Deck 5: Make or Buy, Insourcing, and Outsourcing

Question 1

When a team has decided that a task or function currently performed by company employees is not a core competency, the team will probably recommend:

A) insourcing.
B) outsourcing.
C) continuing to make.
D) continuing to buy.
E) near-sourcing..

Answer 1

B

Question 2

Outsourcing is prevalent in both the private and public sectors.

Answer 2

True

Question 3

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.

Answer 3

False

Question 4

Currently, managements tend toward:

A) making rather than buying.
B) buying parts and assembling them onsite.
C) insourcing entire operations.
D) outsourcing entire operations.
E) making anything that is low risk.

Question 5

Deciding what represents a core competency in an organization is:

A) a decision best left to the organization's Board of Directors.
B) a decision best left to the Chief Executive Officer.
C) always the same for companies in the same industry.
D) a fairly easy decision once organizational goals and objectives are known.
E) often a fairly complex decision and a function of many factors.

Question 6

Supply management:

A) has been outsourced in many organizations because it is not a core competency.
B) has been outsourced in many organizations because of its tactical nature.
C) has not been outsourced because the chief purchasing officer makes outsourcing decisions.
D) and logistics have not been outsourced because both are considered core competencies in most organizations.
E) is seldom outsourced in its entirety, but activities such as inventory monitoring, order placement, and order receiving are outsourced.

Question 7

One of the most fundamental and critical decisions in any organization is, should we:

A) have a single source or multiple sources for a specific purchase?
B) order small quantities to avoid carrying costs or large quantities to get volume discounts?
C) switch suppliers because of a slight price discount from a potential supplier?
D) make or buy the needed good or service?
E) enter into a long- or short-term agreement with a supplier?

Question 8

Supply managers typically recommend insourcing.

Question 9

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) reviewing the analysis conducted by the outsourcing team.
C) providing a comprehensive, competitive process.
D) being available if the internal users want their assistance.
E) managing the contract once the decision has been implemented.

Question 10

Outsourcing of services is:

A) unrealistic because of the difficulty in measuring and evaluating the performance of service providers.
B) realistic if the internal users and the buyer can carefully define service requirements and quality expectations.
C) declining in popularity because of buyers' dissatisfaction with most third party service providers.
D) realistic because of the ease in measuring and evaluating performance of service providers.
E) realistic because it is relatively easy to define service requirements and measure the quality of a service provider.

Question 11

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 12

Loss of control is:

A) seldom a concern when considering outsourcing.
B) a concern of the supplier in an outsourcing situation.
C) a concern within the buying organization when considering outsourcing.
D) one of the advantages of outsourcing.
E) one reason few organizations outsource services.

Question 13

Subcontracts are useful when the work is easy to define, has a short time horizon, and is relatively inexpensive.

Question 14

Insourcing and outsourcing occur when a newly formed company first decides what to make inhouse and what to buy from suppliers.

Question 15

Some of the concerns about outsourcing are centered around layoffs, exposure to supplier's risks, and unexpected fees.

Question 16

The gray zone in make or buy provides the opportunity to test and learn without fully committing to make or buy.

Question 17

Outsourcing:

A) is often chosen as a way for the organization to reduce or control operating costs, improve company focus, and gain access to world-class capabilities.
B) is a low risk venture because the firm can always revert back to performing the function in-house at low cost.
C) occurs primarily in large manufacturing firms in the private sector, but is rarely practiced in public purchasing.
D) usually results in increased hiring to attain expertise that the organization does not already possess.
E) decisions are based on financial factors that most organizations can easily access through their accounting system.

Question 18

In the outsourcing decisions in many organizations, supply has had:

A) a leadership role.
B) extensive involvement.
C) relatively moderate involvement.
D) limited involvement
E) virtually no involvement.

Question 19

The logistics function and tasks such as freight auditing, leasing, and maintenance and repair are often outsourced because they typically do not represent core competencies.

Question 20

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