Deck 7: Supply Management

Question 1

For the average manufacturer,over 50 percent of the value of shipments comes from materials.

Answer 1

True

Question 2

The analyst turned on his banker's lamp,adjusted his eye shade,and slowly pulled a legal pad from his desk.His weathered hands punched the buttons on his desk calculator deliberately as he divided earnings by total assets in order to calculate:

A) return on assets.
B) cost of goods sold.
C) merchandise inventory.
D) profit margin.

Answer 2

A

Question 3

Dusty is evaluating three bids to supply fence hardware for the 5 acres of pasture that need to be fenced.Breezy submits a bid of $40 per unit,Lady's bid is $50 per unit,and Spike's bid is $30 per unit.If a section of fence fails,it costs an average of $500 in losses and herding costs to round up all of the capybaras.Dusty believes it will take 500 units to fence in this pasture configuration.What defect rates for the three suppliers would make Dusty indifferent among them from a total cost standpoint?

A) Breezy 5%, Spike 6%, Lady 2%
B) Breezy 3%, Spike 5%, Lady 1%
C) Breezy 1%, Spike 3%, Lady 2%
D) Breezy 2%, Spike 3%, Lady 4%

Answer 3

B

Question 4

The phenomenon that a dollar in cost savings increases pretax profits by a dollar,while a dollar increase in sales increases pretax profits only by the dollar multiplied by the pretax profit margin is known as the:

A) profit margin.
B) return on assets.
C) saving to spending ratio.
D) profit leverage effect.

Question 5

Flingers Inc.reveals the following information in their annual report for FY 2014. What is Flingers' profit margin?

A) 5%
B) 16%
C) 2%
D) 4%

Question 6

The ratio of earnings to sales for a given time period is a firm's profit margin.

Question 7

Dusty is evaluating three bids to supply fence hardware for the 5 acres of pasture that need to be fenced.Breezy submits a bid of $40 per unit with a defect rate of 2%; Lady's bid is $50 per unit with a defect rate of 0.5%; and Spike's bid is $30 per unit with a defect rate of 5%.If a section of fence fails,it costs an average of $500 in losses and herding costs to round up all of the capybaras.Dusty believes it will take 1000 units to fence in this pasture configuration; what is the lowest total cost?

A) $47,500
B) $50,000
C) $52,500
D) $55,000

Question 8

Company A spends $250 million purchasing materials and subassemblies that it processes and sells for a total of $350 million.The cost of goods sold by Company A is $350 million.

Question 9

The percentage of value of shipments that come from materials for the average manufacturer is:

A) greater than or equal to 40 and less than or equal to 49 percent.
B) greater than or equal to 50 and less than or equal to 59 percent.
C) greater than or equal to 60 and less than or equal to 69 percent.
D) greater than or equal to 70 percent.

Question 10

Dusty is evaluating two bids to supply fence hardware for the 5 acres of pasture that need to be fenced.Breezy submits a bid of $40 per unit with a defect rate of 3%; Lady's bid is $50 per unit and their product manager estimates the defect rate to be around 0.5%.If a section of fence fails,it costs an average of $500 in losses and herding costs to round up all of the capybaras.Dusty believes it will take 500 units to fence in this pasture configuration.The product manager's uncertainty has Dusty concerned; what defect rate for Lady would make Dusty indifferent between the two suppliers as far as total cost is concerned?

A) 1%
B) 0.5%
C) 0.33%
D) 0%

Question 11

Firms do not compete only against global competitors,but against:

A) their suppliers.
B) themselves.
C) the customers of their competitors.
D) their competitors' supply chains.

Question 12

Flingers Inc.reveals the following information in their annual report for FY 2014. Upper management plans to cut cost of goods sold by 5% for the coming year but retain the same sales.What will Flingers' profit leverage effect be for 2015?

A) $13.33
B) $14.71
C) $17.50
D) $18.50

Question 13

Flingers Inc.reveals the following information in their annual report for FY 2014. What is Flingers' return on assets?

A) 16%
B) 20%
C) 25%
D) 40%

Question 14

Flingers Inc.reveals the following information in their annual report for FY 2014. Every dollar Flingers saves in purchasing has the same impact as what amount of increased sales?

A) $10
B) $14
C) $17
D) $20

Question 15

Flingers Inc.reveals the following information in their annual report for FY 2014. Upper management plans to cut cost of goods sold by 5% for the coming year but retain the same sales.What will Flingers' return on assets figure be for 2015?

A) 26%
B) 29%
C) 33%
D) 38%

Question 16

The ratio of earnings to sales for a given time period is the:

A) cost of goods sold.
B) merchandise inventory.
C) profit margin.
D) return on assets.

Question 17

Briefly discuss the three trends that make supply management so critical in today's business climate.

Question 18

Dusty is evaluating three bids to supply fence hardware for the 5 acres of pasture that need to be fenced.Breezy submits a bid of $40 per unit with a defect rate of 3%; Lady's bid is $50 per unit with a defect rate of 0.5%; and Spike's bid is $30 per unit with a defect rate of 5%.If a section of fence fails,it costs an average of $500 in losses and herding costs to round up all of the capybaras.Dusty believes it will take 500 units to fence in this pasture configuration; which supplier should win the business?

A) Spike
B) Breezy
C) Lady
D) no difference between Breezy and Spike

Question 19

Flingers Inc.reveals the following information in their annual report for FY 2014. Upper management plans to cut cost of goods sold by 5% for the coming year but retain the same sales.What will Flingers' profit margin be for 2015?

A) 5%
B) 7.5%
C) 9%
D) 11%

Question 20

Profit margin is the ratio of ________ to ________.

Question 21

Flingers Inc.reveals the following information in their annual report for FY 2014.
Calculate Flingers' profit margin,return on assets,and leverage effect

Question 22

The request for quotation is a formal request for suppliers to deliver a product or service that includes key terms and conditions,such as price,delivery,and quality requirements.

Question 23

The purchasing team examined all of its purchasing patterns in order to identify any irregularities or possible areas of cost savings in a little scheme the team liked to call:

A) internal auditing.
B) purchase consolidation.
C) spend analysis.
D) cooking the books.

Question 24

The weighted-point evaluation system allows for a completely objective decision to be made.

Question 25

A manufacturer that wants to make sure that suppliers do not become complacent should use multiple sourcing.

Question 26

Outsourcing can be risky because it decreases the firm's strategic flexibility.

Question 27

Which of the following is required in order to execute a successful spend analysis?

A) graphics capabilities found in charting packages and Visio
B) a sophisticated statistical software package such as SPSS or SAS
C) ability to analyze large quantities of data
D) a minimum of six months uninterrupted work time

Question 28

In a cost-based contract,the stated price does not change,regardless of fluctuations in the general overall economic conditions.

Question 29

Portfolio analysis begins with assignment to a quadrant before a sourcing strategy is formulated.

Question 30

Use of EDI in the supply chain has led to shorter lead times and lower inventory.

Question 31

Flingers Inc.reveals the following information in their annual report for FY 2014.
They plan to aggressively pursue cost savings in the purchasing area for FY 2015 and expect to lower their cost of goods sold by 8% while maintaining the same level of sales.Calculate Flingers' leverage effect for 2014 and their expected leverage effect for 2015.Compare the two results for your leverage effect calculations and provide insight as their relative magnitude.

Question 32

In the description of the purchasing process,the product should be described only by brand or specification.

Question 33

A manufacturer seeking to reduce the variability of the quality of purchased products should use multiple sourcing.

Question 34

When a preferred supplier does not exist,competitive bidding and negotiation are two methods commonly used for final supplier selection.

Question 35

Cross sourcing is a strategy in which two suppliers are used for the same purchased product or service.

Question 36

Dusty is evaluating three bids to supply fence hardware for the 5 acres of pasture that need to be fenced.Breezy submits a bid of $40 per unit with a defect rate of 2%; Lady's bid is $50 per unit with a defect rate of 0.5%; and Spike's bid is $30 per unit with a defect rate of 5%.If a section of fence fails,it costs an average of $500 in losses and herding costs to round up all of the capybaras.Dusty believes it will take 1000 units to fence in this pasture configuration; what is the BEST choice for supplier?

Question 37

A company that uses portfolio analysis would probably classify things like office supplies in the Bottleneck quadrant.

Question 38

Maverick spending is often promoted by top management as a way to improve the bottom line and break out of a purchasing cycle.

Question 39

The first step of the purchasing process is to select the supplier.

Question 40

Total cost analysis divides costs into direct (costs that are tied to the level of operations or supply chain activities)and indirect (costs that are not tied to the level of operations or supply chain activity).

Question 41

This table contains the performance criteria and scores (larger numbers are better)for four potential suppliers to Los Pollos Hermanos.Evaluate the data and identify the BEST source for Los Pollos Hermanos.

A) Company W
B) Company P
C) Company G
D) Company D

Question 42

Single sourcing is a better choice than multiple sourcing from the perspective of:

A) increased competition.
B) ensuring that a supplier will not become complacent.
C) spreading risk.
D) gaining access to the supplier's design and engineering capabilities.

Question 43

Competitive bidding,active sourcing,and using industry standards are all actions that are appropriate if the sourcing strategy is to:

A) form partnerships with suppliers.
B) maximize commercial advantage.
C) simplify the acquisition process.
D) ensure supply continuity.

Question 44

Which of these is an indirect cost associated with insourcing?

A) maintenance
B) purchasing
C) receiving
D) quality control

Question 45

This table contains a list of three companies that have been rated on four weighted performance dimensions (larger numbers are better).Which of the following statements regarding this information is BEST?

A) Thatherton is superior to Amerigas.
B) Amerigas is superior to Strickland.
C) Mega-Low is superior to Thatherton.
D) Strickland is superior to Mega-Low.

Question 46

Which of these is a direct cost associated with outsourcing?

A) direct material
B) direct labor
C) variable overhead
D) price from invoice

Question 47

One advantage of outsourcing is that it:

A) gives the company a high degree of control over its operations.
B) increases the company's access to state-of-the-art products and processes.
C) protects the company's proprietary designs and processes.
D) discourages the development of the company's core competencies.

Question 48

When compared with single sourcing,multiple sourcing has the advantage of:

A) spreading risk.
B) volume leveraging.
C) lower transportation costs.
D) reduced quality variability.

Question 49

A supplier that has previously demonstrated its performance capabilities through purchase contracts may well receive:

A) maverick status.
B) a request for description.
C) preferred supplier status.
D) a request for proposal.

Question 50

A sourcing strategy in which two suppliers are used for the same purchased product or service is:

A) cross sourcing.
B) dual sourcing.
C) contingency sourcing.
D) multisourcing.

Question 51

________ are high level,often strategic decisions regarding which products or services will be provided internally and which will be provided by external supply chain members.

Question 52

A company that regularly outsources goods and services may have established close relationships with their suppliers and therefore will allow these suppliers the first opportunity to bid for new business needs.These suppliers are known as ________.

Question 53

A description method used when a product or service is proprietary or when there is a perceived advantage to using a particular supplier's product or services is:

A) description by market grade.
B) description by brand.
C) description by specification.
D) description by performance characteristics.

Question 54

The use of supply chain partners to provide products or services is called:

A) outsourcing.
B) insourcing.
C) offloading.
D) partnering.

Question 55

This table contains the performance criteria and scores (larger numbers are better)for four potential suppliers to Kramerica Industries.Evaluate the data and identify the BEST source for Kramerica.

A) Company A
B) Company B
C) Company C
D) Company D

Question 56

________ is the name for a technique requiring a company to identify and determine all of the major costs associated with different sourcing possibilities.

Question 57

The two basic types of purchasing contracts are:

A) fixed-price and cost-based.
B) bid-rigged and cost-plus.
C) cost-zero and fixed-variable.
D) fixed-quantity and variable-cost.

Question 58

The purchasing team occasionally examined its spending patterns to identify irregularities as part of a(n)________.

Question 59

The bulk of insourcing costs are usually ________ costs.

Question 60

A company using portfolio analysis correctly decides to streamline the purchasing process for a few items by use of EDI and automated requisitions to the greatest extent possible.The quadrant that these items fall in is most probably the:

A) bottleneck quadrant.
B) critical quadrant.
C) leverage quadrant.
D) routine quadrant.

Question 61

What is sourcing portfolio analysis? Discuss the model and the strategies and tactics associated with each quadrant.

Question 62

What takes place in each step in the procure-to-pay cycle and which step is most critical?

Question 63

Which of these factors is most likely to increase the risk of a missed shipment,communication problem,or human error?

A) supply base reduction
B) global outsourcing
C) multicriteria decision models
D) electronic data interchange

Question 64

A company using portfolio analysis decides to form partnerships with suppliers; the products in question probably fall in the ________ quadrant.

Question 65

The entire plant needs a fresh coat of paint so you,as the operations manager,are charged with securing a painting contract to accomplish this.You locate four painting contractors and ask them for their performance on four criteria.Their responses,along with your minimum standards and the importance you place on each criterion,is shown in the table.Assign scores from 1 to 5 where 1 is terrible and 5 is excellent,for each contractor's performance on each criterion and determine who should be awarded the contract.Write a brief explanation for all the 1s and 5s you assign.

Question 66

A recent trend in supply management is a move towards a more sustainable supply chain.

Question 67

Perhaps the best way for standard items is ________ which is a description method that is applicable when the requirements are well understood.

Question 68

A recent survey of executives at Global 1000 companies uncovered what fear?

A) the fear of a supply chain disruption
B) the fear of the unknown
C) the fear of improperly weighting performance dimensions
D) the fear of misclassifying direct and indirect costs

Question 69

Use of a single supplier for a part or service in part of the business and another supplier with the same capability for a different part or service in another area of the business is known as ________.

Question 70

This table contains the performance criteria and scores (larger numbers are better)for four potential suppliers to Los Pollos Hermanos.Evaluate the data and identify the BEST source for Los Pollos Hermanos.

Question 71

What are the four sourcing strategies,how do they work,and what are the advantages of each?

Question 72

Among the disadvantages of ________ are that different product attributes with varying qualities may be produced and that it can actually result in reduced supplier loyalty over time.

Question 73

Define outsourcing and discuss its advantages and disadvantages.

Question 74

________ is a purchasing description method that focuses attention on the outcomes the customer wants.

Question 75

Authorization to a supplier to deliver a product,known as a(n)________,increasingly takes the form of a technology known as ________.

Question 76

Business partners that transfer payments between banks using an information system are using ________.

Question 77

Terms and conditions for a purchased service that indicate what services will be performed and how the service provider will be evaluated is called a:

A) request for quotation.
B) bid specification.
C) preferred supplier contract.
D) statement of work.

Question 78

This table contains the performance criteria and scores (larger numbers are better)for four potential suppliers to Satriale's Pork Store.Evaluate the data and identify the BEST source for Satriale's.Consider the two runners-up to the best source and what points of negotiation might lead them to becoming the optimal supplier.

Question 79

Horace Smithfield,Esq.,was insistent that he pay a flat rate of $10,000,000 and not a penny more to transfer his inheritance through your checking account so he could move vast sums of cash out of his country.Sure,he had fallen out of favor with the government and the economy in his country was in a dire situation,but a deal was a deal and $10,000,000 was all he could afford to pay.This type of purchase contract was to be a(n)________ if you would kindly provide your account information..

Question 80

Money is automatically drawn from the buyer's account and deposited into the supplier's account in an electronic funds transfer (EFT).