Purchasing Exam 2

Buyers perceptions of risk in supplier selection decisions are:

generally the same for strategic and non-strategic items.

ISO 9001:2008:

provides guidance for continuous improvement of quality management systems to achieve sustained customer satisfaction.

Total quality management (TQM) tools include:

a, b, and c.

All quality improvement programs are initiated by a desire to:

eliminate incoming inspection.

An internal failure cost is:

scrap and rework costs.

When selecting freight carriers, buyers are most concerned with:

ability to deliver on-time with no damages.

Which statement is most accurate when thinking about deciding how much to buy:

balancing price, volume, carrying cost, and the cost of stockouts is key to successfully determining how much to buy at any point in time.

The best type of inspection to use is:

dependent on the nature of the purchase.

Demand for buttons and zippers at a sportswear manufacturer is an example of:

derived demand

A third party logistics (3PL) services provider:

is a company that is separate from the buyer's and supplier's organizations.

When the carrying cost of inventory is expressed as a percentage:

it is multiplied by the material unit cost to calculate the per unit carrying cost.

A supplier's references:

may be useful if they are of similar size and objectives as the buyer's organization.

"C" items in ABC analysis are:

ordered frequently

Closed-loop MRP:

provides a feedback loop between capacity and the master production schedule.

A sampling technique in which every element in the population has an equal chance of being selected is called:

random sampling.

The match between a commercially available material, good or service and the intended function is known as:

reliability.

Large suppliers:

tend to have a strong financial base.

In FOB Origin:

the buyer gains title of the goods when the carrier signs at point of origin.

A mode of transportation is:

the means by which people, freight or information gain mobility.

Organizations operating under a just-in-time system, prefer to ship by:

truck

Capital items cannot be depreciated, are often bought under a separate budgetary allocation, and may require special financing arrangements.

False

Standardization, a selective and commercial problem, means a reduction in the number of sizes and designs.

False

When software is delivered to users by an application service provider (ASP) where the software is housed in one location from which multiple users access it, this is known as:

On-demand delivery.

Any cost associated with having, as opposed to not having, inventory is included in inventory carrying costs, including (1) capital costs, (2) inventory service costs, (3) storage space costs, and (4) inventory risk costs.

True

MRO stands for Maintenance, Repair, and Operating Supplies.

True

Purchasing by specification typically occurs when:

a high degree of supplier expertise is required and difficult to define.

When a commercial janitorial service company predicts demand for janitorial services using commercial building permits issued, office leasing and vacancy rates, this is an example of:

a casual model

Integrated carriers (truck-air) like UPS and Federal Express are able to capture a larger market share because they:

a, b and c.

In Kanban systems large raw material inventories are necessary.

False

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

True

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

True

The three main inputs of a material requirements planning (MRP) system are:

a bill of material, a master production schedule, and the inventory record.

Managing the consumption of services organizationwide:

is difficult because multiple contracts may exist at varying prices and terms with the same suppliers.

In the portfolio matrix, characteristics of goods and services in the bottleneck quadrant are:

item substitution and switching suppliers are difficult because few suppliers are available with the capability to meet the unique specification requirements.

The supplier selection decision:

can be depicted by a decision tree identifying options, evaluation criteria, and probabilities of success and failure.

Early supply involvement means:

supply considerations are included during need identification and specification.

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.

Anticipation inventories are carried:

to cover a well-defined future need.

Quality control in services is:

especially difficult if the service is highly intangible

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

identify the function of a good or service.

Telecommunication routes are:

practically unlimited because there are few land or sea restraints to laying cable.

A request for quotation that asks for a "brand or equal":

shifts responsibility for establishing equality or superiority to the bidder.

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

the high dollars spent on services and the opportunities to reduce costs.

Stockout costs are the same whether it is a seller's market or a buyer's market.

False

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

A transportation strategy should include consideration of:

all of the above.

Capital assets:

are not bought and sold in the regular course of business.

In statistical process control (SPC), special or assignable causes of variation:

are outside, nonrandom problems such as breakdown of machinery, material variation, or human error.

Which of the following statements supports multiple sourcing:

concerns exist about supplier capacity for future volume.

The characteristic of a service that has the greatest impact on the ability to define, measure and control service quality is:

degree of tangibility.

New technology:

frequently enables competitive advantage from product/service differentiation at lower cost.

Reverse marketing is:

an aggressive, purchaser-initiated approach to finding and developing world class suppliers.

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

standard specification.

If the decision has been made that a new requirement cannot be made inhouse and no existing supplier is adequate, then:

three options exists: search the marketplace for a new supplier, engage in reverse marketing, or redesign/respecify the requirement so that it is procurable.

Buying capital equipment differs from other types of purchases because determination of final cost includes estimates over the life of the equipment.

True

Intermodal transportation has increased due in large part to:

increased reliability from technological and operational improvements

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

False

Quality as a term covers functionality: "Does it do the job we want done?" but not conformance to specification: "Does it fit the specification agreed to?"

False

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

True

For the supply management function, time-based strategies that impact competitive advantage relate to cycle time reductions and greater coordination of materials and information flows.

True

If there were 400 requests for a particular item in a year and 372 were immediately satisfied, the service coverage would be 372/400 or 93 percent.

True

In fixed quantity inventory models, a fixed economic order quantity is ordered when the reorder point is reached.

True

JIT requires frequent deliveries of relatively small quantities in compliance with quality standards.

True

MRP II systems link the organization's planning processes with its financial system to produce "what if" scenarios to help achieve sales and profitability projections.

True

Supply chain inventory management involves establishing operational design of the physical flow of goods and services, but does not deal with managing information flows.

True

The "bullwhip effect" is a term that refers to the buildup of inventory in a supply chain.

True

Packaging may be a difficult category to buy because it has disposal, environmental, and transportation implications.

True

The preferred hierarchy of environmental supply chain strategies is:

(1) source reduction, (2) reuse, ((3) recycle, (4) incinerate, and (5) landfill.

Sustainability is the ability to:

achieve economic prosperity and a higher quality of life and protect natural systems.

On an annual requirement of 100 items spread evenly throughout the year, any purchaser has an opportunity of buying all 100 units at a price of $100 each, or buying 10 units at a time at a price of $130. If the inventory carrying cost is 20 percent per year and assuming no ordering costs:

buying 100 at a time will save the company $2,130 per year.