SCM 371 Purchasing: EXAM 1

What is inventory pooling?

-> act of holding safety stock in a single location rather than multiple locations (Inventory can reduce the costs of a supply disruption. To reduce your inventory investment, you may pool safety stock with firms, including rivals in your own industry)

If you are expected to reduce spend by 5% on a category where 2,500,000 is spent each year what is the amount you must save?

125,000

Once you know who the (blank) are, what (blank) them, and where you (blank), you can

??

Which of the following is not true about the balance sheet?

???

What is the suppliers overhead as a percent of labor given the following information?

??? = Overhead / Labor

A week after John started working at the bakery, it took him 2 hours to make one batch of bread. Two months later he had increased his batch making speed, taking only 45 mins to make one batch of bread. What is this scenario an example of: a. Economies of scale b. The pointer effect c. Crash Course Learning d. Learning Curve e. both a & d

??? Both. Economies of Scale and Learning Curve

You need to be financially literate as a purchasing professional because?

????? You can't always trust the numbers. Need to be aware of two other reasons you can't take the numbers at face value. -Window Dressing (making financial performance as attractive as possible while still following standard accounting practices) -Assumptions & Estimates

How can you increase your attractiveness as a customer—i.e., become a customer of choice? a. Call the supplier to ask questions b. Tell the supplier what you can do for him c. Offer a transactional relationship d. Ensure that you are a source of learning e. None of the above

???????? D. Ensure that you are a source of learning

What is a Tier 1 supplier?

A supplier who sells to you

New product development activities can impact which of the following? a. Income statement b. Balance sheet c. Profit d. COGS e. All of the above f. Only C& D e. All of the above

ALL of the above (Income statement, Balance sheet, Profit, COGS)

For high-technology processing you might look at a/n _______ process technology

AUTOMATED

There are a number of strategic choices that influence how you should select suppliers (i.e., they require that you match your selection process to your sourcing strategy). These strategic choices include: a. Size b. Location c. Buying from a rival d. Corporate Social Responsibility e. All of the above f. Only A, B, & D

All of the above (a. Size b. Location c. Buying from a rival d. Corporate Social Responsibility)

The nature of the item and process includes an assessment of which of the following? a. Complexity b. Types of materials c. Labor content d. Production processes e. All of the above f. None of the above e. All of the above

All of the above (Complexity, Types of materials, Labor content, Production processes)

You want to use data to evaluate supplier capabilities, processes and value added activities and align those with needs, processes and value added activities in order to: a. Eliminate low value added processes/activities b. Eliminate redundant processes/activities c. Modify processes/activities for better alignment d. Shift specific responsibilities where appropriate e. All of the above

All of the above (eliminate low value added processes/activities, eliminate redundant processes/activities, modify processes/activities for better alignment, shift specific responsibilities where appropriate)

Which of the following risks can have an impact on your supply chain? a. Regulations b. Port congestion c. Economic instability d. Changes in economic conditions e. All of these f. Only A & C

All of these (Regulations, Port congestion, Economic instability, Changes in economic conditions)

Which of the following supplier requests should raise a red flag regarding a supplier's financial health? a. Urgent re-pricing b. Check pickup c. Funding for capital expenditures d. Delay of cost reductions e. All of these f. Only A and B

All of these (urgent re-pricing, check pickup, funding for capital expenditures, delay of cost reductions)

Which of the following does risk identification address? e. How acceptable is the risk? c. How severe is the impact? b. How likely is the risk? d. What can go wrong? a. How are we doing?

Answer: What can go wrong? Risk ID process: 1. Identify Risk 2. Assess risk and analyze 3. Plan action 4. Implement 5. Measure, control, and monitor

Financial literacy means . . .? a. You understand assumptions and estimates of plant managers b. You can create a firm's financial statements c. You can make better decisions using financial numbers d. You can analyze and understand decisions made by other managers e. All of the above f. C and D only

C & D only (you can make better decisions using financial numbers & you can analyze and understand decisions made by other managers)

Cash comes from (and is used for) three types of activities. Which of the following does not represent one of those activities? a. Cash from Fundraising Activities b. Cash from Financing Activities c. Cash from Investment Activities d. Cash from Operating Activities

Cash from Fundraising Activities

What is the rate of change in an industry called? a. Velocity b. Clockspeed c. Efficiency d. Swiftness e. Speed

Clockspeed

What can suppliers be a source of?

Competitive intelligence, vital innovation, and defective inputs that can put your company's products at risk of being defective

The risk of price volatility can be addressed by which of the following? a. Part standardization b. Contract language c. Supplier segmentation d. Supplier selection e. Supplier monitoring

Contract Language

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

Cost

Which category is high important and high market complexity?

Critical

Given the following information, what is the supplier's "grade" for the scorecard? Supplier Scorecard Summary Criteria Weight Score (Scale 1-100) Weighted Score Quality 50% 80 Delivery 25% 80 Customer Satisfaction 15% 100 Impact 10% 80 a. 100 (A) b. 92 (A-) c. 85 (B) d. 83 (B-) e. 50 (F)

D. 83 (B-)

Which of the following is a good match between buyer and supplier for all types of buys? a. Nuisance b. Exploitable c. Development d. Core e. None of the above

D. Core

In order to perform cost modeling what do you need to understand?a. Data triangulation b. Total cost of ownership c. Key drivers d. Cost elements e. All the above f. None of the above

Data triangulation, total cost of ownership, key drivers, and cost elements (all of the above)

What are the materials that do not go directly into the product but rather facilitate its creation?

Direct materials

What might flashlight and calculator manufacturers view smartphone manufacturers as?

Disruptors

Which of the following is a poor match between buyer and supplier for all types of buys? a. Nuisance b. Exploitable c. Development d. Core e. Both A & B f. None of the above

E. Both A & B (Nuisance and Exploitable)

When solving disputes in buyer-supplier relationships, which action should be used as a last resort?

Going to court

There is a "line" for which some costs fall above and others fall below. This "line" is an important determinant of . . .? a. COGS b. Operating expenses c. Bonuses d. Gross profit e. None of the above

Gross Profit

Southwest airlines is known for which risk management strategy?

Hedging

The purchase of future contracts is also referred to as what?

Hedging

What are capital goods?

High dollar, infrequent purchases

The balance sheet helps you answer particular questions about your supplier. Which of the following is not one of those questions? a. What assumptions is the supplier making? b. Do total assets outweigh total liabilities? c. How much money is the supplier making? d. Can the supplier pay its bills? e. All of the above are found on the balance sheet.

How much money is the supplier making?

Why are price, quality, and delivery the first selection criteria criteria you should assess?

If a supplier cannot meet your needs on these, it's not worth evaluating them further

For a purchasing professional, what does "Caveat Emptor" ("Let the Buyer Beware") mean?

If the price is too low, it's possible you're buying a low quality item

Which financial statement shows you how your efforts contribute to profit? a. Cash flow statement b. Balance Sheet c. 401K d. Income Statement e. None of the above

Income Statement

Which is not one of the ways to promote ethical behavior?

Inconsistent behavior

Long lead times contribute to which risk? a. Quality risk b. Economics risks c. Risks of natural disasters d. Inventory risk e. Risk of terrorism

Inventory Risk

What's a possible disadvantage of forward buying inventory bulk?

Inventory costs will rise

What can bargaining too aggressively on price result in?

Long-term cost increases, angry and resentful suppliers, a supplier going out of business, and lower quality and innovation (all of the above)

Hurricanes Rita and Katrina are examples of which type of risk?

Natural Disaster

In a complex or uncertain buying scenario, ___________ might be the best supplier selection approach a. coin-flipping b. a reverse auction c. competitive bidding d. negotiation e. random selection

Negotiation

What will be affected if purchasing pushes a (Just In Time) JIT approach with suppliers? a. Operations and inventory management b. Sales and marketing c. R&D d. R&D and Sales e. Human Resources

Operations and Inventory Management

What's the connection between purchasing personnel and the gathering of competitive intelligence?

Purchasing personnel need to scan supply markets and work with suppliers to provide their company with vital competitive intelligence

Since WWII what has been true about purchasing?

Purchasing's strategic importance has been increasing

In which step of the risk management process do you calculate the risk exposure value?

Risk Exposure

In which step of the risk management process do you classify risks from trivial to severe? a. Risk consequence b. Risk identification c. Risk mitigation d. Risk exposure e. Risk monitoring

Risk Exposure

In which phase of the risk management process is supply chain process mapping is especially useful? a. Risk consequence b. Risk identification c. Risk mitigation d. Risk exposure e. Risk monitoring b. Risk identification

Risk Identification

Which legislation was developed in 2002 in response to several corporate scandals?

SOX (Sarbanes-Oxley)

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

Safe working conditions

Which of the following is an indirect material buy? a. Lumber for framing a house b. Whole grains for the cereal factory c. Safety goggles for the car factory d. Rubber for the sneaker factory e. Chemicals for the shampoo factory

Safety Goggles for the car factory

How might a purchasing manager influence his company's corporate social responsibility reputation?

Selecting an international supplier who pays high wages and treats employees well

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

Social Bottom Line

To define the best organizational structure and identify improvement opportunities, you should look for which of the following? a. Standardization Opportunities b. Aggregation Opportunities c. Duplication d. Supplier Performance e. All of the Above

Standardization Opportunities, Aggregation Opportunities, Duplication, and Supplier

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

Supplier's Code of Conduct

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

Sustainability and social responsibility

Like a well-managed household budget, a _____________ will help you make sure you are getting the best value for your money, time and efforts. a. Revenue matrix table b. Cost-value analysis c. High value chain d. A systematic spend analysis e. None of the above

Systematic Spend Analysis

What does it mean for a process to have diminishing returns? a. There is a limit to learning b. There is no limit to learning c. Most of your learning takes place in your later efforts d. The longer you work, the more tired you become and the task becomes easier

There is a limit to learning

You need to give the most careful attention to the price and quality on which purchased inputs?

Those that directly affect the customer's experience

What of the following is an objective of lean production? a. To reduce supply disruptions b. To become more innovative c. To eliminate waste, including to strive for zero inventory d. To mitigate the risk of global sourcing e. To aim for greater diversification

To eliminate waste, including to strive for zero inventory

In a risk heat map, which area is of most concern? a. The diagonal b. The top left corner c. The top right corner d. The bottom left corner e. the bottom right corner

Top Right Corner

What should a scorecard measure?

Trends over time, the same metrics you used to select the supplier Design your scorecard to focus on many of the same metrics you used to select the supplier in the first place (e.g., price per unit, on-time delivery, PPM defective, technical capability).

Which of the following is true about direct material purchases?

Typically largest spend category

Which conflict first brought a significant change in how purchasing was perceived?

WWII (World War 2)

What is postponement? a. Segmenting suppliers based on risk b. Ensuring careful contract language c. It is comparable to near-sourcing d. Waiting to customize a product until the last minute

Waiting to customize the product until the last minute (the delay of value-add activities until the latest possible time)

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

Your purchasing power and multiple supplier options means you can demand and get the best deals from suppliers

You've been buying a small amount of standard material from a local supplier for 20 years. The supplier factory suddenly burns down, forcing you to buy the item from a supplier halfway around the world, with whom you have never done business. What just happened?

Your routine item has probably become a bottleneck

Risk severity and risk probability can be graphically depicted using what?

a heat map (to compute the risk exposure value)

Which is not one of the conditions for a valid contract?

a. Purchase price reductions

Total cost of ownership tries to determine what it really costs to do business with a particular supplier in a particular location. What costs might be considered if you are doing business with a supplier in China? a. Transportation costs b. Cost of holding inventory c. Dutiesd. Tariffs e. Security f. All of the above g. None of the above

all of the above (Transportation costs, Cost of holding inventory, Duties, Tariffs, Security)

Which of the following is true when comparing the profit impact of sales versus purchasing efforts? a. Purchasing efforts don't impact profits b. A sales dollar is typically more impactful on profit than a dollar saved by purchasing c. Sales have no impact on profit, only on revenue growth d. Sales dollars hit the top line (revenues), purchasing savings go straight to operating profit e. They have the same impact

d. Sales dollars hit the top line (revenues), purchasing savings go straight to operating profit

Which of the following is a valuable source of supplier information? a. Current suppliers b. Personal contacts c. Directories d. Trade shows e. All of the above are sources of supplier information

e. All of the above are sources of supplier information

Single sourcing is a strategy used by some organizations. Which of the following is not a benefit of single sourcing? a. Volume consolidation b. Strategic versus transactional relationship c. Synergies between multiple suppliers benefit the buyer d. Market competition between suppliers drives down price e. Neither C nor D are benefits of single sourcing f. All of the above are benefits

e. Neither C nor D are benefits of single sourcing (Synergies between multiple suppliers benefit the buyer // Market competition between suppliers drives down price ... are NOT benefits of single sourcing)

The approval stage of supplier selection parallels draft day in which of the following ways? a. You've done your homework and know who is qualified to sell to you b. You need to pick the best available supplier c. You always pick the right supplier d. Top management joins the process for small-dollar-value buys e. None of the above—i.e., the two are not comparable f. Only A & B

f. Only A & B (a. You've done your homework and know who is qualified to sell to you b. You need to pick the best available supplier)

When draft day arrives, which of the following are appropriate ways to define the deal and get a contract signed? a. Reverse auctions b. Negotiation c. Competitive bidding d. Buying consortiums e. All of the above f. Only A, B, & C

f. Only A, B, & C (a. Reverse auctionsb. Negotiationc. Competitive bidding)

What is the environmental bottom line concerned with?

harming the environment as little as possible

To which supply chain design issue does the mantra faster, better, cheaper refer to? a. Increasing customer demands b. Increasing clockspeeds c. Greater levels of outsourcing d. Globalization e. Lean production

increasing customer demands

The economic bottom line is concerned with ______________________ .

profitability