Deck 14: Outsourcing as a Supply-Chain Strategy

Question 1

The term renewal has been created to describe the return of business activity to the purchasing firm.

Answer 1

False

Question 2

Outsourcing has expanded to become a major strategy in business due to the continuing move toward specialization in an increasingly technological society.

Answer 2

True

Question 3

Nearshoring is the practice of choosing an outsource provider in the home country or in a nearby country.

Answer 3

True

Question 4

Offshoring is the practice of procuring from foreign external sources services or products that are normally part of an organization.

Question 5

Research data suggest that foreigners outsource far more services to the U.S. than American companies send abroad.

Question 6

A purchasing firm should not include its home country when conducting a country risk assessment.

Question 7

Offshoring is the practice of moving a business process to a foreign country but retaining control of it.

Question 8

An organization's unique skills, talents, and capabilities are referred to as its core competencies.

Question 9

Outsourcing is the practice of moving a business process to a foreign country but retaining control of it.

Question 10

Nearly any business activity can be outsourced.

Question 11

Some business activities, such as human resources and legal processes, cannot be outsourced.

Question 12

Outsouring is the practice of procuring from external sources services or products that are normally part of an organization.

Question 13

Core competencies are good candidates for outsourcing.

Question 14

The theory of competitive advantage states that you should allow another firm to perform work activities for your company if that company can do it more productively than you can.

Question 15

Some organizations use outsourcing to replace entire purchasing, information systems, marketing, finance, and operations departments.

Question 16

The factor-rating method is an excellent tool for dealing with both country risk assessment and source provider selection problems.

Question 17

Research indicates that of all the reasons given for outsourcing failure, the most common is that the decision was made without sufficient understanding of the options through analysis.

Question 18

The theory of comparative advantage states that you should allow another firm to perform work activities for your company if that company can do it more productively than you can.

Question 19

Outsourcing is not a new concept; it is simply an extension of the long-standing practice of subcontracting production activities.

Question 20

Research data suggest that foreigners outsource far fewer services to the U.S. than American companies send abroad.

Question 21

Outsourcing is simply an extension of the long-standing practice of

A) subcontracting
B) importing
C) exporting
D) postponement
E) e-procurement

Question 22

Outsourcing manufacturing is also known as

A) license manufacturing
B) sublease manufacturing
C) concurrent manufacturing
D) hollow manufacturing
E) contract manufacturing

Question 23

The reason behind most outsourcing failures is

A) decision was rushed
B) lack of understanding and analysis before decision
C) costs were higher than predicted
D) labor was less productive than predicted
E) unable to handle increased logistic complexity

Question 24

The practice of choosing an external provider in the home country or in a nearby country is referred to as

A) homeshoring
B) homesourcing
C) nearshoring
D) nearsourcing
E) backsourcing

Question 25

Which of the following is not an advantage of outsourcing?

A) cost savings
B) gaining outside expertise
C) improving operations and service
D) outsourcing core competencies
E) gaining outside technology

Question 26

What is the practice of procuring from external sources services or products that are normally part of an organization?

A) nearshoring
B) farshoring
C) offshoring
D) outsourcing
E) backsourcing

Question 27

Nearsourcing helps compromise a company's desire for __________ while still providing some __________.

A) control, cost savings
B) quality, control
C) control, quality
D) quality, cost savings
E) political stability, quality

Question 28

The number-one reason driving outsourcing for many firms is to focus on core competencies.

Question 29

Which of the following statements is most accurate?

A) Nearly all outsourcing relationships do not last beyond two years.
B) Nearly all U.S. firms that outsourced processes to India have backsourced them.
C) Approximately half of all outsourcing agreements fail.
D) Outsourcing is a relatively risk-free activity.
E) More than 90% of outsourcing agreements succeed.

Question 30

Which of the following is the number-one reason driving outsourcing for many firms?

A) cost savings
B) gaining outside expertise
C) improving operations and service
D) focusing on core competencies
E) gaining outside technology

Question 31

A manufacturing plant is considering outsourcing its production of tires. There are 5 risk areas in which the decision will be based. The current plant had scores of 1, 2, 4, 8, 2 while the outsourced plant had scores of 3, 2, 4, 2, 5. What is the current plant's score if high scores indicate low risk and an unweighted factor method is applied?

A) 14
B) 15
C) 16
D) 17
E) none of the above

Question 32

Which of the following are possible outsourcing risks?
I) Incorrectly identifying a core competency as non-core
II) Setting savings goals too high
III) Inability to control product development, quality
IV) Non-responsive provider
V) Currency fluctuations

A) I, II, IV
B) II, III, V
C) I, III, V
D) III, IV, V
E) I, II, III, IV, V

Question 33

What is the practice of moving a business process to a foreign country but retaining control of it?

A) exporting
B) farshoring
C) offshoring
D) outsourcing
E) backsourcing

Question 34

What term has been created to describe the return of business activity to the purchasing firm?

A) renewal
B) backsourcing
C) reversal
D) reversesourcing
E) insourcing

Question 35

What theory states that you should allow another firm to perform work activities for your company if that company can do it more productively than you can?

A) theory of competitive advantage
B) theory of core competencies
C) theory of comparative advantage
D) theory of outsourcing
E) theory of offshoring

Question 36

Which of the following is not true regarding core competencies?

A) They may include specialized knowledge.
B) They may represent a small portion of an organization's business activities.
C) They may include proprietary technology or information.
D) They may be good candidates for outsourcing.
E) They may include unique production methods.

Question 37

Advantages of outsourcing do not include

A) cost savings
B) outside expertise
C) renewed focus on core competencies
D) gaining outside technologies
E) creating future competition

Question 38

A company that had previously sent its call center business to India has now brought that business back to small towns in the U.S. such as Dubuque, Iowa. This is an example of

A) return outsourcing
B) inshoring
C) offshoring
D) outsourcing
E) backsourcing

Question 39

The decline in customer satisfaction for outsourced call centers highlights which aspect of outsourcing risk?

A) cost
B) quality
C) core competency
D) erratic utility functionality
E) technological

Question 40

According to research, which of the following is the most common reason cited for outsourcing failure?

A) core competencies identified as non-core
B) erratic power grids in foreign countries
C) unable to control product development, schedules, and quality
D) decisions made without sufficient understanding of the options through analysis
E) political and exchange rate uncertainty

Question 41

In the electronics industry, the __________ sets environmental standards, bans child labor and excessive overtime, and audits outsourcing producers to ensure compliance.

Question 42

Identify some business processes that are outsourced.

Question 43

__________ is the number-one reason driving outsourcing for many firms.

Question 44

__________ is the practice of procuring from external sources services or products that are normally part of an organization.

Question 45

Outsourcing manufacturing is also known as __________.

Question 46

Which of the following metrics is most likely used in evaluating an outsourced call center but not a manufacturing process?

A) quality
B) delivery
C) logistics
D) cost
E) personnel evaluations and training

Question 47

Identify three factors fueling the continuing growth of outsourcing.

Question 48

Offshoring is the practice of moving a business process to a foreign country __________ control of it.

Question 49

Outsourcing is an extension of the long-standing practice of __________ production activities.

Question 50

__________ is the practice of choosing an external provider in the home country or in a nearby country.

Question 51

Offshoring is the practice of moving a business process to a foreign country but retaining __________.

Question 52

The term __________ has been created to describe the return of business activity to the original firm.

Question 53

Which of the following is a key issue coupled between ethics and outsourcing?

A) moving pollution from one country to another
B) ignoring religious customs and holidays
C) low wages that are the result of labor abuse
D) short-term arrangements instead of long-term deals
E) All of the above are key tenets of ethics in outsourcing

Question 54

The factor-rating method is an excellent tool for dealing with both __________ and __________ problems.

Question 55

__________ is the practice of moving a business process to a foreign country but retaining control of it.

Question 56

Which of the following statements is most accurate?

A) outsourcing is shrinking; international trade is shrinking
B) outsourcing is shrinking; international trade is growing
C) outsourcing is growing; international trade is shrinking
D) outsourcing is growing; international trade is growing
E) outsourcing is holding steady, but international trade always shrinks when outsourcing grows

Question 57

Whatever the outsourced product or service, agreements must specify ongoing __________ and expected __________.

Question 58

The theory of __________ states that you should allow another firm to perform work activities for your company if that company can do it more productively than you can.

Question 59

An organization's unique skills, talents, and capabilities are referred to as its __________.

Question 60

Describe the difference between outsourcing and offshoring.

Question 61

Identify several outsourcing processes, that is, activities that firms should undertake when embarking on outsourcing.

Question 62

A firm is evaluating country risk as a first step in its outsourcing provider selection process. Legal issues, currency risk, political risk, and cultural compatibility have been assigned weights of 30%, 10%, 20%, and 40%, respectively. Three countries were scored on each of those risk factors (see table below) using a scale of 1-10, with a score of 1 meaning high risk and 10 meaning minor risk. Using the factor-rating method, which country appears to have the least risk overall?

Question 63

What do you think would be a major risk for a government trying to promote its country as a low-cost producer, filled with ready and willing outsourcing providers?

Question 64

Has there been any political backlash in the United States resulting from outsourcing in foreign countries?
Explain.

Question 65

Which country should a firm choose for production using a weighted factor method if high scores indicate high risk?
$\begin{array}{|l|l|l|l|l|}\hline &&\text { Currency } && \text { Logistics }\\ \text { Country } & \text { Labor }(W=5) &(W=3) & \text { Quality }(W=7)&(W=2)\\\hline \text { Canada } & 10 & 9 & 6 & 4 \\\hline \text { Singapore } & 7 & 7 & 5 & 9 \\\hline \text { Mexico } & 8 & 5 & 7 & 9 \\\hline\end{array}$

Question 66

A company is deciding between 2 countries to locate its call center.
A: Which country is preferred by an un-weighted method if high scores indicate low risk.
B: Suppose a consultant recommended that Factor 2 have its weight doubled while Factor 3 should have its weight quadrupled. Which country is best now using a weighted method?

Question 67

Identify five main advantages of outsourcing.

Question 68

A firm is considering two countries to outsource its call center. Currently the weighted factor method has given a score of 120 to the first country and 110 to the second country. If the
second country wants to improve its score in the labor rating (weight=1.5), how much must it increases its labor rating by to have a score greater than or equal to country 1?

Question 69

Identify some ethical principles as applied to outsourcing.

Question 70

What permits CEOs, who prefer short-term planning and are interested only in bottom-line improvements, to use the outsourcing strategy to make quick gains at the expense of longer-term objectives?

Question 71

Which country should the firm choose for production using an unweighted factor method if high scores indicate low risk?

Question 72

Identify several risks in outsourcing.

Question 73

Two firms that are being considered for an outsourced job have equal un-weighted factor method
scores. Suppose that the ratings for each firm are identical except in two categories, currency and cost risk with high numbers representing low risk. The weight factor for currency risk is three times that of cost risk. Firm 1's score for currency is a 2 and Firm 2's score for cost is a 5. If firm 1 and 2 have identical cumulative scores with the weighted method, find Firm 1's cost score and Firm 2's currency score.