SCM 425 Procurement Exam one (ch 1, 2, 3, 4, and 5)

As a purchasing professional, you should spend a lot of time managing routine buys. True or False?

False

Capital goods are small, frequently purchased, low-dollar buys. True or False?

False

A factory buying a new computer for the accounting department is making a direct material purchase. True or False?

False, it is an indirect capital material

A 70% learning curve is more productive than a 90% learning curve. True or False?

True

Buying a larger quantity than you need to get a price break might cause additional problems, so do this with caution. True or False?

True

Not all buys are created equal; you should spend more time and effort on some purchases than others. True or False?

True

The purchasing process consists of four key steps: need communication, supplier selection, transaction management, relationship management. True or False?

True

To identify the right organizational structure for your firm, which of the following needs to be done? a Spend analysis b. Spend documentation c. Firm documentation d. Firm spending e. None of the above

a Spend analysis

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)? a. 3 seconds b. 15 seconds c. 80 seconds d. 90 seconds e. 17 seconds

a. 3 seconds

Which of the following is true about direct material purchases? a. Are typically the largest spend category b. Are intangible c. Go into the income statement as SG&A expenses d. Do not go into the final product e. Are frequent, small-dollar buys scattered over a geographically dispersed area

a. Are typically the largest spend category

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 pressures are so intense that most companies tend to lean more towards a centralized sourcing structure? a. Cost b. Management c. Supplier d. Customer e. Stockholder

a. Cost

______________________ was developed by the European Commission in order for companies to evaluate, report, and improve their environmental performance. a. EMAS b. ISO 14001 c. FSC Certification d. ISO 26001

a. EMAS

President Obama issued an Executive Order in 2009 that all new contracts federal agencies sign are "green." To which bottom line does this refer? a. Environmental bottom line b. Social bottom line c. Both economic and social bottom lines d. None of the above

a. Environmental bottom line

When solving disputes in buyer-supplier relationships, ________________ should be used as a last resort? a. Going to court b. Open communication c. Mediation d. Arbitration e. Putting yourself in the shoes of the supplier

a. Going to court

Maintaining business professionalism in all communications, including social media, relates to which ISM standard for supply management? a. Impropriety b. Influence c. Reciprocity d. Sustainability and social responsibility e. Responsibility to your employer

a. Impropriety

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? a. Information exchange b. Recommendations c. Requests d. Ingratiation e. Threats

a. Information exchange

Just-in-time is related to which other principle? a. Lean production b. Outsourcing c. Globalization d. Greater competition e. More complex supply chains

a. Lean production

The ___________________ is based on the simple idea that the time it takes to perform a task decreases as you gain experience with the task. a. Learning curve b. Scale economies c. Operating procedures d. Logistics e. All of the above

a. Learning curve

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? a. Personal benefits b. Power benefits c. Product benefits d. Process benefits e. Profit benefits

a. Personal benefits

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

Dividing suppliers into different groups based on the risk they pose to a company is referred to as what? a. Supplier segmentation b. Supplier selection c. Supplier monitoring d. Supplier auditing e. Supplier site visits f. Both A and D

a. Supplier segmentation

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? a. Suppliers are complex b. Customers are demanding c. Competition is fierce d. Purchased goods account for up to 80% of COGS

a. Suppliers are complex

_______ powers the centralized sourcing structure. Because everything happens in one central location, you know what your spend looks like. a. Visibility b. Coherence c. Reliability d. Interdependency e. Adjacency

a. Visibility

The economic bottom line is concerned with ______________________ . a. profitability b. safe working conditions c. fair wages d. harming the environment as little as possible e. supporting diverse suppliers

a. profitability

A CMS can help assure that contractual terms are adhered to primarily by its __________________________. a. structure and resulting visibility into your company's contracts b. greater efficiency in processing purchase orders c. enhanced knowledge of the competitive landscape d. ability to better interface with suppliers

a. structure and resulting visibility into your company's contracts

The _______________________________ translates the company's ethical stance into supplier requirements. a. supplier's code of conduct b. environmental bottom line c. sarbanes-Oxley Act d. eco-Management and Audit Scheme e. general public

a. supplier's code of conduct

What is your biggest fear with a bottleneck item? a. The price will never change b. A supply disruption c. Too many potential suppliers d. Your customers will hate it e. The technology is too standardized

b. A supply disruption

What is the main pressure that purchasing professionals feel from internal customers—especially senior management—when making purchasing decisions? a. Selecting qualified suppliers b. Cutting costs c. Working with other departments d. Creating contracts e. Switching between suppliers

b. Cutting costs

Thomas Friedman's best-selling book The World is Flat was primarily concerned with what? a. Sustainability b. Globalization c. Innovation d. Global warming e. International conflict

b. Globalization

What is the environmental bottom line concerned with? a. Fair wages b. Harming the environment as little as possible c. Profitability d. Safe working conditions e. Supporting diverse suppliers

b. Harming the environment as little as possible

______________________ is a family of standards that provides guidance to companies on how to structure their processes so as to minimize harmful effects on the environment. a. EMAS b. ISO 14001 c. FSC Certification d. ISO 26001

b. ISO 14001

Understanding that when suppliers are also customers may not be a problem if the customer/supplier is the best source relates to which ISM standard for supply management? a. Impropriety b. Influence c. Reciprocity d. Sustainability and social responsibility e. Responsibility to your employer

b. Influence

How does purchasing add value to operations? a. Constant supplier switching keeps operations on its toes b. Lowers costs by choosing suppliers with reasonable prices and high quality c. Choosing highest-cost supplier ensures best quality of delivered material d. Purchasing can shield operations from bad news about the supply market, so morale stays high e. Purchasing adds no value to operations; these are separate functions

b. Lowers costs by choosing suppliers with reasonable prices and high quality

What is unauthorized buying by non-purchasing personnel called? a. Outlaw spending b. Maverick spending c. Illegal spending d. Forbidden spending e. Frozen spending (because it's put on "hold" until a purchasing manager clears it)

b. Maverick spending

External spend, as a fraction of total cost, has increased for most companies. Which risk does this impact the most? a. Inventory risk b. Quality risk c. Transit loss risk d. Risk of natural disasters e. Economics risks

b. Quality risk

What is the form of competitive bidding where suppliers bid on the contract on-line in real-time? a. Internet playoff b. Reverse auction c. Virtual free-for-all d. Timed bid event e. Web contest

b. Reverse auction

Based on Toyota's experience, ____________________ should be an important consideration in a thorough spend analysis. a. Supplier-customer partnership b. Risk assessment c. Negotiation d. Sourcing strategy e. All of the above f. A and C Only

b. Risk assessment

_______________ are the cost advantages that come with larger-scale production. a. Learning effects b. Scale economies c. Operating procedures d. Logistics e. All of the above

b. Scale economies

The process for making spend visible is called? a. Spend analysis b. Spend documentation c. Firm documentation d. Firm spending e. None of the above

b. Spend documentation

As a buying agent, whose "best interest" should you have in mind? a. Your own best interest b. Your employer's best interest c. The supplier's best interest d .The sales representative's best interest e .Society's best interest

b. Your employer's best interest

As a buying agent, whose best interest should you have in mind? a. Your own best interest b. Your employer's best interest c. The supplier's best interest d. The sales representative's best interest e. Society's best interest

b. Your employer's best interest

The social bottom line is concerned with ______________________ . a. profitability b. safe working conditions c. making money d. harming the environment as little as possible e. ensuring your supplier's environmental sustainability

b. safe working conditions

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)? a. 7 seconds b. 20 seconds c. 80 seconds d. 90 seconds e. 70 seconds

c. 80 seconds

After Toyota's production ground to a halt following a devastating fire, what allowed them to make up for all the lost production in only 6 months? a. An extremely lean supply chain b. Only having 4 hours of inventory on hand c. A strong relationship and interdependence with Aisin d. Brand recognition

c. A strong relationship and interdependence with Aisin

Several conditions have to be met in order to have a valid contract. Which is not one of these conditions? a. An offer b. An acceptance of the offer c. Absence of mutual assent d. Legal subject matter e. Consideration

c. 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

c. Almost all ethical standards apply to all companies

What PO is used for recurring purchases and covering a longer period of time? a. Transactional PO b. Longitudinal PO c. Blanket PO d. Transfer PO e. Extended PO

c. Blanket PO

When a contract is cancelled because the supplier violated contract terms, the buyer may cancel the contract. What is this type of cancellation called? a. Cancellation for convenience b. Cancellation by mutual consent c. Cancellation for default d. Cancellation for inconvenience e. Cancellation for nonpayment

c. Cancellation for default

Which of the following is probably a high importance buy for Starbucks Coffee? a. Aprons for the baristas b. Holiday jazz CDs c. Coffee beans d. In-store pumpkin spice advertisements e. Toilet paper

c. Coffee beans

Which of the following statements is false? a. There is a high level of apathy toward supply risk management b. Most companies do not quantify risks when outsourcing production c. Companies are well versed in supply chain risk management d. Risk management is a challenging domain in need of more attention e. Many companies do not have a risk management plan in place

c. Companies are well versed in supply chain risk management

What does a CMS help users ensure? a. Contracts are kept as flexible as possible b. Contracts are never breached c. Contractual guidelines are followed d. Milestones are never missed e. Purchasing managers can keep their job f. All of the above

c. Contractual guidelines are followed

Which of the following is not one of the four steps top-notch sales people use to close a deal and keep customers happy? a. Determine perceptions b. Define the buying center c. Cultivate authoritative presence d. Evaluate motivations e. Assess sources of power

c. Cultivate authoritative presence

What type of sourcing organizational structure is known for distributing control to individual plants or business units? a. Centralized b. Localized c. Decentralized d. Outlandered e. External

c. Decentralized

What happens in sales & operations planning? a. The sales force tells operations what to do b. Operations tells the sales force what to do c. Diverse functions come together to forecast how much the company will sell, and how much it needs to make d. Sales and operations make plans without inputs from any other function e. Government regulators present limits on sales and operations activities

c. Diverse functions come together to forecast how much the company will sell, and how much it needs to make

The objective of ___________________ is to promote the sustainable management of the world's forests by the provision of certifications. a. EMAS b. ISO 14001 c. FSC Council d. ISO 26001

c. FSC Council

Which category is high-importance, but low market complexity? a. Critical b. Routine c. Leverage d. Bottleneck e. Exploitable

c. Leverage

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? a. Location b. Visibility c. Proximity d. Compatibility e. Adjacency

c. Proximity

Understanding that when suppliers are also customers may not be a problem if the customer/supplier is the best source. Which ISM standard for supply management discusses this reality? a. Impropriety b. Influence c. Reciprocity d. Sustainability and social responsibility e. Responsibility to your employer

c. Reciprocity

Which of the following is not one of the advantages of a decentralized sourcing structure? a. More responsive to local needs b. Better understanding of local requirements c. Reduces leverage d. More effective use of local suppliers e. Better risk assessment and response

c. Reduces leverage

The tragedy that happened at one of Apple's suppliers, Foxconn, in 2010, when several workers committed suicide, calls importance to which bottom line? a. Economic bottom line b. Environmental bottom line c. Social bottom line d. Both economic and social bottom lines e. None of the above

c. Social bottom line

You can acquire services from Dun & Bradstreet to help do a better job with which of the following? a. Hedging b. Near-sourcing c. Supplier monitoring d. Postponement e. Contract language f. All of the above

c. Supplier monitoring

What can contract management software help ensure? a. That suppliers produce 100% good quality b. That we are never unhappy with the supplier c. That the benefits negotiated for the contract are taken advantage of d. That the lowest costs are negotiated e. That no conflicts with the supplier will occur

c. That the benefits negotiated for the contract are taken advantage of

Why should purchasing personnel pay better attention to MRO purchases? a. Better quality safety goggles can increase productivity over 100% b. The top cause of workplace accidents is poorly-sourced MRO supplies c. When combined, MRO purchases often represent a large dollar spend d. MRO items are always bought by the maintenance department, and someone's got to keep an eye on those guys e. They shouldn't - MRO purchases are a waste of time

c. When combined, MRO purchases often represent a large dollar spend

The strength of a CMS lies in it having a __________________. a. single strategy for all contracts b. dual strategy for all contracts c. central repository for all contracts d. limited view into all contracts e. cumbersome reporting capability f. All of the above g. A and B only

c. central repository for all contracts

Companies use standards and certifications like EMAS, ISO 14001 and FSC to ensure supplier compliance on _________________________________. a. global issues b. social issues c. environmental issues d. risk management issues e. political issues

c. environmental issues

Although most spend documentation looks backward to see what has been purchased, you should be proactive and match future spend to _______, _______, and _______ plans. a. market, spending, and cost b. technology, saving, and investing c. product, market, and technology d. growth, purchasing, and product e. eating, sleeping, and playing

c. product, market, and technology

The __________________ cannot be ascertained from any single source—even at the category level. a. organizational structure b. agreements c. total spend d. capacity strategy e. none of the above

c. total spend

Which of the following are significant downsides to a centralized sourcing structure? a. Creates distance between decision makers b. Reduces flexibility c. Instills silo mindset d. All of the above

d. All of the above

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. e. They are not particularly challenging to buy - it's actually quite easy.

d. All of the above.

Which of the following is characteristic of a high importance buying category? a. You spend a lot of money on this purchased input b. There are many suppliers who want to sell you this input c. The input has a large impact on customer experience d. Both A & C e. None of the above

d. Both A & C

Which category is low-importance, but high market complexity? a. Critical b. Routine c. Leverage d. Bottleneck e. Exploitable

d. Bottleneck

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 d. CMS can be costly to implement e. CMS enhances the monitoring of your contracts

d. CMS can be costly to implement

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

d. CMS can be costly to implement

In managing internal relations, what is your main role as a purchasing professional? a. Determine the lowest cost to procure necessary company supplies b. Act as the gatekeeper to ensure only the best materials are bought c. Initiate the process by finding out what the needed components are d. Figure out how to work with and influence the members of the buying center e. All of the above

d. Figure out how to work with and influence the members of the buying center

_____________ is not a commonly used environmental certification in supply management? a. EMAS b. ISO 14001 c. FSC Certification d. ISO 26001

d. ISO 26001

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

d. Inconsistent behavior

Which of the following is not one of the advantages of a centralized sourcing structure? a. Standardization b. Duplication c. Talent development d. Increased bureaucracy e. Economies of scale

d. Increased bureaucracy

Which documents must agree for the triple-match? a. PO, requisition, receiving report b. PO, requisition, bill of materials c. PO, invoice, bill of materials d. PO, invoice, and receiving report e. PO, invoice, requisition

d. PO, invoice, and receiving report

How do internal customers formally communicate their needs to purchasing? a. Invoice b. Packing slip c. Purchase order d. Purchase requisition e. Receiving report

d. Purchase requisition

For more specific feedback and understanding of how internal customers perceive purchasing performance, purchasing professionals should ask about what two dimensions? a. Purchasing's services and purchasing's benefits b. Purchasing's people and purchasing's reliability c. Purchasing's problem resolution and purchasing's feedback d. Purchasing's services and purchasing's people e. None of the above

d. Purchasing's services and purchasing's people

In order to identify key influencers, purchasing professionals need to be able to assess personal power. Which of the following is not one of the five sources of power? a. Reward b. Coercive c. Legitimate d. Reliant e. Expert

d. Reliant

Spreading fixed costs out over a larger number of products, reducing the cost per unit is called? a. Program management b. Performance measurement c. Order management d. Scale economies e. None of the above

d. Scale economies

Not tolerating corruption in any of its forms, including extortion and bribery, relates to which ISM standard for supply management? a. Impropriety b. Influence c. Reciprocity d. Sustainability and social responsibility e. Responsibility to your employer

d. Sustainability and social responsibility

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

The environmental bottom line is concerned with ______________________ . a. profitability b. safe working conditions c. fair wages d. harming the environment as little as possible e. supporting diverse suppliers

d. harming the environment as little as possible

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? a. Scale economies b. Learning effects c. One-time design changes d. None of the above e. A & B only

e. A & B only

Where can you look for information on potential suppliers? a. Your company's database and salesforce b. Industry contacts c. Supplier directories and trade magazines d. The Internet e. All of the above

e. All of the above

What is/are potential conflict(s) between purchasing and marketing? a. Purchasing may fail to inform marketing/sales about a supplier change which results in a product change. b. Marketing may fail to inform purchasing of a product change in a timely manner. c. Purchasing personnel develop competing marketing plans which are presented to top management for review, angering marketing personnel. d. There are no conflicts--i.e., these functions face in opposite "directions" - purchasing upstream to suppliers, marketing downstream to customers. e. Both A & B

e. Both A & B

If the buyer is a major shareholder of the supplier, this could be indicative of which unethical situation(s)? a. Sharp business practices b. Accepting small gifts c. Bribery d. Collusion e. Conflict of interest f. All of the above g. C and E only

e. Conflict of interest

Which of the following is NOT a step in the "Four-Step Process to Understand Internal Customers"? a. Assess sources of power b. Evaluate motivations c. Define the buying center d. Determine perceptions e. Develop better customer feedback f. None of the above; i.e., they are all steps in the process

e. Develop better customer feedback

What's a possible disadvantage of forward-buying inventory in bulk? a. Prices will be better when buying in bulk b. There will be plenty of stock when needed c. You'll be ready for an unexpected upsurge in customer demand d. There are no disadvantages to forward buying e. Inventory costs will rise

e. Inventory costs will rise

Which of the following is not contributing to an increased emphasis on risk management? a. Globalization b. Outsourcing c. Faster clockspeeds d. Increasing customer demands e. None of the above; that is, they all contribute to the increasing importance of risk management

e. None of the above; that is, they all contribute to the increasing importance of risk management

What is purchase price variance? a. The difference in "regular" and "holiday" pricing b. The difference in the real price and what you think is fair c. The difference in the price at the store, and what you can buy it for online d. How fast the price goes up over a six-month period e. The price difference between the amount that you pay a supplier to buy a product and the budgeted price for the product

e. The price difference between the amount that you pay a supplier to buy a product and the budgeted price for the product

Which of the following would suggest a highly complex buying market? a. Many suppliers who fight for your business b. The purchased input is a highly standardized item c. Your company is very large and sophisticated compared to any potential suppliers d. The risks of buying this input are low e. The technology of the purchased input is constantly changing

e. The technology of the purchased input is constantly changing

Which two tactics can be considered as coercive? a. Threats and requests b. Information exchange and recommendations c. Ingratiation and promises d. Requests and ingratiation e. Threats and promises

e. Threats and promises

Which is not one of the principles underlying the Institute for Supply Management's standards for ethical behavior? a. Loyalty to your decisions b. Value for your employer c. Loyalty to your actions d. Loyalty to your profession e. Value for the supplier f. A and C only

e. Value for the supplier

What is one challenge in buying capital goods? a. They don't cost much, so you get no credit for buying them well b. You are constantly buying them, it's hard to keep up c. They don't last very long d. You spend very little time planning the acquisition of a capital good e. You often need to speak "engineering" and understand complex specifications

e. You often need to speak "engineering" and understand complex specifications

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? a. Your delivery pipeline just got shorter b. You've just encountered a major technological shift c. You now have less risk in your supply market d. Quality will definitely decrease e. Your routine item has probably become a bottleneck

e. Your routine item has probably become a bottleneck