SCM 421 Exam 1
If costs are 80% of sales (and profit is 20%), what is the amount of extra sales needed to equal $1,500 in profit from purchasing cost savings efforts?
$7,500
After bringing in a consultant to optimize processes, your company expects to be on a 65% learning curve. The first unit will take 150 seconds. How long will it take you to produce the 550th unit (round to the next full second)?
3 seconds
What is ROA if profit margin is 5% and asset turnover is 1.7?
8.5
A new production tool is purchased that will fix quality issues as well as increase output. As the company is new to the technology, they expect to benefit from a learning curve. It takes them 200 seconds to produce the first gizmo after the new machine has been installed and they expect to be on a 90% learning curve. How long is it going to take them to produce the 415th gizmo (rounded up to the next full second)?
80 seconds
Several conditions have to be met in order to have a valid contract. Which is not one of these conditions?
Absence of mutual assent
Which of the following statements about ethics is false? a. Accepting a small gift from a supplier can be labeled as unethical b. Unethical behavior can include behavior that is completely legal c. Almost all ethical standards apply to all companies d. Purchasing is probably the function that is most prone to unethical temptation e. As a buyer, you need to be aware of potential unethical behavior by the supplier
Almost all ethical standards apply to all companies
Which of the following is not a process that must be managed in the SCOR model?
Assess
What PO is used for recurring purchases and covering a longer period of time?
Blanket PO
What is purchasing's primary impact on the income statement (upper) portion of the strategic profit model?
COGS
When a contract is cancelled because the supplier violated contract terms, the buyer may cancel the contract. What is this type of cancellation called?
Cancellation for default
Example(s) of purchased materials that directly affect the customer experience is/are:
Car-seat material and cloth for a sweatshirt
If the buyer is a major shareholder of the supplier, this could be indicative of which unethical situation(s)?
Conflict of interest
What do purchasing cost reduction efforts tend to reduce?
Costs of goods sold
Which of the following is not one of the four steps top-notch sales people use to close a deal and keep customers happy?
Cultivate authoritative presence
What is the main pressure that purchasing professionals feel from internal customers—especially senior management—when making purchasing decisions?
Cutting costs
What type of sourcing organizational structure is known for distributing control to individual plants or business units?
Decentralized
What might flashlight and calculator manufacturers view smartphone manufacturers as?
Disruptors
Which certified supplier goods can bypass inspection and go straight to storage or an assembly line?
Dock-to-Stock
The Strategic Profit Model was developed by which company?
DuPont Chemical
President Obama issued an Executive Order in 2009 that all new contracts federal agencies sign are "green." To which bottom line does this refer?
Environmental bottom line
As a purchasing professional, you should spend a lot of time managing routine buys
False
Capital goods are small, frequently purchased, low-dollar buys.
False
On the strategic profit model, purchasing can only impact operating costs and taxes.
False
Purchased goods and services are typically a very small cost category
False
Purchasing and operations are so closely aligned they rarely have conflicts
False
Purchasing has always been considered a strategic, value-added function.
False
Sales personnel have no ability to impact the Strategic Profit Model.
False
Your goal as a purchasing professional should always be to get the lowest possible price
False
In managing internal relations, what is your main role as a purchasing professional?
Figure out how to work with and influence the members of the buying center
When solving disputes in buyer-supplier relationships, ________________ should be used as a last resort?
Going to court
Which is not one of the ways to promote ethical behavior? a. Top management commitment to ethics b. Having an ombudsman c. Ethical standards and guidelines d. Inconsistent behavior e. Rotating assignments
Inconsistent behaviors
Which of the following is not one of the advantages of a centralized sourcing structure?
Increased bureaucracy
That are the materials that do not go directly into the product, but rather facilitate its creation?
Indirect materials
A supplier telling the buyer that many customers have benefited a great deal from its vendor managed inventory (VMI) services is what type of influence tactic?
Information exchange
What's a possible disadvantage of forward-buying inventory in bulk?
Inventory costs will rise
The ___________________ is based on the simple idea that the time it takes to perform a task decreases as you gain experience with the task.
Learning curve
During WWII, there was increased emphasis on purchasing's importance due to which of the following:
Material Shortages
What is unauthorized buying by non-purchasing personnel called?
Maverick spending
What are retail chains large enough to buy directly from manufacturers called?
National Accounts
Where does every dollar saved in purchasing go straight to?
Operating Profit
What will be affected if purchasing pushes a just-in-time approach with suppliers?
Operations and inventory management
What is one trend that has helped to make purchasing strategic?
Outsourcing
Which documents must agree for the triple-match?
PO, invoice, and receiving report
When making decisions, if someone decides something because it will make others like or respect them more, they are most motivated by what type of benefits?
Personal benefits
The economic bottom line is concerned with ______________________ .
Profitability
In decentralized sourcing structures, decisions are made where the work is done. As a result, you can respond more quickly and effectively to local needs, unique requirements in a region, and unforeseen events. What powers this type of structure?
Proximity
How do internal customers formally communicate their needs to purchasing?
Purchase requisition
Which of the following is true for a typical manufacturer?
Purchased inputs are about 60-80% of COGS
Which of the following is/are true about the "Clerical Era?"
Purchasing personnel "placed and chased" orders
What's the connection between purchasing personnel and the gathering of competitive intelligence?
Purchasing personnel need to scan supply markets and work with suppliers to provide their company with vital competitive intelligence
What can suppliers be a source of?
Purchasing personnel should provide competitive intelligence to suppliers b. Vital innovation c. Defective inputs that can put your company's products at risk of being defective d. All of the above-- correct
For more specific feedback and understanding of how internal customers perceive purchasing performance, purchasing professionals should ask about what two dimensions?
Purchasing's services and purchasing's people
What is a potential conflict between purchasing and R&D?
R&D specifications may limit the supplier pool to one supplier, limiting purchasing's ability to negotiate the best deal
What is the form of competitive bidding where suppliers bid on the contract on-line in real-time?
Reverse auction
Based on Toyota's experience, ____________________ should be an important consideration in a thorough spend analysis.
Risk assessment
Aggregating spend with a smaller number of suppliers drives supplier efficiencies, reducing suppliers costs and passing savings on to the customer. Where do these cost savings come from?
Scale economies and Learning effects
How might a purchasing manager influence his company's corporate social responsibility reputation?
Selecting an international supplier who pays high wages and treats employees well
The tragedy that happened at one of Apple's suppliers, Foxconn, in 2010, when several workers committed suicide, calls importance to which bottom line?
Social bottom line
To identify the right organizational structure for your firm, which of the following needs to be done?
Spend analysis
Which of the following is not one of the three facts you were asked to consider while learning how to organize purchasing to create value?
Suppliers are complex
What does it mean to say "organizational boundaries are blurred" from a purchasing perspective?
Suppliers provide innovation, not just goods and services
Which of the seven "rights" of purchasing is the most important?
The "right" supplier
Which of the following would suggest a highly complex buying market?
The technology of the purchased input is constantly changing
What is the total cost of buying, using, and disposing of an item called?
Total Cost of Ownership
A dollar saved in purchasing nearly always has a greater impact on profit than an additional dollar of sales revenue.
True
Buying a larger quantity than you need to get a price break might cause additional problems, so do this with caution
True
Not all buys are created equal; you should spend more time and effort on some purchases than others.
True
Purchased goods and services are typically a firm's largest cost category.
True
The SCOR model was created to provide a common vision of SCM for any company.
True
The purchasing process consists of four key steps: need communication, supplier selection, transaction management, relationship management
True
_______ powers the centralized sourcing structure. Because everything happens in one central location, you know what your spend looks like.
Visibility
Which conflict first brought a significant change in how purchasing was perceived?
WWII
Why should purchasing personnel pay better attention to MRO purchases?
When combined, MRO purchases often represent a large dollar spend
What is one challenge in buying capital goods?
You often need to speak "engineering" and understand complex specifications
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?
You should be making an effort to understand oil prices, since oil is a crucial input to your supply market
Which of the following is characteristic of a high importance buying category?
You spend a lot of money on this purchased input and the input has a large impact on the customer experience
As a buying agent, whose "best interest" should you have in mind?
Your employer's best interest
You've been buying a small amount of standard material from a local supplier for 20 years. The supplier factory suddenly burns down, forcing you to buy the item from a supplier halfway around the world, with whom you have never done business. What just happened?
Your routine item has probably become a bottleneck
Which of the following is a direct material?: a. Cardboard for cereal boxes b. Stamping machine in an auto-parts factory c. Copier paper d. Landscaping services for corporate headquarters e. All of the above
a. Cardboard for cereal boxes
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-- Correct
Which is not one of the conditions for a valid contract? a. Purchase price reductions b. Consideration c. Meeting of the minds d. Offer e. Legal subject matter f. Neither Consideration nor Legal subject matter
a. Purchase price reductions
Services can be challenging to buy because
a. They are intangible b. It's hard to know what you are actually getting or to evaluate quality c. They are hard to classify - can be direct or indirect d. All of the above.-- Correct
Which one of the following is not an advantage of contract management software (CMS)? a. CMS brings visibility to contracts b. CMS offers templates with which contracts can be easily generated c. CMS alerts you once contract conditions have been met—or if they haven't d. CMS can be costly to implement e. CMS enhances the monitoring of your contracts
b. CMS offers templates with which contracts can be easily generated
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
The strength of a CMS lies in it having a __________________.
central repository for all contracts
Why is a leverage item called a leverage item? a. This item is typically purchased through debt financing b. The supply market is incredibly complex c. Suppliers can basically force you to accept their terms d. Your purchasing power and multiple supplier options means you can demand (and get) the best deals from suppliers e. You spend very little money on it
d. Your purchasing power and multiple supplier options means you can demand (and get) the best deals from suppliers
What happens in sales & operations planning?
diverse functions come together to forecast how much the company will sell, and how much it needs to make
The environmental bottom line is concerned with ______________________ .
harming the environment as little as possible
Which category is high-importance, but low market complexity?
leverage
How does purchasing add value to operations?
lowers costs by choosing suppliers with reasonable prices and high quality
Although most spend documentation looks backward to see what has been purchased, you should be proactive and match future spend to _______, _______, and _______ plans.
product, market, and technology
What do return on assets (ROA) equal?
profit margin x asset turnover
The social bottom line is concerned with ______________________ .
safe working conditions
_______________ are the cost advantages that come with larger-scale production.
scale economies
The process for making spend visible is called?
spend documentation
What does the profit-leverage effect measure?
the amount of sales needed to have the equivalent profit impact as a dollar of cost savings
What is purchase price variance?
the price difference between the amount that you pay a supplier to buy a product and the budgeted price for the product
Which two tactics can be considered as coercive?
threats and promises
The __________________ cannot be ascertained from any single source—even at the category level.
total spend
It makes a lot of sense to build strategic partnerships with suppliers of critical items.
true
