SCM 371- EXAM 1 KNOWLEDGE CHECK QUESTIONS

Which of the folloiwng are significant downsides to a centralized sourcing structure? a. Creates distance between decision makers b. Reduces flexibility c. Instills silo mindset d. Reduce material costs e. All of the above f. A, B, and C only

A, B, and C only

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

False

T/F- An extra dollar of sales revenue nearly always has a greater impact on profit than a dollar saved by purchasing.

False

T/F- Evaluating Motivations is not an important step in the "Four-Step Process to Understand Internal Customers."

False

T/F- A single person may perform all six social processes roles in acquiring goods for a company.

True

T/F- You will probably meet a co-worker who doesn't see the strategic value in purchasing.

True

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

a. Critical

______________ was developed by the European Commission in order for companies to evaluate, report, and improve their environmental performance. a. EMAS b. ISO 14001 c. FSC Certification d. ISO 26001

a. EMAS

What is inventory pooling? a. Establishing designated safety stock with others in the industry b. Delaying product differentiation to a point as late as possible c. Sourcing from geographically diverse suppliers d. Standardizing parts as much as possible e. Developing multiple products that can supply the same item

a. Establishing designated safety stock with others in the industry

Which strategy leverages the physical closeness of a supplier? a. Near-shoring b. Multi-sourcing c. Part standardization d. Electronic sourcing e. Supplier segmentation

a. Near-shoring

What will be affected if purchasing pushes a just-in-time approach with suppliers? a. Operations and inventory management b. Sales and marketing c. R&D d. R&D and Sales e. Human Resources

a. Operations and inventory management

Which of the following statements is true? a. There is a great deal of apathy in supply risk management b. Most companies do a good job quantifying risks when outsourcing production c. Companies are well versed in supply chain risk management d. Most supply chains are structured in such a way that risks would not impact them e. Supply chain risk management has always been a top priority for companies

a. There is a great deal of apathy in supply risk management

Which two tactics can be considered as coercive? a. Threats and promises b. Information exchange and recommendations c. Ingratiation and recommendations d. Requests and ingratiation e. Threats and requests

a. Threats and promises

A purchasing professional's primary job is managing what? a. Upstream portion of your company's supply chain b. Downstream portion of your company's supply chain c. Whole supply chain from end-to-end d. Internal functions of your company e. Company customer interface

a. Upstream portion of your company's supply chain

A customer sells your company a defective part. The part is put into your product, rendering it defective. What will most likely happen? a. Your customer will likely blame you for the defect, not the supplier b. Your customer will likely blame the supplier c. You aren't legally responsible for any problems the customer has with the product d. Your only additional costs will be giving the customer a good product and taking the old one back e. The customer can call a federal agency, get the supplier name, and deal with them directly

a. Your customer will likely blame you for the defect, not the supplier

The economic bottom line is concerned with ______________________ . a. making money b. safe working conditions c. fair wages d. harming the environment as little as possible e. supporting diverse suppliers

a. making money

It is estimated that maverick spend is up to ___% of indirect spend a. 1% b. 2% c. 5% d. 10% e. 25%

b. 2%

What is a Tier 1 supplier? a. The biggest supplier you have b. A supplier who sells to you c. A supplier who sells to your suppliers d. A supplier who is also your customer e. The supplier with the best quality rating

b. A supplier who sells to you

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

Which of the following statements about ethics is false? a. As a buyer, you need to be aware of potential unethical behavior by the supplier b. All ethical standards apply to all companies c. Unethical behavior can include behavior that is completely legal d. Purchasing is probably the function that is most prone to unethical temptation e. Accepting a small gift from a supplier can be labeled as unethical

b. All ethical standards apply to all companies

What is the rate of change in an industry called? a. Velocity b. Clockspeed c. Efficiency d. Swiftness e. Speed

b. Clockspeed

President Obama issued an Executive Order in 2009 that all new contracts federal agencies sign are "green." To which bottom line does this refer? a. Economic bottom line b. Environmental bottom line c. Social bottom line d. Both A and C e. None of the above

b. Environmental bottom line

What is the environmental bottom line concerned with? a. Fair wages b. Harming the environment as little as possible c. Profitability d. Safe working conditions e. Supporting diverse suppliers

b. Harming the environment as little as possible

Which of the following is true about a PO? a. "PO" and "requisition" mean the same thing b. It becomes a legal contract once accepted by the supplier c. Everyone is authorized to create a PO d. A supplier will refuse to accept a PO if it isn't signed by the buying firm's purchasing manager e. A PO has no legal significance, it is only used for auditing firm records

b. It becomes a legal contract once accepted by the supplier

Which legislation was developed in 2002 in response to several corporate scandals, including Enron and Worldcom? a. The Uniform Commercial Code b. The Sarbanes-Oxley Act c. The Dodd-Frank Act d. Customs-Trade Partnership Against Terrorism e. Foreign Corrupt Practices Act

b. The Sarbanes-Oxley Act

Which conflict first brought a significant change in how purchasing was perceived? a. WWI b. WWII c. The Crimean War d. Gulf War 1 e. The War of the Roses

b. WWII

If costs are 85% of sales (and profit is 15%), what is the amount of extra sales needed to equal $1,200 in profit from purchasing cost savings efforts? a. $1,020 b. $1,412 c. $8,000 d. $9,412 e. $12,000

c. $8,000

What is the best way to know how the internal customers for purchasing services perceive purchasing's performance? a. Tell them b. Wait for feedback c. Ask them d. Set up interviews e. All of the above

c. Ask them

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 does CMS help users to ensure? a. Contracts are kept as flexible as possible b. Contracts are never breached c. Contractual guidelines are followed d. Milestones are never missed e. Purchasing managers can keep their job

c. Contractual guidelines are followed

The objective of ___________________ is to promote the sustainable management of the world's forests by the provision of certifications. a. EMAS b. ISO 14001 c. FSC Council d. ISO 26001

c. FSC Council

Once you know who the _______ are, what _______ them, and where you _______, you can develop a strategy to improve supply management's position of respect and influence. a. Approvers, incentivizes, work b. Decision makers, moves, stay c. Influencers, motivates, stand d. Approvers, motivates, stand

c. Influencers, motivates, stand

Which of the following does not necessarily promote ethical behavior? a. Internal compliance officer b. Ethical standards and guidelines c. Long-term assignments of buyers to specific suppliers d. Top management support e. Letters emphasizing a no-gift policy

c. Long-term assignments of buyers to specific suppliers

In decentralized sourcing structures, decisions are made where the work is done. As a result, you can respond more quickly and effectively to local needs, unique requirements in a region, and unforeseen events. What powers this type of structure? a. Location b. Visibility c. Proximity d. Compatibility e. Adjacency

c. Proximity

Which of the following are true for a typical service company? a. Purchased inputs are about 80-95% of COGS b. Purchased inputs are about 60-80% of COGS c. Purchased inputs are about 30-40% of COGS d. Purchased inputs are about 20-30% of COGS e. Purchased inputs are about 10% of COGS

c. Purchased inputs are about 30-40% of COGS

Understanding that when suppliers are also customers may not be a problem, if the customer/supplier is the best source. This concept relates to which ISM standard for supply management? a. Impropriety b. Influence c. Reciprocity d. Sustainability and social responsibility e. Responsibility to your employer

c. Reciprocity

A supplier telling the buyer that it would like to ship on an FOB basis is which influence tactic? a. Information exchange b. Recommendations c. Requests d. Ingratiation e. Threats

c. Requests

Which is usually the last step in a risk management process? a. Risk consequence b. Risk identification c. Risk mitigation d. Risk exposure e. Risk monitoring

c. Risk mitigation

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

The tragedy that happened at one of Apple's suppliers, Foxconn, in 2010, when several workers committed suicide, calls importance to which bottom line? a. Economic bottom line b. Environmental bottom line c. Social bottom line d. Both A and C e. None of the above

c. Social bottom line

Why is the most important purchasing right picking the right supplier? a. Customers will judge you for choosing poorly b. The right supplier will always have the lowest possible price c. The choice of supplier affects all the other rights d. The right supplier is the one with closest ties to your CEO e. The right supplier is the only one with whom it is possible to do business

c. The choice of supplier affects all the other rights

In a risk heat map, which area is of most concern? a. The diagonal b. The top left corner c. The top right corner d. The bottom left corner e. the bottom right corner

c. The top right corner

Companies use standards and certifications like EMAS, ISO 14001 and FSC to ensure supplier compliance on _________________________________. a. global issues b. social issues c. environmental issues d. risk management issues e. political issues

c. environmental issues

Like a well-managed household budget, a _____________ will help you make sure you are getting the best value for your money, time and efforts. a. Revenue matrix table b. Cost-value analysis c. High value chain d. A systematic spend analysis e. None of the above

d. A systematic spend analysis

Personal Benefits may drive your colleagues to make decisions. Which of the following questions address personal benefits that motivate people? a. Will the decision enhance the influencer's performance rating, promotion potential, or standing with top management? b. Will the decision strengthen the influencer's identity or self-concept? c. Will the decision boost others' liking and respect for the influencer? d. All of the above e. A & B only

d. All of the above

Which of the following is a voluntary program by the U.S. Customs and Border Protection that aims to improve supply chain security? a. The Uniform Commercial Code b. The Sarbanes-Oxley Act c. The Dodd-Frank Act d. Customs-Trade Partnership Against Terrorism e. Foreign Corrupt Practices Act

d. Customs-Trade Partnership Against Terrorism

In managing internal relations, what is your main role as a purchasing professional? a. Determine the lowest cost to procure necessary company supplies b. Act as the gatekeeper to ensure only the best materials are bought c. Initiate the process by finding out what the needed components are d. Figure out how to work with and influence the members of the buying center e. All of the above

d. Figure out how to work with and influence the members of the buying center

Which is not a commonly used environmental certification in supply management? a. ISO 14001 b. EMAS c. FSC Certification d. ISO 9001

d. ISO 9001

Several conditions have to be met in order to have a valid contract. Which is not one of them? a. An offer b. An acceptance of the offer c. Mutual assent d. Illegal subject matter e. Consideration

d. Illegal subject matter

Which of the following is an MRO purchase? a. Copier paper for the marketing department b. Paper cups for a coffee shop c. An injection-molding machine to make bottle caps for bottled water d. Lubricating oil for a machine on the assembly line e. Steel for a factory making dishwashers

d. Lubricating oil for a machine on the assembly line

In which step of the risk management process do you calculate the risk exposure value? a. Risk consequence b. Risk identification c. Risk mitigation d. Risk exposure e. Risk monitoring

d. Risk exposure

Spreading fixed costs out over a larger number of products, reducing the cost per unit is called? a. Program management b. Performance measurement c. Order management d. Scale economies e. None of the above

d. Scale economies

Which of the following does risk identification address? a. How are we doing? c. How severe is the impact? b. How likely is the risk? d. What can go wrong? e. How acceptable is the risk?

d. What can go wrong?

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

The environmental bottom line is concerned with ______________________ . a. profitability b. safe working conditions c. fair wages d. harming the environment as little as possible e. supporting diverse suppliers 3

d. harming the environment as little as possible

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

Centralization delivers powerful benefits. However, there are some downsides including a. Increase bureaucracy b. Reduce flexibility c. Increase visibility d. All of the above e. A & B only

e. A & B only

What can bargaining too aggressively on price result in? a. Long-term cost increases b. Angry and resentful suppliers c. A supplier going out of business d. Lower quality and innovation 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

The purchase of future contracts is also referred to as what? a. Backward buying b. Forward integration c. Outsourcing d. Postponement e. Hedging

e. Hedging

If something happens to your primary supplier, which of the following practices can help you quickly find an alternative supplier? a. Near-sourcing b. Postponement c. Supplier segmentation d. Hedging e. Part standardization

e. Part standardization

Personally adopting and promoting the ethical standards expected of a supply management professional relates to which ISM standard for supply management? a. Impropriety b. Influence c. Reciprocity d. Sustainability and social responsibility e. Professional competence

e. Professional competence

What is one risk of using technology to streamline and simplify purchasing? a. All suppliers will submit identical prices for a contract b. The company will end up using the same system as its competitors, losing a vital competitive advantage c. Potential suppliers will be overlooked d. The CEO will ignore purchasing's activities e. Simpler, tech-enabled purchasing systems are somewhat more vulnerable to fraud and abuse

e. Simpler, tech-enabled purchasing systems are somewhat more vulnerable to fraud and abuse

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