SCM 421 Exam 2

Has to pay premium pricing

A customer that is exploitable...?

Distributive negotiation

A negotiation that is arm's length, adversarial, and even confrontational is called a...?

Understand a supplier's financial documents Assess the quality of the financial numbers Understand the capabilities a supplier has for preparing financial documents Assess "window dressing" that shows overly optimistic numbers

A purchaser needs to be able to...?

What if supplier quality decreases?

A sensitivity analysis allows you to perform a "What if..." analysis on a product or component cost. Which of the following is a typical "What if" scenario you should consider?

Include collection of receivables

Activity ratios

True

As a core customer you and a highly capable/desirable supplier are a good match.

Anchor

As a supply manager, by making an aggressive first offer, you can form a/n ___ which might help to drive down price

False

As an exploitable customer of routine buys you are confident in the supplier's pricing strategy.

40%

A supplier sells a spare part for $99 per unit. The net profit and selling, general, and administrative expense are a total of 15% of the selling price. Direct material costs are 20% of the selling price. The ratio of direct material costs to direct labor costs is 1.25 (for every dollar of materials, it is 1.25 dollars in labor). How much manufacturing overhead is the supplier including in the selling price?

79

Calculate the supplier score given the following parameters: Criteria Weight Score Weighted Score Price 25% 100 25 Quality 30% 50 15 Lead time 30% 80 24 Delivery 15% 100 15 Total weighted score

Price will potentially increase Factory cost will increase Manufacturing overhead will increase SGA will increase

Given an increase in manufacturing labor:

10.3

Given the following financials and a 365-day year, what is the cash-to-cash cycle? Sales: $120,357 Cost of Goods Sold: $59,468 Beginning Inventory: $7,490 Ending Inventory: $6,317 Receivables: $16,407 Payables: $13,350

-40.4

Given the following financials and a 365-day year, what is the cash-to-cash cycle? Sales: $50,002 Cost of Goods Sold: $42,068 Beginning Inventory: $1,051 Ending Inventory: $1,301 Receivables: $6,493 Payables: $11,293

$1915.20

Given the following information, what is the sum of both duties and customs fees for one container? Price paid to supplier: $630 per reel (500 foot of hose per reel) 4 reels of hose fit on each pallet Pallets per container: 10 Shipping costs: $4,600 per container to the Los Angeles Port Duties: 5.3% the value of the container Customs Fees: 2.3% the value of the container Rail transportation from LA port to Intermodal rail hub in St. Louis: $1150 (per container) Transportation from Rail hub to your company's warehouse: $900 (per container) Internal warehouse charges (receiving, stocking): $220 per pallet Quality control (pressure testing, inspections): $110 per pallet Calculate the sum of both duty and customs fees for one container.

What astonishing announcement did Adidas make in June of 2016? a. They were going out of business b. They were entering the computer business c. They reshored shoe manufacturing to Germany d. They reshored shoe manufacturing to China e. Their cost of goods sold decreased 30%

c. They reshored shoe manufacturing to Germany

True

Just because outsourcing is viable, that doesn't mean that it is your best option

Simplify, complexity

LEGO's outsourcing issues were driven by the goal of _____________ the supply chain but ended up adding ______________________ to the supply chain as they outsourced to Flextronics.

Assess whether a supplier can pay its bills when due

Liquidity ratios...?

Difficulty in performance measurement

Location attractiveness is not influenced by what?

Is a common practice among manufacturers It involves buying a product, taking it apart to see how it is made Involves an understanding of which suppliers are making key parts Helps you to better negotiate with suppliers

Reverse engineering

True

Selecting the right suppliers is your most important job?

Manage your firm's value-creation capabilities

Strategic Cost Management's most important role is to help you...?

To understand which costs are important and relevant to your firm

Strategic Positioning Analysis is important...?

False

T/F: A buy decision is also called reshoring

False

T/F: After completing a negotiation, you learn that your first offer was above the supplier's RV. This was probably a good first offer

False

T/F: Competitive bidding and negotiation are appropriate tools to help you achieve your cost goals for buys that are in the Routine quadrant of the Strategic Sourcing Matrix

False

T/F: For electronic sourcing to yield beneficial outcomes, the successful implementation of the technology is the only requirement

True

T/F: If suppliers are unwilling to bid, then negotiation is a better option than competitive bidding

False

T/F: If you are involved in an integrative negotiation, you focus on value creation and avoid value claiming at all costs

False

T/F: If you are unable to make an apples-to-apples comparison, then competitive bidding is a better option than negotiation

False

T/F: Most companies possess pricing power

Fasle

T/F: Negotiations often lead to a decrease understanding of a supplier and as a result, less cooperation

True

T/F: The outsourcing decision is really about who can do it best

False

T/F: Threats can help you move the negotiation forward whether you are ready to end the negotiation or not

Your RV and the other party's RV

The ZOPA is formed by...?

Shows what you own and owe

The balance sheet...?

Your RV

The ceiling of the ZOPA if formed by...?

Is to understand if you are managing well the prices you are paying in terms of market volatility

The goal of price analysis...?

Includes sales/revenue

The income statement...?

Benchmarking data for various commodities

The producers Price Index (PPI) is...?

New product or service introduction New suppliers have entered the market Your current supplier overpromised and is underpeforming Testing the market

Under which circumstance do you need to search for a new supplier?

There are an adequate number of suppliers that want to compete for your business

Under which of the following circumstances is competitive bidding a better option than negotiating?

f suppliers' capacity is exceeded by market demand and you buy a relatively low volume but require delivery in frequent, small quantities.f your service requirements are so high that you are causing the supplier to lose moneyIf your negotiations are so fierce that the supplier makes unprofitable concessions.

When might a supplier legitimately determine you are NOT a customer of choice?

Trusted suppliers may refuse participating in the auction

When planning for a reverse auction, which of the following should you keep in mind?

Placing purchase orders

When setting up and using a web catalogue, which of the following is not one of your primary responsibilities (i.e., as a purchasing professional)?

Identification of a suitable set of suppliers Qualification of suppliers Negotiations with suppliers Exchanging documents electronically (e.g. POs)

Which activities can be enabled by electronic sourcing?

Cumbersome processes

Which is NOT one of the benefits of an ERP system?

Information can be accessed through different modules All information is stored in one system Customizable dashboards allow continuous performance monitoring Purchasing tasks can be conducted more efficiently and effectively

Which is a benefit of an electronic sourcing application suite?

Makes communication between buyer and supplier more challenging

Which is not a characteristic of a successful supplier portal?

Demand forecasting

Which is not commonly part of an electronic sourcing application suite?

Supplier performance measurement and management

Which module in a sourcing application suite helps you keep up-tp-date with supplier information?

They are like a stress test They include debt to equity and times interest earned They help you determine if a supplier is exposed to too much debt

Which of the following accurately describes leverage ratios?

Purchasing Payment collections Risk management Design of products

Which of the following activities can be sourced?

Development and Core

Which of the following are a good match for strategic buys?

United States and Germany

Which of the following are among the top three exporter countries?

Support costs

Which of the following are costs that are challenging to quantify?

Use online bidding events for the right product categories Include the right criteria to select the supplier Provide supplier education Set clear expectations

Which of the following are critical steps to running a successful reverse auction that builds productive buyer/supplier relationships?

Improved visibility of transactions Automated or streamlined purchasing Brings spend under control Enhances compliance

Which of the following are key benefits of P2P (i.e., operational) modules?

Capabilities to perform the actual work

Which of the following are key criteria to where we should outsource?

Strategic Positioning Analysis Value Chain Analysis Cost Driver Analysis

Which of the following are lenses for Strategic Cost Management?

They are activities or decisions that create costs. They can be just about anything and vary across industry. Understanding cost drivers helps you make better decisions. Can help you reduce costs tactically and strategically.

Which of the following are true regarding Cost Drivers?

Use P-cards and catalogs to outsource to end user

Which of the following characterizes how you should manage routine buys?

Price Transportation Documentation

Which of the following do Total Landed Costs and Total Costs of Ownership both consider?

Target Profit = Target Price - Target Cost Target Cost = Target Price - Target Profit

Which of the following expresses the relationships that are essential to calculating target cost?

Failing to ask

Which of the following is NOT a common "process" negotiating mistake?

pursue interests

Which of the following is NOT a tactic that you would use during a distributive negotiation?

Call your supplier and discuss changes in cost

Which of the following is NOT one of the steps in price analysis?

Better use of approved suppliers (i.e., less maverick buying) Improved buying efficiency Web catalogues free up time for purchasing professionals to spend on strategic projects

Which of the following is a benefit of a web catalogue?

Faster invoice processing Reduced invoice processing costs Fewer invoice processing errors You make friends

Which of the following is a benefit on an invoice-management module?

Map the process used to product/procure the component

Which of the following is a critical step in using cost modeling to estimate a product or component cost?

Lower transaction costs Better sourcing decisions Improved leverage More effective supplier relationship management

Which of the following is a potential positive outcome of a successful electronic sourcing strategy?

Pursue interests Explore possibilities Build trust Share benefits

Which of the following is a tactic that you would use to move a negotiation toward an integrative negotiation?

Comprehensiveness

Which of the following is not one of the four reasons to include a multi-criteria analysis in your toolkit?

Negotiation

Which of the following is not one of the four steps in the supplier selection process?

None of the above, i.e. all are part of the process

Which of the following is not part of the Outsourcing/Offshoring process?

Identifying the relevant costs

Which of the following is the most difficult- and most important- step in performing a total landed cost or total cost of ownership analysis?

You use a cross-functional category team

Which of the following is true about critical buys?

Requisition management

Which of the following is usually NOT considered a strategic module in a sourcing application suite?

Spend Analysis Contract Management

Which of the following is usually NOT considered an operational module in a sourcing application suite

Introducing more than one issue into the negotiation

Which of the following is your best approach to creating value in a negotiation?

How each party to the negotiation values the different benefits of the relationship How much the relationship's success depends on your supplier's capabilities. Your willingness to take a more liberal approach to sharing in the short term.

Which of the following should be considered when sharing co-created value with the supplier?

Are you claiming value? What are the facts? What are the issues? How strong are your positions? What concessions are you willing to make?

Which of the following should you ask to develop an effective negotiation plan?

Electronic sourcing applications are a one-size-fits-all solution

Which of the following statements is false?

Evaluate options

Which step in the process asks you to fill in your comparison matrix?

Set weights

Which step in the process helps you determine how important each criterion is?

To manage the costs of a product over its entire life cycle. To determine how to make sure a product can achieve a positive net present value. To change the cost equation if a product is not profitable. To sell product at a profit.

Why do you perform Target Costing?

Efforts made by accountants to make a firms' financial performance look as attractive as possible—within the rules of accounting.

Window dressing is...?

Tell the supplier that it appears that you are looking at the deal in different ways, and give the supplier an opportunity to make a more reasonable offer.

You are negotiating with a supplier, and the supplier makes a very aggressive first offer. The best strategy is to . . .?

Leverage

You are responsible for buying an item that has many capable and competent suppliers available and your spend is quite large for your company. How would this item be classified on the strategic sourcing matrix?

Offshore Outsourcing

You work for a company located in the United States and have decided to buy customer contact center services from a company located in India. What is this is called?

ZOPA

If you are confident about the _____, it is generally best to make the first offer

Pause the negotiation

If, during the negotiation, you discover information that substantially changes the negotiation landscape, you should...?

How much profit you want

In setting a target sales price there are a number of criteria to consider, which of the following is not one of those?

Win-win

Integrative negotiations are also sometimes referred to as:

Requisition approval relies on paper documents circulated between parties

All of the following are characteristics of effective electronic sourcing, EXCEPT...

Not listening to the concerns of affected users

All of the following can serve as conditions for success of an electronic sourcing strategy, EXCEPT...

Quick ratio

An acid test is also called...?

Efficient

An item that is purchased that has many suppliers available and is of low importance to your organization should have the following selection process characteristics . . .?

Fuel

Below are the market prices and historical prices three different commodity teams have been paying. Which of the purchasing teams is performing the BEST? PPI (Market) Actual (Historical) Oct-14 Oct-15 Oct-14 Oct-15 Steel 173.7 191.7 2.25 3.00 Paper 176.3 186.5 27.00 28.80 Fuel 166.8 187.6 132.75 145.00

Accounts payables in days Accounts receivables in days Inventory turnover in days

Cash-to-cash cycle considers...?

False

Caveat Emptor means let the seller beware.

Discounting feedback from affected individuals

Change management entails all of the following activities, except...

Reassess costs Reassess labor Renegotiate with suppliers Find new suppliers Change locations

Conditions might change from the time your initial offshoring decision was made. What might this require you to do?

Gain insight into individual cost elements that make up a product

Cost Analysis is used to:

Can be used by any functional areas to understand the costs of a product or process

Cost Modeling...?

Book service revenues earlier

Declining performance caused Xerox to ... ?

Price Reach/scalability Management Strength Cultural fit

Defining clear key selection criteria help you to collect consistent and comparable data. Which of the following criteria are important to consider and compare?

By selling products and collecting revenue before paying suppliers

Dell achieved a negative cash-to-cash cycle by doing which of the following?

Income statement Balance sheet Profit COGS

Depreciation...?

Reduce costs

During execution of the target costing decision the primary objective is to...?

MRP II

ERP was an immediate outgrowth of which other technology?

False

Elimination implies that your process needs significantly fewer human resources.

$1.85

Given the following information, what is the total landed cost PER FOOT of hydraulic hose? Price paid to supplier: $630 per reel (500 foot of hose per reel) 4 reels of hose fit on each pallet Pallets per container: 10 Shipping costs: $4600 per container to the Los Angeles Port Duties: 5.3% the value of the container Customs Fees: 2.3% the value of the container Rail transportation from LA port to Intermodal rail hub in St. Louis: $1150 (per container) Transportation from Rail hub to your company's warehouse: $900 (per container) Internal warehouse charges (receiving, stocking): $220 per pallet Quality control (pressure testing, inspections): $110 per pallet

Mediocre Job (i.e., will likely keep job but no bonus)

Given the following table, how would you characterize the performance of the purchasing #2 diesel fuel commodity team?

Use technology to collect sales faster Lean-up processes so that they are more efficient and eliminate waste

How can you improve your cash-to-cash cycle in a way that leads to positive and productive buyer/supplier relations?

Total Costs of Ownership consider the net present value of money whereas total landed costs do not

How do Total Landed Costs differ from Total Cost of Ownership?

False

If the best supplier is located outside of your home country, the decision to buy overseas is known as outsourcing.

A percent of labor

Manufacturing overhead is calculated as:

False

Moving to a wholly owned subsidiary is always the best option and allows you to retain control and reduce costs.

True

Multi-criteria analysis is a tool that helps you compare "distinctly different" options.

Integrative negotiations

Negotiations that involve both value creation and value claiming are referred to as...?

Is higher than calculated based on the cost element change

Often the price a supplier requests because of increases in individual cost elements:

True

Price is an important strategic consideration in the geographic decision-making process

Return on assets Return on equity Profit margin Operating profit margin

Profitability ratios include...?

True

Purchasing consortiums are a good way to aggregate buys and gain industry intelligence.

Top Management Finance/accounting Production management Production engineering Suppliers

Purchasing plays a key role in the make versus buy decision! Other functions that may play a role include which of the following?

Material costs and inventory costs which are represented on the income statement and balance sheet

The strategic profit model shows that purchasers impact...?

Best alternative to a negotiated agreement

The term BATNA stands for...?

Emotion

There are many potential cost drivers. Which of the following should you exclude from your analysis?

True

To calculate results you multiply the score for each criterion by the associated weight and add up the results.

How you can-- or should-- work with your supply chain partners

Value Chain Analysis can help you understand...?

Consider the strategic implications of outsourcing, Evaluate cost and performance implications, Decide who are the right decision makers

What are the main areas to look at during the outsourcing decision process?

Electronic Data Interchange

What does EDI stand for?

Production planning and scheduling

What does MRP enable you to do better?

Make versus buy

What is the "who should do it" question also called?

The relational database

What is the central component of an ERP system?

Probe Explore possibilites

What is the key to pursuing interests?

Cash helps run a business not profits Running out of cash can make a profitable business go bankrupt There is a delay in the receipt of cash from the sale of products Depreciation is a non-cash expense

What is true about cash?

COGS vary with sales and influence gross profit

What is true about the "line" on the income statement?

1970s

When did Material Requirements Planning state to gain traction (i.e., widespread adoption)?

All are reason for outsourcing except a. Internal capabilities b. High internal capacity c. Accessing qualified personnel d. Capital Investment and innovation e. Taking out cost f. All of the above

b. High internal capacity

What does hollowing out of corporations mean? a. Too much has been reshored b. Too much flesh and not enough bone c. Relinquished too much of your core capability e. None of the above

c. Relinquished too much of your core capability

Porsche outsources between which percentages? a. 10-20% of its components/services b. 30-40% of its components/services c. 50-60% of its components/services d. 80-90% of its components/services e. Don't have a clue!

d. 80-90% of its components/services

Why does Toyota offshore to the US? a. Toyota wants to be perceived as local. b. Production costs in the US is less expensive c. Toyota wants to produce where they sell. d. All of the above e. Only A & C

e. Only A&C

Which of the following would be a reason for insourcing? a. New technologies emerge b. New suppliers come to market c. Costs change d. Politics shift e. Only B & C f. All of the above

f. All of the above