Deck 8: Supply Management

Question 1

Use of EDI in the supply chain has led to shorter lead times and lower inventory.

Answer 1

True

Question 2

Maverick spending is often promoted by top management as a way to improve the bottom line and break out of a purchasing cycle.

Answer 2

False

Question 3

Total cost analysis divides costs into direct (costs that are tied to the level of operations or supply chain activities)and indirect (costs that are not tied to the level of operations or supply chain activity).

Answer 3

True

Question 4

A company that uses portfolio analysis would probably classify things like office supplies in the Bottleneck quadrant.

Question 5

Cross sourcing is a strategy in which two suppliers are used for the same purchased product or service.

Question 6

In the description activity of the purchasing process,the product should be described only by brand or specification.

Question 7

The weighted-point evaluation system allows for a completely objective decision to be made.

Question 8

The first step of the purchasing process is to select the supplier.

Question 9

When a preferred supplier does not exist,competitive bidding and negotiation are two methods commonly used for final supplier selection.

Question 10

In a cost-based contract,the stated price does not change,regardless of fluctuations in the general overall economic conditions.

Question 11

Money is automatically drawn from the buyer's account and deposited into the supplier's account in an electronic funds transfer (EFT).

Question 12

Outsourcing can be risky because it decreases the firm's strategic flexibility.

Question 13

A recent trend in supply management is a move towards a more sustainable supply chain.

Question 14

For the average manufacturer,over 50 percent of the value of shipments comes from materials.

Question 15

The request for quotation is a formal request for suppliers to deliver a product or service that includes key terms and conditions,such as price,delivery,and quality requirements.

Question 16

Company A spends $250 million purchasing materials and subassemblies that it processes and sells for a total of $350 million.The cost of goods sold by Company A is $350 million.

Question 17

Portfolio analysis begins with assignment to a quadrant before a sourcing strategy is formulated.

Question 18

A manufacturer seeking to reduce the variability of quality should use multiple sourcing.

Question 19

A manufacturer that wants to make sure that suppliers do not become complacent should use multiple sourcing.

Question 20

The ratio of earnings to sales for a given time period is a firm's profit margin.

Question 21

Which of the following is required in order to execute a successful spend analysis?

A)graphics capabilities found in charting packages and Visio
B)a sophisticated statistical software package such as SPSS or SAS
C)ability to analyze large quantities of data
D)a minimum of six months uninterrupted work time

Question 22

Single sourcing is a better choice than multiple sourcing from the perspective of:

A)increased competition.
B)ensuring that a supplier will not become complacent.
C)spreading risk.
D)access to the supplier's design and engineering capabilities.

Question 23

Firms do not compete only against global competitors,but against:

A)their suppliers.
B)themselves.
C)the customers of their competitors.
D)their competitors' supply chains.

Question 24

The analyst turned on his banker's lamp,adjusted his eye shade,and slowly pulled a legal pad from his desk.His weathered hands punched the buttons on his desk calculator deliberately as he divided earnings by total assets in order to calculate:

A)return on assets.
B)cost of goods sold.
C)merchandise inventory.
D)profit margin.

Question 25

Which of these is a direct cost associated with outsourcing?

A)direct material
B)direct labor
C)variable overhead
D)price from invoice

Question 26

One advantage of outsourcing is that it:

A)gives the company a high degree of control over its operations.
B)increases the company's access to state-of-the-art products and processes.
C)protects the company's proprietary designs and processes.
D)encourages the development of the company's core competencies.

Question 27

A supplier that has previously demonstrated its performance capabilities through purchase contracts may well receive:

A)maverick status.
B)a request for description.
C)preferred supplier status.
D)a request for proposal.

Question 28

Flingers Inc.reveals the following information in their annual report for FY 2004. What is Flingers' return on assets?

A)16%
B)20%
C)25%
D)40%

Question 29

A company using portfolio analysis correctly decides to streamline the purchasing process for a few items by use of EDI and automated requisitions to the greatest extent possible.The quadrant that these items fall in is most probably the:

A)bottleneck quadrant.
B)critical quadrant.
C)leverage quadrant.
D)routine quadrant.

Question 30

The purchasing team examined all of their purchasing patterns in order to identify any irregularities or possible areas of cost savings in a little scheme they liked to call:

A)internal auditing.
B)purchase consolidation.
C)spend analysis.
D)cooking the books.

Question 31

Competitive bidding,active sourcing,and using industry standards are all actions that are appropriate if the sourcing strategy is to:

A)form partnerships with suppliers.
B)maximize commercial advantage.
C)simplify the acquisition process.
D)ensure supply continuity.

Question 32

The use of supply chain partners to provide products or services is called:

A)outsourcing.
B)insourcing.
C)offloading.
D)partnering.

Question 33

A sourcing strategy in which two suppliers are used for the same purchased product or service is:

A)cross sourcing.
B)dual sourcing.
C)contingency sourcing.
D)multisourcing.

Question 34

The phenomenon that a dollar in cost savings increases pretax profits by a dollar,while a dollar increase in sales increases pretax profits only by the dollar multiplied by the pretax profit margin is known as the:

A)profit margin.
B)return on assets.
C)saving to spending ratio.
D)profit leverage effect.

Question 35

The percentage of value of shipments that come from materials for the average manufacturer is:

A)greater than or equal to 40 and less than or equal to 49 percent.
B)greater than or equal to 50 and less than or equal to 59 percent.
C)greater than or equal to 60 and less than or equal to 69 percent.
D)greater than or equal to 70 percent.

Question 36

This table contains a list of three companies that have been rated on four weighted performance dimensions.Which of the following statements regarding this information is BEST?

A)Thatherton is superior to Amerigas.
B)Amerigas is superior to Strickland.
C)Mega-Low is superior to Thatherton.
D)Strickland is superior to Mega-Low.

Question 37

Which of these is an indirect cost associated with insourcing?

A)maintenance
B)purchasing
C)receiving
D)quality control

Question 38

This table contains the performance criteria and scores for four potential suppliers to Kramerica Industries.Evaluate the data and identify the BEST source for Kramerica.

A)Company A
B)Company B
C)Company C
D)Company D

Question 39

When compared with single sourcing,multiple sourcing has the advantage of:

A)spreading risk.
B)volume leveraging.
C)lower transportation costs.
D)reduced quality variability.

Question 40

The ratio of earnings to sales for a given time period is the:

A)cost of goods sold.
B)merchandise inventory.
C)profit margin.
D)return on assets.

Question 41

The second step of the purchasing process may be performed a number of ways.Perhaps the best way for standard items is ________ which is a description method that is applicable when the requirements are well understood.

Question 42

Profit margin is the ratio of ________ to ________.

Question 43

A description method used when a product or service is proprietary or when there is a perceived advantage to using a particular supplier's product or services is:

A)description by market grade.
B)description by brand.
C)description by specification.
D)description by performance characteristics.

Question 44

________ is the name for a technique requiring a company to identify and determine all of the major costs associated with different sourcing possibilities.

Question 45

Authorization to a supplier to deliver product,known as a(n)________,increasingly takes the form of ________.

Question 46

A company using portfolio analysis decides to form partnerships with suppliers;the products in question probably fall in the ________ quadrant.

Question 47

A recent survey of executives at Global 1000 companies uncovered what fear?

A)the fear of a supply chain disruption
B)the fear of the unknown
C)the fear of improperly weighting performance dimensions
D)the fear of misclassifying direct and indirect costs

Question 48

Which of these factors is most likely to increase the risk of a missed shipment,communication problem,or human error?

A)supply base reduction
B)global outsourcing
C)multicriteria decision models
D)electronic data interchange

Question 49

Top executives name ________ as a significant threat to their companies' revenue streams.

Question 50

Business partners that transfer payments between banks using an information system are using ________.

Question 51

Terms and conditions for a purchased service that indicate what services will be performed and how the service provider will be evaluated are called a:

A)request for quotation.
B)bid specification.
C)preferred supplier contract.
D)statement of work.

Question 52

________ are high level,often strategic decisions regarding which products or services will be provided internally and which will be provided by external supply chain members.

Question 53

Horace Smithfield,Esq. ,was insistent that he pay a flat rate of $10,000,000 and not a penny more to transfer his inheritance through your checking account so he could move vast sums of cash out of his country.Sure,he had fallen out of favor with the government and the economy in his country was in a dire situation,but a deal was a deal and $10,000,000 was all he could afford to pay.This type of purchase contract was to be a(n)________ if you would kindly provide your account information..

Question 54

A company that regularly outsources goods and services may have established close relationships with their sources and therefore will allow these sources the first opportunity to bid for new business needs.These sources are known as ________.

Question 55

The purchasing team occasionally examined their spending patterns to identify irregularities as part of a(n)________.

Question 56

Among the disadvantages of ________ are that different product attributes with varying qualities may be produced and that it can actually result in increased prices over time.

Question 57

The two basic types of purchasing contracts are:

A)fixed-price and cost-based.
B)bid-rigged and cost-plus.
C)cost-zero and fixed-variable.
D)fixed-quantity and variable-cost.

Question 58

The bulk of insourcing costs are usually ________ costs.

Question 59

________ is a purchasing description method that focuses attention on the outcomes the customer wants.

Question 60

Use of a single supplier for a part or service in part of the business and another supplier with the same capability for a different part or service in another area of the business is known as ________.

Question 61

What takes place in each step in the procure-to-pay cycle and which step is most critical?

Question 62

Briefly discuss the three trends that make supply management so critical in today's business climate.

Question 63

Define outsourcing and discuss its advantages and disadvantages.

Question 64

The entire plant needs a fresh coat of paint so you,as the operations manager,are charged with securing a painting contract to accomplish this.You locate four painting contractors and ask them for their performance on four criteria.Their responses,along with your minimum standards and the importance you place on each criterion,is shown in the table.Assign scores from 1 to 5 where 1 is terrible and 5 is excellent,for each contractor's performance on each criterion and determine who should be awarded the contract.Write a brief explanation for all the 1s and 5s you assign.

Question 65

What is sourcing portfolio analysis? Discuss the model and the strategies and tactics associated with each quadrant.

Question 66

What are the four sourcing strategies,how do they work,and what are the advantages of each?

Question 67

Identify the major trends in supply management and their impact from a strategic perspective.