Exam 1 Practice Questions

A manufacturer of women's dresses has been a supplier for many years to a regional retail chain. Based on internal seasonal demand forecasts, the manufacturer orders fabric, and arranges for production overseas. However, instances of stockouts and excess inventory are common. Given this situation, which of the following would be MOST beneficial? (A) CPFR - Collaborative Planning Forecasting and Replenishment (B) ESI - Early Supplier Involvement (C) MRP II - Manufacturer Resource Planning II (computer-based system) (D) SMI - Supplier Management Inventory

(A) CPFR - Collaborative Planning Forecasting and Replenishment

Multiplying the book value by the constant depreciation rate at the end of each fiscal period. Assumes matching has a higher value at beginning of life than at the end: (A) Declining Balance Depreciation (B) Total Cost of Ownership (TCO) (C) Sum of years digits depreciation (D) Request for Information (RFI)

(A) Declining Balance Depreciation

Which of the following are needed in order to establish a benchmark against which performance will be measured? I. Before-the-fact controls- corrected action at the beginning of the planning period II. During-the-fact controls - corrected action during of the planning period III. After-the-fact controls - corrected action at the end of the planning period (A) I only - looking at data before the benchmark is set (B) II only (C) I and III only (D) I, II and III

(A) I only - looking at data before the benchmark is set

Cost that have both a fixed and variable cost component such as supervisors salaries, pensions plans, utilities, and fuel. (A) Indirect-semi-variable cost (B) Indirect-Variable Cost (C) Indirect-Fixed Cost (D) Indirect Cost

(A) Indirect-semi-variable cost

What is a spec for service to be performed and includes two components: 1. defines what product must look like or do and 2. quantitative to measure performance? (A) Statement of Work (SOW) (B) Leading division buying (C) Indirect - Variable Cost (D) Total Cost of Ownership (TCO)

(A) Statement of Work (SOW)

The total cost of one unit of goods or services. It includes purchase price plus all other cost associated with the item or service over it's useful life, including other direct cost, policy costs and cost of non-performance. (A) Unit total Cost (B) Indirect Cost (C) Indirect-Fixed Cost (D) Life-Cycle cost

(A) Unit total Cost

Used for more complex biding situations and detailed information where dialog w/ buyer and supplier are required with engineering and supplier. Potential problems is the time it takes to conduct. (A) Lead division buying (B) Bidder's Conferences (C) Indirect Fixed Cost (D) Indirect Cost

(B) Bidder's Conferences

Expenses that can be identified with individual units of output, typically direct materials and direct labor. Important for several reasons: 1. Direct cost have largest impact on supplier prices. 2. Reduced direct cost give bigger savings than reduced profit margin. 3. Reducing direct cost is a good way to get a win-win. (A) Finance Cost (B) Direct Cost (C) Landed Cost (D) Indirect Cost

(B) Direct Cost

All of the following are appropriate tactics for a purchaser to use during negotiations EXCEPT the revealing of (A) minimum (B) minimum objectives (C) maximum position (D) no position

(C) maximum position

In anticipation of an upcoming price increase by its current supplier, a supply manager in charge of purchasing corrugated boxes conducts a competitive bid to determine if there are any suppliers who can offer more competitive prices. The supply manager accepts a bid from a supplier who will meet the current supplier's price, and will also hold pricing firm for a second year. The actions of the supply manager can BEST be described as A. Cost avoidance B. Cost containment C. Cost reduction D. Cost savings

A. Cost avoidance

A category manager for ductile iron castings is tasked with consolidating spend and driving savings within the category. The category manager forms a cross-functional sourcing team, conducts spend analysis, and determines that the category fits the "leverage quadrant of the Kraljic matrix. In this situation, which of the following is the BEST course of action for the team A. Check the existing supply base for capabilities and determine if the suppliers are in good standing with the company. B. Determine the number of suppliers required along with their capabilities, and establish criteria to evaluate them. C. Conduct an internet search to find new iron casting suppliers in low cost countries. D. Pick an existing supplier and have it design the part so that its production processes are optimized for cost.

B. Determine the number of suppliers required along with their capabilities, and establish criteria to evaluate them.

Of the following, the selection of a potential new supplier of capital equipment would MOST likely be affected by: a. Supplier lead times b. Supplier's ability to produce reliable equipment c. Location of the supplier plant d. Supplier's willingness to negotiated quoted prices

B. Supplier's ability to produce reliable equipment

A sourcing manager is reviewing cost savings over a 3-year period for packaging used in operations. The packaging usage remained constant throughout the 3 years. The prices paid per year are below. What are the hard savings over the term of the contract? A. $5,000 B. $10,000 C. $60,000 D. $115,000

C. $60,000

PQR, Inc. has a number of contracts approaching expiration. The firm's supply manager and chief engineer meet to identify cost savings that can be achieved by reducing tolerances, using substitute materials, and changing packaging. Internal stakeholders agree to these changes. In order to be successful, which of the following will be MOST important in validating cost savings? A. Approval from the legal department for the issuance of new contracts B. Confirmation that the organization can withdraw from the current contracts C. Agreement on the reporting methods to be employed D. Agreement from sub-tier suppliers on the proposed changes

C. Agreement on the reporting methods to be employed

Which of the following market factors would be plotted on the low end of the market complexity axis on a spend analysis matrix? A. Many suppliers, excess capacity, unique specifications, no substitutions B. Standard specifications, possible substitutes, few suppliers, restricted capacity C. Many suppliers, excess capacity, standard specifications, possible substitutes D. Few suppliers, restricted capacity, unique specifications, no substitutes

C. Many suppliers, excess capacity, standard specifications, possible substitutes

Investigates the profitability of an organization in relation to it's sales. Net operating margin expresses profitability as a ratio of income to sales. Net Operating Margin = Total Operating Income / Total Sales A. Types of solicitation bids B. Centralized buying C. Margin analysis D. Return on assets employed (ROAE)

C. Margin analysis

Which of the following sources of spend analysis is likely to contain the GREATEST level of detail? A. Accounts payable B. General ledger C. Supplier data D. Supply management

C. Supplier data

LMN, Inc is a manufacturing firm that prices itself on responsiveness to customer needs. Recently, the firm's customer service manager has complained about slow delivery and increased lead times for components. As maintaining excellent customer service is critical to LMN, the supply manager has been directed to address the customer service manager's concerns. What would be the BEST course of action for the supply manager to take? a. Emphasize the time-to-market improvements in the sourcing process. b. Analyze the supply management function for value-add tasks c. Set goals for and track on-time delivery performance d. Incorporate stakeholder requirements into supply chain priorities

D. Incorporate stakeholder requirements into supply chain priorities

Supplier B manufactures exhaust systems for passenger trucks and sports utility vehicles. Company A is one of its many customers. Supplier B asks for a 20% price increase, using a 33% rise in price of nickel as justification. Company A estimates material cost is 50% of the total cost of the exhaust system. What is the maximum price increase that Company A should accept from Supplier B? a. 16.5% b. 22.5% c. 33% d. 50%

a. 16.5%

A part supplier for FGH, Inc informs the company it is no longer interested in being FGH's supplier and returns all of FGH's tooling. FGH decides to move all of its business to a new supplier in China. The firm must now pay to ship its tools to the Chinese firm with the hope that the tools will be compatible with the new supplier's equipment. Which of the following would MOST likely have prevented this situation? a. Contingency plan b. Contract management system c. Insurance d. Supply chain mapping

a. Contingency plan

A supply manager hold a pre-performance conference with a chosen supplier. This event falls under which of the following areas of responsibility? a. Contract administration b. Contract closeout c. Earned value management d. Project planning

a. Contract administration

A supply manager is evaluating a departmental budget and notices that there is no comparison between established goals and actual results. This indicated an omission in which of the following? a. Controlling b. Executing c. Organizing d. Planning

a. Controlling

Which of the following is a PRIMARY supplier performance measurement? (a scorecard) a. Delivery b. Forecasting c. Stability d. Support

a. Delivery

A supply manager is evaluating responses to a request for information (RFI) seeking off-site communications training for company employees. The supply manager receives a request from the vice president of marketing for a list of all respondents to the RFI, explaining that a letter will be sent to the respondents outlining the company's services and the importance of security at training facilities, and strongly implying that organizations who do business with the company will have an advantage in future proposal evaluations. a. Explain to the vice president that such a letter might be constructed as attempted coercion or restraint from trade b. Refrain from endorsing or prohibiting the letter, as it Is not being sent from supply management c. Remind the vice president that marketing is not part of the proposal evaluation process d. Document the procurement files to ensure that suppliers' purchases are not included as evaluation factors

a. Explain to the vice president that such a letter might be constructed as attempted coercion or restraint from trade

A company conducts an e-auction for forklifts. Immediately after the e-auction concludes, the two suppliers with the lowest prices inform the company they will not be able to honor their pricing. To avoid situations like this in the future, which of the following is the BEST course of action for the company to take? a. Include a clause within the registration process stating that participants will honor their prices, or be excluded from the current auction and all subsequent auctions. b. Exclude the two suppliers from any future e-auctions that the company holds, as they did not honor their e-auction price. c. Rather than using e-auctions, opt for a closed bid-process to avoid the possibility of companies not honoring their pricing during the e-auctions. d. Verify with the suppliers mid-way through the e-auction that they will continue to honor their prices.

a. Include a clause within the registration process stating that participants will honor their prices, or be excluded from the current auction and all subsequent auctions.

A supply manager issues a request for proposal for engineering services. In order to provide clarification on the specifications, the company holds a question and answer session for interested suppliers. Shortly after the question and answer session is held and before any proposals are actually received, the firm's engineering department revises the specifications. Given this situation, which of the following should the supply manager do FIRST? a. Inform the suppliers of the change via call or email, tell them when the new specifications will be available, and ask for immediate notification if additional time is required. b. Write a letter to each supplier advising of the change, tell each supplier when the new specifications will be available and ask for immediate notification if additional time is required. c. Hold an interim pre-bid meeting with all suppliers to discuss and clarify the revised specifications, and ask for immediate notification if additional time will be required. d. Prepare and distribute a brand new request for proposal package to be sent to each supplier

a. Inform the suppliers of the change via call or email, tell them when the new specifications will be available, and ask for immediate notification if additional time is required.

_________ is the total accumulation of costs for an imported item, including purchase price plus freight, handling, duties, customs clearance and storage to a designated point. a. Landed Cost b. Indirect Cost c. Finance Cost d. Direct Cost

a. Landed Cost

A supply manager completes a category profile and identifies services provided by multiple service providers. A market and industry analysis shows that the service providers are rowing their business by acquiring companies, this enabling them to provide a greater range of services. Which of the following techniques BEST enables the supply manager to leverage market competition? a. Lotting strategy b. Market-based model c. Market-segmentation d. Sole sourcing

a. Lotting strategy

A supply manager has several suppliers that use copper in the products they manufacture. However, none of the suppliers is a major buyer of copper. The supply manager decides to purchase the copper on behalf of their suppliers. Which of the following BEST describes this type of arrangement? a. Multi-tier purchasing agreement b. Process improvement c. Risk management Supply chain management

a. Multi-tier purchasing agreement

BCD, Inc. implements an Enterprise Resource Planning (ERP) system which includes an accounts payable module. The system enables suppliers to submit invoices for payment. Shortly after implementation, suppliers begin complaining about slow payment. BCD's supply manager determines that many supplier invoices are not being received in a timely fashion by BCD, and that most invoices do not contain all of the information required by the ERP system. In this situation, which of the following is the BEST course of action for BCD's supply manager to take? a. Offer additional training on requirements of the new procure-to-pay system, and find ways to expedite processing. b. Amend standard payment terms in all procurement contracts from 30-days to 45-days, to better align with the ERP system. c. Reduce the amount of information required by the ERP system on submitted invoices. d. Amend all procurement contracts to include specific instructions on information required in supplier invoices.

a. Offer additional training on requirements of the new procure-to-pay system, and find ways to expedite processing.

A supply manager for a government agency receives a purchase requisition from a stakeholder to pay an invoice of $35,000 to Supplier X. As the agency's competitive bidding threshold is $50,000, the supply manager approves the requisition and issues a purchase order. The supply manager then discovers that, over the past year, three more purchase orders for the same amount were issued to Supplier X by the same stakeholder. It is revealed that the stakeholder did not want to exceed the $50,000 threshold. In this situation, the supply manager's BEST course of action would be to (question is saying $50K+ requires a bid but amounts below do not.) a. Place the requisition on hold, and contact the stakeholder to determine how to proceed b. Finalize the purchase order, as the requisition was below the competitive bidding threshold of $50,000 c. Reject the requisition and report the case to human resources to begin an investigation d. Finalize the purchase order and recommend the board specifically prohibit the splitting of requisitions

a. Place the requisition on hold, and contact the stakeholder to determine how to proceed

DEF, Inc is making efforts to buy from a wider geographic base of suppliers. However, the company is concerned about how to release detailed specifications to potential suppliers without compromising proprietary information. Which of the following should DEF take first? a. Review laws concerning protection of intellectual property in the countries of interest b. Search the market for counterfeit products produced under brand name or logo mimicking c. Strengthen confidentiality clauses in contracts with suppliers in other countries d. Alert marketing to opportunities for creating a more uniform brand message internationally

a. Review laws concerning protection of intellectual property in the countries of interest

RST is a manufacturer in Asia that produces wooden bar stools sold in many U.S. department stores. The assembled bar stools are packaged in corrugated boxes, one unit per box. RST has developed a design that is very inexpensive to assemble in comparison to the costs to manufacture components. RST is looking for ways to reduce landed cost of the bar stools. Which of the following is the BEST way of dealing with this issue? a. Ship the components to the U.S. and assemble them nearer the point of sale b. Move all manufacturing operations to the U.S. c. Use 20-foot rather than 40-foot ocean containers to ship then d. Ask the freight forwarder to only book the largest vessel for ocean transport.

a. Ship the components to the U.S. and assemble them nearer the point of sale

A company's legal department is establishing budgets for the upcoming calendar year. The organization's general counsel identifies several cases of litigation involving intellectual property rights that could impact several product development projects. It is imperative that the budget include appropriate funding to retain external legal counsel. The general counsel asks the supply manager to assist in preparing the budget for the legal costs for these cases. Which of the following is the BEST course of action for the supply manager to take? a. Solicit proposals from the qualified external law firms (future-based) b. Estimate costs based on recent contracts for similar matters (past-based) c. Provide general counsel with hourly rates from qualified attorneys (past-based) d. Perform a should-cost analysis for each major IP (past-based)

a. Solicit proposals from the qualified external law firms (future-based)

Takes the number of years of useful life of an asset, counts back to one, and adds the digits together. This method depreciates more in the first few years of an asset than the others. a. Sum of Years Digits Depreciation b. Indirect-Variable Cost c. Indirect-Semi-Variable Cost d. Total Cost of Ownership (TCO)

a. Sum of Years Digits Depreciation

A buying organization has the greatest opportunity to experience cost efficiencies when it a. Understands the supplier's manufacturing processes b. Shares the business forecasting model c. Secures confidentiality agreements d. Promises the supplier shared responsibility In managing inventory

a. Understands the supplier's manufacturing processes

Choose the word for the definition: pooling spend volume together to increase spend leverage and bargaining power. Can be done in several ways: - pooling spend across divisions or units - consolidate number of suppliers - combine volume from different commodity groups - restrict volume among suppliers and optimize supplier base a. Volume Concentration (a leverage strategy) b. Best Price Evaluation c. Market analysis should address d. Joint Process Improvement (JPI)

a. Volume Concentration (a leverage strategy)

What is an organizational policy and structure in which the authority and responsibility for most supply related functions and decisions are assigned to a central organization. Decisions are made in one spot, not all people are necessarily located in one spot. a. Types of Solicitation Bids b. Centralized Buying c. Cooperative purchasing d. Top-down management

b. Centralized Buying

A supplier's solicitation documents occasionally include detailed design specifications that are considered proprietary. Several potential suppliers from developing countries have expressed interest in offering products or services to the manufacturer company. Which of the following actions will MOST likely help balance intellectual property protection with the expanded supplier based? a. Sourcing strictly from suppliers in advanced industrial countries b. Checking supplier references and past performance c. Drafting strong contract language concerning confidentiality d. Defining where any disputes will be settled.

b. Checking supplier references and past performance

Two or more organizations (public or private) that join together to combine spend for common commodities. Members are usually active in the purchasing decisions even if a 3rd party makes the purchases for them. a. Cooperative Purchasing b. Consortia c. Bidder's Conference d. Indirect Cost

b. Consortia

MNO, Inc is a multinational mining company. At the request of the facilities operations team, MNO contracts with a diverse supplier for emergency maintenance services. The contract is for three months at a maximum of $50,000 USD. After two months, the supplier insists that additional rates need to be included in the contract. While nothing in the contract mentions a trial period or a specific number of visits, the supplier states that the intent of the contract was for two trial service sessions, and that these sessions would allow the facilities operations team an opportunity to evaluate its performance. The supplier states that is has been absorbing considerable expenses that were not included in the contract. MNO's supply manager investigates the situation and finds no mention of any additional rates in the supplier's proposal. Through amendments, the maximum contract value has more than doubled to $120,000 USD, and this amount is almost completely used. Yet the supplier remains very competitive even with these extra rates. Which of the following should the supply manager do in this situation? a. Reject the request, as the terms agreed upon at contract signing remain valid b. Contract the facilities operations team to discuss the supplier's stance with them c. Accept the supplier's request as it remains competitive, and the increased value shows greater than intended usage. d. Counter the supplier's additional rates by proposing acceptance of half the amounts presented

b. Contract the facilities operations team to discuss the supplier's stance with them

DEF is a large publicly-held company. DEF conducts a request for proposal (RFP) to purchase desktop computers, and awards the contract to a local IT reseller. Following the award, several of the non-winning bidders call DEF's supply manager, and the supply manager informs these suppliers of the firm's decision. A month later, DEF receives a protest form another non-winning supplier. The supplier complains that it never received adequate notice of the award, and requests that the RFP be reissued to give it another opportunity. Which of the following is TRUE in this situation? a. As DEF is publicly-held, it violated the law by not treating all bidders equally, and must make restitution to the offended supplier. b. DEF is void of any obligation to send notice of awards to all bidders. c. DEF's procurement policy must be amended to reflect local regulations related to RFx processes and contract award. d. DEF must reissue the RFP, as it failed to follow proper solicitation procedures.

b. DEF is void of any obligation to send notice of awards to all bidders.

The factors to consider in the make-or-buy decision include costs, proprietary knowledge, and: a. Available capacity b. Design history c. Inventory balance Warehouse location

b. Design history

What is the cost of capital to finance the inventory. There are two ways to get the cost: One, is to use the companies short-term borrowing rate or 2. The company's required rate of return on an investment. a. Landed Cost b. Finance Cost c. Indirect Cost d. Direct Cost

b. Finance Cost

XYZ Company has a long history of aggressive supplier consolidation. XYZ experiences frequent quality and delivery issues, and its marketing department believes product costs are too high in some cases. Given the situation, which of the following would be the BEST course of action for XYZ to take? (think internal stakeholders - operations team) a. Initiate Kanban and other inventory management systems with the current suppliers. b. Initiate a category management process featuring stakeholders from impacted functional areas c. Develop an audit plan of current suppliers, focusing on the quality and cost component of their businesses d. Conduct strategic sourcing initiatives on all major spend areas

b. Initiate a category management process featuring stakeholders from impacted functional areas

A supply manager for a privately held manufacturing company is preparing a request for proposal (RFP) for raw materials. None of the RFP recipients is an incumbent, and the award resulting from the RFP is expected to be of significant dollar value. The supply manager is concerned that the lack of publicly available financial information could impact willingness of the prospective suppliers to submit proposals. Which of the following will BEST address the concerns of the prospective bidders? a. Escrow account b. Letter of credit c. Payment bond (subcontractor paid) d. Surety bond (insurance company guaranteeing work will be paid)

b. Letter of credit

Choose the word for the definition: the combination of goods and services used to calculate U.S. government reported indices such as consumer price or producer price index a. Duties (tariffs) b. Market Basket approach c. Enabling a source d. Sealed bids

b. Market Basket approach

When designing a supply chain for strategic advantage, a company first should consider: a. Whether to use custom or standard parts b. Matching the supply chain to product type c. The financial stability of suppliers d. The impact on customers using Just-in-Time manufacturing

b. Matching the supply chain to product type

A newly hired sourcing specialist meets with various stakeholders within the company and hears many opinions concerning where sourcing actions should start. Which of the following would be the MOST appropriate first step for the sourcing manager to take to begin sourcing efforts? a. Send out a survey to all stakeholders to get their opinions on opportunities to pursue b. Perform Pareto analysis on current spend to help identify opportunity areas c. Conduct supplier visits with all major suppliers d. Conduct a review of all existing supplier agreements

b. Perform Pareto analysis on current spend to help identify opportunity areas

A supply manager implements an agreement for three years containing a 30 day out clause with an early payment discount of 2%, if paid within 10 days/30 days net payable. If the supply manager's company terminates the agreement, it would be responsible for any goods already produced by the supplier on the company's behalf. Which of the following pieces of information, if any, must the supply manager report to the company finance organization? a. Annual value of the contract b. Potential obligation of the contract c. 30 day out clause and payment terms d. Term of the contract

b. Potential obligation of the contract

Which of the following provides the OST comprehensive view when determining the total cost of procured materials? a. Product, transportation, and delivery b. Product, process, network, source, and security c. Product, logistics, storage, and handling d. Product, indirect costs, and profit

b. Product, process, network, source, and security

Compared to a global strategy, a multicountry strategy would be characterized by: a. Strategy coordination across countries b. Products adapted to local needs c. Major strategic decisions coordinated centrally d. Preferred suppliers located in host countries

b. Products adapted to local needs

Supply chains delivering products or services are most able to respond quickly to changing market requirements when: a. Products have been standardized b. Products have modular design c. Production processes have been standardized Production processes have been simplified

b. Products have modular design

When assessing international markets for suppliers, the MOST important item supply management should consider is the a. Culture of the supplier b. Risk of the extended supply chain c. Broadening supply base d. Expansion of the customer base

b. Risk of the extended supply chain

A sourcing specialist working on a project improvement team identifies a product line for which both profit margins and sales volumes have declines. Although the end product is a staple in the industry, customer have resisted price increases and have south alternatives. The product is also subject to sharp fluctuations in demand due to consumer trends. Resultant stockouts have led to lost sales. Through value analysis, the team identifies a ball bearing component that is single sourced from a supplier to the aerospace industry. The supplier was chosen several years ago because of its ability to provide the precise overall dimensions required for the component. Discussions with the supplier reveal that 3 weeks of the 6-week lead tie for the product are spent in precision polishing operation for a smooth surface condition. The process also accounts for one-third of the product cost. Product quality and reliability from the supplier have been exceptional, although there are other suppliers for ball bearings. Which of the following courses of action should the project team recommend to recoup shrinking margins and volume for this product line? a. Change to a lower priced supplier with shorter lead times b. Work with the current supplier to reconsider the high-polish finish c. Provide better demand information to the supplier to reduce lead time d. Negotiate with the supplier to provide supplier-managed inventories

b. Work with the current supplier to reconsider the high-polish finish

A supply manager has consistently achieved hard cost savings through the bidding process, demand management, and other category management activities. However, the perception within the organization is that these savings are not "real", as the impact is not reflected in the company financials. To resolve this situation, which of the following should the supply manager do FIRST? a. Meet with leaders of other departments to develop a tracking system for the savings b. Work with the finance department to develop a process to validate savings. c. Evaluate the budgets of other functional departments to identify savings d. Ask the team to verify their savings numbers for the past few years.

b. Work with the finance department to develop a process to validate savings.

The practice of bypassing signature authority by splitting single purchases into smaller purchase orders not requiring management approval is MOST likely a result of a. Inadequate training b. Incompetent personnel c. A lack of capable processes d. A lack of top management support

c. A lack of capable processes

Which of the following situations is an example of inventory being held as a way to balance supply and demand? a. A manufacturer holds inventory of key components to maintain a level production schedule b. A distributor maintains safety stock of slow-moving items at a central distribution center c. A manufacturer of seasonal products builds finished-goods inventory before the peak selling period d. A retailer stocks a variety of sizes and colors of a fast-selling item to avoid losing sales.

c. A manufacturer of seasonal products builds finished-goods inventory before the peak selling period

Risk pooling enables a lower total inventory level without affecting service levels based on which of the following assumptions? a. The supplier shares some risk for holding inventory b. Inventory turnover ration can be reduced c. Aggregate demand is more accurate than disaggregated demand d. The planning time fence can be adjusted as needed

c. Aggregate demand is more accurate than disaggregated demand

Which of the following is likely to be the BEST use of social media sites such as LinkedIn during the preparation for negotiations with a potential supplier? a. Selecting the ideal negotiation site b. Determining the objectives for negotiation c. Collecting information, reports and comments on the supplier Defining roles and responsibilities of the negotiation team

c. Collecting information, reports and comments on the supplier

A gourmet foods maker has been enjoying steady growth and anticipates order volume beyond current production capabilities. The firm's supply manager investigates additional co-packers to handle holiday demand surges. MNO, Inc. a co-packer for a variety of foods, has an excellent reputation for quality, pricing, and delivery. However, MNO, Inc has recently been experiencing a significant drop in cash flow. Which of the following is the BEST course of action for the supply manager to take? a. Eliminate MNO as a potential supplier at this time b. Conduct a more extensive review of MNO's references c. Compare MNO's financial ratios with those of other suppliers d. Use an automated financial assessment model to evaluate MNO

c. Compare MNO's financial ratios with those of other suppliers

Which of the following is the MOST effective method for negotiating with the sole supplier of a unique item? a. Price analysis negotiations b. Price comparison negotiations c. Cost analysis negotiations d. Adversarial negotiations

c. Cost analysis negotiations

Which of the following supplier evaluation methods totals the price of quality, delivery and service for a supplier, and divides this figure into the total purchases from that supplier? a. Benchmarking b. Categorical c. Cost-ratio d. Weighted point

c. Cost-ratio

Smith is a supply manager for XYZ, Inc. Smith issues a request for proposal and awards the contract to a new overseas supplier. As Smith's team concludes negotiations with the selected supplier, XYZ's chief financial officer (CFO) inquires about the project's budget. Smith had assumed that supply management had the usual authorization to spend under the current direct materials budget and therefore did not prepare a budget. Given this situation, which of the following should Smith do? a. Include a member of the CFO's staff in the negotiations to report budgetary issues back to the CFO b. Place the orders, as Smith has pre-authorization to purchase under the existing budget process c. Create a specialized budget to track cost performance of the new program d. Suspend the negotiations and purchase the item from current suppliers

c. Create a specialized budget to track cost performance of the new program

After the evaluation of cost data and the determination of the budget figures, what is the NEXT step in the budgeting process? a. Identifying financial resources allocated to each department b. Negotiating with suppliers c. Defining processes for comparing goals to actual results d. Analyzing contract pricing

c. Defining processes for comparing goals to actual results

A supply manager has been asked to participate in a cost management program to help the organization generate more working capital. Which of the following is the BEST way for the supply manager to contribute to that goal? a. Establish a standard cost system b. Employ a cost modeling tool c. Focus on a standardized program d. Implement a contribution to margin analysis

c. Focus on a standardized program

MNO is a medium sized company with international operations. A key component of the firm's strategic plan has been to engage small business partners with strong technical expertise (someone's brain, but they're broke.) but minimal financial resources. Which of the following should MNO focus on in order to achieve this objective? a. Bond and currency markets b. Depreciation and appreciation c. Investment in suppliers d. Private equity

c. Investment in suppliers

After identifying the potential causes for delays in communicating demand information up the supply chain, the trading partners should take which of the following actions? a. Implement a higher-speed data communications network b. Identify the root causes for delays c. Map and analyze the value stream d. Change procedures so data is communicated more frequently

c. Map and analyze the value stream

Smith has been a procurement manager for a manufacturing company for several years and is well-acquainted wit the company's strategic plan and procurement strategy. Smith has been asked to be procurement manager for a new, unfamiliar category of items. Smith analyzes the historical spend data, maps out the stakeholders, and looks at the external market for the category. Which of the following is the NEXT step Smith should take in the process? a. Contact the key suppliers and learn more about their business b. Develop a strategy that will drive the category activities in the near future c. Meet with Key stakeholders to learn their views of the market and suppliers d. Study the external market to gain more product knowledge.

c. Meet with Key stakeholders to learn their views of the market and suppliers

UVW, Inc. has been sourcing parts from Supplier A, an overseas supplier, for the past two years. UVW's manufacturing and customer schedules require a single release consisting of the full quantity, and this is stated on the purchase order, as well as Supplier A's purchase order confirmation. In practice, however, Supplier A often ships partial quantities over several releases. UVW is becoming concerned over the partial deliveries, even though Supplier A's pieces have been market tested and found to be very competitive. Given the situation, which of the following modifications to the sourcing agreement should UVW negotiate with Supplier A? a. Pay 5% piece penalty for any partial deliveries b. Extend payment terms for all partial deliveries c. Pay any added costs accrued due to partial deliveries d. Hold safety stock in its overseas factory

c. Pay any added costs accrued due to partial deliveries

XYZ has a long-term agreement with a supplier. The agreement is set to expire within six months. The current supplier has failed to demonstrate reliable delivery and quality, and a cost analysis shows that the "should cost" for the highest volume part is 10% below the price XYZ is currently paying. The category manager wants to consider another supplier for a possible long-term relationship. Which of the following should the category manager do FIRST in order to prepare for negotiations with another supplier? a. Determine the category strategy b. Develop negotiation targets and settlement ranges Reassess the needs and wants of internal stakeholders c. Reassess the needs and wants of internal stakeholders d. Learn the market dynamics of the industry

c. Reassess the needs and wants of internal stakeholders

After the notice period specified in a "Termination for Convenience" clause, the buying organization may no longer a. Employ that contractor for providing goods and services b. Request damagers for any default under the contract c. Seek a certain deliverable in the contract d. Provide payments to the contractor

c. Seek a certain deliverable in the contract

Managers from all major departments in an organization are working together to find ways to minimize non-value-added activities, and devote more resources to efforts offering the best chance for continued success. Which of the following types of root cause analysis is the team using? a. Business case b. Kepner-Tregoe rational process c. Six Sigma Process d. SWOT (strength, weakness, opportunity, threats)

c. Six Sigma Process

An in-depth analysis of a supplier's proposal is useful because it is important to understand the a. SOW throughout the evaluation process b. SOW throughout the proposal process c. Supplier's proposal throughout the negotiation process d. Supplier's firm-fixed price

c. Supplier's proposal throughout the negotiation process

A company's annual cost of goods sold is $350 million, and inventory carrying cost is 18%. The company averages four inventory turns. The cost savings resulting from increasing inventory turns from four to six would be: a. $29,000,000 b. $15,750,000 c. $10,500,00 d. $5,250,000

d. $5,250,000

The payment term 2/10 net 30 is equivalent to an annual interest rate of a. 12% b. 18% c. 24% d. 36%

d. 36%

A supply manager is evaluating proposals for a critical commodity. Although there is nothing substantively wrong with the low bidder's proposal, and it is likely to result in significant cost savings, the supply manager is concerned about the low bidder's financial stability. Which of the following is the BEST course of action in this situation? a. Split the award between the lowest bidder and the next lowest bidder b. Award the contract to the next lowest bidder to assure supply c. Award the contract to the lowest bidder and ensure that the contract has appropriate protection from default d. Award the contract to the low bidder and develop a reasonable contract termination plan

d. Award the contract to the low bidder and develop a reasonable contract termination plan

XYZ Company is experiencing eroding margins of its key products. The company decides to commission a value analysis team to explore ways to reduce the cost of the product without disregarding quality. Which of the following team compositions would MOST likely meet these objectives? a. Cost accounting, finance, marketing, manufacturing, product engineering b. Cost accounting, finance, marketing, procurement, product engineering c. Cost accounting, finance, manufacturing, procurement, product engineering d. Cost accounting, manufacturing. Marketing, procurement, product engineering

d. Cost accounting, manufacturing. Marketing, procurement, product engineering

A company wants to conduct an audit of the supply management function to ensure that its policies, processes and procedures are based on company principals and values. Which of the following would indicate that supply management is in compliance with corporate expectations? a. Implementation of commodity rotation and limitation of authority for buyers (subset of a larger policy) b. Use of an electronic system to document purchase entries, with multi-layer approval and automatic tracking of changes c. Development of a team approach in dealing with suppliers to prevent favoritism (could be a subset of a larger policy) d. Implementation of written procedures on ethical behavior and mandatory training for all employees

d. Implementation of written procedures on ethical behavior and mandatory training for all employees

The primary reason for the evolution of the supply chain is: a. Increased on-time delivery b. Fewer rejects due to poor quality c. Increased communication d. Increased cost savings

d. Increased cost savings

A company is evaluating its supplier performance classification criteria. Currently, data are reviewed in 1, 3, and 5 year intervals to determine best value which is based on price and delivery. The company wishes to determine if additional resources are needed in order to manage the investment recovery program. Which of the following should the company consider analyzing? a. Direct materials cost modeling b. First-in-first-out (FIFO) c. Last-in-first-out (LIFO) d. Life cycle management

d. Life cycle management

In spend analysis, which of the following attributes describes a critical sourcing category? a. High supply market competitiveness, low business impact b. Low supply market competitiveness, low business impact c. High supply market competitiveness, high business impact d. Low supply market competitiveness, high business impact

d. Low supply market competitiveness, high business impact

Which of the following refers to the decisions made by national regulatory agencies to manage interest rates and the supply of money in the economy? a. Econometric modeling b. Econometric indexing c. Fiscal management d. Monetary policy

d. Monetary policy

A supply manager meets with a salesperson for Supplier X to review a recent bid submission. The supply manager tells the salesperson that unless a certain provision in Supplier X's bid is changed, Supplier X will be out of contention. Accordingly, the salesperson revises the bid in order to meet supply manager's requirements. Is the salesperson's change to the bid submission legally binding on Supplier X? a. Yes, because the salesperson is the appointed representative to the buyer. b. Yes, because supplier X must back up what its salespeople tell customers. c. No, because the salesperson is a general agent, not a special agent. d. No, because the salesperson's agency is limited to the solicitation of business.

d. No, because the salesperson's agency is limited to the solicitation of business.

Which of the following situations is an example of postponement? a. Shipments are broken down into smaller groups for reshipment b. Production begins after a customer order is received c. Shipments are consolidated immediately for reshipment d. Partially assembled goods are assembled at a later stage

d. Partially assembled goods are assembled at a later stage

The global commodity manager for manufacturer XYZ Inc. is conducting negotiations on a long-term contract with DEF, a key strategic supplier. DEF's delivery performance is rated 73%, which is below the divisional goal of 98%. For this reason, XYZ's operations manager wants to drop DEF and find a new supplier. The commodity manager, however, is not in agreement with the operations manager, and notes that as part of the long-term agreement, DEF will provide a 15% cost reduction, which is critical to achieving the cost-reduction goal for the division for the current year. At this point, which of the following would be the MOST appropriate course of action for the commodity manager to take? a. Move forward with the contract implementation, as negotiations with FEF have been taken in good faith. b. Place contract negotiations on hold to validate the initial project scope on delivery and cost targets for DEF. c. Proceed with the contract implementation, but add a delivery performance clause to clarify the divisional goal. d. Postpone contract negotiations to review the contract with the operations manager to ensure improved performance

d. Postpone contract negotiations to review the contract with the operations manager to ensure improved performance

In which of the following ways will off-balance sheet obligations affect an organization's financial statement? a. Overstating debts and assets b. Making debt-to-equity ratios look less favorable c. Implying higher risks d. Showing only amounts paid in the current period

d. Showing only amounts paid in the current period

A supply manager analyzes the potential savings by consolidating expenditures across the organization. In this situation, which of the following types of analyses would be MOST appropriate? a. Cost b. Market c. Risk d. Spend

d. Spend

A company plans to hire a consulting firm to implement a new employee benefit website. Which if the following is MOST appropriate for this contract? a. Cost Plus Pricing b. Loss Leader Pricing c. Market based pricing d. Time and material pricing

d. Time and material pricing

A company has facilities in several locations. The engineering department is located in a facility somewhat distant from supply management. For this reason, interdepartmental communication and cooperation are poor, and it is not uncommon for engineering to contract with suppliers that supply management has not approved. The supply manager is developing a sourcing strategy and understands that engineering's cooperation is needed to make the strategy work. Given the situation, which of the following would be the supply manager's best course of action? a. Send the engineering manager a memo explaining the strategy, requiring that only approved suppliers should be contacted by engineering. b. Send the strategy to both the engineering manager and the CEO, and ask the CEO for support in enforcing the strategy c. Visit the engineering department and explain the sourcing strategy to all design and engineering personnel d. Visit the engineering manager and ask for help in creating the strategy to make sure it supports all of the organization's goals.

d. Visit the engineering manager and ask for help in creating the strategy to make sure it supports all of the organization's goals.

A category manager for XYZ Corp. has an upcoming negotiation with Supplier A. Supplier A has a patent on a unique piece of technology that enhances XYZ's best-selling product. XYZ's competitors also use Supplier A's technology but the supplier's capacity is limited for XYZ as well as its competitors. Given the situation, which of the following strategies should the category manager employ? a. Benevolent negotiation b. Positional bargaining c. Power negotiation d. Win-win negotiation

d. Win-win negotiation