide early warnings of impending disruptions.
34. In order to survive in the post-pandemic world, procurement executives should avoid which of the following?
a. Re-examining their assumptions on single and sole sources.
b. Determining how much sourcing reliance they should put on any nation or geographic region.
c. Assessing their optimal number of first-, second-, and third-tier suppliers.
d. Returning to the 2019 views on total and landed costs.
35. Which of the following best describes the evolution of supply chains over time?
a. Supply chains become less complex and more efficient.
b. Supply chains become more complex and less efficient.
c. Supply chains become less complex and less efficient.
d. Supply chains become more complex and more efficient.
36. Which of the following is NOT a guideline for navigating change in evolving supply chains?
a. Executives must remain focused on cost management rather than other metrics.
b. In the absence of substantial cash reserves, an agile and immune supply chain is essential for firms to survive
c. Use effective measures of flow.
d. Begin flow acceleration activities with a focused set of metrics.