Deck 6: Supply Management and Commodity Strategy Development

Question 1

In some cases,a firm may be looking to develop a long-term relationship with a potential supplier,particularly if the supplier is in the "Routine" category of the Strategy Portfolio Matrix.

Answer 1

False

Question 2

Identifying the major suppliers in a market is an important first step of any supplier analysis.

Answer 2

True

Question 3

As a strategic planning tool,a SWOT analysis can provide insight even with limited data.

Answer 3

True

Question 4

One factor that is increasing the risk exposure to supply chain disruption is the decreasing propensity of companies to outsource processes to global suppliers.

Question 5

After the buyer-supplier relationship has been established,buyers no longer need to track supplier performance over time.

Question 6

The problem with secondary data is that they are often outdated and may not provide the specific information for which the sourcing team is looking.

Question 7

Increasing revenues involves either raising prices or keeping prices stable and increasing volume.

Question 8

Supply base optimization usually refers to increasing the number of suppliers used.

Question 9

The insourcing/outsourcing decision is seldom applied to virtually every process conducted within the traditional walls of an organization.

Question 10

The strategic sourcing process ends when a contract is signed with a supplier.

Question 11

SWOT analysis was created to describe competitive forces in a market economy.

Question 12

In general,the less important the commodity,the more likely that cross-functional members and user groups will be involved in building category strategies.

Question 13

In general,the more important the commodity,the less likely that cross-functional members and user groups will be involved.

Question 14

Supply base optimization requires an analysis of the number of suppliers required currently and in the future for each purchased item.

Question 15

Only recently have senior executives begun to realize the increased risk attributed to the higher probability of product and service flow disruptions in global sourcing networks.

Question 16

A supplier catalog allows users to order directly through the Internet using a company procurement card with the delivery made directly to the site the next day.

Question 17

A category strategy is a decision process used to identify which suppliers should provide a group of products or services.

Question 18

A preferred supplier designation indicates that the selected supplier should receive the business for a critical commodity under most conditions.

Question 19

Objectives drive goals,whether at the highest levels of an organization or at the functional or department level.

Question 20

The RFI process cannot be used when a large or complicated purchase is being considered and the potential pool of suppliers must be prequalified.

Question 21

More complex logistics and currency fluctuations require measuring all relevant costs before committing to a worldwide source.

Question 22

Which of the following is not one of the primary ways that companies create shareholder value?

A) Increase volume.
B) Reduce cost of employees (downsize).
C) Reduce cost of process and waste.
D) Reduce cost of goods and services.
E) Lower prices.

Question 23

Total cost of ownership typically includes costs associated with late delivery,poor quality,or other forms of supplier nonperformance.

Question 24

An e-RA is an offline,real-time dynamic auction between a buying organization and a group of pre-qualified suppliers who compete against each other to win the business to supply goods or services that have ill-defined specifications for design,quantity,quality,delivery,and related terms and conditions.

Question 25

In the initial stages of supply management strategy development,supply management adopts essentially a short-term approach and reacts to complaints from its internal customers when deliveries are late,quality is poor,or costs are too high.

Question 26

Organizations tend to evolve through four phases as they become mature and sophisticated in their supply management strategy development.

Question 27

When purchasers find that suppliers' capabilities are not high enough to meet current or future expectations,those suppliers should always be eliminated from the supply base.

Question 28

Which of the following is not one of the steps in the strategic sourcing strategy?

A) Build the team and the project charter.
B) Conduct market research on suppliers.
C) Increasing revenues.
D) Strategy development.
E) Supplier relationship management.

Question 29

Which of the following is not one of the questions to be addressed when conducting a spend analysis?

A) What did the business spend its money on over the past year?
B) Did the business receive the right amount of products and services given what it paid for them?
C) What suppliers received the majority of the business?
D) What was the on-time delivery performance for each supplier?
E) Which divisions of the business spent their money on products and services that were correctly budgeted for?

Question 30

In the moderate development phase of supply management strategy development,supply management councils or lead buyers may be responsible for entire classes of commodities,and companywide databases by region may be developed to facilitate this coordination.

Question 31

A longer-term relationship should never include joint product development with shared development costs and intellectual property.

Question 32

A ____ is an annual review of a firm's entire set of purchases.

A) cost analysis
B) price analysis
C) make-buy analysis
D) technology roadmap
E) spend analysis

Question 33

A ____ is concerned with (1)the scope or boundaries of each business and the links with corporate strategy and (2)the basis on which the business unit will achieve and maintain a competitive advantage within an industry.

A) commodity strategy
B) category strategy
C) business unit strategy
D) functional strategy
E) supply management strategy

Question 34

A ____ is concerned with (1)the definition of businesses in which the corporation wishes to participate and (2)the acquisition and allocation of resources to these business units.

A) business unit strategy
B) supply management strategy
C) commodity strategy
D) corporate strategy
E) functional strategy

Question 35

The ____ of a strategic sourcing process is a clear statement of the goals and objectives of the sourcing project,which is officially announced shortly after the team's first few meetings.

A) triangulation
B) optimization
C) spend analysis
D) project charter
E) price analysis

Question 36

A ____ specifies how a group tasked with developing the strategy for the specific commodity being purchased will achieve goals that in turn will support higher-level strategies.

A) commodity strategy
B) corporate strategy
C) supply management strategy
D) functional strategy
E) business unit strategy

Question 37

In the final and most advanced stage of supply management strategy development,supply management is often characterized as a lower-level support function.

Question 38

A ____ refers to a specific family of products or services that is used in delivering value to the end customer.

A) spend analysis
B) decentralized structure
C) category
D) centralized structure
E) hybrid structure

Question 39

Global sourcing can be used to access new markets.

Question 40

Longer-term relationships are sought with suppliers that have exceptional performance or unique technological expertise.

Question 41

In supplier evaluation,a ____ includes those systems that release,schedule,and control the flow of work in an organization.

A) logistics system
B) cost accounting system
C) traffic management system
D) planning and control system
E) warehouse management system

Question 42

Which of the following is not one of the four categories found in a portfolio analysis matrix?

A) Critical.
B) Routine.
C) Leverage.
D) Substantial.
E) Bottleneck.

Question 43

The ____ is a solicitation document that is used by organizations to obtain general information about services,products,or suppliers and is used generally before a specific requisition of an item is issued.

A) e-auction
B) PO
C) RFP
D) RFI
E) RFQ

Question 44

The key to market intelligence is to ____ data,which means to explore,compare,and contrast data from multiple sources in order to validate it.

A) triangulate
B) collaborate
C) gather
D) collect
E) assemble

Question 45

A ____ has unique requirements or niche suppliers,yet are significant to the business.

A) critical commodity
B) bottleneck commodity
C) matrix commodity
D) routine commodity
E) leverage commodity

Question 46

All of the following are goals for sourcing a strategic commodity except ____.

A) develop a competitive advantage
B) support and leverage the supplier's core competencies
C) develop best-in-class suppliers
D) support the company's overall strategy
E) simplification of the procurement process using electronic tools

Question 47

Which of the following is not one of the goals for sourcing a routine commodity?

A) Reduction of the number of items through substitution.
B) Elimination of small volume spend.
C) Conduct of a detailed negotiation to improve supplier capability.
D) Elimination of duplicate SKUs.
E) Simplification of the procurement process using electronic tools.

Question 48

In supplier evaluation,different aspects of ____ include management's commitment to continuous process and quality improvement,overall professional ability and experience,ability to maintain positive relationships with its workforce,and willingness to develop a closer working relationship with the buyer.

A) management capability
B) process and design capabilities
C) financial condition and cost structure
D) planning and control systems
E) environmental regulation compliance

Question 49

____ is used to help identify the cost savings opportunities that exist within the supply chain.

A) Marketing research
B) Make-buy analysis
C) Value chain analysis
D) Price analysis
E) Cost analysis

Question 50

All of the following are examples of Porter's power of buyers except ____.

A) buyer concentration
B) exit barriers
C) price sensitivity
D) brand identity
E) buyer volume

Question 51

A ____ has a high volume of internal consumption,is readily available,is important to the business,and represents a significant proportion of spend.

A) leverage commodity
B) portfolio commodity
C) critical commodity
D) routine commodity
E) bottleneck commodity

Question 52

All of the following are examples of Porter's market internal competition force except ____.

A) speed of industry growth
B) buyer propensity to substitute
C) exit barriers
D) switching costs
E) capacity utilization

Question 53

____ is a tool to structure and segment the supply base and is used as a means of classifying suppliers into one of four types.

A) The supplier evaluation scorecard
B) The portfolio analysis matrix
C) Make-buy analysis
D) Price analysis
E) Value chain analysis

Question 54

Which of the following is not one of the examples of Porter's threat of new entrants?

A) Capital markets.
B) Economies of scale.
C) Supplier concentration.
D) Product life cycles.
E) Brand equity and customer loyalty.

Question 55

Which of the following is not one of Porter's five forces?

A) Buyer bargaining power.
B) Switching costs.
C) Threat of new entrants.
D) Market internal competition.
E) Supplier bargaining power.

Question 56

The whole point of collecting ____ is to understand the prevailing market conditions and the ability of current or potential new suppliers to deliver the product or service effectively.

A) customer data
B) triangulate data
C) internal data
D) spend analysis data
E) market research

Question 57

Which of the following is not one of the examples of Porter's power of suppliers?

A) Prices of major inputs.
B) Ability to pass along price increases.
C) Supplier concentration.
D) Availability of skilled workers.
E) Threat of forward or backward integration.

Question 58

____ is required to identify the specific capabilities and financial health of key suppliers that are in the supply base or that may not currently be in the supply base.

A) Make-buy analysis
B) Market research
C) Price analysis
D) Portfolio analysis matrix
E) Supplier research

Question 59

Which of the following is not one of the examples of Porter's threat of substitute products?

A) Relative performance of substitutes.
B) Relative price of substitutes.
C) Switching costs.
D) Buyer propensity to substitute.
E) Economies of scale.

Question 60

In supplier analysis,____ requires identifying critical performance criteria and identifying relative competitive performance.

A) benchmarking
B) triangulation
C) insourcing/outsourcing analysis
D) Porter's Five Forces analysis
E) cost analysis

Question 61

____ is a simultaneous engineering approach that occurs between buyer and supplier and seeks to maximize the benefits received by taking advantage of the supplier's design capabilities.

A) Supplier development
B) Early supplier design involvement
C) Total cost of ownership
D) Supplier relationship management
E) Supply base optimization

Question 62

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

A) commodity supplier
B) preferred supplier
C) sole source supplier
D) supplier responding to a RFQ
E) online catalog supplier

Question 63

____ is the process of identifying cost considerations beyond unit price,transport,and tooling.

A) Total cost of ownership
B) Price analysis
C) Make-buy analysis
D) Portfolio analysis
E) Global sourcing

Question 64

Face-to-face negotiation is best when all of the following conditions apply except ____.

A) the item is a new or technically complex item with only vague specifications
B) the purchase requires agreement about a wide range of performance factors
C) the firm does not have a preferred supplier
D) the buyer requires the supplier to participate in the development effort
E) the supplier cannot determine risks and costs without additional input from the buyer

Question 65

Which of the following is false regarding Phase 2,Moderate Development,of supply management strategy development?

A) Purchasers now begin to pursue strategic supplier relationships that focus on customer needs and the organization's competitive strategy.
B) Suppliers are viewed as a resource.
C) There may be some informal channels of functional integration developed internally.
D) Buyers adopt a systems thinking perspective that encompasses the entire supply chain.
E) Single sourcing with long term agreements eventually emerge as a policy for leveraged or consolidated purchase families.

Question 66

Competitive bidding is most effective when all of the following conditions apply except ____.

A) the buying firm can provide qualified suppliers with clear descriptions of the items or services to be purchased
B) volume is high enough to justify the cost and effort
C) the firm does not have a preferred supplier
D) the item is a new or technically complex item with only vague specifications
E) None of these choices conditions apply to competitive bidding.

Question 67

A/An ____ is a formal request for the suppliers to prepare bids,based on the terms and conditions set by the buyer.

A) RFQ
B) purchase order
C) RFI
D) supplier analysis
E) e-auction

Question 68

____ is the process of determining the appropriate number and mix of suppliers to maintain.

A) Make-buy analysis
B) Competitive bidding
C) Supply base optimization
D) Portfolio analysis
E) Price analysis

Question 69

A/An ____ is often used in regularly scheduled review meetings with suppliers,so that deficiencies in performance can be noted,discussed,and acted upon.

A) supplier scorecard
B) make-buy analysis
C) competitive bidding process
D) portfolio analysis
E) cost analysis

Question 70

Buying firms use competitive bidding when ____ is a dominant criterion and the required items or services have ____ specifications.

A) price....unique
B) product performance....unique
C) product performance....straightforward
D) product design....unique
E) price....straightforward

Question 71

Which of the following is true regarding Phase 4,Fully Integrated Supply Chains,of supply management strategy development?

A) The only impetus for change is the demand for change by management.
B) Non-value-added activities such as purchase order follow-up and expediting have been automated.
C) Limited cross-functional integration is occurring.
D) Purchasers begin to pursue strategic supplier relationships that focus on customer needs and the organization's competitive advantage.
E) Execution of supply management strategy takes place primarily at the business unit or local level.

Question 72

A/An ____ may be used as a decision support tool in which the sourcing team assigns a weight to the different categories and develops a numerical score for each supplier in each category,thereby developing a final performance score.

A) make-buy analysis
B) portfolio analysis matrix
C) reverse auction
D) e-catalog
E) supplier selection scorecard

Question 73

Which of the following is false regarding Phase 1,Basic Beginnings,of supply management strategy development?

A) Supply management is often characterized as a lower-level support function.
B) The primary role of supply management is to ensure that enough supply capacity exists.
C) Performance measures focus on efficiency-related measures and price reduction.
D) The amount of resources for improvement is limited, usually because the highest ranking supply manager likely reports to manufacturing or materials management.
E) Supply management strategies are established and integrated early into the product and process design stage.

Question 74

Which of the following is not true in regards to global sourcing?

A) Global sourcing requires supply management to view the entire world as a potential source for components, services, and finished goods.
B) The major objective of global sourcing is to provide immediate and dramatic improvements in cost and quality as determined through the commodity research process.
C) Global sourcing is an opportunity to gain exposure to product and process technology, increase the number of available sources, satisfy countertrade requirements, and establish a presence in foreign markets.
D) Global sourcing is not contradictory to supply base optimization because it involves locating the worldwide best-in-class suppliers for a given commodity.
E) Global sourcing cannot be used to access new markets or to gain access to the same suppliers that are helping global companies become more competitive.