Section 6: Building the Supply Base

Identify three common features of contracts between buyers and suppliers.

(1) quantity discounts; (2) buybacks; (3) revenue sharing

Identify the four stages of supplier selection.

(1) supplier evaluation; (2) supplier development; (3) negotiations; (4) contracting

What are the four stages of supplier selection? A) supplier evaluation, supplier development, negotiations, and contracting B) supplier evaluation, negotiations, supplier acquisition, and supplier development C) introduction, growth, maturity, and decline D) supplier evaluation, supplier development, negotiations, and centralized purchasing E) negotiations, contracting, centralized purchasing, and E-procurement

A

What type of negotiating strategy requires the supplier to open its books to the purchasers? A) cost-based price model B) market-based price model C) competitive bidding D) price-based model E) transparent negotiations

A

Describe a reverse auction (also known as a Dutch auction).

A buyer initiates the process by submitting a description of the desired product or service. Potential suppliers then submit bids, which may include price and other delivery information. Thus, price competition occurs on the selling side of the transaction—bidding the price down.

E-procurement: A) works best in long-term contract situations but is not suited for auctions. B) is purchasing facilitated through the Internet. C) has many benefits but requires a lot of paperwork. D) is illegal in all states except Nevada and New Jersey. E) All of the above are true of e-procurement.

B

What are the three classic types of negotiation strategies? A) supplier evaluation, supplier development, and supplier selection B) Theory X, Theory Y, and Theory Z C) many suppliers, few suppliers, and keiretsu D) cost-based price model, market-based price model, and competitive bidding E) traditional auctions, reverse auctions, and online exchanges

D

Which of the following is NOT a typical benefit of centralized purchasing? A) leverage purchase volume for better pricing B) develop specialized staff expertise C) reduce the duplication of tasks D) reduce lead times E) promote standardization

D

Which of the following would NOT be subject to negotiation between a buyer and supplier? A) price B) credit and delivery terms C) quality standards D) cooperative advertising agreements E) All of the above could be negotiated.

E

________ is the term describing purchasing facilitated through the Internet.

E-Procurement

What is e-procurement?

Purchasing facilitated through the Internet.

Of the four stages of supplier selection, the stage at which the factor weighting approach would be used is ________.

Supplier evaluation

What are the three classic negotiation strategies? Briefly describe each of them.

The three classic strategies for negotiating with suppliers are the cost-based model, the market-based price model, and competitive bidding. In the cost-based model, contract price is a function of supplier costs, such as those for time and materials. In the market-based price model, price is set by some form of published, auction, or index price. Competitive bidding may be used when vendors are not open to the cost-based model, or where information is not perfect enough for market-based pricing. Bidding policies usually require that the purchasing agent has several potential suppliers and quotations from each.

One classic type of negotiation strategy is the market-based price model.

True

Operations managers are finding online auctions a fertile area for disposing of discontinued inventory.

True

While the prices that consumers pay are often inflexible, a significant number of final prices paid in business-to-business transactions are negotiated.

True

Suppliers are also known as ________.

Vendors

In what type of auction does a buyer initiate the process by submitting a description of the desired product or service? A) traditional B) buyer C) Dutch D) French E) Mexican

C