Deck 1: The Role of Purchasing in the Value Chain

Question 1

Which of the following is a definition of a decision-making unit (DMU)? 

A) All those individuals and groups external to the purchasing decision-making process. 
B) All those individuals and groups who participate in the purchasing decision-making process, who share some common goals and the risks arising from the decisions (identical to buying centre). 
C) All those individuals and groups who supply the organization. 
D) All those individuals and groups who participate in the purchasing decision-making process but do not share its risks.

Answer 1

  B

Question 2

What is the DuPont analysis used for? 

A) It is used to assess the effect of a 2% purchasing saving on the company's return on investment (ROI). 
B) Predicting sales growth. 
C) Analysing stock market trends 
D) Outsourcing purchasing.

Answer 2

  A

Question 3

Which of the following is not an explanation of 'corporate social responsibility'? 

A) Developing business solutions which do not harm the needs of future generations. 
B) Focusing on profit maximisation regardless of its consequences. 
C) Balancing the interests of customers, employees, the environment and its shareholders, i.e. serving the needs of 'people, planet, profit'. 
D) Contributing to a better world, a better environment and better labour conditions.

Answer 3

  B

Question 4

Which of the following explain a situation where the contractor designs and provides,in accordance with the client's requirements,plant and/or other Works? 

A) Plan and Purchase 
B) Construct Only 
C) Design and Construct 
D) Design Only

Question 5

Which of the following is a characteristic of a finished product? 

A) A component for the manufacturing process. 
B) Products which are purchased to be sold, after negligible added value. 
C) Raw materials for the production process. 
D) Purchased for storage.

Question 6

Which of the following is an explanation of 'corporate social responsibility (CSR)'? 

A) Balancing the interests of customers, employees, the environment and its shareholders, i.e. serving the needs of 'people, planet, profit'. 
B) Profit maximisation. 
C) Investing in new machinery. 
D) Contributing to higher profits.

Question 7

Which of the following is not an explanation or an example of a 'category'? 

A) Cereals. 
B) Household products. 
C) Time. 
D) Gardening products.

Question 8

Which of the following is a definition of cross-functional buying teams? 

A) Generalists from user departments and buyers are put together in teams to develop specific sourcing and commodity strategies and plans. 
B) Specialists from user departments and buyers are put together in teams to develop specific sourcing and commodity strategies and plans. 
C) Generalists from user departments only are put together in teams to develop specific sourcing and commodity strategies and plans. 
D) Specialists from buyers only are put together in teams to develop specific sourcing and commodity strategies and plans.

Question 9

Which of the following are examples of direct materials? 

A) Raw materials 
B) Semi-manufactured goods 
C) Half-fabricated components and modules 
D) All of the above

Question 10

What is Early Supplier Involvement (ESI)? 

A) A situation where the supplier is involved by the buyer in an early stage of the new product development process. 
B) A situation where a new supplier is involved by the buyer in a later stage of the new product development process. 
C) A situation where the customer is involved in an early stage of the new product development process. 
D) A situation where the supplier is involved by the buyer in an early stage of a situation where the product will no longer be manufactured.

Question 11

Which of the following are not forms of global sourcing? 

A) Low-cost country sourcing 
B) Products which are sold outside of the European Community 
C) Regional sourcing 
D) Offshoring

Question 12

Which of the following is not a definition of 'components'? 

A) Components are manufactured goods which will not undergo additional physical changes. 
B) Components are finished goods which will not undergo additional physical changes before being purchased by consumers 
C) Components are manufactured goods which will not undergo additional physical changes and which will be incorporated into a system. 
D) Components are manufactured goods which will not undergo additional physical changes and will be incorporated into a system with which there is a functional relationship by joining it with other components.

Question 13

Which of the following explains global sourcing? 

A) Products are increasingly sourced from foreign, low-cost countries. 
B) Products which are purchased to be sold locally. 
C) Products that are sold outside of the European Community. 
D) Products sourced from local suppliers.

Question 14

What is the DuPont analysis? 

A) A case study of the DuPont organization. 
B) A cosmetic testing process. 
C) A financial diagnostic tool to calculate the company's return on investment based upon sales margin and capital turnover ratio. 
D) A tool used by the Boston consulting Group to identify market opportunities.

Question 15

Which of the following is not a form of expediting? 

A) A routine status check. 
B) An advanced status check. 
C) Field analysis. 
D) A credit check.

Question 16

Which of the following is an explanation of a 'category'? 

A) A strategy. 
B) A group of products which can be substituted for one another by a consumer. 
C) A plan. 
D) A procedure.

Question 17

What is direct purchasing? 

A) Purchasing of all materials and products that are used for manufacturing companies' end products. 
B) Purchasing directly from a retailer. 
C) Purchasing with cash. 
D) Outsourcing purchasing.

Question 18

Which of the following is not a definition of cross-functional buying teams? 

A) Generalists from user departments and buyers are put together in teams to develop specific sourcing and commodity strategies and plans. 
B) Specialists from user departments and buyers are put together in teams to develop specific sourcing and commodity strategies and plans. 
C) Specialists from user departments and buyers are put together in teams. 
D) Specialists from user departments and buyers develop specific sourcing strategies and plans.

Question 19

Which of the following is a definition of 'components'? 

A) Components are manufactured goods which will not undergo additional physical changes, but which will be incorporated into a system with which there is a functional relationship by joining it with other components. 
B) Components are finished goods which will not undergo additional physical changes before being purchased by consumers 
C) Components are manufactured goods which will undergo additional physical changes and which will be incorporated into a system. 
D) Components are finished goods which will undergo additional physical changes and will be incorporated into a system with which there is a functional relationship by joining it with other components.

Question 20

What is expediting? 

A) Following up on a purchase order to cancel it. 
B) Following up on a purchase order to change the delivery date. 
C) Following up on a purchase order to make sure that the supplier is being paid. 
D) Following up on a purchase order to make sure that the supplier is going to perform as it has confirmed through the purchase order confirmation.

Question 21

Which of the following situations explains 'ordering'? 

A) Ordering refers to the placing of purchase orders at a supplier against previously arranged conditions. 
B) Ordering is when orders are placed directly at the supplier, without questioning the supplier's conditions. 
C) Ordering refers to the placing of purchase orders at a supplier without previously arranged conditions. 
D) Ordering is when orders are placed directly at the supplier and there is questioning of the supplier's conditions.

Question 22

Which of the following terms refers to products,indirect materials or consumable items which are necessary for keeping the organization running in general,and for the support activities in particular? 

A) Maintenance, repair and operating materials. 
B) Supplies 
C) Consumables 
D) Tangible goods

Question 23

Which of the following explains 'purchasing? 

A) The management of the company's indirect activities in such a way that the supply of all goods, services, capabilities and knowledge which are necessary for running, maintaining and managing the company's primary and support activities is secured under the most favourable conditions. 
B) The management of the company's internal resources in such a way that the supply of all goods, services, capabilities and knowledge which are necessary for running, maintaining and managing the company's primary and support activities is secured under the most favourable conditions. 
C) The management of the company's distribution channels in such a way that the distribution of good and services is secured under the most favourable conditions. 
D) The management of the company's external resources in such a way that the supply of all goods, services, capabilities and knowledge which are necessary for running, maintaining and managing the company's primary and support activities is secured under the most favourable conditions.

Question 24

Which of the following are indirect materials? 

A) Transport 
B) Raw materials 
C) Services 
D) Components

Question 25

Which of the following is a definition of procurement? 

A) Procurement is all activities required in order to get the product from the supplier to its final destination. 
B) Procurement is all activities required in order to get the product from the manufacturer to its final destination. 
C) Procurement is all activities required in order to get the product from the supplier to the distributer 
D) Procurement is all activities required in order to get the product from the distributor to its final destination.

Question 26

Which of the following is a definition of 'quality'? 

A) Quality is meeting (internal or external) customer's requirements that have not been formally agreed between a customer and a supplier. 
B) Quality is meeting (internal customer's requirements that have been formally agreed between an internal customer and a supplier. 
C) Quality is meeting (internal or external) customer's requirements that have been formally agreed between a customer and a supplier. 
D) Quality is meeting (internal or external) customer's requirements that have been informally agreed between a customer and a supplier.

Question 27

Which of the following are activities of the purchasing function? 

A) Property maintenance 
B) Production control 
C) Market research 
D) Preparing and conducting negotiations with suppliers.

Question 28

Which term describes the purchasing of all materials,components and services that are used to support the company's infrastructure and back-office activities? 

A) Components acquisition 
B) Raw materials acquisition 
C) Direct purchasing 
D) Indirect purchasing

Question 29

Which of the following are activities of the purchasing function? 

A) Representing the company in legal matters. 
B) Monitoring and controlling orders to secure supply. 
C) Public relations. 
D) Developing strategic corporate plans.

Question 30

Which term describes products which are not consumed immediately,but whose purchasing value is depreciated during its economic life cycle? 

A) Just -in-Time supplies 
B) Raw materials acquisition 
C) Equipment 
D) Investment goods

Question 31

Procurement activities are necessary for running,maintaining and managing which of the following activities? 

A) Primary activities 
B) Support activities 
C) Primary and Support activities 
D) Future activities

Question 32

Which of the following are not procurement activities? 

A) Traffic and transportation 
B) Inventory control 
C) Incoming inspection 
D) Quality control and quality assurance.

Question 33

Which of the following situations explains 'primary activities'? 

A) Primary activities are those activities that are required to offer the company's value proposition to its customers. 
B) Inbound logistics, operations and outbound logistics, 
C) Marketing and sales and customer service activities. 
D) All of the above.

Question 34

Which of the following are activities of the purchasing function? 

A) Selecting the best possible supplier 
B) Recruiting staff 
C) Distributing goods and services 
D) Financial control

Question 35

Which of the following are 'primary activities'? 

A) Human Resources Management 
B) Inbound logistics. 
C) Public relations 
D) Payroll

Question 36

Which of the following situations explains the 'make to order (MTO)' process? 

A) Maintenance repair and operating materials are kept in stock. 
B) Only raw materials and components are kept in stock. 
C) Finished products are stockpiled. 
D) No raw materials or components are kept in stock.

Question 37

Which of the following situations explains a 'supplier partner' relationship? 

A) A supplier partner is defined as a firm with whom a company has an ongoing buyer/seller relationship. 
B) A supplier partner is defined as a firm with whom a company orders places directly at the supplier, without questioning the supplier's conditions. 
C) A supplier partner is defined as a firm with whom a company has not yet completed a contractual agreement to supply. 
D) A supplier partner is defined as a firm with whom a company supplies raw materials only.

Question 38

Which of the following statements explains 'purchasing management'? 

A) All activities necessary to manage supplier relationships in such a way that their activities are aligned with the company's overall business strategies and interests. 
B) Relates to all activities necessary to manage customer relationships in such a way that their activities are aligned with the company's overall business strategies and interests. 
C) Relates to all activities necessary to manage staff relationships in such a way that their activities are aligned with the company's overall business strategies and interests. 
D) Relates to all activities necessary to manage financial relationships in such a way that their activities are aligned with the company's overall business strategies and interests.

Question 39

Which of the following situations explains 'payment terms'? 

A) Payment terms relate to what, how and when the buyer will pay for the products and services delivered by the supplier. 
B) Payment terms relate to a 12 week period allowed before payment is due for the products and services delivered by the supplier. 
C) Payment terms relate to when the buyer will pay for the products and services delivered by the supplier. 
D) Payment terms relate to what and how the buyer will pay for the products and services delivered by the supplier.

Question 40

Which of the following situations does not apply to a 'supplier partner' relationship? 

A) A situation where a company has an ongoing buyer/seller relationship. 
B) A situation involving a commitment over an extended period, 
C) A situation involving the placing of purchase orders at a supplier without previously arranged conditions. 
D) A situation involving a mutual sharing of information and a sharing of risks and rewards resulting from the relationship.

Question 41

Which of the following is a consequence of a 'Request for Tender'? 

A) Suppliers submit general information that may help them to qualify for a potential tender. 
B) Suppliers are invited to submit a general tender. 
C) Suppliers are invited to submit general information that will result in them being awarded a supply contract. 
D) Suppliers are invited to submit a detailed bid which meets the requirements as laid down in the request for quotation against the lowest possible price (identical to request for tender).

Question 42

Which of the following explains 'semi-manufactured goods'? 

A) These products have already been processed and are ready for sale and distribution. 
B) These products have already been processed once or more, and they will be processed further at a later stage. 
C) These products have already been processed once or more, and they will not be processed further at a later stage. 
D) These products have not yet been processed.

Question 43

Which of the following explains the 'Value Chain margin'? 

A) Composed of value activities and a margin which is achieved by these activities. The margin represents the value that customers want to pay extra for the company's efforts compared with the costs that were required for these. 
B) Composed of value activities which can be divided into primary activities and support activities. 
C) Composed of value activities and a margin which is achieved by these activities. Value activities can be divided into primary activities and support activities 
D) Composed of value activities and a margin which is achieved by these activities.

Question 44

Which of the following explains 'support activity'? 

A) Those value activities that are required to support the company's primary activities. 
B) Those value activities that are required to support the company's after sales service activities. 
C) Those value activities that are required to support the company's manufacturing. 
D) Those value activities that are required to support the company's distribution activities.

Question 45

Which of the following activities is not part of sourcing strategy? 

A) Identifies for a certain category from how many suppliers to buy, what type of relationship to pursue, and type of contract to negotiate for. 
B) Identifies for a certain category whether to source locally, regionally or globally. 
C) Competitor analysis. 
D) Identifies for a certain category from how many suppliers to buy, what type of relationship to pursue, and contract duration

Question 46

Which of the following is a consequence of a 'Request for Information (RFI)'? 

A) Suppliers submit general information that may help them to qualify for a potential tender. 
B) Suppliers are invited to submit a tender. 
C) Suppliers are invited to submit general information that will result in them being awarded a supply contract. 
D) Suppliers are invited to submit information that may help them to be contacted for the award of a future contract for supplying goods and services.

Question 47

Which of the following explains 'supply chain'? 

A) A series of companies (links) in which the final stages of production of an economic product take place. 
B) A series of companies (links) in which the consecutive stages of production of an economic product take place, from primary producer to final consumer. 
C) A series of companies (links) in which the initial stages of production of an economic product take place. 
D) A series of companies (links) in which the final stages of production of an economic product take place and the product is distributed to final consumer.

Question 48

Which of the following explains the 'Value Chain management'? 

A) All stakeholders belonging to the same value chain are challenged to improve the (buying) company's value proposition to staff. 
B) All stakeholders belonging to the same value chain are challenged to improve efficiency. 
C) All stakeholders belonging to the same value chain are challenged to reduce costs. 
D) All stakeholders belonging to the same value chain are challenged to improve the (buying) company's value proposition to its final end customers i.e. consumers.

Question 49

Which of the following explains 'supply'? 

A) Includes at least purchasing, materials management, incoming inspection and receiving. Supply is used when relating to buying based upon total cost of ownership in a manufacturing environment. 
B) Purchasing 
C) Includes at least incoming inspection and receiving. 
D) Includes at least purchasing and materials management.

Question 50

What is 'supply chain management'? 

A) The management of all suppliers in such a way that the expectations of the end users of the company are met or surpassed. 
B) The management of all of goods and services up from the raw materials suppliers, component suppliers and other suppliers in such a way that the expectations of the end users of the company are met or surpassed. Purchasing 
C) The management of all activities, information, knowledge and financial resources associated with the flow and transformation of goods and services. 
D) The management of all activities, information, knowledge and financial resources associated with the flow and transformation of goods and services up from the raw materials suppliers, component suppliers and other suppliers in such a way that the expectations of the end users of the company are met or surpassed.

Question 51

Which of the following better explains 'Procurement'? 

A) A focus on price versus functionality. 
B) A focus on the total cost of ownership (TCO). 
C) Its orientation is commercial. 
D) its scope is the purchasing process.

Question 52

Which of the following influences the leverage effect of procurement? 

A) The procurement to sales ratio. 
B) The capital turnover ratio. 
C) The procurement to sales ratio and the capital turnover ratio. 
D) Neither the procurement to sales ratio nor the capital turnover ratio.

Question 53

Which of the following is not a 'support activity'? 

A) Procurement 
B) Human Resources Management. 
C) Facilities Management 
D) Production Management

Question 54

Which of the following is a definition of 'raw materials'? 

A) Materials which have undergone no transformation or a minimal transformation, and they serve as the basis materials for a production process. 
B) Materials which have undergone transformation and they serve as the basis materials for a production process. 
C) Materials which have undergone no transformation or a minimal transformation, and they serve as the end product of a production process. 
D) Materials which have undergone transformation or a minimal transformation, and they serve as the end product of a production process.

Question 55

Which of the following activities is part of sourcing strategy? 

A) Identifies for a certain category from how many suppliers to buy, what type of relationship to pursue, contract duration, type of contract to negotiate for, and whether to source locally, regionally or globally. 
B) Environmental scanning 
C) Portfolio analysis 
D) Competitor analysis

Question 56

Procurement and supply chain management can contribute to improving the company's bottom line in which of the following ways? 

A) Quantitative only. 
B) Qualitative only. 
C) Both quantitative and qualitative. 
D) Neither quantitative nor qualitative.

Question 57

Which of the following explains 'Total Cost of Ownership (TCO)'? 

A) Relates to the initial costs of the product that is purchased. 
B) Relates to the total costs that the company will incur over the lifetime of the product that is purchased. 
C) Relates to the marginal costs that the company will incur over the lifetime of the product that is purchased Facilities Management 
D) Relates to the total costs that the company will incur over the first year of the product that is purchased.

Question 58

Which of the following is a consequence of a 'Request for Quotation (RFQ)'? 

A) Suppliers submit general information that may help them to qualify for a potential tender. 
B) Suppliers are invited to submit a general tender. 
C) Suppliers are invited to submit general information that will result in them being awarded a supply contract. 
D) Suppliers are invited to submit a detailed bid which meets the requirements as laid down in the request for quotation against the lowest possible price (identical to request for tender).

Question 59

Which of the following is a product of using the DuPont model? 

A) This enables the procurement manager to demonstrate the sensitivity of the company's financial results to procurement savings. 
B) A sectoral focus on project and process based activities. 
C) A more commercial orientation. 
D) Efficiency gains.

Question 60

Which of the following explains 'sourcing'? 

A) Finding and selecting the best possible source of supply on a worldwide basis. 
B) Contracting and managing the best possible source of supply on a worldwide basis. 
C) Finding, selecting, contracting and managing the best possible source of supply on a worldwide basis. 
D) Finding, selecting, contracting and managing possible source of local supply.