Deck 5: Make or Buy,insourcing and Outsourcing

Question 1

The type(s)of procurement outsourcing contracts include:

A)procure-to-pay (P2P).
B)source-to-contract (S2C).
C)source-to-pay (S2P).
D)procure-to-pay (P2P)and source-to-contract (S2C).
E)procure-to-pay (P2P),source-to-contract (S2C)and source-to-pay (S2P).

Answer 1

E

Question 2

Insourcing should be considered when:

A)assurance of supply is a problem.
B)the supplier has developed a unique process to produce the product or service.
C)there is an opportunity to reduce costs significantly.
D)assurance of supply is a problem and there is an opportunity to reduce costs significantly.
E)assurance of supply is a problem,the supplier has developed a unique process to produce the product or service and there is an opportunity to reduce costs significantly.

Answer 2

D

Question 3

Outsourcing:

A)occurs primarily in large manufacturing firms in the private sector,but is rarely practiced in public purchasing.
B)may reduce operating costs,improve focus on core competencies,and gain access to world-class capabilities.
C)decisions are based on cost-benefit analysis.
D)usually results in increased hiring to attain expertise that the organization does not already possess.
E)is a low risk initiative because the firm can always revert back to performing the function in-house.

Answer 3

B

Question 4

Concerns about outsourcing include:

A)supply's ability to provide the required inputs at the right quality and price.
B)layoffs,exposure to supplier's risks,and loss of control.
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.

Question 5

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 of less strategic importance than identifying opportunities for outsourcing.
E)is best left to the function most directly affected by the outsourcing decision.

Question 6

In a service triad:

A)the service supplier and customers are the coproducer of the service,excluding the buyer from the service encounter.
B)the buyer is dependent on the supplier for the satisfactory fulfillment of customers' service demands.
C)the buyer is dependent on the supplier for customer service innovation and organizational learning.
D)the service supplier and customers are the coproducer of the service,excluding the buyer from the service encounter,and the buyer is dependent on the supplier for the satisfactory fulfillment of customers' service demands.
E)the service supplier and customers are the coproducer of the service,excluding the buyer from the service encounter;the buyer is dependent on the supplier for the satisfactory fulfillment of customers' service demands;and the buyer is dependent on the supplier for customer service innovation and organizational learning.

Question 7

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.

Question 8

An organization may decide to continue to produce a good or service in-house rather than outsource:

A)to control the quality of customer service.
B)to reduce risk.
C)because of a lack of technical expertise in-house.
D)to control the quality of customer service and to reduce risk.
E)to control the quality of customer service,to reduce risk and because of a lack of technical expertise in-house.

Question 9

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.

Question 10

Subcontracts can only occur:

A)in government procurement.
B)if there is a prime contractor bidding out part of a job.
C)when a lead contractor is behind schedule.
D)if substitution is required after the specification has been set.
E)when purchasing a good,not a service.

Question 11

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-contract (P2P).
B)source-to-contract (S2C).
C)procure-to-pay (P2P).
D)source-to-pay (S2P).
E)third party logistics (3PL).

Question 12

The decision to make or buy a good or service is:

A)a one-time decision never to be reconsidered.
B)a decision of strategic importance that deserves careful evaluation.
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.

Question 13

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

Question 14

Supply managers believe they can add the most value to the outsourcing decision by:

A)providing a comprehensive,competitive process.
B)advising the outsourcing team on relevant contractual terms and conditions.
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.

Question 15

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.

Question 16

Deciding what represents a core competency in an organization is:

A)often a fairly complex decision and a function of many factors.
B)always the same for companies in the same industry.
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 (CEO).

Question 17

The growth in outsourcing in the logistics area is attributed to:

A)increased transportation regulations.
B)enhanced logistics technologies that provide real-time data.
C)truck driver shortages.
D)increased transportation regulations and enhanced logistics technologies that provide real-time data.
E)increased transportation regulations,enhanced logistics technologies that provide real-time data and truck driver shortages.

Question 18

Outsourcing of services is:

A)decreasing in volume,but increasing in scope.
B)decreasing in volume and scope.
C)increasing in volume and scope.
D)increasing in volume,but decreasing in scope.
E)about the same in volume and scope over the last decade.

Question 19

A recent North American trend is to insource a number of services that were traditionally outsourced.

Question 20

Subcontracts are a special class of the make or buy,used exclusively in construction procurement.

Question 21

It is not 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.

Question 22

Outsourcing is prevalent in both the private and public sectors,but primarily for services.

Question 23

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

Question 24

The procurement of indirect or noncore spend is more likely to be outsourced than procurement of direct or core spend.

Question 25

The gray zone in make or buy refers to the range of options between 100 percent make to 100 percent buy.

Question 26

Growth in outsourcing in the logistics area can be attributed,in part,to growing deregulation of transportation companies.

Question 27

Currently,organizations tend toward buying rather than making.

Question 28

Service triads favor contracts that control how the service is delivered.

Question 29

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

Question 30

The chief executive officer (CEO)identifies opportunities for insourcing and outsourcing and supply is responsible for aiding in the selection of sources.