Chapter 7 Quiz - Linkages between CRM and SRM

Q: Which of the following is a true prerequisite for developing collaborative relationships central to supply chain strategy? A) Auditable information exchange to share knowledge, not just data B) Allowing employees to manage the relationship rather than the firm's leaders C) The most advanced communications hardware and software D) Sharing some benefits but none of the burdens of collaboration with partners

A: A) Auditable information exchange to share knowledge, not just data Rationale: Auditable information exchange and technology for connectivity should allow sharing of knowledge, not mere data. The required technology itself may not have to be the most powerful, but it must be compatible to allow information exchange. For more information, see Module 2, Section B, Chapter 7, Topic 3

Q: Which of the following is not a component of quality as defined by APICS? A) Degree of customer satisfaction with product price B) Absence of defects C) Degree of customer satisfaction with product features D) Degree of customer satisfaction with product characteristics

A: A) Degree of customer satisfaction with product price Rationale: Quality, as defined by the APICS Dictionary, 15th edition, has two major components—quality of conformance...defined by the absence of defects, and quality of design...measured by the degree of customer satisfaction with a product's characteristics and features. For more information, see Module 2, Section B, Chapter 7, Topic 3

Q: Into which of the following categories would a precision spring for an expensive clock fit if it was the key component that made the clock tell time reliably and needed to be of exacting dimensions and quality? A) Direct/core competency material B) Bottleneck material C) Leveragable material D) Commodity material

A: A) Direct/core competency material Rationale: A material that is of both high strategic importance and high supply chain difficulty due to its complexity and need for low variance would be a core competency or direct material. These items must be produced in-house or through as close a partnership as possible. For more information, see Module 2, Section B, Chapter 7, Topic 3

Q: A firm that has always claimed that it has the best processes and highest quality has recently suffered losses. They dictate these processes to their long-term Asian suppliers, but several of the suppliers have, without any explanation, recently had a string of cost and quality problems. Which of the following would best help this firm resolve its problems? A) Increase visibility with the suppliers and allow the suppliers to suggest processes that work for them. B) Find new suppliers who can follow the firm's process more closely. C) Move production so that it is once again performed correctly in-house. D) Enforce the provisions of the suppliers' contracts through litigation.

A: A) Increase visibility with the suppliers and allow the suppliers to suggest processes that work for them. Rationale: Cultures tend to be egocentric and thus tend to resist external collaboration. They feel that their ways are the best ways of doing things and will often reject a different way without even considering it. Culture conflicts are increased when each company relies on its own sources of information and is unable to see the impact of its choices on other areas of the network. When companies don't see the negative results of their actions, they can't learn from their mistakes. Increasing visibility will correct some of these problems. For more information, see Module 2, Section B, Chapter 7, Topic 3

Q: Which of the following statements about a trading partner agreement between strategic partners in a supplier relationship management (SRM) strategy is correct? A) It should be mutually beneficial for both partners. B) It is not subject to standard strategic goal metrics. C) It should be standardized for all suppliers. D) It is crafted only after a carefully conducted pilot program.

A: A) It should be mutually beneficial for both partners. Rationale: A trading partner agreement is a long-term contract between partners that should be mutually beneficial. It may be customized, should precede pilot and full implementation, and should always be measured for improvement. For more information, see Module 2, Section B, Chapter 7, Topic 2

Q: Which of the following does not describe suboptimization? A) It's the amount of unusable warehouse space shared by supply chain partners. B) It can also apply to transportation activities. C) It occurs when supply chain partners focus on their own respective gains. D) It can include a loss of investments by supply chain partners when planning is not coordinated.

A: A) It's the amount of unusable warehouse space shared by supply chain partners. Rationale: Suboptimization occurs when supply chains are not truly connected at the planning level and each partner in the supply chain works to maximize its own profits or to increase other measures at the expense of the other partners. When this occurs despite the recommendations of a holistic optimization tool, it is a double loss, because the investment in global planning is being put to waste. The term also applies to transportation activities. For more information, see Module 2, Section B, Chapter 7, Topic 3

Q: Which of the following is a good example of a virtual organization? A) Strategic alliance of four companies to develop a new drug under one company's name B) Merger of two competitors to capture a majority of market share C) Company that sells products only through online means D) Raw materials supplier that agrees to be a contingent supplier

A: A) Strategic alliance of four companies to develop a new drug under one company's name Rationale: A virtual organization is a short-term alliance between independent organizations in a potentially long-term relationship to design, produce, and distribute a product. Organizations cooperate based on mutual values and act as a single entity to third parties. For more information, see Module 2, Section B, Chapter 7, Topic 3

Q: What level of communication would be expected in a successful small business still run with paper versions of the general ledger and with purchase orders once a month by telephone and is asked by its most important customer to accept EDI orders? A) Transactional with information sharing B) Shared processes and partnership C) Backward integration D) Linked competitive vision and strategic alliance

A: A) Transactional with information sharing Rationale: The small business is just starting to build teh relationship with the customer. Currently it is nothing more than purely transactional. For more information, see Module 2, Section B, Chapter 7, Topic 3

Q: Companies outsourcing customer relationship management (CRM) should: A) develop an exit strategy. B) transfer responsibility for CRM to vendors as a contractual obligation. C) encourage vendors to establish their own performance standards that will be meaningful to their own resources and culture. D) consider outsourcing core competencies.

A: A) develop an exit strategy. Rationale: The company outsourcing CRM should be the one to define the performance standards against which the vendor will be measured at regular intervals. CRM, after all, remains the responsibility of the outsourcing business, since these are their customers. These businesses should also maintain an exit strategy in case the relationship with the CRM vendor falters. For more information, see Module 2, Section B, Chapter 7, Topic 2

Q: The fifth step in the process for creating and maintaining a customer-centric business (monitor, measure, and report) displays what characteristics? 1)It is based on measures arising from ongoing customer contact. 2) It is an event that should be performed at least annually. 3) It involves continuous research. 4) It is iterative. A) 1 2 4 B) 1 3 4 C) 2 3 4 D) All of the above

A: B) 1 3 4 Rationale: Step 5 in the customer relationship management (CRM) model involves constantly learning more about customers and the way they prefer to do business, researching continuously, and documenting what is working and not working. It is iterative, based on the measures arising from ongoing customer contact and exchange. For more information, see Module 2, Section B, Chapter 7, Topic 3

Q: Which of the following is true of collaborative relationships in the supply chain? A) Incompatible hardware or legacy systems remain a barrier to collaboration despite new integration tools. B) Companies will always have a good reason to treat competitors in a different class from other types of supply chain members. C) Power-based relationships place long-term gains ahead of short-term results. D) The most technologically advanced supply chain partner will determine the level of supply chain development for the network.

A: B) Companies will always have a good reason to treat competitors in a different class from other types of supply chain members. Rationale: Competitors can often find a way to collaborate with each other for mutual gain, but since each competitor is actively trying to gain market share from the other, the relationships should be kept at arm's length to ensure fairness, and extra caution must be devoted to sharing information. Companies may pretend to embrace collaboration when they really only want access to information for their own benefit. Companies will always have a good reason to treat competitors warily. Incompatible hardware or legacy systems are no longer a barrier to collaboration because of new integration tools. For more information, see Module 2, Section B, Chapter 7, Topic 3

Q: A manufacturer is developing a new product. It will use a new manufacturing process, and this makes it difficult for both the manufacturer and the supplier to accurately estimate costs. The manufacturer and the supplier have a strong, long-standing relationship. What type of contract would be most appropriate for this situation? A) Cost-plus contract B) Cost-based contract C) Cost-plus-fixed-fee contract D) Firm fixed-price contract

A: B) Cost-based contract Rationale: A pure cost-based contract minimizes the risk for the supplier because cost overruns are charged to the customer. These types of contracts might be appropriate when it is impossible for either party to accurately assess costs in advance and there is a level of trust between the partners. Such contracts need to be audited regularly to ensure that all costs charged are reasonable and appropriate. For more information, see Module 2, Section B, Chapter 7, Topic 2

Q: A channel master or nucleus firm is finding that many of its current partners have begun to look for ways of bypassing the firm, while others are performing redundant functions that cause unnecessary competition among supply chain members. Which of the following is a likely cause of this behavior? A) Weakest collaborative links becoming bottlenecks B) Exploitation of power-based relationships C) Working with competitors as peers D) Individual incentives conflicting with organizational goals

A: B) Exploitation of power-based relationships Rationale: Power-based relationships occur where a channel master or nucleus firm dictates the terms of the relationship to the other members. While its profits increase, other members of the network may suffer losses. When this occurs, the disadvantaged partners may rebel. Resistance may result in redundancy, loss of overall profitability for the chain, or an actual reversal of the power relationship. For more information, see Module 2, Section B, Chapter 7, Topic 3

Q: A company's product is basically a cheap but branded plastic toy that doesn't require much quality. Which would be a type of material that is tightly linked to the company's brand equity? A) Commodity materials B) Leveragable materials C) Direct/core competency materials D) Bottleneck materials

A: B) Leveragable materials Rationale: Leveragable materials are of high strategic importance but of low supply chain difficulty, so they are key areas where supply chain leverage can be applied to increase efficiencies and lower costs. For more information, see Module 2, Section B, Chapter 7, Topic 3

Q: According to Jordan Lewis, author of Partnerships for Profit, which of the following could be a negative indicator when selecting a potential strategic partner? A) The firm is focused on production of seasonal merchandise. B) The firm's management is not introspective. C) The firm does not have similar product lines. D) The firm wants to share administrative costs.

A: B) The firm's management is not introspective. Rationale: A potential strategic partner should be interested in learning more about itself and increase its desire to be more flexible in the partnership. This includes sharing its insights and key learning with your company. Alliances where that can occur yield a wealth of information that can be used by both organizations. (The other statements could actually be positive indicators for a potential partner.) For more information, see Module 2, Section B, Chapter 7, Topic 3

Q: Increased customer visibility means: 1 making most customers profitable in the first year of contact. 2 knowing what each customer values. 3 being aware of each point of contact between the customer and the business. 4 seeing the transaction from the customer's viewpoint. A) 2 3 B) 1 3 4 C) 2 3 4 D) All of the above

A: C) 2 3 4 Rationale: Increased customer visibility is a benefit of customer relationship management (CRM) in that CRM helps businesses to see each point of the purchasing transaction from the customer's perspective and to understand what the customer needs and values. For more information, see Module 2, Section B, Chapter 7, Topic 3

Q: A buyer uses its market dominance to insist upon cost reductions from its suppliers, offering nothing in return. It gives suppliers a week to comply and threatens to terminate contracts. Which of the following could a supplier do to preserve its contract and already narrow profit margins? A) Take a hard line and threaten the buyer with a grassroots boycott effort if it doesn't relent. B) Work to be friends with the buyer by making all price concessions and lay off employees to stay in business. C) Ask for more time to study the problem and present an alternative that could help both parties. D) Haggle and compromise to find even a small amount of reduction in its demands or for a small amount of additional business.

A: C) Ask for more time to study the problem and present an alternative that could help both parties. Rationale: While it may not be possible to get the buyer to agree to more time to study the problem, it may be better to cease being a supplier to this buyer if the buyer will not agree to even look at alternative methods for mutual profitability. Inventing options for mutual gain could result in a mutually profitable alternative that the buyer will see as a benefit despite not getting all of its desired concessions. For more information, see Module 2, Section B, Chapter 7, Topic 2

Q: What can an organization leverage in order to enable customers and suppliers to participate in product development? A) Customer relationship management (CRM) only B) Supplier relationship management (SRM) only C) CRM and SRM together D) Neither SRM nor CRM

A: C) CRM and SRM together Rationale: CRM and SRM collaboration can include enabling customers or suppliers to participate in product development. When working with customers, this can involve focus groups for large customer segments and partnerships with larger clients or customers. For suppliers, this may consist of including supplier representatives in product design. For more information, see Module 2, Section B, Chapter 7, Topic 1

Q: What contract term specifies how orders will be placed? A) Performance criteria B) Order requirements C) Delivery requirements D) Payment terms

A: C) Delivery requirements Rationale: Delivery requirements should specify dates, locations, and conditions such as how orders will be placed, how a product is to be protected during shipment, what modes of shipping are to be used, minimum or maximum orders, and the like. For more information, see Module 2, Section B, Chapter 7, Topic 2

Q: Which is true of contract elements? A) Price per unit may be specified, but spare parts require a separate contract. B) Transfer of ownership is governed by international commercial terms, so there is no need to specify Incoterms® trade terms in a contract. C) Delivery requirements can specify exactly how to protect a product during shipment. D) Payment terms are negotiated by finance and are not part of a supplier contract.

A: C) Delivery requirements can specify exactly how to protect a product during shipment. Rationale: Delivery requirements are a type of contract element. They specify dates, locations, and conditions such as how orders will be placed and how a product should be protected during shipment. For more information, see Module 2, Section B, Chapter 7, Topic 2

Q: Once a collaborative partnership has been formed, which of the following should be avoided? A) Sharing information with external parties and internal staff B) Striving for equity in profits C) Maintaining existing incentives from each of the respective firms D) Identifying and holding each party accountable for specific contributions

A: C) Maintaining existing incentives from each of the respective firms Rationale: The managers of both firms need to work together from the start: sharing information with external parties and with internal staff, modifying incentives to match collaborative goals, enforcing agreements by departments and staff, stabilizing pricing and ordering, and improving operations. For more information, see Module 2, Section B, Chapter 7, Topic 3

Q: Which of the following best defines a virtual organization? A) Separate entities that collaborate to design and sell intangible products and services by promoting internal competition between the partners B) Merger of separate entities with common business values and goals to gain better market position and have seamless communications C) Potentially long-term relationship between separate business entities to design products and immediately share all customer data D) Short-term tactical alliance in which partnering companies remain distinct and visible to end users but immediately share customer data

A: C) Potentially long-term relationship between separate business entities to design products and immediately share all customer data Rationale: A virtual organization is best described as an alliance of independent businesses for a potentially long-term relationship. Businesses cooperate to design, create, and distribute product (including services) based on shared values and are perceived by third parties as a single entity. For more information, see Module 2, Section B, Chapter 7, Topic 3

Q: An organization is failing to achieve its envisioned savings from its new supplier contracts and web-based ordering system, and it discovers that some employees are still using old, personally preferred suppliers. This is a failure in: A) internet-enabled sourcing. B) supplier measurement. C) compliance management. D) strategic sourcing.

A: C) compliance management. Rationale: Compliance management is emerging as a discipline equal in importance to strategic sourcing. It includes monitoring and measuring compliance and identifying off-contract purchases to uncover lost savings opportunities. For more information, see Module 2, Section B, Chapter 7, Topic 2

Q: Which is an element of contract deployment? A) Conducting a strategic supplier search B) Defining the supplier relationship management strategy C) Defining the terms and conditions of the joint venture with the supplier D) Communicating with the winning supplier

A: D) Communicating with the winning supplier Rationale: Contract deployment activities include things like communicating with the winning supplier, implementing order-to-payment procedures, and training users and suppliers on new procedures. For more information, see Module 2, Section B, Chapter 7, Topic 2

Q: An organization outsources a key activity and stays involved with the supplier, monitoring and controlling on a daily basis. The resulting quality is not what was desired, but the supplier insists that its quality is superior to that of its competitors. Which of the following is the most likely reason for this problem? A) Failure to maintain ultimate responsibility B) Failure to define quality metrics C) Failure to coordinate the activities between buyer and supplier D) Failure to establish clear performance expectations

A: D) Failure to establish clear performance expectations Rationale: Rather than failing to define quality metrics, the organizations in this scenario failed to agree on a common standard or target for those metrics. For more information, see Module 2, Section B, Chapter 7, Topic 2

Q: What is a chief customer officer (CCO) in charge of? A) Responding to customer dissatisfaction B) Assigning account managers to high-value customers C) Identifying opportunities for enhancing revenue and profit through customer interactions D) Identifying and responding to customer care opportunities

A: D) Identifying and responding to customer care opportunities Rationale: A CCO may supervise management of customer dissatisfaction, but the job entails more activities, including identifying customer touchpoints, defining and enforcing service standards, enriching the customer experience, and helping customers navigate within the organization. For more information, see Module 2, Section B, Chapter 7, Topic 3

Q: Which of the following is not a true statement about levels of collaborative intensity? A) If it's a complex process or an item with multiple parts, many contractors can form an alliance to get all the components to work together. B) If there are limited suppliers of a particular component, the firm should consider forming a strategic alliance with that supplier. C) If there is uncertainty about good or service availability, price, or quality, then the firm should form partnerships with one of more suppliers who can meet the product/service criteria. D) If there is little room for error in sourcing and the company has the internal capability, it should still form an alliance with one or more suppliers.

A: D) If there is little room for error in sourcing and the company has the internal capability, it should still form an alliance with one or more suppliers. Rationale: The primary sourcing consideration is the strategic importance of the product or service. If the company cannot afford to make mistakes in sourcing, it should produce the item in-house, even if this is more expensive, rather than having it made by an external supplier. If the company lacks internal capability, it should form an alliance with one or more firms that can make the item or perform the service. Multiple sources provide a backup. For more information, see Module 2, Section B, Chapter 7, Topic 3

Q: Which of the following is the best basis for moving to formal remedies after a supplier has been warned that it is in violation of its contract and has been given a deadline for further review? A) Results of audits constituting a legal requirement to pursue formal remedies B) Formal remedies triggered automatically by the contract C) If the supplier has not completed all changes by the deadline D) Judgment call on supplier's intent to make changes

A: D) Judgment call on supplier's intent to make changes Rationale: Contracts usually specify both incentives and penalties to ensure compliance, and it is partly a judgment call to determine when to move beyond informal to formal contract remedies. The choice may relate to a perception of the supplier's (or buyer's) intent to make changes to honor the agreement. For more information, see Module 2, Section B, Chapter 7, Topic 2

Q: Cost-effective and efficient collaboration between supply chain partners requires: A) maintaining separate decision-making structures to avoid conflicts. B) structuring communication and decision making so that conflicts do not occur. C) defining an early point at which to dissolve a troubled relationship. D) a conflict resolution model specified within the buyer-supplier contract.

A: D) a conflict resolution model specified within the buyer-supplier contract. Rationale: Forging supplier relationships represents an investment that must be protected by developing ways to identify potential and actual conflicts, resolve them without endangering the relationship, and learning from the conflict. Specifying the conflict resolution model in the contract protects both parties from excessive costs and sets expectations. For more information, see Module 2, Section B, Chapter 7, Topic 3