SCM 371 FINAL EXAM

The world's leading exporter of manufactured goods is: -Germany. -the U.S. -China. -Japan. -the European Union.

China.

What actions can supply managers take to prevent identical pricing?

Choose award criteria for future bids that prevent identical bids. Encourage firm bidding policies. Allow large contracts to be broken into smaller bids. Encourage small sellers.

Which method of description is confined to certain primary materials?

Description by market grade.

True or false: Activity-based costing attempts to turn direct costs into indirect costs.

False

True or false: Price changes for parts and components are high and more frequent than raw materials.

False

_____ standards set the regulations that organizations must meet when concerning employee health and safety, environmental factors, or consumer product safety.

Government

The governing convention on shipping terms and responsibilities involved in international transportation is called: -FOB (Free on Board) terms. -EXQ (Ex Quay) terms. -FCA (Free Carrier named place) terms. -INCOTERMS (International Commercial Terms). -ITAPS (International Transport and Payment Specifications) terms.

INCOTERMS (International Commercial Terms).

Hybrid supply structures can capture the benefits of both centralized and decentralized organizational structures.

TRUE

Most organizations have maintenance, repair and operations requirements. TRUE or FALSE

TRUE

TRUE OR FALSE A company's boilerplate or framework agreement includes the complete terms and conditions that apply to any transaction.

TRUE

TRUE or FALSE One services contracting method is a Service Level Agreement (SLA) which is a document that details the means, method, organization, and processes along with material requirements.

TRUE

TRUE or FALSE Some organizations have found that when entering a new market, purchasing products and/or services, before trying to sell into the market, provides several advantages.

TRUE

The six sigma (6σ) approach to quality uses the five step methodology of: define, measure, analyze, improve, and control (DMAIC). TRUE OR FALSE

TRUE

The supply organization structure must be aligned with the corporate organization structure.

TRUE

The supply process and structure for managing indirect spend is typically different from the process and structure for managing direct spend.

TRUE

True or false: Nonrepetitive purchases must be handled on a case by case basis, this can be from small value purchasing to capital investment.

TRUE

Some operational risks in a supply chain are beyond the control of the purchaser or supplier, and some are within their control.

True

The key decisions and plans in corporate strategy address: What business are we in and how will we allocate resources among these businesses?

True

Which of the following are the disadvantages or concerns of LCC?

What the start-up costs will be. Uncertainty about the volume the machine will produce or be sued. Awareness of future costs.

Application software for the procurement process is available:

from an ERP system, a systems developer, or a cloud solution.

Lean quality management philosophy is based on: maximizing customer value. minimizing waste. statistical process control (SPC). maximizing customer value and minimizing waste. maximizing customer value, minimizing waste and statistical process control (SPC).

maximizing customer value and minimizing waste.

Lean is a management philosophy that focuses on: prevention, appraisal and internal failure costs. data to reduce variation and waste. maximizing customer value while eliminating waste. the voice of the customer. statistical quality control (SQC) techniques.

maximizing customer value while eliminating waste.

A change from a decentralized supply structure to a centralized one:

typically requires experience and skills not present in the existing structure.

This bond guarantees work will be done according to specifications, in the time specified, and if another supplier does rework or completes the order, purchasing is indemnified for these extra costs. -bid bond. -performance bond. -lien bond. -payment bond. -surety bond.

performance bond

The type(s) of procurement outsourcing contracts include:

procure-to-pay (P2P), source-to-contract (S2C) and source-to-pay (S2P).

Quotations are typically required for

purchasing that exceeds a minimum dollar amount. most governmental purchases.

ISO 9001:2015 is the international standard for _________ management.

quality

Successful negotiation relies on the ________ and ________ of planning in preparation.

quality, amount

The traditional supplier evaluation criteria are: quality, quantity, delivery, price and service. quality, quantity, delivery, price and sustainability. price and quality. price, quality and delivery. price, quality, delivery and sustainability.

quality, quantity, delivery, price and service.

External failure costs are those that

pass through the system and lead to customer warranties, loss of customers, handling complaints, and product repair.

In the outsourcing decisions in many organizations, supply has had:

relatively moderate involvement.

If the buyer does not have a clear and unambiguous description or specification and wants to find out which supplier can deliver the best value when and where needed, he or she will typically issue a:

request for proposal (RFP).

The Sarbanes-Oxley Act: -has no impact on the supply management process. -requires the Chief Purchasing Officer to sign off on every contract. -requires listing off-balance sheet items such as long-term purchase agreements. -requires supply management to report directly to the Chief Financial Officer. -affects internal accounting procedures of privately-held companies.

requires listing off-balance sheet items such as long-term purchase agreements.

Privatization is:

the term for outsourcing used in the public sector.

Which of the following statements supports single-sourcing: -there is a high probability of a devastating natural disaster. -concerns exist about supplier capacity for future volume. -there is a need to reduce dependence on a supplier. -the use of just-in-time production, stockless buying, or systems contracting. -there is volatility in the supplier market.

the use of just-in-time production, stockless buying, or systems contracting.

A zero defects quality strategy emphasizes:

"do it right the first time."

Which form of specification data requires extensive consultation and can be expensive?

Individual standards

The objectives of supply are to obtain:

the right quality materials, in the right quantity, at the right time and place, from the right source, at the right service level, and at the right price.

Besides the dollar value, items are considered strategic if

-they improve the reputation of the organization. -they allow access to new markets.

ABC analysis is an inventory categorization method which consists of dividing items into three categories, A, B, and C: A being the most valuable items, C being the least valuable ones. A items make up about ____ to _____ percent for an organization.

10 to 20

Six Sigma philosophy allows no more than defects per million opportunities.

3.4

The purchase price of a capital purchase is between _______ percent of total cost of ownership.

30 to 50

A items account for _________% of total dollar value for total corporate spend.

70 -80

How is using description by brand restrictive?

Brand specific requirements can deprive the buyer of using other suppliers.

Which costs typically remain equal for each unit?

Fixed

Three major challenges facing supply executives when setting supply strategies and objectives are:

(1) What is the effective interpretation of corporate objectives and supply objectives? (2) What is the appropriate action plan or strategy to achieve the desired objectives? and, (3) How can supply issues be identified and integrated into organizational objectives and strategies?

Some estimates place the total costs of quality to be: insignificant to the cost of the final product. 10-20 percent of the final product cost. 20-30 percent of the final product cost. 30-40 percent of the final product cost. 40-50 percent of the final product cost. Next Visit question mapQuestion 11 of 15 Total

30-40 percent of the final product cost.

How can buyers reduce supplier costs with activity-based costing?

Eliminate nonvalue-added steps. Reduce the cost drive rate. Reduce activity occurrence

Governments typically play no role in establishing prices or regulating how buyers and sellers are allowed to behave in agreeing on prices.

FALSE

In portfolio analysis, bottleneck items are characterized by high risk and high value. TRUE or FALSE

FALSE

Indirect costs can be specifically and accurately assigned to a given unit of production or a specific identifiable task performed by a service provider.

FALSE

Jidoka is a Japanese term for continuous improvement. TRUE OR FALSE

FALSE

Research has found that supply management does not play an important role in mergers, acquisitions, and divestitures.

FALSE

TRUE or FALSE: Environmental sustainability in supply chain management includes product and process issues that affect human safety and welfare, community development, and protection from harm.

FALSE

TRUE or FALSE: Commercial letters of credit (CLCs) are the least actively used structured payment instruments in global trade.

FALSE Commercial Letter of Credit is most used

Capital items are not bought in the regular course of business. TRUE or FALSE

TRUE

The costs associated with defects incurred within the system that can lead to scrap, rework, repair?

Internal failure costs

What are the two main pillars of a lean enterprise?

Jidoka, Just in time

What is used to describe the analysis of costs throughout products life including planning, design, operation, maintenance, repair, replacement, demolition as well as disposal or reuse?

Life-Cycle Costing (LCC)

What are some options for price changes?

Most-favored-customer clause Guarantee against price decline Escalator clause Price protection clause

What costs are typically indirect that are incurred during the manufacturing of a good?

Overhead costs

What costs affect labor costs that manufacturers need to watch carefully?

Product mix Labor turnover Run sizes

What is the purpose of ISO 9001:2015?

Provides standardized quality management requirements regardless of industry or size of the organization. Increased emphasis is placed on senior leadership accountability with quality and business strategies. Places a greater emphasis on assessing process inputs and outputs in regards to quality.

If identical bids are received what options do supply managers have?

Reject all bids. Call for new bids. Negotiate with one or more specific suppliers.

A payment bond protects the buyer against liens that might be granted to suppliers of material and labor to the bidder, in the event the bidder does not make proper payment to its suppliers.

TRUE

When is a description by brand desirable?

The quantity bought is so small. Specifications cannot be laid down with sufficient accuracy. The manufacturing process is secret or the item is covered by a patent.

True or false: Supply managers should not use deceptive means to get lower pricing.

True

Competitive bids must contain

a careful selection of sources. particular wording of requirements. careful bid analysis prior to awarding.

When there is a large number of common requirements across facilities or business units, and the supply base is dispersed geographically, an appropriate global sourcing structure is: -regional purchasing offices that manage the region's spend for every commodity. -a global commodity management organization. -a centralized international purchasing office equidistant from key suppliers. -a centrally managed global sourcing office located in the corporate headquarters. -a decentralized structure where purchasing managers are at each facility.

a global commodity management organization.

Outsourcing is:

a high risk venture because the costs of reversing the decision are often high.

Subcontracting refers to the practice of:

a prime contractor bidding out part of a job to another contractor.

A non-repetitive purchase, such as a $5 million piece of equipment, should be purchased by: -a project team representing supply, finance, and operations. -a permanent team representing supply, finance, and operations. -the user with a purchasing card. -a blanket order. -a procurement process or system.

a project team representing supply, finance, and operations.

Identical pricing for bids can be discouraged through: -allowing bids on parts of large contracts if bidders feel the total contract is too large. -using firm bidding without revision. -increasing the number of bidders. -allowing bids on parts of large contracts if bidders feel the total contract is too large and using firm bidding without revision. -allowing bids on parts of large contracts if bidders feel the total contract is too large, using firm bidding without revision and increasing the number of bidders.

allowing bids on parts of large contracts if bidders feel the total contract is too large and using firm bidding without revision.

Descriptions for supplies can be given using a variety of forms, supply personnels responsibility is to

alter the description as needed and provide alternatives. order as requested. verify the description and provide alternatives.

A strategy is:

an action plan to achieve specific long-term goals and objectives.

Simplification is: -essentially a technical and engineering concept. -an agreement on definite sizes, design, and quality. -a reduction in the number of suppliers providing a certain item. -an attempt to concentrate production on the most important product sizes. -an attempt to reduce conflicting information in specifications.

an attempt to concentrate production on the most important product sizes.

Linking current and future needs with current and future markets is the primary focus of:

an effective supply strategy.

Costs associated with inspection, testing, and other tasks to ensure that the product or process is acceptable is _______ costs.

appraisal

Supply may contribute to the containment of the costs of poor quality by addressing: -appraisal costs. -internal costs. -external costs. -prevention costs. -appraisal costs, internal costs, -external costs and prevention costs.

appraisal costs, internal costs, external costs and prevention costs.

Capital assets: -have an expected use of less than one year. -have little or no effect on the organization's operations. -are generally expensed. -are acquired for fairly small sums of money. -are not bought and sold in the regular course of business.

are not bought and sold in the regular course of business.

Electronic or digital signatures for contractual purposes: -are valid in very few countries. -are valid in most countries. -are legal in the European Union (EU) and apply across all boundaries. -are invalid because they cannot be authenticated with current technology. -are invalid in the U.S. because the UCC expressly prohibits them.

are valid in most countries.

A request for quotation (RFQ): -signals the purchaser has identified a supplier as a potential source of supply and asks for information. -asks the supplier to declare at what price and what terms they are prepared to supply. -permits the supplier to fit the specifications for supply to its strengths. -signals the purchaser has identified a supplier as a potential source of supply and asks for information, and asks the supplier to declare at what price and what terms they are prepared to supply. -asks the supplier to declare at what price and what terms they are prepared to supply and permits the supplier to fit the specifications for supply to its strengths.

asks the supplier to declare at what price and what terms they are prepared to supply.

Capital expenditures are shown as ______ on the balance sheet.

assets

Supply strategies that are based on changes in demand and supply are known as:

assurance-of-supply strategies.

Activity based costing attempts to correct the distortions built into product costing: -by tracking cost drivers of indirect costs and turning indirect costs into direct. -by improving the way that direct costs are allocated. -by improving the way that the learning curve is applied to direct labor costs. -by tracking cost drivers of direct costs and turning direct costs into indirect. -by capturing labor and material usage more accurately.

by tracking cost drivers of indirect costs and turning indirect costs into direct.

The most-cited reason for international trade is: -better overall value. -better quality. -more advanced technology. -lower total costs. -lower price.

better overall value.

Using or equal descriptions transfers responsibility for establishing equality to the ________.

bidder

Competitive bids must contain

careful bid analysis prior to awarding. particular wording of requirements. a careful selection of sources.

Marketing and production contracts in agriculture are used instead of ______ sales.

cash

Marketing and production contracts in agriculture are used instead of _________ sales.

cash

The ________________ refers to the time between purchasing the raw materials used to make a product and collecting the money from selling the product.

cash conversion cycle

Deming's 14 points stress the importance of: setting numeric quotas. using slogans and targets for the workforce as a means of improving quality. annual rating or merit systems. dual sourcing as a means of improving quality costs. ceasing dependence on inspection.

ceasing dependence on inspection.

In activity-based costing, overhead is divided into costs that

change in response to unit-level activities.

Which of the following is a factor in determining the validity of a contract? -competent parties. -opposing parties. -employment in the legal department. -amount over $500. -offer and counteroffer.

competent parties.

In the portfolio matrix, characteristics of goods and services in the leverage quadrant are: -few suppliers with adequate capability so substitution and switching are difficult. -item substitution is possible, switching is difficult, many suppliers are available. -item substitution and supplier switching are possible, but few suppliers are capable. -competitive supply market, substitution is possible, total cost is a primary focus. -competitive supply market, substitution is possible, price per unit is important. Next

competitive supply market, substitution is possible, price per unit is important.

High-performing cross-functional supply teams:

concentrate most of the work at the front-end of the process.

Which of the following statements supports multiple sourcing: -an ongoing long-term contract exists with a preferred supplier. -supply is plentiful and supply assurance is important. -there is a patent involved. -the order is small. -concerns exist about supplier capacity for future volume.

concerns exist about supplier capacity for future volume.

If the buyer wants to motivate the seller to manage total costs, the best type of contract is: -cost-plus-fixed-fee (CPFF). -cost-no-fee (CNF). -firm-fixed-price (FFP). -firm-fixed-price plus incentive fee (FFPIF). -cost-plus-incentive-fee (CPIF).

cost-plus-incentive-fee (CPIF).

The inability to store services: -means timing is non-critical to successful service acquisition. -makes it easier to acquire services than goods. -creates quality assurance difficulties. -facilitates supplier performance evaluation and measurement. -is of little importance at the time of supplier selection.

creates quality assurance difficulties.

When developing a negotiation strategy, the negotiator should assess the positions of strength of both (all) parties to: -decide if negotiation makes sense. -establish negotiation points. -avoid setting unrealistic expectations. -establish negotiation points and avoid setting unrealistic expectations. -decide if negotiation makes sense, establish negotiation points and avoid setting unrealistic expectations.

decide if negotiation makes sense, establish negotiation points and avoid setting unrealistic expectations.

DMAIC is the six sigma philosophy, it stands for

define, measure, analyze, improve, control.

ISO 9001: 2015: -provides common quality standards across all sectors of the United States economy. -was established by the International Supply Organization to focus quality efforts on supplier relationships. -defines the requirements a quality system must meet but does not dictate how they should be met. -was developed and first issued in the United States, and later adopted worldwide. -was designed to recognize U.S. organizations that excel in quality achievements and quality management.

defines the requirements a quality system must meet but does not dictate how they should be met.

The characteristic of a service that has the greatest impact on the ability to define, measure and control service quality is: -degree of tangibility. -nature of the demand. -monetary value of the service. -degree of repetitiveness. -direction of the service.

degree of tangibility.

The best type of inspection to use is: dependent on the nature of the purchase. 100 percent inspection. sequential sampling. continuous sampling. carried out by a commercial testing laboratory.

dependent on the nature of the purchase.

A ____ means the different methods by which the buyer communicates to the seller a clear, detailed picture of the required item.

description

Internal business partnerships between supply and other functional areas such as marketing/sales, finance/accounting, operations and engineering are:

desirable because of the interdependencies between and among functions.

When a supplier offers a lower price for a larger quantity, the buyer should: -determine the return on investment. -order according to the EOQ model. -always take the quantity discount. -never take the quantity discount. -determine the preference of senior management.

determine the return on investment.

ISO 9001:2015 defines the requirements for a quality system, but does not ________ how they should be be met.

dictate

ISO 9001:2015 defines the requirements for a quality system, but does not _________ how they should be be met.

dictate

Identical prices received from various sources should: -be expected when the specification is highly customized. -draw attention if the specification is complex or detailed. -always make the buyer suspicious of collusion. -only draw attention if the buyer is dissatisfied with the price quoted. -result in the buyer taking legal action against all bidders.

draw attention if the specification is complex or detailed.

Radio frequency identification (RFID) will:

eliminate bar coding and manual counting.

Quality improvement programs for goods are initiated by a desire to: -achieve ISO 9001 certification. -achieve ISO 14001 certification. -eliminate incoming inspection. -reduce incoming inspection. -increase prices.

eliminate incoming inspection.

A requirement typically is considered strategic if it: enhances revenue. reduces risk. provides access to new technology. enhances revenue and reduces risk. enhances revenue, reduces risk and provides access to new technology.

enhances revenue, reduces risk and provides access to new technology.

Supply strategies that are designed to anticipate and recognize shifts in the economy, organization, people, legal, government regulations and controls, and technologies are:

environmental change strategies.

A(n) _________ clause provides for either an increase or decrease in price if costs change.

escalator

Supply management's role in environmental sustainability is: -expanding because suppliers can influence the ability to achieve the goal of zero environmental impact. -expanding because purchasing has primary responsibility for specification writing. -limited because environmental issues have little impact on the acquisition cycle. -limited by the product design developed by design engineers. -limited to compliance with government laws and regulations.

expanding because suppliers can influence the ability to achieve the goal of zero environmental impact.

Public purchasers are required to award contracts to the lowest "responsible" and "responsive" bidder. This means the bidder is: -fully capable and willing to perform the work and submits a bid that conforms to the invitation for bid. -a business in the local community and submits the bid by the deadline. -a respected business in the local community and responds within 48 hours of all requests. -fully capable and willing to perform the work and responds to the bid in a timely manner. -willing to perform the work using some minority-owned sub-contractors and submits the bid by the deadline.

fully capable and willing to perform the work and submits a bid that conforms to the invitation for bid.

The ___ of a product is the noun-verb combination.

function

The _____ of a product is the noun-verb combination.

function

The ______ of a product is the noun-verb combination.

function

value =

function/cost

To avoid risk, a buyer can: -hedge in a commodities market. -require bid or performance bonds. decide not to do business in certain countries. -hedge in a commodities market and require bid or performance bonds. -hedge in a commodities market, require bid or performance bonds and decide not to do business in certain countries.

hedge in a commodities market, require bid or performance bonds and decide not to do business in certain countries.

Early supply and supplier involvement: -is seldom necessary because internal users are best suited to identify needs. -helps assure that what is specified is procurable and represents best value. -is focused on early establishment of key contractual terms and conditions. -relies on cross-functional teams to manage the buyer-supplier relationship. -is a way to encourage internal customers to regularly interact with suppliers.

helps assure that what is specified is procurable and represents best value.

Negotiation can be used to achieve

higher quality. lower pricing. faster changes to engineering specifications.

Total cost of ownership (TCO) can be used to: -highlight cost reduction opportunities. -compare suppliers in a supplier selection decision. -prepare for a negotiation. -assess the reasonableness of a supplier's prices. -highlight cost reduction opportunities, compare suppliers in a supplier selection decision, prepare for a negotiation and assess the reasonableness of a supplier's prices.

highlight cost reduction opportunities, compare suppliers in a supplier selection decision, prepare for a negotiation and assess the reasonableness of a supplier's prices.

Supply can provide an uninterrupted flow of materials, supplies and services by:

holding large inventories and standardizing capital equipment, materials, MRO and services.

When a supply-related risk exists, the supply management team should:

identify and classify risks, assess possible impact, develop a mitigation strategy, inform the chief supply officer, await instructions, and implement the directive.

Small dollar value purchase orders for MRO can be efficiently and effectively managed by:

implementing a vendor- or supplier-managed inventory system.

The authority that is necessary, usual, and proper to carry through to completion the express authority conferred, is called: -apparent authority. -implicit authority. -implied authority. -direct authority. -performance authority.

implied authority.

When the goods fit the ordinary purpose for which goods of that description are used in the trade, there is a(n): -express warranty. -implicit warranty. -warranty of title and against infringement. -implied warranty of merchantability. -implied warranty of fitness for a particular purpose.

implied warranty of merchantability.

The market approach to pricing: -means prices are set to cover direct costs, contribute to indirect costs, and attain a profit. -is the only defensible pricing mechanism for ethical companies to use. -implies that prices are set based on what the market will bear. -means that prices are adjusted regularly to ensure that the seller recoups all of its marketing costs. -implies that market analysis is the only technique that should be employed to negotiate prices.

implies that prices are set based on what the market will bear.

In international buying, the entity that makes a contract with the buyer and then buys the product in its name from the foreign supplier, takes title, delivers to the place agreed on with the buyer, and then bills the buyer for the agreed-on price, is a(n): -import merchant. -import broker. -import agent. -sales agent. -trading company.

import merchant.

Information systems technology can:

increase data accuracy and accessibility at lower cost.

A centralized supply structure is designed to:

increase the strategic focus of purchasing and supply management.

The zone of negotiation: -is the mindset that one must be in prior to initiating face-to-face negotiations. -may be positive or negative depending on the gap between buyer's and seller's objectives. -is the range of options the buyer will consider during the negotiation. -indicates the feasibility of negotiation and the likelihood of an agreement. -is perceived in exactly the same way by buyer and seller in a negotiation.

indicates the feasibility of negotiation and the likelihood of an agreement.

Costs incurred in the operation of a production plant or process, but normally cannot be related directly to any given unit of production or service provided, are called: -direct costs. -variable costs. -semivariable costs. -indirect costs. -fixed costs.

indirect costs.

When a specification is formulated by the buying organization, often on the basis of standards set by governmental or technical societies, it is called a(n): standard specification. performance standard. individual standard. market standard. customized standard.

individual standard.

According to the six sigma philosophy, if you control the _______ , you will control the ______ .

input or output

The value of materials purchased by market grade is subject to ______ to ascertain the degree of compliance.

inspection

Corporate purchasing cards are issued to:

internal customers to purchase low-dollar, high-volume goods and services.

In a contractual dispute between buyer and seller, the process of elevating the discussion from buyer and sales representative to their supervisors and up through the organization before other forms of dispute resolution are pursued. -arbitration. -mediation. -negotiation. -adjudication. -internal escalation.

internal escalation.

ISO standard help to facilitate

international trade. improved efficiency. improved quality.

Forward buying: -offsets transactions to protect against price and exchange risks. -involves purchasing for known or estimated future requirements. involves no risk for the buying organization. -is the same as speculation. -seeks to take advantage of price movements.

involves purchasing for known or estimated future requirements.

The United Nations Convention for the International Sale of Goods (CISG): -replaces the UCC as the worldwide body of law governing international trade. -should always be the preference for a buyer from the United States. -always puts the United States buyer at an advantage. -is automatically applied if both nations have adopted the CISG and there can be no exceptions. -is automatically applied if both nations have adopted the CISG unless another body of law is agreed upon in the contract.

is automatically applied if both nations have adopted the CISG unless another body of law is agreed upon in the contract.

Reverse marketing: -is when the buying organization has decided to stop making something in-house and identifies a supplier from its existing supply base. -is an aggressive, marketing-initiated, approach to finding and developing world class suppliers. -is encouraged by the rapid rate of technological change, growth in international trade, and the need to extract competitive advantage from supply chains. -requires that the marketing department in the buyer's organization fully understand the needs of supply. -is most appropriate when the product is fairly standard and available from multiple local suppliers.

is encouraged by the rapid rate of technological change, growth in international trade, and the need to extract competitive advantage from supply chains.

If a termination for convenience clause is included in a services contract: -its validity depends on whether the contract is in the private or public sector. -it is easy to determine if it is exercised in bad faith or an abuse of discretion. -it specifically identifies events that will trigger termination. -it defines what constitutes sufficient cause to terminate. -is exercised in bad faith, it may mean the termination is a breach of contract.

is exercised in bad faith, it may mean the termination is a breach of contract.

A fair price: -is the lowest price that ensures a continuous supply of the proper quality where and when needed and at which the supplier makes a reasonable profit. -is based on market conditions, and cost structure has no bearing on the determination of a fair price. -is based on the cost to produce an item or service without consideration for the supplier's profit margin. -is an amount arrived at through negotiations where the seller's price is a starting point. -is when all sellers of equal goods or services receive the same per unit price.

is the lowest price that ensures a continuous supply of the proper quality where and when needed and at which the supplier makes a reasonable profit.

A challenge with MRO purchases is

keeping acquisition costs low.

Make or buy and insourcing or outsourcing decisions are:

key strategic decisions.

A document which is drawn by the buyer's bank at the buyer's request, and guarantees that the bank will pay the agreed-on amount when all prescribed conditions, such as satisfactory delivery, have been completed, is called a: -bill of material. -bill of exchange. -letter of credit. -sight draft. -letter of exchange.

letter of credit.

When it comes to product liability, supply management: -lowers risk by ensuring that suppliers deliver defect-free goods. -has little or no role since this is essentially a legal action. -has responsibility only to the internal customer, not the final customer. -is liable depending on the type of warranty agreed to in the contract. -is responsible for establishing the cost of the actual damage.

lowers risk by ensuring that suppliers deliver defect-free goods.

The degree of tangibility can be used in strictly service organizations, with no tangible goods, by setting standards for

machine qualification. personnel training.

The total cost of ownership with capital assets includes

maintenance and repair costs. yield. operating and downtime costs.

One of the most fundamental and critical decisions in any organization is, should we:

make or buy the needed good or service?

Contracts are beneficial for farmers to

manage price and production risks. produce specialty plants with relative pricing. smooth the flow of commodities to processing plants.

In a contract for services, a key personnel clause: -legally cannot be included because work assignment is the responsibility of the service provider. -is undesirable from the buyer's perspective because on-going negotiations are a better way to ensure the best personnel are assigned throughout the contract. -should always be included no matter the nature of the service. -may be included if success depends on specific individuals. -is desirable from the supplier's perspective to ensure that the buyer cannot demand personnel changes mid-contract.

may be included if success depends on specific individuals.

Invoice clearance and payment procedures:

may be streamlined with an invoiceless system within an e-procurement system.

A supplier's references: should always be in the same industry as the buying organization. should be ask closed-ended (yes-no) questions. may be useful if they are of similar size and objectives as the buyer's organization. are never completely trustworthy and therefore of little use. are useful only to confirm factual information.

may be useful if they are of similar size and objectives as the buyer's organization.

Decision trees: -may be useful in making effective supplier selection decisions the first-time a buying decision is made, but not on repetitive purchases. -may be useful in making effective supplier selection decisions if probabilities of success and failure are assessed for each option. -may be useful in making effective supplier selection decisions when making repetitive purchases, but not special, one-time purchases. -are of limited value because options can only be evaluated qualitatively, not quantitatively. -cannot reflect past decisions so they are useless as a decision tool when making repetitive purchases.

may be useful in making effective supplier selection decisions if probabilities of success and failure are assessed for each option.

When dealing with an international supplier, a knowledgeable buyer: -will normally attempt to negotiate a cost-plus-incentive-fee contract. -may decide to deal in international currency options. -will attempt to price in euros. -will normally price in the currency of the seller's country. -will always state the price in U.S. dollars.

may decide to deal in international currency options.

Assessment of a potential supplier's financial situation: -is best left to the finance department which will alert supply to any issues that might adversely affect a pending deal. -may yield substantial opportunities for negotiating favorable terms for both buying and selling organizations. -seldom relies on financial information provided by the supplier. -is always necessary and follows a strict protocol no matter what type of purchase or dollar value. -is usually unnecessary because it is highly unlikely that a supplier will go out of business, and, even if they do, it is relatively easy to replace a supplier.

may yield substantial opportunities for negotiating favorable terms for both buying and selling organizations.

In portfolio analysis, the goal when purchasing leverage items is to: -assure supply. -assure continuous supply at lowest total cost of ownership. -minimize acquisition time and cost, and price per unit. -assure quality at expected levels. reduce or eliminate customization.

minimize acquisition time and cost, and price per unit.

In portfolio analysis, the goal when purchasing noncritical or routine spend is to: assure quality at expected levels. minimize price per unit. minimize acquisition time and cost. reduce or eliminate customization. assure continuous supply at lowest total cost of ownership.

minimize acquisition time and cost.

Quality control in services is: more difficult for standardized services delivered by low-skilled workers. performed exactly the same for small, medium, and large service providers. more difficult for customized services delivered by highly skilled workers. especially difficult if the service is a combination of tangible and intangible. most easily done on the buyer's premises after the service is delivered.

more difficult for customized services delivered by highly skilled workers.

A ___ ____ _____clause is a contractual arrangement between vendor and customer that guarantees the customer the best price the vendor gives to anyone.

most favored customer

When using performance or function specification as a method of description: -it is fairly easy to ensure that suppliers are quoting for exactly the same material or service. -the opportunity exists to purchase identical requirements from several sources. -it is easy to compare quotations and the supplier cannot include a risk allowance in the price. -most of the risk is borne by the buyer. -most of the risk is borne by the supplier.

most of the risk is borne by the supplier.

About 70 percent of the opportunity for value improvement lies in: -supplier selection and contract negotiations. -evaluation of potential suppliers and supplier selection. -identification and evaluation of potential suppliers. -specification and identification of potential suppliers. -need identification and specification.

need identification and specification.

The greatest opportunity to affect value in the purchasing process is when:

needs are recognized and described.

The most sophisticated and expensive means of determining price is _

negotiation.

Which one of the following is NOT one of the six major supply strategy areas:

new-product development strategies.

A purchasing approach to minimize the acquisition costs and rely on competition to keep prices low is best suited for: bottleneck items. strategic items. leverage/commodity items. noncritical/routine items. bottleneck items and strategic items.

noncritical/routine items.

The Sherman Antitrust Act states that suppliers: -must adjust price so that profit does not exceed a set percentage of direct costs. -use standard grade descriptions in advertising products. -not talk with competitors about price. -meet competition by adjusting price. -must sell the same item, in the same quantity, to all customers at the same price.

not talk with competitors about price.

Direct spend is:

of greater importance in manufacturing companies than in service companies.

Modern supply chain financing helps

offer small to medium sized organizations capital. eliminate a potential barrier to global sourcing.

When one condition of a countertrade agreement is that government and/or military-related exports be purchased, this is called: -pure barter. -mixed barter. -co-production. -offset arrangement. -buyback.

offset arrangement.

Commercial bribery: -is outlawed in very few countries. -often flourishes although it is outlawed in almost every country in the world. -is outlawed throughout the West, but not in Asia. -legal rulings rest on the doctrine of promissory estoppel. -usually involves only one company offering bribes.

often flourishes although it is outlawed in almost every country in the world.

Small suppliers: are most suited for large dollar value "A" requirements. usually represent very low risk to the purchaser. tend to have a strong financial base. tend to have an extensive management structure. often provide the greatest responsiveness and flexibility.

often provide the greatest responsiveness and flexibility.

Overall, the objectives of supply management focus on:

operational and strategic issues.

Supply chain risk can be classified as: operational. financial. reputational. operational and financial. operational, financial and reputational.

operational, financial and reputational.

Supply chain risks may be: -operational. -financial. -reputational. -operational and financial. -operational, financial and reputational.

operational, financial and reputational.

When a team decides that a task or function currently performed by company employees is a noncore competency, the team is likely to recommend:

outsourcing.

Traditional criteria for supply management are: -quality, quantity, delivery and cost. -quality, quantity, price and service. -quality, quantity, delivery, price and specification. -quality, quantity, delivery, price and service. -quality, quantity, delivery and cost and quality, quantity, price and service.

quality, quantity, delivery, price and service.

The organization needs to be categorized under the traditional value proposition are evaluated under the criteria of

quantity, quality, service

Outsourcing of services is:

realistic if service requirements and quality expectations can be clearly defined.

Traveling requisitions are used for:

recurring requirements and standard parts.

Blanket purchase orders:

reduce costs by decreasing the number of purchase orders issued.

In portfolio analysis, the goal when purchasing bottleneck items is to: assure quality at expected levels. reduce or eliminate customization. assure lowest total cost of ownership. minimize acquisition time and cost. minimize price per unit.

reduce or eliminate customization.

Making the procure-to-pay (P2P) process as seamless as possible can:

reduce order cycle times and improve satisfaction of internal customers and suppliers.

Developing standard quality assessment tools is useful with _______ services.

repetitive

The three options for soliciting business from potential suppliers are:

request for quotation (RFQ), request for proposal (RFP) and request or invitation for bid (RFB or IFB).

Manufacturers typically rely on ______ for purchasing parts, components, and packing.

salespeople

Electronic data interchange (EDI) provides:

secure transmission, greater accuracy and shorter process cycle time for all data.

Supply professionals can monitor performance with MRO acquisitions and

select suppliers. identify needs. develop contracts

A sampling technique that is based on the cumulative effect of information that every additional item in the sample adds as it is inspected is called: random sampling. 100 percent testing. cumulative sampling. sequential sampling. additive testing.

sequential sampling.

A flaw that results in loss of consumers or a lower customer satisfaction level is a

service defect.

Items for which prices may be fixed or variable, by the job or by the hour, day, or week are called: -raw and semi processed materials. -parts, components, and packaging. -maintenance, repair, and operating supplies. -capital assets. -services.

services.

SA8000 certification is for: -quality management. -logistics management. -social sustainability. -environmental sustainability. -management of innovation.

social sustainability.

Under U. S. product liability law, relevant product defects are: -sourcing defects, design defects, and manufacturing defects. -sourcing defects, manufacturing defects, and marketing defects. -design defects, specification defects, and manufacturing defects. -design defects, manufacturing defects, and marketing defects. -specification defects, sourcing defects and marketing defects.

sourcing defects, design defects, and manufacturing defects.

Purchases categorized as leverage items in portfolio analysis have the following characteristic(s): -standard specification or commodity-type items. -switching suppliers is difficult. supplier technology is important. -standard specification or commodity-type items and supplier technology is important. -standard specification or commodity-type items, switching suppliers is difficult and supplier technology is important.

standard specification or commodity-type items.

The question: "How can supply and the supply chain contribute effectively to organizational objectives and strategy?" is a key question in:

strategic supply management.

The match between a commercially available material, good or service and the intended function is known as: quality. best buy. suitability. reliability. functionality.

suitability.

Buyers have the benefit of extended payment terms that can be a burden for _____.

suppliers

The ratio of purchased material and services costs compared to total costs or total income has a major influence on:

supply's reporting level in the organization.

Strategies designed to make available the knowledge and capabilities of supply chain members to others in the buying organization are called:

supply-chain-support strategies.

Normally, most organizational objectives can be summarized as:

survival, growth, financial, and sustainability.

When developing strategies related to "how to buy," decisions must be made about:

systems and processes.

Which tool will focus everyone in the organization on cost management: learning curve. negotiation. activity based costing. portfolio analysis. target costing.

target costing.

Online reverse auctions have been most effective when:

technological, logistical and commercial specifications are clear.

Acceptance of goods occurs when: -the buyer behaves as if the seller no longer owns the goods. -the buyer fails to reject after a reasonable opportunity to inspect. -the goods have been in possession of the buyer for 30 days. -the buyer behaves as if the seller no longer owns the goods and the buyer fails to reject after a reasonable opportunity to inspect. -the buyer behaves as if the seller no longer owns the goods, the buyer fails to reject after a reasonable opportunity to inspect and the goods have been in possession of the buyer for 30 days.

the buyer behaves as if the seller no longer owns the goods and the buyer fails to reject after a reasonable opportunity to inspect.

When sourcing offshore: -the buyer should learn about the culture, customs, norms, taboos, and history of the supplier's country. -differing cultural and social norms will have little impact since most businesspeople are accustomed to working with North Americans. -the need for personal space is generally the same in most regions of the world. -the global availability and use of email, fax, and phone has largely eliminated communication barriers. -the buyer should immediately establish an informal first-name basis with the supplier's representatives.

the buyer should learn about the culture, customs, norms, taboos, and history of the supplier's country.

Portfolio analysis is: -a method of multiple sourcing. -a method of identifying substitute materials. -the categorization of spend map based on the risks to acquire in the marketplace and value. -a method of multiple sourcing and the categorization of spend map based on the risks to acquire in the marketplace and value. -a method of multiple sourcing, a method of identifying substitute materials and the categorization of spend map based on the risks to acquire in the marketplace and value.

the categorization of spend map based on the risks to acquire in the marketplace and value.

Sustainability is: -the combination of environmental and social performance. -the ability to sustain economic prosperity through long-term relationships with key suppliers. -the ability to sustain long term bottom line growth with a stable supply base. -a supply base that meets requirements and protects the natural environment. -the achievement of economic prosperity for the company and its shareholders, while avoiding environmental litigation.

the combination of environmental and social performance.

The learning curve is based on: -the difficult to prove the premise that more training leads to lower costs. -the assumption that labor will never forget how to do something. -the common principle that one becomes more proficient with experience. -a direct relationship to overhead costs. -an indirect relationship to direct material costs.

the common principle that one becomes more proficient with experience.

Noncore competencies of an organization are typically:

the first things to be outsourced to access supplier expertise.

Which of the following would encourage countertrade? -excess foreign exchange. -readily available credit. -a well-developed domestic economy. -a strong base of suppliers. -the need to develop export markets for new products.

the need to develop export markets for new products.

The degree of purchasing centralization is reflected by:

the percentage of spend managed or controlled by corporate supply.

A U.S. buyer may be discouraged from sourcing offshore if: -unemployment is high in the U.S. -the political situation in the country of interest is questionable. -the supplier offers lower overall costs. -there are few domestic sources. -popular opinion in the U.S. is against it.

the political situation in the country of interest is questionable.

The size and activities of the supply function in a single business unit organization will depend on:

the size of the company and the nature of the company's business.

An organization may decide to continue to produce a good or service in-house rather than outsource:

to control the quality of customer service and to reduce risk.

The legal authority of a salesperson normally is: -the same as that of a buyer. -to solicit orders and get ratification and acceptance from his or her employer. -to make legally-binding contracts for $500 or less. -to make legally binding contracts for sales over $500. -based on the length of time the salesperson has been employed.

to solicit orders and get ratification and acceptance from his or her employer.

The process of attempting to determine all cost elements such as acquisition price, purchasing administration, follow-up, expediting, inspection and testing, rework, scrap, downtime, lost sales and customer returns is called: activity-based costing. total cost of ownership. target costing. competitive bidding. learning curve.

total cost of ownership.

The logistics activities most frequently outsourced are:

transactional, operational and repetitive.

Currently, organizations tend toward buying rather than making.

true

Pareto analysis usually reveals that 70-80 percent of transactions account for 10-15 percent of spend.

true

Some of the reasons an organization may decide to make rather than buy are: greater supply assurance, stringent quality requirements, and very small quantity requirements.

true

The increase in outsourcing has resulted in an increase in the percentage of revenue paid out to suppliers.

true

Special economic zones of China (SEZs): -are located in Hong Kong. -use tax and business incentives to attract foreign investment and technology as a means of supporting economic growth. -allow foreign and domestic trade and investment to be conducted, with the authorization of the Chinese central government. -are located in Hong Kong and use tax and business incentives to attract foreign investment and technology as a means of supporting rapid economic growth. -are located in Hong Kong, use tax and business incentives to attract foreign investment and technology as a means of supporting rapid economic growth and allow foreign and domestic trade and investment to be conducted, with the authorization of the Chinese central government.

use tax and business incentives to attract foreign investment and technology as a means of supporting economic growth.

Most direct costs are: -overhead costs. -general and administrative costs. -fixed costs. -variable costs. -semivariable costs.

variable costs.

Most direct costs are ________.

variable.

An example of an external failure cost is: returns to suppliers. warranty costs. lost labor. scrap and rework costs. returns to suppliers and lost labor.

warranty costs.

When developing supply strategies, the supply manager must determine:

what to make or buy, when to buy, how much to buy and how it should be ordered.