Deck 10: Sourcing and Supply Management

Question 1

Which of the following is NOT a benefit of outsourcing?

A)Greater flexibility to change product specifications
B)Better access to market information
C)Lower supply management costs
D)Less capital needed for investment

Answer 1

Lower supply management costs

Question 2

If you are evaluating whether a supplier's workforce is receiving fair wages, you are most likely doing a(n):

A)Spend analysis.
B)Assessment of sustainability.
C)ISO 9000 assessment.
D)Total cost of ownership assessment.

Answer 2

Assessment of sustainability.

Question 3

A relationship with a supplier that is characterized by lack of trust, little communication, and short-term transactions is called a(n):

A)Adversarial relationship.
B)Arms-length relationship.
C)Acceptance of mutual goals.
D)Full partnership.

Answer 3

Adversarial relationship.

Question 4

Moderate- to high-risk purchases with low to moderate levels of spend are categorized as:

A)Noncritical.
B)Leverage.
C)Bottleneck.
D)Strategic.

Question 5

Outsourcing is often a good choice when:

A)There are only a few suppliers.
B)A product is in the mature phase of the life cycle.
C)Technology is new.
D)The product is critical to a firm's competitiveness.

Question 6

Which of the following is (are) advantages of full partnerships with suppliers, as compared to traditional adversarial relationships?
I. They help reduce uncertainties for both buyer and supplier.
II. The full partnership is easier to establish and maintain than other relationships, so more suppliers can be dealt with.
III. The full partnership assures the lowest material price.

A)I only
B)II only
C)III only
D)I and II only
E)II and III only

Question 7

Jones Company has identified an item for which the supply risk is high and the value of the purchase to the firm is low. A recommended sourcing strategy for Jones is to:

A)Multiple source.
B)Increase efficiencies.
C)Build partnerships.
D)Consolidate purchases.

Question 8

The process of understanding how a firm is spending its money and with which suppliers is called:

A)Strategic sourcing.
B)Make or buy analysis.
C)Market analysis.
D)Spend analysis.

Question 9

All of the following are supply management goals EXCEPT:

A)Ensure timely availability of resources.
B)Purchase at the lowest price.
C)Enhance quality.
D)Assess technology and innovation.

Question 10

Aspen Corporation has discovered that it uses 10 different suppliers for a particular type of item, has bought 20 different models of that item, and total expenditures last year for the item were $100,000. Aspen most likely is conducting:

A)Supplier audits.
B)Spend analysis.
C)Supplier certification.
D)Make or buy analysis.

Question 11

Zanda Corp. had outsourced its production to a company located in Asia. Recently it decided to continue to outsource but bring the production back to a company located in the United States. This decision was likely made after Zanda:

A)Conducted a spend analysis.
B)Conducted a make or buy analysis.
C)Examined total cost of ownership.
D)Developed supplier certification processes.

Question 12

Qualitative factors that should be assessed when making an insourcing/outsourcing decision include all of the following EXCEPT:

A)Compatibility of the supplier's organizational culture and values with your company
B)The importance assigned to the supplier's location
C)The skills and knowledge of the supplier's management team
D)The costs incurred at the start of the contract

Question 13

In its own country, a former supplier to your company recently began selling its own product that is identical to a product that was developed by your company. This is an example of:

A)Supply risk.
B)Sustainability.
C)Insourcing.
D)Strategic sourcing.

Question 14

Zanda Corp. is considering trying to develop a full partnership with a particular supplier. This suggests that the item Zanda buys from the supplier is:

A)A noncritical part.
B)A "bottleneck" item.
C)A strategically important part.
D)An item appropriate for a "leverage" strategy.

Question 15

Which of the following would NOT be a step in conducting a make/buy analysis?

A)Assessing quantitative costs of outsourcing
B)Evaluating new suppliers who could make the SKU
C)Assessing the relationship of the product to the firm's core competencies
D)Conducting a detailed internal audit of purchasing practices

Question 16

A global food products company makes soups that are specifically tailored to the tastes of consumers in individual countries. What sourcing strategy is the company likely to use for its fresh ingredients such as vegetables?

A)Local, close to its production plant when possible.
B)National, using suppliers within each country.
C)Global, using the same suppliers across the world.
D)Low-cost country sourcing.

Question 17

Which approach is likely to be used for leverage purchases?

A)Purchasing cards
B)Vendor-managed inventory
C)Using executive champions
D)Standardizing purchases

Question 18

Squeaky Klean, a small consumer products company, purchases custom-designed plastic bottles for its cleaning products that are made at a single plant in Cleveland, Ohio. To make these bottles, specialized tooling must be purchased at a high cost and installed at a supplier's plant. Its sourcing strategy for bottles should be to:

A)Use three or more suppliers.
B)Dual source.
C)Single source.
D)Insource bottle production.

Question 19

A primary reason for using global suppliers is to:

A)Improve sustainability.
B)Reduce transportation costs.
C)Take advantage of free trade agreements such as NAFTA.
D)Work with the same suppliers in many different regions of the world.

Question 20

Benefits of single sourcing include all of the following EXCEPT:

A)Quantity discounts.
B)More consistent quality.
C)Better supplier relationships.
D)Less supply risk.

Question 21

Williams Inc. has acquired software to help manage interactions with its supply base. This suggests that Williams Inc. is involved in:

A)Vendor-managed inventory.
B)Supplier relationship management.
C)Online reverse auctions.
D)Supplier auditing.

Question 22

A company has decided that it no longer needs to extensively count and inspect the products it receives from a particular supplier. This suggests that the purchasing company has begun:

A)Spend analysis.
B)Supplier certification.
C)Process simplification.
D)Time reduction analysis.

Question 23

An online auction used for sourcing:

A)Typically drives prices up as suppliers compete against each other.
B)Is used in situations similar to negotiation.
C)Can hurt supplier relationships.
D)Can only consider price.

Question 24

Preparing an RFQ or RFP is an important step in:

A)Negotiation.
B)Online reverse auctions.
C)Supplier scorecards.
D)Competitive bidding.

Question 25

A legally binding document that signals to a supplier that goods and services are needed is a(n):

A)Purchase requisition.
B)Electronic data interchange.
C)Purchase order.
D)Supplier relationship management document.

Question 26

Which of the following is true about the use of weighted scoring models for supplier selection?

A)Once developed, the model weights should never change.
B)The supply management department should determine the weights.
C)The highest-scoring supplier should always be selected to receive the business.
D)There is a good deal of subjectivity in developing and using the model.

Question 27

When you need to identify a supplier for a new purchase, the FIRST place that you should look is:

A)A local trade show.
B)The list of your company's current suppliers.
C)The list of suppliers that your company has used in the past.
D)The Web site of industry groups.

Question 28

Negotiation is typically used when:

A)Price is the most important factor.
B)There are many equally qualified suppliers who are willing to compete.
C)Early supplier involvement is needed in new product development.
D)There are standard product specifications that are clear and complete.

Question 29

All of the following are true about supplier scorecards EXCEPT:

A)They reduce the need for incoming quality inspection.
B)They are used to provide performance feedback to suppliers.
C)They are often used to categorize suppliers based on an overall score.
D)They are used to measure supplier performance based on key performance indicators.

Question 30

Advanced Manufacturing Company is evaluating two suppliers for a component sourcing. After much internal discussion, AMC's management has determined that the critical factors in choosing suppliers are: quality, delivery, price, and service. Further, management has rated the importance of these factors as 0.4, 0.3, 0.2, and 0.1, respectively. On a scale of 1 to 5, Supplier A is rated at 5, 3, 3, and 3, respectively. Supplier B's ratings are 4, 4, 3, and 4. Which supplier has the better weighted score?

A)Supplier A
B)Supplier B
C)Neither, they both have the same weighted score.