Deck 17: Purchasing Services

Question 1

More effective control of inbound shipment costs usually requires purchasing goods under a shipping designation of FOB destination.

Answer 1

False

Question 2

The most significant advantage of a motor carrier is its relatively lower variable cost.

Answer 2

False

Question 3

Oftentimes, a single mode of transportation may prove inadequate for a specific shipment.

Answer 3

True

Question 4

Private carriers are never utilized to make daily "milk runs," picking up smaller amounts of materials from a series of close by suppliers to be used in a lean or just-in-time environment.

Question 5

Growth in international trade has increased the amount of freight moving on oceangoing vessels.

Question 6

By limiting internal requisitioners to previously approved catalogs of already contracted goods and services from preselected and approved suppliers, volume commitments to approved suppliers can be achieved and maverick spending reduced.

Question 7

Moving to a centralized process for procuring professional services does not allow the buying company to leverage its corporate buying power.

Question 8

A savvy buyer will want to control transportation costs internally instead of simply allowing the shipper to pass them along in the form of a delivered price.

Question 9

The use of a pipeline is usually part of the decision tradeoff between transportation modes.

Question 10

A major advantage of a rail carrier is the wide range of items it is capable of hauling.

Question 11

Inbound logistics may also include the shipment of repairable items back to maintenance facilities for refurbishment and return to usable or salable condition.

Question 12

A performance-based logistics system seeks to drive the logistics service provider's performance by clearly delineating the buyer's preferred outcomes, not by transaction, but in terms of provider value-added and overall systems cost.

Question 13

An apparently low-cost carrier may actually end up costing far more than a seemingly higher-cost carrier when all associated costs are calculated.

Question 14

On average, transportation costs easily comprise 10 percent or more of a product's total cost.

Question 15

Assigning and maintaining accurate and truly representative commodity codes for indirect goods and services across an enterprise is relatively easy.

Question 16

Centralization of professional service procurement can increase the accountability of outside consultants to the buyer by increasing the monitoring and auditing of services provided.

Question 17

The greatest competition between domestic transportation modes involves rail and motor carriers.

Question 18

Shipping a high-priced component via air is never a cost-effective option.

Question 19

A two-day shipment by truck can often take a week or more by rail due to the extra handling involved.

Question 20

The importance of effectively managing an organization's indirect spend is decreasing.

Question 21

Project scopes should be very detailed for all service providers, including those who have previously performed work for the organization.

Question 22

A project's scope does not need to include any nondisclosure statements to protect the buying company's interest and the service provider's interest as well.

Question 23

Historically, expenditures for indirect materials and services have received the same level of management attention as have direct materials.

Question 24

Inland water carriers typically transport finished or semifinished products because of the lengthy in-transit time.

Question 25

Inland water carriers are usually accessible for most shippers, as lakes, rivers, and canals are widely dispersed throughout the country.

Question 26

If indirect spend is to be leveraged, supply management must have a clear understanding of exactly what indirect goods and services are being purchased by individual SBUs.

Question 27

The primary objective of economic deregulation in the United States was to make its domestic transportation systems more efficient by increasing marketplace competition within the transportation and logistics industry and increasing economic regulation.

Question 28

A shipper should necessarily negotiate a contract with every carrier it uses, particularly if it is considered a small or infrequent shipper.

Question 29

A clear trend is that many carriers now market themselves simply as providers of physical transportation services.

Question 30

A PBL agreement and a SLA are similar concepts.

Question 31

Suppliers of multiple indirect items can often have multiple ship-to and bill-to addresses, resulting in multiple codes being assigned to the same supplier for the same item.

Question 32

Although mode selection is usually not an issue for international ocean shipments, as in all strategic supplier selection decisions, carrier selection within the preferred mode is still paramount.

Question 33

Air carriers haul the most amount of commercial freight because of their relative speed advantage.

Question 34

Additional railcars can be added to a freight train with only a minimal increase in its total variable cost.

Question 35

The use of 3PLs is increasingly becoming a viable option for smaller shippers and infrequent shipments

Question 36

A preferred supplier list database should be set up to generate a list of preferred suppliers based on previous project performance criteria.

Question 37

Virtually all of indirect spend is normally purchased through the organization's formal sourcing function or proven supply management processes and strategies.

Question 38

Performance-based logistics has been widely adopted by the private sector.

Question 39

A major outcome from transportation economic deregulation has been the shift of pricing information garnered from public tariffs and rate bureaus to the negotiating table.

Question 40

Air freight has a high variable-cost-to-fixed-cost ratio due to the high costs of operating a flight.

Question 41

Traditional cost accounting systems are designed to systematically track and consolidate indirect spend across an organization.

Question 42

Whenever a supplier ships FOB destination, the buyer often loses the ability to track or control its inbound transportation expenses which also artificially increases the value of the buyer's inventory.

Question 43

Carriers will generally not consider the availability of backhauls when quoting one-way freight rates on a particular traffic lane.

Question 44

The U.S.Bureau of Customs and Border Protection established the so-called 10 + 2 rule that affects all modes of transportation except ocean container freight.

Question 45

Because of the huge quantities involved, deciding on the use of pipeline is rarely something a buyer needs to consider.

Question 46

In general, supply management should provide and manage suppliers' e-catalogs.

Question 47

Researching, defining, and writing clear and descriptive specifications is easy to accomplish.

Question 48

Full-service providers, in addition to picking up and delivering goods, may consolidate shipments, provide simplified billing, ship just-in-time from local storage points, handle complex overseas shipments, coordinate shipments with other carriers or modes, or configure final products for direct shipment to end customers.

Question 49

The parameters on which a professional services supplier is evaluated should include, but not be limited to, quality, cost management, delivery, technical support, milestone achievement, and wavelength.

Question 50

Although it is important to develop a rationalized supply base such that buying power can be appropriately leveraged, a single-source strategy frequently maximizes the value of professional services.

Question 51

Reverse logistics flow requires companies to find innovative methods of recovering and recycling products to minimize potential negative impacts on the environment.

Question 52

As organizations continue to focus more and more on their core competencies and outsource noncore activities, they come to recognize that many of their necessary transportation and logistics services can, and should, be outsourced to experts specializing in transportation and logistics services.

Question 53

A major disadvantage of a rail carrier is its relatively higher cost.

Question 54

Every project must have a detailed scope that succinctly defines the project's parameters to help avoid misunderstandings between the buyer and the service provider.

Question 55

Because of widespread industry differences, one company's indirect spend may be considered direct spend for another.

Question 56

Exempt carriers are highly regulated economically by the Surface Transportation Board.

Question 57

For some purchased items, such as bulk raw materials, transport speed is the most important factor.

Question 58

Many buyers are beginning to question the sustainability of cost reductions achieved through reverse auctions over time once the initial reductions are made.

Question 59

Top management should consider adequate buy-in from affected employees and other stakeholders before defining the final scope of the project.

Question 60

In purchasing professional services, it is not important for a standard contract template or format to be developed by the organization's legal department because there are so many types of professional services and providers.

Question 61

Which of the following is not one of the disadvantages of water carrier over other modes of transportation?

A)Limited flexibility.
B)Seasonal availability.
C)Very long lead times.
D)Poor reliability.
E)Cannot be used for large volumes.

Question 62

Motor carriers are characterized by _____ variable costs, while rail carriers have comparatively _____ fixed costs.

A)higher….high
B)lower….high
C)higher….low
D)lower….low
E)There is no difference in variable and fixed costing between motor and rail carriers.

Question 63

A/An _____ is a manufacturer or distributor that controls and manages its own transportation equipment, whether owned or leased.

A)common carrier
B)private carrier
C)contract carrier
D)intermodal carrier
E)exempt carrier​

Question 64

_____ can be defined as that amount of an organization's total procurement budget that is purchased from unauthorized sources.

A)Indirect spend
B)Direct spend
C)PBL
D)E-commerce
E)Maverick spend

Question 65

_____ refers to a mode's or carrier's ability to provide the proper equipment and provide the appropriate services for a given product movement.

A)Accessibility
B)Capability
C)Speed
D)Total cost
E)Reliability

Question 66

_____ includes movement of materials between production facilities within the same organization as well as movement to and out of intermediary storage facilities.

A)Inbound logistics
B)Recovery
C)Outbound logistics
D)Intraorganizational movement
E)Recycling

Question 67

Which of the following is not a key part of a project's scope?

A)Project deliverables.
B)Milestones and deadlines.
C)Service provider's background and experience.
D)Approved budget.
E)Performance metrics.

Question 68

All of the following are criteria used to measure transportation performance except _____.

A)speed
B)reliability
C)capability
D)accessibility
E)operator hours of service

Question 69

A _____ is a key individual or unit that controls substantial indirect spending and that typically has a position of great authority within the organization.

A)purchasing consortium
B)maverick spender
C)3PL
D)power spender
E)kanban

Question 70

Which of the following is not one of the advantages of water carrier over other modes of transportation?

A)Good for bulk commodities (inland).
B)High flexibility.
C)Good for heavy, large items (international).
D)Can handle most types of freight.
E)Low cost.

Question 71

In order for _____ to work, both the buyer and the logistics service provider must explicitly agree as to what the buyer's desired outcomes, goals, and objectives are and on how the logistics service provider can help meet them.

A)PBL
B)MRO
C)TQM
D)TCO
E)KPIs

Question 72

By law, a/an _____ must serve the general public without discrimination based on published rates for specific goods.

A)contract carrier​
B)private carrier
C)common carrier
D)motor carrier​
E)intermodal carrier

Question 73

A/An _____ involves picking smaller amounts of materials from a series of close by suppliers to be used in a lean or just-in-time environment.

A)common carrier
B)exempt carrier
C)milk run
D)private carrier
E)contract carrier

Question 74

Which of the following is not one of the disadvantages of rail carrier over other modes of transportation?

A)Seasonal availability.
B)Limited access to rail line.
C)Longer in-transit lead times.
D)Less flexible - may not have rails to all locations.
E)Limited access to rail spur.

Question 75

Which of the following is not one of the major transportation service linkages throughout a typical supply chain?​

A)Production planning.
B)Inbound logistics
C)Intraorganizational movements.
D)Outbound logistics.
E)Recovery and recycling.

Question 76

_____ refers to a mode's or carrier's ability to provide service over a geographic area.

A)Speed
B)Capability
C)Total cost
D)Accessibility
E)Reliability

Question 77

Which of the following is not one of the disadvantages of motor carrier over other modes of transportation?

A)High cost.
B)Limited to domestic or regional transportation.
C)Very long lead times.
D)Cannot be used for large volumes.
E)None of these answers.

Question 78

A/An _____ system provides status alerts, via e-mail, fax, pager, and so on, to a buyer (consignee) or supplier (shipper) that a particular shipment has been delayed and whether this may affect other entities in the supply chain.

A)event-based
B)MRP
C)ERP
D)DRP
E)None of these answers.

Question 79

Which of the following is not a disadvantage of using a 3PL?​

A)Relinquish control, ownership, and expertise.
B)Loss of integration between sales and supply.
C)Loss of dedicated in-house managed staff
D)Concentrate on core business activities.
E)Sacrifice key business service differentiation.

Question 80

_____ represents the link between a company and its customers.

A)Inbound logistics
B)Intraorganizational movement
C)Reverse logistics
D)Outbound logistics
E)Recovery and recycling