SCIM 233 Exam 2 (Chapters 5, 6, & 10)

Outsourcing of services is:

increasing in volume and scope.

A prime function of an organized commodity exchange is to furnish an established marketplace where:

the forces of supply and demand operate freely.

A payment bond protects the buyer against liens that might be granted to suppliers of material and labor to the bidder, in the event the bidder does not make proper payment to its suppliers.

True

Capital items are not bought in the regular course of business.

True

Competitive bidding, in general, is the most efficient means of obtaining a fair price for items bought.

True

Equipment, real estate, construction, and information technology are examples of capital acquisitions.

True

Farmers turn to marketing and production contracts when they perceive the efficacy of spot markets to be inadequate in handling their risks, and processors turn to contracts as a way to encourage farmers to produce specific products at desired times.

True

It is common practice to specify the procedure and results necessary to meet quality standards as part of the specification.

True

Prices may not be directly related to costs in the market approach.

True

Subcontracts are useful when the work is difficult to define, has a long time horizon, and is relatively expensive.

True

The gray zone in make or buy refers to the range of options between 100 percent make to 100 percent buy.

True

The increase in outsourcing has resulted in an increase in the percentage of revenue paid out to suppliers.

True

The process for bidding in the public sector is generally similar to the private sector, although there are a few important differences.

True

The procurement of indirect or noncore spend is more likely to be outsourced than procurement of direct or core spend.

True

The decision to make or buy a good or service is:

a decision of strategic importance that deserves careful evaluation.

Labor and material costs are typically:

direct costs.

The inability to inventory services makes quality assurance less difficult.

False

Fixed costs generally remain the same regardless of the number of units produced.

True

Concerns about outsourcing include:

layoffs, exposure to supplier's risks, and loss of control.

Outsourcing:

may reduce operating costs, improve focus on core competencies, and gain access to world-class capabilities.

The type(s) of procurement outsourcing contracts include:

procure-to-pay (P2P), source-to-contract (S2C) and source-to-pay (S2P).

The disadvantages of buying with specifications include:

specifications can add costs and the potential for disqualifying or discouraging potential suppliers.

When a specification is widely known, commonly recognized and readily available to every buyer, it is called a:

standard specification.

Early supply involvement means:

supply considerations are included during need identification and specification.

Growth in outsourcing in the logistics area can be attributed, in part, to growing deregulation of transportation companies.

True

A procurement outsourcing contract that covers approval workflow, material acquisition, purchase order, expediting, material and invoice receipt, invoice payment, financial performance, compliance management, policies and procedures, and performance and results reporting is called:

procure-to-pay (P2P).

A corporate travel department determines that employees have been staying in 15 different hotel chains. The director of corporate travel mandates that travelers may only stay in four designated hotel chains. This action is an example of:

simplification.

The lowest bid may not receive the order if:

the buyer discovers the lowest bidder is unreliable, the lowest bid is higher than the buyer believes justifiable and there is reason to believe the bidders colluded.

Supply chain risk can be classified as:

operational, financial and reputational.

This bond guarantees work will be done according to specifications, in the time specified, and if another supplier does rework or completes the order, purchasing is indemnified for these extra costs.

performance bond.

A cash discount of 1/15, N/30 (1 percent cash discount if payment is made in 15 days, with the gross amount due in 30 days) is the equivalent of what approximate interest rate?

24 percent.

A recent North American trend is to insource a number of services that were traditionally outsourced.

False

A specification is a loose description of a requirement that leaves room for supplier enhancements and contributions.

False

Accepting a price discount for ordering larger quantities leads to lower levels of anticipation inventory.

False

An escalator clause provides for an increase, but not a decrease, in price if costs change.

False

For nonrepetitive requirements, a system or process of acquisition can be designed.

False

Indirect costs can be specifically and accurately assigned to a given unit of production or a specific identifiable task performed by a service provider.

False

Information regarding price trends cannot be easily obtained because most organizations are reluctant to share cost and price information.

False

It is not possible for some activities in a function to be core competencies that are made or insourced, and for some activities in the same function to be noncore and bought or outsourced.

False

Online reverse auctions are useful means of price determination for customized items.

False

Packaging is an easy category to buy because it has few disposal, environmental, and transportation implications.

False

Service triads favor contracts that control how the service is delivered.

False

A criterion in establishing whether a purchase is strategic can be:

determined by performing Pareto analysis to determine if the purchase is an "A" item.

The growth in outsourcing in the logistics area is attributed to:

enhanced logistics technologies that provide real-time data.

If the delivery date is some months or years away and if there is substantial chance of price escalation, a supplier may feel that there is far too much risk of loss to agree to sell under a:

firm-fixed-price (FFP).

Supply's growing involvement in the acquisition of services may be explained by:

high dollar value on services and the opportunities to reduce costs.

Items for which prices are comparatively low and the cost of price reduction efforts may exceed any price savings realized are:

maintenance, repair, and operating supplies.

Description by brand:

may be a necessity because the manufacturing process is secret.

Deciding what represents a core competency in an organization is:

often a fairly complex decision and a function of many factors.

Traditional criteria for supply management are:

quality, quantity, delivery, price and service.

An advantage of buying by performance or function over other specification methods is that it provides:

the opportunity for the potential supplier to establish how to make the most suitable product/service.

A cash discount allows:

the seller to secure prompt payment and the buyer to pay a lower price per unit.

Purchasing by specification typically occurs when:

there are multiple sources for an identical requirement.

Hedging is a way to:

try to minimize price and currency exchange risks.

To assist in determining what represents acceptable value, a buyer is likely to:

identify the function of a good or service.

Subcontracts can only occur:

if there is a prime contractor bidding out part of a job.

Some of the reasons an organization may decide to buy rather than make are: greater supply assurance, stringent quality requirements, and very small quantity requirements.

False

Subcontracts are a special class of the make or buy, used exclusively in construction procurement.

False

The chief executive officer (CEO) identifies opportunities for insourcing and outsourcing and supply is responsible for aiding in the selection of sources.

False

The price of a semiprocessed material—such as steel sheets instead of ingots, frozen pork bellies instead of hogs, cocoa butter instead of beans—tends to move in the opposite direction as the price of the basic raw material.

False