SCM 371 Hw7,11 - 10,6 EXAM 3

How is using description by brand restrictive?

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

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.

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

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

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

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.

External failure costs are those that

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

Which costs typically remain equal for each unit?

Fixed

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

Government

Competitive bids must contain

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

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

escalator

The most sophisticated and expensive means of determining price is _

negotiation.

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.

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

operational, financial and reputational.

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.

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

target costing.

Besides the dollar value, items are considered strategic if

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

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

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

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

Individual standards

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 affect labor costs that manufacturers need to watch carefully?

Product mix Labor turnover Run sizes

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

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.

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.

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 expenditures are shown as ______ on the balance sheet.

assets

Competitive bids must contain

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

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.

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

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.

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.

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.

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

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.

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.

A challenge with MRO purchases is

keeping acquisition costs low.

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.

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.

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.

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

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

quantity, quality, service

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.

Developing standard quality assessment tools is useful with _______ services.

repetitive

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.

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

suitability.

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

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

suppliers

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

3.4

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

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

30 to 50

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.

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

70 -80

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

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

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

Overhead costs

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.

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

TRUE

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.

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.

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.

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

bidder

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.

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.

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.

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

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.

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

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.

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.

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.

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.

Modern supply chain financing helps

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

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

operational, financial and reputational.

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

salespeople

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.

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.

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.