Supply Chain Management Quiz 9 Review

Which of the following is not a benefit of effective sourcing decisions?

Selected Answer: Correctb. Better economies of scale can be achieved if orders within a firm are disaggregated. Answers: a. Appropriate supplier contracts can allow for the sharing of risk, resulting in higher profits for both the supplier and the buyer. Correctb. Better economies of scale can be achieved if orders within a firm are disaggregated. c. Design collaboration can result in products that are easier to manufacture and distribute, resulting in lower overall costs. d. Firms can achieve a lower purchase price by increasing competition through the use of auctions. e. None of the above.

Direct materials are:

Selected Answer: Correctb. components used to make finished goods. Answers: a. goods used to support the operation of a firm. Correctb. components used to make finished goods. c. supplies produced by onshore sources. d. supplies produced by offshore sources. e. None of the above.

As companies have outsourced supply chain activities, it has become harder to align the goals of all parties involved. Supply chain __________ can have unintended consequences when the third party's information and actions are hard to observe.

Selected Answer: Correctc. incentives. Answers: a. auctions. b. market conditions. Correctc. incentives. d. deterrents. e. None of the above.

When designing a sourcing strategy, it is important for a firm to:

Selected Answer: Correctd. be clear on the factors that have the greatest influence on performance and target improvement on those areas. Answers: a. develop a process that will procure all materials at the lowest possible cost. b. maintain a record of all contracts, receipts, issues and other transactions in the event of lawsuits. c. maximize the profitability of the distributors within the supply chain. Correctd. be clear on the factors that have the greatest influence on performance and target improvement on those areas. e. All of the above.

To improve overall profits, the supplier must share risk in a way that encourages the buyer to purchase more and increase the level of product availability. This requires the supplier to share in some of the buyer's demand uncertainty. What is an approach to risk sharing between the supplier and the buyer?

Selected Answer: Correctd. All of the above. Answers: a. Buybacks or returns. b. Revenue sharing. c. Quantity flexibility. Correctd. All of the above. e. None of the above.

It is important to focus on total cost of ownership (TCO) when selecting a supplier. What does TCO include?

Selected Answer: Correctd. All of the above. Answers: a. Supplier price. b. Delivery costs. c. Environmental costs. Correctd. All of the above. e. (a) and (b) only.

An important factor that affects the increase in supply chain surplus that a third party provides is:

Selected Answer: Correctd. All of the above. Answers: a. scale. b. uncertainty. c. specificity of assets. Correctd. All of the above. e. None of the above.

Firms must evaluate the risks when they move any function to a third party. Which of the following is not a risk to the firm?

Selected Answer: Correcte. Positive reputational impact. Answers: a. Underestimation of the cost of coordination. b. Reduced customer/supplier contact. c. Leakage of sensitive data and information. d. Ineffective contracts. Correcte. Positive reputational impact.

A firm gains the most by outsourcing to a third party if its needs are large, highly certain, and not shared by other firms sourcing from the same third party.

Selected Answer: Correct False Answers: True Correct False

If the assets required are specific to a firm and cannot be used by others, outsourcing to a third party is likely to increase the supply chain surplus.

Selected Answer: Correct False Answers: True Correct False

Outsourcing is the practice of using an organization's own personnel and resources to accomplish a supply chain function.

Selected Answer: Correct False Answers: True Correct False

The use of risk sharing between supply chain partners will result in locally optimal decisions that decrease the total supply chain profits.

Selected Answer: Correct False Answers: True Correct False

A third party may be able to provide a sustainable growth of surplus by aggregating to a higher level than the firm itself. The growth in surplus comes from aggregating capacity, inventory, inbound/outbound transportation, warehousing, procurement, information, receivables, or relationships to a level that the firm cannot achieve on its own.

Selected Answer: Correct True Answers: Correct True False

Firms must consider a tailored sourcing strategy that couples responsive onshore or near-shore sources with low-cost offshore sources. The responsive onshore/near-shore sources should focus on high-value products with high demand volatility, whereas the low-cost offshore sources should focus on the lower-value, high-volume products.

Selected Answer: Correct True Answers: Correct True False

Purchasing, also known as procurement, is the process used to acquire raw materials, components, products, services, or other resources from suppliers.

Selected Answer: Correct True Answers: Correct True False

Sharing the rewards from improvements can induce performance improvement from a supplier along dimensions, such as lead time, for which the benefit of improvement accrues primarily to the buyer but the effort for improvement comes primarily from the supplier.

Selected Answer: Correct True Answers: Correct True False

Sourcing is the entire set of business processes required to purchase goods and services.

Selected Answer: Correct True Answers: Correct True False

Supplier performance should be compared based on the impact on total cost of ownership. In addition to acquisition costs, ownership and post-ownership costs should also be considered. In many instances, a higher acquisition cost is more than compensated for by lower ownership and post-ownership costs.

Selected Answer: Correct True Answers: Correct True False

Third parties increase the supply chain surplus if they either increase value for the customer or decrease the supply chain cost relative to the firm performing the task in-house. A third party may aggregate demand across multiple firms and gain production economies of scale that no single firm can on its own. What mechanism is the third party using to grow the surplus?

Selected Answer: Correcta. Capacity aggregation. Answers: Correcta. Capacity aggregation. b. Inventory aggregation. c. Transportation aggregation. d. Procurement aggregation. e. Information aggregation.

For supplier selection in general, ___________ are best used when the quantifiable acquisition cost is the primary component of total cost.

Selected Answer: Correcta. auctions. Answers: Correcta. auctions. b. negotiations. c. lotteries. d. All of the above. e. None of the above.