SCM 371 Chapter 2

Capital goods are small, frequently purchased, low-dollar buys? T or F

F, they are infrequent high-dollar buys

As a purchasing professional, you should spend a lot of time managing routine buys? T of F

False

Purchasing and operations are so closely aligned they rarely have conflicts T or F

False

A factory buying a new computer for the accounting department is making a direct material purchase T or F

False, that would be indirect

A requisition communicates internal need, a PO is a request made to external suppliers T or F

True

Buying a larger quantity than you need to get a price break might cause additional problems, so do this with caution. T or F

True

Not all buys are equal, you should spend more time and effort on some purchases more than others? T or F

True

The purchasing process consists of four key steps: need communication, supplier selection, transaction management, relationship management T or F

True

Which of the following is a direct material? a) Cardboard for cereal boxes b) Stamping machine in an auto-parts factory c) Copier paper d) Landscaping services for corporate headquarter

a) cardboard for cereal boxes

It is estimated that maverick spend is up to ___% of indirect spend

b. 2%

What is your biggest fear with a bottleneck item? a. The price will never change b. A supply disruption c. Too many potential suppliers d. Your customers will hate it e. The technology is too standardized

b. A supply disruption

Why are price, quality, and delivery the first supplier selection criteria you should assess? a. Federal law requires that these be assessed first to ensure non-discrimination b. If a supplier cannot meet your needs on these, it's not worth evaluating them further c. They are the least important criteria; start here and build up d. Because they are the only criteria you should assess e. They are the best way to separate domestic versus international suppliers

b. If a supplier cannot meet your needs on these, it's not worth evaluating them further

How does purchasing add value to operations? a. Constant supplier switching keeps operations on its toes b. Lowers costs by choosing suppliers with reasonable prices and high quality c. Choosing highest-cost supplier ensures best quality of delivered material d. Purchasing can shield operations from bad news about the supply market, so morale stays high e. Purchasing adds no value to operations; these are separate functions

b. Lowers costs by choosing suppliers with reasonable prices and high quality

What is unauthorized buying by non-purchasing personnel called? a. Outlaw spending b. Maverick spending c. Illegal spending d. Forbidden spending e. Frozen spending (because it's put on "hold" until a purchasing manager clears it)

b. Maverick spending

What is the form of competitive bidding where suppliers bid on the contract on-line in real-time? a. Internet playoff b. Reverse auction c. Virtual free-for-all d. Timed bid event e. Web contest

b. Reverse auction

Why should purchasing personnel pay better attention to MRO purchases? a) Better quality safety goggles can increase productivity over 100% b)The top cause of workplace accidents is poorly-sourced MRO supplies c) When combined, MRO purchases often represent a large dollar spend d) MRO items are always bought by the maintenance department, and someone's got to keep an eye on those guys e) They shouldn't - MRO purchases are a waste of time

c) when combined, they often rep a large $ spend

What PO is used for recurring purchases and covering a longer period of time? a. Transactional PO b. Longitudinal PO c. Blanket PO d. Transfer PO e. Extended PO

c. Blanket PO

Which of the following is probably a high importance buy for Starbucks Coffee? a. Aprons for the baristas b. Holiday jazz CDs c. Coffee beans d. In-store pumpkin spice advertisements e. Toilet paper

c. Coffee beans

What happens in sales & operations planning? a. The sales force tells operations what to do b. Operations tells the sales force what to do c. Diverse functions come together to forecast how much the company will sell, and how much it needs to make d. Sales and operations make plans without inputs from any other function e. Government regulators present limits on sales and operations activities

c. Diverse functions come together to forecast how much the company will sell, and how much it needs to make

What are capital goods? a. Not used in factories b. Low-dollar, multiple purchases c. High-dollar, infrequent purchases d. Short-lived e. Items which go directly into the final product

c. High-dollar, infrequent purchases

Which category is high importance, but low market complexity? a) Critical b) Routine c) Leverage d) Bottleneck e) Exploitable

c. Leverage

Which of the following is an indirect material buy? a. Lumber for framing a house b. Whole grains for the cereal factory c. Safety goggles for the car factory d. Rubber for the sneaker factory e. Chemicals for the shampoo factory

c. Safety goggles for the car factory

Which category is low-importance, but high market complexity? a. Critical b. Routine c. Leverage d. Bottleneck e. Exploitable

d. Bottleneck

Which documents must agree for the triple-match? a. PO, requisition, receiving report b. PO, requisition, bill of materials c. PO, invoice, bill of materials d. PO, invoice, and receiving report e. PO, invoice, requisition

d. PO, invoice, and receiving report

How do internal customers formally communicate their needs to purchasing? a. Invoice b. Packing slip c. Purchase order d. Purchase requisition e. Receiving report

d. Purchase requisition

Why is a leverage item called a leverage item? a. This item is typically purchased through debt financing b. The supply market is incredibly complex c. Suppliers can basically force you to accept their terms d. Your purchasing power and multiple supplier options means you can demand (and get) the best deals from suppliers e. You spend very little money on it

d. Your purchasing power and multiple supplier options means you can demand (and get) the best deals from suppliers

Which of the following is characteristic of a high importance buying category? a) You spend a lot of money on this purchased input b) There are many suppliers who want to sell you this input c) This input has a large impact on customer experience d) Both a and c e) None of the above

d. both A and C

In a complex or uncertain buying scenario, ___________ might be the best supplier selection approach a. coin-flipping b. a reverse auction c. competitive bidding d. negotiation e. random selection

d. negotiation

Services can be challenging to buy because... a) They are intangible b) It's hard to know what you are actually getting or to evaluate quality c) They are hard to classify - can be direct or indirect d) You being may lack knowledge in the service being purchased e) All of the above

e) All of the above

What is one challenge in buying capital goods? a) They don't cost much, so you get no credit for buying them well b) You are constantly buying them, it's hard to keep up c) They don't last very long d) You spend very little time planning the acquisition of a capital good e) You often need to speak "engineering" and understand complex specifications

e) You often need to speak "engineering" and understand complex specifications

Where can you look for information on potential suppliers? a. Your company's database and salesforce b. Industry contacts c. Supplier directories and trade magazines d. The Internet e. All of the above

e. All of the above

Which of the following is true about services? a. Are always direct spend b. Are very easy to assess from a quality standpoint c. Are never associated with a good d. Require almost no advance planning to buy e. Are characterized by intangibility

e. Are characterized by intangibility

What is/are potential conflict(s) between purchasing and marketing? a. Purchasing may fail to inform marketing/sales about a supplier change which results in a product change. b. Marketing may fail to inform purchasing of a product change in a timely manner. c. Purchasing personnel develop competing marketing plans which are presented to top management for review, angering marketing personnel. d. There are no conflicts--i.e., these functions face in opposite "directions" - purchasing upstream to suppliers, marketing downstream to customers. e. Both A & B

e. Both A & B

What's a possible disadvantage of forward-buying inventory in bulk? a. Prices will be better when buying in bulk b. There will be plenty of stock when needed c. You'll be ready for an unexpected upsurge in customer demand d. There are no disadvantages to forward buying e. Inventory costs will rise

e. Inventory costs will rise

What is purchase price variance? a. The difference in "regular" and "holiday" pricing b. The difference in the real price and what you think is fair c. The difference in the price at the store, and what you can buy it for online d. How fast the price goes up over a six-month period e. The price difference between the amount that you pay a supplier to buy a product and the budgeted price for the product

e. The price difference between the amount that you pay a supplier to buy a product and the budgeted price for the product

You've been buying a small amount of standard material from a local supplier for 20 years. The supplier factory suddenly burns down, forcing you to buy the item from a supplier halfway around the world, with whom you have never done business. What just happened? a. Your delivery pipeline just got shorter b. You've just encountered a major technological shift c. You now have less risk in your supply market d. Quality will definitely decrease e. Your routine item has probably become a bottleneck

e. Your routine item has probably become a bottleneck

Which of the following would suggest a highly complex buying market? a) Many suppliers who fight for your business b) The purchased input is a highly standardized item c) Your company is very large and sophisticated compared to any potential suppliers d) The risks of buying are low e) The technology of the purchased input is constantly changing

e. tech is constantly changing