PART V: EXAMINATION QUESTIONS AND ANSWERS

EXAMINATION QUESTIONS AND ANSWERS

Chapter 1 The Progression to Professional Supply ManagementTrue/False Questions

Note to students, select the answer that is true or false most of the time, few situations in social sciences are simply black or white.1. Purchasing is primarily a clerical activity.

Answer: False

2. Supply management is also known as procurement at many firms and government agencies.

Answer: True

3. Strategic sourcing starts with the analysis of the supply market.

Answer: False

4. Materials have always been vital in the history of industrial growth.

Answer: False

5. In the history of power source relationships, percentage wise, labor costs went down while materials costs went up.

Answer: True

6. Supply management plays a major role in improving the bottom line by driving sales up and costs down.

Answer: True

7. Generally speaking, firms with the fasted time to market with new products by using cross functional teams including suppliers, enjoy higher profits.

Answer: True

8. Some 75% of many manufacturers quality problems can be traced back to defects in purchased materials.

Answer: True

9. Of the factors that make up total cost of ownership (TCO), the big majority of this cost is in the acquisition cost.

Answer: False

10. Lean thinking is primarily concerned with conversion cost.

Answer: False

11. When supply savings and increased sales due to superior supply chain management are combined, it is not uncommon to increase ROI 50%.

Answer: True

12. The term supply chain means all the members are linked together in one master contract covering a long time period.

Answer: False

13. The term value chain includes both the upstream and downstream portion of the supply chain.

Answer: True

14. The extended enterprise means a group of firms collaborating as a supply alliance, i.e. a strategic network or virtual corporation.

Answer: True

15. The key role of a supply management professional is one of leadership.

Answer: True

16. The final step in the typical purchasing cycle for materials in to audit the invoice.

Answer: False

17.Supply management must be a core competency based on its impact on the bottom line. Answer: True

18.SM requires change, driven by upper management.

Note: SM means Supply Management

Answer: True

19.World-class supply managers proactively improve supply processes. Answer: True

20.When a group or network of firms collaborates in a partnership (alliance) fashion; the collaboration is sometimes referred to as a strategic network, virtual corporation, or extended enterprise. Answer: True

21.When the group of firms view each other as partners and collaborate effectively for the good of the larger group, then they leave established an extended enterprise characterized by virtual integration. Answer: True

22.Strategic sourcing is about understanding the markets you're purchasing from inside and out and learning from your own organization and your suppliers' organizational processes, working as a mediator between suppliers and your organization, and capturing information and using it to improve relationships. Answer: True

23.Strategic sourcing requires two-way continuous improvement process work from each organization. Answer: True

24.Maintenance is an issue that should be considered after equipment has been purchased. Answer: False

25.Supply management does not have much of an impact on the bottom line. Answer: False

26.SM does not require change driven by upper management. Answer: False

27.World-class supply managers need not improve supply processes before the processes have been implemented. Answer: False

28.When a group or network of firms collaborates in a partnership (alliance) fashion; the collaboration is sometimes referred to as a tactical network. Answer: False

29.When the group of firms view each other as partners and collaborate effectively for the good of the larger group, then they leave established a transactional relationship. Answer: False

30.Strategic sourcing is about dominating the markets you're purchasing from through force and intimidation, never letting the supplier forget that you are the boss. Answer: False

31.Strategic sourcing requires one-way improvement efforts where the buying firm tells the supplying firm what is best. Answer: False Multiple Choice Questions

32.

The five right objectives of purchasing are:

A)Quality, Quantity, Price, Time, Place

B)Cost, Service, Specs, Time, Quantity

C)Place, Time, Price, Ethics, Contract

D)Agent, Supplier, Contract, Price, Quantity E) Logistics, time, Quality, Price, Quantity

Answer: A

33.

The term supply management is broader than the purchasing function because it::

A)includes marketing

B)includes operations/production

C)includes managing relationships with suppliers

D)includes negotiating enforceable contracts E) includes measuring the total cost of ownership

Answer: C

34.

Strategic sourcing differs from tactical purchasing in that this activity periodically:

A)analyzes the organizations spend

B)analyzes the supply market

C)develops sourcing strategy and plans

D)outsources basic business services such as security E) A, B &C

Answer: E

35.

Supply managements impact on the bottom line includes the ability to increase sales by:

A)reducing the development time of new products by using cross functional teams including suppliers

B)obtaining the lowest possible prices

C)finding suppliers with the fastest delivery times

D)all of the above E) none of the above

Answer: A

36.

Lean Thinking can help reduce total cost of ownership (TCO), this means the supply team in the entire chain must work to:

A)lower conversion cost

B)reduce cycle time cost

C)reduce risk cost

D)reduce non-value costs E) reduce processing costs

Answer: D

37.

The major reason supply management can greatly improve a firms return on investment (ROI) is:

A)the reduction of post ownership costs

B)the reduction of downtime costs

C)the reduction of quality costs

D)the reduction of acquisition cost E) every dollar saved in purchasing is = to a new dollar of profit

Answer: E

38.

The concept of a supply chain means we analyze and manage:

A)a chain or network of upstream suppliers

B)converters

C)original equipment manufacturers (OEM)

D)extractors E) key suppliers

Answer: A

39.

The term value chain means we include the supply chain in our analysis and management with:

A)end consumer

B)the downstream portion of the chain and distribution, such as marketing

C)channels of distribution

D)financial impact studies E) opportunity cost

Answer: B

40.

When we add the term networks to the supply and value chains, we are emphasizing the need to focus on and interactively communicate with:

A)suppliers

B)distributors

C)final consumers

D)tiers of suppliers E) all support organizations

Answer: C

41.

The term extended enterprise is an extension of supply networks, we now have:

A)true value creation

B)real value maintenance

C)innovative and virtual integration

D)a network of firms collaborating in partnership E) adaptive networks

Answer: D

42.

In Appendix A, The Mechanics of Supply Management, the typical purchasing cycle for materials starts with:

A)investigating and selecting the supplier

B)negotiating a contract

C)defining and describing the need

D)preparing the purchase order E) communicating the need

Answer: C

43.

Which statement about SM is not true?

A)SM recognizes the global environment

B)SM is a philosophy

C)SM is synonymous with logistics

D)SM is proactive

E)SM spans functional boundaries Answer: C

44.Which statement about SM is not true?

A)SM spans company borders

B)SM focuses on optimization of the supply chain

C)SM requires change from upper management

D)SM requires continuous improvement

E)SM relies on mathematical models Answer: E

45.Which action is not necessary in implementing SM?

A)Senior management must recognize supply management's critical nature to the firm

B)Senior management must support the required transformation of supply management to world class

C)Firms must know where they are in relation to where they want to be

D)Firms must benchmark best-in-class practices and develop metrics

E)Firms must force their suppliers into world-class compliance Answer: E

46.Which bullet is not true of the clerical stage of SM?

A)Relationships: personal

B)Design: suppliers are involved

C)Bottom line impact: overhead

D)Reporting: very low level

E)Data: not available Answer: B

47.Which bullet is not true of the clerical stage of SM?

A)Process Paperwork

B)Confirm actions of others

C)Emphasis: convenience

D)Total cost of ownership focus

E)Relationships: personal Answer: D

48.Which bullet is not true of the mechanical stage of SM?

A)Engage in eCommerce II

B)Transactional focus

C)React to requisitions

D)Not involved in key source selections

E)Emphasis: purchase price Answer: A

49.Which bullet is not true of the mechanical stage of SM?

A)Relationships: transactional and adversarial

B)Bottom line impact: revenue neutral

C)Active in source selection

D)Reporting: low level

E)Data: used to expedite Answer: C

50.Which bullet is not true of the proactive stage of SM?

A)Coordinate procurement system

B)Develop suppliers

C)Long-term contracts

D)Involved in development of requirements

E)Not involved in key source selections Answer: E

51.Which bullet is not true of the proactive stage of SM?

A)Involved in development of requirements

B)Short-term contracts

C)Plan for recurring requirements

D)Procurement adds value

E)Active in source selection Answer: B

52.Which bullet is not true of the proactive stage of SM?

A)Near defect free materials and services

B)Emphasis: cost, quality and timeliness

C)Reporting: low level

D)Relationships: transactional and collaborative

E)Bottom line impact: profit contributor Answer: C

53.Which bullet is not true of the proactive stage of SM?

A)Reporting: upper management

B)Data: facilitates sourcing and pricing

C)Fulfill social responsibilities

D)Confirm actions of others

E)Engage in electronic commerce Answer: D

54.Which bullet is not true of the world-class stage of SM?

A)Supply management a core competence

B)Strategic sourcing

C)Bottom line impact: overhead

D)Manage risk

E)Emphasis: total cost relationships Answer: C

55.Which bullet is not true of the world-class stage of SM?

A)React to requisitions

B)Relationships: transactional, collaborative and alliance

C)Bottom line impact: increase shareholder value

D)Reporting: member, executive group

E)Data: facilitates strategic planning Answer: A

56.Which bullet is not true of the world-class stage of SM?

A)Monitor supply environment

B)Develop and implement commodity strategies

C)Supply base by design

D)Relationships: personal

E)Develop and manage alliances and networks Answer: D

57.Which bullet is not true of the world-class stage of SM?

A)Time based competition

B)Bottom line impact: overhead

C)Virtually defect free materials and services

D)Leverage supplier technology

E)Integrated supply strategy Answer: B

58.Which is not true about supply chains and networks?

A)The supply chain extends from the ultimate customer back to Mother Earth

B)The chain is viewed as a whole, a single entity rather than fragmented groups

C)Money enters the supply chain only when the ultimate customer buys a product or service

D)Supply chains are relatively easy to describe and visualize

E)The term supply chain is a more accurate description than supply network Answer: E

59.Which of the following is generally not true about supply management and the bottom line?

A)Purchased items account for a large percentage of the cost of goods sold. Hence, a reduction in cost of purchased goods has a major impact on the bottom line

B)A Euro increase in sales is equivalent to a Euro decrease in materials cost in impacting the bottom line

C)Outsourcing allows firms to focus on their core competencies, which reduced potential for waste, which then can improve the bottom line

D)A dollar saved in materials cost is usually considered a dollar increase in profit, which directly translates into bottom line savings

E)Supply management can work collaboratively with suppliers to discover opportunities to lower costs, which ultimately improves the bottom line Answer: B

60.Which of the following is not one of The Four Phases of Supply Management?

A)Generation of Requirements

B)Sourcing

C)Pricing

D)Profit Sharing

E)Post Award Activities Answer: D

61.Which of the following bullets is not true about supply management systems?

A)Supply management systems require software optimization models to run effectively

B)Virtually all firms have supply management systems

C)A cross-functional approach to supply management systems enables the lowest total cost

D)Carefully selected suppliers should also join in-house cross-functional teams in developing supply management systems

E)Supply management systems that include reverse auctions, exchanges, and real-time electronic transmissions only increase the importance of supply management Answer: A

62.Which of the following is not a strategic supply management activity?

A)Activity Based Costing

B)Environment Monitoring

C)Integrated Supply Strategy

D)Commodity Strategies

E)Data Management Answer: A

63.Which of the following is not a strategic supply management activity?

A)Corporate Strategic Plans

B)Simulation Modeling

C)Strategic Sourcing

D)Strategic Supply Alliances

E)Supply Chain / Supply Networks Answer: B

64.Which of the following is not a strategic supply management activity?

A)Environment Monitoring

B)Supply Chain / Supply Networks

C)Operations Research

D)Social Responsibilities

E)Understand Key Supply Industries Answer: C

EXAMINATION QUESTIONS AND ANSWERS

Chapter 2 Organizational IssuesTrue/False Questions

17. The lower purchasing is on the organization chart, the less impact the supply function will have on corporate strategy.

Answer: True

18. The degree of competition for critical materials will be a key factor in the importance of supply management.

Answer: True

19. Even in a firm, which primarily purchases small numbers of standard production parts, the supply department can be a significant value as a profit center.

Answer: False

20. The mind set or focus on internal processes usually produces the kind of detailed work necessary to achieve significant material savings.

Answer: False

21. The smaller the organization, the less likely the purchasing operations will be strategic.

Answer: True

22. Supplier relationship management includes motivation, assistance, incentives, cooperation, collaboration and on occasion, penalties.

Answer: True

23. Managing supplier relationships is a strategic responsibility.

Answer: False

24. Managing contract and blanket order releases are operational responsibilities.

Answer: True

25. Consolidation provides the opportunity to standardize, simplify and leverage material purchases.

Answer: True

26. Hybrid organizational structures often use cross functional teams to achieve the best of both centralized and decentralized decision making.

Answer: True

27. E-commerce has strengthened the case for decentralization of purchasing.

Answer: False

28. The materials management organization structure is now obsolete.

Answer: False

29. Supply chain management expanded the materials management structure functions to include all the stake holders and total demand management.

Answer: True

30. Cross function teams are often the key step in a firms evolution to supply chain management.

Answer: True

31. Aside from the benefits of synergy, cross functional teams provides input from all affected functions.

Answer: True

32. One of the big challenges and problems with cross functional teams is the lack of time for the team member participation and role conflict.

Answer: True

17.Cross functional teams operate best when they use the brainstorming approach to innovative thinking. Answer: False

18.The key first step in establishing cross functional teams is obtaining executive sponsorship.Answer: True

19.Its best to let a cross functional team train itself as they learn how to communicate with one another. Answer: False

20.One of the key skills for any leader is to be an effective listener. Answer: True Multiple Choice Questions

21.The importance of supply management in any specific firm is determined by the following factors:

A)availability of materials and services

B)absolute dollar volume of purchases

C)percentage of product cost represented by materials and services

D)types of materials and services purchased F) All of the above

Answer: E

22.Of the purchasing/supply responsibilities and activities, ______ becomes more important as the function becomes responsible for supply and value network chains:

:

A) buying supply management

B)executive management

C)strategic planning and research work

D)contract and relationship management E) Supplier liaison work

Answer: C

23.Managing supplier relationships, contracts, placement of purchase orders and other transaction focused activities are _____ responsibilities:

:

A) strategic

B)short term

C)long term

D) operational E) action

Answer: D

24.Aside from reducing potential duplication of efforts, the major advantage of centralized purchasing is:

:

A) improved inventory control

B)leveraged volume purchasing

C)consolidation

D) transportation savings E) lower administrative costs

Answer: B

25.When a firms major activity is research and development, the firm will most likely use:

:

A) centralized purchasing

B)headquarter purchasing

C) decentralized purchasing

D) hybrid purchasing structure E) a specialized purchasing staff at headquarters

Answer: C

26.E-commerce has facilitated the use of:

:

A) centralized purchasing

B)decentralized purchasing

C)hybrid purchasing

D) none of the above E) A, B & C

Answer: C

27.The materials management organization structure paved the way for _____ structure:

:

A) value network chain structures

B)supply chain management structure

C)procurement management structure

D) purchasing centralization E) purchasing decentralization

Answer: B

28.The most significant advantage of the supply chain management structure is:

:

A) it facilitated a total systems approach to stimulate integration

B)it uses the internet to extract key information

C)it increases the visibility of the purchasing department

D) it focuses management attention on quality E) it reveals that inventory costs are often understated

Answer: A

29.Cross functional teams have proven to help:

:

A) break down functional silos

B)reduce new product development time

C)facilitate integrated planning and coordination

D) stimulate engineering change management control E) all of the above

Answer: E

30.The key prerequisite to having cross functional teams is:

:

A) effective team leaders

B)qualified team members

C)a clear team charter

D) adequate training E) executive sponsorship

Answer: EEXAMINATION QUESTIONS AND ANSWERS

Chapter 4 A Portfolio of Relationships True/False Questions

1.Systematically selected supply alliances built on institutional trust help organizations complete their evolution to SM. Answer: True

2.The transformation from reactive and mechanical purchasing to proactive procurement and on to SM, parallels a similar transformation in relationships between buyers and suppliers. Answer: True

3.Prior to the 1980s, most purchasing relationships were reactive. Interaction between vendor and purchasing resulted in outcomes where one's gain would be the other's loss. Answer: True

4.During the late 1980's and early 1990's, partnerships became popular. The authors of the textbook argue that there are problems with the term partner. One of the problems given in the text was that the implications of the term partner were not well understood. Answer: True

5.During the late 1980's and early 1990's, partnerships became popular. The authors of the textbook argue that there are problems with the term partner. One of the problems given in the text was that legal problems and concerns inevitably arose regarding the term. Answer: True

6.Collaborative relationships are typically used for the procurement of non-commodity items and services. Answer: True

7.A collaborative relationship frequently is an appropriate first step on the road to a strategic alliance. Answer: True

8.The fundamental difference between collaborative relationships and supply alliances is the presence of institutional trust in alliances. Answer: True

9.The failure to develop and manage institutional trust is the principle reason that so many supply alliances fail. Answer: True

10.Power is a topic that makes people uncomfortable. Answer: True

11.Power is at the heart of all business relationships. Answer: True

12.A captive buyer is held hostage by a supplier free to switch to another customer. Answer: True

13.A captive supplier makes investments in order to secure a portion of the buyer's business, with no assurance of sufficient business to recoup the investment. Answer: True

14.Successful supply chain management requires the effective and efficient management of a portfolio of relationships. Answer: True

15.One of the advantages of transactional relationships is that relatively less purchasing time and effort are required to establish price. Answer: True

16.One of the advantages of transactional relationships is that lower skill levels of procurement personnel are required. Answer: True

17."Collaboration is the new imperative," declares Michael Dell. Answer: True

18.Collaborative and alliance relationships tend to result in lower total costs and improve performance of the supply chain. Answer: True

19.A firm can evolve to SM without any relationships that are built on institutional trust. Answer: False

20.The transformation from reactive and mechanical purchasing to proactive procurement and on to SM can be done without top management commitment. Answer: False

21.Prior to the 1980s, most purchasing relationships were proactive. Answer: False

22.Since it has become a well-known term and is established in the legal system, the authors of the textbook support the use of the term partner Answer: False

23.Collaborative relationships are typically used for the procurement of commodity items. Answer: False

24.A transactional relationship frequently is an appropriate first step on the road to a strategic alliance. Answer: False

25.The fundamental difference between collaborative relationships and supply alliances is the presence of cost measurement and information technology in alliances. Answer: False

26.Institutional trust does not require much management. Answer: False

27.A captive buyer is buyer that uses single sourcing. Answer: False

28.A captive supplier makes investments in order to secure a portion of the buyer's business, but it is given assurance of sufficient business to recoup the investment through legal contracts. Answer: False

29.Successful supply chain management requires that all relationships with suppliers be either collaborative or alliances. Answer: False

30.One of the advantages of collaborative relationships is that relatively less purchasing time and effort are required to establish price than in transactional relationships. Answer: False

31.One of the advantages of collaborative relationships is that lower skill levels of procurement personnel are required. Answer: False

32."Greater price competition through the Internet is the new imperative," declares Michael Dell. Answer: False

33.Collaborative and alliance relationships tend to result in higher total costs for non-commodity products than conducting the same business using transactional relationships. Answer: False Multiple Choice Questions

34.Which of the following is not one of the three types of buyer supplier relationships presented in the textbook?

A)Transactional

B)Transcendental

C)Collaborative

D)Alliance Answer: B

35.Which of the following is not a transactional relationship characteristic?

A)Long-term contract

B)An absence of concern

C)One of a series of independent deals

D)Costs, data and forecasts are not shared

E)Price is the focus of the relationship Answer: A

36.Which of the following is not a transactional relationship characteristic?

A)One of a series of independent deals

B)Costs, data and forecasts are not shared

C)A minimum of purchasing time and energy is required to establish prices

D)Transactional purchases lend themselves to e-procurement

E)Parties work together to develop designs Answer: E

37.Which of the following is not a disadvantage of transactional relationships?

A)Lowest Total Cost of Ownership is usually forced out of suppliers

B)Suppliers provide the minimum service required

C)Less effective performance by suppliers

D)Customers are subject to more supply disruptions

E)Supplier is not motivated to invest time and energy development of buyer's products Answer: A

38.Which of the following is not a disadvantage of transactional relationships?

A)Potential for communication difficulties

B)Expediting and monitoring of incoming quality

C)Inflexible when flexibility may be required

D)No inspection needed due to low prices

E)Tend to result in more delivery problems Answer: D

39.Researchers Stanley and Pearson found that there are three most important factors in a successful buyer-supplier relationship. Which of the following is not one of the factors?

A)Two-way communication

B)Paying a fair and reasonable price

C)The supplier's responsiveness to supply management's needs

D)Clear product specifications Answer: B

40.Which of the following is not one of the outcomes that collaborative relationships tend to foster?

A)Longer term contracts

B)Reduction of risk for suppliers

C)Reducing total costs

D)A focus on price

E)Improvement of processes Answer: D

41.Which of the following is not one of the outcomes that collaborative relationships tend to foster?

A)Decreased information sharing

B)Increased investment in R & D

C)Increased investment in training

D)Increased investment in equipment

E)Better focus on customer needs Answer: A

42.Which of the following is not one of the benefits of supply alliances?

A)Lower total costs

B)Reduced time to market

C)Increased inspection levels

D)Improved technology flow from suppliers

E)Improved continuity of supply Answer: C

43.Which of the following is not an attribute of alliances?

A)Continuous improvement

B)Contracts that are difficult to interpret

C)Interdependence and commitment

D)Atmosphere of cooperation

E)Informal interpersonal connections Answer: B

44.Which of the following is not an attribute of alliances?

A)Internal infrastructures to enhance learning

B)Openness in all areas of the relationship

C)Negotiations result in one winner

D)A living system

E)A shared vision of the future Answer: C

45.Which of the following is not an attribute of alliances?

A)Ethics take precedence over expediency

B)Adaptable in the face of change

C)Penalties are used to guide performance

D)Win-win negotiations

E)Executive level commitment Answer: C

46.Which of the following is not one of the issues that affect a supplier's assessment of a buying firm?

A)Cash Flow

B)Openness and Approachability

C)Availability

D)Professionalism

E)Gifts and gratuities Answer: E

47.Which of the following is a situation wherein an alliance may be appropriate?

A)Price Volatility

B)Synergistic collaborative design opportunities exist

C)Demand Volatility

D)High Switching Likelihood with High Switching Costs

E)No Partnership/Alliance-Capable Supplier for the Item Answer: B

48.Which of the following is a situation wherein an alliance may be appropriate?

A)Demand is Stable

B)No Partnership/Alliance-Capable Supplier for the Item

C)No Partnership/Alliance-Capable Supplier in the Geographic Area

D)Rapid Technological Change

E)Mismatch of Clock Speed Answer: A

49.Which of the following is a situation wherein an alliance may be appropriate?

A)Supplier Dependency Creation

B)Neglected Areas

C)Suppliers Seeking to Reduce Competition

D)Low Switching Likelihood with Low Switching Costs

E)No leverage from Partnership Answer: D

50.Which of the following is a situation wherein an alliance may be appropriate?

A)High Switching Likelihood with High Switching Costs

B)No Partnership/Alliance-Capable Supplier in the Geographic Area

C)No Hard Savings from Partnership

D)No Internal Customer Buy-In

E)Price is Stable Answer: E

51.Developing and managing collaborative relationships require supply professionals that possess the all of the following skills and attitudes except one in the following list. Which skill in the following list is not required?

A)Recognize the benefits of collaboration

B)Ability to identify, obtain and use data

C)Able to work in chaos and uncertainty

D)Agile, flexible, and highly

E)Ability to develop information systems Answer: E

52.Which of the following is not an e-Commerce trap presented in the textbook?

A)Gilding the pig

B)The Magic pill

C)Shooting the moon

D)Supplier equality Answer: C

53.Which of the following statements is not true about trust?

A)Trust is one of the key factors that differentiate the three classes of relationships.

B)The simplest definition of trust according to the textbook is being confident that the other party will do what it says it will do.

C)Transactional relationships are completely void of trust

D)Some level of trust must be present in all three types of relationships

E)The level of trust increases with collaborative relationships and becomes an essential characteristic with strategic alliances Answer: C

54.Which of the following is not an attribute of institutional trust?

A)Trust exists if it is written into a contract

B)Developed over time

C)Internal trust is developed before external trust

D)Based on individual and institutional integrity

E)It is greater than individual trust. Answer: A

55.Which of the following is not an attribute of institutional trust?

A)It can be developed quickly

B)Trust and relationship are viewed as investments

C)Partners have access to other's strategic plans

D)Relevant costs and forecasts are shared

E)When key individuals leave, fingerprints are left behind that hold the relationships together Answer: A

56.Which of the following is not an attribute of institutional trust?

A)Informal agreements are as good as written

B)Tactical plans are shared, but not strategic plans

C)Both parties are sensitive to the cultural bridge

D)Relationship is adaptable in the face of change

E)Both firms recognize the interdependency Answer: B

57.Which of the following is not an attribute of institutional trust?

A)Sharing information is a means of developing trust

B)Based only on institutional integrity

C)Conflict in the relationship is openly addressed

D)Rights, desires, and opinions are considered

E)Firms have mutual goals Answer: B

58.Which of the following is not an attribute of institutional trust?

A)Recognizes trust has different cultural meanings

B)Both CEO's make a personal investment

C)Senior managers from both firms commit

D)Sharing of information is discouraged

E)Ethical issues are freely brought up without fear Answer: D

59.Which of the following is not an action to develop and manage trust?

A)An inter-firm team is appointed

B)Discussions conducted in an atmosphere of respect

C)A team of attorneys is appointed to manage the relationship

D)Inter-firm team receives guidance and training in the implementation of practices

E)Listening, understanding, time, energy are invested Answer: C

60.Which of the following is not an action to develop and manage trust?

A)Senior leaders at both firms act as champions

B)A communication system is developed

C)Base negotiations on the zero-sum game

D)Actions to develop and measure trust are created

E)Risks and rewards are addressed openly Answer: C

61.Which of the following is not an action to develop and manage trust?

A)Hold back critical information from the alliance partner, just in case

B)Negotiation is used as a trust-building opportunity

C)Both firms work together on technology plans

D)Technical personnel from both firms visit the other

E)Contractual relations are designed to enhance trust Answer: A

62.Which of the following is not an action to develop and manage trust?

A)Contract relations focus on continuous improvement

B)Team and relationship skills are developed early

C)A contracting philosophy and a legal infrastructure are designed to the relationship

D)Develop multiple backup suppliers to assure continuity of supply

E)Institutional trust is measured and managed Answer: D

63.The Quaker Oats case history demonstrates that in addition to having the trust required to form an alliance:

A)Both parties must have mutual respect

B)Volume quantities must be fixed

C)There is still a need for a comprehensive contract, including such questions and answers as what if?

D)It is not necessary to have open book accounting

E)Legal provisions are still necessary Answer: CEXAMINATION QUESTIONS AND ANSWERS

Chapter 9 Purchasing Services True/False Questions

1.The ideal services supplier listens to what users complain about most and then designs service products that supply the market's missing ingredients. Answer: True

2.Satisfaction is built into service products rather than added as an afterthought. Answer: True

3.The procurement of services is one of supply management's most interesting and challenging assignments. Answer: True

4.Supply Management frequently must assume a far more active role in all phases of services procurement than when purchasing materials. Answer: True

5.The four formats for statements of work given in the textbook are: performance, functional, design and level-of-effort. Answer: True

6.In planning the statement of work, all of the following should be considered: performance measurements, deliverables, delivery schedule, performance schedule and service levels. Answer: True

7.In writing an effective S.O.W. as given in the textbook, the S.O.W. should explain the interrelationship between tasks, identify all constraints and limitations and be clear about phase requirements. Answer: True

8.In writing an effective S.O.W. as given in the textbook, the S.O.W. should: limit abbreviations to those in common usage, include procedures and eliminate extraneous statements. Answer: True

9.The conventional method and the owner as a contractor are alternative methods of purchasing construction services as presented in the textbook. Answer: True

10.The ideal services supplier focus on cost reduction ahead of customer satisfaction. Answer: False

11.Satisfaction is cannot be built into service products but must be added as an afterthought. Answer: False

12.The procurement of services is a relatively simple assignment in supply management that usually results in lower pay for the supply manager. Answer: False

13.Supply management frequently must assume a less active role in services procurement than when purchasing materials. Answer: False

14.The four formats for statements of work given in the textbook are: performance, functional, design and firm fixed price. Answer: False

15.In planning the statement of work, all of the following should be considered: statistical process control, process capability analysis, and the sampling methodology. Answer: False

16.In writing an effective S.O.W. as given in the textbook, the S.O.W. should not include explanations of the interrelationship between tasks or constraints and limitations. Answer: False

17.In writing an effective S.O.W. as given in the textbook, brevity should be used by utilizing as many abbreviations as possible and not including procedures and or extraneous statements. Answer: False

18.The Constraint-Based Method is one methods of purchasing construction services as presented in the textbook. Answer: False Multiple Choice Questions

19.Which of the following is not one of the four formats for statements of work?

A)Performance S.O.W., which details everything the buyer wants

B)Functional S.O.W., which defines what the buyer is trying to do

C)Design S.O.W., which is the most detailed type of statement of work

D)Development S.O.W., which specifies the assistance that a buying firm must provide the supplying firm during the length of the contract

E)Level-of-Effort S.O.W., which is a specialized version of the performance statement of work Answer: D

20.Which is usually not included in planning the statement of work?

A)Work approvals

B)Process flows in the supplier's facility

C)Use of subcontractors

D)Authorized personnel

E)Exhibits, schedules, and attachments Answer: B

21.Which is usually not included in planning the statement of work?

A)Second and third tier supplier obligations

B)Description of the work

C)Schedule

D)Specifications and requirements

E)Quality requirements Answer: A

22.Which is usually not included in planning the statement of work?

A)Performance measurements

B)Deliverables

C)Delivery and performance schedule

D)Service levels

E)Local buying requirements Answer: E

23.Which is usually not included in writing the SOW?

A)Quality monitoring system

B)Total cost of ownership

C)Personnel plan

D)Performance and payment bonds

E)Metrics Answer: B

24.Which of the following is not one of the tips on writing an effective S.O.W. given in the textbook?

A)Explain the interrelationship between tasks

B)Identify all constraints and limitations

C)Include standards that will make performance measurement possible and meaningful

D)Include clause for punitive damages to assure compliance

E)Be clear about phase requirements Answer: D

25.Which of the following is not one of the tips on writing an effective S.O.W. given in the textbook?

A)Be clear

B)Use active, not passive tenses

C)Utilize legalese to hide negative issues

D)Be precise

E)Spell out the buyer's obligations carefully Answer: C

26.Which of the following is not one of the tips on writing an effective S.O.W. given in the textbook?

A)Limit abbreviations to those in common usage

B)Include procedures

C)Do not over specify or overstate

D)Always integrate escape clauses

E)Eliminate extraneous statements Answer: D

27.Which of the following is not a tip given in the textbook for selecting service contractors?

A)Partner with users

B)Engage in reciprocity

C)Learn from the past

D)Update specifications

E)Minimize assumptions Answer: B

28.Which of the following is not a tip given in the textbook for selecting service contractors?

A)Minimize assumptions

B)Encourage questions

C)Facilitate comparison

D)Play hardball

E)Plan evaluation Answer: D

29.Which of the following is not an alternative method of purchasing construction services presented in the textbook?

A)Conventional Method

B)Cost Plus Discretionary Expenses

C)Design and Build, Agreed Price Method

D)Design and Build, Cost-Reimbursable Method

E)The Owner as a Contractor Answer: B EXAMINATION QUESTIONS AND ANSWERS

Chapter 10 Outsourcing True/False Questions

1.Outsourcing has become a way to increase an organization's flexibility to meet rapidly changing market conditions, focus on core competencies and develop competitive advantage. As a result, the need for SM has intensified and positioned supply managers as agents of strategic change critical to supply chain success. Answer: True

2.Outsourcing all non-critical activities is a trend where the idea is to achieve significant cost leverage. Answer: True

3.To identify non-critical activities, the firm's core competencies must be defined. Answer: True

4.Many companies are not readily staffed to keep a company competitive in e-business. As a result, companies are outsourcing infrastructure development and maintenance to Netsourcers. Answer: True

5.Firms are becoming more aware of the strategic dimension of the make-or-buy decision. Answer: True

6.As technology has advanced most manufacturing firms have become much more specialized. Answer: True

7.Cost of materials has continued to increase in many industries, which means that the make or buy outsourcing decision must be reinvestigated from time to time for even stable demand products. Answer: True

8.Outsourcing decreases an organization's flexibility to meet rapidly changing market conditions, but it can usually reduce total costs in the long-term. Answer: False

9.Outsourcing all critical activities is a trend where the idea is to achieve significant cost leverage. Answer: False

10.Netsourcers are internal supply management specialists that keep a company competitive in e-business. Answer: False

11.As technology has advanced, most manufacturing firms have become much more generalized. Answer: False Multiple Choice Questions

12.Which of the following is not true about outsourcing?

A)Outsourcing is increasing rapidly in not just materials, many business functions are being outsourced

B)Outsourcing should be used for all materials when suppliers are available

C)Outsourcing can enable leveraging of the supplier's expertise and increases in innovation

D)Outsourcing can result in lower staffing levels

E)Outsourcing can result in reduced costs and more flexibility Answer: B

13.Which of the following is not a strategic issue in making the outsourcing decision?

A)The Issue of Short-term Vulnerabilities

B)Core Competencies

C)Supplier Dominance

D)The Creation of Strategic Vulnerabilities

E)The Dangers of Vertical Integration Answer: A

14.From a strategic level, which of the following items is the most logical to outsource?

A)An item that can be bought and sold in a commodity exchange

B)An item that is critical to the success of the product

C)An item that requires specialized design, manufacturing skills or equipment

D)An item that fits well within the firm's core competencies Answer: A

15.Which of the following is not a reason to investigate the make or buy decision at the tactical level?

A)If you currently outsource and the supplier suddenly has poor performance

B)Changing sales demand in the short term

C)Restricted manufacturing capability due to a breakdown

D)Increased manufacturing capability exists due to reduced sales of other items

E)If the part under consideration is still in the design stage Answer: E

16.Which of the following is a consideration that favors buying a product?

A)Cost considerations make in-house production less costly

B)Desire to integrate plant operations

C)Stable work force is desired in a period of rising sales

D)Use of excess plant capacity

E)Control over production Answer: C

17.Which of the following is a consideration that favors buying a product?

A)Control over quality

B)Multiple-source policy

C)Design secrecy required

D)Unreliable suppliers

E)Desire to maintain a stable work force in a period of reduction of sales Answer: B

18.Which of the following is a consideration that favors making a product?

A)Unreliable suppliers

B)Stable work force is desired in a period of rising sales

C)Multiple-source policy

D)Indirect managerial control considerations

E)Procurement and inventory considerations Answer: A

19.Which of the following is a consideration that favors making a product?

A)Limited production facilities

B)Cost considerations dictate that it is less expensive to buy

C)Desire to maintain a stable work force in a period of reduction of sales

D)Small-volume requirements

E)Suppliers' specialized know-how Answer: C

20.Which of the following is a major element typically included in a to buy cost analysis?

A)Delivered purchased material costs

B)Transportation costs

C)Direct labor costs

D)Any follow-on costs stemming from quality and related problems

E)Incremental inventory carrying costs Answer: B

21.Which of the following is a major element typically included in a to buy cost analysis?

A)Incremental factory overhead costs

B)Incremental managerial costs

C)Incremental purchasing costs

D)Incremental costs of capital

E)Receiving and inspection costs Answer: E

22.Which of the following is a major element typically included in a to make cost analysis?

A)Direct labor costs at your facility

B)Purchase price of the part from the supplier

C)Transportation costs

D)Receiving and inspection costs of incoming goods

E)Any follow-on costs related to quality or service provided by the supplier Answer: A

23.Which one of the following points is not a reason that Netsourcing has become popular?

A)Netsourcing enables a quick e-business presence

B)Netsourcing provides supply managers that flexibility to make changes

C)Netsourcing can help create a sustained performance

D)Netsourcing can provide support without the need to train or hire specialized personnel

E)Netsourcing can completely replace supply management using intelligent agents Answer: E

24.Which one of the following points is not a reason that the Make-or-Buy Decision is often a volatile decision?

A)Rigid formulas and rules of thumb are often used, which are often a poor choice to apply

B)The make-or-buy question is influenced by a multitude of diverse factors that are constantly changing

C)Companies do not support promotions based on cost savings

D)The relevant factors for the decision often vary immensely from one firm to another

E)Companies often do not periodically evaluate the effectiveness of their past decisions to generate information helpful in guiding future decisions Answer: C

25.Which of the following points is not considered a danger of outsourcing?

A)Loss of control

B)Loss of client focus

C)Loss of centralization

D)Loss of clarity

E)Loss of cost control Answer: C

26.Which of the following points is not considered a danger of outsourcing?

A)Loss of cost control

B)Ineffective management

C)Loss of confidentiality

D)Double outsourcing

E)Lack of responsibility Answer: E

27.Which of the following activities or steps was not included in the typical framework for outsourcing provided in the textbook?

A)Development of a strategic roadmap

B)Development of a decision flowchart

C)Development of a tactical roadmap

D)Development of a transition back plan

E)Development of a review system Answer: C Burt, Petcavage and Pinkerton Supply Mangement, 8th editionBurt, Petcavage and Pinkerton Supply Mangement, 8th edition