Purchasing Chapter 10

Before doing business with a supplier, you should make sure that he or she is: A. Bonded B. Active in using social media such as Facebook or Twitter C. Endorsed by the local hotel and restaurant business associations D. Willing to become involved in bid buying

A. Bonded

Using a bid buying strategy and shopping around solely on the basis of AP price can be a successful strategy if: A. Buyers know exactly what they want in terms of quality and supplier services, and are able to communicate this information effectively on their specs B. AP price has little effect on quality C. There is very little inflation in the economy D. Buyers can get at least two suppliers to bid for their business

A. Buyers know exactly what they want in terms of quality and supplier services, and are able to communicate this information effectively on their specs

The first step in determining the optimal supplier is to: A. Compile a list of potential suppliers B. Develop the receiving and storage areas C. Examine each potential supplier's credit rating D. Develop ordering and bill paying procedures

A. Compile a list of potential suppliers

Which one of the following is the most critical attribute suppliers should have before you would add them to the approved supplier list? A. Dependability B. Generous credit terms C. A high minimum order requirement D. A willingness to barter

A. Dependability

A daily bid would most likely be used to purchase: A. Fresh fruits and vegetables B. Kitchen equipment C. Canned and frozen juices D. Beverage alcohol

A. Fresh fruits and vegetables

Select the correct order of importance most buyers use to consider when selecting suppliers from most important to least: A. Quality, supplier services, AP price B. Supplier services, AP price, quality C. AP price, quality, supplier services D. AP price, supplier services, quality

A. Quality, supplier services, AP price

The sales procedure that does not focus on selling products one at a time but instead forming personal alliances between sellers and buyers is known as: A. Relationship marketing B. Cost plus purchasing C. Forward buying D. Reciprocal buying

A. Relationship marketing

With the standing order purchasing procedures, the delivery drivers are usually referred to as: A. Route salespersons B. Distributor sales reps C. Merchant wholesalers D. Supply distributors

A. Route salespersons

Which of the following best characterizes the pull strategy? A. The buyer has no choice; he or she must purchase the product B. The buyer has a significant ability to influence the AP price C. The products are mostly generic type products D. The distributors are responsible for all product marketing

A. The buyer has no choice; he or she must purchase the product

When purchasing equipment, a major supplier selection factor would be: A. Trade in allowance for any old equipment B. EP cost of the equipment C. Standing order arrangement the supplier will provide D. Daily bidding procedures provided

A. Trade in allowance for any old equipment

Assume that a case of 12 bottles of Scotch cost $144. What is the price of one bottle? A. 6 B. 12 C. 24 D. None of the above

B. 12

When a buyer purchases a large amount of product and takes delivery of the entire shipment, the procedure is usually referred to as: A. Stock less purchasing B. Forward buying C. Cash and carry D. Open market buying

B. Forward buying

Which of the following items would not be purchased using a standing order? A. Keg beer B. Fresh fish of the day C. Milk D. Bread

B. Fresh fish of the day

When you tell a supplier that, "Ill buy from. You if you'll buy from me", you are trying to develop a: A. Trade out B. Reciprocal buying arrangement C. Buying club D. Push strategy

B. Reciprocal buying arrangement

One of the differences between a cash rebate and a quantity discount is: A. There is no difference B. The time in which the buyer receives the savings C. One requires the buyer to pay COD D. Cash rebates are used solely for alcoholic beverage purchases

B. The time in which the buyer receives the savings

Which one of the following would be considered a reciprocal buying arrangement? A. You accept free samples from a supplier B. Employees are permitted to buy items for their personal use from the hospitality operation C. A restaurant owner purchases paper products from a supplier who holds dinner meetings at the restaurant every month D. A buyer favors one supplier over other qualified ones

C. A restaurant owner purchases paper products from a supplier who holds dinner meetings at the restaurant every month

What is a major disadvantage of will call purchasing? A. Suppliers charge too much for the privilege B. It may be an illegal practice C. Buyers must provide their own delivery D. All of the above

C. Buyers must provide their own delivery

Some hotel companies have experienced savings by purchasing furniture items from co-ops known as: A. Commissaries B. Central distribution centers C. Contract houses D. Wholesale clubs

C. Contract houses

A buyer who wants to purchase large amounts of products over a long period of time will most likely: A. Use a daily bid procedure B. Work together with one supplier to meet the buyers needs C. Employ a fixed bid procedure D. Participate in one stop shopping

C. Employ a fixed bid procedure

An advantage of one stop shopping is: A. Suppliers will usually reduce their AP prices significantly B. The buyer will obtain several discounts C. It may reduce the amount of paperwork D. All of the above

C. It may reduce the amount of paperwork

Reduced ordering costs are a benefit of this type of supplier service: A. Cost plus purchasing B. Daily quotation buying market quote buying C. One stop shopping D. All of the above

C. One stop shopping

A buyer is most likely to use a fixed bid procedure when: A. Purchasing on a day to day basis B. Buying small quantities C. Seeking long term purchase contracts D. None of the above

C. Seeking long term purchase contracts

When the buyer purchases a large amount of product, but arranges for the supplier to store it and deliver a little at a time, the procedure is referred to as: A. Cash and carry purchasing B. Will call buying C. Stock less purchase D. Cost plus buying

C. Stock less purchase

One stop shopping is also referred to as: A. Sole source procurement B. Prime vendor procurement C. Single source procurement D. All of the above

D. All of the above

The daily bid method is known as; A. Call sheet buying B. Opened market buying C. Daily quotation buying D. All of the above

D. All of the above

Which of the following sources should not be used when compiling a list of potential suppliers? A. The internet B. Local trade magazines C. Other hospitality operators D. All of the above can be used to compile the initial list

D. All of the above can be used to compile the initial list

A delivered item that goes straight from the receiving dock to production, bypassing storage, is referred to as a: A. Forward buy B. Computerized receipt C. Back order D. Direct purchase

D. Direct purchase

Which one of the following supplier section criteria may not be allowed per company policy? A. Negotiating lower AP prices B. Buying from a bonded supplier C. Cost plus purchasing D. Free samples

D. Free samples

The major advantage on one stop shopping is: A. Suppliers reduce all of their AP prices B. You can obtain several promotional discounts C. When combined with forward buying, it can eliminate ordering costs D. None of the above

D. None of the above

A supplier will most likely use a push strategy when: A. He or she is a broad line distributor B. The supplier creates a demand for the products among the hospitality operations customers C. The minimum order requirement is very large D. The buyer has the ability to specify products and to shop around for the best value

D. The buyer has the ability to specify products and to shop around for the best value

Another term for the cash and carry purchasing procedure is: A. Stock less purchasing B. Forward buying C. Fixed bid D. Will call purchasing

D. Will call purchasing

T or F AP prices are the most important thing to consider when selecting a supplier

False

T or F An advantage of one stop shopping is the reduction of the AP cost that results from having fewer shipments to receive

False

T or F Another term for the fixed bid buying procedure is "call sheet" buying

False

T or F Because purchasing food is basically the same regardless of the type of hospitality operation, supplier selection in multiunit companies is very similar to that of the independent operations

False

T or F Buyers like to use standing orders for items that are complex to buy such as kitchen equipment

False

T or F Cost plus purchasing describes a contract where buyers set a maximum AP price per unit in advance for an agreed upon time period in order to protect themselves from AP price variations

False

T or F Daily bid procedures are much more detailed and time consuming that fixed bids

False

T or F Fill rates are calculated by multiplying the number of items actually delivered by the total number or items ordered

False

T or F If the buyer makes a mistake during the competitive bid buying process, he or she can legally break the contract upon paying a nominal fee to the supplier

False

T or F It is best not to do business with a supplier that has a high fill rate

False

T or F Once a supplier has been selected, it is important to stick with that supplier and stop evaluating others that are available to you

False

T or F Standing orders are best used with products that are delivered monthly

False

T or F Stock less purchasing, also known as forward buying, occurs when a buyer orders a large amount of a product then takes delivery of the entire shipment

False

T or F Supplier selection is much more difficult if the buyers hospitality operation is part of a large multiunit company

False

T or F Suppliers prefer cost plus purchasing because it allows them to earn significantly higher sales revenues, number of customers, and profits than those associated with other types of buying procedures

False

T or F The cash and carry procedure between buyers and typical hospitality suppliers is one of the most common practices in our industry

False

T or F The most important consideration in determining the optimal supplier is to choose the supplier whose competitive bid reflects the lowest AP price

False

T or F Under the push sales strategy, suppliers attempt to influence the ultimate consumers who use the items purchased by the hospitality buyer

False

T or F While it is desirable to have generous credit terms from a supplier, it should not be used as a major consideration in the supplier selection process

False

T or F It is best not to do business with a supplier who has a very fill rate

False

T or F Bid buying is the easiest type of purchasing procedure

False (One stop shopping)

T or F A bonded supplier is one that has met the requirements of having insurance that is meets the standards of the appropriate government authority

True

T or F A buyer must usually purchase a minimum amount of product in order to qualify for free

True

T or F A file used by vendors that contains information about current and potential customers is known as a buyers fact sheet

True

T or F A high AP price for ten accompanies high levels of consistency, especially supplier services

True

T or F An example of a pull strategy is when a restaurant orders Heinz Ketchup since their customers prefer it and ask for it

True

T or F How close a supplier is to your hospitality operation may be an important consideration in supplier selection

True

T or F If you purchase soda pop syrup in 5 gallon kegs, the supplier may require you to put up a deposit for the kegs

True

T or F Price discounting is not likely to be part of a supplier's pull sales strategy

True

T or F Purchase specifications are important for fixed bid buying and when purchasing equipment, but not absolutely necessary for an informal, daily bid buying procedure

True

T or F References can reveal how fair, honest, timely, and responsive suppliers are

True

T or F Suppliers might be able to assist buyers with offering extra storage space for products they want to purchase in bulk

True

T or F The acronym DSR stands for distributor sales representative

True

T or F The shorter the lead time, the more convenient it is for the buyer

True

T or F Will call purchasing would most likely be used by operators, such as off premise caterers or bed and breakfast owners, who cannot always plan their purchases as carefully as other operations

True

T or F Competitive bid buying may not always be a cost effective strategy for a hospitality operation

True