Procurement and Sourcing Management
Exam Answer Key
Course Introduction
Procurement and Sourcing Management explores the principles, strategies, and best practices involved in acquiring goods and services for organizations. The course covers the entire procurement process, from identifying needs and selecting suppliers to contract negotiation, quality management, and supplier relationship management. Emphasis is placed on strategic sourcing, cost analysis, ethical considerations, risk assessment, and integration with supply chain operations. Students will gain practical insights into global sourcing, e-procurement technologies, and the regulatory environment, preparing them to effectively manage procurement functions in diverse organizational settings.
Recommended Textbook
Supply Management 8th Edition by
David N. Burt
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Page 2
Chapter 1: The Progression to Professional Supply Management
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Sample Questions
Q1) Which bullet is not true of the proactive stage of SM?
A) Coordinate procurement system
B) Develop suppliers
C) Long-term contracts
D) Involved in development of requirements
E) Not involved in key source selections
Answer: E
Q2) Strategic sourcing requires one-way improvement efforts where the buying firm tells the supplying firm what is best.
A)True
B)False
Answer: False
Q3) Which of the following is not one of The Four Phases of Supply Management?
A) Generation of Requirements
B) Sourcing
C) Pricing
D) Profit Sharing
E) Post Award Activities
Answer: D
Page 3
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Chapter 2: Organizational Issues
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Sample Questions
Q1) One of the key skills for any leader is to be an effective listener.
A)True
B)False
Answer: True
Q2) The materials management organization structure paved the way for _____ structure: :
A) value network chain structures
B) supply chain management structure
C) procurement management structure M
D) purchasing centralization N
E) purchasing decentralization O
Answer: B
Q3) Supplier relationship management includes motivation,assistance,incentives,cooperation,collaboration and on occasion,penalties.
A)True
B)False
Answer: True
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Chapter 3: Supply Management: an Organization Spanning Activity
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Sample Questions
Q1) In assuming lesser strategic responsibility,the activities of supply managers are increasingly spanning less organizational boundaries.
A)True
B)False
Answer: False
Q2) Almost all of the problems present in manufacturing organizations are not present in government procurement.
A)True
B)False
Answer: False
Q3) Which of the following is not a step in the "Six-step Environment Monitoring Strategy" presented in Chapter 3?
A) "Identify the major suppliers and customers of the materials and services."
B) "Build a model that predicts the material (or service) behavior."
C) "Monitor the model to determine its accuracy."
D) "Run quantitative models to confirm your strategy"
E) "Continuously make improvements as new relationships are understood and additional data becomes available."
Answer: D
Page 5
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Chapter 4: A Portfolio of Relationships
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Sample Questions
Q1) Which of the following is a situation wherein an alliance may be appropriate?
A) Supplier Dependency Creation
B) Neglected Areas
C) Suppliers Seeking to Reduce Competition
D) Low Switching Likelihood with Low Switching Costs
E) No leverage from Partnership
Q2) Collaborative and alliance relationships tend to result in higher total costs for non-commodity products than conducting the same business using transactional relationships.
A)True
B)False
Q3) One of the advantages of collaborative relationships is that relatively less purchasing time and effort are required to establish price than in transactional relationships.
A)True
B)False
Q4) A collaborative relationship frequently is an appropriate first step on the road to a strategic alliance.
A)True
B)False
Page 6
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Chapter 5: New Product Development
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Q1) Which of the following is not a generalization about value?
A) Value can be defined as the lowest end cost at which the function can be accomplished at the time and place and with the quality required
B) Value is determined objectively and subjectively by design engineers
C) Some items/services/processes which cost less than a similar item/service/process may accomplish the function in a superior or equal manner
D) Value cannot be determined exclusively by an examination of the item/service/process being evaluated
E) The value of any service, material, or product is established by the minimum cost of the other alternatives that will perform the same function
Q2) Which of the following questions does not typically belong on a value-engineering checklist?
A) Can the item be eliminated?
B) Can the product quality be lowered to reach a lower price point?
C) If the item is not standard, can a standard item be used?
D) If it is a standard item, does it completely fit the application, or is it a misfit?
E) Does the item have greater capacity than required?
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Chapter 6: Purchasing Descriptions and Specifications
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Q1) WCSM requires supply management professionals and suppliers to be actively involved in only the tactical development of specifications and standards. The strategic development of specifications and standards is best left solely to the department developing the requirement.
A)True
B)False
Q2) How does a materials catalog help reduce both standard and non-standard parts?
Q3) Industrial standardization deals with such things as operating practices, procedures, and systems.
A)True
B)False
Q4) What does the term "balanced" imply in the balanced specifications?
Q5) Which of the following is a simple specification based on the categorization given in the textbook?
A) Samples
B) Commercial Standards
C) Design Specifications
D) Engineering Drawings
E) Material and Method-of-Manufacture
Q6) Which type of standard should a designer choose first if a choice if possible?
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Chapter 7: Managing for Quality
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Sample Questions
Q1) Which of the following individuals was not presented in the text as a quality guru?
A) Philip Crosby
B) Sheila Petcavage
C) Masaaki Imai
D) Genechi Taguchi
E) Joseph Juran
Q2) The term "tool" emerged from the use of the methodologies in small group improvement efforts,such as quality circles,wherein the group would focus on solving a problem by using a mix of the methodologies.
A)True
B)False
Q3) Just-in-time's two major tenets are: 1.Respect for people,and 2.Elimination of waste.
A)True
B)False
Q4) Wasteful activities do not add value to fulfilling the needs of the customer.
A)True
B)False
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Chapter 8: The Procurement of Equipment
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Sample Questions
Q1) Among the reasons that firms utilize leases are: they would like to purchase the equipment at a later time and the firm wants freedom and flexibility.
A)True
B)False
Q2) Among the reasons that firms utilize leases are: they are not interested in ownership and the firm wants freedom and flexibility.
A)True
B)False
Q3) The length of a financial lease is usually longer than the life of the equipment.
A)True
B)False
Q4) The sourcing team for capital equipment must determine the supplier's:
A) Reputation, time in business, location
B) Technical production and commercial capabilities'
C) Engineering staff and installation procedure, skill
D) Delivery lead time and history of on time completion
E) All of the above
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Chapter 9: Purchasing Services
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Sample Questions
Q1) In planning the statement of work,all of the following should be considered: statistical process control,process capability analysis,and the sampling methodology.
A)True
B)False
Q2) Supply Management frequently must assume a far more active role in all phases of services procurement than when purchasing materials.
A)True
B)False
Q3) Which is usually not included in planning the statement of work?
A) Performance measurements
B) Deliverables
C) Delivery and performance schedule
D) Service levels
E) Local buying requirements
Q4) In writing an effective S.O.W.as given in the textbook,brevity should be used by utilizing as many abbreviations as possible and not including procedures and or extraneous statements.
A)True
B)False
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Chapter 10: Outsourcing
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Sample Questions
Q1) To identify non-critical activities,the firm's core competencies must be defined.
A)True
B)False
Q2) Outsourcing decreases an organization's flexibility to meet rapidly changing market conditions,but it can usually reduce total costs in the long-term.
A)True
B)False
Q3) Many companies are not readily staffed to keep a company competitive in e-business.As a result,companies are outsourcing infrastructure development and maintenance to "Netsourcers."
A)True
B)False
Q4) "Netsourcers" are internal supply management specialists that keep a company competitive in e-business.
A)True
B)False
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Page 12
Chapter 11: Sourcing
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Sample Questions
Q1) The selection of bidding or negotiation should be decided by using subjective criteria,a lowest price perspective and sound supply management logic.
A)True
B)False
Q2) The two steps in two-step bidding are: 1.Submission of technical proposals by potential suppliers and 2.Price bidding by potential suppliers that passed the first step.
A)True
B)False
Q3) A national source is defined by the textbook as one where the firm's headquarters and all facilities are located in the city or region where the materials or services will be used.
A)True
B)False
Q4) The strategic sourcing plan should be developed in an environment that does not include any functional area representatives.
A)True B)False
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Chapter 12: Global Supply Management
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Sample Questions
Q1) Which of the following is not an advantage of countertrade over using currency?
A) Avoiding exchange controls
B) Transaction requires less administration
C) Enables selling to countries with inconvertible currencies
D) Enables marketing products in less-developed countries
E) Reduces risks with an unstable currency
Q2) Which of the following is not true about currencies and/or prices in global trade?
A) The stability of a floating currency is more questionable than pegged currencies
B) A cost driven product is one with few if any competitors
C) A buying firm is prohibited from using hedging in most countries
D) The supplier can set the price based on his/her firm's costs with a cost driven product
E) A market driven product's prices are set on the world market.
Q3) Assists are used in aiding the production outside of the buying firm's country and are provided by the buying firm.
A)True
B)False
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Chapter 13: Total Cost of Ownership
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Q1) TCO analysis may include the study of all but one of the following issues.Which issue does not belong in the TCO analysis?
A) Volatility of end-customer demand
B) Financial accounting reports
C) Inventory carrying costs
D) Inventory risk
E) Quality costs
Q2) TCO analysis of equipment purchases usually does little to help reduce the expenditures for maintenance and parts over the lives of the investments.
A)True
B)False
Q3) An easy problem to resolve in TCO analysis of manufacturers is the accurate allocation of manufacturing overhead to products being purchased.
A)True
B)False
Q4) TCO is an analytical tool and a philosophy.
A)True
B)False
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Page 15
Chapter 14: Price and Cost Analysis
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Q1) Independent cost estimates may be used as a basis for comparison of prices.
A)True
B)False
Q2) When faced with the realities of competition,the price any specific firm will quote will be governed largely by the friendship the sellers have forged with the buyers.
A)True
B)False
Q3) A supply manager without an understanding of cost analysis and costing systems cannot individually aspire towards shifting his or her organization towards excellence.
A)True
B)False
Q4) Cost distortion usually exists in the supplier's pricing of products when the supplier sells a large variety of products,but applies overhead equally per unit.
A)True
B)False
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Page 16
Chapter 15: Methods of Compensation
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Sample Questions
Q1) Under a CPIF arrangement,an incentive applies over the entire range of cost outcomes.
A)True
B)False
Q2) Cost Plus Incentive Fee arrangements combine the incentive arrangement and the cost plus fixed fee arrangement.
A)True
B)False
Q3) Which is not one of the criteria given in the textbook to determine whether using an FFP type contract is feasible?
A) Specifications are well defined
B) Cost risk is high
C) Schedule risk is low
D) Technical risk is low
E) Competition has established pricing
Q4) FPEPA is not similar to an FFP contract.
A)True
B)False
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Page 17
Chapter 16: Negotiation
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Sample Questions
Q1) A typical collaborative and alliance negotiating technique is to separate the people (negotiators)from the problem (quality,price).
A)True
B)False
Q2) Traditional non-cost objectives in a negotiation include all technical aspects of the purchase,buyer-furnished material and equipment and the mode of transportation.
A)True
B)False
Q3) Which of the following cannot be interpreted as a drawback to online negotiation?
A) It is far easier to say 'no' in writing
B) Psychological separation makes the termination of the relationship much easier
C) Online negotiators are likely to feel a need to be more persuasive - more convincing
D) A lack of nonverbal cues forces careful consideration of the impact of each word
E) Can help focus on the issues separately from personalities
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Chapter 17: Contract Formation and Legal Issues
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Sample Questions
Q1) Supply managers need to possess and utilize knowledge of legal issues and considerations.Such knowledge must be coupled with the wisdom to communicate and interact with legal professionals and suppliers proactively in efforts to develop and maintain relationships between supply chain members that minimize conflict and maximize opportunities for collaborative success.
A)True
B)False
Q2) The UCC was written for "goods" and not services,while the UCC might be used for services,generally
A) The National Service Act will be used
B) Each State's Common Law of Contracting will apply
C) The CISG will apply
D) Cancellation Rights are the same
E) The "Battle of the Forms" can decide when services are included
Q3) A mistake in drawing up a contract by the selling firm can always be voided by the selling firm without the consent of the buying firm.
A)True
B)False
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Chapter 18: Contact and Relationship Management
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Sample Questions
Q1) Some of the common approaches that buying firms use to punish suppliers are: not awarding future business,downgrading a supplier and billing the supplier for failures.Litigation and assessing punitive damages are not common approaches due to the severity of the punishment.
A)True
B)False
Q2) A delay in a critical path activity will probably not delay the expected project completion time,but the potential delay should be considered by the project manager in order to proactively think through alternatives.
A)True
B)False
Q3) What usually does not need to be specified at the pre-award conference?
A) Invoicing procedures and documentation
B) Materials purchase procedures
C) Background checks and security clearances
D) Price of the contract
E) Insurance certificates
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Chapter 19: Ethics and Social Responsibilities
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Q1) Which of the following is not a recommended guideline for personal purchases for employees?
A) Avoid using an employer's purchasing power for special purchases
B) Make certain of fair arrangements for personal purchase programs
C) Use caution to ensure that employer-sponsored programs do not force special concessions on the supplier
D) Personal purchases should be used as a bonus for managers in supply management
E) Suppliers should be made aware that such purchases are not for the employer, but for the firm's employees
Q2) Which of the following is not a key law or regulation that impacts supply management in the USA?
A) The Federal Acquisition Regulations
B) The Defense Acquisition Regulations
C) Patent, Copyright, and Trademark Laws
D) OSHA, EPA, and EEOC Laws
E) Foreign Border Control Act
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Chapter 20: Production and Inventory Control
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Sample Questions
Q1) The major mistake most users commit when calculating EOQ is:
A) Using inaccurate demand numbers
B) Using "sunk" cost figures
C) Using average costs
D) Using standard engineering costs
E) Using the wrong labor rates
Q2) Materials Requirement Planning (MRP)uses the Master Planning Schedule (MPS)to "explode" the product Bill of Material (BOM)to calculate the required number of parts needed.
A)True
B)False
Q3) Supplier managed inventories can result in major savings by contracting with the supplier to manage,stock and operate MRO,tools,office supplies and other support material.
A)True
B)False
Q4) C items require more management supervision because they represent such large numbers of items.
A)True
B)False
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Chapter 21: Demand Management and Logistics
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Sample Questions
Q1) Since logistics professionals are responsible for developing and managing the interrelationships between supply chain members,logistics management is the critical function responsible for managing the supply chain.
A)True
B)False
Q2) Operations management is the part of the supply chain process that plans,implements,and controls the efficient,effective flow and storage of goods,services,and related information from point of origin to point of consumption with the purpose of conforming to customer requirements.
A)True
B)False
Q3) Logistics is the part of the supply chain process that plans,implements,and controls the efficient,effective flow and storage of goods,services,and related information from point of origin to point of consumption with the purpose of conforming to customer requirements.
A)True B)False
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Chapter 22: Implementing Value Network Management
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Q1) According to Megatronics,the inflow of technology is not related to the supplier's investment in advancing its technological capabilities and the supplier's willingness to share its innovations.
A)True
B)False
Q2) A problem that the new supply management team faced at Megatronics was the fact the price often rises when the focus is shifted onto TCO.The solution presented by the team was as follows,"If we pay a price premium that is offset with a reduction in the total cost of ownership,we will document our analysis."
A)True
B)False
Q3) Which of the following is not a Megatronics initiative for Year 1?
A) Train alliance champions
B) Invest in an Enterprise Resource Planning (ERP) system
C) Include supply engineers on appropriate new development teams
D) Initiate reverse auctions where appropriate
E) Design, develop, and implement aggressive social responsibilities program
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