Chapter 4 Quiz - Supplier Relationship Management
Q: A supplier is resistant to certification. Which of the following would be the best argument to help convince the supplier to make the effort? A) Certification can improve throughput and reduce costs. B) The buyer will have lower risks for safety issues and lawsuits. C) The buyer's assertions of corporate social responsibility can be extended to the supplier. D) Certification will help with the buyer's ongoing performance evaluations.
A: A) Certification can improve throughput and reduce costs. Rationale: Certification is a benefit for the supplier if best practices can improve throughput and reduce costs, which will increase profits. The other arguments are primarily benefits for the buyer. For more information, see Module 2, Section B, Chapter 4, Topic 2
Q: Which is the best definition of strategic sourcing? A) Developing and managing ongoing supplier relationships to ensure meeting the organization's needs B) Implementing a process for recurring transactions with single suppliers C) Using technology to select low-cost, high-quality sources of materials D) Finding suppliers who can provide materials at the lowest cost
A: A) Developing and managing ongoing supplier relationships to ensure meeting the organization's needs Rationale: The APICS Dictionary, 16th edition, partially defines strategic sourcing as "a comprehensive approach for locating and sourcing key material suppliers, which often includes the business process of analyzing total-spend-for-material spend categories. There is a focus on the development of long-term relationships with trading partners who can help the purchaser meet profitability and customer satisfaction goals." For more information, see Module 2, Section B, Chapter 4, Topic 1
Q: Which benefit of supplier certification is more advantageous for the suppliers than for the customers? A) Helps market existing capabilities B) Helps with selection and ongoing performance evaluation C) Helps build trust and share information D) Helps safeguard consumers and users of products and services
A: A) Helps market existing capabilities Rationale: Supplier certification benefits suppliers by helping market existing capabilities, in addition to other benefits such as providing access to a wider market and demonstrating commitment to partnership. For more information, see Module 2, Section B, Chapter 4, Topic 2
Q: Which of the following is true of ISO standards in relation to supplier certification? A) ISO certification must be renewed every three years. B) ISO performs registration and supplier audits on a rotating three-year cycle. C) Standards are reviewed at least every three years, and some are withdrawn. D) Conformance to ISO standards requires registration every three years.
A: A) ISO certification must be renewed every three years. Rationale: ISO certification must be renewed every three years. Standards do not require registration. They are reviewed at least every five years. The ISO does not perform registration or supplier audits. For more information, see Module 2, Section B, Chapter 4, Topic 2
Q: What is true of strategic sourcing? A) It is collaborative. B) It never crosses the boundaries that distinguish two business entities. C) It is transactional. D) It increases the visibility of the supply chain less than traditional purchasing can.
A: A) It is collaborative. Rationale: Traditional purchasing sees each purchase as a discrete transaction, and adversarial relationships can occur as organizations fight over prices and other demands. Strategic sourcing involves ongoing relationships. There is opportunity for collaboration between the purchaser and the supplier that can result in improving profitability for both parties and adding value to the final product or service. For more information, see Module 2, Section B, Chapter 4, Topic 1
Q: Which is true of ISO certification? A) It is voluntary. B) Each standard relates to a specific industry only. C) Older standards may be out-of-date. D) ISO offers registration or certification services.
A: A) It is voluntary. Rationale: ISO certification is voluntary, but, if it is obtained, it must be renewed every three years to remain valid. For more information, see Module 2, Section B, Chapter 4, Topic 2
Q: Inventory status, capacity status and plans, production schedules, and shipment and demand forecasts are all shared by all parties on a real-time, online basis. This best exemplifies which of the following distinctions between traditional purchasing and strategic sourcing? A) Limited visibility versus entire supply chain visibility B) Boundary-specific versus realigned work processes and workflows C) Landed cost versus total cost of ownership D) Transactional versus collaborative purchasing
A: A) Limited visibility versus entire supply chain visibility Rationale: When information from suppliers, manufacturers, distributors, retailers, and customers is available for analysis, there is enhanced visibility of the supply chain and opportunities for improvement. Demand information, inventory status, capacity status, capacity plans, production schedules, promotion plans, shipment forecasts, and demand forecasts are all shared and ideally can be accessed by all parties on a real-time, online basis. For more information, see Module 2, Section B, Chapter 4, Topic 1
Q: Which of the following companies is most likely to be interested in supplier relationship management (SRM)? A) Paint manufacturer that purchases chemicals and dyes from various suppliers B) Credit card company C) Company that performs market research for political candidates D) Company that produces video games
A: A) Paint manufacturer that purchases chemicals and dyes from various suppliers Rationale: Companies whose ability to meet customer demands rests on their control over the supply side of the supply chain model will be most interested in SRM. The other companies are primarily concerned with understanding and responding to customer needs and expectations. For more information, see Module 2, Section B, Chapter 4, Topic 1
Q: A local supplier is selected as a supply partner over an international supplier who had a lower total cost of ownership. An audit reveals that the supplier was given more weight for being local. Which of the following would make this weighting valid? A) The weight is based on the organization's corporate social responsibility policy. B) The weight is based on landed cost rather than total cost of ownership. C) The weight is based on the lower cost of transportation offsetting the higher price. D) The weight is based on the shorter lead times available from local suppliers.
A: A) The weight is based on the organization's corporate social responsibility policy. Rationale: If an organization's corporate social responsibility policy requires that more weight be given to local suppliers to support a decision to reinvest in the local community, then the use of such weighting is valid. The other answers are incorrect because the total cost of ownership already factors in transportation costs and lead time differences, and it is a more complete version of landed cost. For more information, see Module 2, Section B, Chapter 4, Topic 2
Q: Which of the following activities would hinder implementation of a supplier relationship management (SRM) strategy? A) Conducting a pilot study based only on a discrete portion of the organization's activities B) Delaying training and corporate communication of the strategy until after pilot program results are identified C) Developing a trading partner agreement to define deliverables and allowing it to be revised if problems occur D) Performing a Pareto analysis of all suppliers as the basis for strategy formulation
A: B) Delaying training and corporate communication of the strategy until after pilot program results are identified Rationale: All those affected by the SRM strategy should be informed and trained before the program is piloted. For more information, see Module 2, Section B, Chapter 4, Topic 2
Q: Rather than choosing the least expensive component for its computers, an electronics manufacturer factors in the costs of reverse logistics. This best exemplifies which of the following distinctions between traditional purchasing and strategic sourcing? A) Limited visibility versus entire supply chain visibility B) Landed cost versus total cost of ownership C) Boundary-specific versus realigned work processes and workflows D) Transactional versus collaborative
A: B) Landed cost versus total cost of ownership Rationale: There is a distinction between landed cost and total cost of ownership. For example, a manufacturer of electronics may choose a component based on the lowest price, but that choice may not translate into low cost if the low-priced components are not reliable and fail early. For more information, see Module 2, Section B, Chapter 4, Topic 1
Q: An organization has completed certifying its key suppliers. Which of the following can be used to confirm if the organization is obtaining the returns it was expecting from its investment? A) Joint quality planning B) Supplier quality rating C) Certification registration D) Contract deployment
A: B) Supplier quality rating Rationale: The certification process and/or a benchmarking system may be used to reevaluate suppliers periodically. This will confirm if the organization is obtaining expected returns and identify new ways to improve the process. As supplier reviews are conducted, the organization must ensure that the supplier is maintaining the levels of performance expected and take corrective action if the supplier has fallen below certification standards. For more information, see Module 2, Section B, Chapter 4, Topic 2
Q: For smaller or less market-dominant organizations, which of the following would best ensure that suppliers are complying with ethical standards? A) Require suppliers to audit their own compliance using their employees. B) Use third-party auditors agreed to by both parties. C) Perform auditing of suppliers using one's own employees. D) Inform suppliers of potential sanctions and enforce them.
A: B) Use third-party auditors agreed to by both parties. Rationale: Sanctions may be less effective for less dominant partners. Employing third-party auditors that both parties agree to can be one way for less dominant partners to perform monitoring and enforcement that seems fair. For more information, see Module 2, Section B, Chapter 4, Topic 2
Q: When supplier relationship management (SRM) increases the visibility of the entire supply chain, it benefits SRM participants in which of the following ways? A) Lowers the number of required distributors B) Reduces customer service calls C) Enables faster response and better contingency planning D) Simplifies market segmentation
A: C) Enables faster response and better contingency planning Rationale: Increased supply chain visibility can lessen the bullwhip effect and enable early problem detection, faster response and better contingency planning, and stronger relationships because of increased trust. For more information, see Module 2, Section B, Chapter 4, Topic 1
Q: Which of the following statements about the supplier certification process is correct? A) All potential suppliers should go through the certification process. B) Criteria should be adjusted to individual suppliers' capabilities. C) Suppliers should be clearly informed of certification process criteria. D) Certification is a supplier selection tool only.
A: C) Suppliers should be clearly informed of certification process criteria. Rationale: To achieve certification's highest potential, companies must clearly communicate what they will be measuring and how. Criteria should be consistent from one supplier to the next. The outcome can be used not only for selection but also for supplier improvement. Companies usually opt to pursue the certification process only with actual or key suppliers. For more information, see Module 2, Section B, Chapter 4, Topic 2
Q: Which is true of supplier selection? A) Modern supply chain thinking requires using new technology to select all suppliers on an exchange to get the lowest price. B) In a modern supply chain, ideally no supplier relationship should remain at arm's length. C) Supply chain sourcing considers how a supplier's products could affect the organization's reputation. D) Traditional buyer-supplier relationships have complementary goals.
A: C) Supply chain sourcing considers how a supplier's products could affect the organization's reputation. Rationale: Since the organization that owns a product brand and image will be held responsible for the activities of its extended supply chain, most organizations consider how potential partners could affect their reputation. For more information, see Module 2, Section B, Chapter 4, Topic 2
Q: Which of these companies is practicing good risk management in terms of its suppliers? A) The company relies on the selection process as its means of risk management. B) The company sources a key raw material from one supplier who reliably provides the lowest price. C) The company develops detailed plans to shift work orders among several certified global suppliers in the event of labor disruptions in their countries. D) The company requires in its contracts that all suppliers use a defined third-party transportation provider for all shipments.
A: C) The company develops detailed plans to shift work orders among several certified global suppliers in the event of labor disruptions in their countries. Rationale: Single sourcing of a key material or component is not a good example of risk management, even if the supplier is the lowest-cost provider. Good risk management may involve additional costs incurred through maintaining redundancy in the supply chain and requiring additional supplier performance or assumption of risk. For more information, see Module 2, Section B, Chapter 4, Topic 2
Q: If an organization owning a brand is looking to establish an ongoing relationship with a supplier but does not desire an alliance, it should: A) consider the lowest total cost of ownership as the only selection criterion. B) use online open market bidding to find the lowest-cost supplier with fast lead times. C) establish prices, discounts, and delivery timing cooperatively. D) use hard negotiations to win low prices, discounts, and lead times.
A: C) establish prices, discounts, and delivery timing cooperatively. Rationale: Supply chain thinking requires a strategic view of sourcing that focuses on the long-term success of all partners along the chain. Pricing, discounts, delivery timing, and related matters can be established cooperatively, taking into account the needs of supplier and buyer. The emphasis is on establishing ongoing relationships or alliances rather than simply making a series of transactions, pitting suppliers against one another to drive down prices. In addition to lowest total cost of ownership, organizations must also consider the effect of the supplier on their reputation. For more information, see Module 2, Section B, Chapter 4, Topic 2
Q: An organization is looking to help its supplier with continuous improvement. It would like to seek certification that reflects its narrow focus in a specialty field. Which of the following would be the best place to start searching for appropriate certification standards? A) Internet B) ISO series of quality management system standards C) ISO standards related to measurement and testing D) Industry-specific nonprofit association
A: D) Industry-specific nonprofit association Rationale: Because of its worldwide recognition, the ISO certification has achieved great reach. However, some industries and nonprofit organizations have created their own certification programs that more narrowly reflect the capabilities of the potential supplier. These programs tend to have more depth than ISO certification in their respective specialty. For example, engineering standards for measurement, terminology, test methods, or product specifications are quite different than the ISO series of quality management system standards. For more information, see Module 2, Section B, Chapter 4, Topic 2
Q: Which of the following statements about the role of supplier relationship management (SRM) in the supply chain model is correct? A) It focuses on gaining information about customers. B) It measures success only by satisfaction of end customers. C) It helps ensure the same profitability for all supply chain elements. D) It focuses on meeting demand.
A: D) It focuses on meeting demand. Rationale: SRM helps ensure that demand created by customer relationship management (CRM) can be fulfilled in a manner profitable for all supply chain partners while maintaining customer satisfaction. The success of supplier relationships may be measured by various means, including time-to-market, cost efficiency, competitive advantage, and end customer satisfaction. For more information, see Module 2, Section B, Chapter 4, Topic 2
Q: Which of the following is the primary measurement of whether a supplier certification process is valid? A) Supplier procedures should be in conformance with relevant ISO standards. B) Supplier procedures should be efficient enough to meet the organization's price requirements. C) Supplier procedures should be effective in meeting the organization's needs. D) Supplier procedures should be related to the customer's requirements.
A: D) Supplier procedures should be related to the customer's requirements. Rationale:
Q: Which of the following is correctly associated with supplier relationship management (SRM)? A) Provides fuller communication without actual integration B) Philosophy that should be applied equally to all suppliers C) Tool to align the customer voice with the product produced D) Way to ensure mutual profitability while meeting marketplace needs
A: D) Way to ensure mutual profitability while meeting marketplace needs Rationale: SRM focuses on the supply side of the supply chain to ensure that customer demands can be met with a high degree of satisfaction but also with mutual profitability for all suppliers. Relationships using SRM are marked by a high degree of integration of processes and even information systems. SRM may not be appropriate in relationships with all suppliers but rather with suppliers considered key partners in maintaining the supply chain. For more information, see Module 2, Section B, Chapter 4, Topic 1