SCM EXAM 2 Ch 2,5

Supply Management

a newer term to describe the expanded set of responsibilities of purchasing professionals

Qualitative forecasting methods

are based on intuition or judgmental evaluation and are generally used when data is limited, unavailable, or not currently relevant.

Cyclical variations

are wavelike movements that are longer than a year and are influenced by macroeconomic and political factors.

CPFR relies heavily on? a. Firms retaining information b. Firms acting independently c. Firms acting in their own best interest d. Firms sharing information

d. Firms sharing information working closely together and are willing to share information and risk through a common set of processes

Payment Bonds

protection against 3rd party liens not fulfilled by bidder

Industrial buyers

purchase raw materials for conversion, services, capital equipment, and MRO supplies

Public Procurement or Public Purchasing

purchasing and supply function for government and non-profit sector

Which type of forecasting technique would a firm likely use when launching a new product and historical data does not exist? a. Associative b. Time Series c. Qualitative d. Quantitative

Qualitative

Potential Challenges on Global Sourcing

Requires additional skills and knowledge to deal with international suppliers, logistics, etc

A(n) _______________ performs transactions for a fee, and does not take title to the goods. Instead, title passes directly from the seller to the buyer. a. Keiretsu b. Second-tier-supplier c. Leverage buyer d. Import broker

d. Import broker (sales agent)

decentralized-centralized (Large multiunit org)(hybrid)

decentralized corporate and centralized at business unit

Purchasing Organization

dependent on many factors, such as market conditions and types of materials required

the purchasing process-manual purchasing

each are documents

Offset

exchange agreement for industrial goods or services as a condition of military-related export

Supply Base

list of suppliers a firm uses to acquire its materials, services, supplies and equipment

Reasons for Global Sourcing

opportunity to improve quality, cost and delivery performance

Contracting

term often used for the acquisition of services

Purchasing typically includes

the added activities of specifications development, value analysis, negotiation, expediting, contract administration, supplier quality control, some logistics activities.

Performance Bonds

work will be on time and meet specifications

The primary goals of purchasing

-Ensure uninterrupted flows of materials and services at the lowest total cost -Improve quality of the finished goods produced -maximize customer satisfaction

the purchase order

A written offer to a supplier to buy specified items. if initiated by supplier it is a sales order -Uniform Commercial Code (UCC) document in U.S.

Bid bonds

incentive to fulfill contract

Data Set A1 Period Actual Sales Volume 1 10,000 2 11,400 3 14,550 4 15,050 5 17,250 6 18,500 Using Data Set A1, what would be the forecast for period 6 using a four period simple moving average? (Choose the closest answer.) a. 16,625 b. 16,338 c. 17,100 d. 14,563

(11,400 + 14,550 + 15,050 + 17,250)/4 = 14,563.

Buy American Act

(1933) US government purchases and 3rd party purchases using federal funds must buy if the US good is not more than a certain differential above the foreign good

Federal Acquisition Streamlining Act

(1994) removed restrictions on bids less than $100,000

Advantages of e-Procurement

- time savings - cost savings - accuracy - real time use - mobility - trackability

Reasons for favoring multiple suppliers:

-Need capacity -Spread risk of supply interruption -Create competition -Information -Dealing with special kinds of business

Factors that firms should consider while selecting suppliers include:

-Process and product technologies, -Willingness to share technologies and information, -Quality, -Cost, -Reliability, -Order system and cycle time, -Capacity, -Communication capability, -Location, -Service.

The complexity and costs involved in selecting foreign suppliers and dealing with

-duties;. -tariffs; -custom clearance; -currency exchange; and -political, cultural, labor, and legal problems present sizeable challenges for the international buyer

break-even analysis -- can be helpful:

-new products -make v. buy decisions -make v make decisions

The purchasing and supply management function in the government and nonprofit sectors, such as educational institutions; hospitals; and federal, state, and local governments is called: a. Public spending b. Public procurement c. Transactional procurement d. Competitive buying

. Public procurement

The benefits of CPFR include the following:

1) Strengthens partner relationships, 2) Provides analysis of sales and order forecasts, 3) Uses point-of-sale data, seasonal activity, promotions, new product introductions, and store openings or closings to improve forecast accuracy, 4) Manages the demand chain and proactively eliminates problems before they appear, 5) Allows collaboration on future requirements and plans, 6) Uses joint planning and promotions management, 7) Integrates planning, forecasting, and logistics activities, 8) Provides efficient category management and understanding of consumer purchasing patterns, 9) Provides analysis of key performance metrics.

Countertrade can include

1. Barter 2. Offset 3. Direct Offset 4. Indirect Offset 5. Counterpurchase

Reasons for buying or outsourcing

1. Cost advantage 2. Insufficient capacity 3. Lack of expertise 4. Quality

The primary goals for purchasing are:

1. Ensure uninterrupted flow of raw materials 2. Improve quality of the finished goods produced 3. Maximize customer satisfaction

E-Procurement Steps

1. Material user enters a purchase request 2. its approved and transmitted electronically to buyer 3. buyer reviews 4. buyer reviews closed bids and selects a supplier

Reasons for Making

1. Protect technology 2. No competent supplier 3. Better quality control 4. Lower Cost

Period Actual Sales Volume 4 15,050 5 17,250 Assume the forecast for period 4 is 14000. Use a smoothing constant of α = 0.4

14,000 + 0.4(15,050 - 14,000) = 14,420. forecast + a(period 4 + forecast)

Fm-Fb/Cb-Cm

Fm=fixed make Fb= fixed buy Cb=variable buy Cm=Variable make

Inventory Turnover Effect

Increased inventory turnovers indicate optimal utilization of space and inventory levels, increased sales, avoidance of inventory obsolesce

Return on Assets Effect

Indicates how efficiently management is using its total assets to generate profits. High ROA suggests management is capable of generating large profits

The four common qualitative forecasting models include:

Jury of executive opinion, Delphi method, Sales force composite, Customer surveys.

ROA=

Net Income/Total Assets

Supply Base Rationalization

Reduction in the supply base to the lowest number of suppliers possible without increasing risk top of triangle /OTD on time delivery strategic /98% preferred /95% approved 90%

Profit-Leverage Effect

a decrease in purchase spend directly increases profits before taxes (assuming no decrease in quality)

Using the actual demand shown in the table below, what is the forecast for June (round to whole number) using a 3-month weighted moving average and the weights 0.2, 0.3, 0.5 (remember how to apply them)? Dec. Jan. Feb. Mar. Apr. May 39 36 40 44 48 50 a. 48 b. 52 c. 54 d. 46

a. 48 F(t) = 0.5(50) + 0.3(48) + 0.2(44) = 48.2. Rounding = 48.

Proper demand forecasting enables _____________________ for businesses to be competitive. a. Better planning and utilization of resources b. Stockouts and good responsiveness to market dynamics c. High inventory costs and increased profits d. Low inventory costs and increased costs of obsolescence

a. Better planning and utilization of resources

In 2016, ___________ was the leading market for U.S. exports. a. Canada b. China c. Mexico d. Japan

a. Canada mexico was second

In forecasting, a tracking signal is used to: a. Determine if the forecast bias is within the acceptable control limits b. Measure the underlying changes in demand c. To route the products on a different mode of transportation d. Estimate the demand for the next period

a. Determine if the forecast bias is within the acceptable control limits

The real value of CPFR comes from: a. Firms exchanging forecasting information b. Sophisticated forecasting algorithms c. Centralized purchasing and forecasting relationships d. Reverse logistics programs

a. Firms exchanging forecasting information

The impact of poor communication and inaccurate forecasts along the supply chain can cause: a. Material shortages b. Consumer's risk c. Reverse Logistics d. Economies of scale

a. Material shortages

Petty cash is being phased out in favor of: a. Kanban b. Venmo c. P-cards d. Bitcoin

c. P-cards

forward vertical integration

acquiring customers =suppliers to customers

backward vertical integration

acquiring sources of supply =customers to suppliers

Which of the following is an advantage of decentralized purchasing departments? a. Lower transportation costs b. Better knowledge of unit requirements c. Use of common supply base d. Avoids duplication

b. Better knowledge of unit requirements

A(n) ____________ purchase order is negotiated for repeated supply over a fixed time period, such as quarterly or yearly. a. Automatic b. Blanket c. Invitation for bid d. Blank check

b. Blanket -covers a variety of items

One of the primary goals of purchasing is to: a. Facilitate the processes of knowledge transfer between individuals and between organization b. Ensure uninterrupted flows of raw materials at the lowest total cost c. Maximize stockholder wealth d. Help build the organization's public image and reputation

b. Ensure uninterrupted flows of raw materials at the lowest total cost

Two methods have been used to produce the following forecasts over the past four months. Which forecast is the best one? Demand /Forecast A /Forecast B 150 /130 /180 200 /170 /180 220 /184 /180 190 /195 /180

b. Forecast A Correct. Forecast A using MAD: (|20| + |30| + |36| + |-5|) /4 = 22.75 and Forecast B using MAD: (|-30| + |20|+ |40| + |10|) / 4 = 25.

Which of the following is NOT used to calculate total transportation cost when using the Total Cost of Ownership concept? a. Weight per unit b. Gas prices c. Distance to factory d. Number of units

b. Gas prices Total Transportation Cost = distance X quantity X weight /unit X rate/ton-mile

More than a dozen presidential executive orders requiring federal purchasing officials to include environmental considerations and human health when making purchasing decisions can be attributed to a concept called: a. Hybrid Purchasing b. Green Purchasing c. Buy America Act d. Counter Purchasing

b. Green Purchasing

Which of the following is NOT a benefit of CPFR? a. Allows collaboration on future requirements and plans b. Improved corporate image among regulators c. Provides analysis of sales and order forecasts d. Strengthens partner relationships

b. Improved corporate image among regulators

Which one of the following is NOT a type of qualitative forecasting? a. Consumer survey b. Naïve method c. Delphi method d. Jury of executive opinion

b. Naïve method sales force composite

Which of the following is a reason that single sourcing is considered risky/bad? a. It is easier to establish a mutually beneficial strategic alliance b. Poor supplier performance could result in plant shutdowns c. Volume of order may be too small d. Firms cannot take advantage of transportation economies

b. Poor supplier performance could result in plant shutdowns

The total cost of ownership for Supplier 1 is $1,670,000. The total cost of ownership for Supplier 2 is $1,750,000. The total cost of ownership for Supplier 3 is $1,690,000. Using Total Cost Analysis, it will be more cost-effective to use a. Supplier 3 b. Supplier 1 c. Supplier 2 d. Cannot be determined.

b. Supplier 1 Supplier 1 has the lowest Total Cost of Ownership so it is more cost-effective

What component of a time series is based on increasing or decreasing movements over many years and are due to factors such as population growth, population shifts, cultural changes, and income shifts? a. Cyclical Variations b. Trend Variations c. Random Variations d. Seasonal Variations

b. Trend Variations

PQ=F+CQ

breakeven point= solve for Q ticket price = solve for P fixed cost = F variable cost = C

Making all the purchasing decisions, including order quantity, pricing policy, contracting, negotiations, and supplier selection and evaluation are the key characteristics of a. Decentralized Purchasing b. Single stage replenishment c. Centralized Purchasing d. Logistics Management

c. Centralized Purchasing

A company is conducting forecasting that revolves around the global recession and real estate crises. This type of forecasting can be referred to as what component of a time series? a. Seasonal Variations b. Trend Variations c. Cyclical Variations d. Random Variations

c. Cyclical Variations

Which of the following is NOT a benefit of better forecasts? a. Smoother production plans b. Reduced stock outs c. Improved corporate image among regulators d. Improved customer service

c. Improved corporate image among regulators

Which of the following is NOT a reason for favoring multiple sourcing? a. Encourages competition among suppliers b. Spreads the risk of supply interruption c. Less quality variability d. Increases information about new processing technologies

c. Less quality variability

If a firm manages to lower its purchase spend on materials by $10,000 then: a. Stockholders equity increases 20% b. Cost of goods sold increases by $10,000 c. Profits before taxes increase by $10,000 d. Return on investment increases by 10%

c. Profits before taxes increase by $10,000

According to the text, which of the following is NOT one of the top three challenges for CPFR? a. Trust b. Cost c. Sophisticated forecasting algorithms d. Difficulty making internal changes

c. Sophisticated forecasting algorithms

Barter

complete exchange of goods or services of equal value without the exchange of currency

The formula for forecast error is calculated by using the equation: a. Actual demand for period t plus the forecasted demand for period t b. The average of Actual demand for period t and forecasted demand for period t c. Actual demand for period t divided by the forecasted demand for period t d. Actual demand for period t minus the forecasted demand for period t

d. Actual demand for period t minus the forecasted demand for period t

Which of the following is a potential challenge for global sourcing? a. Dealing with duties b. Currency exchange c. Political problems d. All of these choices are correct.

d. All of these choices are correct.

Which of the following is an advantage to utilizing an e-procurement system? a. Mobility b. Cost savings c. Time savings d. All of these choices are correct.

d. All of these choices are correct.

Which forecasting method would use the size of the advertising budget as a variable in the forecasting technique? a. Business cycle forecasting b. Random variation forecasting c. Time series forecasting d. Cause-and-Effect forecasting

d. Cause-and-Effect forecasting Cause-and-effect forecasting assumes that one or more factors are related to demand and, therefore, can be used to predict future demand.

Which of the following is NOT a factor to consider when selecting suppliers for important materials? a. Reliable product quality level b. Supplier's distance from the manufacturing facility c. Supplier's willingness to share technologies d. Number of customers with which the supplier currently has contracts

d. Number of customers with which the supplier currently has contracts

Countertrade

goods and services of domestic firms are exchanged for goods and services of equal value

Non-tariff barriers

import quotas, licensing agreements, embargoes, laws and other regulations imposed on imports and exports

decentralized purchasing

individual, local purchasing departments, such as plant level, make their own purchasing decisions

Direct Offset

involves coproduction, or a joint venture and exchange of related goods or services

Indirect Offset

involves exchange of goods or services unrelated to the initial purchase

Purchasing

key business function for acquiring materials, services, and equipment

poor communication and inaccurate forecasts

results in the bullwhip effect causing stockouts, lost sales, high costs of inventory and obsolescence, material shortages, poor responsiveness to market dynamics, and poor profitability.

Import Broker

sales agent who performs transactions

centralized purchasing

single purchasing department located at the firm's corporate office makes all purchasing decisions

materials requisition/purchase requisition

stating product, quantity, and delivery date -may originate planned order release in MRP -traveling requisition in recurring orders

Bid or Surety Bonds

successful bidder will accept contract

Counterpurchase

the original exporter agrees to sell goods or services to a foreign importer and simultaneously agrees to buy specific goods or services from the foreign importer

Green Purchasing

variety of federal, state, and local initiatives to include environmental and human health considerations when making purchases

Merchants

wholesalers and retailers who purchase for resale

Advantages of Decentralization include:

1) Better knowledge of unit requirements 2) Local sourcing 3) Less bureaucracy.

Request for Quotation (RFQ)

Buyer identifies suppliers & issues a request for quotation (RFQ) for routine items or (know how many you want) -a Request for Proposal (RFP) for highly technical products. -Supplier Development is used to develop supplier capabilities.

Inventory Turnover Ratio

cost of goods sold/average inventory Average inv = ending -begining

single sourcing

a risky proposition. current trends favor a few sources no other sources

Incoterms

also known as International Commercial Terms uniform rules that simplify international transactions of goods with respect to shipping costs

Tariff

an official list showing the duties, taxes, or customs imposed by the host country on imports or exports

The benefits of better forecasts

are lower inventories, reduced stock outs, smoother production plans, reduced costs, improved customer service.

outsourcing

buying materials and components from suppliers instead of making them in-house

Important merchants

buys and takes title to the goods and resells them to a buyer

Given the following information, find the break-even quantity using Break-even Analysis. Costs /Make Option/ Buy Option Fixed Cost/ $100,000 /$5,000 Variable Cost /$12 /$15 a. 25,000 units b. 33,333 units c. 31,667 units d. 35,000 units

c. 31,667 units 100000-5000/15-12 or 100,000 + 12x = 5000 + 15x

If actual demand for a period was 108 and the forecast for that period was 103, what is the forecast error for the period? a. -5 b. 0 c. 5 d. Forecast error cannot be determined by the information given.

c. 5 108-103

According to the text, for long-term forecasts, it is recommended that which type of forecasts be used? a. Qualitative b. Quantitative c. Combination of both qualitative and quantitative d. Forecasts cannot be developed for the long term

c. Combination of both qualitative and quantitative

Purchasing activities include all the following EXCEPT: a. Logistics considerations b. Contract administration c. Franchising services d. Negotiations

c. Franchising services

centralized- decentralized (large organization w/ centralized control)(hybrid)

centralized large national contracts at corporate level and decentralized items specific to business unit