Topic 2: The purchasing Process: Strategic and Transactional Issues

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

false

Capital goods are small, frequently purchased, low-dollar buys.

false

Purchasing and operations are so closely aligned they rarely have conflicts a. true b. false

false

Which category is high-importance, but low market complexity? Critical Bottleneck Routine Exploitable Leverage

leverage

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

true

Not all buys are created equal; you should spend more time and effort on some purchases than others.

true

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

true

Spend analysis can help you identify improvement opportunities. Which of the following are opportunities you should look for? Standardization Aggregation Reduce duplication All of the above

All of the above

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

Blanket PO

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

Lowers costs by choosing suppliers with reasonable prices and high quality

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

Maverick spending

Which documents must agree for the triple-match? PO, invoice, bill of materials PO, invoice, and receiving report PO, requisition, bill of materials PO, invoice, requisition PO, requisition, receiving report

PO, invoice, and receiving report

Although most spend documentation looks backward to see what has been purchased, you should be proactive and match future spend to ________, ________, and ________ plans. Market, spending, and cost Technology, saving, and investing Eating, sleeping, and playing Growth, purchasing, and product Product, market, and technology

Product, market, and technology

How do internal customers formally communicate their needs to purchasing? Invoice Packing slip Receiving report Purchase requisition Purchase order

Purchase requisition

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

Reverse auction

Based on Toyota's experience, ________ should be an important consideration in a thorough spend analysis. Supplier-customer partnership Negotiation Risk assessment Sourcing strategy

Risk assessment

The process for making spend visible is called? Spend analysis Spend documentation Firm documentation Firm spending None of the above

Spend documentation

Which of the following is characteristic of a high importance buying category? You need a lot of this purchased input There are many suppliers who want to sell you this input The input has a large impact on the customer experience All of the above

The input has a large impact on the customer experience

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

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

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

The technology of the purchased input is constantly changing

The ________ cannot be ascertained from any single source—even at the category level. Total spend Organizational structure Agreements Capacity strategy

Total spend

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

When combined, MRO purchases often represent a large dollar spend

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

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

which category is high-importance, and high market complexity? a. critical b. routine c. leverage d. bottleneck e. exploitable

a. critical

Why can services be challenging to buy? They are intangible It's hard to know what you are actually getting or to evaluate quality You being may lack knowledge in the service being purchased All of the above

all of the above

it is estimated that maverick spend is up to ______% of indirect spend a. 1% b. 29 c. 10% d. 5% e. 2%

b. 29%

Which of the following is true about the supplier selection process? a. Is an out-of-date holdover from the pre-WWII "clerical" era of purchasing b. Should be tailored to the type of buy: routine buys should be kept simple, strategic buys should involve careful planning c. Is only relevant for large companies d. Should be executed the exact same way for every buy e. Needs to be circumvented a lot - it's just too restricting to follow a formal process

b. Should be tailored to the type of buy: routine buys should be kept simple, strategic buys should involve careful planning

After Toyota's production ground to a halt following a devastating fire, what allowed them to make up for all the lost production in only 6 months? a. Only having 4 hours of inventory on hand b. Brand recognition c. An extremely lean supply chain d. A strong relationship and interdependence with Aisin

d. A strong relationship and interdependence with Aisin

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

d. if a supplier cannot meet your needs on these; it's not worth evaluating them further

which of the following is an MRO purchase? a. paper cups for a coffee shop b. steel for a factory making dishwashers c. copier paper for the marketing department d. lubricating oil for a machine on the assembly line e. an injection-molding machine to make bottle caps for bottled water

d. lubricating oil for a machine on the assembly line

To define the best organizational structure and identify improvement opportunities, you should look for which of the following? a. Standardization opportunities b. Aggregation opportunities c. Duplication d. Supplier performance e. All of the above

e. All of the above

what is your biggest fear with a bottleneck item? a. you customers will hate it b. the price will never change c. the technology is too standardized d. too many potential suppliers e. a supply disruption

e. a supply disruption

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

e. operations and inventory management

Which of the following is a direct material? Cardboard for cereal boxes Stamping machine in an auto-parts factory Copier paper Landscaping services for corporate headquarters All of the above

Cardboard for cereal boxes

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

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