Deck 2: The Purchasing Process

Question 1

Buyers use competitive bidding when price is a minor criterion and the required item (or service) has complex material specifications.

Answer 1

False

Question 2

In drafting a purchase order, purchasing must include a large number of details regarding policies because it is a legally binding document.

Answer 2

True

Question 3

Material discrepancies usually result from incorrect quantity shipments.

Answer 3

True

Question 4

Capital equipment purchasing involves buying assets intended for use less than one year.

Question 5

When purchasing works directly with internal stakeholders to anticipate future requirements, such as during new-product development, or with physician councils in a health care provider, purchasing is acting reactively.

Question 6

Buyers use material purchase releases to order items covered by blanket purchase orders.

Question 7

Historically, most organizations have paid minimal attention to MRO items.

Question 8

Contract management should be used to trigger proactive sourcing events only after a contract expires.

Question 9

If the requested item is complex or requires an untested or new production process, purchasing can include additional information or attachments on its RFQ to assist the supplier, which might include detailed blueprints, samples, or technical drawings.

Question 10

For standard items, the negotiation process is an efficient method to purchase relatively straightforward requirements.

Question 11

For routine, off-the-shelf items, the purchase requisition may contain all the information that purchasing requires.

Question 12

Organizations are constantly looking for people who have developed the skills necessary to deal with the narrow variety of tasks faced by purchasing.

Question 13

The buyer should assume that the purchasing cycle ends with the receipt of an ordered item or the selection of a supplier.

Question 14

Responsibility for concealed damage is often simple and easy to detect.

Question 15

Purchasing's right to evaluate and select suppliers means that sales representatives are not allowed to talk with non-purchasing personnel.

Question 16

If a supplier's components are defective and causing problems for manufacturing, then purchasing must find ways to improve supplier quality.

Question 17

The process that buyers use to select suppliers does not vary widely depending on the required item and the relationship that a buyer has with its suppliers.

Question 18

It is a common and preferred current practice for suppliers to arrange shipment to a purchaser and simply include the transportation cost as part of the purchase cost.

Question 19

Enterprises are relying increasingly on external suppliers to provide only materials and products, not information technology, services, and design activities.

Question 20

Purchasing can directly affect (positively or negatively) the long-term growth, revenue, and operating outcomes and plans of stakeholders and business units.

Question 21

_____ is might be the best choice for standard items, where the requirements are well understood and there is common agreement between supply chain partners about what certain terms mean.

A)Description by market grade
B)Description by brand
C)Description by performance characteristics
D)Use of prototypes
E)Description by specification

Question 22

Almost all firms establish blanket purchase orders with their suppliers.

Question 23

Which of the following is not an appropriate performance criterion to be used when evaluating suppliers?

A)Ability to develop process and product technology.
B)Commitment to quality.
C)Management capability and commitment.
D)Cost performance.
E)Commitment to effective marketing analytics and promotion.

Question 24

_____ include(s) the materials required to pack and ship final products, such as pallets, boxes, master shipping containers, tape, bags, wrapping, inserts, and other packaging material.

A)Raw materials
B)Production support items
C)Semifinished products
D)Components
E)Work-in-process inventory

Question 25

Which of the following is not one of the common ways that internal customers should communicate their needs to purchasing?

A)Purchase requisitions from internal users.
B)Chance meeting in the company cafeteria.
C)Forecasts and customer orders.
D)Material requirements identified during new-product development.
E)Routine reordering systems.

Question 26

A/An _____ has demonstrated its performance capabilities through previous purchase contracts and therefore receives preference during the supplier selection process.

A)internal supplier
B)new supplier
C)capable supplier
D)final supplier
E)preferred supplier

Question 27

All of the following are benefits of electronically generating and transmitting purchasing-related documents except _____.

A)a reduction in the need to ensure higher levels of quality from suppliers
B)a virtual elimination of paperwork and paperwork handling
C)improved communication both within the company and with suppliers
D)a reduction in errors
E)a reduction in the time spent by purchasing personnel on processing purchase orders and invoices and more time spent on strategic value-adding purchasing activities

Question 28

One of the most important objectives of the purchasing function is the selection, development, and maintenance of suppliers, a process that is sometimes described as _____.

A)supplier performance management
B)category management
C)customer service
D)procure-to-pay
E)maverick buying

Question 29

The authority to review and challenge specifications (for products or for services) is within purchasing's span of control in managing demand, although internal stakeholders sometimes dispute this right.

Question 30

When creating a forecast for a needed product or service, internal customers may not always be able to express exactly what it is they will need at a future point in time.

Question 31

_____ is the process of developing insights into stakeholder requirements, comparing these to external industry intelligence, supply base capabilities and operational risks, and developing a strategy to align internal requirements with external supply market conditions.

A)Spend analysis
B)Cost management
C)Contract management
D)Category management
E)Procure-to-pay

Question 32

The objectives of a world-class purchasing organization do not include evolving beyond the traditional goal of "getting the lowest price!"

Question 33

Managing the purchase of semifinished components is not a critical purchasing responsibility because components rarely affect product quality and cost.

Question 34

The way MRO items are typically dispersed throughout an organization makes monitoring MRO inventory relatively simple.

Question 35

Which of the following is false regarding concealed damage?

A)A user may discover concealed damages after opening a shipping container.
B)Responsibility for concealed damage is often difficult to establish.
C)The carrier may blame the supplier or maintain that the damage occurred after delivery of the material.
D)The supplier may maintain total innocence and implicate the carrier.
E)The bill of lading protects the carrier against charges of concealed damage.

Question 36

When using negotiating a/an _____, it is necessary to include a/an _____ that allows a buyer to terminate the contract in the event of persistently poor quality, delivery problems, and so on.

A)spot buy contract….evergreen clause
B)RFP….RFQ
C)purchase order….purchase agreement
D)blanket purchase order….escape clause
E)online catalog….RFP

Question 37

The purchasing cycle begins with the _____.

A)selection of an appropriate supplier
B)issuance of a purchase order
C)receipt of a supplier's acknowledgement
D)identification of a need (a requirement)
E)determination of who can authorize the purchase

Question 38

Effective supply market intelligence involves all of the following except _____.

A)updating supply markets and trends and translating their impacts on key business outcomes
B)ensuring that purchasing does not exceed its annual operating budget
C)identifying emerging materials and service technologies to support company strategies in key performance areas
D)developing supply options and contingency plans to reduce risk
E)supporting the organization's requirements for a diverse and globally competitive supply base

Question 39

The _____ helps protect the carrier against wrongful allegations that the carrier somehow damaged, lost, or otherwise tampered with a shipment.

A)bill of lading
B)material packing slip
C)invoice
D)material purchase release
E)blanket purchase order

Question 40

In a _____, when inventory is depleted to a given level, the system notifies the materials control department (or the buyer in some organizations) to issue a request to a supplier for inventory replenishment.

A)reorder point system
B)traveling purchase requisition system
C)customer service system
D)forecasting system
E)just-in-time system

Question 41

_____ is used when a product or service is proprietary or when there is a perceived advantage to using a particular supplier's products or services.

A)Description by market grade
B)Description by industry standard
C)Description by specification
D)Description by performance characteristics
E)Description by brand

Question 42

Transportation carriers use a/an _____ to record the quantity of goods delivered to a facility.

A)electronic transfer of funds
B)material packing slip
C)receiving discrepancy report
D)bill of lading
E)purchase order

Question 43

A/An _____ is an open order, usually effective for one year, covering repeated purchases of an item or family of items.

A)outstanding order
B)pending order
C)blanket purchase order
D)completed order
E)order acceptance

Question 44

_____ include anything that does not go directly into an organization's product.

A)MRO items
B)Raw materials
C)Production support items
D)Services
E)Semifinished products and components

Question 45

In a _____, the supplier is reimbursed all of their actual costs plus some agreed on operational margin and overhead amount.

A)RFP
B)cost-based contract
C)material purchase release
D)fixed-price contract
E)reverse auction

Question 46

_____ is the process of collecting historical data by commodity, relative to demand from the lines of business, with the exception of personnel expenses, occupancy, and corporate spend.

A)Demand management
B)Supply analysis
C)Category management
D)Contract management
E)Spend analysis

Question 47

_____ is the process of using unit and rate consumption levels to forecast and estimate future consumption in an internal functional customer and providing guidance and input on how to optimize usage and educating the user on the tradeoffs.

A)Specification management
B)Demand management
C)Category management
D)Supply market intelligence
E)Cost management

Question 48

Suppliers are more often being paid through _____, which is the automatic transfer of payment from the buyer's bank account to the supplier's bank account.

A)RFQ
B)EFT
C)MRO
D)PO
E)None of these answers.

Question 49

All of the following are required elements in a purchase requisition except _____.

A)quantity and date required
B)estimated unit cost
C)operating account to be charged
D)authorized signature
E)identification and approval of a supplier by the end user

Question 50

_____ is a process associated with defining the contract, defining roles and responsibilities of both parties, and advising when to modify and ensure appropriate escalation.

A)Spend analysis
B)Contract management
C)Cost management
D)Supplier selection
E)Category management

Question 51

The _____, which the supplier provides, details the contents of a shipment and contains the description and quantity of the items in a shipment.

A)material packing slip
B)purchase requisition
C)bill of lading
D)electronic funds transfer
E)request for quotation

Question 52

Which of the following is not a feature that separates capital equipment purchases from other purchases?

A)Capital equipment purchases do not occur with regular frequency.
B)Capital equipment investment requires large sums of money.
C)For accounting purposes, most capital equipment is not depreciable over the life of the item.
D)Buyers can rarely switch suppliers in the middle of a large-scale project or dispose of capital equipment after delivery because of dissatisfaction.
E)Capital equipment is highly sensitive to general economic conditions.

Question 53

A _____ details any shipping or receiving discrepancies noted by the receiving department.

A)receiving discrepancy report
B)bill of lading
C)material packing slip
D)change notice
E)RFP

Question 54

Which of the following is not one of the objectives in supplier performance management?

A)Selecting suppliers that are competitive.
B)Identifying new suppliers that have the potential for excellent performance and developing closer relationships with these suppliers.
C)Improving existing suppliers.
D)Developing new suppliers that are not competitive with current suppliers.
E)Ensuring timely and accurate payment of supplier invoices.

Question 55

_____ is a situation that occurs when sellers seek to "go around" purchasing and instead directly contact and attempt to sell directly to end users (stakeholders).

A)Insourcing
B)Bidding
C)Maverick buying and selling
D)Negotiating
E)Outsourcing

Question 56

Which of the following is not one of the conditions under which face-to-face negotiation is effective?

A)When the purchase requires agreement about a wide range of performance factors, such as price, quality, delivery, risk sharing, and product support.
B)When the buyer requires early supplier involvement.
C)When the specifications or requirements are clear to the seller.
D)When the supplier cannot determine risks and costs.
E)When the supplier requires a long period of time to develop and produce the items purchased.

Question 57

_____ is the end-to-end process of managing a supplier through the entire sourcing life cycle, which includes first identifying the abilities of a particular company with regard to performing a service for the internal customer, completing a sourcing event, negotiating a contract, executing an order, and determining payment.

A)P2P
B)CRM
C)Outsourcing
D)Competitive bidding
E)SRM

Question 58

All of the following are conditions under which competitive bidding is effective except _____.

A)the buyer has a preferred supplier for the item
B)volume is high enough to justify this method
C)the marketplace is competitive
D)the specifications or requirements are clear to the seller
E)adequate time is available for suppliers to evaluate the RFQs

Question 59

The _____ purchase category includes such items are petroleum, coal, lumber, and metals such as copper and zinc.

A)semifinished products and components
B)finished products
C)MRO items
D)raw materials
E)capital equipment

Question 60

Which of the following is not one of the characteristics of a mature, well-developed supply strategy?

A)A repeatable and well-defined process for building strategy and governance around defining, planning, managing, and receiving products and services for a business.
B)Clear alignment with executive vision and internal user-specific business goals.
C)Established goals and metrics for short-term project plans, as well as a definite five-year plan that provides year over year performance improvements.
D)Established communication plan to inform senior management and all lines of business updated and reviewed quarterly against defined goals and objectives.
E)Required use of an online catalog.

Question 61

_____ can cover such characteristics as the materials used, the manufacturing or service steps required, and even the physical dimensions of the product.

A)Description by market grade
B)Description by specification
C)Description by brand
D)Description by industry standard
E)Description by performance characteristics

Question 62

_____ involves unbundling the price paid and understanding the total cost of ownership over the life cycle of a product or service to deliver a target cost and a unit rate to determine if it is priced competitively in the marketplace.

A)Cost management
B)Procure-to-pay
C)Supplier relationship management
D)Category management
E)Spend management

Question 63

When marketing wants to purchase an advertising campaign, the _____ should specify the work that is to be completed, when it is needed, and what type of service provider is required.

A)reorder point
B)acknowledgement
C)traveling purchase requisition
D)statement of work
E)sales forecast

Question 64

Failing to respond to the needs of internal customers will diminish the confidence these users have in purchasing, and they may try to negotiate contracts themselves (a practice known as _____).

A)strategic sourcing
B)spend management
C)maverick buying
D)outsourcing
E)internal sourcing

Question 65

In a _____, the price stated in the agreement does not change, regardless of fluctuations in general overall economic conditions, industry competition, levels of supply, market prices, or other environmental changes.

A)blanket purchase order
B)RFQ
C)cost-based contract
D)material purchase release
E)fixed-price contract

Question 66

All of the following are objectives of a world-class purchasing organization except _____.

A)ensure that all hard copies of purchase orders and other paper documents are filed correctly in a secure area
B)develop aligned goals with internal stakeholders
C)manage the procure-to-process efficiently and effectively
D)supplier performance management
E)supply assurance

Question 67

A _____ involves the physical checking of inventory to verify that system records match actual on-hand inventory levels.

A)reorder point system
B)stock check
C)just-in-time system
D)forecasting system
E)p-card system

Question 68

_____ focuses attention on the outcomes the customer wants, not on the precise configuration of the product or service.

A)Description by industry standard
B)Description by brand
C)Description by specification
D)Description by performance characteristic
E)Description by market grade

Question 69

When a situation arises when an internal customer has a need that comes up suddenly, which is not planned for and for which there is no preexisting supplier identified to provide the product or service required, purchasing should use a/an _____ approach.

A)spot buy
B)long term agreement
C)P2P
D)e-procurement
E)None of these answers.

Question 70

The _____ is used to identify user requirements, evaluate the user needs in a concise and accurate manner, identify suppliers who can meet user requirements, develop agreements with those suppliers, employ a mechanism to place the order with suppliers, ensure payment occurs promptly, validate that the need was effectively met, and drive continuous improvement.

A)demand management process
B)backdoor buying process
C)materials budgeting process
D)forecasting process
E)purchasing process

Question 71

A key characteristic of a/an _____ is a lack of processing by the supplier into a newly formed product.

A)component
B)semifinished product
C)finished good
D)MRO item
E)raw material

Question 72

Good reasons for allowing other departments to view purchase orders and incoming receipts does not include which of the following?

A)The accounting department gains visibility to future accounts payable obligations.
B)The requestor can refer to the purchase order number when inquiring into the status of an order.
C)Receiving has a record of the order to match against the receipt of the material.
D)Traffic becomes aware of inbound delivery requirements and can make arrangements with carriers or use the company's own vehicles to schedule material delivery.
E)There is never a good reason for purchasing to allow other departments access to purchase orders and incoming receipts due to the confidential nature of the price and delivery terms.