Procurement Management Exam Bank
Course Introduction
Procurement Management examines the strategies, processes, and best practices involved in acquiring goods, services, and works from external sources essential for organizational operations. The course covers the end-to-end procurement lifecycle, including needs identification, supplier selection, contract negotiation, purchasing, and supplier performance evaluation. Students learn to balance cost, quality, risk, and sustainability considerations, navigate legal and ethical issues, and implement effective sourcing strategies. Emphasizing both public and private sector perspectives, the course integrates real-world case studies and current technologies to develop analytical and decision-making skills necessary for effective procurement in a global environment.
Recommended Textbook
Supply Management 8th Edition by David N. Burt
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Chapter 1: The Progression to Professional Supply Management
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Sample Questions
Q1) When we add the term networks to the supply and value chains, we are emphasizing the need to focus on and interactively communicate with:
A)suppliers
B)distributors
C)final consumers
D)tiers of suppliers
E)all support organizations
Answer: C
Q2) Which of the following is not a strategic supply management activity?
A) Corporate Strategic Plans
B) Simulation Modeling
C) Strategic Sourcing
D) Strategic Supply Alliances
E) Supply Chain / Supply Networks
Answer: B
Q3) Strategic sourcing requires two-way continuous improvement process work from each organization.
A)True
B)False
Answer: True
Page 3
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Chapter 2: Organizational Issues
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Sample Questions
Q1) Cross functional teams have proven to help: :
A) break down functional silos
B) reduce new product development time
C) facilitate integrated planning and coordination
D) stimulate engineering change management control
E) all of the above
Answer: E
Q2) The "mind set" or focus on internal processes usually produces the kind of detailed work necessary to achieve significant material savings.
A)True
B)False
Answer: False
Q3) E-commerce has facilitated the use of: :
A) centralized purchasing
B) decentralized purchasing
C) hybrid purchasing
D) none of the above
E) A, B & C
Answer: C
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Page 4
Chapter 3: Supply Management: an Organization Spanning Activity
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Sample Questions
Q1) A common conflict of interest between supply management and accounts payable is the delivery schedule of suppliers.
A)True
B)False
Answer: False
Q2) Supply management in manufacturing organizations is responsible for a very large percentage of a firm's financial resources,so a capable CFO should have a stake in managing the supply chain and desire collaboration with supply management.
A)True
B)False
Answer: True
Q3) Virtually all of the problems present in manufacturing organizations are present in government procurement.
A)True
B)False
Answer: True
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Page 5
Chapter 4: A Portfolio of Relationships
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Sample Questions
Q1) The transformation from reactive and mechanical purchasing to proactive procurement and on to SM,parallels a similar transformation in relationships between buyers and suppliers.
A)True
B)False
Q2) A captive supplier makes investments in order to secure a portion of the buyer's business,but it is given assurance of sufficient business to recoup the investment through legal contracts.
A)True
B)False
Q3) A captive buyer is buyer that uses single sourcing.
A)True
B)False
Q4) 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
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Chapter 5: New Product Development
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Sample Questions
Q1) Early Supply Management Involvement was formerly called Early Supplier Involvement (ESI).
A)True
B)False
Q2) Which of the following questions does not typically belong on a value-engineering checklist?
A) Can the weight be reduced?
B) Is there a similar item in inventory that could be substituted?
C) Can standard parts be replaced by complex parts?
D) Are closer tolerances specified than are necessary?
E) Is unnecessary machining performed on the item?
Q3) Which of the following is not associated with the development phase of the design process?
A) Development of prototypes
B) Design reviews
C) Qualification testing
D) Failure analysis
E) Value analysis
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7
Chapter 6: Purchasing Descriptions and Specifications
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Sample Questions
Q1) Why have samples been called the lazy person's method of describing requirements?
Q2) Which of the following is a complex specification based on the categorization given in the textbook?
A) Function and Fit Specifications
B) Material and Method-of-Manufacture
C) Brand or Trade Names
D) Market Grades
E) Qualified Products
Q3) Why is the standardization treated as a philosophy in some companies and supply chains rather than a procedure?
Q4) A simple specification for buying ketchup might be "12 ounce plastic bottle of Heinz tomato ketchup."
A)True
B)False
Q5) What are the situations that require the development of qualified products?
Q6) What should a company do before implementing EST?
Q7) How does Dell use standardization to build competitive advantage?
Q9) How does a materials catalog help reduce design time? Page 8
Q8) What does the term "balanced" imply in the balanced specifications?
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Page 9
Chapter 7: Managing for Quality
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Sample Questions
Q1) Sequential sampling continues the sample taking until the lot is either: fully inspected,rejected,or accepted.
A)True
B)False
Q2) Which of the following points is not true about Joseph Juran?
A) Juran is the author of the Quality Control Handbook
B) Juran believes that upper management should establish specific goals to be reached
C) Juran espoused the philosophy of zero defects
D) Juran believes that upper management should establish plans for reaching goals
E) Juran believes upper management should base rewards on results achieved
Q3) Which of the following is not a principle of the Quality Management System (QMS)?
A) System approach to management
B) Continual improvement
C) Proactive Management
D) Factual approach to decision making
E) Mutually beneficial supplier relationships
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Chapter 8: The Procurement of Equipment
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Sample Questions
Q1) Which of the following is not one of the primary sources of used equipment?
A) Buying from a competitor
B) Through a used equipment dealer
C) For sale by the owner
D) Arrangement through a broker
E) Through auctions, both online and traditional
Q2) The following factors are major "nuances" or considerations that make the purchase of capital equipment much more different than materials and services: they are
A) Non-recurring and size of expenditure
B) Operating and maintenance costs are often more important than price
C) Lead times are longer
D) Installation is often a major percentage of total cost
E) All of the above
Q3) Operating leases are short-term and are used by most firms to facilitate business operations.
A)True
B)False
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Chapter 9: Purchasing Services
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Sample Questions
Q1) Satisfaction is cannot be built into service products but must be added as an afterthought.
A)True
B)False
Q2) The four formats for statements of work given in the textbook are: performance,functional,design and firm fixed price.
A)True
B)False
Q3) The procurement of services is one of supply management's most interesting and challenging assignments.
A)True
B)False
Q4) Supply management frequently must assume a less active role in services procurement than when purchasing materials.
A)True
B)False
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Page 12
Chapter 10: Outsourcing
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Sample Questions
Q1) Which of the following is not true about outsourcing?
A) Outsourcing is increasing rapidly in not just materials, many business functions are being outsourced
B) Outsourcing should be used for all materials when suppliers are available
C) Outsourcing can enable leveraging of the supplier's expertise and increases in innovation
D) Outsourcing can result in lower staffing levels
E) Outsourcing can result in reduced costs and more flexibility
Q2) Outsourcing all critical activities is a trend where the idea is to achieve significant cost leverage.
A)True
B)False
Q3) Which of the following is a consideration that favors buying a product?
A) Control over quality
B) Multiple-source policy
C) Design secrecy required
D) Unreliable suppliers
E) Desire to maintain a stable work force in a period of reduction of sales
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13
Chapter 11: Sourcing
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Sample Questions
Q1) World class supply management has to develop a strategic sourcing plan that details how supply management will discover,evaluate,select,develop and manage a viable supplier base.
A)True
B)False
Q2) Two benefits of supply base reduction cited by John Deere are: increased leverage with suppliers and better focus and supplier integration in product development.Increased leverage is also due to the increased involvement with the suppliers that builds goodwill and trust.
A)True
B)False
Q3) In the discovery stage of the strategic sourcing plan given in the textbook,several analyses and approaches were presented to aid the decision.Which of the following was not one of those approaches?
A) Supplier Surveys
B) Facility Visits
C) Trial and Error
D) Third Party Evaluators
E) Evaluation Conference
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Page 14
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 a global trade intermediary?
A) Import merchants: easiest method, basically like buying from a "domestic source"
B) Commission houses: act for exporters abroad, paid by the exporter, they do selling, shipping and customs details
C) Import brokers: commission paid by sellers and buyers, charges fee for bringing parties together
D) Trade seekers: utilize the Internet to broker the deal between both parties
E) Trading companies: may work for both or one party, handles selling, shipping, customs details
Q3) A pro forma invoice enables the firm to obtain an import or exchange permit.
A)True
B)False
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Chapter 13: Total Cost of Ownership
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Sample Questions
Q1) TCO is an analytical tool,but not a philosophy.
A)True
B)False
Q2) Supply managers must shift their focus in procuring materials,services and equipment from total cost to price.
A)True
B)False
Q3) Accurate estimation of total costs does not require a cross-functional approach.It only requires that supply management carefully perform extensive time and motion studies to estimate accurate costs.
A)True
B)False
Q4) Which of the following is not an acquisition cost?
A) Purchase Price
B) Planning Costs
C) Taxes
D) Risk costs
E) Financing Costs
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Chapter 14: Price and Cost Analysis
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Sample Questions
Q1) The purpose of cost analysis is to arrive at a price that is fair and reasonable to both the buying and selling firms.
A)True
B)False
Q2) A learning curve is an empirical relationship between the number of units produced and the number of overhead hours required to produce them.
A)True
B)False
Q3) Cost analysis is a review and an evaluation of actual or anticipated costs involving the application of experience,knowledge,and judgment to data in an attempt to project reasonable estimated contract costs.
A)True
B)False
Q4) Cost analysis is generally most useful when purchasing standard items and services than when purchasing non-standard items and services.
A)True
B)False
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Chapter 15: Methods of Compensation
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Sample Questions
Q1) A supplier that is under an FFP contract may end up losing money and request relief.Which of the following reasons is why the customer will allow changing the price?
A) Customer did not contributed to the loss
B) Customer does not need the items
C) Customer assumes no other suppliers are available
D) Supplier has facilities that are not unique
E) There is plenty of time to find a new supplier
Q2) Which of the following is not typical of a cost without fee arrangement?
A) Used primarily by nonprofit institutions
B) Used for research work
C) The objective is to only make a small profit
D) Institutions generally recover all overhead costs when using this type of contract
E) In recent years, high-technology firms have increased their use of this contract type
Q3) Contract schedule risk is the risk associated with material and labor cost increases and possible schedule slippages.
A)True
B)False
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Chapter 16: Negotiation
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Q1) Which of the following is not a general guideline when creating and organizing negotiation teams for sourcing supplies from suppliers?
A) The team should be composed of cross-functional members
B) The design engineer should serve as leader of the team
C) An overall strategy is required
D) Roles should be defined
E) Mock negotiations are needed to prepare for the negotiation
Q2) Negotiation should be used instead of bidding when it is possible to estimate costs with a high degree of certainty.
A)True
B)False
Q3) Which of the following is not a typical collaborative and alliance negotiating technique?
A) Use diversions
B) Separate the people (negotiators) from the problem (quality, price)
C) Focus on interests, not positions
D) Invent options for mutual gain
E) Insist on using objective criteria
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19
Chapter 17: Contract Formation and Legal Issues
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Sample Questions
Q1) Supply managers need not possess and utilize knowledge of legal issues and considerations,but need to know where to find someone who has knowledge of legal issues and considerations.
A)True
B)False
Q2) A buyer operates under two types of authority: true authority and inherent authority.
A)True
B)False
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
Q4) F.O.B.origin shipment designates that the buying firm becomes owner when the material is delivered onto the buyer's receiving dock.
A)True
B)False
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Chapter 18: Contact and Relationship Management
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Sample Questions
Q1) Which of the following is not a common approach that buying firm's use to punish a supplier?
A) Bad mouthing the supplier to other buyers
B) Litigation and punitive damages
C) Not awarding future business
D) Downgrading a supplier
E) Billing the supplier for failures
Q2) The critical path is the shortest path through the network.
A)True
B)False
Q3) A delay in a critical path activity delays the expected project completion time.
A)True
B)False
Q4) Only one critical path is possible in a project.
A)True
B)False
Q5) The critical path is the longest path through the network.
A)True
B)False
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Chapter 19: Ethics and Social Responsibilities
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Sample Questions
Q1) Ethical actions can be reasonably avoided when the pressures that the marketplace exerts on supply management departments and on individual buyers are forcing expediency.
A)True
B)False
Q2) Supply management's involvement in employer-sponsored programs of personal purchases that are not business related is not only ethically okay,but it is a typical perk of being a supply professional.
A)True
B)False
Q3) SCPA is a term that applies to recycling and reusing efforts.
A)True
B)False
Q4) According to a study discussed in the textbook,a minority of supply professionals feel that any form of gratuity constitutes a conflict with ethical standards.
A)True
B)False
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Chapter 20: Production and Inventory Control
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Sample Questions
Q1) MRP and ERP systems are one in the same.
A)True
B)False
Q2) JIT systems work the best when the firm:
A) Produces a large number of different products
B) Has widely fluctuating demand
C) Has a large inspection department
D) Production operation set up requirements have short change over times
E) None of the above
Q3) Just-In-Time (JIT)inventory seeks to match factory output tightly to distribution demand for finished goods,i.e.a pull system.
A)True
B)False
Q4) JIT inventory control works best under conditions of dependent demand.
A)True
B)False
Q5) Detailed production scheduling comes after the release and dispatching of orders.
A)True
B)False
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Chapter 21: Demand Management and Logistics
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Sample Questions
Q1) 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
Q2) Which of the following is not a software driven demand/inventory management approach or system discussed in chapter 21?
A) Material Requirements Planning (MRP)
B) Distribution Requirements Planning (DRP)
C) Material Resources Planning (MRP II)
D) Distribution Resources Planning (DRP II)
E) Enterprise Resource Planning (ERP)
Q3) Logistics can be defined as synonymous with the term SCM.
A)True
B)False
Q4) The definition of Supply Chain Management (SCM)depends on one's perspective.
A)True
B)False
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Chapter 22: Implementing Value Network Management
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Sample Questions
Q1) Which of the following is not a Megatronics initiative for Year 1?
A) Initiate supplier development program
B) Implement a total cost of ownership program
C) Develop and implement a training program
D) Enter into as many supply alliances as possible
E) Initiate a supplier certification program
Q2) Implementing Value Network Management is as much about leadership and management as it is about supply management concepts and practices.
A)True
B)False
Q3) The overall goals for year 1 at Megatronics were to reduce the average price on incoming goods and services by 5 percent and reduce the average incoming defects by 10 percent to 900 ppm.
A)True
B)False
Q4) A conclusion of the authors of the textbook is that "world class supply managers have the essential skill set to become Chief Executive Officers!"
A)True
B)False
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