SCM 421 Topic 1: Purchasing & Supply Management

Which of the seven "rights" of purchasing is the most important? a. The right time b. The right material c. The right price d. The right supplier e. The right place

d. The right supplier

Which of the following is/are true about the "Clerical Era?" a. Purchasing personnel "placed and chased" orders b. Purchasing was the place to move up in the organization c. Purchasing was considered quite strategic d. All of the above e. None of the above

a. Purchasing personnel "placed and chased" orders

You need to give the most careful attention to the price and quality on which purchased inputs? a. Those that are made of metal b. Those coming from larger suppliers c. Those that are physically smaller d. Those that directly affect the customer's experience e. Those that you find the most interesting to buy

d. Those that directly affect the customer's experience

A dollar saved in purchasing nearly always has a greater impact on profit than an additional dollar of sales revenue. a. True b. False

a. True

Purchased goods and services are typically a firm's largest cost category. a. True b. False

a. True

You will probably meet a co-worker who doesn't see the strategic value in purchasing. a. True b. False

a. True

Which of the following is not a process that must be managed in the SCOR model? a. Plan b. Assess c. Source d. Make e. Deliver

b. Assess

What do purchasing cost reduction efforts tend to reduce? a. Profit b. Cost of goods sold c. Liabilities d. Shareholder's equity e. Debt

b. Cost of goods sold

On the strategic profit model, purchasing can only impact operating costs and taxes. a. True b. False

b. False

Purchased goods and services are typically a very small cost category a. True b. False

b. False

Purchasing has always been considered a strategic, value-added function. a. True b. False

b. False

Sales personnel have no ability to impact the Strategic Profit Model. a. True b. False

b. False

Your goal as a purchasing professional should always be to get the lowest possible price a. True b. False

b. False

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

b. Purchased inputs are about 60-80% of COGS

How might a purchasing manager influence his company's corporate social responsibility reputation? a. Negotiating with a supplier to lower the price of a purchased part b. Selecting an international supplier who pays high wages and treats employees well c. Making sure the supplier delivers to the factory on time d. Obtaining competitive intelligence and conveying this to company engineers e. Making sure to throw his water bottle in the recycle bin while visiting a supplier's facility

b. Selecting an international supplier who pays high wages and treats employees well

Which of the following statements are true? a. Suppliers can be reliable, but rarely provide innovation b. Suppliers can be a crucial source of innovation c. Innovation from suppliers is always higher-risk than innovation from within the company d. Innovation has nothing to do with suppliers one way or another e. Innovation is best left to R&D and marketing; as a purchasing professional, you have no interest in it

b. Suppliers can be a crucial source of innovation

During WWII, there was increased emphasis on purchasing's importance due to which of the following: a. Weapons systems design b. Infantry training standards c. Material shortages d. The prevalence of sea battles e. Improved farming yields

c. Material shortages

What are retail chains large enough to buy directly from manufacturers called? a. Major players b. Final destinations c. National accounts d. Direct Buyers e. Big Boxes

c. National Accounts

Where does every dollar saved in purchasing go straight to? a. Gross profit b. Net profit c. Operating profit d. The balance sheet e. Current assets

c. Operating profit

What do return on assets (ROA) equal? a. Net income / sales b. Inventory + Cash + Accounts Receivable c. Profit Margin x Asset Turnover d. Fixed Assets / Current Assets e. COGS x Profit Margin

c. Profit Margin x Asset Turnover

Since WWII what has been true about purchasing? a. Purchasing has been viewed as a top strategic function b. Purchasing's strategic importance has been decreasing c. Purchasing's strategic importance has been increasing d. Purchasing's tactical importance has been increasing while its strategic importance has decreased e. There has been little change in how purchasing is perceived

c. Purchasing's strategic importance has been increasing

You buy plastic parts that go into your company's finished product. Your CEO just asked you a question about oil market prices. What would your thoughts be about his question? a. You're pretty sure he must have mistaken you for someone else b. You helpfully point him toward the commodities forecasters on the third floor c. You should be making an effort to understand oil prices, since oil is a crucial input to your supply market d. Not much, the price of oil won't really affect the price or supply of plastic parts e. You have no clue, but make something up because the boss likes snappy answers when he asks a question

c. You should be making an effort to understand oil prices, since oil is a crucial input to your supply market

For a purchasing professional, what does "Caveat Emptor" ("Let the Buyer Beware") mean? a. Avoid doing business with anyone but friends and relatives b. Pay the highest price to always ensure the best item is delivered c. Paying too much is just a fact of life d. If the price is too low, it's possible you're buying a low-quality item e. You can't trust your internal customers

d. If the price is too low, it's possible you're buying a low-quality item

Which of the following is true when comparing the profit impact of sales versus purchasing efforts? a. Purchasing efforts don't impact profits b. A sales dollar is typically more impactful on profit than a dollar saved by purchasing c. Sales have no impact on profit, only on revenue growth d. Sales dollars hit the top line (revenues), purchasing savings go straight to operating profit e. They have the same impact

d. Sales dollars hit the top line (revenues), purchasing savings go straight to operating profit

What does it mean to say "organizational boundaries are blurred" from a purchasing perspective? a. Companies aren't separate anymore b. Suppliers and customers can't be differentiated c. Different internal functions like accounting and marketing are no longer needed d. Suppliers provide innovation, not just goods and services e. It's meaningless jargon used by consultants

d. Suppliers provide innovation, not just goods and services

What does the profit-leverage effect measure? a. How much profit comes from company debts b. Profits which come from leveraging purchasing volumes for better price discounts c. Company profits compared with competitors d. The amount of sales needed to have the equivalent profit impact as a dollar of cost savings e. The extent to which a company has "leverage" over customers by being able to command price premiums (and so make more profit)

d. The amount of sales needed to have the equivalent profit impact as a dollar of cost savings

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

e. All of the above

Example(s) of purchased materials that directly affect the customer experience is/are: a. Car-seat material b. Blister packaging for electronics c. Cloth for a sweatshirt d. The plastic bag holding the cereal inside the box e. Both A and C

e. Both A and C

What is purchasing's primary impact on the income statement (upper) portion of the strategic profit model? a. Sales revenue b. S&A costs c. Taxes and interest d. Cash and receivables e. COGS

e. COGS

What is one trend that has helped to make purchasing strategic? a. Consulting b. Drop-shipping c. Activity-based Costing d. Cellular manufacturing e. Outsourcing

e. Outsourcing

What happens if sales revenues stay flat? a. ROA cannot change b. Inventory will stay flat c. Gross profit will fall d. Fixed assets will skyrocket e. Purchasing can still increase ROA through cost savings

e. Purchasing can still increase ROA through cost savings

What is the total cost of buying, using, and disposing of an item called? a. Total price calculation b. Target cost of purchasing c. Maximum cost of usage d. Final cost of buying e. Total cost of ownership

e. Total cost of ownership