Deck 13: Performance Measurement and Governance in Purchasing

Question 1

Which view of purchasing is described in the following statement??Management recognizes that purchasing is actively involved in deciding on the company's future business strategy and how to strengthen the company's competitive position 

A) Purchasing as an operational, administrative activity. 
B) Purchasing as a commercial activity. 
C) Purchasing as part of integrated logistics 
D) Purchasing as a strategic business area.

Answer 1

  D

Question 2

Which of the following is not a benefit of measuring purchasing performance? 

A) Better decision-making. 
B) Better communication. 
C) Better motivation. 
D) Better profits.

Answer 2

  D

Question 3

Which of the following is not a potential form of added value of the purchasing department to the firm? 

A) Cost reduction. 
B) Lower material prices. 
C) Fewer rejects of incoming goods. 
D) Better motivation.

Answer 3

  D

Question 4

Which of the following is a reason for evaluating purchasing performance regularly? 

A) To rate the individual buyer. 
B) To lower material prices. 
C) Fewer rejects of incoming goods. 
D) Better sourcing decisions.

Question 5

Which of the following best explains 'purchasing effectiveness'? 

A) The extent to which, by choosing a certain course of action, a previously established goal or standard is met. 
B) This refers to the relationship between planned and actual costs. 
C) The savings made against budget allocation. 
D) The longer term consequences of the activity.

Question 6

Which of the following is a performance measure related to the view of purchasing function as a strategic business function? 

A) Number of orders. 
B) Savings. 
C) Reject rates. 
D) Make-or-buy.

Question 7

Which of the following is a performance measure related to the view of purchasing function as a commercial function? 

A) Number of orders. 
B) Savings. 
C) Reject rates. 
D) Make-or-buy.

Question 8

Which view of purchasing is described in the following statement??Management becomes aware that pressing suppliers for low prices has its drawbacks and may lead to sub-optimization.

A) Purchasing as an operational, administrative activity. 
B) Purchasing as a commercial activity. 
C) Purchasing as part of integrated logistics 
D) Purchasing as a strategic business area.

Question 9

Which of the following is a performance measure related to the view of purchasing as an operational administrative function? 

A) Number of orders. 
B) Savings. 
C) Reject rates. 
D) Make-or-buy.

Question 10

Which of the following is a performance measure related to the view of purchasing function as part of integrated logistics management? 

A) Number of orders. 
B) Savings. 
C) Reject rates. 
D) Make-or-buy.

Question 11

Which view of purchasing is described in the following statement??Management is aware of the savings potential which purchasing may represent.

A) Purchasing as an operational, administrative activity. 
B) Purchasing as a commercial activity. 
C) Purchasing as part of integrated logistics 
D) Purchasing as a strategic business area.

Question 12

Which of the following is not a potential form of added value of the purchasing department to the firm? 

A) Better motivation. 
B) Lower material prices. 
C) Fewer rejects of incoming goods. 
D) Better sourcing decisions.

Question 13

Which of the following is a reason for evaluating purchasing performance regularly? 

A) To rate the individual buyer. 
B) To serve the purpose of self-appraisal. 
C) Fewer rejects of incoming goods. 
D) Better sourcing decisions.

Question 14

Which of the following is not a problem making it difficult to evaluate purchasing performance? 

A) The lack of a definition of purchasing performance. 
B) The lack of formal objectives and performance standards. 
C) The time it takes to evaluate purchasing performance. 
D) The accuracy with which purchasing performance actually can be measured.

Question 15

Which view of purchasing is described in the following statement??Management evaluates primarily on parameters such as backlog,number of orders issues and number of complaints.

A) Purchasing as an operational, administrative activity. 
B) Purchasing as a commercial activity. 
C) Purchasing as part of integrated logistics 
D) Purchasing as a strategic business area.

Question 16

Which of the following best explains the concept of 'purchasing effectiveness'? 

A) Purchasing within budget 
B) An assessment of costs and outputs achieved. 
C) The extent to which, by choosing a certain course of action, a previously established goal standard is being pursued. 
D) The extent to which, by choosing a certain course of action, a previously established goal standard is being met.

Question 17

Which of the following best explains the concept of 'purchasing effectiveness'? 

A) Purchasing within budget. 
B) An assessment of costs and outputs achieved. 
C) The extent to which, by choosing a certain course of action, a previously established goal standard is being pursued. 
D) The extent to which, by choosing a certain course of action, a previously established goal standard is being met.

Question 18

Which of the following is not a benefit of measuring purchasing performance? 

A) Better decision-making. 
B) Better communication. 
C) Better profits. 
D) Better motivation.

Question 19

Which of the following best explains 'purchasing efficiency'? 

A) The extent to which, by choosing a certain course of action, a previously established goal or standard is met. 
B) This refers to the relationship between planned and actual costs. 
C) The savings made against budget allocation. 
D) The longer term consequences of the activity.

Question 20

Which of the following is not a problem making it difficult to evaluate purchasing performance? 

A) The difference in the scope of purchasing both within and between companies. 
B) The lack of formal objectives and performance standards. 
C) The time it takes to evaluate purchasing performance. 
D) The time it takes to evaluate purchasing performance. 
E) The accuracy with which purchasing performance actually can be measured.

Question 21

Which of the following best explains 'price/cost control'? 

A) The continuous monitoring and evaluation of process and price increases as they are charged by suppliers. 
B) The continuous monitoring and evaluation of activities initiated to reduce costs. 
C) The continuous monitoring of quality of supplied orders. 
D) The continuous monitoring of suppliers.

Question 22

Which of the following is not an example of supplier relationship measures? 

A) Price versus targeted price. 
B) Supplier quality. 
C) Supplier complaints. 
D) Supplier invoice processing.

Question 23

Which of the following best explains 'purchasing's strategic contribution'? 

A) The extent to which, by choosing a certain course of action, a previously established goal or standard is met. 
B) This refers to the relationship between planned and actual costs. 
C) The savings made against budget allocation. 
D) The building of superior relationships with best-in-class suppliers across the company's value chain.

Question 24

Which of the following is not a dimension on which measurement and evaluation of purchasing activities can be based? 

A) A supplier relationship dimension. 
B) A logistics dimension. 
C) The right material, in the right quantity, from the right supplier, at the right time, at the right place and at the right place. 
D) A product/quality dimension.

Question 25

Which of the following is not a dimension on which measurement and evaluation of purchasing activities can be based? 

A) An organizational dimension. 
B) Reduce the company's overall supply risk. 
C) A product/quality dimension. 
D) A logistics dimension.

Question 26

Which of the following best explains 'purchasing's contribution to total quality control'? 

A) Ensuring that goods ordered are delivered according to the company's specifications. 
B) The continuous monitoring and evaluation of activities initiated to reduce costs. 
C) The continuous monitoring of delivery dates. 
D) This relates to purchasing's contribution to product innovation.

Question 27

Which of the following is not a dimension on which measurement and evaluation of purchasing activities can be based? 

A) An organizational dimension. 
B) A product/quality dimension. 
C) A logistics dimension. 
D) Favourable supplier relationships

Question 28

In car manufacturing,which of the following percentages may account for the purchasing component of the total cost of a car? 

A) 50%. 
B) 70%. 
C) 80%. 
D) 60%.

Question 29

Which of the following is not an activity associated with purchasing's role in contributing to an efficient incoming flow of purchased materials and services? 

A) Control of the timely and accurate handling of purchasing requisitions. 
B) The control of timely delivery by suppliers. 
C) The continuous monitoring of payments made. 
D) The control of quantities delivered.

Question 30

Which of the following is not a dimension on which measurement and evaluation of purchasing activities can be based? 

A) A price/cost dimension. 
B) The right material, in the right quantity, from the right supplier, at the right time, at the right place and at the right place. 
C) A product/quality dimension. 
D) A logistics dimension.

Question 31

Which of the following is not a level of aggregation for measuring and evaluating the five dimensions of purchasing performance? 

A) Per individual supplier level. 
B) Per individual buyer. 
C) Per line-item level. 
D) Customer satisfaction.

Question 32

Which of the following best explains 'price/cost reduction'? 

A) The continuous monitoring and evaluation of process and price increases as they are charged by suppliers. 
B) The continuous monitoring and evaluation of activities initiated to reduce costs. 
C) The continuous monitoring of quality of supplied orders. 
D) The continuous monitoring of suppliers.

Question 33

Which of the following is not an example of a major resource used to achieve the goals and objectives of the purchasing function? 

A) Purchasing staff. 
B) Purchasing procedures and guidelines. 
C) Purchasing management. 
D) Customers.

Question 34

Which of the following is not an example of strategic supplier relationship measures? 

A) Control of the timely and accurate handling of purchasing requisitions. 
B) Customer complaints processing. 
C) Supplier satisfaction in working with own company. 
D) Internal customer satisfaction in working with specific suppliers.

Question 35

Which of the following is not an example of a major resource used to achieve the goals and objectives of the purchasing function? 

A) Purchasing staff. 
B) Customers. 
C) Purchasing management. 
D) Information systems.

Question 36

Which of the following best explains 'purchasing materials budget'? 

A) The volume of planned purchases. 
B) The volume per product item which is expected to be purchased for the next planning period and the expected price level for that specific product. 
C) The total purchasing budget. 
D) The purchasing budget for each item.

Question 37

Which of the following is not a key area of measuring purchasing performance? 

A) The goals and objectives of the purchasing function. 
B) The right material, in the right quantity, from the right supplier, at the right time, at the right place and at the right place. 
C) The savings made against budget allocation. 
D) Fostering strong and favourable supplier relationships.

Question 38

Which of the following best explains 'purchasing's involvement in new product development'? 

A) Ensuring that goods ordered are delivered according to the company's specifications. 
B) The continuous monitoring and evaluation of activities initiated to reduce costs. 
C) The continuous monitoring of quality of supplied orders. 
D) This relates to purchasing's contribution to product innovation.

Question 39

Which of the following best explains 'purchasing's contribution to total quality control'? 

A) Ensuring that goods ordered are delivered according to the company's specifications. 
B) The continuous monitoring and evaluation of activities initiated to reduce costs. 
C) The continuous monitoring of delivery dates. 
D) This relates to purchasing's contribution to product innovation.

Question 40

Which of the following best explains 'purchasing's operational contribution'? 

A) This is flawless purchasing and business processes that are operated at the lowest possible cost. 
B) This refers to the relationship between planned and actual costs. 
C) The savings made against budget allocation. 
D) The longer term consequences of the activity.

Question 41

Which of the following best explains 'non-critical deliveries'? 

A) Non-critical deliveries are beyond their delivery date and as a result the continuity of the company's business processes is in immediate danger. 
B) Non-Critical deliveries are on time. 
C) Non-Critical deliveries are beyond their delivery date. 
D) Non-critical deliveries are past their delivery date without immediate damage to the company.

Question 42

Which of the following is not a key performance indicator (KPI) for assessing purchasing logistics performance in relation to payment? 

A) Number of on-time deliveries. 
B) Number of invoices processed. 
C) Number of invoices per supplier. 
D) Number of rush orders per month.

Question 43

Which of the following best explains 'cost reductions'? 

A) The variance between the historical and the actual purchase price paid per unit. 
B) The volume per product item which is expected to be saved in the next planning period and the expected price level for that specific product. 
C) The total purchasing budget savings. 
D) The purchasing savings budget for each item.

Question 44

Which of the following best explains 'contract compliance rate'? 

A) This is the percentage of rejected supplies. 
B) This is the percentage of supplies invoiced. 
C) This is the percentage of the volume that has been ordered from contracted suppliers versus the total contract spend. 
D) This is the percentage of 'on-time' delivery by the supplier.

Question 45

In the automotive industry,which of the following percentages represent the yearly cost reductions targeted? 

A) 5%. 
B) 7%. 
C) 8%. 
D) 10%.

Question 46

Which of the following is not a key performance indicator (KPI) for measuring the quality of incoming goods and services? 

A) The number of quality claims to suppliers and amounts involved. 
B) The cost related to quality inspection and auditing of incoming goods. 
C) This is the percentage of the volume that has been ordered from contracted suppliers versus the total contract spend. 
D) The number of credit notes to suppliers and the cost related to non-quality deliveries.

Question 47

Which of the following best explains 'critical deliveries'? 

A) Critical deliveries are beyond their delivery date and as a result the continuity of the company's business processes is in immediate danger. 
B) Critical deliveries are past their delivery date without immediate damage to the company. 
C) Critical deliveries are beyond their delivery date. 
D) Critical deliveries are on time.

Question 48

Which of the following is not a sub-plan of the purchasing plan? 

A) The purchased materials budget. 
B) The purchased budget indirect materials. 
C) The investment budget. 
D) The consumables budget.

Question 49

Which of the following is not a key performance indicator (KPI) for assessing purchasing logistics performance in relation to on-time delivery? 

A) Number of on-time deliveries. 
B) Number of late deliveries. 
C) Number of incomplete deliveries. 
D) Number of rush orders per month.

Question 50

Which of the following is not a key performance indicator (KPI) for measuring the quality of incoming goods and services? 

A) The line reject rate due to inferior quality of components. 
B) The cost related to quality inspection and auditing of incoming goods. 
C) This is the percentage of the volume that has been ordered from contracted suppliers versus the total contract spend. 
D) The number of credit notes to suppliers and the cost related to non-quality deliveries.

Question 51

Which of the following is not an aspect to be considered in a purchasing Audit? 

A) Vendor rankings. 
B) Goal orientation. 
C) Client orientation. 
D) Risk.

Question 52

Which of the following best explains 'cost avoidance'? 

A) The variance between the historical and the actual purchase price paid per unit. 
B) The reduction on costs against planned costs. 
C) The total purchasing budget savings. 
D) The purchasing savings budget for each item.

Question 53

Which of the following is not a sub-plan of the purchasing plan? 

A) The purchased materials budget. 
B) The purchased budget indirect materials. 
C) The consumables budget. 
D) The purchasing departmental budget.

Question 54

Which of the following do not feature in a company-wide purchasing cost reduction programme? 

A) Clear savings targets. 
B) A distinction between theoretical and actual cost savings. 
C) The arrangements for reporting savings to general managers. 
D) The purchasing savings budget for each item.

Question 55

Which of the following is not a key performance indicator (KPI) for assessing purchasing logistics performance in relation to supply chain efficiency? 

A) Number of on-time deliveries. 
B) Material shortages per month. 
C) Inventory value per month. 
D) Number of rush orders.

Question 56

Which of the following best explains 'vendor ranking scores'? 

A) Actual vendor rating scores can be translated into vendor ranking scores. 
B) Actual vendor rating scores can be translated into vendor ranking scores which allow the buyer to focus efforts on those suppliers that need most attention. 
C) Alphabetical ranking of suppliers. 
D) Actual vendor rating scores can be translated into vendor ranking scores which can be published.

Question 57

Which of the following best explains 'maverick buying'? 

A) Managers not following corporate agreements with contracted suppliers. 
B) Managers buying from any supplier. 
C) Managers buying from local suppliers. 
D) Manager buying from the cheapest suppliers.

Question 58

Which of the following is not a key performance indicator (KPI) for assessing purchasing logistics performance in relation to ordering? 

A) The number of quality claims to suppliers and amounts involved. 
B) Purchasing administrative lead time. 
C) Purchasing order backlog per month. 
D) Number of rush orders per month.

Question 59

Which of the following is not a key performance indicator (KPI) for assessing purchasing logistics performance in relation to supply chain efficiency? 

A) Number of outstanding orders per month. 
B) Material shortages per month. 
C) Inventory value per month. 
D) Number of invoices per supplier.

Question 60

Which of the following is not a key performance indicator (KPI) for measuring the quality of incoming goods and services? 

A) The percentage of rejected deliveries related to the number of total deliveries made. 
B) The percentage of supplies rejected, but repaired goods. 
C) The percentage of the volume that has been ordered from contracted suppliers versus the total contract spend. 
D) The cost related to repair of incoming goods and services.

Question 61

Which of the following are potential benefits of critical or key performance indicators? 

A) They facilitate discussions on how to improve service levels. 
B) They improve performance. 
C) KPIs should be subjective 
D) KPIs should be not be 'cost-driven'.