Purchasing BB question and answers

Supply decisions can affect:

the income statement and the balance sheet.

On average, the dollars spent with suppliers as a percent of revenues:

is greater in manufacturing organizations than in service organizations.

The role of supply management is best captured by the following question:

How can supply and suppliers help decrease costs and increase revenues?

To contribute to organizational strategy, the supply department should:

seek opportunities to provide competitive advantage.

The impact of supply management actions on the balance sheet is measured by the:

return on assets effect.

Evaluation of the supply function's contribution to organizational goals and strategies can be viewed in the context of:

both operational and strategic; strategic and transactional

The profit-leverage effect of supply savings means that:

a reduction in purchase spend increases profit more than an equivalent increase in sales.

As supply chains have become more global, the risk of supply disruptions has:

increased because of financial and exchange rate fluctuations.

Supply management may indirectly contribute to the organization's competitive advantage by:

improve customer satisfaction

For an organization with annual sales of $500 million, purchases of $300 million, and profit of $50 million, a 10% reduction in purchase cost would result in a profit-leverage effect of:

60 percent (sales increase of 60 percent would be required to achieve the same percentage increase in profit).

The supply function in public sector organizations can differ from those in private sector organizations in the following area:

regulatory requirements regarding the acquisition process and policies.

A systems approach to managing the flow of information, materials, and services from tiers of suppliers through the buying organization to tiers of customers is:

supply chain management.

In most organizations, supply–operations coordination is essential to:

operational excellence.

Specialization within the supply function:

allows staff to develop expertise in particular areas.

The organizational structure (centralized, decentralized, or hybrid) of the supply function:

influences supply processes, internal cross-functional relationships, and procedures and systems.

A purchasing consortium:

consists of two or more independent organizations that combine requirements for materials, services, and capital goods to gain better pricing, service, and technology.

The objectives of supply are to obtain:

the right quality materials, in the right quantity, at the right time and place, from the right source, at the right service level, and at the right price.

To achieve time, quality, or cost reduction targets, organizations may:

commit resources to cross-functional teams.

Internal business partnerships between supply and other functional areas such as marketing/sales, finance/accounting, and engineering are:

C) desirable because of the interdependencies between and among functions.

Supply should constantly strive to standardize:

capital equipment purchases, raw material purchases, maintenance, repair, and operations (MRO) supplies purchases, and services purchases and supply management processes.

Supply management can play an important role in mergers, acquisitions, and divestitures by:

providing competitive intelligence about competitors and suppliers, and identifying opportunities of operational synergies.

Centralization of the supply has the advantage of:

greater buying specialization.

Standardization of supply processes can result in:

shorten process cycle times.

Close to 70 percent of the value of any given requirement is established during:

recognition and description of need.

Which factors have a major influence on supply's level in the organization:

the nature of the products or services acquired; the extent to which supply and suppliers can provide competitive advantage; the ratio of purchased material and services costs to total costs or total income.

To add the greatest value to the design of new products and services, the following functions should work together during the design stage:

the primary user, design, engineering, supply, and all other relevant functional areas such as accounting/finance, marketing, and operations.

Supply's contribution to the organization's competitive position depends on its ability to:

reduce costs, enhance revenues, and manage assets.

Electronic data interchange (EDI) provides:

secure transmission, greater accuracy, and shorter process cycle time for all data.

Effectively and efficiently applying technology to the supply management process will:

lower the total cost of doing business.

Poor internal compliance with the supply process:

may indicate that internal customers do not trust the process or suppliers.

Efficient and effective supply processes are needed because of:

the large volume of items, dollar value, severe consequences of poor performance, the potential contribution to organizational objectives, and the need for an audit trail.

Making the procure-to-pay (P2P) process as seamless as possible can:

reduce order cycle times and improve satisfaction of internal customers and suppliers.

Traveling requisitions are used for:

recurring requirements and standard parts.

Blanket purchase orders:

reduce costs by decreasing the number of purchase orders issued and cover multiple purchase requirements on one order.

Improving the efficiency and effectiveness of the process for small value orders can be achieved through:

vendor/supplier managed inventory systems and the use of purchasing cards.

Online reverse auctions are best suited for situations where:

specifications are clearly defined, there is a competitive supply market with qualified suppliers willing to participate, and the buyer is prepared to switch suppliers if necessary.

Expediting:

may be caused by the buyer or the supplier.

One purpose of a requisition is:

to clarify the description of need before communicating with potential suppliers.

Information flows:

between and among supply, and other internal functions and external sources.

The payment process:

and the supply process should be aligned in policy and practice.

The greatest opportunity to affect value in the purchasing process is when:

needs are recognized and described.

If the buyer has a clear and unambiguous description or specification, and wants to find out which supplier can deliver the best value when and where needed, he or she will typically issue a:

request for quotation (RFQ).

Supply managers believe they can add the most value to the outsourcing decision by:

providing a comprehensive, competitive process.

In a service triad:

the service supplier and customers are the coproducer of the service, excluding the buyer from the service encounter; the buyer is dependent on the supplier for the satisfactory fulfillment of customers' service demands; and the buyer is dependent on the supplier for customer service innovation and organizational learning.

Outsourcing:

may reduce operating costs, improve focus on core competencies, and gain access to world-class capabilities.

in an outsourcing decision, developing and negotiating the outsourcing contract:

is of less strategic importance than identifying opportunities for outsourcing.

An organization may decide to continue to produce a good or service in-house rather than outsource:

to control the quality of customer service and to reduce risk.

Outsourcing of services is:

increasing in volume and scope.

Concerns about outsourcing include:

layoffs, exposure to supplier's risks, and loss of control.

The type(s) of procurement outsourcing contracts include:

procure-to-pay (P2P), source-to-contract (S2C) and source-to-pay (S2P).

When a team has decided that a task or function currently performed by company employees is a core competency, the team will probably recommend:

insourcing.

Deciding what represents a core competency in an organization is:

often a fairly complex decision and a function of many factors.

The growth in outsourcing in the logistics area is attributed to:

enhanced logistics technologies that provide real-time data.

The decision to make or buy a good or service is:

a decision of strategic importance that deserves careful evaluation.

A procurement outsourcing contract that covers approval workflow, material acquisition, purchase order, expediting, material and invoice receipt, invoice payment, financial performance, compliance management, policies and procedures, and performance and results reporting is called:

procure-to-pay (P2P).

Insourcing should be considered when:

assurance of supply is a problem and there is an opportunity to reduce costs significantly.

Subcontracts can only occur:

if there is a prime contractor bidding out part of a job.

Purchasing by specification typically occurs when:

there are multiple sources for an identical requirement.

A criterion in establishing whether a purchase is strategic can be:

determined by performing Pareto analysis to determine if the purchase is an "A" item.

New technology:

frequently enables competitive advantage from product/service differentiation at lower cost.

Traditional criteria for supply management are:

quality, quantity, delivery, price and service.

Corporate travel department limiting hotel chains is an example of:

standardization.

Supply chain risk can be classified as:

operational, financial and reputational.

To assist in determining what represents acceptable value, a buyer is likely to:

identify the function of a good or service.

Early supply involvement means:

supply considerations are included during need identification and specification.

A request for quotation that asks for a "brand or equal":

shifts responsibility for establishing equality or superiority to the bidder.

The disadvantages of buying with specifications include:

specifications can add costs and the potential for disqualifying or discouraging potential suppliers.

When a specification is widely known, commonly recognized and readily available to every buyer, it is called a:

standard specification.

An advantage of buying by performance or function over other specification methods is that it provides:

the opportunity for the potential supplier to establish how to make the most suitable product/service.

Capital assets:

are not bought and sold in the regular course of business.

Description by brand:

may be a necessity because the manufacturing process is secret.

Supply's growing involvement in the acquisition of services may be explained by:

high dollar value on services and the opportunities to reduce costs.

Examples of prevention costs include:

employee training and awareness costs, and costs of pre-certifying and qualifying suppliers.

The real costs of quality:

rise significantly as defects increase in the finished product.

Some estimates place the total costs of quality to be:

30-40 percent of the final product cost.

Deming’s 14 points stress the importance of:

ceasing dependence on inspection.

A formal service quality evaluation process:

measures the gap between service expectations and performance perceptions.

Lean is a management philosophy that focuses on:

maximizing customer value while eliminating waste.

A supplier certification program:

may enable the buyer and seller to lower costs and improve quality.

In statistical process control (SPC), special or assignable causes of variation:

are outside, nonrandom problems such as breakdown of machinery, material variation, or human error.

Quality function deployment:

seeks to understand what value represents to the customer, and provides direction on the appropriate level of product performance and which features should be included.

A Six Sigma (6σ) approach to quality:

focuses on preventing defects by using data to reduce variation and waste.

Determination of the “best buy” is based on:

trade-offs among stakeholders (e.g., marketing, operations, and supply).

A sampling technique in which every element in the population has an equal chance of being selected is called:

random sampling.

Process variations that are intrinsic to the process are:

common, nonassignable causes of variation.

If a process is stable and predictable:

the probability of it meeting customer specifications can be predicted.

ISO 9001:2015 provides a tested framework for a systematic approach to consistently delivering product that satisfies customers’ expectations by:

providing a set of standardized requirements a quality system must meet.

Demand for buttons and zippers at a sportswear manufacturer is an example of:

derived demand.

EOQ for the pressure gauge:

2,725 units.

Which statement is most accurate when deciding how much and when to buy?

Balance price, volume, carrying cost, and the cost of stock-outs.

Independent demand items are:

determined directly by customer orders.

The three main inputs of an MRP system are:

bill of material, a master production schedule, and the inventory record.

Buying 100 now vs 10 at a time (result)

buying 100 at a time will save the company $2,130 per year.

Cycle inventories are used to:

reduce the number of setups.

Predicting janitorial demand using permits/leasing/vacancy is an example of:

a causal model.

Anticipation inventories are carried:

to cover a well-defined future need.

Decoupling inventories are used to:

accommodate different rates or patterns of demand.

Managing the consumption of services organization-wide:

is difficult because multiple contracts may exist at varying prices and terms with the same suppliers.

Strategies for managing "C" items in ABC analysis are:

carrying inventories and concentrating requirements with one or a few suppliers

Closed-loop MRP:

provides a feedback loop between capacity and the master production schedule.