Chapter 10 SCM

The Smith Manufacturing Co. uses a weighted-point model to evaluate new suppliers. Based on its competitive priorities, quality performance is weighted 60%, Delivery performance is 25%, and cost is 15%. On a 5-point scale, a supplier is rated, 4 on quality, 5 on delivery, and 5 on cost, what is its overall weighted score? 14. 4.4. 4. 5.

4.4. The ratings are weighted by the weights and then added together. 0.6x4 + 0.25x 5 +0.15*5 = 4.4.

Outsourcing is often a good choice when: There are only a few suppliers. A product is in the mature phase of the life cycle. Technology is new. The product is critical to a firm's competitiveness.

A product is in the mature phase of the life cycle. Outsourcing is often a good choice for mature products. There should be many capable suppliers and known technology Critical competitive items generally shouldn't be outsourced.

A relationship with a supplier that is characterized by high levels of distrust, little communication, and short-term transactions is called a(n): Adversarial relationship. Arms-length relationship. Acceptance of mutual goals. Full partnership.

Adversarial relationship. The characteristics describe an adversarial relationship (see Figure 10-4).

Moderate- to high-risk purchases with low to moderate levels of spend are categorized as: Noncritical. Leverage. Bottleneck. Strategic.

Bottleneck. Moderate- to high-risk purchases with low to moderate levels of spend are categorized as bottleneck, as shown in Figure 10-3.

Which activity is a university least likely to outsource? Operation of the bookstore. Operation of the residence halls. Classroom instruction. Information technology support services.

Classroom instruction. Classroom instruction is a core activity for a university and therefore is least likely to be outsourced

Which of the following would NOT be a step in conducting an insourcing/outsourcing analysis? Assessing quantitative costs of outsourcing Evaluating new suppliers who could make the SKU Assessing the relationship of the product to the firm's core competencies Conducting a detailed internal audit of purchasing practices

Conducting a detailed internal audit of purchasing practices All are steps in make/buy analysis except reviewing internal purchasing practices.

All of following can increase supply chain risk except: Using a supplier that is having financial difficulty. Holding higher levels of inventory of critical materials. Using suppliers in Thailand. Single sourcing.

Holding higher levels of inventory of critical materials. Holding higher inventory levels is one way to mitigate supply chain risk.

A company requires its suppliers to make its products in at least three different locations around the world. Which supply management goals does this BEST accomplish? Fostering sustainability. Reducing total costs. Identifying, assessing, and mitigating supply chain risk. Accessing technology and innovation.

Identifying, assessing, and mitigating supply chain risk. Requiring suppliers to have geographically dispersed operations reduces supply chain risk.

Advanced Manufacturing Company is evaluating two suppliers for a component sourcing. After much internal discussion, AMC's management has determined that the critical factors in choosing suppliers are: quality, delivery, price, and service. Further, management has rated the importance of these factors as 0.4, 0.3, 0.2, and 0.1, respectively. On a scale of 1 to 5, Supplier A is rated at 5, 3, 3, and 3, respectively. Supplier B's ratings are 4, 4, 3, and 4. Which supplier has the better weighted score? Supplier A Supplier B Neither, they both have the same weighted score.

Neither, they both have the same weighted score. Supplier A's score = .4(5) + .3(3) + .2(3) + .1(3) = 3.8.Supplier B's score = .4(4) + .3(4) + .2(3) + .1(4) = 3.8

Floor cleaning supplies for an elementary school would be considered to be: Leverage. Noncritical. Strategic. Bottleneck.

Noncritical. The level of spend and risk for floor cleaning supplies for a school are both low. This is a noncritical purchase.

All of the following are supply management goals EXCEPT: Ensure timely availability of resources. Purchase at the lowest price. Enhance quality. Assess technology and innovation.

Purchase at the lowest price. Only purchasing at the lowest price is not a goal of supply management. Rather than reduce purchase price, the appropriate goal is to reduce total cost of ownership.

Local sourcing: Reduces delivery costs. Is called "nearshoring". Is used when cost is the primary objective. Takes advantage of lower trade barriers from trade agreements.

Reduces delivery costs. Because of proximity, local sourcing reduces delivery costs.

The identification, evaluation, selection and management of suppliers is called: Sourcing. Supply management. Supply chain management. Spend analysis.

Sourcing. Sourcing is the identification, evaluation, selection of and management of suppliers.

Outsourcing is least likely when: The process in highly innovative. Products are in the mature phase of the lifecycle. The production processes are standard. The activity Is not strategically important.

The process in highly innovative. When a product is highly innovative it is more likely to be insourced to protect intellectual property.

Stainless steel is an important raw material for an appliance company. Steel accounts for a high level of spend and is critical to customer satisfaction. Further, only three suppliers worldwide can produce steel to meet the company's quality standards. Which is appropriate in this situation? Using electronic catalogs for steel. Finding substitute materials. Use competition to select suppliers. Build collaborative partnerships with suppliers.

Build collaborative partnerships with suppliers. The high value of spend and the high level of supply risk suggests that this is strategic situation. Building collaborative partnerships is appropriate in this situation.

Sustainability: Focuses primarily on increasing environmental compliance. Can lower a company's total cost. Does not include worker safety. Focuses only on social issues.

Can lower a company's total cost. Sustainability can reduce a company's total costs by reducing waste and avoiding problems.

Outsourcing: Should be used for an organization's core activities. Always uses suppliers from developing countries. Can reduce a company's capital requirements Is only done for services.

Can reduce a company's capital requirements Outsourcing reduces a company's capital requirements because it does not need to invest in equipment or facilities to make the sourced product.

Which of the following is NOT true with respect to an RFQ or RFP? It describes the purchase requirements. It is the first step in competitive bidding. It is often communicated to suppliers electronically. It is used to determine weights in supplier scorecards. Weights in supplier scorecards are determined based on the importance to the organization. An RFQ or RFP is used to communicate the purchase needs to suppliers usually electronically.

It is used to determine weights in supplier scorecards. Weights in supplier scorecards are determined based on the importance to the organization. An RFQ or RFP is used to communicate the purchase needs to suppliers usually electronically.

Benefits of single sourcing include all of the following EXCEPT: Quantity discounts. More consistent quality. Better supplier relationships. Less supply risk.

Less supply risk. Single sourcing increases supply risk.

Which of the following is NOT a benefit of outsourcing? Greater flexibility to change product specifications Better access to market information Lower supply management costs Less capital needed for investment

Lower supply management costs When outsourcing, a company has to spend more time and effort managing a supplier, so supply management costs are likely to increase rather than to decrease.

Aspen Corporation has discovered that it uses 10 different suppliers for a particular type of item, has bought 20 different models of that item, and total expenditures last year for the item were $100,000. Aspen most likely is conducting: Supplier audits. Spend analysis. Supplier certification. Make or buy analysis.

Spend analysis. Spend analysis refers to analyzing the dollars spent with which suppliers.

Which approach is likely to be used for leverage purchases? Purchasing cards Vendor-managed inventory Using executive champions Standardizing purchases

Standardizing purchases Standardizing purchases across the company increases the purchase volume needed for leverage purchases. Purchasing cards and VMI are used for noncritical purchases, and executive champions are used for strategic purchases.

A company has decided that it no longer needs to extensively count and inspect the products it receives from a particular supplier. This suggests that the purchasing company has begun: Spend analysis. Supplier certification. Process simplification. Time reduction analysis.

Supplier certification. After certifying a supplier, a company may decide it no longer needs to perform certain activities such as counting and inspecting.

Determining the right number of supplier that a company should use is: Spend analysis. Strategic sourcing. Supply base optimization. Supply chain resilience.

Supply base optimization. Determining the right number of supplier that a company should use is supply base optimization.

In its own country, a former supplier to your company recently began selling its own product that is identical to a product that was developed by your company. This is an example of: Supply risk. Sustainability. Insourcing. Strategic sourcing.

Supply risk. Theft of intellectual property is one type of supply risk.

A primary reason for using global suppliers is to: Improve sustainability. Reduce transportation costs. Take advantage of free trade agreements such as NAFTA. Work with the same suppliers in many different regions of the world.

Take advantage of free trade agreements such as NAFTA. When expanding globally, many companies want their suppliers to be able to expand with them.