Supply Chain Management Exam 1
A fair trade product refers to one that is manufactured or grown by a disadvantaged producer in a developing country that receives for its goods.
A fair price
ISO 14000
A family of international standards for environmental management developed by the International Organization for Standardization (ISO).
Billback Penalty
A fee charged back to the supplier for services or products not received by the customer.
Return on Assets
A financial ratio of a firm's net income in relation to its total assets.
Return on Investment
A financial ratio of a firm's net income in relation to its total assets.
Request for Proposal
A formal request for a project or product proposal issued by the buyer to qualified suppliers. The use of RFPs allows the supplier to develop part specifications based on their own knowledge of the materials and technology needed.
Request for quotation
A formal request for pricing from a supplier; commonly used when the purchasing requirements are clear.
Distributive Negotiations
A negotiating objective that seeks an outcome that primarily favors the interests of one side.
Follow-up
A proactive act to contact the supplier to ensure on-time delivery of the goods ordered.
Sustainable Sourcing
A process of purchasing goods and services that takes into account the long-term impact on people, profits, and planet.
Utilitarianism
A theory that maintains an ethical act creates the greatest good for the greatest number of people.
International Commercial Terms
A uniform set of rules created by the International Chamber of Commerce to simplify international transactions of goods with respect to shipping costs, risks and responsibilities of the buyer, seller and shipper.
Which of the following is NOT a step suggested in the Supply Chain Sourcing Strategy Framework?
Certify suppliers as ISO 9001 compliant
Ethical and environmental certifications
Certifying companies according to ethical and environmental requirements. A number of certifying agencies can be used, such as the New York-based Rainforest Alliance and Trans- Fair USA.
SRM software can automate procurement activities that lead to significant cost savings as purchasing professionals move toward:
Collaborative planning
Big Data
Collections of data sets that are too large and complex to be processed by traditional database management tools or processing software applications
According to the textbook, Supplier Recognition Programs:
Encourage suppliers to keep their performance high
The purchasing department at Big Horn Sheep Corporation decided to intentionally increase purchases from small, underdeveloped nations. This decision can be considered:
Ethical Sourcing
____________ considers the public consequences of organizational buying.
Ethical sourcing
Which of the following can happen as a result of the bullwhip effect?
Excess costs for each firm in a supply chain
It is illegal for corporations to provide their suppliers appreciation banquets to award performance.
False
Merchant
Firms that buy goods in large quantities for resale purposes. Wholesalers and retailers are examples of merchants.
Third-Party Logistics Services
For-profit logistics companies
Micro-purchases
Government purchases of less than $2,500.
Which of the following is NOT a typical strategy for firms to obtain benchmarking data about other companies?
Hiring former employees from other companies and assessing their knowledge
The use of environmental supplier certification programs assists companies by which of the following?
Identifying strategic alliance candidates
According to the text, key ingredients for developing successful supply partnerships include all of the following EXCEPT:
Individualized objectives
Strategic Supplier Alliances
The creation of partnerships with key suppliers.
Supply Management
The identification, acquisition, access, positioning and management of resources the organization needs or potentially needs in the attainment of its strategic objectives.
Public Procurement
The management of the purchasing and supply management function of the government and nonprofit sector, such as educational institutions, charitable organizations and the federal, state and local governments.
Inventory Turnover
The number of times a firm's inventory is utilized and replaced over an accounting period, such as a year.
Distribution Network
The organization of a distribution system that ensures successful product delivery.
Corporate Social Responsibility
The practice of business ethics
Benchmarking
The practice of copying what other businesses do best; studying how things are done well in other firms to potentially make use of the same methods
Ethical Sourcing
The practice of purchasing from suppliers that are governed by social and ethical practices.
Environmental Management System
The practices put in place by a firm to try to reduce environmental waste and improve environmental performance.
Federal Acquisition Regulations - FAR
The primary set of rules issued by the U.S. government to govern the process through which the government purchases goods and services.
Subcontracting
The process of entering into a contractual agreement with a supplier to produce goods and/or services according to a specific set of terms and conditions.
Outsource
The process that occurs when a firm purchases materials or products instead of producing them in-house.
Business Process Reengineering
The radical rethinking and redesigning of business processes to reduce waste and increase performance
One standard which is measured in environmental supplier certification is:
The supplier's recycled content
Tier-3 Suppliers
The supplier's suppliers' suppliers of a company
Automating procurement activities can lead to significant cost savings as buyers move toward managing processes by exception.
True
Criteria to evaluate a purchasing department's performance should include both quantitative and qualitative assessments
True
Decentralized purchasing is the practice throughout a single corporation make their own, individual purchasing decisions to fulfill their individual local needs.
True
Demands by customers for companies to become more ethically and environmentally focused have placed added pressures on firms to improve their performance in supply chain management
True
According to the text, the goal of a good performance evaluation system is to provide metrics that are:
Understandable, easy to measure, focused on value-added results
According to the text, which of the following is considered a current trend in supply chain management?
Using supply chain analytics and increasing supply chain visibility
Which of the following terms refers to an act that creates the greatest good for the greatest number of people:
Utilitarianism
Supply base Rationalization
getting rid of poorly performing suppliers
Nontariff 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
Early Supplier Involvement
involving key suppliers during the product design and development stage to take advantage of their knowledge and technologies
Three P's
profit, people, planet
Ethical and Sustainable Sourcing
purchasing from suppliers that are governed by environmental sustainability and social and ethical practices
Global Sourcing
purchasing materials or labor from around the world wherever it is cheapest
A negotiation where both sides work together to maximize the joint outcome or to create a joint optimal result is referred to as:
win-win negotiations
Single Sourcing
"Refers to the deliberate practice of concentrating purchases of an item with one source from a pool of viable suppliers."
Before supplier relationship management (SRM), buyers typically spent 40% of their time on expediting orders. After SRM implementation buyers spent about:
10% of their time on expediting orders
Supplier Relationship Management
Accenture defines SRM as "the systematic management of supplier relationships to optimize the value delivered through the relationship over their life cycle."
Supplier Relationship Mangement
Accenture defines SRM as "the systematic management of supplier relationships to optimize the value delivered through the relationship over their life cycle."
Forward Vertical Integration
Acquiring downstream customers
Which of the following is NOT important in developing a successful strategic alliance?
Developing efficient processes that will remain unchanged for the duration of the partnership
Trends in supple chain management include expansion of the supply chain and decreasing supply chain visibility.
False
Which of the following refers to the measurement of the impact of change in purchase spend on a firm's profit before taxes, assuming gross sales and other expenses remain unchanged?
Profit-Leverage Effect
Total Cost Ownership does NOT consider which of the following factors?
Purchase order costs
Supply Base
Refers to the list of suppliers that a firm uses to acquire its materials, services, supplies, and equipment.
Sole sourcing
Refers to the situation when the supplier is the only available source.
When a product is purchased which is complicated or highly technical a ___________ may be issued instead of a request for quotation.
Request for proposal
According to the text, one of the most basic and successful approaches to protecting trade secrets is:
Requiring employees and vendors to sign non-disclosure agreements
Strategic Sourcing
Strategically managing a firm's external resources and services to improve cost, quality, delivery, performance and competitive advantage.
Which of the following acronyms is NOT paired with its correct "translation"?
TLS- Third-Party Logistics Services
Collaborative Negotiations
The process that occurs when both sides work together to maximize the joint outcome, or to create a win-win result; also referred to as integrative negotiations.
Tier-2
The supplier's suppliers of a company
The bullwhip effect causes an amplification of the variation in the demand pattern along the supply chain.
True
Sustainable sourcing policies should include which of the following?
Use of renewable energy
Bid
When suppliers respond to a buyer's invitation to bid, with an offered price for specific services or goods.
Pretransaction
costs that are incurred prior to order and receipt of the purchased goods
Direct Offset
A form of countertrade that usually involves coproduction, or a joint venture, and exchange of related goods and/or services.
Centralized Purchasing
A single purchasing department, usually located
The main benefit(s) from benchmarking sourcing practices is/are:
Allows firms to leapfrog the experience-gaining stage by trying things that have worked well for other companies.
Procurement Credit Cards
Credit cards with a predetermined credit limit, usually not more than $5,000 depending on the organization, issued to authorized personnel of the buying organization to make low-dollar purchases.
Blanket or open-end purchase orders are suitable for buying
Office supplies
Supplier Management
One of the most crucial issues within the topic of supply management— getting suppliers to do what the buyer's firm wants them to do.
Petty cash is being phased out in favor of:
P-card
Travel Card
P-cards can be used to pay for meals, lodging, and other traveling expenses, thus eliminating the need to process travel expenses in advance for the user. This type of P-card is commonly called a travel card.
Some businesses refer to sustainability in terms of supporting the three P's. This stands for:
People, Planet and Profit
Which of the following is TRUE?
Performance metrics and personal business relationships are both keys to building successful partnerships.
The total cost of ownership for Supplier ! is $2,670,000. The total cost of ownership for Supplier B is $1,750,000. The total cost of ownership for Supplier C is $2,990,000. Using Total Cost Analysis, it will be more cost-effective to use
Supplier B
Which of the following activities allows buyers to assume the supplier will meet certain product quality and service requirements?
Supplier certification
ISO 14000 may play a role in a firm's.
Supplier certification program
An internal or external event that causes a disruption or failure of supply chain operations is an example of:
Supply chain risk
According to the text, the FOUR important elements of the supply chain are:
Supply, operations, logistics, integration
Convincing your supplier to cutting back on packaging, fuel, or electricity is an example of:
Sustainable Sourcing
Purchase Spend
The money a firm spends on goods and services
In general, European companies prefer suppliers:
Who have ISO 9001 certifications
Six Sigma Quality Management
a commitment by the firm's top management to help the firm identify customer expectations and excel in meeting and exceeding those expectations
Traveling Requisition
a material requisition that is used for materials and standard parts that are requested on a recurring basis
Analytic SRM
a method that allows the company to analyze the complete supplier base
Fair Trade Products
a product manufactured or grown by a disadvantaged producer in a developing country that receives a fair price for its goods
Value Engineering
designing better quality and cost savings into the products originally
Supplier Evaluation
determining the current capabilities of suppliers
Sealed bids
A bid for business by a supplier in response to an invitation for bid sent by a buyer. The bid is kept sealed until all bids are received, whereupon they are opened and the low bidder is typically awarded the purchase contract.
Tier-1
A company's direct suppliers
Purchase Order
A contractual commercial document issued by the buying firm to a supplier, indicating the type, quantities and agreed prices for products or services that the supplier will provide to the buying firm.
vendor managed inventory
A progressive partner-based approach to controlling inventory and reducing supply chain costs. Customers provide information to the key supplier, including historical usage, current inventory levels, minimum and maximum stock levels, sales forecasts and upcoming promotions, who then takes on the responsibility and risk for planning, managing and monitoring the replenishment of inventory. The supplier may even own the inventory until the product is sold.
Open-End Purchase Order
A purchase order that covers a variety of items and is negotiated for repeated supply over a fixed time period, such as quarterly or yearly. Additional items and expiration dates can be renegotiated in an open-end purchase order.
Profit-Leverage Effect
A purchasing performance measure that calculates the impact of a change in purchase spend on a firm's profit before taxes, assuming gross sales and other expenses remain unchanged.
Simplification
A reduction of the number of components, supplies, or standard materials used in a product or process.
Invitation for Bid
A request for qualified suppliers to submit bids for a contract. Suppliers are asked to bid, given certain opening and closing dates of the bid. The basis for awarding a contract is preset and binding.
ISO 9000
A series of management and quality assurance standards in design, development, production, installation and service developed by the International Organization for Standardization (ISO).
Petty Cash
A small cash reserve maintained by a midlevel manager or clerk
Comanaged Inventories
A somewhat more collaborative form of VMI; can also refer to JIT II buyer and supplier reach an agreement regarding how information is shared, order quantities, when an order is generated, and the delivery timing and location.
Make or Buy Decision
A strategic one that can impact an organization's competitive position. It is obvious that most organizations buy their MRO and office supplies rather than make the items themselves.
Sales Order
A supplier's offer to sell goods and services at the supplier's terms and conditions. The sales order becomes a legally binding contract when accepted by the buyer.
Transactional SRM
A system that enables an organization to track supplier interactions such as order planning, order payment and returns. The volume of transactions involved may result in independent systems maintained by geographic region or business lines. Transactional SRM tends to focus on short term reporting.
Lean Production System
Also known as a pull system, where parts are placed in standardized containers, and kanbans exist for each container.
Ethical Trading Initiative (ETI)
An alliance of organizations seeking to take responsibility for improving working conditions and agreeing to implement the ETI Base Code, a standard for ethical practices for the firms and its suppliers.
Offset
An exchange agreement for industrial goods and/or services as a condition of military- related export. It is also commonly used in the aerospace and defense sectors.
Stockless Buying
An extension of the blanket purchase order. Also known as system contracting.
purchase requisition
An internal document initialed by a department or person within the entity asking the purchasing department to buy specific goods or services.
Material Requisition
An internal document initiated by the material user to request materials from the warehouse or purchasing department.
Internal Control
An internal operational system that prevents, for example, abuse of purchasing funds.
Tariff
An official list or schedule showing the duties, taxes or customs imposed by a host country on imports or exports.
SRM software should be capable of:
Automating transactional processes, Making information flow between partners more visible, and Integration of the supply chain making it possible to monitor multiple departments and processes both internally and externally
Which of the following can be used as a punishment for suppliers that perform poorly?
Billback penalty, Elimination of future business with the focal firm, and Downgrade the supplier's status
Performance Bonds
Bonds posted by the bidders to guarantee that the work done by the successful bidder meets specifications and is completed in the time specified.
Payment Bonds
Bonds posted by the bidders to protect the buyer against any third-party liens not fulfilled by the successful bidder.
Business Metrics
Business metrics describe a company's case performance, such as the number of orders processed or how many orders are canceled. Business metrics represent the data that you have defined when you create properties.
Total Cost of Ownership
Considers the unit price of the material, payment terms, cash discount, ordering cost, carrying cost, logistical costs, maintenance costs and other more qualitative costs that may not be easy to assess.
Posttransaction Costs
Costs are incurred after the goods are in the possession of the company, agents, or customers.
Transaction
Costs that are incurred prior to order and receipt of the purchased goods.
Innovative Products
Newly developed products characterized by short product life cycles, volatile demand, high profit margins and relatively less competition.
Sustainability reporting is ______________ for American companies:
Largely a voluntary effort
Which of the following is NOT a key tenant of an SRM system?
Lean operations
Uniform Commercial Code
Legislation that governs the purchase and sale of goods
Functional Products
MRO items and other commonly purchased items and supplies. These items are characterized by low profit margins, relatively stable demands and high levels of competition.
Which of the following is important in developing successful relationships in a partnership?
Mutual/compatible needs that result in a win-win situation for the partners, Interpersonal business relationships between employees of the companies, and Commitment by top management
Streamlining the processes and communications between the buyer and supplier using software applications that enable these processes to be managed more efficiently and effectively can be referred to as:
SRM
When using a Weighted Criteria Evaluation System to evaluate suppliers, all of the following are true EXCEPT:
Select the key dimensions of performance based on what is important to the end consumer
Business Ethics
The application of ethical principles to business situations
Planned Order Releases
The bottom line of an MRP part record. It designates when the specific quantity is to be ordered from the supplier or to begin being processed. These quantities also determine the gross requirements of the dependent or "children" parts going into this higher level part or product.
Original Equipment Manufacturers
The companies that make the final products
Maximize Competition
The competition that is designed for ensuring the purchases of goods and services that are in strict compliance with statutes and policies, public procurement procedures.
Leveraging Purchase Volume
The concentration of purchase volume to create quantity discounts, less-costly volume shipments and other more favorable purchase terms.
Why do firms assess their sourcing capabilities?
They can gauge their success in improving their own value-enhancing contributions to the firm
Which of the following is NOT a reason for supplier recognition programs?
To select the best suppliers
What type of major cost category is considered in the cost associated with placing and receiving the order?
Transaction Cost
Surety Bonds
bonds posted by bidders to ensure that the successful bidder will accept the contract
An organization's process for evaluating the quality systems of key suppliers in an effort to eliminate incoming inspections can be referred to as:
supplier certification
Supplier Development
the efforts of a buying firm to improve the capabilities and performance of specific suppliers to better meet its needs
Third-Party Logistics Providers
For-hire outside agents that provide transportation and other services including warehousing, document preparation, customs clearance, packaging, labeling and freight bill auditing.
Bullwhip Effect
A term referring to ineffective communication between buyers and suppliers and infrequent delivery of materials, combined with production based on poor forecasts along a supply chain that results in either too little of too much inventory at various points of storage and consumption. Simply, it causes an amplification of variation in the demand pattern along the supply chain.
Economies of Scale
A theory stating that the cost per unit decreases as the number of units purchased, produced or transported increases
Blank Check Purchase Order
A small value purchase order with a signed blank check attached, usually at the bottom of the purchase order.
Second-tier supplier
A supplier's suppliers
While most public procurement is focused on goals like those of purchasing departments in the private sector, U.S. federal government purchases must comply with the:
Federal Acquisition Regulation
Contracts for the International Sale of Goods
A set of rules established by the United Nations to govern the international transactions in goods
General Services Administration
A U.S. federal agency that is responsible for most federal purchases. It is based in Washington, D.C., and has 11 regional offices throughout the U.S.
Triple Bottom Line
A broad term that includes protecting the environment and some aspects of social responsibility, as well as financial performance.
Strategic Partnerships
A close working relationship that develops among trading partner relationships.
Sustainability
A commitment to environmental responsibility
Federal Acquisition Streamlining Act
A federal act signed by President Clinton in October 1994 to remove many restrictions on government purchases that do not exceed $100,000.
Which of the following would be a good reason to outsource (buy) versus making?
A firm lacks the technology or expertise to produce an item
Import Merchant
A firm that imports and takes title to the good, and then resells them to a buyer.
Import Broker
A firm that is set up to import goods for customers for a fee. An import broker does not take title to the goods.
Which of the following would be considered a third party provider?
A firm that leases storage warehousing
Hybrid Purchasing Organization
A firm that uses either a centralized-decentralized or decentralized-centralized purchasing structure.
Indirect Offset
A form of countertrade that involves an exchange of goods and/or services unrelated to the initial purchase.
Blanket Order Release
A form used to release a specific quantity against a pre-negotiated blanket purchase order.
Countertrade
A global sourcing process in which goods and/or services of domestic firms are exchanged for goods and/ or services of equal value or in combination with currency from foreign firms. This type of arrangement is sometimes used by countries where there is a shortage of hard currency or as a means to acquire technologies.
Centralized/Decentralized Purchasing Structure
A hybrid purchasing structure that is centralized at the corporate level but decentralized at the individual business unit level.
Decentralized/Centralized Purchase Structure
A hybrid purchasing structure that is decentralized at the corporate level but centralized at the individual business unit level.
Department of Defense
A major public buyer within the United States government
Supply Chain
A network of trading partners that make products and services available to consumers, including all of the functions enabling the production, delivery and recycling of materials, components, end products and services
Enterprise Resource Planning
A packaged business software system that lets a company automate and integrate the majority of its business processes, share common data and practices across the enterprise and produce and access information in a real-time environment.
Green Purchasing
A practice aimed at ensuring that purchasing personnel include environmental considerations and human health issues when making purchasing decisions; also termed green sourcing and sustainable procurement.
Demand Management
A set of activities that range from determining or estimating the demand from customers through converting specific customer orders into promised delivery dates to help balance demand with supply.
break-even analysis
A tool for computing the cost-effectiveness of sourcing decisions when cost is the most important criterion. Several assumptions underlie the analysis: (1) all costs involved can be classified as either fixed or variable cost, (2) fixed cost remains the same within the range of analysis, (3) a linear variable cost relationship exists, (4) fixed cost of the make option is higher because of initial capital investment in equipment, and (5) variable cost of the buy option is higher due to supplier profits.
Counterpurchase
A trade arrangement whereby the original exporter either buys or finds a buyer to purchase a specified quantity of unrelated goods and/or services from the original importer.
Incoterms
A uniform set of rules created by the International Chamber of Commerce to simplify international transactions of goods with respect to shipping costs, risks and responsibilities of the buyer, seller and shipper.
Backward Vertical Integration
Acquiring upstream suppliers
When a particular item is in short supply accompanied by rising prices, a firm might find it beneficial to:
Align itself with one of the suppliers to ensure a continued supply of the scarce item.
What company is experimenting with the management of the final mile of delivery in some markets, using small aerial drones to deliver shoebox-size packages from fulfillment centers?
Amazon
The following is an example of the bullwhip effect:
Barkely's incorrectly anticipated consumer demand resulting in stockouts at several popular retailers
The continuing cycle of erratic demand causing forecasts to include safety stock which in turn magnify supplier forecasts and cause production planning problems is known as:
Bullwhip effect
Developed in the 1990's as a popular way of developing radically new business processes in an effort to reduce waste and increase performance is referred to as:
Business process reengineering
Industrial Buyers
Buyers with a primary responsibility of purchasing raw materials for conversion purposes.
According to the textbook, conditions which must be present for successful supply chain management include:
Cooperation among firms
Supply chain management includes the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. It also includes:
Coordination and collaboration with channel partners
Supplier Certification
Defined by the Institute of Supply Management as "an organization's process for evaluating the quality systems of key suppliers in an effort to eliminate incoming inspections."
Which of the following activities would fall under the foundational element of operation?
Demand management
Supply Chain Performance Measurement
Determining the performance of an entire supply chain.
The primary goals of purchasing include all EXCEPT:
Ensure the highest quality raw materials are purchased
Which of the following is NOT a form of countertrade?
Kaizen blitz
Buy American Act
Legislation mandating that U.S. government purchases and third-party purchases that utilize federal funds must buy domestically produced goods, if the price differential between the domestic product and an identical foreign-sourced product does not exceed a certain percentage amount.
Customer Relationship Management (CRM)
Managing a firm's customer base such that customers remain satisfied and continue to purchase goods and services. Sometimes it also refers to CRM software applications.
Supply Chain Sustainability
Meeting the needs of current supply chain members without hindering the ability to meet the needs of future generations in terms of economic, environmental, and social challenges.
Inventory Turnover can be calculated by:
Ratio of cost of goods sold over average inventory cost
Which of the following is a reverse logistics activity:
Recycling products and components
Firms can use total cost analysis to:
Select the most cost effective supplier
The following strategy is usually employed by lean organizations is an effort to ensure continued quality compliance among suppliers and with internal production facilities:
Six Sigma
Supply Chain Visibility
The ability of suppliers, manufacturers, business partners, and customers to know exactly where products are, at any point in the supply chain.
Inventory Visibility
The ability of supply chain companies to see inventory quantities of the various members, typically using the Internet.
Expediting
The act of contacting the supplier to speed up an overdue shipment.
Barter
The complete exchange of goods and/or services of equal value without the exchange of currency. The seller can either consume the goods and/or services or resell the items.
Supply Chain Management
The integration of key business processes regarding the flow of materials from raw material suppliers to the final customer.
Which type of requisition is used for materials and standard parts that are requested on a recurring basis?
Traveling requisition
Which of the following is a reason that single sourcing is considered risky/bad?
The limited (finite) capacity of one supplier
Supply Chain Analytics
Tools that harness data from internal and external sources to produce breakthrough insights that can help supply chains reduce costs and risk.
Lean production is typically associated with which of the following company's production systems?
Toyota
A reason for making items instead of buying them would include better quality control.
True
Second-Tier Customers
a customer's customers
Material Requirements Planning (MRP)
a planning system that schedules the precise quantity of materials needed to make the product
Global Supply Chain
supply chains with foreign trading partners
Process Integration
the sharing of information and coordinating resources to jointly manage a process