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Bank SCM tủ - SCM201

Working in groups (Trường Đại học FPT)

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CHAP 1
T/F: The development of strategic purchasing practices can only help a company
maintain its competitive position in a rapidly changing business environment.
false
T/F: Global sourcing is a requirement and no longer a luxury for most firms.
true
T/F: Sophisticated customers, both industrial and consumer, no longer talk about price
increases - they demand price reductions!
true
T/F: An abundance of competitors and choices have conditioned customers to want
higher quality, faster delivery, and products and services tailored to their individual
needs at a higher total cost.
false
T/F: The availability of low-cost domestic supplier alternatives has led to the shift away
from outsourcing and offshoring.
false
T/F: Competition today is no longer between firms; it is between the supply chains of
those firms.
true
T/F: In the manufacturing sector, the percentage of purchases to sales averages 55
percent.
true
T/F: The traditional approach to purchasing and supply management is to build relations
with suppliers to jointly pull costs out of the product or service and expect suppliers to
contribute innovate ideas that continually add value to a firm's products and services.
false
T/F: Most of the features that make their way into final products originate with suppliers.
false
T/F: Purchasing and supply management has a major impact on product and service
quality.
true
T/F: Supply management is a broader concept than purchasing.
true
T/F: The routine ordering and follow-up of basic operational supplies is a strategic
responsibility.
false
T/F: Supply chain management does not require the coordination of activities and flows
that do not extend across boundaries.
false
T/F: According to Porter, a firm's value chain is composed of primary and support
activities that can lead to competitive advantage when configured properly.
true
T/F: Purchasing is becoming less responsible for sourcing indirect goods and services
required by internal groups.
false

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T/F: Distribution management involves the management of packaging, storing, and

handling of materials at receiving docks, warehouses, and retail outlets.
true
T/F: Today's emphasis on supplier quality has shifted from detecting defects at the time
of receipt or use to prevention early in the materials-sourcing process.
true
T/F: The key to the success of any company is the quality of its employees.
true
T/F: Cost management is no longer an integral part of purchasing and supply chain
management.
false
T/F: Formal organizational charts portray the entirety of the workings of an organization.
false
T/F: There is a definitive and prescriptive set of supply chain measures that result in one
best way to measure supply chain performance.
false
T/F: In Period 4 of the evolution of purchasing and supply chain management, firms
faced stable competition and had access to abundant material - conditions that
historically have diminished the overall importance of purchasing.
true
Which of the following is not one of the features of the new model of progressive
purchasing?
a. Developing closer relationships with important suppliers.
b. Performing due diligence on suppliers before awarding longer-term contracts.
c. Focusing primarily on price analysis and short term contracts.
d. Conducting worldwide Internet searches for the best sources of supply.
e. Inviting key suppliers to participate in product and process development.
C
Which of the following is not one of the factors driving an emphasis on supply chain
management?
a. An increasing emphasis on domestic sourcing due to the longer lead times and
higher levels of pipeline inventories associated with global sourcing.
b. The cost and availability of information resources among entities in the supply chain
that allow easy linkages that eliminate time delays in the network.
c. The level of competition in both domestic and international markets requires
organizations to be fast, agile, and flexible.
d. Customer expectations and requirements that are becoming much more demanding.
e. The ability of an organization's supply chain to identify and mitigate risk minimizes
disruptions in both supply and downstream product or services to mitigate the impact on
lost sales.
A
_____ is a functional group (i.e., a formal entity on the organizational chart as well as a
functional activity (i.e., buying goods and services).
a. Engineering
b. Purchasing
c. Quality assurance

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d. Logistics
e. Treasury operations
B
The _____ is a change index, and generally a rating over 50 indicates that the economy
is expanding.
a. Consumer Price Index
b. Producer Price Index
c. ISM Report on Business
d. rate of inflation
e. None of the above.
C
According to the Institute for Supply Management, _____ is the identification,
acquisition, access, positioning, and management of resources and related capabilities
an organization needs or potentially needs in the attainment of its strategic objectives.
a. supply chain management
b. procurement
c. logistics
d. supply management
e. distribution
D
Instead of adversarial relationships which characterize _____, _____ features a long-
term, win-win relationship between a buying company and specially selected suppliers.
a. traditional purchasing....supply management
b. traditional purchasing....logistics management
c. supply management....traditional purchasing
d. strategic sourcing....supply management
e. supply chain management....strategic sourcing
A
A _____ is a set of three or more organizations linked directly by one or more of the
upstream or downstream flows of products, services, finances, and information from a
source to a customer.
a. process
b. manufacturing system
c. value chain
d. social media chain
e. supply chain
E
All of the following are typical processes involved in supply chain management except
_____.
a. new-product development
b. customer-order fulfillment
c. supplier evaluation and selection
d. demand and supply planning
e. cash flow management
E

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According to Michael Porter, a firm's _____ is composed of primary and secondary

support activities that can lead to competitive advantage when configured properly.
a. supply chain
b. process
c. value chain
d. marketing channel
e. core competency
C
The _____ states that success is a function of effectively managing a linked group of
firms past first-level suppliers or customers.
a. supply chain orientation
b. value chain concept
c. traditional purchasing perspective
d. extended enterprise concept
e. process orientation
D
_____ are those items provided by suppliers and used directly during production or
service delivery.
a. Direct materials
b. Indirect materials
c. Indirect services
d. Internal materials
e. Vendor managed inventories
A
Which of the following is an example of a purchased direct item for a manufacturing
firm?
a. Parts and components.
b. Travel.
c. Office and janitorial supplies.
d. Advertising and media.
e. Personal computers.
A
Within the downstream portion of a supply chain, _____ are responsible for the actual
movement of materials between locations.
a. buyers
b. trucking firms
c. logistics managers
d. accountants
e. purchasing managers
C
Which of the following is not an example of a typical resource shared between a buyer
and supplier?
a. Dedicated capacity.
b. Specific information.
c. Technological capabilities.

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d. Direct financial support.

e. Advertising and media.
E
All of the following are examples of demand planning activities except _____.
a. forecasts of anticipated demand
b. accounts payable
c. inventory adjustments
d. orders taken but not filled
e. spare parts and aftermarket requirements
B
_____ schedules the firm's output; while _____ is the process of taking demand data
and developing a supply, production, and logistics network capable of satisfying
demand requirements.
a. Inventory control....quality control
b. Quality control....supply planning
c. Order processing....material control
d. Demand planning....customer service
e. Demand planning....supply planning
E
_____ involves generating the materials release, contacting a supplier directly
concerning changes, and monitoring the status of inbound shipments.
a. Order processing
b. Material control
c. Warehousing
d. Customer service
e. Quality control
B
_____ helps ensure that customers receive material when and where they require it and
represents the key link between the producer and the external customer.
a. Order processing
b. Inbound transportation
c. Customer service
d. Scheduling
e. Inventory control
A
The _____ activity involves physically getting a product ready for distribution to the
customer.
a. customer service
b. material control
c. materials handling
d. quality control
e. shipping
E
Which of the following is not one of the four enablers of purchasing and supply chain
management?
a. Sufficient cash flow and large on-hand cash deposits.

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b. Capable human resources.

c. Proper organizational design.
d. Real-time collaborative technology capabilities.
e. Right measures and measurement systems.
A
Recent research indicates that all of the following are top knowledge areas for
purchasers except _____.
a. supplier relationship management
b. total cost analysis
c. supplier analysis
d. consumer behavior
e. competitive market analysis
D
_____ refers to the process of assessing and selecting the structure and formal system
of communication, division of labor, coordination, control, authority, and responsibility
required to achieve organizational goals and objectives, including supply chain
objectives.
a. Supply chain orientation
b. Human resource management
c. Demand planning
d. Organizational design
e. Extended value chain
D
_____ seeks to improve forecast accuracy, optimize production scheduling, reduce
working capital costs, shorten cycle times, cut transportation costs, and improve
customer service; while _____ helps obtain materials and manage physical flows from
suppliers through downstream distribution to ensure that customers receive the right
products at the right location, time, and cost.
a. RFID....GPS
b. Execution software....planning software
c. Customer service....inbound transportation
d. The process approach....cost management
e. Planning software....execution software
E
All of the following are roadblocks between measurement and improved performance
except _____.
a. up-to-date information technology
b. too many metrics
c. debate over the correct metrics
d. constantly changing metrics
e. old data
A
CHAP 2
T/F: Enterprises are relying increasingly on external suppliers to provide only materials
and products, not information technology, services, and design activities
false

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T/F: The objectives of a world-class purchasing organization do not need to evolve

beyond the traditional mantra of ensuring we "get a good price!"
false
T/F: Organizations are constantly looking for people who have developed the skills
necessary to deal with the narrow variety of tasks faced by purchasing.
false
T/F: If a supplier's components are defective and causing problems for manufacturing,
then purchasing must find ways to improve supplier quality.
true
T/F: Purchasing can directly affect (positively or negatively) the long-term growth,
revenue, and operating outcomes and plans of stakeholders and business units.
true
T/F: The authority to review and challenge specifications (for products or for services) is
within purchasing's span of control in managing demand, although internal stakeholders
sometimes dispute this right.
true
T/F: Purchasing's right to evaluate and select suppliers means that sales
representatives are not allowed to talk with non-purchasing personnel.
false
T/F: Contract management should be used to trigger proactive sourcing events only
after a contract expires
false
T/F: When creating a forecast for a needed product or service, internal customers may
not always be able to express exactly what it is they will need at a future point in time.
true
T/F: For routine, off-the-shelf items, the purchase requisition may contain all the
information that purchasing requires.
true
T/F: When purchasing works directly with internal stakeholders to anticipate future
requirements, such as during new-product development, or with physician councils in a
health care provider, purchasing is acting reactively.
false
T/F: The process that buyers use to select suppliers does not vary widely depending on
the required item and the relationship that a buyer has with its suppliers.
false
T/F: Buyers use competitive bidding when price is a minor criteria and the required item
(or service) has complex material specifications.
false
T/F: For standard items, the negotiation process is an efficient method to purchase
relatively straightforward requirements
false
T/F: If the requested item is complex or requires an untested or new production
process, purchasing can include additional information or attachments on its RFQ to
assist the supplier, which might include detailed blueprints, samples, or technical
drawings.
true

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T/F: In drafting a purchase order, purchasing must include a large number of details
regarding policies because it is a legally binding document.
true
T/F: Almost all firms establish blanket purchase orders with their suppliers.
true
T/F: Buyers use material purchase releases to order items covered by blanket purchase
orders.
true
T/F: Responsibility for concealed damage is often simple and easy to detect.
false
T/F: Material discrepancies usually result from incorrect quantity shipments.
true
T/F: The buyer should assume that the purchasing cycle ends with the receipt of an
ordered item or the selection of a supplier.
false
T/F: Managing the purchase of semifinished components is not a critical purchasing
responsibility because components rarely affect product quality and cost.
false
T/F: Historically, most organizations have paid minimal attention to MRO items.
true
T/F: The way MRO items are typically dispersed throughout an organization makes
monitoring MRO inventory relatively simple.
false
T/F: Capital equipment purchasing involves buying assets intended for use less than
one year.
false
T/F: It is a common and preferred current practice for suppliers to arrange shipment to a
purchaser and simply include the transportation cost as part of the purchase cost.
false
T/F: Most companies spend too much time and too many resources managing the
ordering of goods and services, particularly lower-value items.
true
T/F: The dollar value of the items covered by procurement cards is relatively high.
false
The _____ is used to identify user requirements, evaluate the user needs effectively
and efficiently, identify suppliers who can meet that need, develop agreements with
those suppliers, develop the ordering mechanism, ensure payment occurs promptly,
ascertain that the need was effectively met, and drive continuous improvement.
a. demand management process
b. backdoor buying process
c. materials budgeting process
d. forecasting process
e. purchasing process
E
All of the following are objectives of a world-class purchasing organization except
_____.

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a. ensure that all hard copies of purchase orders and other paper documents are filed
correctly in a secure area
b. develop integrated supply strategies that support business goals and objectives
c. manage the sourcing process efficiently and effectively
d. supplier performance management
e. supply assurance
A
Failing to respond to the needs of internal customers will diminish the confidence these
users have in purchasing, and they may try to negotiate contracts themselves (a
practice known as _____).
a. strategic sourcing
b. spend management
c. maverick buying
d. outsourcing
e. internal sourcing
C
One of the most important objectives of the purchasing function is the selection,
development, and maintenance of suppliers, a process that is sometimes described as
_____.
a. supplier performance management
b. category management
c. customer service
d. procure-to-pay
e. maverick buying
A
Which of the following is not one of the objectives in supplier performance
management?
a. Selecting suppliers that are competitive.
b. Identifying new suppliers that have the potential for excellent performance and
developing closer relationships with these suppliers.
c. Improving existing suppliers.
d. Developing new suppliers that are not competitive with current suppliers.
e. Ensuring timely and accurate payment of supplier invoices.
E
Effective supply market intelligence involves all of the following except _____.
a. updating supply markets and trends and translating their impacts on key business
outcomes
b. ensuring that purchasing does not exceed its annual operating budget
c. identifying emerging materials and service technologies to support company
strategies in key performance areas
d. developing supply options and contingency plans to reduce risk
e. supporting the organization's requirements for a diverse and globally competitive
supply base
B
_____ is the process of collecting historical data by commodity, relative to demand from
the lines of business, with the exception of personnel expenses, occupancy, and

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corporate spend.
a. Demand management
b. Supply analysis
c. Category management
d. Contract management
e. Spend analysis
E
_____ is the process of using unit and rate consumption levels to forecast and estimate
future consumption in an internal functional customer and providing guidance and input
on how to optimize usage and educating the user on the tradeoffs.
a. Specification management
b. Demand management
c. Category management
d. Supply market intelligence
e. Cost management
B
_____ is the process of developing insights into stakeholder requirements, comparing
these to external industry intelligence, supply base capabilities and operational risks,
and developing a strategy to align internal requirements with external supply market
conditions.
a. Spend analysis
b. Cost management
c. Contract management
d. Category management
e. Procure-to-pay
D
____ is a situation that occurs when sellers seek to "go around" purchasing and instead
directly contact and attempt to sell directly to end users (stakeholders).
a. Insourcing
b. Bidding
c. Maverick buying and selling
d. Negotiating
e. Outsourcing
C
_____ is a process associated with defining the contract, defining roles and
responsibilities of both parties, and advising when to modify and ensure appropriate
escalation.
a. Spend analysis
b. Contract management
c. Cost management
d. Supplier selection
e. Category management
B
_____ involves unbundling the price paid and understanding the total cost of ownership
over the life cycle of a product or service to deliver a target cost and a unit rate to
determine if it is priced competitively in the marketplace.

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a. Cost management
b. Procure-to-pay
c. Supplier relationship management
d. Category management
e. Spend management
A
_____ is the end-to-end process of managing a supplier through the entire sourcing life
cycle, which includes first identifying the abilities of a particular company with regard to
performing a service for the internal customer, completing a sourcing event, negotiating
a contract, executing an order, and determining payment.
a. P2P
b. CRM
c. Outsourcing
d. Competitive bidding
e. SRM
E
Which of the following is not one of the characteristics of a mature, well-developed
supply strategy?
a. A repeatable and well-defined process for building strategy and governance around
defining, planning, managing, and receiving products and services for a business.
b. Clear alignment with executive vision and internal user-specific business goals.
c. Established goals and metrics for short-term project plans, as well as a definite five-
year plan that provides year over year performance improvements.
d. Established communication plan to inform senior management and all lines of
business updated and reviewed quarterly against defined goals and objectives.
e. Required use of an online catalog.
E
All of the following are benefits of electronically generating and transmitting purchasing-
related documents except _____.
a. a reduction in the need to ensure higher levels of quality from suppliers
b. a virtual elimination of paperwork and paperwork handling
c. improved communication both within the company and with suppliers
d. a reduction in errors
e. a reduction in the time spent in by purchasing personnel on processing purchase
orders and invoices and more time spent on strategic value-adding purchasing activities
A
The purchasing cycle begins with the _____.
a. selection of an appropriate supplier
b. issuance of a purchase order
c. receipt of a supplier's acknowledgement
d. identification of a need (a requirement)
e. determination of who can authorize the purchase
D
When a situation arises when an internal customer has a need that comes up suddenly,
which is not planned for and for which there is no preexisting supplier identified to
provide the product or service required, purchasing should use a/an _____ approach.

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a. spot buy
b. long term agreement
c. P2P
d. e-procurement
e. None of the above.
A
Which of the following is not one of the common ways that internal customers should
communicate their needs to purchasing?
a. Purchase requisitions from internal users.
b. Chance meeting in the company cafeteria.
c. Forecasts and customer orders.
d. Material requirements identified during new-product development.
e. Routine reordering systems.
B
All of the following are required elements in a purchase requisition except _____.
a. quantity and date required
b. estimated unit cost
c. operating account to be charged
d. authorized signature
e. identification and approval of a supplier by the end user
E
When marketing wants to purchase an advertising media campaign, the _____ should
specify the work that is to be completed, when it is needed, and what type of service
provider is required
a. reorder point
b. acknowledgement
c. traveling purchase requisition
d. statement of work
e. sales forecast
D
In a _____, when inventory is depleted to a given level, the system notifies the materials
control department (or the buyer in some organizations) to issue a request to a supplier
for inventory replenishment.
a. reorder point system
b. traveling purchase requisition system
c. customer service system
d. forecasting system
e. just-in-time system
A
A _____ involves the physical checking of inventory to verify that system records match
actual on-hand inventory levels.
a. reorder point system
b. stock check
c. just-in-time system
d. forecasting system
e. p-card system

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B
_____ is used when a product or service is proprietary or when there is a perceived
advantage to using a particular supplier's products or services.
a. Description by market grade
b. Description by industry standard
c. Description by specification
d. Description by performance characteristics
e. Description by brand
E
_____ is might be the best choice for standard items, where the requirements are well
understood and there is common agreement between supply chain partners about what
certain terms mean.
a. Description by market grade
b. Description by brand
c. Description by performance characteristics
d. Use of prototypes
e. Description by specification
A
_____ can cover such characteristics as the materials used, the manufacturing or
service steps required, and even the physical dimensions of the product.
a. Description by market grade
b. Description by specification
c. Description by brand
d. Description by industry standard
e. Description by performance characteristics
B
_____ focuses attention on the outcomes the customer wants, not on the precise
configuration of the product or service.
a. Description by industry standard
b. Description by brand
c. Description by specification
d. Description by performance characteristics
e. Description by market grade
D
A/An _____ has demonstrated its performance capabilities through previous purchase
contracts and therefore receives preference during the supplier selection process.
a. internal supplier
b. new supplier
c. capable supplier
d. final supplier
e. preferred supplier
E
All of the following are conditions under which competitive bidding is effective except
_____.
a. the buyer has a preferred supplier for the item
b. volume is high enough to justify this method

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c. the marketplace is competitive

d. the specifications or requirements are clear to the seller
e. adequate time is available for suppliers to evaluate the RFQs
A
Which of the following is not one of the conditions under which negotiation is effective?
a. When the purchase requires agreement about a wide range of performance factors,
such as price, quality, delivery, risk sharing, and product support.
b. When the buyer requires early supplier involvement.
c. When the specifications or requirements are clear to the seller.
d. When the supplier cannot determine risks and costs.
e. When the supplier requires a long period of time to develop and produce the items
purchased.
C
Which of the following is not an appropriate performance criterion to be used when
evaluating suppliers?
a. Ability to develop process and product technology.
b. Commitment to quality.
c. Management capability and commitment.
d. Cost performance.
e. Commitment to effective marketing and promotion.
E
Good reasons for allowing other departments to view purchase orders and incoming
receipts does not include which of the following?
a. The accounting department gains visibility to future accounts payable obligations.
b. The requestor can refer to the purchase order number when inquiring into the status
of an order.
c. Receiving has a record of the order to match against the receipt of the material.
d. Traffic becomes aware of inbound delivery requirements and can make arrangements
with carriers or use the company's own vehicles to schedule material delivery.
e. There is never a good reason for purchasing to allow other departments access to
purchase orders and incoming receipts due to the confidential nature of the price and
delivery terms.
E
A/An _____ is an open order, usually effective for one year, covering repeated
purchases of an item or family of items.
a. outstanding order
b. pending order
c. blanket purchase order
d. completed order
e. order acceptance
C
When using negotiating a/an _____, it is necessary to include a/an _____ that allows a
buyer to terminate the contract in the event of persistently poor quality, delivery
problems, and so on.
a. spot buy contract....evergreen clause
b. RFP....RFQ

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c. purchase order....purchase agreement

d. blanket purchase order....escape clause
e. online catalog....RFP
D
In a _____, the price stated in the agreement does not change, regardless of
fluctuations in general overall economic conditions, industry competition, levels of
supply, market prices, or other environmental changes.
a. blanket purchase order
b. RFQ
c. cost-based contract
d. material purchase release
e. fixed-price contract
E
In a _____, the supplier is reimbursed all of their actual costs plus some agreed on
operational margin and overhead amount.
a. RFP
b. cost-based contract
c. material purchase release
d. fixed-price contract
e. reverse auction
B
The _____, which the supplier provides, details the contents of a shipment and contains
the description and quantity of the items in a shipment.
a. material packing slip
b. purchase requisition
c. bill of lading
d. electronic funds transfer
e. request for quotation
A
Transportation carriers use a/an _____ to record the quantity of goods delivered to a
facility.
a. electronic transfer of funds
b. material packing slip
c. receiving discrepancy report
d. bill of lading
e. purchase order
D
The _____ helps protect the carrier against wrongful allegations that the carrier
somehow damaged, lost, or otherwise tampered with a shipment.
a. bill of lading
b. material packing slip
c. invoice
d. material purchase release
e. blanket purchase order
A

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Which of the following is false regarding concealed damage?

a. A user may discover concealed damages after opening a shipping container.
b. Responsibility for concealed damage is often difficult to establish.
c. The carrier may blame the supplier or maintain that the damage occurred after
delivery of the material.
d. The supplier may maintain total innocence and implicate the carrier.
e. The bill of lading protects the carrier against charges of concealed damage.
E
A _____ details any shipping or receiving discrepancies noted by the receiving
department.
a. receiving discrepancy report
b. bill of lading
c. material packing slip
d. change notice
e. RFP
A
The _____ purchase category includes such items are petroleum, coal, lumber, and
metals such as copper and zinc.
a. semifinished products and components
b. finished products
c. MRO items
d. raw materials
e. capital equipment
D
A key characteristic of a/an _____ is a lack of processing by the supplier into a newly
formed product.
a. component
b. semifinished product
c. finished good
d. MRO item
e. raw material
E
Suppliers are more often being paid through _____, which is the automatic transfer of
payment from the buyer's bank account to the supplier's bank account.
a. RFQ
b. EFT
c. MRO
d. PO
e. None of the above.
B
_____ include anything that does not go directly into an organization's product.
a. MRO items
b. Raw materials
c. Production support items
d. Services
e. Semifinished products and components

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A
_____ include(s) the materials required to pack and ship final products, such as pallets,
boxes, master shipping containers, tape, bags, wrapping, inserts, and other packaging
material.
a. Raw materials
b. Production support items
c. Semifinished products
d. Components
e. Work-in-process inventory
B
Which of the following is not a feature that separates capital equipment purchases from
other purchases?
a. Capital equipment purchases do not occur with regular frequency.
b. Capital equipment investment requires large sums of money.
c. For accounting purposes, most capital equipment is not depreciable over the life of
the item.
d. Buyers can rarely switch suppliers in the middle of a large-scale project or dispose of
capital equipment after delivery because of dissatisfaction.
e. Capital equipment is highly sensitive to general economic conditions.
C
All the following are expected growth areas in e-commerce except _____.
a. transmitting purchase orders to suppliers
b. submitting requests for quotes to suppliers
c. placing orders with suppliers
d. making electronic funds transfer payments
e. submitting written check requests to accounts payable
E
Once a purchaser and a supplier reach agreement on a longer-term purchase contract,
material releasing responsibility should shift to _____.
a. marketing
b. purchasing
c. the supplier
d. user groups
e. accounts payable
D
While similar in concept, blanket purchase orders are typically used more often for
_____ purchases.
a. unique
b. lower-value
c. complex
d. spot buy
e. There are no differences in the types of products or amounts purchased in either
method.
B
Which of the following is not an advantage of online ordering systems?
a. Immediate visibility to back-ordered items.

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b. Longer order cycle time from input to delivery.

c. Faster order input time.
d. Reduced ordering errors.
e. Ability to batch multiple items from multiple users on a single order.
B
[A/An] _____ involves a communications standard that supports inter-organizational
electronic exchange of common business documents and information.
a. electronic catalog
b. cloud-based ordering system
c. Procure-to-pay
d. Electronic data interchange
e. blanket purchase order
D
CHAP 4
T/F: Purchasing offices were once corporate backwaters, filled with people who didn't
dream of advancing to the top rungs of their organization.
true
T/F: Integration does not require that people create a common understanding of the end
goal or purpose.
true
T/F: Outsourcing products through low cost country sourcing environments or contract
manufacturers is very much the same as sourcing in North American buyer-seller
situations.
false
T/F: Because the links between operations and supply management have been so
close, it is not unusual for supply management to report directly to operations.
true
T/F: Many firms are now colocating supply management personnel directly at operating
locations so supply management can respond quickly to operation's needs.
true
T/F: Perhaps the most important and challenging linkages exist between supply
management and marketing/sales.
false
T/F: Many supply management groups are recruiting commodity managers with very
strong technical backgrounds, who are able to talk the talk and walk the walk alongside
their engineering counterparts.
true
T/F: Supply management usually maintains significant data about individual activity
costs that can increase total cost.
false
T/F: In collaboration, the relationship is bilateral; both parties have the power to shape
its nature and future direction over time.
true
T/F: A long-term contract does not provide an incentive for a supplier to invest in new
plants and equipment.
false

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T/F: The need for confidentiality regarding financial, product, and process information is
the most frequently cited reason for not developing closer supplier relationships.
true
T/F: Closer buyer-supplier relationships interest all suppliers.
false
T/F: A shift to a more trusting buyer-supplier relationship is easy.
false
T/F: External relationship management begins with internal relationship management:
internal alignment is key.
true
T/F: Experience reveals that cross-functional sourcing teams are usually part-
time/continuous assignments, making the use of sourcing teams a challenging way to
work.
true
T/F: A primary objective of using teams is to bring together individuals with common
perspectives and expertise to perform better on a task compared to individuals or
departments acting along.
false
T/F: Perhaps the greatest benefit of team interaction is that once a team makes a
decision, implementing the decision often becomes easier due to group buy-in.
true
T/F: The use of cross-functional sourcing teams guarantees a successful outcome to a
project or assignment.
false
T/F: Membership on a team can have negative effects on individuals.
true
T/F: A team may pressure an individual to support or conform to a lower production
norm than the individual's personal norm.
true
T/F: Successfully using teams does not require extensive planning before a team
should be allowed to pursue an assignment.
false
T/F: Organizations should use teams selectively due to limited resource availability.
true
T/F: Interacting as a team requires the same set of skills as the skills required for
traditional work.
false
T/F: If team members receive delayed reinforcement, they will exert greater effort than if
the reinforcement is immediate
false
T/F: If positive work is never recognized or reinforced through rewards, the positive
effort will likely be extinguished.
true
T/F: The effectiveness of the sourcing team leader is one of the weakest predictors of
team success.
false

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T/F: Being an effective team leader means satisfying a demand set of essential
operating responsibilities and requirements while still promoting the creativity,
leadership ability, and cohesiveness of team members.
true
T/F: Goal setting is not a critical cross-functional team requirement.
false
T/F: Cross-functional sourcing teams are a less-than-ideal way to promote cross-
organizational cooperation.
false
T/F: Cross-functional sourcing teams that incorporate supplier participation report fewer
problems coordinating work activity between the team and key suppliers.
true
T/F: In forward-thinking enterprises, supply management seldom plays a key role in the
development of new products and services.
false
T/F: On supplier assessments, performance data should be weighted in such a manner
that they are aligned with customer performance requirements.
true
T/F: Supplier selection should never occur before a new part is actually designed or
reaches production.
false
T/F: If given the opportunity, suppliers seldom have a major impact on the overall timing
and success of a new product.
false
T/F: According to research, the sharing of technology roadmaps often strongly
influences the type of buyer-supplier relationship that resulted in the integration process.
true
T/F: The physical co-location of a supplier engineer at a buying company is increasingly
becoming a part of the normal product development process structure.
true
T/F: Suppliers of critical nonstandard commodities are involved much later in the
product development initiative.
false
T/F: Early visibility to product requirements allows supply management to share critical
information with suppliers that can help avoid delays.
true
T/F: Suppliers are never an invaluable source of ideas for process improvement.
false
T/F: Many companies are encouraging suppliers to provide a permanent on-site
representative who can aid the company in improving customer order fulfillment
processes.
true
_____ involves professionally managing suppliers and developing close working
relationships with different internal groups.
a. Purposeful cooperation
b. Program management

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c. Credible commitment
d. Supply integration
e. Relationship management
D
_____ is the process of incorporating or bringing together different groups, functions, or
organizations, either formally or informally, physically or by information technology, to
work jointly and often concurrently on a common business-related assignment or
purpose.
a. Cooptation
b. Program management
c. Collaboration
d. Collusion
e. Integration
E
Which of the following are not considered relationship management skills?
a. Ability to conduct detailed price and cost analyses
b. Ability to act ethically.
c. Ability to listen effectively.
d. Ability to communicate.
e. Ability to use creative problem-solving.
A
All of the following are examples of the different methods that supply management will
apply to achieve integration except _____.
a. Cross-functional or cross-organizational committees and teams
b. Hiring English majors into supply management to correct document language
c. Information systems such as videoconferencing and webmail
d. Process-focused organizations that are dedicated to certain processes
e. Colocation of suppliers and customers
B
_____ is defined as the process by which two or more parties adopt a high level of
purposeful cooperation to maintain a trading relationship over time to achieve specific
goals.
a. Supply base management
b. Collaboration
c. KPI
d. Supply integration
e. SRM
B
All of the following are characteristics that define a collaborative buyer-supplier
relationship except _____.
a. one or a limited number of suppliers for each purchased item or family of items
b. a win-win approach to reward sharing
c. open exchange of information
d. a credible commitment to work together during difficult times
e. the buyer unilaterally resolving disputes
E

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Which of the following is not a common obstacle to closer buyer-seller relationships?

a. Long-term contracts.
b. Confidentiality.
c. Limited interest by suppliers.
d. Legal barriers.
e. Resistance to change.
A
[A/An] _____ consists of personnel from different functions and increasingly from
suppliers who are brought together to achieve supply management or supply chain-
related tasks.
a. Big R
b. External RM
c. cross-functional sourcing team
d. Little r
e. Internal RM
C
Which of the following is not a benefit of using a cross-functional sourcing team?
a. Reduced time to complete a task.
b. Increased innovation.
c. Joint ownership of decisions.
d. Enhanced communication among functions or organizations.
e. Groupthink.
E
Which of the following is not a potential drawback of using a cross-functional sourcing
team?
a. Team process loss.
b. Reduced innovation.
c. Negative effects on individual members.
d. Poor team decisions.
e. Groupthink.
B
_____ is a function of the professional's ability to translate supply market data into
compelling insights that solve business problems and to enable organizational
connections and networking that accelerate business success.
a. SRM
b. Groupthink
c. Reciprocity
d. Process gain
e. Relationship capital
E
_____ occurs when a team does not complete its task in the best or most efficient
manner or members are not motivated to employ their resources to create a successful
outcome.
a. Groupthink
b. KPI
c. Collaboration

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d. Process loss
e. Synergy
D
When _____ is present, the total group effort is _____ the expected sum of the
individual parts.
a. process loss....less than
b. groupthink....more than
c. process loss....more than
d. collaboration....less than
e. synergy....the same as
A
_____ is the tendency of a rational group or team to arrive at a bad decision when other
information is available.
a. Serendipity
b. Collusion
c. Process loss
d. Maverick spend
e. Groupthink
E
Which of the following is not an example of an appropriate use of a cross-functional
team?
a. New product development.
b. Preparing a RFQ for a routine commodity product.
c. Locating a new production facility.
d. Developing a commodity or purchase family strategy.
e. Establishing a new business unit.
B
A _____ is one that requires members to use a variety of higher-level skills, supports
giving members regular feedback about performance, results in an outcome with a
significant effect on the organization and others outside the team, and provides
members autonomy for deciding how they will do the work.
a. gray box design
b. statement of work
c. technology roadmap
d. meaningful task
e. traditional buyer-supplier relationship
D
Which of the following is not a requirement of being an effective team member?
a. Understands the team's task - the member has task-relevant knowledge.
b. Has the time to commit to the team.
c. Has the right corporate political connections.
d. Has the ability to work with others in a group.
e. Can assume an organizational rather than strict functional perspective.
C
Management can exert subtle control over a team's tasks through all of the following
except _____.

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a. authorizing the creation of the sourcing team

b. selecting the team's task
c. selecting the team leader and members
d. conducting performance reviews and holding teams accountable for performance
outcomes
e. sitting in on all team meetings
E
Which of the following is not true regarding establishing sourcing team goals?
a. Teams with established goals often use those goals as a basis for evaluating how
well the team is performing.
b. Teams will establish, on average, challenging rather than easy goals.
c. External pressure on a team to set goals usually results in the setting of more
challenging goals.
d. Teams establish goals only because they have to.
e. Teams with goals perform better, on average, than teams that are asked simply to
perform their best without explicit end goals.
D
All of the following are examples of how supply management should monitor and
anticipate activity in its supply market except _____
a. ensuring that cost accounting keeps track of historical prices paid
b. forecasting long-term supply and prices for its basic commodities
c. monitoring technological innovations that impact its primary materials or make
substitute materials economically attractive
d. evaluating not only its existing suppliers but also other potential suppliers
e. providing timely visibility to new-product requirements
A
All of the following questions are important in considering new or existing suppliers for
integration except _____.
a. Is the supplier capable of hitting affordable targets regarding cost, quality,
conductivity, weight, and other performance criteria?
b. Does the supplier have sufficient marketing funds for promoting its new products?
c. Will the supplier be able to meet product introduction deadlines?
d. Will the supplier be able to increase capacity and production fast enough to meet our
market share requirements?
e. Do the supplier's personnel have the required training to start up required processes
and debug them?
B
Using _____, the supplier is given blueprints and told to make the product from them.
a. black box design
b. gray box design
c. red box design
d. white box design
e. shadow box design
D
Using _____, the supplier's engineers work cooperatively with the buying company's
engineers to jointly design the product.

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a. shadow box design

b. gray box design
c. red box design
d. white box design
e. black box design
B
Using _____, suppliers are provided with functional specifications and are asked to
complete all technical specifications, including materials to be used, blueprints, and so
on.
a. shadow box design
b. white box design
c. gray box design
d. red box design
e. black box design
E
The term _____ refers to the set of performance criteria and products and processes an
organization intends to develop or manufacture.
a. concurrent engineering
b. early supplier involvement
c. process loss
d. technology roadmap
e. R&D plan
D
Which of the following are not examples of technology roadmaps?
a. Incorporation of new AICPA accounting standards into existing accounting systems.
b. Projected performance specifications for a class of products or processes.
c. An intention to integrate a new material or component.
d. Development of a product to meet customer requirements that is currently
unavailable in the market.
e. Integration of multiple complementary technologies that results in a radically new
product.
A
All of the following are elements of successful supplier suggestion programs except
_____.
a. the savings from the suggestion are often shared 50/50, not kept solely by the buying
company
b. the program focuses on cost improvement, not simply cutting the supplier's margins
c. successful buying companies provide prompt feedback to the supplier on its
suggestion and also implement good suggestions promptly
d. it is critical to acknowledge the supplier's suggestion, through an awards program,
newsletter, or announcement at a supplier conference
e. the supplier should be allowed to keep 100% of the savings since it came up with the
idea
E
CHAP 6

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T/F: Increasing revenues involves either raising prices or keeping prices stable and
increasing volume
true
T/F: In general, the less important the category, the more critical it is that internal
stakeholders will be involved
false
T/F: Objectives drive goals, whether at the highest levels of an organization or at the
functional or department level.
true
T/F: A category strategy is a decision process used to identify which suppliers should
provide a group of products or services, the form of the contract, the performance
measures used to measure supplier performance, and the appropriate level of price,
quality, and delivery arrangements that should be negotiated.
true
T/F: In general, the more important the commodity, the less likely that cross-functional
members and user groups will be involved
false
T/F: The problem with secondary data is that they are often outdated and may not
provide the specific information for which the team is looking
true
T/F: SWOT analysis was created to describe the competitive forces in a market
economy that help shape an industry.
false
T/F: As a strategic planning tool, a SWOT analysis can provide insight even with limited
data.
true
T/F: The RFI constitutes a binding agreement by both the supplier and the purchaser.
false
T/F: Identifying the major suppliers in a market is an important first step of any supplier
analysis.
true
T/F: A preferred supplier designation indicates that the selected supplier should receive
the business for a critical commodity under all possible conditions.
false
T/F: A supplier catalog allows users to order directly through the Internet using a
company procurement card (just like a credit card) with the delivery made directly to the
site the next day.
true
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T/F: 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" quadrant of the Strategy
Portfolio Matrix and the category of spend is low volume and routine to the company's
business.
false

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T/F: After the buyer-supplier relationship has been established, buyers no longer need
to track supplier performance over time.
false
T/F: The strategic sourcing process ends when a contract is signed with a supplier.
false
T/F: The insourcing/outsourcing decision cannot be applied to virtually every process
conducted within the traditional walls of an organization.
false
T/F: Supply base optimization usually refers to increasing the number of suppliers used.
false
T/F: Supply base optimization requires an analysis of the number of suppliers required
currently and in the future for each purchased item.
true
T/F: 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.
true
T/F: One factor that is increasing the risk exposure to supply chain disruption is the
decreasing propensity of companies to outsource processes to global suppliers.
false
T/F: Global sourcing can be used to access new markets or to gain access to the same
suppliers that are helping global companies become more competitive.
true
T/F: More complex logistics and currency fluctuations require measuring all relevant
costs before committing to a worldwide source.
true
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T/F: Longer-term relationships are sought with suppliers that have exceptional
performance or unique technological expertise.
true
T/F: A longer-term relationship should never include a joint product development
relationship with shared development costs and intellectual property
false
T/F: 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
false
T/F: Total cost of ownership typically includes costs associated with late delivery, poor
quality, or other forms of supplier nonperformance.
true
T/F: An e-RA is an offline, static 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
false

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T/F: Organizations tend to evolve through four phases as they become mature and
sophisticated in their supply management strategy development.
true
T/F: In the final and most advanced stage of supply management strategy development,
supply management has assumed a tactical orientation with reporting directly to lower-
level management and a simple internal, rather than a strong external, customer focus.
false
T/F: 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
true
T/F: 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.
true
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
C
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.
E
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. human resource management strategy
d. corporate strategy
e. functional strategy
D
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

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c. business unit strategy

d. functional strategy
e. supply management strategy
C
A _____ specifies how supply management will (1) support the desired competitive
business-level strategy and (2) complement other functional strategies.
a. supply management strategy
b. corporate strategy
c. marketing strategy
d. category strategy
e. business unit strategy
A
A _____ specifies how a group tasked with developing the strategy for the specific
category being purchased will achieve goals that in turn will support higher level
strategies.
a. functional strategy
b. corporate strategy
c. business unit strategy
d. category strategy
e. None of the above.
D
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
E
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, and did they charge an
accurate price across all the divisions in comparison to the requirements in the POs,
contracts, nad statements of work?
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?
D
Which of the following is not one of the steps in the strategic sourcing process?
a. Build the team and the project charter.
b. Conduct market intelligence research on suppliers.
c. Increasing revenues.
d. Strategy development.
e. Supplier relationship management.

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C
The _____ in the 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 phase
b. optimization process
c. spend analysis
d. project charter
e. price analysis
D
The key to good market intelligence is to _____ data, which means to explore, compare,
and contrast data from multiple sources before it can be validated.
a. triangulate
b. minimize
c. gather
d. collect
e. assemble
A
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. secondary data
c. internal data
d. spend analysis data
e. market research
E
All of the following are examples of factors in 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
B
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.
B
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.

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d. Product life cycles.

e. Brand equity and customer loyalty.
C
Which of the following is not one of the examples of Porter's threat of substitute
products and services?
a. Relative performance of substitutes.
b. Relative price of substitutes.
c. Switching costs.
d. Buyer propensity to substitute.
e. Economies of scale.
E
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
B
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.
D
In supplier analysis, _____ requires identifying critical performance criteria and
identifying relative competitive performance.
a. benchmarking
b. make/buy analysis
c. insourcing/outsourcing analysis
d. Porter's Five Forces analysis
e. cost analysis
A
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-RA
b. PO
c. RFP
d. RFI
e. RFQ
D
The goal of _____ is to be able to understand, identify, and exploit cost savings
opportunities that may have been overlooked by business unit managers or even by
suppliers in bringing the products and services to the appropriate location.
a. Marketing research

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b. Make-buy analysis
c. Value chain analysis
d. Price analysis
e. Cost analysis
C
[A] _____ 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. supplier evaluation scorecard
c. Price analysis
d. Portfolio analysis
e. Supplier research
E
[A] _____ 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. Supplier scorecard
b. Portfolio analysis
c. Make-buy analysis
d. Price analysis
e. Value chain analysis
B
Which of the following is not one of the four categories found in a portfolio analysis
matrix?
a. Critical.
b. Routine.
c. Leverage.
d. Commodity.
e. Bottleneck.
D
All of the following are goals for a strategic category 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
E
Which of the following is not one of the goals for sourcing a routine commodity?
a. Reduce 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.
C
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

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b. portfolio commodity
c. critical commodity
d. routine commodity
e. bottleneck commodity
A
A _____ has unique requirements or niche suppliers, yet is significant to the business.
a. critical commodity
b. bottleneck commodity
c. matrix commodity
d. routine commodity
e. leverage commodity
B
In supplier evaluation, different aspects of _____ include management's commitment to
continuous process and quality improvement, its overall professional ability and
experience, its ability to maintain positive relationships with its workforce, and its
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
A
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
D
In the _____ of the process of supplier segmentation, the supplier views the buyer as a
core customer, as the size of the account is significant to the supplier, and the account
is also important from a strategic perspective.
a. COMMODITY segment
b. DEVELOP segment
c. EXPLOIT segment
d. NUISANCE segment
e. CORE segment
E
In the _____ of the process of supplier segmentation, the attractiveness of the buyer as
a customer is significant and important to the supplier, but perhaps the historical volume
of business with the buyer has been relatively low.
a. EXPLOIT segment
b. CORE segment
c. DEVELOP segment

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d. PRICE segment
e. NUISANCE segment
C
In the _____ of the process of supplier segmentation, suppliers have a significant
portion of the buyer's spend but do not view the buyer as an important customer.
a. NUISANCE segment
b. COMMODITY segment
c. DEVELOP segment
d. EXPLOIT segment
e. CORE segment
D
In the _____ of the process of supplier segmentation, the supplier views the buyer as an
unimportant customer, and to make the situation worse, the volume the buyer has with
this supplier is insignificant to the supplier
a. NUISANCE segment
b. CORE segment
c. EXPLOIT segment
d. DEVELOP segment
e. None of the above.
A
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
E
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. new supplier responding to a RFQ
e. marginal supplier
B
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-RA
A

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Buying firms use competitive bidding when _____ is a dominant criterion and the
required items or services have ______ specifications.
a. price....unique
b. delivery....unique
c. product performance....straightforward
d. design....unique
e. price....straightforward
E
Competitive bidding is most effective when all of the following conditions apply except
when _____.
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 new or technically complex, with only vague specifications
e. None of the above conditions apply to competitive bidding.
D
Face-to-face negotiation is best when all of the following conditions apply except when
_____.
a. the item is new or technically complex, 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
C
A _____ is 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
A
_____ 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
C
Which of the following is not true in regards to low-cost country sourcing?
a. Low-cost country sourcing can be used to access new markets or to gain access to
the same suppliers that are helping global companies become more competitive.
b. Although there has been a strong push to source from emerging BRIC countries in
search of lower costs, there has also been a strong push toward sourcing in these

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countries because of local content requirements established by governments in these

areas.
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. Some buyers source globally to introduce competition to domestic suppliers.
e. Firms are highly experienced with global business processes and practices, and
there are many personnel qualified to develop and negotiate with global suppliers or
manage material pipelines.
E
_____ is a simultaneous engineering approach that occurs between buyer and seller
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
B
_____ 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. Low-cost country sourcing
A
Which of the following elements is false regarding Phase 1, Basic Beginnings, of supply
management strategy development?
a. Quality/cost teams.
b. Longer-term contracts.
c. Volume leveraging.
d. Supply-base consolidation.
e. Early sourcing.
E
Which of the following elements is false regarding Phase 2, Moderate Development, of
supply management strategy development?
a. e-RAs.
b. Ad hoc supplier alliances.
c. International sourcing.
d. Global supply chains with external customer focus.
e. Supply-base optimization.
D
Which of the following elements is false regarding Phase 3, Limited Integration, of
supply management strategy development?
a. Supplier quality focus.

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b. Global sourcing.
c. Ad hoc supplier alliances.
d. Volume leveraging.
e. Long-term contracts.
A
Which of the following elements is true regarding Phase 4, Fully Integrated Supply
Chains, of supply management strategy development?
a. Cross-functional sourcing teams.
b. Cross-enterprise decision making.
c. Quality/cost teams.
d. International sourcing.
e. Total cost of ownership.
B
CHAP 7
T/F: Most purchasing experts will agree that there is only one best way to evaluate and
select suppliers.
false
T/F: The degree of effort associated with supplier selection is inversely related to the
importance of the required good or service
false

T/F: Progressive purchasing groups increasingly anticipate rather than react to supplier
selection needs
true
T/F: The complexity and value of a required purchase does not influence the extent to
which a buyer evaluates potential supply sources
false

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T/F: A major source of information on potential supply sources comes from current or
existing suppliers
true
T/F: Using existing suppliers, because it is easier and quicker, is always the best long-
term approach
false
T/F: Designation as a preferred supplier means that a supplier consistently satisfies the
performance and service standards defined by the buyer and responds to unexpected
changes.
true
T/F: Databases allow the purchaser to quickly identify suppliers potentially qualified to
support a requirement and may contain information on current products, the supplier's
future technology roadmap, process capability ratios, and past performance
true
T/F: One argument against rotating buyers too frequently between product lines or
types of purchases is that a buyer may lose the expertise built up over the years
true
T/F: Suppliers seldom use trade journals to advertise their products or services
false
T/F: Trade shows are seldom an ineffective way to gain exposure to a large number of
suppliers at one time
false
T/F: Today, buyers seldom use the Internet to help locate potential sources that might
qualify for further evaluation
false

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T/F: The popularity of JIT and quick replenishment systems favor using fewer local
suppliers
false
T/F: Supplier size does become a factor when one firm decides to leverage its
purchases from one or a few suppliers
true
T/F: A buying firm frequently wants the seller to become more dependent on its
business.
false
T/F: Purchasing from competitors may limit information sharing between the parties
true
T/F: Supply departments that are building diversity into their supply base are likely to
deal with a decreased number of small suppliers
false
T/F: Local suppliers are less responsive to the buying firm's changing needs and cannot
economically make frequent smaller deliveries
false
T/F: Many purchasers prefer to focus on suppliers who have the "capability to do the
job" regardless of size.
true
T/F: Purchasers always want to select suppliers who are profitable and growing
true
T/F: Certain suppliers who may present the lowest cost seldom present greater risks
false
T/F: Traditional purchasers understand the risk/reward tradeoff and are prepared to
manage it better to attain overall lower costs
false
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T/F: An in-depth evaluation of all potential supply sources should be conducted for
every purchase
false
T/F: Purchasers often perform a first cut or preliminary evaluation of potential suppliers
to narrow the list before conducting an in-depth formal evaluation
true
T/F: Most purchasers fail to perform at least a cursory financial analysis of prospective
suppliers
false
T/F: Before committing time to evaluate a supplier in depth, suppliers should satisfy
certain entry qualifiers
true
T/F: Buyers seldom receive and evaluate detailed information directly from potential
suppliers for the purpose of awarding a purchase contract
false

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T/F: Although many sources exist to discover information about a potential supplier,
visiting the actual facility provides the most complete way to ensure an accurate
assessment of the supplier
true
T/F: Supplier site visits are relatively inexpensive and require minimal buyer time in
travel and information collection
false
T/F: Due to resource constraints, the use of teams for supplier evaluation and selection
is decreasing
false
T/F: Using third-party information can be a timely and effective way to gain insight into
potential suppliers
true
T/F: The selection criteria used in a high-technology purchase will be the same as those
used for a distributor
false
T/F: Many suppliers do not have a sophisticated cost accounting system and are unable
to assign overhead costs to products or processes.
true
T/F: As some suppliers view cost data as highly proprietary, buyers will often develop
reverse pricing models that provide estimates of the supplier's cost structure during the
initial supplier evaluation
true
T/F: Few purchasers expect potential suppliers to have adopted quality systems based
on MBNQA or ISO 9000 criteria
false
T/F: The supplier's selection of a production process does little to define its required
technology, human resource skills, and capital equipment requirements
false
T/F: Sustainable carbon footprint reductions should be measured at product suppliers
but not at service suppliers
false
T/F: Professional purchasers should become familiar with financial ratios because they
can provide quick and valuable insights into a supplier's financial health
true
T/F: A supplier's willingness to move beyond a traditional purchasing relationship should
be part of the evaluation process for items and services where a longer-term
relationship might be beneficial
true
T/F: In supplier evaluation, reliability refers to the different individuals or groups
reviewing the same items and measurement scales will arrive at the same conclusion
true
T/F: The format of a supplier evaluation should not provide any flexibility across different
types of purchase requirements
false

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T/F: A well-defined supplier evaluation scoring systems takes criteria that may be highly
subjective and develops a quantitative scale for measurement
true
T/F: Purchasers should set minimum acceptable performance requirements for a
supplier to meet before they become part of the supply base.
true
T/F: Most purchase contracts address areas that are similar.
true
T/F: Progressive supply managers work with their legal group to develop pre-
established contract language that can be cut and pasted during a supplier negotiation
true
T/F: Progressive firms are working to increase the length of their purchase contracts
false
Which of the following is not a commonly accepted source of information regarding
potential supply sources?
a.
Current suppliers.
b.
Sales representatives.
c.
Television advertising.
d.
Organizational knowledge.
e.
Second-party or indirect information.
C
Which of the following information is not generally maintained in a supplier informational
database?
a.
Current products.
b.
Supplier's future technology roadmap.
c.
Process capability ratios.
d.
Advertising campaign information.
e.
Past performance.
D
The _____ buys from the OEM and resells, therefore incurring a transaction cost, and it
must make a profit.
a.
vendo
b.
customer
c.

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preferred supplier
d.
single source supplier
e.
distributor
E
_____ is a program that distributors market to manage their customers' inventory for
them.
a.
Just-in-time
b.
Supplier managed inventory
c.
Self-managed inventory
d.
Countertrade
e.
Preferred supplier inventory
B
Which of the following is not one of the criteria used to determine whether to buy direct
vs. using a distributor?
a.
Size of the purchase.
b.
Manufacturer's policies regarding direct sales.
c.
Storage space available at the purchaser's facility.
d.
Distance between the manufacturer and the distributor.
e.
Extent of services required.
D
_____ are more responsive to the buying firm's changing needs and can economically
make frequent smaller deliveries.
a.
Local suppliers
b.
International suppliers
c.
Global suppliers
d.
National suppliers
e.
There is no relationship with the location of the supplier and customer responsiveness.
A
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Although _____ provides optimum leverage and power over the supplier, _____
provides improved assurance of supply.
a.
multiple sourcing....single sourcing
b.
single sourcing....multiple sourcing
c.
sole sourcing....single sourcing
d.
multiple sourcing....sole sourcing
e.
There is no difference in the number of suppliers for these benefits.
B
A _____ is one that consistently satisfies the performance and service standards
defined by the buyer and responds to unexpected changes.
a.
certified supplier
b.
sole source supplier
c.
partnered supplier
d.
preferred supplier
e.
disqualified supplier.
D
A _____ has had its quality systems extensively audited by the buying firm and are
capable of consistently meeting or exceeding the buyer's quality needs.
a.
certified supplier
b.
disqualified supplier
c.
single source supplier
d.
partnered supplier
e.
None of the above.
A
A _____ is limited to a select group of suppliers who provide critical high value items to
the firm.
a.
disqualified supplier
b.
sole source supplier

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c.
preferred supplier
d.
single source supplier
e.
partnered supplier
E
A _____ is a supplier who no longer meets the buying organization's standards and will
not be considered for future business until its problems are corrected.
a.
preferred supplier
b.
disqualified supplier
c.
certified supplier
d.
single source supplier
e.
sole source supplier
B
_____ is the process of identifying potential negative events, assessing the likelihood of
their occurrence, heading off these events before they occur or reducing the probability
that they will occur, and making contingency plans to mitigate the consequences if they
do occur.
a.
Supplier selection
b.
Supplier evaluation
c.
Supplier categorization
d.
Global sourcing
e.
Risk management
E
_____ is defined as the continual monitoring of the strength of suppliers' financial
condition to ensure their ability to meet the purchaser's performance requirements for
products or services.
a.
Operational risk management
b.
Sole sourcing
c.
Financial risk management
d.
Multiple sourcing

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e.
None of the above.
C
_____ focuses on the continued ability of the supplier's human, intellectual, and physical
capital to meet the buying firm's requirements with respect to quality and delivery.
a.
Operational risk management
b.
Global sourcing
c.
Logistics risk management
d.
Total quality management
e.
Financial risk management
A
A/An _____ involves sending a preliminary survey to suppliers.
a.
request for quotation
b.
request for information
c.
purchase order
d.
order release
e.
All of the above.
B
A/An _____ is a basic component that suppliers must possess before they proceed to
the next phase of the evaluation and selection process.
a.
core competency
b.
technology roadmap
c.
Internet website
d.
entry qualifier
e.
triple bottom line
D
All of the following are examples of entry qualifiers that suppliers must possess before
they proceed to the next phase of the evaluation and selection process except _____.
a.
appropriate sales and marketing activities
b.

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financial strength
c.
proven manufacturing or service capability
d.
capable and supportive management
e.
adequate facilities
A
Which of the following is not a method used to further evaluate and select suppliers
once the initial evaluation has taken place?
a.
Evaluation of supplier-provided information.
b.
Supplier visits.
c.
Use of preferred, certified, and partnered suppliers.
d.
Trade journals.
e.
External or third party information.
D
Which of the following is not an example of questions that should be asked when
evaluating a supplier's management capability?
a.
Has management committed the supplier to TQM and continuous improvement?
b.
Is management customer focused?
c.
What is the willingness of employees to contribute to improved operations?
d.
Does management put a priority on supply chain management?
e.
What is the history of labor/management relations?
C
Which of the following is not an example of points that should be considered when
evaluating a supplier's employee capabilities?
a.
The degree to which employees are committed to quality and continuous improvement.
b.
The overall skills and abilities of the workforce.
c.
Employee morale.
d.
Workforce turnover.
e.
Disclosure of environmental infractions.

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E
All of the following are examples of commonly used environmental performance criteria
except _____.
a.
disclosure of any environmental infractions
b.
attainment of ISO 9000 certification
c.
formal hazardous and toxic waste reduction programs exist
d.
programs to control or eliminate ozone-depleting substances
e.
attainment of ISO 14000 certification
B
Which of the following is not a risk of selecting a supplier in poor financial condition?
a.
The supplier is unwilling to share its technical expertise with the purchaser.
b.
The supplier will go out of business.
c.
The supplier may not have the resources to invest in plant, equipment, or research that
is necessary for longer-term technological or other performance improvements.
d.
The supplier may become too financially dependent on the purchaser.
e.
Financial weakness is usually an indication of other underlying problems.
A
Which of the following key financial ratios is calculated as Current assets/Current
liabilities?
a.
Inventory turnover.
b.
Debt to equity.
c.
Current ratio.
d.
Total asset turnover.
e.
Quick ratio.
C
Which of the following key financial ratios is calculated as Profit after taxes/Sales?
a.
Current debt to equity.
b.
Fixed asset turnover.
c.

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Return on assets.
d.
Says sales outstanding.
e.
Net profit margin.
E
Which of the following key financial ratios is calculated as Sales/Total assets?
a.
Fixed asset turnover.
b.
Total asset turnover.
c.
Current ratio.
d.
Return on assets.
e.
Interest coverage.
B
Which of the following is not an example of a question that should be asked when
evaluating a supplier's production scheduling and control systems?
a.
Does the supplier use a requirements planning system as part of an ERP system to
ensure the availability of required components or meet service requests on a timely
basis?
b.
What lead time does the supplier's production scheduling and control system require?
c.
What is the supplier's on-time delivery performance history?
d.
Does the supplier's scheduling system support a purchaser's delivery requirements?
e.
What safeguards are in place to protect the confidentiality of electronic transfers?
E
All of the following are examples of questions that should be asked when evaluating a
supplier for longer-term relationship potential except _____.
a.
Has the supplier indicated a willingness or commitment to a longer-term relationship?
b.
Will the supplier engage in joint problem solving and improvement efforts?
c.
What is the supplier's on-time delivery performance?
d.
Is the supplier willing to come to us first with innovations?
e.
Is the corporate culture similar between the two parties?
C

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All of the following are characteristics of an effective supplier survey except _____.
a.
the survey should include the performance categories considered important to the
evaluation and selection process
b.
the survey process should be as objective as possible
c.
it is mathematically straightforward
d.
the buyer should attempt to measure every possible variable every time it is used
e.
the format of the evaluation should provide some flexibility across different types of
purchase requirements
D
A/An _____ is a discrepancy, nonconformance, or missing requirement that will have a
significant negative impact on an important area of concern in an audit statement.
a.
deficiency
b.
performance problem
c.
entry qualifier
d.
unacceptable outcome
e.
challenge
B
A/An _____ is a minor departure from an intended level of performance, or a
nonconformance that is easily resolved and does not materially affect the required
output.
a.
discrepancy
b.
problem
c.
defect
d.
unacceptable outcome
e.
deficiency
E
_____ involves the identification of the steps, activities, time, and costs involved within a
process.
a.
Data warehousing
b.

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Co-location
c.
Process mapping
d.
Supply base optimization
e.
TQM
C
A _____ is responsible for understanding in depth entire families or groups of purchased
goods and services.
a.
third party
b.
general buyer
c.
preferred supplier
d.
long-term buyer-supplier relationship
e.
commodity team
E
CHAP 8
T/F: In recent years, the concept of quality has changed radically from meeting
customer requirements or expectations to exceeding them
true
T/F: Within its supply chains, supply management does not merely buy parts or services
from suppliers - it buys (and sometimes must help manage and improve) current and
anticipated supplier capabilities that will result in quality products and services.
true
T/F: Buyers should focus only on a supplier's physical output (the end result), never on
the supporting inputs, systems, and processes that created that output
false
T/F: It is difficult to maintain a trusting and collaborative relationship and receive quality
goods and services when suppliers do not enjoy working with the buying organization
true
T/F: A buyer cannot realistically expect the highest levels of supplier performance when
the supplier must respond to frequent or short lead time changes
true
T/F: Reliance on a firm's suppliers for raw materials, components, subassemblies, and
even finished products is steadily decreasing
false
T/F: One of the primary causes of nonconforming supplier quality involves inconsistent
communication and the resultant misunderstanding of specifications, expectations, and
requirements between supply chain members.
true
T/F: Most specifications are precise and succinct

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false
T/F: Many suppliers are hesitant to challenge excessive specifications for fear of losing
the bid
true
T/F: Deming's quality philosophy has often been criticized because it does not prescribe
specific firm-level actions and programs for management to follow
true
T/F: Deming's 14 Points constitute an à la carte menu of quality improvement activities,
from which a company can pick and choose only those with which they agree
false
T/F: The focal point of the Deming philosophy is that the entire organization should be
focused on satisfying customer needs, whether the customer is internal or external.
true

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T/F: Quality is only for manufacturing
false
T/F: Deming indicates that the only proper way of dealing with defects is to inspect for
and remove them from the process
false
T/F: The lowest purchase price of an item may be important in the short run for supply
management but may cause increased costs somewhere else in the production system
over the long run: excessive scrap and rework, defective products, greater warranty
claims, and so on
true

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T/F: Working with more suppliers allows the supply manager to concentrate on building
trusting, collaborative relationships and supplier loyalty while improving quality in
purchased goods and services
false
T/F: The TQM-focused organization must look at increasing process variation and
seeking innovation in both product and process
false
T/F: There is a minimal gap between real leadership and what we traditionally think of
as management or supervision
false
T/F: Slogans, signs, and posters are highly effective in changing worker behavior
because they assume that most, if not all, quality problems are due to human behavior
false
T/F: Designed-in systemic variation is a managerial concern, not a labor issue
true
T/F: The performance appraisal systems in most organizations create real barriers to
pride in workmanship as they promote competitive behavior and quantity of work over
quality
true
T/F: Even when given the proper climate in which to work, most people do not want to
do a good job
false
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T/F: A grassroots TQM effort that emanates from the lower levels of the organization is
doomed to failure without active and visible top management commitment and support.
true
T/F: The objective of supplier certification is to ensure that nonconforming items are not
created or do not leave a supplier's facility
true
T/F: Supplier certification applies only to entire companies or products, rather than a
specific part, process, or site
false
T/F: The extensive use of corrective action requests supports prevention of
nonconforming defects
true
T/F: Perhaps the most dramatic difference between traditional quality control methods
and total quality management thinking involves a shift from a process orientation to a
product orientation
false
T/F: It is far less expensive and more efficient in the long run to avoid generating the
defect in the first place than it is to inspect for it once it is created
true
T/F: An emphasis on finished product rather than process demands that a supplier
provide evidence of its process capability to the buyer on an ongoing, regular basis
false

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T/F: To be considered capable, the outputs from a process must fall outside upper and
lower specification limits
false
T/F: One property of normally distributed data is that 99.7 percent of all possible
observations of process output occur within plus-or-minus standard deviations of the
process mean
true
T/F: A process that is stable and in control (i.e., no special and correctable causes of
variation) can be expected to produce virtually all of its output within its natural tolerance
limits
true
T/F: The Cpk value is always larger than the Cp index
false
T/F: According to Genichi Taguchi, any deviation from a target value carries with it some
level of opportunity loss due to scrap, rework, and customer dissatisfaction
true
T/F: Inconsistency is the enemy of total quality
true
T/F: In many respects, the cost of quality should actually be considered as the cost of
"poor quality."
true
T/F: Because of the nature of many cost accounting systems, quality costs are rarely
aggregated into various overhead accounts, which would mask their real impact on the
finances and operations of a company
false
T/F: All delivery activities in a process can be considered wasteful
true
T/F: Once a firm fully rationalizes and optimizes its supply base, improvement will occur
primarily by developing the capabilities of existing suppliers rather than by switching
suppliers on a large scale
true
T/F: Companies that are unable to commit the necessary resources to assess or certify
supplier quality on their own will never accept ISO 9000:2008 registration as proxy
evidence of a supplier's quality management capability
false
T/F: ISO 9000:2008 follows a product-based approach to quality management that
stresses planning, acting, analyzing results, and making improvements.
false
T/F: Suppliers that earn ISO 9000:2008 registration typically demonstrate lower levels of
quality than those suppliers that are not registered
false
T/F: ISO 14000:2004 does not build on existing governmental regulations, establish
emissions and pollution levels, or detail any specific testing methods
true
T/F: The MBNQA is a competition and implies that a winning organization excels not
only in quality management but also in quality achievement.

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true
T/F: It can take only a few months for a company to adequately develop a quality
management system that is competitive for the MBNQA
false
T/F: A supplier quality manual may delineate the maximum process required for the
supplier regarding inspections, use of statistical process control, continuous
improvement, testing, sample evaluations, performance improvement, and the like
false
T/F: A comprehensive supplier quality manual does not need to describe the supplier
selection and evaluation processes
false
According to Armand Fiegenbaum, _____ is defined as the total composite of product
and service characteristics of marketing, engineering, manufacturing, and maintenance
through which the product or service in use will meet or exceed the expectations of the
customer.
a.
productivity
b.
process capability
c.
zero defects
d.
quality
e.
supply base optimization
D
_____ represents the ability to meet or exceed current and future customer (i.e., buyer
and eventually end customer) expectations or requirements within critical performance
areas on a consistent basis.
a.
Kaizen
b.
Supplier quality
c.
Strategic sourcing
d.
Process capability
e.
Supply base rationalization
B
Which of the following is not one of the expectations that suppliers have in a typical
supply chain relationship?
a.
Minimizing product design changes once production begins.
b.
Providing visibility to future purchase volume requirements.

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c.
Sharing early access and visibility to new-product requirements.
d.
Valuing accurate and timely payment of invoices.
e.
Having the buyer co-locate its buying, engineering, and quality staffs into a supplier's
facility.
E
The average North American manufacturing firm spends _____ percent of its cost of
goods sold on purchased goods and services.
a. < 10
b. 25
c. 55
d. 75
e. > 90
C
The _____ the proportion of the final product that suppliers provide, the _____ the
impact they will have on overall product cost and quality.
a.
smaller....greater
b.
larger....lesser
c.
smaller....more significant
d.
larger....greater
e.
There is no definitive relationship between proportion of final product provided by
suppliers and impact on overall product cost and quality.
D
All of the following are factors that influence how much attention supply management
should commit to managing supplier quality except _____.
a.
the physical distance between the supplier and buyer facilities
b.
the ability of a supplier to affect a buyer's total quality
c.
the internal resources available to support supplier quality management and
improvement
d.
the ability of a buying firm to practice world-class quality
e.
a buyer's ability to collect and analyze quality-related data
A
Which of the following is not one of the eight key principles of total quality
management?

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a.
Define quality in terms of customers and their requirements.
b.
Inspect for quality at the end of the production line.
c.
Stress objective rather than subjective analysis.
d.
Strive for zero defects.
e.
Make quality everyone's responsibility.
B
Which of the following is not one of the eight key principles of total quality
management?
a.
Pursue quality at the source.
b.
Emphasize prevention rather than detection of defects.
c.
Focus on process rather than output.
d.
Establish continuous improvement as a way of life.
e.
Stress subjective rather than objective analysis. (LO #2)
E
Which of the following is not one of the eight key principles of total quality
management?
a.
Strive for zero defects.
b.
Define quality in terms of customers and their requirements.
c.
Focus on output rather than process.
d.
Make quality everyone's responsibility.
e.
Stress objective rather than subjective analysis.
C
Which of the following is one of the dimensions used in developing a clear
understanding of the buyer's expectations and requirements?
a.
The ability of the buyer to succinctly identify, define, quantify, or specify its technical and
sourcing requirements.
b.
The seller's ability to effectively communicate its requirements.
c.
How compatible the buyer's and supplier's respective corporate cultures are.

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d.
The ability of the selling company to succinctly identify, clearly define, quantify, or
specify its technical and sourcing requirements.
e.
None of the above.
A
Which of the following is not one of the unique features of Deming's philosophy?
a.
Variation is the primary source of quality nonconformance.
b.
Although quality is everyone's responsibility, senior management has the ultimate
responsibility for quality improvement.
c.
Intrinsic motivation is more powerful than extrinsic motivation.
d.
Interacting parts of a system must be treated individually, not as a whole.
e.
Predictions must be grounded in theory that helps to understand cause-and-effect
relationships.
D
Which of the following is not one of Deming's 14 points?
a.
Create a vision and demonstrate commitment.
b.
Utilize fear to motive workers.
c.
Improve constantly and forever.
d.
Optimize the efforts of teams.
e.
Remove barriers to pride in workmanship.
B
Which of the following is not one of Deming's 14 points?
a.
Encourage education and self-improvement.
b.
Take action.
c.
Institute leadership.
d.
Optimize the efforts of teams.
e.
Utilize numerical quotas and measurement by objective to motivate management.
E
Which of the following is not one of Deming's 14 points?
a.

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Institute training.
b.
Drive out fear.
c.
Optimize the efforts of individuals working alone. (LO #4)
d.
Stop making decisions purely on the basis of price.
e.
Improve constantly and forever.
C
_____ means continuous improvement and must be built into every single process in
the organization.
a.
Banzai
b.
Optimization
c.
Gung ho
d.
Kaizen
e.
Bonsai
D
The concept of _____ consists of rework and disposal efforts that increase cost and
decrease productivity.
a.
the hidden factory
b.
Six Sigma
c.
continuous improvement
d.
zero defects
e.
kaizen
A
Which of the following is false concerning Deming's philosophy on fear in the
workplace?
a.
Employees may be fearful of making a mistake and being reprimanded for it.
b.
Fear-free organizations are very common as only takes a short time to develop and
maintain an organizational culture that promotes risk taking and change.
c.
Most people have a fear of failure, so they don't want to try anything new or different.
d.

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People are creatures of habit and do not like to make changes in their routines.
e.
Middle managers may be fearful of letting go of their traditional power based on
command and control.
B
Which of the following is false concerning Deming's philosophy on numerical quotas and
measurement by objective?
a.
Workers may game the system to make their individual production and output goals.
b.
Many numerical based goals and objectives are often developed arbitrarily.
c.
Goals are often short term in their focus.
d.
Output standards fully support TQM improvements and other quality initiatives.
e.
Many numerically-based goals and objectives are beyond the control of the worker.
D
_____ occurs whenever value is added to a product or service as it moves through
transformation processes in the supply chain.
a.
Six Sigma
b.
Process capability
c.
Kaizen
d.
Supply base rationalization
e.
Quality at the source
E
All of the following are positive results from early supplier design involvement except
_____.
a.
longer lead-times in order to find and fix product defects before they get to the customer
b.
better quality and product design
c.
establishing reasonable tolerances
d.
suppliers can anticipate and begin preproduction work
e.
improved product quality and manufacturability
A
_____ is the avoidance of nonconformance in products and services by not allowing
errors or defects to occur in the first place.

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a.
Detection
b.
Inspection
c.
Prevention
d.
The hidden factory
e.
Optimization
C
A _____ program is the formal process of verifying, usually through an intensive cross-
functional on-site audit, that a supplier's processes and methods actually produce
consistent and conforming quality.
a.
supplier selection and evaluation program
b.
supplier certification
c.
Six Sigma
d.
process capability
e.
zero defects
B
. _____ is the ability of a process to generate outputs that meet engineering
specifications and/or customer requirements and refers to the normal behavior of a
process when operating in a state of statistical control.
a.
Process optimization
b.
Six Sigma
c.
Supplier certification
d.
Quality at the source
e.
Process capability
E
The _____ process capability index quantifies the relationship between the process's
natural tolerance limits and the product's specifications using a two-sided approach,
regardless of process centering.
a.
Cpk
b.
x-bar

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c.
MRP
d.
Cp
e.
Six Sigma
D
The _____ process capability index does not adequately account for situations where
the process is not closely centered on the nominal specification target value.
a. Cxy
b. optimization
c. Six Sigma
d. Cpk
e. Cp
E
A _____ is designed to provide information about the performance of the process under
stable operating conditions, i.e., when no special causes of variation are present.
a.
make-buy analysis
b.
process capability study
c.
price analysis
d.
cost analysis
e.
Six Sigma project
B
According to Philip Crosby, the only true performance standard that defines total quality
is _____, which he defined as conformance to requirements.
a.
zero defects
b.
Six Sigma
c.
process capability
d.
optimization
e.
rationalization
A
_____ include the direct, out-of-pocket costs of measuring quality, specifically checking
for possible defects.
a.
Six Sigma costs
b.

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Internal failure costs

c.
Appraisal costs
d.
External failure costs
e.
Prevention costs
C
_____ occur before the product or service is provided to the customer.
a.
Internal failure costs
b.
Appraisal costs
c.
External failure costs
d.
Prevention costs
e.
Total costs
A
_____ are incurred following production or after the customer takes possession.
a.
Inspection costs
b.
Appraisal costs
c.
Internal failure costs
d.
Prevention costs
e.
External failure costs
E
_____ are those costs incurred when production processes are designed or modified to
prevent defects from occurring in the first place.
a.
Appraisal costs
b.
Internal failure costs
c.
External failure costs
d.
Prevention costs
e.
Six Sigma costs
D

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All of the following are examples of appraisal costs except _____.

a.
laboratory testing of prototypes and samples
b.
production inspection activities
c.
development and maintenance of a quality management system
d.
development and maintenance of a quality management system
e.
incoming materials inspections
C
Which of the following is not an example of an internal failure cost?
a.
Process troubleshooting.
b.
Equipment calibration.
c.
Re-inspection following detection of a defect.
d.
Production downtime caused by defects.
e.
Scrap and process waste.
B
All of the following are examples of external failure costs except _____.
a.
warranty costs
b.
replacement of defective products to customers
c.
liability lawsuits
d.
quality planning
e.
loss of customer goodwill
D
Which of the following is not an example of a prevention cost?
a.
Incoming material inspections.
b.
Quality planning.
c.
Equipment calibration.
d.
Development of a quality manual.

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e.
Maintenance of a quality management system.
A
In _____, there is an intense focus on identifying and eliminating common causes of
waste that add cost, time, and effort to the product or service while not adding value to
the customer.
a.
supplier evaluation and selection process
b.
the MBNQA
c.
SIO 14000:2004
d.
the Honda BP process
e.
None of the above.
D
Which of the following is not one of the seven wastes identified by the Honda BP
process?
a.
Overproduction.
b.
Delivery.
c.
Waste in the work itself.
d.
Inventory.
e.
Product advertising and promotion.
E
_____ results in waste because a valuable equipment or labor resource is not producing
output.
a.
Idle time
b.
Inventory
c.
Wasted operator motion
d.
Delivery
e.
Overproduction
A
_____ is the organized and systematic study of every element of cost in a part, material,
process, or service to ensure that it fulfills its design and operational functions at the
lowest possible total cost.

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a.
Six Sigma
b.
Process capability
c.
New product development
d.
CAD/CAM
e.
VA/VE
E
Which of the following is not one of the five elements in the Six Sigma performance
improvement model?
a.
D(efine).
b.
M(easure).
c.
A(ccess).
d.
I(mprove).
e.
C(ontrol).
C
To remain current registration, ISO 9001:2008 registration must be accomplished every
_____.
a.
10 years
b.
5 years
c.
2 years
d.
3 years
e.
There is no expiration date for ISO 9001:2008 registration.
D
In ISO 9000:2008, (the) _____ consists of a quality manual, related procedures, and
work instructions.
a.
third-party registration
b.
quality management system
c.
environmental management system
d.

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supplier certification
e.
All of the above.
B
Which of the following is not one of the benefits to the buyer of a supplier achieving ISO
9001:2008 registration?
a.
Few buying firms have sufficient size or resources to independently develop and
implement their own comprehensive supplier certification audits.
b.
The supplier may develop interest from other buyers wanting to do business with it. (LO
#5)
c.
Third party registration may provide insight into a supplier's quality system conformance
that a buyer may otherwise lack.
d.
The buying firm receives the benefit of a supplier quality certification without actually
having to conduct its own quality certification audits.
e.
The supplier assumes responsibility for meeting the ISO standards and paying its own
registration fees.
B
The _____ series of standards, originally established in 1993, is designed to promote
environmental awareness and protection as well as pollution prevention.
a.
MBNQA
b.
ISO 9001:2008
c.
Zero defects
d.
Six Sigma
e.
ISO 14001:2004
E
_____ is a competition and implies that a winning organization excels not only in quality
management but also in quality achievement.
a.
ISO 9001:2008
b.
MBNQA
c.
ISO 14001:2004
d.
Six Sigma

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e.
Zero defects
B
_____ is the most basic and important tenet of the MBNQA criteria.
a.
Continuous improvement
b.
Six Sigma
c.
Statistical process control
d.
Process capability
e.
None of the above.
A
An effective supplier quality manual will contain all of the following except _____.
a.
documentation control
b.
testing and acceptance procedures
c.
metrics and measurement protocols
d.
basic responsibilities of both the buyer and the supplier
e.
approved accounting expenses
E
CHAP 9
T/F: Supplier performance that is sufficient today should be competitive in the
marketplace of tomorrow
false
T/F: Supplier performance measurement differs somewhat from the process used to
initially evaluate and select a supplier as it is a continuous process as opposed to a
unique, one-time event
true
T/F: Central to the design of all supplier measurement systems is the decision about
what to measure and how to weight various performance categories
true
T/F: Buyers rarely rely on suppliers for cost-reduction assistance
false
T/F: A buyer should delay reporting a supplier's poor performance until the next annual
performance review.
false
T/F: All supplier measurement systems have some element of subjectivity
true

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T/F: The categorical approach to supplier evaluation is commonly used by smaller

organizations because it is both easy and relatively inexpensive to implement.
true
T/F: Weighted-point supplier evaluation systems are very inflexible because the user
cannot change the weights assigned to each performance category or the actual
performance categories themselves.
false
T/F: The cost-based system is the most thorough and least subjective of the three
supplier performance measurement systems.
true
T/F: Considering the cost-based supplier evaluation system, the actual cost per
nonconformance event may be difficult to estimate or calculate, as many traditional cost
accounting systems are not designed to identify and capture such data.
true
T/F: The supplier performance index (SPI) always provides a complete or accurate
assessment of supplier performance.
false
T/F: Supply base rationalization and optimization often involves eliminating those
suppliers who are unwilling to achieve (or are incapable of achieving) supply
management performance objectives, either currently or expected in the near future.
true
T/F: The elimination of both marginal and small-purchase-volume suppliers is usually
the last phase of the rationalization process.
false
T/F: ring the early phases of supply base rationalization and optimization, the process
usually results in an absolute reduction in the total number of suppliers.
true
T/F: The remaining suppliers in a rationalized and optimized supply base are seldom
capable of performing additional tasks or providing other products and services that add
value to the buyer-supplier relationship.
false
T/F: Many buyers have now concluded that, if they select suppliers carefully and
develop close and collaborative working relationships with fewer suppliers, supply risk
can actually decrease.
true
T/F: Maintaining multiple suppliers for each item can actually increase the probability
and level of supply base risk.
true
T/F: The administrative cost of maintaining 5,000 suppliers will be dramatically lower
than the cost of maintaining a core group of 500 highly qualified suppliers.
false
T/F: Short-term purchase contracts that award small volumes of business to multiple
suppliers decrease production costs and provide incentive for individual supplier
investments in process improvement.
false

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T/F: A single source can never deliver cost and quality improvements over the life of a
contract even if a buyer manages that supplier effectively.
false
T/F: A smaller supplier with limited capacity for growth may need to eliminate some
existing customers to meet the increased requirements of a larger customer
true
T/F: In an absence of competition situation, a supplier may hold the buyer hostage by
unduly raising prices without justification or becoming too complacent, particularly when
there are higher switching costs
true
T/F: Buyers can minimize supply disruption risk from a single suppler by selecting a
supplier with multiple production facilities.
true
T/F: Buyers cannot move too aggressively when reducing the supply base.
false
T/F: There is only one common approach to supply base rationalization and
optimization.
false
T/F: A large supply base means the duplication of a wide range of supply management
activities, adding to acquisition cost without a corresponding increase in value added to
the customer
true
T/F: Supplier rationalization and optimization should be a one-time activity.
false
T/F: Direct involvement in a supplier's operations by buyer personnel is the most
challenging part of any supplier development process
true
T/F: In supplier development, the supplier must be convinced that it is in the supplier's
own best interest to accept the buyer's direction and technical assistance.
true
T/F: All organizations need to pursue supplier development
false
T/F: If a supplier's product or service is deemed routine to the buyer, it should then be
considered for supplier development.
false
T/F:The buyer and the supplier must agree on how to divide or share the costs and
benefits from the supplier development project.
true
T/F: Suppliers are sometimes not willing to accept outside help in the form of supplier
development, either because they are too proud to accept help or because they do not
see the value in improving quality or delivery performance.
true
T/F: Pursuing supplier development activities directly with suppliers is both quick and
easy.
false

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T/F: Regarding supply base risk, every sourcing decision will be different and must be
carefully evaluated regarding its own particular situation.
true
T/F: Maintaining small quantities of inventory has been the traditional methods of
dealing with supply base risk
false
T/F: Multiple sourcing can add quality variability to the sourced product because of the
use of different materials, manufacturing techniques, and processes.
true
T/F: Scenario analysis is technically considered forecasting and attempts to explore and
prepare for possible future scenarios that may have a significant negative impact on the
costs and operations of an organization.
false
T/F: Scenario planning begins with the creation of viable working strategies and plans
that would allow managers to respond quickly in the event that a specific risk scenario
should actually come about.
false
T/F: The prime reason for hedging is to protect the buyer against major swings in the
value of a future purchase.
true
T/F: All buyers are encouraged to engage in currency hedging activities, regardless of
their level of experience.
false
T/F: Few international shipments of merchandise require insurance coverage.
false
T/F: Certain risks, such as those arising from war, piracy, and losses attributable to
delays in transit, are generally covered by standard insurance policies
false
T/F: Sustainability reflects only the importance of strategic environmental practices of an
organization's suppliers but not the management of social responsibility in the supply
base.
false
T/F: Overall reduction in material usage and disposal can be accomplished through
engineering design changes and reuse and recycle programs.
true
Which of the following is not a typical qualitative service factor in a supplier performance
measurement system?
a.
Problem resolution ability.
b.
Technical ability.
c.
Process capability.
d.
Ongoing progress reporting.

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e.
Wavelength.
C
Which of the following is not one of the typical uses of supplier measurement data?
a.
Supporting supply base rationalization and optimization.
b.
Identifying those highly capable suppliers that may qualify for consideration of longer-
term partnerships or designation as preferred suppliers.
c.
Identifying those suppliers that are not performing at expected levels so that appropriate
remedial or development actions can be taken.
d.
Deciding where to locate supplier facilities.
e.
Determining a supplier's future purchase volume based on its past performance.
D
Which of the following is a disadvantage of a categorical supplier evaluation system?
a.
Least reliable.
b.
Cost accounting system required.
c.
Less frequent generation of evaluations.
d.
Most subjective.
e.
Usually manual.
B
All of the following are advantages of a categorical supplier evaluation system except
_____.
a.
easy to implement
b.
requires minimal data
c.
different personnel can contribute
d.
low-cost system
e.
greatest potential for long-range improvement
E
Which of the following is a disadvantage of a weighted-point supplier evaluation
system?
a.
Tends to focus on unit price.

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b.
Most complex, so implementation costs are high.
c.
Most subjective.
d.
Least reliable.
e.
Cost accounting system required.
A
All of the following are advantages of a weighted-point supplier evaluation system
except _____.
a.
flexible system
b.
supplier ranking allowed
c.
moderate implementation costs
d.
total cost approach
e.
quantitative and qualitative factors combined into a single system
D
Which of the following is a disadvantage of a cost-based supplier evaluation system?
a.
Least reliable.
b.
Most complex so implementation costs are high.
c.
Less frequent generation of evaluations.
d.
Most subjective.
e.
Tends to focus on unit price.
B
All of the following are advantages of a cost-based supplier evaluation system except
_____.
a.
total cost approach
b.
specific areas of supplier nonperformance identified
c.
objective supplier ranking
d.
greatest potential for long-range improvement
e.
good for firms with limited resources

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E
The _____ supplier evaluation system seeks to identify and quantify the total cost of
doing business with a given supplier, as the lowest purchase price may not always
result in the lowest total cost for an item or service.
a.
Six Sigma
b.
zero defects
c.
cost-based
d.
categorical
e.
weighted-point
C
In supplier measurement, the basic logic of the _____ is built around the calculation of
a/an _____.
a.
categorical system...supplier performance index
b.
cost-based system...process capability index
c.
weighted-point system...Q adjustment factor
d.
weighted-point system...cost accounting system
e.
cost-based system...supplier performance index (SPI)
E
The supplier performance index (SPI) equals (_____ plus _____) divided by _____.
a.
Total Purchases....Nonperformance Costs....Total Purchases
b.
Nonperformance Costs....Total Purchases....Nonperformance Costs
c.
Total Purchases....Appraisal Costs....External Failure Costs
d.
External Failure Costs....Internal Failure Costs....Total Purchases
e.
TransportationCosts....Appraisal Costs....Prevention Costs
A
Which of the following is not one of the management uses for the data derived from a
comprehensive cost-base supplier evaluation system?
a.
Such a system provides the necessary information that allows a buyer to justify buying
from a preferred supplier despite a higher unit price.
b.

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The system allows a buyer to communicate the cost of specific nonperformance events
to the originating supplier, which then helps identify improvement opportunities.
c.
Quantifying nonconformance costs can result in a chargeback to the offending supplier
for unplanned costs.
d.
The system allows customized assignment of cost accounting codes depending on how
much money is left in the annual budget.
e.
A buyer can use this data to identify longer-term sources of supply based on a supplier's
total cost performance history.
D
The _____ is a normalization factor for the supplier performance index (SPI) that
eliminates high-dollar lot bias.
a.
Cp
b.
MRO
c.
Q adjustment factor
d.
Cpk
e.
Rfx
C
_____ is the process of identifying how many and which suppliers a buyer will maintain.
a.
Supply base optimization
b.
Supply base rationalization
c.
Six Sigma
d.
Zero defects
e.
Strategic sourcing
B
_____ involves a detailed analysis of the supply base to ensure that only the most
capable and highest performing suppliers are kept in the supply base after it is
rationalized.
a.
Supply base optimization
b.
Outsourcing
c.
Strategic sourcing

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d.
Supply base reduction
e.
Supply base management
A
Which of the following is not one of the advantages of a rationalized and optimized
supply base?
a.
Buying from world-class suppliers.
b.
Use of full-service suppliers.
c.
Lower supply base administrative costs.
d.
Reduction of supply base risk.
e.
Absence of competition.
E
Which of the following is not one of the advantages of a rationalized and optimized
supply base?
a.
Longer lead-times.
b.
Use of full-service suppliers.
c.
Lower total product cost.
d.
Ability to pursue complex supply management strategies.
e.
Buying from world-class suppliers.
A
All of the following are possible risks of maintaining fewer suppliers except _____.
a.
supplier dependency
b.
supply disruption
c.
overaggressive supply reduction
d.
maintaining an all-foreign supply base
e.
absence of competition
D
In _____, a buyer selects or develops suppliers with multiple or redundant capabilities.
a.
single sourcing

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b.
cross-sourcing
c.
global sourcing
d.
strategic sourcing
e.
sole sourcing
B
Which of the following is not one of the formal approaches to supply base
rationalization?
a.
Twenty/eighty rule.
b.
"Improve or else" approach.
c.
Global sourcing.
d.
Triage approach.
e.
Competency staircase approach.
C
The _____ identifies those 20 percent of suppliers receiving the bulk of purchase spend
or that minority of suppliers that cause the most quality problems.
a.
"improve or else" approach
b.
triage approach
c.
strategic sourcing approach
d.
competency staircase approach
e.
twenty/eighty rule
E
The _____ provides all suppliers, regardless of their performance history, a chance to
remain in the supply base.
a.
"improve or else" approach
b.
triage approach
c.
competency staircase approach
d.
twenty/eighty rule

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e.
Six Sigma approach
A
The _____ requires the systematic evaluation of the performance of individual suppliers
and ultimate placement into one of three categories.
a.
twenty/eighty rule
b.
competency staircase approach
c.
"improve or else" approach
d.
triage approach
e.
zero defects approach
D
The _____ requires suppliers to successfully navigate a successive series of
performance milestones or hurdles in order to remain in the supply base.
a.
triage approach
b.
competency staircase approach
c.
MAS*H approach
d.
"improve or else" approach
e.
twenty/eighty rule
B
_____ is any activity undertaken by a buyer to improve a supplier's performance or
capabilities to meet the buyer's short- and long-term supply needs.
a.
Supply base rationalization
b.
The twenty/eighty rule
c.
Supply base optimization
d.
Supplier development
e.
Six Sigma
D
Which of the following is not a typical supplier development activity?
a.
Providing incentives to suppliers for improved performance.
b.

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Promoting competition among suppliers.

c.
Raising prices paid for purchased goods and services.
d.
Directly involving buyer personnel with suppliers.
e.
Conducting training and process improvement initiatives.
C
In overcoming the barriers to supplier development, which of the following is not one of
the approaches typically used?
a.
Direct-involvement activities.
b.
Single sourcing.
c.
Incentives and rewards.
d.
Warnings and penalties.
e.
All of the above are typical approaches.
B
Which of the following is not a buyer-specific barrier to supplier development?
a.
The buying company's purchase volume from the supplier does not justify development
investment
b.
No immediate benefit to supplier development is evident to the buying organization.
c.
Lack of executive support within the buying organization for supplier development.
d.
Importance of purchased item does not justify development efforts.
e.
Supplier's management agrees to improvement but fails to implement the proposals.
E
Which of the following is not a supplier-specific barrier to supplier development?
a.
No immediate benefit to supplier development is evident in the buying organization.
b.
Lack of commitment on the part of supplier's management.
c.
Supplier's management agrees to improvements but fails to implement the proposals.
d.
Supplier lacks engineering resources to implement solutions.
e.
Supplier lacks employee skill base to implement solutions.
A

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All of the following are general categories of supply base risk except _____.
a.
political risk
b.
market risk
c.
sourcing risk
d.
financial risk
e.
employee hiring risk
E
_____ in a supply base consists of such factors as: country stability, regional stability,
political and governmental stability, levels of official corruption, dissimilarities regarding
contract law and intellectual property rights, elections, military actions, civil
disturbances, terrorism, trade balance issues, and customs duties and tariffs.
a.
Financial risk
b.
Market risk
c.
Supplier company risk
d.
Political risk
e.
Sourcing risk
D
All of the following are elements of market risk in a supply base except _____.
a.
the number of buyers competing for the same goods or source of supply
b.
increasingly shorter product life cycles
c.
regional political risk
d.
threat of emerging, often disruptive, technologies
e.
protecting and maintaining trade secrets and intellectual properties from misuse or
misappropriation by suppliers, particularly those located overseas
C
Which of the following is not one of the elements of financial risk in a supply base?
a.
Inventory carrying costs.
b.
Currency exchange rates.
c.

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INCOTERMS
d.
Hard vs. soft currencies.
e.
Legal systems.
E
All of the following are common contingency management tools that can be effectively
used at the tactical level to assist the supply manager in identifying, analyzing, reducing,
and monitoring supply base risk except _____.
a.
single sourcing
b.
inventory
c.
automated visibility and early warning systems
d.
use of third party intermediaries
e.
scenario analysis
A
_____ allows a buying organization to react more quickly when supply chain risk events
occur by already having previously prepared plans and proposed responses in place in
advance of the actual risk event.
a.
Hedging
b.
Use of third party intermediaries
c.
Multiple sourcing
d.
Scenario analysis
e.
None of the above.
D
If a/an _____ currency is utilized, the _____ bears the currency risk and is likely to build
in additional contingency costs to cover its unknown risk.
a.
supplier's...supplier
b.
buyer's...supplier
c.
buyer's...buyer
d.
supplier's...buyer
e.
Regardless of the currency chosen, both parties share the currency risk equally.

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B
_____ can be defined as how supply chain members communicate and collaborate
regarding sources of risk, utilizing risk management tools to mitigate and minimize risk
and uncertainty across the supply chain.
a.
PERT/CPM
b.
Scenario analysis
c.
Hedging
d.
SCRM
e.
None of the above.
D
According to ISM, _____ is defined as the ability to meet current needs without
hindering the ability to meet the needs of future generations in terms of economic,
environmental, and social challenges.
a.
Sustainability
b.
Scenario analysis
c.
Social responsibility
d.
Supply chain risk management
e.
Standardization
A
According to ISM, _____ is a framework of measurable corporate policies and
procedures and resulting behavior designed to benefit the workplace and, by extension,
the individual, the organization, and the community.
a.
supply chain risk management
b.
sustainability
c.
ISO 9000:2008
d.
social responsibility
e.
supplier development
D
CHAP 11
_____ = (Quality + Technology + Service + Cycle Time) ÷ Price.
a.

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Cost
b.
Efficiency
c.
Value
d.
Total cost
e.
Target cost
C
_____ refers to the process of comparing supplier prices against external price
benchmarks, without direct knowledge of the supplier's costs.
a.
Cost analysis
b.
Make-buy analysis
c.
Target costing
d.
Price analysis
e.
Total cost analysis
D
_____ is the process of analyzing each individual cost element (i.e., material, labor
hours and rates, overhead, general and administrative costs, and profit) that together
add up to the final price.
a.
Price analysis
b.
Cost analysis
c.
Cost analysis
d.
Total cost analysis
e.
Make-buy analysis
B
_____ applies the price/cost equation across multiple processes that span two or more
organizations across a supply chain.
a.
Make-buy analysis
b.
Price analysis
c.
Cost analysis
d.

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Target costing
e.
Total cost analysis
E
In the framework for strategic cost management, _____ are high-value products or
services and can be sourced through traditional bidding approaches that require price
analysis using market forces to do the work and identify what is a competitive price.
a.
critical products
b.
unique products
c.
custom-made products
d.
generics
e.
commodities
E
Which of the following is not one of the categories of products in the strategic cost
management matrix?
a.
Commodities.
b.
One-time buys.
c.
Critical products.
d.
Unique products.
e.
Generics.
B
A _____ is an analytical tool that identifies the primary external forces that are causing
prices to either increase or decrease.
a.
market analysis
b.
total cost analysis
c.
cost analysis
d.
make-buy analysis
e.
target price analysis
A
In a/an _____ market structure, there exist identical products with minimal barriers for
new suppliers to enter the market, and price is solely a function of the forces of supply

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and demand.
a.
monopolistic
b.
oligopolistic
c.
communistic
d.
perfect competition
e.
Price is never solely a function of supply and demand, regardless of market structure.
D
Which of the following is not one of the questions that should be asked when analyzing
a seller's pricing strategy?
a.
Does the seller have a long-term pricing strategy, or is it short-term in nature?
b.
Is the seller a price leader or a price follower?
c.
How many employees does the seller's plant employ?
d.
Is the seller attempting to establish entry barriers to other competitors by establishing a
low price initially, then preparing to raise prices later in the future?
e.
Is the seller using a cost-based pricing approach or a market-based pricing approach?
C
In the _____, the supplier analyzes the market to find the combination of price per unit
and quantity of sales that maximizes its profit on the assumption that (1) lowering the
price per unit will result in more units being sold, and (2) greater volume will spread the
indirect cost over more units.
a.
price volume model
b.
sole sourcing model
c.
market-share model
d.
market skimming model
e.
promotional pricing model
A
In the _____, pricing is based on the assumption that long-run profitability depends on
the market share obtained by the supplier.
a.
price volume model
b.

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market-share model
c.
open market model
d.
target pricing model
e.
market skimming model
B
In the _____, the seller is willing to take a lower price because of the potential mass
market appeal of the product, resulting in substantially higher sales volumes.
a.
revenue pricing model
b.
promotional pricing model
c.
revenue pricing model
d.
cash discount model
e.
market-share model
E
00:0201:24

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In the _____, prices are set to achieve a high profit on each unit by selling to supply
managers who are willing to pay a higher price because of a lack of supply
management sophistication or who are willing to pay for products or services of

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perceived higher value.

a.
market skimming model
b.
revenue pricing model
c.
promotional pricing model
d.
price volume model
e.
competition pricing model
A
The emphasis of the _____ is on obtaining sufficient current revenue to pay for
operating cost rather than on profit.
a.
price volume model
b.
promotional pricing model
c.
revenue pricing model
d.
market skimming model
e.
competition pricing model
C
In the _____, suppliers are typically concerned about capacity utilization, covering fixed
cost, and retaining skilled labor during market slowdowns, when they are willing to
reduce their prices until market conditions change.
a.
revenue pricing model
b.
market skimming model
c.
penetration pricing model
d.
market-share model
e.
competition pricing model
A
The _____ presents pricing for individual products and services that is set to enhance
the sales of the overall product line rather than to ensure the profitability of each
product.
a.
price volume model
b.
competition pricing model

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c.
market skimming model
d.
promotional pricing model
e.
revenue pricing model
D
The _____ strategy is based on determining the highest price that can be offered to the
supply manager that will still be lower than the price offered by competitors.
a.
penetration pricing model
b.
market-share model
c.
cash discount
d.
revenue pricing model
e.
competition pricing model
E
In the _____, the supplier simply takes its estimate of costs and adds a markup
percentage to obtain the desired profit.
a.
margin pricing model
b.
cost markup pricing model
c.
total cost analysis model
d.
penetration pricing model
e.
revenue pricing model
B
In the _____, the supplier establishes a price that will provide a profit margin that is a
predetermined percentage of the quoted price, i.e., not a percentage of cost.
a.
rate-of-return pricing model
b.
margin pricing model
c.
market-share model
d.
competition pricing model
e.
target costing model
B

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In the _____, the desired profit is added to the estimated costs.

a.
penetration pricing model
b.
revenue pricing model
c.
margin pricing model
d.
rate-of-return pricing model
e.
TCO model
D
In _____, a purchaser may have to use internal engineering estimates about what it
costs to produce an item, rely on historical experience and judgment to estimate costs,
or review public financial documents to identify key cost data about the seller.
a.
reverse price analysis
b.
TCO analysis
c.
penetration pricing
d.
using the PPI
e.
competition pricing
A
All of the following are opportunities for supplier cost reductions except _____.
a.
process capability
b.
plant utilization
c.
learning-curve effect
d.
ability to vote out the supplier's labor union
e.
management capability
D
_____ indicates whether a seller can lower its cost as a result of the repetitive
production of an item.
a.
Process capability analysis
b.
Market analysis
c.
Price analysis

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d.
Break-even analysis
e.
Learning-curve analysis
E
_____ includes both cost and revenue data for an item to identify the point where
revenue equals cost, and the expected profit or loss at different production volumes.
a.
Make-buy analysis
b.
TCO
c.
Break-even analysis
d.
Market-share pricing
e.
None of the above.
C
Which of the following is not one of the common assumptions typically used in break-
even analysis?
a.
Fixed costs are never considered.
b.
Fixed costs remain constant over the period and volumes considered.
c.
Variable costs fluctuate in a linear fashion.
d.
Revenues vary directly with volume.
e.
Break-even analysis considers total costs rather than average costs.
A
The _____ is an approach to estimating the different components that make up the
supplier's per unit price per unit of product or service, i.e., what the product or service
should cost in a theoretical world.
a.
market skimming model
b.
make-buy analysis
c.
competition pricing model
d.
rate-of-return model
e.
Should-cost model
E

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In should-cost modeling, the _____ provides a high level view of the supply chain, and
then the supplier's primary cost elements are broken down into material, labor,
overhead, transportation freight, inventory cost, maintenance costs, and others.
a.
PPI
b.
value stream map
c.
target price
d.
product specification
e.
None of the above.
B
In should-cost modeling, _____ are any components not under the direct control of the
buying or supplying company but those that have a significant influence on the outcome
being modeled.
a.
direct costs
b.
assumption variables
c.
overhead costs
d.
transportation modes
e.
decision variables
B
In should-cost modeling, _____ include those components the company has direct
control or influence over.
a.
direct costs
b.
assumption variables
c.
variable costs
d.
decision variables
e.
commodity prices
D
In should-cost modeling, _____ refers to the integrity and transparency of the cost
model created.
a.
direct cost
b.

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value stream maps

c.
make-or-buy analysis
d.
fixed cost
e.
auditability
E
_____ is defined as the present value of all costs associated with a product, service, or
capital equipment that are incurred over its expected life.
a.
Cash flow analysis
b.
Total cost of ownership
c.
Make-buy analysis
d.
Revenue pricing
e.
Competition pricing
B
All of the following are examples of broad total cost of ownership categories except
_____.
a.
purchase price
b.
acquisition costs
c.
sales, general, and administrative overhead costs
d.
usage costs
e.
end-of-life costs
C
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In TCO, _____ is the amount paid to the supplier for the product, service, or capital
equipment.
a.
acquisition cost
b.
usage cost
c.
end-of-life cost
d.
purchase price

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e.
opportunity cost
D
In TCO, _____ includes all costs associated with bringing the product, service, or capital
equipment to the customer's location.
a.
purchase price
b.
opportunity costs
c.
acquisition costs
d.
usage costs
e.
end of life costs
C
In TCO for a product, _____ include(s) all costs associated with converting the
purchased part/material into the finished product and supporting it through its usable
life.
a.
purchase price
b.
acquisition costs
c.
end of life costs
d.
opportunity costs
e.
usage costs
E
In TCO for a service, _____ include all costs associated with the performance of the
service that are not included in the purchase price.
a.
invoice costs
b.
usage costs
c.
acquisition costs
d.
end of life costsend of life costs
e.
interest costs
B
In TCO for capital equipment, _____ are all costs associated with operating the
equipment during its life.
a.

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usage costs
b.
end of life costs
c.
opportunity costs
d.
acquisition costs
e.
training costs
A
_____ include(s) all costs incurred when a product, service, or capital equipment
reaches the end of its useful life, net of amounts received from the sale of remaining
product or the equipment (salvage value).
a.
Net present value costs
b.
Usage costs
c.
Purchase price
d.
End-of-life costs
e.
Opportunity costs
D
A/An _____ is defined as the cost of the next best alternative.
a.
operating cost
b.
purchase price
c.
net present value
d.
usage cost
e.
opportunity cost
E
Which of the following is not one of the important factors to consider when building a
TCO model?
a.
Focus on the small and easily measurable costs first.
b.
Building a TCO can be a costly and time-intensive activity.
c.
Work in a team.
d.
Make sure to obtain senior management buy-in before embarking on a full-fledged

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TCO.
e.
When considering global sourcing, consider all of the relevant labor, quality, logistics,
and import costs associated with the total supply chain.
A
With _____, a product's allowable cost is strictly a function of what a market segment is
willing to pay less the profit goals for the product.
a.
penetration pricing
b.
target pricing
c.
market-share pricing
d.
should-cost modeling
e.
revenue pricing
B
Which of the following statements regarding cost-savings sharing is false?
a.
Cost-sharing approaches require joint identification of the full cost to produce an item.
b.
Profit is a function of the productive investment committed to the purchased item and a
supplier's asset return requirements.
c.
The cost-based approach provides a supplier with incentives to pursue continuous
performance improvement to realize shared cost savings and invest in productive
assets.
d.
Profit is a direct function of cost.
e.
In the traditional market-based pricing approach, one party (usually the purchaser)
seeks to capture all cost savings resulting from a supplier's improvement effort.
D
Which of the following is not an item or product that is an appropriate candidate for a
cost-based pricing approach?
a.
An item in which the seller contributes high added value through direct or indirect labor
and specialized expertise.
b.
A complex item customized to specific requirements.
c.
A product requiring a conversion from raw material through value-added designs.
d.
A product requiring supplier-provided design and engineering support.

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e.
Commodity-like items.
E

T/F: The price paid for purchased products and services has no direct impact on the
end customer's perception of value provided by the organization.
false
T/F: Price analysis focuses simply on a seller's price with little or no consideration given
to the actual cost of production.
true

T/F: With the increased amount of outsourcing occurring in every global company today,
the majority of the cost of goods sold is driven by suppliers, which are outside the four
walls of an organization.
true
T/F: Strategic cost management approaches do not vary according to the stage of the
product life cycle.
false
T/F: As a product reaches its end of life, supply management cannot ignore the potential
value of environmental initiatives to remanufacture, recycle, or refurbish products that
are becoming obsolete.
true
T/F: The major benefits from cost-reduction efforts occur when supply management is
not involved in the new-product/service development cycle.
false
T/F: In general, low-value generics in which a competitive market with many potential
suppliers exists should emphasize total delivered price.
true
T/F: When demand exceeds supply, a buyer's market exists, and prices generally
decrease.
false
T/F: When supply exceeds demand, a buyer's market exists, and prices generally move
downward.
true
T/F: Examples of monopolies in the United States include the steel, automobile, and
appliance industries
false
T/F: Economic conditions seldom determine whether a market is favorable to the seller
or to the purchaser.
false
T/F: Some sellers rely on a detailed analysis of internal cost structures to establish
price, whereas others simply price at a level comparable to the competition.
true
T/F: In many cases, the price charged by a seller may have little or no relationship to
actual costs
true

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T/F:A major benefit of multiple sourcing is a lower price that results from the higher
volumes offered to a supplier
false
T/F: Although a quantity discount has a positive effect on the purchase price, a buyer
need not be cautious about the net impact on the total cost of an item.
false
T/F: The market-share model is also known as the penetration pricing model and is an
aggressive pricing approach for efficient producers because price is a direct function of
cost.
true
T/F: The opportunity cost of taking the supplier's cash discount is almost always higher
than the opportunity cost of not taking the cash discount.
false
T/F: The Consumer Price Index (CPI) tracks material price movements from quarter to
quarter, is scaled to a base year (1988), and tracks the percentage increase in material
commodity prices based on a sample of industrial purchasers.
false
T/F: Purchasers impact price at the time they set the specifications for the product or
service.
true
T/F: A seller's cost structure affects price because, in the long run, the seller must price
at a level that covers all variable costs of production, contributes to some portion of
fixed costs, and contributes to some level of profit
true
T/F: How well suppliers purchase their goods and services has no direct impact on
purchase price levels.
false
T/F: Break-even analysis includes both cost and revenue data for an item to identify the
point where revenue equals costs, and the expected profit or loss at different production
volumes.
true
T/F: A should-cost model can lead the procurement manager to better understand
elements of overhead, mark-ups on non-value-added costs, and other components that
can undermine price inflation.
true
T/F: At the highest levels of the organization, top management uses break-even
analysis as a strategic planning tool.
true
T/F: Most large firms base purchase decisions and evaluation suppliers on only the cost
elements of unit price, transportation, and tooling.
false
T/F: Building a TCO model is an easy task.
false
T/F: The value of money spent any time in the future does not depend on the
organization's cost of capital
false

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T/F: Target pricing is an innovative approach used in the final stages of the product life
cycle to establish a contract price between a buyer and a seller.
false
T/F: The cost of a new product is no longer an outcome of the product design process;
rather, it is an input to the process.
true
T/F: Under penetration pricing, using final price as a basis, the product is disaggregated
into major subsystems, each of which has its own target cost.
false
T/F: Under traditional pricing approaches, product cost + profit = selling price.
true
T/F: Using a traditional pricing approach, the selling price - profit = allowable product
cost.
false
T/F: The difference between the supplier's price and the target cost becomes the
strategic cost-reduction objective.
true
T/F: In setting target prices and target costs, the new-product development team should
bear in mind the cardinal rule of target costing: the target cost can never be violated.
true
T/F: If total costs are less than target costs, the design must change or costs must be
reduced.
false
T/F: Traditional pricing practices have supported cooperative efforts to make design,
product, and process improvements with suppliers.
false
T/F: Identification of all costs provides the basis for establishing joint improvement
targets.
true
T/F: The main risk in target and cost-based pricing concerns volume variability.
true
T/F: A cost-based approach to determining price is clearly appropriate for all purchased
items.
false
T/F: A cost-based approach to supplier pricing is feasible when the seller contributes
high added value to an item through direct or indirect labor and specialized expertise.
true
CHAP 12
A/An _____ is a series of tasks that requires the completion of specific objectives within
a certain time frame; has defined start and stop dates; consumes resources, particularly
time, personnel, and budget; and operates with limited resources.
a.
process
b.
work order
c.

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purchase order
d.
project
e.
team charter
D
All of the following are points that should be considered before initiating a project except
_____.
a.
make sure the objectives and outcomes are championed by senior executive
management
b.
measure subjectively
c.
place the program under the leadership of people with skill, credentials, and credibility
d.
establish an effective governance process with a cross-functional team
e.
break down the project into phased deliverables
B
00:0101:24

Which of the following is not one of the six phases of a project?

a.
Precompletion.
b.
Project definition.
c.

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Preliminary studies.
d.
Performance.
e.
Post-completion.
A
All of the following are characteristics of the post-completion phase of a project except
_____.
a.
confirm that the final project meets the expectations of management or customers
b.
reassign project personnel to other positions or other projects
c.
restore any used equipment and facilities to their original status
d.
conduct a post-implementation meeting to discuss the strengths and weaknesses of the
project
e.
identify broad budget, personnel, and resource requirements for future projects
E
A _____ visually displays the tasks and times associated with a project and consists of
a horizontal bar chart with activities listed vertically and times or dates displayed
horizontally.
a.
PERT tool
b.
Gantt chart
c.
CPM tool
d.
TCO chart
e.
networking tool
B
Users apply _____ to projects where there is a single known time for each activity with
no variance, while _____ applies to projects where time estimates are variable or
uncertain.
a.
Make-buy analysis....CPM
b.
PERT....CPM
c.
Post-completion analysis....PERT
d.
CPM...PERT

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e.
PERT....TCO
D
Which of the following is not one of the network rules for PERT/CPM?
a.
Networks start and finish at multiple events.
b.
Identify each unique activity within a project by a capital letter that corresponds only to
that activity.
c.
Branch direction indicates the general progression in time from left to right.
d.
When a number of activities end at one event, no activity starting at that event may
begin before all activities ending at that event are complete.
e.
Two or more activities cannot share graphically the same beginning and ending events.
A
In a PERT network, which of the following is not one of the times shown on the chart?
a.
Early start.
b.
Late start.
c.
On time start.
d.
Early finish.
e.
Late finish.
C
In a PERT network, a/an _____ is the earliest point in time an activity can begin
a.
late start
b.
on time start
c.
early finish
d.
early start
e.
late finish
D
In a PERT network, a/an _____ is the latest point in time an activity can begin without
delaying the entire project.
a.
late start
b.

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late finish
c.
early start
d.
early finish
e.
on time finish
A
In a PERT network, a/an _____ is the earliest time a project can finish given the
expected activity time.
a.
late finish
b.
on time start
c.
on time finish
d.
early start
e.
early finish
E
In a PERT network, a/an _____ is the latest time an activity can finish without delaying
the entire project.
a.
late start
b.
late finish
c.
on time finish
d.
early start
e.
late start
B
The _____ (in time) through a PERT network is the _____.
a.
longest path....critical path
b.
shortest path....critical path
c.
longest path....slack
d.
shortest path....slack
e.
None of the above.
A

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In a PERT network, the difference between the _____ and the _____ is slack.
a.
early start....late finish
b.
late start....early finish
c.
early start....early finish
d.
late start....early start
e.
None of the above.
D
In a PERT network, the difference between the _____ and the _____ is slack.
a.
late finish....early finish
b.
late start....late finish
c.
early finish....late start
d.
early start....early finish
e.
None of the above.
A
[A] _____ establishes the rate of improvement because of learning as producers realize
direct-labor cost improvements as production volumes increase.
a.
leverage
b.
learning curve
c.
knowledge curve
d.
product life cycle
e.
short-term contract
B
When referring to learning improvement, the _____ represents a reduction in the
cumulative average number of labor hours as production doubles from a previous level.
a.
critical path
b.
slack path
c.
expected activity time
d.

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learning rate
e.
early finish
D
Historically, the term _____ applies to the reduced direct-labor requirement per unit of
output because of the effects of learning, while the term _____ refers to the longer-term
factors of production that systematically reduce production costs.
a.
learning curve....experience curve
b.
learning curve....infinity curve
c.
experience curve....Boeing curve
d.
experience curve....learning curve
e.
None of the above.
A
Which of the following is false regarding when to use the learning curve?
a.
Learning-curve analysis is appropriate when a supplier uses a new production process.
b.
Learning-curve analysis is appropriate when a supplier produces any item for the first
time.
c.
The learning curve is appropriate when a supplier produces a technically complex item
for the first time.
d.
All processes and items can benefit from or exhibit improvement from learning.
e.
The human factors present at the beginning of production must remain fairly constant
over time to apply the learning curve.
D
_____ techniques are primarily applied to existing products and services, while _____ is
the application of value principles during product or service design.
a.
Value analysis....total cost of ownership
b.
Value engineering....price analysis
c.
Value analysis....value engineering
d.
Price analysis....cost analysis
e.
Value engineering....value analysis
C

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_____ is a way to achieve continuous performance improvement in an item, product, or

service, but it is not a technique for cheapening a product or service by lowering quality
or other performance attributes below what customers expect.
a.
Make-buy analysis
b.
Total cost analysis
c.
Price analysis
d.
Cost analysis
e.
Value analysis
E
Which of the following is not a question that value analysis teams should ask to
determine if opportunities exist for item, product, or service improvement?
a.
Are there additional uses for this product?
b.
Can we use a different color of paint?
c.
Is there a better production method to produce the item or product?
d.
If we are making an item now, can we buy it for less (or vice versa)?
e.
Are packaging cost reductions possible?
B
_____ is a technique used to examine the incremental changes in cost between
quantities within a supplier's price quotation.
a.
TCO
b.
Price analysis
c.
Market-share pricing
d.
Competition pricing
e.
Quantity discount analysis
E
_____ is a tool that reduces processes to their component parts or activities and helps
identify and then eliminate non-value-added activities (waste) or delays within a
process.
a.
Process mapping
b.

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TCO
c.
PERT/CPM
d.
QDA
e.
Productivity analysis
A
A _____ is one in which the set of steps or activities that make up the activity occur one
after the other.
a.
continuous process
b.
sequential process
c.
concurrent process
d.
standardized process
e.
None of the above.
B
A/An _____ consists of activities or steps that can be performed at the same time during
the main flow of work.
a.
intermittent process
b.
continuous process
c.
standardized process
d.
concurrent process
e.
None of the above.
D
Which of the following is not one of the critical steps to process mapping?
a.
Search for better ways and methods to perform the tasks comprising a process.
b.
Replace sequential activities with concurrent activities whenever possible.
c.
Identify those activities that contribute to waste or add minimal value to the process and
target those for elimination.
d.
Identify the time associated with each part of a process and identify how much of that
time is waste.

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e.
Utilize all sequential activities whenever possible as concurrent activities are wasteful.
E
_____ is a process of visually presenting the flow of materials and information to identify
wasted time and actions in a manufacturing or service process.
a.
Make-buy analysis
b.
QDA
c.
Value stream mapping
d.
TCO
e.
None of the above.
C
According to Ohno and Toyota, _____ is a category of waste that produces items for
which there are no orders.
a.
excess inventory
b.
overproduction
c.
unnecessary movement
d.
waiting time
e.
defect
B
According to Ohno and Toyota, _____ is a category of waste that occurs when
employees are standing about and inventory is at a standstill.
a.
waiting time
b.
defect
c.
overproduction
d.
unnecessary movement
e.
over-processing
A
According to Ohno and Toyota, _____ is a category of waste that moves material
unnecessarily or long distances.
a.
unnecessary movement

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b.
over-processing
c.
defect
d.
unnecessary transport
e.
overproduction
D
According to Ohno and Toyota, _____ is a category of waste that uses more steps to
produce a product than necessary.
a.
excess inventory
b.
defect
c.
unnecessary movement
d.
unnecessary transport
e.
over-processing
E
According to Ohno and Toyota, _____ is a category of waste that retains unnecessary
inventory between process steps.
a.
excess inventory
b.
overproduction
c.
over-processing
d.
waiting time
e.
None of the above.
A
According to Ohno and Toyota, _____ is a category of waste that includes any wasted
motion by man or machine.
a.
overproduction
b.
unnecessary transport
c.
unnecessary movement
d.
defect

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e.
None of the above.
E
According to Ohno and Toyota, _____ is a category of waste that makes the wrong
product.
a.
overproduction
b.
waiting time
c.
defect
d.
unnecessary movement
e.
over-processing
C
_____ actions and resources are those that create value for the customer.
a.
Extras
b.
Non-value-adding
c.
Necessary non-value-adding
d.
Value-adding
e.
None of the above.
D
_____ actions and resources are everything done in the process, which contribute no
value to the customer, but which they are forced to pay for when they buy the product or
service.
a.
Value-adding
b.
Excess inventory
c.
Necessary non-value-adding
d.
Waiting time
e.
Non-value-adding
E
_____ actions and resources are those actions in a process that must be done to make
the product but create no value for the customer.
a.
Non-value-adding

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b.
Necessary non-value-adding
c.
Value-adding
d.
Inventory surplus
e.
None of the above.
B
In value stream mapping, the flow diagram that depicts the process and shows the
times and resources used at each step and the time delay between each step is called
a/an _____.
a.
anticipated state map
b.
future state map
c.
ideal state map
d.
current state map
e.
None of the above.
D
In value stream mapping, the flow diagram that depicts process improvements to
optimize the value and minimize the non-value-added streams is called a/an _____.
a.
current state map
b.
future/ideal state map
c.
variation map
d.
anticipated state map
e.
None of the above.
B
T/F: Projects have certain characteristics that make them unique compared with other
forms of work.
true
T/F: Because a project usually has a defined scope with agreed-upon tasks,
responsibilities, and deliverables, it is often more difficult to measure project success
compared with other types of work.
false
T/F: The planning phase of a project is particularly critical because there is a strong
correlation between effective planning and successful project outcomes.
true

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T/F: The advantage of a Gantt chart is that for larger projects, it can be easy to use and
keep up to date.
false
T/F: Each activity in PERT has three time estimates: (1) most likely, (2) pessimistic, and
(3) optimistic.
true
T/F: In a CPM or PERT project, a network is a graphical representation that shows how
each individual activity relates in time and sequence to all other activities.
true
T/F: The longest path (in time) through a PERT network is the critical path.
true
T/F: Activities without any slack in a PERT network are by definition on the critical path.
true
T/F: activities on the critical path in a PERT network will have slack
false
T/F: If learning occurs at a supplier during the performance of a purchase contract, and
the buyer does not take that into account, then the supplier will not reap the financial
benefits that result from learning
false
T/F: In collaborative relationships, buyers and suppliers can work together to mutually
share the benefits of learning curves and productivity improvements.
true
T/F: The work force factor of the learning curve refers to the ability of the worker on the
job to learn and improve through repetitive effort and increased efficiency, but not the
effort by management to pursue productivity gains.
false
T/F: Offering a supplier a longer-term contract with guaranteed volumes encourages
investment in equipment that results in lower production costs.
true
T/F: All processes or items can benefit from, or exhibit improvement from, learning.
false
T/F: Learning curve analysis is appropriate when a supplier uses a new production
process or produces an item for the first time
true
T/F: Learning curves require the accurate collection of cost and labor data, particularly
during the latter stages of production
false
T/F: Learning-curve analysis highlights a key reason why many purchasers consolidate
purchase volumes with fewer suppliers.
true
T/F: Value analysis traditionally applies to tangible products, and there are many
reasons why companies cannot VA techniques to services
false
T/F: The primary objective of value analysis is to increase the value of an item or
service at the lowest cost without sacrificing quality.
true

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T/F: When using quantity discount analysis, the key calculation is the incremental cost
of each additional unit at different quantity levels.
true
T/F: Most processes do not cross functional boundaries.
false
T/F: When a process crosses functional boundaries, there is a risk that no one actually
owns or takes responsibility for the entire process.
true
T/F: Organizations should not use process mapping to redesign or reengineer
processes
false
T/F: Many organizations are attempting to develop new products concurrently rather
than sequentially, which not only saves time and money but also allows agreement on
major issues early in the process.
true
T/F: Because so few processes move across functional boundaries, it is illogical to have
those groups connected with the process involved with mapping and improving the
process.
false
T/F: By identifying unnecessary steps and resources, value stream mapping
streamlines processes for greater efficiency.
true
T/F: Non-value-adding actions and resources are those actions in a process that must
be done to make the product but create no value for the customer.
false
CHAP 13
Which of the following is not one of the popular definitions of negotiation as presented in
the text?
a.
A negotiation is an interactive communication process that may take place whenever we
want something from someone else or another person wants something from us.
b.
Negotiation is the process of communicating back and forth for the purpose of reaching
a joint agreement about differing needs or ideas.
c.
Negotiating is the end game of the sales process.
d.
Negotiation is to be used only to get the absolutely lowest price from a supplier.
e.
Negotiation is a process of formal communication, either face-to-face or via electronic
means, where two or more people, groups, or organizations come together to seek
mutual agreement about an issue or issues.
D
A/An _____ is also known as the negotiator's bottom line or reservation point, that is,
that point in the negotiation where it is most advantageous for the negotiator to walk
away from the table and implement his or her next-best option.

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a.
BATNA
b.
position
c.
interest
d.
need
e.
want
A

A negotiator's _____ can be defined as his or her opening offer, which represents the
optimistic (or ideal) value of the issue being negotiated.
a.
interest
b.
need
c.
BATNA
d.
position
e.
want
D
The negotiator's _____ is the unspoken motivation or reason that underlies any given
negotiation position.
a.

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want
b.
need
c.
interest
d.
BATNA
e.
bargaining zone
C
A/An _____ is considered to be a negotiated outcome that the negotiator must have in
order to reach a successful outcome to the negotiation.
a.
want
b.
need
c.
BATNA
d.
position
e.
interest
B
A/An _____ refers to those negotiated outcomes that a negotiator would like to have as
opposed to those outcomes that must be achieved.
a.
need
b.
BATNA
c.
position
d.
interest
e.
want
E
Step 1 of Triangle Talk is _____.
a.
know exactly what they want
b.
propose action in a way they can accept
c.
know exactly what you want
d.
apply tactics to win the negotiation

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e.
None of the above.
C
Step 2 of Triangle Talk is _____.
a.
apply strategy to win the negotiation
b.
know exactly what they want
c.
know exactly what you want
d.
propose action in a way they can accept
e.
use power to get exactly what you want
B
Step 3 of Triangle Talk is _____.
a.
apply tactics to win the negotiation
b.
know exactly what you want
c.
use power to get what you want
d.
propose action in a way they can accept
e.
know exactly what they want
D
Which of the following is not a reason for negotiating with suppliers?
a.
The total contract value or volume is large.
b.
The purchase is for widely available, commodity-like goods.
c.
The purchase involves utilization of capital-intensive plant and equipment.
d.
The purchase involves a special or collaborative relationship.
e.
The supplier will perform important or significant value-added activities.
B
_____ are the action plans designed to help achieve a desired result.
a.
Arguments
b.
Questions
c.
Strategies

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d.
Objectives
e.
Tactics
E
A/An _____ is an aspiration or vision to work toward in the future.
a.
need
b.
objective
c.
plan
d.
BATNA
B
00:0201:24

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Which of the following is not one of the reasons that negotiators frequently fall short of
their goals or reach an impasse?
a.
They neglect the other party's problems.
b.
They focus too much on price.
c.
They focus too much on common ground.
d.

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They neglect their BATNAs.

e.
They focus on interests rather than on positions.
E
A/An _____ is a method or scheme devised for making or doing something to achieve a
desired end.
a.
want
b.
objective
c.
BATNA
d.
plan
e.
position
D
In negotiation, a/an _____ is a reality or truth that the parties can state and successfully
verify.
a.
fact
b.
issue
c.
position
d.
interest
e.
BATNA
A
A/An _____ is an item or topic to be resolved during the negotiation.
a.
BATNA
b.
issue
c.
interest
d.
position
e.
fact
B
The area of overlapping positions among issues, when there is one, between the
negotiators is termed the _____.
a.
concurrent zone

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b.
agreement possibility
c.
positive position
d.
objective
e.
bargaining zone
E
Negotiation _____ refers to the overall approach used to reach a mutually beneficial
agreement with a supplier that holds different points of view from the buyer.
a.
tactics
b.
positioning
c.
strategy
d.
conflict
e.
None of the above.
C
_____ is/are the ability to influence another person or organization to do something.
a.
Positions
b.
Planning
c.
Strategy
d.
Power
e.
None of the above.
D
_____ is ready access to relevant and useful information and relies on trying to
influence the other party through the cogent presentation of facts, data, information, and
persuasive arguments.
a.
Information power
b.
Reward power
c.
Coercive power
d.
Legitimate power

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e.
Referent power
A
_____ means that one party is able to offer something of perceived value to the other
party.
a.
Referent power
b.
Informational power
c.
Expert power
d.
Coercive power
e.
Reward power
E
_____ includes the ability to punish the other party - financially, physically, emotionally,
or mentally.
a.
Reward power
b.
Coercive power
c.
Legitimate power
d.
Expert power
e.
Referent power
B
The basis of _____ is the official job position or title that an individual holds, rather than
the characteristics of the individual him/herself.
a.
informational power
b.
referent power
c.
legitimate power
d.
coercive power
e.
expert power
C
A negotiator with _____ is recognized as having accumulated and mastered a high level
of knowledge about a particular subject, often coupled with verifiable credentials and
stature to document that mastery.
a.

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referent power
b.
legitimate power
c.
coercive power
d.
reward power
e.
expert power
E
The source of _____ comes from interpersonal appeal based on socially acceptable
individual qualities and attributes, such as one's personality or attractiveness.
a.
informational power
b.
expert power
c.
coercive power
d.
referent power
e.
physical power
D
A _____ is a movement away from a negotiating position that offers something of value
to the other party in order to ultimately gain something else of value.
a.
reward
b.
concession
c.
coercive maneuver
d.
tactic
e.
strategy
B
_____ is a negotiation tactic that involves one party, often the seller, offering an
unusually low price to receive a buyer's business.
a.
Low ball
b.
High ball
c.
Boulwarism
d.
Caucus

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e.
Trial balloon
A
_____ is a negotiation tactic that involves taking a time out.
a.
Silence
b.
Venue
c.
Caucus
d.
Take-it-or-leave-it
e.
Low ball
C
_____ is a negotiation tactic that is a test of acceptability.
a.
Take-it-or-leave-it
b.
Best and final offer
c.
Price increase
d.
Trial balloon
e.
Honesty and openness
D
_____ is a negotiation tactic that involves taking an abnormally high initial position on an
issue.
a.
Low ball
b.
High ball
c.
Best and final offer
d.
Curve ball
e.
Knuckleball
B
_____ is a negotiation tactic that often signals the end of a negotiation on a given issue.
a.
Venue
b.
Silence
c.

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Planned concessions
d.
Trial balloon
e.
Best and final offer
E
_____ is a negotiation tactic that involves not immediately responding when the other
party makes an offer in the hope that an awkward silence will encourage further offers
or concessions from the other party.
a.
Trial balloon
b.
Silence
c.
High ball
d.
Questions
e.
Planned concessions
B
_____ is a negotiation tactic that signals that it is now the other party's turn to
reciprocate and make a concession on an important issue.
a.
Venue
b.
Low ball
c.
Honesty and openness
d.
Best and final offer
e.
Planned concessions
E
_____ is a negotiation tactic in which the negotiator insists on negotiating in a location
that is more favorable to him/her.
a.
Consistency
b.
Caucus
c.
Venue
d.
Low ball
e.
High ball
C

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According to Cialdini, _____ is a principle which states that people feel an obligation to
give something back of equal or greater value to someone else after we have received
something of perceived value from them.
a.
social proof
b.
authority
c.
consistency
d.
reciprocation
e.
scarcity
D
According to Cialdini, _____ is a principle that says we prefer to be consistent in our
beliefs and actions.
a.
scarcity
b.
liking
c.
social proof
d.
reciprocation
e.
consistency
E
According to Cialdini, _____ is a principle which states that we look to the behavior of
others to determine what is desirable, appropriate, and correct.
a.
social proof
b.
liking
c.
consistency
d.
scarcity
e.
authority
A
According to Cialdini, _____ is a principle which states that we work well and are more
agreeable with people we like or who are like us.
a.
leverage
b.
liking

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c.
authority
d.
reciprocation
e.
consistency
B
According to Cialdini, _____ is a principle which states that we are more likely to accept
the positions, arguments, and direction from recognized authority figures.
a.
liking
b.
consistency
c.
scarcity
d.
social proof
e.
authority
E
_____ means that two or more parties are competing over a fixed sum value with the
winner taking all or the larger share.
a.
Lose-lose negotiation
b.
Win-lose negotiation
c.
Winner-take-all negotiation
d.
Integrative bargaining
e.
None of the above.
B
_____ seeks to expand the value or resources of outcomes available to all parties
through cooperative negotiation.
a.
Win-win negotiation
b.
Distributive bargaining
c.
Competitive bargaining
d.
Lose-lose negotiation
e.
Open-table bargaining
A

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In _____, the parties work closely together to identify new and creative ways to expand
available resources or generate new value obtained through a negotiated agreement.
a.
logroll
b.
use non-specific compensation
c.
cut the costs for compliance
d.
expand the pie
e.
find a bridge solution
D
In _____, the parties identify more than one issue where disagreement exists and then
agree to trade off these issues so that each party has one of its top-priority issues
satisfied.
a.
use non-specific compensation
b.
cut the costs for compliance
c.
expand the pie
d.
find a bridge solution
e.
logroll
E
In _____, one party achieves his or her objective on an issue, whereas the other
receives something else of value as a reward for going along.
a.
use nonspecific compensation
b.
logroll
c.
expand the pie
d.
find a bridge solution
e.
cut the costs for compliance
A
In _____, one party (usually the buyer) gets a lower price as the parties work jointly to
reduce the seller's costs or the joint transaction costs of doing business together.
a.
logroll
b.
expand the pie

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c.
cut the costs for compliance
d.
find a bridge solution
e.
use non-specific compensation
C
_____ involves inventing new options that satisfy each party's needs.
a.
Expand the pie
b.
Find a bridge solution
c.
Logroll
d.
Cut the costs for compliance
e.
Use non-specific compensation
B
_____ occurs as a result of negotiators being immersed in a place in which their
established norms have been confronted and may no longer be applicable.
a.
Win-win negotiation
b.
Competitive bargaining
c.
Reciprocation
d.
Consistency
e.
Culture shock
E
All of the following are effective e-negotiating practices except _____.
a.
use a blended negotiation, starting with an initial face-to-face meeting or a telephone
call to build essential rapport with the other party
b.
establish common ground and interests to build mutual trust
c.
use "emoticons" to counter the lack of nonverbal awareness
d.
forward e-mail negotiations to the other party's immediate superior for verification
e.
proofread the entire message, including addressees, before sending the e-mail out
D
T/F: Everyone negotiates something every day

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true
T/F: Negotiation is a simple skill that applies to only a few purchasing and supply
managers.
false
T/F: Negotiation is noncritical means to convey the buyer's specific sourcing
requirements and specifications to its supply base.
false
T/F: An important part of negotiation is realizing that the process involves relationships
between people, not just organizations.
true
T/F: An integral part of negotiation involves each party trying to persuade the other party
to do something that is in its best interests
true
T/F: A negotiator should ensure that his or her BATNA is revealed to the other party,
because the final settlement is unlikely to vary much from that point.
false
T/F: All negotiation settlements must ultimately be judged in light of the other viable
alternatives that existed at the time of the agreement.
true
T/F: Sharing the underlying interests behind a position may cause a negotiator's power
to shift toward the other party, ultimately resulting in a less than desired outcome.
true
T/F: To reach a negotiated agreement using principled negotiation, a negotiator should
always focus on the other party's stated position, not his or her underlying interests.
false
T/F: When a negotiator is planning an upcoming negotiation, it is imperative to prioritize
all of the potential issues to be negotiated into needs and wants, thereby knowing what
must be achieved and what can be exchanged for something else of value.
true
T/F: It is easy to develop common ground in the negotiation without knowing what the
other party is seeking.
false
T/F: A negotiator can automatically assume that the other party thinks the same way he
or she does.
false
T/F: The purchasing cycle begins with identifying (or anticipating) a specific need or
requirement for a part component, raw material, subassembly, service, piece of
equipment, or finished good to be sourced to conduct or support organizational
operations.
true
T/F: All purchase requirements will require buyers and sellers to conduct a thorough,
detailed, and time-consuming negotiation
false
T/F: Negotiation is more appropriate when other issues besides price are important or
when competitive bidding will not satisfy the buyer's requirements on various issues.
true

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T/F: All buyer-supplier negotiations are relatively straightforward, only requiring

rudimentary preparation and planning.
false
T/F: Deciding the physical location of where to negotiate is an unimportant part of any
planning process.
false
T/F: Excessive formality in negotiation can effectively constrain the parties and restrict
the free exchange of ideas and solutions.
true
T/F: Packaging issues together risks undermining an entire negotiation if the parties
reach impasse on a single issue within the linked proposal.
true
T/F: Effective negotiators are unwilling to make counterproposals
false
T/F: Good negotiators know that reaching agreement is the end of the negotiation
process.
false
T/F: Many negotiators fail to prepare adequately before entering into a formal
negotiation oftentimes because of a very short timeframe in which to make a deal.
true
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T/F: Before actual negotiations begin, the parties need to believe realistically that they
can reach an agreement.
true
T/F: Experienced negotiators do not need to understand their counterparts through
research and experience.
false
T/F: Analyzing the other party requires a thorough assessment of the relative strengths
and weaknesses of the parties, as well as the particulars for each individual issue to be
negotiated.
true
T/F: The issues that are most critical to a supplier are likely to be those most critical to a
buyer.
false
T/F: The bargaining zone represents the heart of the negotiation process, as any
proposal or counterproposal offered outside of this range is likely to be rejected by the
other party because it is not what he or she is willing to settle for.
true
T/F: A procurement negotiation seldom affects other stakeholders throughout the
organization who have an interest in or will be affected by the negotiation outcomes.
false
T/F: An experienced negotiator does not need to practice or rehearse a complex
negotiation before commencing the formal negotiation.
false

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T/F: The effective use of information in a negotiation does not necessarily mean open
and complete sharing.
true
T/F: There is minimal likelihood that retaliation or escalation will occur if the power
structure shifts unfavorably in the future.
false
T/F: Referent power is most successful in negotiation when the referents are aware that
a counterpart identifies with or has an attraction to them.
true
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T/F: For the effective negotiator, it is acceptable to give away any concession without
getting something of equal or greater value in return.
false
T/F: It is unimportant for the negotiator to have adequately prepared and established a
thoughtful BATNA for each issue until after the negotiation has begun.
false
T/F: The manner in which a negotiator approaches concession making is an important
part of every successful negotiation strategy.
true
T/F: A willingness to offer large concessions is always in the best interests of a buyer.
false
T/F: The caveat to the best and final offer tactic is that the person making the best and
final offer must be prepared to actually end the negotiation if the other party does not
accept the offer.
true
T/F: People seldom show the tendency to fill in the gaps when a discussion encounters
silence
false
T/F: A tactic used during one negotiation may not be successful or applicable to another
negotiation, even with the same counterpart.
true
T/F: In win-win negotiation, if one party gains, it is only at the expense of the other party.
false
T/F: A win-lose negotiation approach works best for items or services that are important
to the buyer's products or business or when the item involves high-dollar items or
services where cost control is critical.
false
T/F: When preparing for a negotiation with a supplier located in another country,
companies must invest in substantial extra time and effort in planning for the negotiation
to accommodate new language translations, travel, modes of transportation, and other
foreign business requirements.
true
T/F: During an international negotiation, an interpreter might verbally communicate yet
not fully convey the significance of unspoken actions, signals, and customs that may be
invisible to the foreign or nonnative negotiator.

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true
T/F: There is minimal danger in stereotyping or oversimplifying the cultural
characteristics of different countries or regions.
false
T/F: Use of electronic media such as e-mail, texting, and instant messaging, has no
measurable impact on the dynamics and effectiveness of a negotiation.
false
T/F: In e-negotiation, status differences are readily apparent, and social norms and
behaviors are easier to discern.
false
T/F: Parties may behave differently when negotiating electronically than they do in
person.
true
T/F: According to Karrass, research indicates that e-mail-based negotiations typically
take less time to complete than those conducted face-to-face
false
T/F: E-negotiators generally ask more questions and tend to make fewer assumptions
during the negotiation.
false
T/F: Negotiators who interact face-to-face are more likely to reach agreement and avoid
impasse than their e-negotiation counterparts
true
CHAP 16
T/F: According to Shook, lean is a philosophy that seeks to shorten the time between
when the customer order and the shipment to the customer by eliminating waste.
true
T/F: In a pull system, an upstream work center or operation will create output regardless
whether a downstream center directly requests that output.
false
00:0201:24

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T/F: Anything less than perfect quality leads to waste

true
T/F: WIP is incomplete - it has not yet been transformed to a saleable finished good
true
T/F: If WIP builds up at a workstation, a scheduler should not have to reroute the flow of
material to another work center
false
T/F: A higher-than-anticipated finished-goods inventory level may mean that a increase
in customer demand is occurring
false
T/F: When firms produce goods in anticipation of future customer orders, they are
operating in a just-in-time environment
false
T/F: The most basic and the easiest inventory-related cost to quantify and track is unit
cost.
true
T/F: Ordering costs are a composite of the costs associated with the release of a
material order.
true
T/F: Carrying costs do not vary with the level of inventory, which makes these costs
fixed
false
T/F: It is often difficult to quantify the total costs associated with ordering and carrying
physical inventory.
true
T/F: Most cost accounting systems are capable of identifying and assigning the true
costs related to maintaining physical inventory.

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false
00:0201:24

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Chỉ 47,88 US$/năm
T/F: From the financial accounting perspective, inventory has historically been
considered a current asset.
true
T/F: Even in an era of just-in-time production, almost all firms hold some level of
preproduction inventory.
true
T/F: Production inventory consumes a minor portion of inventory investment.
false
T/F: The true cost of MRO inventory often goes unnoticed because firms fail to track
these items with the same intensity as production inventory.
true
T/F: Supply chains are insensitive to changes in markets, including changes in the
availability of material supply as well as price changes
false
T/F: Suppliers seldom offer quantity discounts to encourage larger orders from
purchasers
false
T/F: Unnecessary inventory usually results from one thing: uncertainty
true
T/F: It is harder to increase a material release by 10 percent or carry safety stock to
cover supplier quality problems than to correct the root cause of a problem.
false
T/F: Suppliers that cannot meet delivery schedules create delivery uncertainty

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true
T/F: Purchasers should not accept any of the blame for delivery uncertainty
false
T/F: A major step toward eliminating delivery uncertainty is a commitment to stable
release schedules with realistic (but not overly generous) supplier lead times.
true
T/F: The ability to plan material requirements accurately increases as order-cycle time
lengthens.
false
T/F: Specifying customized parts when standardized parts are available adversely
affects material inventory because customized parts are usually more expensive
true
T/F: Most inventory waste results from underlying problems that blue collar workers
have failed to correct.
false
T/F: The underlying emphases of lean- to eliminate all forms of uncertainty and waste -
are relevant to all organizations, regardless of the specific planning and control tools
that are used
true
T/F: Continuous improvement involves small, daily improvements that ensure that the
process in moving forward.
true
T/F: According to JIT, inspection is a waste of both time and personnel caused by
defects
true
T/F: Lean is an easy approach to implement.
false
T/F: Decisions in lean must be based on the opinions or preferences of influential
individuals, as well as on facts and data
false
T/F: A logical place to begin when managing inventory investment is to make sure there
is agreement between physical and electronic inventory.
true
T/F: Record integrity exists when the physical inventory on hand exceeds the electronic
record on hand, regardless of the quantity of inventory.
false
T/F: The advantage of consignment to the buyer is the ability to defer ownership and
avoid committing working capital and incurring carrying charges
true
T/F: Very few organizations use distributors to provide at least some portion of their
inventory requirements, particularly maintenance, repair, and operating supplies.
false
T/F: Shortening the material pipeline in terms of time between suppliers and a buyer
can reduce the average amount of inventory in a system.
true

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T/F: Using a RFID system, if supplier quality and lead times are reliable, planners can
time the arrival of components just before production of the final part number.
false
_____ means that inventory moves through the supply chain continuously with minimal
queueing or non-value-adding activity being performed.
a. Pull
b. WIP
c. MRO
d. Flow
e. Push
D
_____ means that customer orders start the work process, which ripples down through
the supply chain.
a.
Make-to-stock
b.
Push
c.
MRP
d.
DRP
e.
Pull
A
_____ means that supply chains must have perfect quality.
a.
DRP
b.
Flow
c.
Pull
d.
Push
e.
Striving for excellence
A
All of the following are categories of inventory except _____.
a.
lean inventory
b.
raw material and semifinished item inventory
c.
work-in-process inventory
d.
MRO supplies inventory

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e.
pipeline/in-transit inventory
A
_____ inventory includes the items purchased from suppliers or produced internally to
directly support production requirements.
a.
Work-in-process
b.
Finished-goods
c.
MRO suppliers
d.
Pipeline/in-transit
e.
Raw material and semifinished items
A
Which of the following is an example of WIP inventory?
a.
Waiting to be moved to another process.
b.
Currently being worked on at a work center.
c.
Lining up at a processing center due to a capacity bottleneck or machine breakdown.
d.
All of the above.
e.
None of the above.
A
_____ inventory includes completed items or products that are available for shipment or
future customer orders.
a.
WIP
b.
Finished-goods
c.
MRO
d.
Pipeline/in-transit
e.
Raw materials and semifinished items
B
When firms produce goods in anticipation of future customer orders, they are operating
in a/an _____ environment
a.
assemble-to-order
b.

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make-to-order
c.
make-to-stock
d.
just-in-time
e.
None of the above.
C
When firms produce goods in response to a customer order, they are operating in a/an
_____ environment.
a.
make-to-order
b.
make-to-stock
c.
make-to-forecast
d.
WIP
e.
None of the above.
A
_____ inventory includes the items used to support production and operations and are
not physically part of a finished product.
a.
Raw materials
b.
WIP
c.
Semifinished items
d.
MRO
e.
Pipeline/in-transit
D
____ represents the funds committed to operating a business, including the purchase
and holding of inventory.
a.
Pipeline inventory
b.
WIP
c.
MRP
d.
Working capital
e.
None of the above.

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D
Which of the following is a component of carrying cost?
a.
Cost of capital.
b.
Cost of storage.
c.
Cost of obsolescence, deterioration, and loss.
d.
All of the above.
e.
None of the above.
D
____ are calculated as Average Inventory in Units x Unit Price x Carrying Cost per Year.
a.
Quality costs
b.
Ordering costs
c.
Inventory carrying costs
d.
MRO costs
e.
Cycle counting costs
C
All of the following are considered to be the right reasons for investing in inventory
except _____.
a.
avoid disruptions in operational performance
b.
Unreliable supplier delivery
c.
support customer service requirements
d.
hedge against marketplace uncertainty
e.
take advantage of order quantity discounts
B
Which of the following is not one of the wrong reasons for investing in inventory?
a.
Poor quality and material yield.
b.
Extended order-cycle times from global sourcing.
c.
Hedge against marketplace uncertainty.
d.

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Specifying custom items for standard applications.

e.
Inefficient manufacturing processes.
C
Which of the following is not one of the key principles of the lean concept?
a.
Maximize the use of people.
b.
Simplify first, and only then apply new technology.
c.
Focus on gradual, but continuous, improvement.
d.
Minimize waste (including poor quality).
e.
All of the above.
A
All of the following are important barriers to lean supply except _____.
a.
large warehouses
b.
dispersed supply base
c.
historic buyer-supplier relationships
d.
number of suppliers
e.
supplier quality performance
A
_____ involves frequent deliveries of smaller quantities directly to the point of use at the
purchaser.
a.
Lean supply
b.
Lean transportation
c.
Lean warehousing
d.
Lean ordering
e.
None of the above.
B
A repeatable lean transportation schedule, also called a _____, moves goods from
supplier to purchaser and then from purchaser back to supplier with return material.
a.
MRO system
b.

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pull system
c.
push system
d.
closed-loop system
e.
None of the above.
D
A _____ system is a production control approach that uses containers, cards, or visual
cues to control the production and movement of goods through the supply chain
a.
MRP
b.
DRP
c.
lean supply
d.
JIT kanban
e.
lean transportation
D
All of the following are common signaling methods used in a kanban system except
_____.
a.
single-card system
b.
color coding of containers
c.
designated storage spaces
d.
computerized bar coding systems
e.
verbal notification
A
_____ of inventory refers to the amount of inventory that a firm owns at any given time.
a.
Volume
b.
Velocity
c.
Value
d.
Vigor
e.
None of the above.
A

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_____ of inventory refers to how quickly raw material and work-in-process inventory
transform into finished goods that the customer accepts.
a.
Volume
b.
Velocity
c.
Value
d.
Vigor
e.
None of the above.
B
_____ of inventory pertains to the unit cost of the inventory.
a.
Volume
b.
Velocity
c.
Value
d.
Virtue
e.
None of the above.
C
Record integrity is the result of various activities and procedures designed to ensure
that the amount of _____ is equal to the computerized record of _____.
a.
MRP....kanban
b.
DRP....MRP
c.
ROH....POH
d.
POH....ROH
e.
None of the above.
D
The downside of poor forecasting includes all of the following except _____.
a.
higher inventory volumes
b.
poor customer service as inventory is misallocated across locations and products
c.
higher inventory carrying charges
d.

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excessive safety stock levels

e.
decreased customer service costs
A
Which of the following is not one of the benefits of simplified designs?
a.
Fewer suppliers.
b.
Increased number of manual transactions.
c.
Reduced transactions to support the inventory.
d.
Fewer part numbers.
e.
Lower inventory management costs.
B
Which of the following is not one of the policies used to improve design simplification
and reduce complexity?
a.
Increase the number of suppliers.
b.
Establish premium pricing for customization.
c.
Establish geographic-specific options and standards.
d.
Do not eliminate frequently requested options.
e.
Utilize business modeling and TCO tools to support complexity reduction decisions.
A
According to the APICS Dictionary, _____ is defined as the process of a supplier placing
goods at a customer location without receiving payment until after the buyer uses the
goods.
a.
Kanban
b.
Just-in-time
c.
Consignment
d.
MRO
e.
None of the above.
C
All of the following action support reduced order-cycle time with suppliers except _____.
a.
expanded global sourcing

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b.
expanded electronic capability
c.
supplier development support
d.
order-cycle time measurement
e.
focus on second- and third-tier suppliers
A
The _____ is one that is delivered on time, accurately, and in perfect condition.
a.
kanban order
b.
MRO order
c.
consignment order
d.
perfect order
e.
MRP order
D
In _____, demand for an item is not directly dependent upon the demand for any other
item that is produced.
a.
dependent demand
b.
independent demand
c.
codependent demand
d.
Six Sigma
e.
just-in-time
B
A/An _____ system takes a period-by-period set of master production schedule
requirements (anticipated or booked customer orders) and produces a time-phased set
of material, component, and subassembly requirements timed to support an expected
build schedule.
a.
kanban
b.
DRP
c.
just-in-time
d.
perfect order

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e.
MRP
A
A _____ details the components or subassemblies and the quantity required to produce
a final part number or end item.
a.
kanban
b.
perfect order
c.
bill of material file
d.
DRP system
e.
RFID system
C
Which of the following is not one of the functions of a distribution resource planning
system?
a.
Forecasting finished-goods inventory requirements.
b.
Establishing correct inventory levels at each stocking location.
c.
Determining the timing and replenishment of finished-goods inventories.
d.
Producing a time-phased set of material, component, and subassembly requirements
timed to support an expected build schedule.
e.
Transportation planning and vehicle load scheduling.
D
_____ inventory is in transit to a customer or is located throughout distribution channels.
a.
Pipeline/in-transi
b.
MRO
c.
WIP
d.
Raw materials and semifinished items
e.
Just-in-time
A
CHAP 19
T/F: Although this sounds difficult, it is often easy to develop measures that direct
behavior or activity exactly as intended
false

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T/F: Few measures include a standard or target against which to evaluate performance
results or outcomes.
false
T/F: It is difficult to develop performance improvement plans without understanding the
areas in which performance falls short.
true
T/F: Measurement fails to motivate and direct behavior toward desired end results.
false
T/F: Measuring and evaluating performance historically has had certain problems and
limitations
true
T/F: Having too little data is the most common problem an organization has with its
measurement system.
false
T/F: A serious problem in measurement is that the data that managers pay attention to
are often the wrong data.
true
T/F: Few measures drive behavior that is not what is intended or needed.
false
T/F: The problem with measuring behavior is that there is no guarantee the behavior will
lead to desired results
true
T/F: The most common price performance measures include actual purchase price
versus planned purchase price comparisons, actual purchase price(s) compared to a
market index, comparisons of actual-to-actual purchase prices for individual and
aggregated items between operating plants or divisions within an organization, and
target prices achieved
true
T/F: Purchase price versus market index measures are least appropriate for market-
based products where pricing is primarily a function of supply and demand
false
T/F: Actual prices for similar items should not be compared between plants, divisions, or
business units due to differing market conditions
false
T/F: Although firms are increasingly focusing on cost versus price, price performance
measures are no long popular
false
T/F: Cost avoidance figures almost always require manual calculation and are
sometimes subject to exaggeration.
true
T/F: Customer defects per supplier is a measure of the number of defects from
individual suppliers to indicate comparative quality performance among competing
suppliers
true

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T/F: The PPM measure indicates the incidence of failures of components, assemblies,
and systems or services when actually incorporated into the final product or service and
supplied to external customers.
false
T/F: It is uncommon to have measures that track different aspects of a firm's inventory
investment
false
T/F: On-time delivery or responsiveness measures indicate the degree to which
suppliers are able to meet customer schedule requirements.
true
T/F: Transportation costs can be measured only in total dollars and never as a
percentage of cost of goods sold or sales revenue.
false
T/F: Salaries traditionally take the largest share of the purchasing administrative budget
true
T/F: The most common method of establishing a budget uses the current administrative
budget as a starting point
true
T/F: With the current budget plus adjustment approach, the administrative budget for
purchasing is a percentage of another measure that reflects purchasing's workload.
false
T/F: Supply managers should emphasize purchasing efficiency over purchasing
effectiveness as a strict measure of performance.
false
T/F: Purchasing requires measures that reflect its ability to support overall corporate
and functional goals, which means a reduced emphasis on pure efficiency measures
and greater emphasis on effectiveness measures.
true
T/F: Each location of an organization must use the same performance objectives or
performance criteria
false
T/F: The measurement system should rely on quantitative data instead of qualitative
feelings and assessments
true
T/F: Well-defined measures use data that are available and accurate.
true
T/F: A common misconception is that a performance evaluation system should not
measure every activity.
false
T/F: Joint participation means that the personnel responsible for each measure
participate in developing the measure or establishing the measure's performance
objective.
true
T/F: Performance measurement systems receiving their data from automated or
computerized systems are generally more susceptible to data manipulation.
false

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T/F: A performance objective must reflect the realities of the firm's competitive
environment.
true
T/F: Purchasing and supply chain managers often use the historical approach with
effectiveness-related measures.
false
T/F: Historical data provide substantial insight about the performance capabilities of
competitors or other leading firms.
false
T/F: A sound measurement and evaluation system provides sporadic reporting of
performance results.
false
T/F: Some individuals resist the benchmarking process because of a reluctance to
recognize the value of a competitor's way of doing business - the "not invented here"
syndrome.
true
T/F: The original premise of the balanced scorecard was that a total reliance on
financial measures was leading organizations to make poor decisions.
true
T/F: Measurement is virtually free.
false
T/F: All aspects of performance lend themselves to quantitative measurement.
false
T/F: There is no one best way to measure performance
true
T/F: A single, overall productivity measure representing purchasing and supply chain
performance is feasible.
false
_____ refers to the extent to which, by choosing a certain course of action,
management can meet a previously established goal or standard.
a.
Operational benchmarking
b.
Efficiency
c.
Support-activity benchmarking
d.
Effectiveness
e.
None of the above.
D
____ refers to the relationship between planned and actual sacrifices made to realize a
previously agreed-upon goal.
a.
Strategic benchmarking
b.

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Effectiveness
c.
Efficiency
d.
Operational benchmarking
e.
None of the above.
C
Which of the following is one of the reasons for measuring performance?
a.
Support better decision making.
b.
Support better communication.
c.
Provide performance feedback.
d.
Motivate and direct behavior.
e.
All of the above.
E
Which of the following is not one of the common problems in measuring performance?
a.
Too much detail.
b.
Too much and wrong data.
c.
Measures that are short-term focused.
d.
Drive the wrong performance.
e.
Measures of behavior versus accomplishments.
A
A _____ is the increase or decrease in cost resulting from a change in purchasing
strategy or practice brought about by an individual or a group.
a.
cost change
b.
cost avoidance
c.
target cost
d.
target price
e.
purchase price variance
A

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_____ is the process of determining what the external customer is willing to pay for a
product or service and then assigning specific cost targets to the components,
assemblies, and systems that make up the product or service.
a.
Specific costing
b.
Target pricing
c.
Total cost analysis
d.
Cost avoidance
e.
None of the above.
B
_____ represents the difference between a price paid and a potentially higher price
(which might have occurred if purchasing had not obtained the lower price through a
specific effort or action).
a.
Target cost
b.
Cost reduction
c.
Target price
d.
Cost avoidance
e.
None of the above.
D
A/An _____ demonstrates the impact of purchasing and supply strategies and actions
on revenues of the firm.
a.
income measure
b.
target cost
c.
revenue measure
d.
target price
e.
cost avoidance measure
C
The _____ measure expresses a maximum number (in absolute or percentage terms)
of level of defects allowable for any particular product, assembly, or service.
a.
Effectiveness
b.

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Efficiency
c.
TQM
d.
Cost avoidance
e.
PPM
E
A/An _____ is the amount of time (in weeks or months) from concept to first shipment or
provision of a product or service to the external customer.
a.
on-time delivery measure
b.
time-to-market target
c.
responsiveness measure
d.
first insight measure
e.
cost avoidance measure
B
A/An _____ would typically link to a contractual agreement whereby, for new
technologies, the buying firm may get insight, some period of time before new
technology developments are shared with other organizations.
a.
TQM measure
b.
first insight measure
c.
cycle time reduction
d.
responsiveness measure
e.
None of the above.
B
_____ focus on achieving standardization of components, systems, and services and
application of currently used purchased items or the use of industry-standard versus
unique items.
a.
First insight measures
b.
Standardization measures
c.
Responsiveness measures
d.
Cycle time reduction measures

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e.
Flexibility measures.
B
_____ measures include tracking actual transportation costs against some
preestablished objective, demurrage and detention costs, and premium transportation.
a.
Transportation cost avoidance
b.
PPM
c.
Field failure rate
d.
Target prices achieved
e.
Transportation cost reduction
E
All of the following are examples of customer order measures except _____.
a.
percentage of on-time delivery
b.
total time from customer order to customer delivery
c.
returned orders
d.
warranty claims
e.
inventory turns
E
A/An _____ is one that personnel cannot inappropriately influence the results of.
a.
efficient measure
b.
qualitative measure
c.
quantitative measure
d.
non-manipulable measure
e.
None of the above.
D
All of the following are examples of e-transaction measures except _____.
a.
days/weeks/months of supply of inventory
b.
absolute number of suppliers
c.

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percentage of suppliers
d.
percentage of advanced shipping notices
e.
electronic funds transfer
A
_____ is the continuous measuring of products, services, processes, activities, and
practices against a firm's best competitors or those companies recognized as industry
or functional leaders.
a.
Benchmarking
b.
TCO
c.
TQM
d.
Effectiveness
e.
Efficiency
A
_____ involves a comparison of one firm's market strategies against those of another.
a.
Functional benchmarking
b.
Strategic benchmarking
c.
Operational benchmarking
d.
Support-activity benchmarking
e.
None of the above.
B
_____ is a process that the purchasing function follows when it performs benchmarking
comparisons.
a.
Strategic benchmarking
b.
Support-activity benchmarking
c.
Process capability
d.
Operational benchmarking
e.
Outsourcing
D

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Which of the following is not one of the benefits of benchmarking?

a.
Helps identify the best business or functional practices to include in a firm's business
plans.
b.
Determines internal customer needs and wants.
c.
Breaks down a reluctance to change.
d.
Serves as a source of market intelligence.
e.
Uncovers a previously unrecognized technological breakthrough.
B
All of the following are phases in the benchmarking process except _____.
a.
planning
b.
analysis
c.
integration
d.
maturity
e.
total cost analysis
E
According to Kaplan and Norton, a balanced scorecard includes all of the following key
performance measurement areas except the _____.
a.
customer satisfaction perspective
b.
operational excellence perspective
c.
innovation perspective
d.
human resource perspective
e.
financial perspective
D

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