exam 2

If there were 400 requests for a particular item in a year and 372 were immediately satisfied, the service coverage would be 372/400 or 93 percent.

True

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

True

Any cost associated with having, as opposed to not having, inventory is included in inventory carrying costs, including (1) capital costs, (2) inventory service costs, (3) storage space costs, and (4) inventory risk costs.

True

Transportation rates: a. are lower for LTL than TL shipments. b. are established primarily through negotiation. c. are established primarily by government regulation. d. typically decrease as delivery speed increases. e. typically do not change when smaller shipments are consolidated.

b. are established primarily through negotiation.

When the carrying cost of inventory is expressed as a percentage: a. the lower it is, the lower the economic order quantity. b. it is multiplied by the material unit cost to calculate the per unit carrying cost. c. it usually exceeds 57.5 percent per year. d. it must exclude the insurance cost of inventory. e. it is usually the same as the borrowing cost of the organization.

b. it is multiplied by the material unit cost to calculate the per unit carrying cost.

Supply managers believe they can add the most value to the outsourcing decision by: a. advising the outsourcing team on relevant contractual terms and conditions. b. providing a comprehensive, competitive process. c. reviewing the analysis conducted by the outsourcing team. d. being available if the internal users want their assistance. e. managing the contract once the decision has been implemented.

b. providing a comprehensive, competitive process.

A sampling technique in which every element in the population has an equal chance of being selected is called: a. additive sampling. b. random sampling. c. sequential sampling. d. 100 percent testing. e. cumulative sampling.

b. random sampling.

Managing the consumption of services organizationwide: a. is easy because organizationwide services spend data is readily accessible. b. is of little concern because annual spend for services is declining in most organizations. c. is difficult because multiple contracts may exist at varying prices and terms with the same suppliers. d. is easy because supply management has historically had responsibility for managing services spend. e. is easy because forecasting aggregate demand for services is typically more reliable than forecasting demand for goods.

c. is difficult because multiple contracts may exist at varying prices and terms with the same suppliers.

Deming's 14 points stress the importance of: a. incoming inspection in quality assurance. b. top management in quality control. c. annual rating or merit systems. d. minimizing total cost with a single source. e. specialized education for high potential employees.

d. minimizing total cost with a single source.

The selection of the FOB point is important to the purchaser, for it determines: a. who pays the carrier. b. when legal title to goods being shipped passes to the buyer. c. who is responsible for preparing and pursuing loss or damage claims. d. who routes the freight. e. all of the above.

e. all of the above.

In an outsourcing decision, developing and negotiating the outsourcing contract: a. is not an area where supply managers believe they can add value. b. is the biggest area where supply managers can affect organizational strategy. c. is less important than ensuring prompt payment to suppliers. d. is best left to the function most directly affected by the outsourcing decision. e. is of less strategic importance than identifying opportunities for outsourcing.

e. is of less strategic importance than identifying opportunities for outsourcing.

Growth in outsourcing in the logistics area can be attributed to growing regulation of transportation companies.

False

ISO 14000 which focuses on global purchasing processes is similar to ISO 9000 in management principles.

False

Transportation costs decrease as distance, quantity, and speed increase.

False

For the supply management function, time-based strategies that impact competitive advantage relate to cycle time reductions and greater coordination of materials and information flows.

True

Subcontracts are useful when the work is difficult to define, has a long time horizon, and is relatively expensive.

True

A mode of transportation is any means of conveyance of people or property, but not information.

False

A recent North American trend is to perform in-house a number of services that were traditionally outsourced.

False

Currently, managements tend toward making rather than buying.

False

Economic, safety and environmental regulations have been eliminated for the most part for all modes of transportation.

False

In Kanban systems large raw material inventories are necessary.

False

Total quality management (TQM) is a philosophy and system of management focused on short-term success through statistical process control.

False

Insourcing and outsourcing occur when a company reverses previous make or buy decisions.

True

It is reasonable to expect a supplier to both improve quality and lower costs.

True

Kaizen is a Japanese term for continuous improvement.

True

Logistics is the management of inventory in motion and at rest.

True

MRP II systems link the organization's planning processes with its financial system to produce "what if" scenarios to help achieve sales and profitability projections.

True

Operator action is required when process output exceeds the upper control limit (UCL) or dips below the lower control limit (LCL).

True

Quality function deployment (QFD) is a comprehensive quality system that seeks both spoken and unspoken customer needs.

True

Reliability is the mathematical probability that a product will function for a stipulated period of time.

True

The "bullwhip effect" is a term that refers to the buildup of inventory in a supply chain.

True

The allocation between buyer and seller of the costs incurred when materials are rejected is affected by the kind of materials rejected, trade customs, the buyer's cost accounting procedures, and the positions of strength of each organization.

True

The bill of lading is the key document in the movement of goods.

True

Two effective cost reduction strategies are partnering agreements with logistics services provider and long-term contracts.

True

Some of the concerns about outsourcing are: a. layoffs, exposure to supplier's risks, and loss of control. b. supply's ability to provide the required inputs at the right quality and price. c. transitioning from supplier's operations to internal operations. d. losing long-term buyer-supplier relationships and cost advantages. e. loss of a lean enterprise as the supply base grows.

a. layoffs, exposure to supplier's risks, and loss of control.

Demurrage charges: a. may indicate poor delivery scheduling on the part of the buying organization. b. are never legitimate because delays are typically caused by the carrier's actions. c. are insignificant and can easily be justified in the buying organization. d. discourage the buyer from using a particular carrier. e. growing because of the lengthy delays in most supply chains.

a. may indicate poor delivery scheduling on the part of the buying organization.

Deciding what represents a core competency in an organization is: a. always the same for companies in the same industry. b. often a fairly complex decision and a function of many factors. c. a fairly easy decision once organizational goals and objectives are known. d. a decision best left to the organization's Board of Directors. e. a decision best left to the Chief Executive Officer.

b. often a fairly complex decision and a function of many factors.

On an annual requirement of 100 items spread evenly throughout the year, any purchaser has an opportunity of buying all 100 units at a price of $100 each, or buying 10 units at a time at a price of $130. If the inventory carrying cost is 20 percent per year and assuming no ordering costs: a. buying 100 at a time will save the company $3,600 per year. b. buying 100 at a time will save the company $2,260 per year. c. buying 100 at a time will save the company $2,130 per year. d. buying 100 at a time will save the company $1,260 per year. e. buying 100 at a time will lose the company $840 per year.

c. buying 100 at a time will save the company $2,130 per year.

Subcontracts can only occur: a. in government procurement. b. when a lead contractor is behind schedule. c. if there is a prime contractor bidding out part of a job. d. if substitution is required after the specification has been set. e. when purchasing a good, not a service.

c. if there is a prime contractor bidding out part of a job.

Determination of the "best buy" is based on: a. suitability for a given use. b. a balance between price and quality. c. trade-offs among stakeholders (e.g., marketing, operations, and supply). d. technical considerations only. e. the internal user or specifier's perceptions.

c. trade-offs among stakeholders (e.g., marketing, operations, and supply).

Decreasing logistics costs may be attributed to: a. deregulation of the transportation sector. b. technology advances and e-commerce. c. an increase in global supply chains. d. a and b e. b, and c.

d. a and b

When a team has decided that a task or function currently performed by company employees is a core competency, the team will probably recommend: a. outsourcing. b. insourcing. c. offshoring. d. continuing to make. e. continuing to buy.

d. continuing to make.

Outsourcing of services is: a. decreasing in volume, but increasing in scope. b. decreasing in volume and scope. c. increasing in volume, but decreasing in scope. d. increasing in volume and scope. e. about the same in volume and scope over the last decade.

d. increasing in volume and scope.

Anticipation inventories are carried: a. to stock the distribution pipelines. b. to permit activities on either side of a major process. c. to protect against machine breakdown. d. to cover a well-defined future need. e. to protect against uncertainties in supply and demand.

d. to cover a well-defined future need.

Organizations operating under a just-in-time system, prefer to ship by: a. rail. b. same day air. c. next-day air. d. truck. e. intermodal carriers.

d. truck.

Integrated carriers (truck-air) like UPS and Federal Express are able to capture a larger market share because they: a. utilize their own aircraft. b. have extensive ground networks. c. have accurate, real-time tracking systems. d. b and c. e. a, b and c.

e. a, b and c.

A transportation strategy should include consideration of: a. safety on the ground, in the air and on water. b. environmental factors such pollution. c. consolidation of freight. d. alternative transport modes. e. all of the above.

e. all of the above.

JIT requires frequent deliveries of relatively small quantities in compliance with quality standards.

True

Radio frequency (RF) waves are a mode of transportation for information and carriers for RF waves are air, copper wire and fiberoptic cable.

True

A formal service quality evaluation process: a. is relatively simple and applicable for all types of services. b. is performed exactly the same as it is for goods. c. impossible to quantify if the service is highly intangible. d. is most easily done on the buyer's premises. e. measures the gap between service expectations and performance perceptions.

e. measures the gap between service expectations and performance perceptions.

In fixed quantity inventory models, a fixed economic order quantity is ordered when the reorder point is reached.

True

It is possible for some activities in a function to be core competencies that are made or insourced, and for some activities in the same function to be noncore and bought or outsourced.

True

Supply's role in logistics may include direct functional responsibility and acquisition of logistics services.

True

Logistics costs can be divided into three categories—inventory carrying costs, administrative costs, and transportation—with inventory carrying costs accounting for the bulk of the costs.

False

Outsourcing is prevalent in both the private and public sectors, but for goods only.

False

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

When a commercial janitorial service company predicts demand for janitorial services using commercial building permits issued, office leasing and vacancy rates, this is an example of: a. a causal model. b. a repetitive pattern modeling tool. c. a time series forecasting technique. d. a deterministic model. e. a qualitative forecasting technique.

a. a causal model.

The decision to make or buy a good or service is: a. a decision of strategic importance that deserves careful evaluation. b. a one-time decision never to be reconsidered. c. primarily an operational decision. d. the same as deciding to insource or outsource. e. typically made by the chief supply officer and his or her executive team.

a. a decision of strategic importance that deserves careful evaluation.

The three main inputs of a material requirements planning (MRP) system are: a. required human resources and machine resources, and available resources. b. required manufacturing and human resources, and master production schedule. c. a bill of material, a master production schedule, and the inventory record. d. Pareto analysis results, inventory records and a master production schedule. e. inventory records, annual sales forecast, and a master production schedule.

c. a bill of material, a master production schedule, and the inventory record.

With deregulation of the transportation industry and the development of intermodal service, the focus for the transport buyer is: a. selecting the best mode of transport. b. procuring logistics services at the lowest rates. c. the carrier's ability to handle multiple parts of the logistics process. d. bringing all logistics activities under the management of the VP of Supply. e. shifting responsibility for shipper-carrier relationships to the carrier.

c. the carrier's ability to handle multiple parts of the logistics process.

Internal failure costs include warranty costs and managerial time handling customer complaints.

False

Lean thinking focuses on maximizing profitability while minimizing waste in the form of the costs of quality (scrap, rework, and inspection).

False

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

False

Stockout costs are the same whether it is a seller's market or a buyer's market.

False

Supply chain inventory management involves establishing operational design of the physical flow of goods and services, but does not deal with managing information flows.

False

In statistical process control (SPC), special or assignable causes of variation: a. are outside, nonrandom problems such as breakdown of machinery, material variation, or human error. b. are intrinsic to the process and will always be there unless the process is changed. c. have everything to do with the underlying process and can only be eliminated by changing the process. d. are of secondary importance in quality control procedures used to detect and eliminate variation. e. can be present in a process that is fully capable of meeting specifications consistently.

a. are outside, nonrandom problems such as breakdown of machinery, material variation, or human error.

Demand for buttons and zippers at a sportswear manufacturer is an example of: a. derived demand. b. buffer demand. c. anticipated demand. d. independent demand. e. scheduled demand.

a. derived demand.

Closed-loop MRP: a. is a system which closes the loop between the supplier and the purchaser. b. provides a feedback loop between capacity and the master production schedule. c. requires a feedback loop between purchasing and accounting. d. requires a check between the master production schedule and inventory. e. allows a unit manager to sequence jobs done in that department.

a. is a system which closes the loop between the supplier and the purchaser.

A procurement outsourcing contract that covers approval workflow, material acquisition, purchase order, expediting, material and invoice receipt, invoice payment, financial performance, compliance management, policies and procedures, and performance and results reporting is called: a. procure-to-pay (P2P). b. procure-to-contract (P2P). c. source-to-contract (S2C). d. source-to-pay (S2P). e. third party logistics (3PL).

a. procure-to-pay (P2P).

A supplier certification program: a. adds cost to the supplier, but provides few benefits to the supplier. b. may enable the buyer and seller to lower costs and improve quality. c. may improve quality, but at best will not raise costs. d. always improves quality, but usually at a higher purchase price. e. typically cost more to implement than the value of the quality improvement.

b. may enable the buyer and seller to lower costs and improve quality.

"C" items in ABC analysis are: a. reviewed frequently. b. ordered frequently. c. often managed by the supplier. d. normally carried in small quantities. e. particularly critical in financial terms.

b. ordered frequently.

A six sigma (6σ) approach to quality: a. means there are no more than 6 defects per million opportunities. b. was developed by Japanese companies in the 1950s. c. focuses on preventing defects by using data to reduce variation and waste. d. has no connection to the concept of zero defects. e. has soft goals such as happier customers and employees.

c. focuses on preventing defects by using data to reduce variation and waste.

ISO 9001:2008 provides a tested framework for a systematic approach to consistently delivering product that satisfies customers' expectations by: a. dictating how quality requirements should be met in every organization. b. dictating scope and flexibility for quality system implementation. c. assuming all national cultures will meet quality requirements the same way. d. providing a set of standardized requirements a quality system must meet. e. assuming all business sectors will meet quality requirements the same way.

d. providing a set of standardized requirements a quality system must meet.

If a process is stable and predictable: a. the process averages a varying number of standard deviations. b. common causes have been eliminated through process change. c. it produces the same exact result each time the activity is performed. d. random causes have been detected and eliminated. e. the probability of it meeting customer specifications can be predicted.

e. the probability of it meeting customer specifications can be predicted.

Third-party logistics service providers are carriers that always own assets (trucks, airplanes, railcars) and act as intermediaries between trading partners, for example, shippers and carriers.

False

Fuel efficiency and energy consumption considerations: a. have no impact on transportation strategy in most organizations. b. are a factor in transportation strategy development in many organizations. c. encourage shippers to focus on increasing LTL shipments. d. lead to disintermediation in the supply chain. e. result in lower use of third party logistics providers.

b. are a factor in transportation strategy development in many organizations.

Telecommunication routes are: a. practically unlimited because of the superiority of hardware and software. b. practically unlimited because radio frequency waves have unlimited range. c. practically unlimited because of few land or sea restraints to laying cable. d. very limited because network and distribution costs are high. e. very limited because most countries severely restrict land and sea cables.

c. practically unlimited because of few land or sea restraints to laying cable.

The real costs of quality: a. are frequently overstated in an organization. b. are incurred in the quality control department. c. rise significantly as defects increase in the finished product. d. tend to rise significantly with the cost of prevention. e. are easily identified by the accounting department.

c. rise significantly as defects increase in the finished product.

Which statement is most accurate when thinking about deciding how much to buy: a. forecasts of future demand, lead times, and prices are usually fairly accurate. b. the price premium to attain the desired quantity is usually less than the costs of not having materials available when needed. c. managers seldom make purchase decisions until they are absolutely sure of the volume required. d. balancing price, volume, carrying cost, and the cost of stockouts is key to successfully determining how much to buy at any point in time. e. the costs of placing orders and holding inventory are so low they do not significantly affect the decision of how much to buy.

d. balancing price, volume, carrying cost, and the cost of stockouts is key to successfully determining how much to buy at any point in time.

Outsourcing: a. occurs primarily in large manufacturing firms in the private sector, but is rarely practiced in public purchasing. b. decisions are based on financial factors that most organizations can easily access through their accounting system. c. usually results in increased hiring to attain expertise that the organization does not already possess. d. may reduce or control operating costs, improve focus on core competencies, and gain access to world-class capabilities. e. is a low risk venture because the firm can always revert back to performing the function in-house at low cost.

d. may reduce or control operating costs, improve focus on core competencies, and gain access to world-class capabilities.