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CHAPTER 1 PURCHASING AND SUPPLY
MANAGEMENT
1. The
design and management of seamless, value-added processes across organizational
boundaries to meet the real needs of the end customer is called:
a. strategic sourcing.
b. value management.
c. customer relationship management.
d. supply chain management.
e. strategic process management.
2. As
supply chains have become more global, the risk of supply disruptions has:
a. decreased because risk is spread among
suppliers all over the world.
b. decreased because there are also more
international laws and treaties.
c. stayed the same because the issues are
similar wherever suppliers are located.
d. increased because other countries lack
the business ethics of the U.S.
e. increased because of financial and exchange
rate fluctuations.
3. Performance
of the supply management function can be viewed in two contexts:
a. operational and trouble-avoidance.
b. operational and strategic.
c. operational and transactional.
d. strategic and opportunistic.
e. strategic and future-oriented.
4. The
return on assets effect (ROA) quantifies and measures:
a. the indirect contribution of supply
management to profitability.
b. any increase in sales that occurs at a
greater rate than the cost of assets.
c. the impact of supply actions on
inventory and the balance sheet.
d. reductions in the allocations to the
operating budget of the supply
department.
e. the effect on profitability of reduced
spend compared to a sales increase.
5. Supply
has the potential to contribute to:
a. cost management, profitability, return
on assets, competitive position and corporate social policy.
b. cost management, profitability, return
on assets and competitive position.
c. cost management, profitability and
return on assets.
d. cost management and profitability.
e. cost management.
6. In
manufacturing organizations, the dollars spent with suppliers fall into what
range as a percent of revenues?
a. 65 to 75.
b. 50 to 80.
c. 45 to 75.
d. 30 to 60.
e. 25 to 35.
7. Supply
management may indirectly contribute to the organization’s competitive
advantage by:
a. the profit-leverage effect.
b. the return on assets effect.
c. reducing annual spend.
d. improving process efficiency.
e. all of the above.
8. Evidence
of the growth and influence of supply management in an organization includes:
a. fewer activities under the management
or control of supply.
b. more intense involvement in fewer
supply chain activities.
c. involvement in strategic planning and
mergers and acquisitions.
d. a clear delineation between supply and
accounting.
e. merging of supply and accounts payable.
9. The
profit-leverage effect of supply savings means that:
b. a reduction in money tied up in
inventory improves profits.
c. a reduction in purchase spend increases
profit more than an equal sales increase.
d. effective price negotiations with a
supplier will lower the supplier’s profits.
e. the buyer gains leverage over suppliers
when purchases are standardized.
f. efficient and effective supply management
processes will increase profits.
10. The
use of the concepts of purchasing, procurement, supply, and supply chain
management
will vary from organization to organization depending on:
a. the organization’s stage of development
and/or sophistication.
b. the industry in which they operate
c. the organization’s competitive
position.
d. a and b.
e. a, b and c.
True and False
1.The
true test of supply’s contribution is when the chief executive officer and the
management team recognize the value of supply and suppliers in reducing prices
paid for goods and services.
2. Sustainability
initiatives include the effective and efficient capture and disposition of
downstream products from customers and the reduction of the impact of the
organization’s supply chains on the natural environment
3. Terms
such as purchasing, procurement, supply, supply chain and logistics do not have
standard definitions that are widely used across sectors and industries.
4. Reductions
in inventory investment primarily come from getting users to reduce their
demand for inventoried items.
5. Supply
management has evolved from a transaction-based, tactical function to a
process-oriented, strategic function.
6. One
of the most important steps in achieving the potential of the supply function
in a company is elevation of the chief supply officer to executive status.
7. The
increase in outsourcing has resulted in an increase in the percentage of
revenue paid out to suppliers.
8. Since
labor and other costs greatly exceed outlays for purchased materials and
services in most service organizations, supply is of little consequence in most
service organizations.
9. Supply
makes a limited contribution to organizational risk management since most
supply decisions have few downside risks that might impact the organization’s
strategy.
10. The
total purchase sales ratio (the percentage of sales dollars paid out to
suppliers) varies little from industry to industry.
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