SCM 421 Topic 5: Sourcing Risk Management and Mitigation

For continuity planning to be effective, you have to update your mitigation/recovery plans based on what happened during and after each disruption event. a. True b. False

A. True

The goal of continuity planning is to prepare for a disruption before it strikes so that you can resume normal operation as quickly as possible. a. True b. False

A. True

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

a. Increasing customer demands

Just-in-time is related to which other principle? a. Lean production b. Outsourcing c. Globalization d. Greater competition e. More complex supply chains

a. Lean production

Which strategy leverages the physical closeness of a supplier? a. Near-shoring b. Multi-sourcing c. Part standardization d. Electronic sourcing e. Supplier segmentation

a. Near-shoring

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

a. Part standardization

Companies are buying more compared to what they are making. To which risk does this outsourcing expose a company (choose the best answer)? a. Poor quality b. Transit loss c. Weather and natural disasters d. Political instability e. Compliance

a. Poor quality

To compute the risk exposure value, you need which two indices? a. Risk consequence index and risk probability index b. Risk probability index and risk likelihood index c. Risk consequence index and risk severity index d. Risk severity index and risk likelihood index e. Risk magnitude index and risk scale index

a. Risk consequence index and risk probability index

How is the risk exposure value computed? a. Risk consequence index x Risk probability index b. Risk consequence index + Risk probability index c. Risk consequence index - Risk probability index d. Risk consequence index / Risk probability index e. 1 - (Risk consequence index + Risk probability index)

a. Risk consequence index x Risk probability index

Dividing suppliers into different groups based on the risk they pose to a company is referred to as what? a. Supplier segmentation b. Supplier selection c. Supplier monitoring d. Supplier auditing e. Supplier site visits f. Both A and D

a. Supplier segmentation

FMEA allows us to brainstorm about what can go wrong and then thinking about possible ways to prevent a failure from happening. a. True b. False

a. True

FMEA usually starts by identifying the function or process that can experience a defect. a. True b. False

a. True

What is the primary outcome of disruption assessment? a. A clear understanding of all of the risks that might affect your operations b. A set of priorities to help you effectively use resources to mitigate risks c. A pretty heat map d. All of the above e. Only A & C

b. A set of priorities to help you effectively use resources to mitigate risks

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

b. Clockspeed

A complete FMEA usually does not include recommended actions to ensure that failure modes do not manifest themselves. a. True b. False

b. False

Thomas Friedman's best-selling book The World is Flat was primarily concerned with what? a. Sustainability b. Globalization c. Innovation d. Global warming e. International conflict

b. Globalization

Risk probability addresses which of the following questions? a. How are we doing? b. How likely is the risk? c. How severe is the impact? d. What can go wrong? e. How acceptable is the risk?

b. How likely is the risk?

External spend, as a fraction of total cost, has increased for most companies. Which risk does this impact the most? a. Inventory risk b. Quality risk c. Transit loss risk d. Risk of natural disasters e. Economics risks

b. Quality risk

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

Which is usually the first step in a risk management process? a. Risk measurement b. Risk identification c. Risk mitigation d. Risk evaluation e. Risk assessment

b. Risk identification

A risk acceptance pyramid classifies risks into which categories? a. Catastrophic, critical, marginal, and negligible b. Unacceptable (Can't Live With), tolerable, and acceptable c. Extremely rare, rare, infrequent, and often d. Good, better, and best e. High risk, medium risk, and low risk

b. Unacceptable (Can't Live With), tolerable, and acceptable

Why is part standardization able to reduce risk? a. You are able to monitor quality much better b. You increase the supply options you can turn to when a disruption occurs c. Standardized parts are easier describe in an RFP/RFQ d. Standardized parts are likely much preferred by your customers e. Standardized parts can be purchased in bulk

b. You increase the supply options you can turn to when a disruption occurs

Which of the following statements is false? a. There is a high level of apathy toward supply risk management b. Most companies do not quantify risks when outsourcing production c. Companies are well versed in supply chain risk management d. Risk management is a challenging domain in need of more attention e. Many companies do not have a risk management plan in place

c. Companies are well versed in supply chain risk management

The risk priority number is the product of which of the following? a. Severity and likelihood of occurrence b. Detectability and likelihood of occurrence c. Likelihood of occurrence, severity, and detectability d. Likelihood of occurrence, detectability, probability of occurrence e. Risk magnitude, risk severity and detectability

c. Likelihood of occurrence, severity, and detectability

Which is usually the last step in a risk management process? a. Risk consequence b. Risk identification c. Risk mitigation d. Risk exposure e. Risk monitoring

c. Risk mitigation

You can acquire services from Dun & Bradstreet to help do a better job with which of the following? a. Hedging b. Near-sourcing c. Supplier monitoring d. Postponement e. Contract language f. All of the above

c. Supplier monitoring

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

c. The top right corner

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

c. To eliminate waste, including to strive for zero inventory

As you implement continuity planning, what questions should you ask? a. How likely is each disruption? b. What are each disruption's potential impacts? c. How prepared are you to respond to each disruption? d. All of the above e. Only A & B

d. All of the above

One strategy to reduce risks is to have a backup supplier in case your incumbent is not able to deliver. What is this strategy called? a. Inventory pooling b. Hedging c.Postponement d. Dual- or multi-sourcing e. Single-sourcing

d. Dual- or multi-sourcing

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

d. Inventory risk

Which of the following is not true of a risk management process? a. It provides a structured approach to think about risks b. It can help us to identify risk mitigation strategies c. It offers a way to quantify risks d. It can help us eradicate all risks e. It helps us in controlling risks

d. It can help us eradicate all risks

Which is usually not part of an FMEA? a. Severity b. Detectability c. Likelihood d. Potential effects e. None of the above; that is, they are all part of an FMEA

d. Potential effects

In which step of the risk management process do you calculate the risk exposure value? a. Risk consequence b. Risk identification c. Risk mitigation d. Risk exposure e. Risk monitoring

d. Risk exposure

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 e. Waiting to customize a product until the last minute

d. Waiting to customize a product until the last minute

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?

d. What can go wrong?

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

e. All of these

Which of the following is not contributing to an increased emphasis on risk management? a. Globalization b. Outsourcing c. Faster clockspeeds d. Increasing customer demands e. None of the above; that is, they all contribute to the increasing importance of risk management

e. None of the above; that is, they all contribute to the increasing importance of risk management

Which of the following is true of disruption scanning. a. Proactive scanning is part science; that is, it is data driven b. Proactive scanning is part art, requiring that you ask "What if . . .?" c. Almost all disruptions are completely unforeseeable—that's why you do continuity planning d. All of the above e. Only A & B

e. Only A & B

A risk heat map usually has the following two axes? a. Risk severity and risk magnitude b. Risk rank and risk exposure c. Risk probability and risk likelihood d. Risk impact and risk exposure e. Risk likelihood and risk impact

e. Risk likelihood and risk impact

Which of the following is not true of a FEMA? a. FMEA stands for failure mode and effect analysis b. FMEA relies in a structured worksheet c. In FMEA, you think about possible defects and how you can mitigated or prevent them d. FMEA extends the risk management process by accounting for how well we are able to detect defects e. Since FMEA has been developed for detecting failures in process, it is difficult to apply in purchasing

e. Since FMEA has been developed for detecting failures in process, it is difficult to apply in purchasing

What is hedging? 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 e. The purchase of future contracts

e. The purchase of future contracts