MGT 333 Ch. 1

For an organization with annual sales of $500 million, purchases of $300 million and profit of $50 million, a 10 percent reduction in the cost of purchases would result in a profit-leverage effect of:

60 percent (sales increase of 60 percent would be required to achieve the same percentage increase in profit).

One of the most important steps in achieving the potential of the supply function is hiring someone from outside of the company's industry into the top supply position.

False

The role of supply management is best captured by the following question:

How can supply and suppliers help decrease costs and increase revenues?

Supply is of great consequence in most manufacturing organizations since the costs of purchased materials and services greatly exceeds labor and other costs.

True

Supply makes a significant contribution to organizational risk management since many supply decisions have downside risks that might impact the organization's strategy.

True

Terms such as purchasing, procurement, supply, and supply chain management are terms that are used almost interchangeably.

True

The profit-leverage effect of supply savings means that:

a reduction in purchase spend increases profit more than an equivalent increase in sales.

The supply function in public sector organizations can differ from those in private sector organizations in the following area:

regulatory requirements regarding the acquisition process and policies.

To contribute to organizational strategy, the supply department should:

seek opportunities to provide competitive advantage.

Evaluation of the supply function's contribution to organizational goals and strategies can be viewed in the context of:

strategic & practical, direct & indirect