Deck 6: Supply Management and Commodity Strategy Development

Question 1

The strategic sourcing process ends when a contract is signed with a supplier.

Answer 1

False

Question 2

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.

Answer 2

False

Question 3

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.

Answer 3

True

Question 4

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 company-wide databases by region may be developed to facilitate this coordination.

Question 5

Organizations tend to evolve through four phases as they become mature and sophisticated in their supply management strategy development.

Question 6

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.

Question 7

Total cost of ownership typically includes costs associated with late delivery, poor quality, or other forms of supplier nonperformance.

Question 8

A longer-term relationship should never include a joint product development relationship with shared development costs and intellectual property.

Question 9

As a strategic planning tool, a SWOT analysis can provide insight even with limited data.

Question 10

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.

Question 11

A preferred supplier designation indicates that the selected supplier should receive the business under all possible conditions.

Question 12

Longer-term relationships are sought with suppliers that have exceptional performance or unique technological expertise.

Question 13

The problem with secondary data is that they are often outdated and may not provide the specific information for which the team is looking.

Question 14

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.

Question 15

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.

Question 16

The insourcing/outsourcing decision cannot be applied to virtually every process conducted within the traditional walls of an organization.

Question 17

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.

Question 18

The RFI constitutes a binding agreement by both the supplier and the purchaser.

Question 19

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.

Question 20

Supply base optimization usually refers to increasing the number of suppliers used.

Question 21

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.

Question 22

In general, the more important the category, the less likely that cross-functional members and user groups will be involved.

Question 23

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

Question 24

Supply base optimization requires an analysis of the number of suppliers required currently and in the future for each purchased item.

Question 25

SWOT analysis was created to describe the competitive forces in a market economy that help shape an industry.

Question 26

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

Question 27

Increasing revenues involves either raising prices or keeping prices stable and increasing volume.

Question 28

Identifying the major suppliers in a market is an important first step of any supplier analysis, especially when you are talking about global market share.

Question 29

After the buyer-supplier relationship has been established, buyers no longer need to track supplier performance over time.

Question 30

[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

Question 31

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

Question 32

In general, the less important the category, the more critical it is that internal stakeholders will be involved.

Question 33

In the _____ of the process of supplier segmentation, the supplier views the buyer as an unimportant customer, and to further 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 these answers.

Question 34

One factor that is increasing the risk exposure to supply chain disruption is the decreasing propensity of companies to outsource processes to global suppliers.

Question 35

Objectives drive goals, whether at the highest levels of an organization or at the functional or department level.

Question 36

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

Question 37

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

Question 38

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

Question 39

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.

Question 40

More complex logistics and currency fluctuations require measuring all relevant costs before committing to a worldwide source.

Question 41

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 these answers.

Question 42

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.

Question 43

The _____ is a solicitation document that is used by organizations to obtain general information about services, products, or suppliers.

A)e-RA
B)PO
C)RFP
D)RFI
E)RFQ

Question 44

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

Question 45

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.
D)Product life cycles.
E)Brand equity and customer loyalty.

Question 46

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

Question 47

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

Question 48

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

Question 49

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

Question 50

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

Question 51

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

Question 52

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.

Question 53

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.

Question 54

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.

Question 55

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

Question 56

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

Question 57

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 process.
E)Supplier relationship management.

Question 58

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

Question 59

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

Question 60

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

Question 61

[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

Question 62

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
D)PRICE segment
E)NUISANCE segment

Question 63

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

Question 64

_____ 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

Question 65

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.

Question 66

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, and 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?

Question 67

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
B)portfolio commodity
C)critical commodity
D)routine commodity
E)bottleneck commodity

Question 68

_____ 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

Question 69

Which of the following is not one of the goals for sourcing a routine commodity?

A)Reduce the number of items in this category 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.

Question 70

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 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 typically 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.

Question 71

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

Question 72

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

Question 73

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

Question 74

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
B)Make-buy analysis
C)Value chain analysis
D)Price analysis
E)Cost analysis

Question 75

_____ 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

Question 76

Which of the following is not one of the four categories found in a portfolio analysis matrix?

A)Critical.
B)Routine.
C)Leverage.
D)Maintenance, repair, and operating supplies.
E)Bottleneck.

Question 77

Which of the following elements is false regarding Phase 3, Limited Integration, of supply management strategy development?

A)Total cost of ownership.
B)Global sourcing.
C)Strategic supplier alliances.
D)Early supplier involvement.
E)Dock-to-stock pull systems.

Question 78

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
C)business unit strategy
D)functional strategy
E)supply management strategy

Question 79

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 these conditions apply to competitive bidding.

Question 80

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.