SCM - Chapt. 9 Quiz Questions

Which of the following statements regarding outsourcing arrangements is best?

A traditional buyer would probably do a nice job with a routine or contractual outsourcing relationship.

Company A outsources a business function to Company B, a turnkey provider. Company B could be described as an Arm's Length supplier that is performing minimal services for Company A.

FALSE. Company B, the turnkey provider, performs everything for Company A as far as the outsourced business function is concerned.

A reverse marketing campaign should be conducted when a company wants to bring an outsourced item back inside.

FALSE. Reverse marketing describes the search for a suitable supplier for something a company wishes to outsource.

One strategic risk of outsourcing is that the firm may find itself subject to short term price fluctuations.

FALSE. Short term price fluctuations are a tactical risk.

Strategic items and processes are best suited for an arm's-length relationship as to spread risk.

FALSE. Strategic items are best suited for a solutions integrator/full-service solution provider.

Which of these statements about core competencies is best?

Most companies that are industry leaders build their core competencies around a handful of essential skills.

Outsourcing relationships must be managed as any other business function. One relationship type, the committed relationship, is based on the knowledge that a great deal of resources and efforts have been devoted to the arrangement. Which type of outsourcing arrangement would be well-suited for a committed relationship?

Solutions integrator

Insourcing is not an unusual process.

TRUE

Most of the outsourcing that occurs is to save money.

TRUE

An effective risk mitigation strategy for the outsourcing firm is to establish a contractual agreement with the outside entity.

TRUE.

Most companies that outsource business processes do so for the same reasons that they would outsource parts.

TRUE.

Outsourcing has potential risks associated with it that can be classified as strategic or tactical. Which of these risks should be classified as tactical?

There may be hidden transaction or management costs.

Damron has decided to focus on its core competency of trailer design and outsource production, transportation, and warehousing. In order to find a suitable outsourcing partner, the president of Damron should flip open the yellow pages and look under:

Third Party Logistics.

NGW Company has decided to outsource production of a key component to another company located in the adjacent state. This outsourcing arrangement could be described as:

contract manufacturing

A very specific, limited good or service is outsourced to a(n):

niche provider.

Regardless of the type of outsourcing relationship that is best, there should be some type of:

ongoing supplier evaluation and feedback.

A government agency plans to move an operation to an outside supplier; it is engaged in:

privatizing.

The top priority for most outsourcing decisions is to:

reduce operating costs.