TEST BANK

CHAPTER 6: PROCUREMENT
Multiple Choice Questions
1. ___________ refers to the raw materials, component parts, and supplies
bought from outside organizations to support a company’s operations.
a. Inbound logistics
b. Procurement
c. Materials management
d. Supply management

2. Procurement costs often range between ___________ and ___________

percent of an organization’s revenues.
a. 60; 80
b. 50; 70
c. 40; 60
d. 30; 50

3. Procurement’s historical focus in many organizations was to ___________.

a. incur minimal supply disruptions
b. use a limited number of suppliers
c. minimize loss and damage
d. achieve the lowest possible cost

4. Procurement and ___________ are viewed as synonymous terms.

a. materials management
b. supply management
c. purchasing
d. inbound logistics

5. ___________ involves an increased focus on identifying and using data

internally and across a supply chain so that a company can consolidate its
purchasing power for enhanced value.
a. Supply management
b. Strategic sourcing
c. Supply chain management
d. Procurement

6. Which of the following is not a potential benefit associated with

procurement cards (p-cards)?
a. There is a reduced number of invoices.
b. Users can make purchases in a more timely fashion.
c. Suppliers can be paid in a more timely fashion.
d. They can be used in non-domestic markets.
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 7. Which of the following is not a potential procurement objective?
a. minimizing procurement costs
b. supporting organizational goals and objectives
c. managing the supply base
d. supporting operational requirements

8. A focus on satisfying internal customers is associated with which

procurement objective?
a. managing the supply base
b. supporting operational requirements
c. supporting organizational goals and objectives
d. managing the purchasing process effectively and efficiently

9. The selection, development, and maintenance of supply sources is

associated with which procurement objective?
a. managing the purchasing process effectively and efficiently
b. supporting operational requirements
c. developing relationships with other functional groups
d. managing the supply base

10. Buying the right products, at the right price, from the right source, at the
right specifications, in the right quantity, and for delivery at the right time to
the right internal customer is associated with what procurement objective?
a. managing the supply base
b. managing the purchasing process effectively and efficiently
c. supporting operational requirements
d. supporting organizational goals and objectives

11. What is the first step in supplier selection and evaluation?

a. Prepare a request for proposal.
b. Prepare a procurement budget.
c. Identify possible suppliers.
d. Identify the need for supply.

12. With respect to the supplier selection and evaluation process,

___________ looks at both the internal and external environment within
which the supply decision is to be made.
a. Identify the need for supply.
b. Identify suppliers.
c. Perform a situation analysis.
d. Evaluate suppliers.

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 13. What is the final step in the supplier selection and evaluation process?
a. Provide feedback.
b. Select suppliers.
c. Implement the decision.
d. Evaluate the decision.

14. Multiple sourcing uses more than one supplier in hopes of increased
competition, improved market intelligence, and ___________.
a. greater supply risk mitigation
b. lower costs per unit
c. increased cooperation
d. increased communication

15. Single sourcing consolidates purchase volume with a single supplier in

hopes of increasing cooperation and communication in the supply
relationship as well as ___________.
a. greater supply risk mitigation
b. increased amounts of competition
c. improved market intelligence
d. lower costs per unit

16. Which of the following statements is false?

a. Supplier selection and evaluation generally involves multiple criteria.
b. The evolution of business practices and philosophies may require new
supplier selection criteria.
c. Selecting suppliers is the final step of the supplier selection and evaluation
process.
d. Some supplier selection criteria may be contradictory.

17. Which of the following would not be part of a supplier audit?

a. supplier’s structure
b. supplier’s resources
c. supplier’s scorecard
d. supplier’s financial and risk health

18. Kraljic’s Portfolio Matrix ___________.

a. provides a framework for evaluating warehousing decisions
b. is used by many managers to classify corporate purchases in terms of their
importance and supply complexity
c. allows managers to evaluate whether to add, or not add, product lines
d. is synonymous with the total cost of ownership

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 19. Bottleneck, leverage, and strategic are categories associated with
___________.
a. Kraljic’s Portfolio Matrix
b. Supplier Audit Matrix
c. Supplier Development Matrix
d. Global Procurement Matrix

20. A degree of aggressive procurement involvement not normally

encountered in supplier selection refers to ___________.
a. supply management
b. supplier development
c. materials management
d. physical supply

21. Supplier development is synonymous with ___________.

a. supplier selection and evaluation
b. procurement
c. materials management
d. reverse marketing

22. Which of the following is not a reason that purchasers are adopting a
more proactive and aggressive role in the procurement process?
a. There are myriad inefficiencies associated with suppliers initiating
marketing efforts toward purchasers.
b. They are achieving a competitive advantage in the supply chain.
c. An excess number of suppliers currently exists.
d. Purchasers may be aware of important benefits that are not known to the
supplier.

23. Which of the following is false?

a. In the factor-input strategy, an organization is seeking low-cost or high-
quality sources of supply.
b. Global procurement refers to buying components and inputs anywhere in
the world.
c. Planning is the first step in global procurement.
d. A market access strategy emphasizes procurement from geographically
close countries.

24. What is the first step in a global sourcing development model?

a. planning
b. specification
c. situation analysis
d. problem recognition
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 25. ___________ is often a major shortcoming of many global procurement
plans.
a. Confiscation
b. Specification
c. Implementation
d. Evaluation

26. What concept refers to when firms consider all the costs that can be
assigned to the acquisition, use, and maintenance of a purchase?
a. activity-based costing
b. cost trade-offs
c. the systems approach
d. total cost of ownership

27. Procuring products from suppliers close to one’s own facilities refers to
___________.
a. agglomeration
b. near-sourcing
c. sustainability
d. outsourcing

28. Which of the following is not a dimension associated with socially

responsible procurement?
a. profit
b. safety
c. the environment
d. human rights

29. With respect to gift giving and gift receiving, a ___________ refers to
money paid before an exchange.
a. kickback
b. agglomeration
c. bribe
d. dovetailing

30. With respect to gift giving and gift receiving, a ___________ refers to
money paid after an exchange.
a. kickback
b. agglomeration
c. bribe
d. dovetailing

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 31. ___________ identifies opportunities to recover revenues or reduce costs
associated with scrap, surplus, obsolete, and waste materials.
a. Recycling
b. Reuse
c. Reverse logistics
d. Investment recovery

32. ___________ materials refer to stock that exceeds the reasonable

requirements of an organization.
a. Waste
b. Excess
c. Obsolete
d. Scrap

33. ___________ materials are no longer serviceable, have been discarded, or

are a by-product of the production process.
a. Waste
b. Obsolete
c. Scrap
d. Excess

34. ___________ materials have no economic value.

a. Waste
b. Scrap
c. Obsolete
d. Excess

35. ___________ refers to a set of technology and finance-based processes

that strive to optimize cash flow by allowing businesses to extend their
payment terms to their suppliers while simultaneously allowing their
suppliers to get paid early.
a. Cash flow management
b. Supply chain finance
c. Flexible payment system
d. Supplier credit float

True-False Questions
1. Procurement refers to the raw materials, component parts, and supplies
bought from outside organizations to support a company’s operations.
2. Procurement’s costs often range between 40 and 60 percent of an
organization’s revenues.
3. Procurement’s historical focus in many organizations was to minimize the
total
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 4. A contemporary procurement manager might have responsibility for
reducing cycle times and for generating additional revenues by collaborating
with the marketing department.
5. Procurement and purchasing are viewed as synonymous terms.
6. Supply chain management refers to a relational exchange approach
involving a limited number of suppliers.
7. Strategic sourcing involves an increased focus on identifying and using data
internally and across the supply chain so that a company can consolidate its
purchasing power for enhanced value.
8. One benefit to procurement cards is that they are easily used outside of
their domestic market.
9. First and foremost, procurement’s objectives must manage the purchasing
process effectively and efficiently.
10. One of procurement’s most important responsibilities involves supplier
selection and evaluation.
11. The first step in supplier selection and evaluation is situation analysis.
12. A benefit to multiple sourcing is increased cooperation and
communication in a supply relationship.
13. Single sourcing consolidates purchase volume with a single supplier with
the hopes of enjoying lower costs per unit.
14. The final step of the supplier selection process is to evaluate the decision.
15. Supplier scorecards involve assessments of a supplier’s structure,
resources, technology, health, and responsibility.
16. Supplier scorecards can be categorical, weighted point, or cost based in
nature.
17. Supplier selection and evaluation generally involve multiple criteria, and
these criteria can vary in both number and importance, depending on the
particular situation.
18. The Optimal Cost Reliability Model is used by many managers to classify
corporate purchases in terms of their importance and supply complexity.
19. Bottleneck refers to the low importance, low complexity category of
Kraljic’s Portfolio’Matrix.
20. Leverage refers to the high importance, low complexity category of
Kraljic’s Portfolio Matrix.
21. Supply management refers to a degree of aggressive procurement not
normally encountered in supplier selection.
22. Supplier development is synonymous with reverse marketing.
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 23. One reason for the growth of the supplier development concept is that
achieving competitive advantage in the supply chain is predicated on
purchasers adopting a more aggressive approach.
24. Global procurement refers to buying components and inputs anywhere in
the world.
25. Global procurement is primarily driven by the input-output and market-
access strategies.
26. Problem recognition is the first step in global procurement.
27. Because global sourcing increases the distance that components and
inputs must be moved, managers must consider the trade-off between
transportation and holding costs.
28. Implementation is often a major shortcoming of many global procurement
plans.
29. When taking an activity-based costing approach, firms consider all the
costs that can be assigned to the acquisition, use, and maintenance of a
purchase.
30. Dovetailing refers to procuring products from suppliers closer to one’s
own facilities.
31. Sustainable procurement refers to the integration of social and
environmental considerations into all stages of the purchasing process.
32. Diversity and philanthropy are two dimensions of socially responsible
procurement.
33. With respect to gift giving and gift receiving, bribes refer to money paid
after an exchange.
34. The relevance, importance, and challenges associated with socially
responsible procurement are likely to lessen in the coming years.
35. Investment recovery identifies opportunities to recover revenues or
reduce costs associated with scrap, surplus, obsolete, and waste materials
36. Investment recovery is often the responsibility of the finance manager.
37. Excess materials refer to stock that exceeds the reasonable requirements
of an organization.
38. Scrap materials are no longer serviceable, have been discarded, or are a
by-product of the production process.
39. Obsolete materials have no economic value.
40. Supply chain finance refers to a set of technology and finance-based
processes that strive to optimize cash flow by allowing businesses to extend
their payment terms to their suppliers while simultaneously allowing
suppliers
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