Deck 16: Global Sourcing and Procurement

Question 1

The phenomenon that magnifies the variability in order quantities for goods as orders move through the supply chain from the customer to the producer is called the bullwhip effect.

Answer 1

True

Question 2

Retailer behavior when stocking up during promotion periods (where the prices of goods are reduced) is called backward buying.

Answer 2

False

Question 3

An organizationally driven reason for outsourcing is that it can improve effectiveness by focusing on what the firm does best.

Answer 3

True

Question 4

Two common measures to evaluate supply chain efficiency are the Consumer Price Index and the beta flow system.

Question 5

Inventory turn values that are considered good differ by industry and the type of products being handled.

Question 6

Outsourcing allows a firm to achieve an improved focus on its core competencies.

Question 7

A financially driven reason for outsourcing is that it can reduce costs through a lower cost structure.

Question 8

Functional products include staples that people buy in a wide range of retail outlets, such as grocery stores and gas stations.

Question 9

Outsourcing is the act of moving some of a firm's internal activities and decision responsibility to outside providers.

Question 10

Strategic sourcing is the development and management of supplier relationships to acquire goods and services in a way that aids in achieving the immediate needs of the business.

Question 11

A financially driven reason for outsourcing is that it can turn fixed costs into variable costs.

Question 12

Logistics is a term indicating transportation choices for goods produced internationally but consumed domestically.

Question 13

An organizationally driven reason for outsourcing is that it can transform the organization.

Question 14

Logistics is a term that refers to the management functions that support the complete cycle of material flow, from the purchase and internal control of production materials; to the planning and control of work-in-process; to the purchasing, shipping, and distribution of the finished product.

Question 15

A financially driven reason for outsourcing is that it can shorten cycle time.

Question 16

The best strategy for innovative products is to use either a responsive or an agile supply chain.

Question 17

The optimal strategy for functional products is to use an efficient supply chain.

Question 18

Two common measures to evaluate supply chain efficiency are the inventory turnover and weeks-of-supply ratios.

Question 19

The optimal strategy for innovative products is to use an efficient supply chain.

Question 20

The optimal strategy for functional products is to use a responsive supply chain.

Question 21

Green sourcing requires incorporating new criteria for evaluating alternatives.

Question 22

Capability sourcing refers to outsourcing the functions that a company does best to trusted key partners.

Question 23

The total cost of ownership (TCO) is an estimate of the cost of an item that includes all the costs related to the procurement and use of an item, but it does not include any of the costs related to disposing of the item after it is no longer useful.

Question 24

A firm that controls most of the activities in its supply chain is said to be vertically integrated.

Question 25

A financially driven reason for outsourcing is that it can help gain access to new markets, especially in developing countries.

Question 26

A stable supply process is one where product volumes are high, demand is predictable, and there is a long product life.

Question 27

The inventory turnover ratio used in measuring supply chain efficiency is found by the ratio of which of the following?

A)Cost of goods sold/Average aggregate inventory value
B)Fixed costs/Variable costs
C)Sales costs/Marketing costs
D)Cost of goods sold/Cost to sell goods
E)Operations flow costs/Supplier flow costs

Question 28

The total cost of ownership (TCO) can be categorized into three areas: acquisition costs, ownership costs, and post-ownership costs.

Question 29

An improvement-driven reason for outsourcing is that it can increase product and service value, customer satisfaction, and shareholder value.

Question 30

Overemphasis on purchase price frequently results in failure to address other significant costs.

Question 31

A stable supply process is one where the manufacturing process and the underlying technology are mature and the supply base is well established.

Question 32

Firms producing functional products are forced to introduce a steady stream of innovations in order to survive.

Question 33

Inventory turnover and weeks of supply are mathematically the inverse of one another.

Question 34

An important opportunity in green sourcing is waste reduction opportunities.

Question 35

In conducting a total cost of ownership analysis, it is probably best to use a team representing the key functional areas.

Question 36

If the average aggregate inventory value is $45,000 and the cost of goods sold is $10,000, which of the following is weeks of supply?

A)45,000
B)234
C)120
D)23.4
E)4.5

Question 37

If the average aggregate inventory value is $1,200,000 and the cost of goods sold is $600,000, which of the following is weeks of supply?

A)1,040
B)606
C)104
D)60.6
E)2.0

Question 38

The total value of all items held in inventory for the firm valued at cost is which of the following?

A)Cost of goods to be sold
B)Average aggregate inventory value
C)Weeks supply of goods
D)Inventory turnover
E)None of these

Question 39

Green sourcing is only about finding new environmentally friendly technologies and increasing the use of recyclable materials.

Question 40

If the average aggregate inventory value is $1,200,000 and the cost of goods sold is $600,000, which of the following is inventory turnover?

A)60
B)10.4
C)2
D)0.5
E)None of these

Question 41

Ownership costs are incurred after the initial purchase and are associated with the ongoing use of the product or material.Which of the following is not an ownership cost listed in the text?

A)Financing costs
B)Energy costs
C)Taxes
D)Maintenance and repair costs
E)Supply network costs

Question 42

Which is the most challenging kind of supply chain to manage according to Hau Lee?

A)Agile supply chain
B)Efficient supply chain
C)Risk-hedging supply chain
D)Erratic supply chain
E)Responsive supply chain

Question 43

In outsourcing, which of the following internal activities and decision responsibilities cannot be transferred to outside contractors?

A)Activities involving people
B)Activities involving facilities
C)Activities involving equipment
D)Activities involving shareholders
E)Activities involving technology

Question 44

In Hau Lee's uncertainty framework to classify supply chains, a supply chain for functional products with a stable supply process is called which of the following?

A)Efficient
B)Forward looking
C)Agile
D)Risk hedging
E)Responsive

Question 45

In Hau Lee's uncertainty framework to classify supply chains, a supply chain for innovative products with a stable supply process is called which of the following?

A)Efficient
B)Forward looking
C)Agile
D)Risk hedging
E)Responsive

Question 46

Which of the following is an organizationally driven reason for outsourcing?

A)Improve effectiveness by focusing on what the firm does best.
B)Turn fixed costs into variable costs.
C)Reduce costs through lowered cost structure and increased flexibility.
D)Improve risk management.
E)Improve credibility and image by associating with superior providers.

Question 47

Which of the following is not an organizationally driven reason for outsourcing?

A)Improve effectiveness by focusing on what the firm does best.
B)Improve flexibility to meet changing demand for products and services.
C)Increase product and service value by improving response to customer needs.
D)Improve credibility and image by associating with superior providers.
E)All of these are organizationally driven reasons for outsourcing.

Question 48

The six-step process for green sourcing does not include which of the following?

A)Assess the opportunity.
B)Assess the supply base.
C)Confer with environmental groups.
D)Engage sourcing agents.
E)Institutionalize the sourcing strategy.

Question 49

The six-step process for green sourcing includes which of the following?

A)Provide a press release to local (and perhaps national) media.
B)Include members of environmental groups in the decision.
C)Notify the state and federal environmental agencies of your plans.
D)Perform an environmental impact study.
E)Develop the sourcing strategy.

Question 50

When considering outsourcing, what should firms be sure to avoid?

A)Losing control of noncore activities that don't distinguish the firm
B)Allowing outsourcing to develop into a substitute for innovation
C)Giving the outsourcing partner opportunities to become a strong competitor
D)Allowing employees transferred to the outsourcing partner to rejoin the firm
E)Adverse corporate tax implications of asset transfers to the outsourcing partner

Question 51

Which of the following is one of the strategic characteristics to consider when deciding how supplier relationships should be structured on the continuum between vertical integration (do not outsource) and arm's length relationships (outsource)?

A)Cost
B)Location
C)Investment
D)Coordination
E)Control

Question 52

Which of the following is not an improvement-driven reason to outsource?

A)Improve risk management.
B)Increase commitment in a noncore area.
C)Shorten cycle time.
D)Improve quality and productivity.
E)Obtain expertise, skills, and technologies that are otherwise not available.

Question 53

In Hau Lee's uncertainty framework to classify supply chains, a supply chain for functional products with an evolving supply process is called which of the following?

A)Efficient
B)Forward looking
C)Agile
D)Risk hedging
E)Responsive

Question 54

Which of the following is not an improvement-driven reason for outsourcing?

A)Improve quality and productivity.
B)Enhance effectiveness by focusing on what you do best.
C)Improve risk management.
D)Obtain expertise, skills, and technologies not otherwise available.
E)Improve credibility and image by associating with superior providers.

Question 55

In Hau Lee's uncertainty framework to classify supply chains, a supply chain for innovative products with an evolving supply process is called which of the following?

A)Efficient
B)Forward looking
C)Agile
D)Risk hedging
E)Responsive

Question 56

Which of the following is an improvement-driven reason for outsourcing?

A)Shorten cycle time.
B)Improve effectiveness by focusing on what the firm does best.
C)Increase product and service value by improving response to customer needs.
D)Turn fixed costs into variable costs.
E)Reduce costs through a lower cost structure.

Question 57

If the average aggregate inventory value is $100,000 and the cost of goods sold is $450,000, which of the following is inventory turnover?

A)19.23
B)4.5
C)0.8654
D)0.2222
E)None of these

Question 58

The effect of the lack of synchronization among supply chain members is referred to as which of the following?

A)Forward buying
B)Continuous replenishment
C)Bullwhip effect
D)Metcalf's law
E)Being out of step

Question 59

Which of the following of Fisher's product categories includes fashionable clothing, personal computers, and other products that typically have a very brief life cycle?

A)Functional products
B)Dysfunctional products
C)Innovative products
D)Bullwhip products
E)Value density products

Question 60

Acquisition costs include which of the following costs?

A)Quality costs
B)Maintenance and repair costs
C)Environmental costs
D)Supply chain costs
E)Customer dissatisfaction costs

Question 61

In the sourcing/purchasing design matrix, there are three variables: contract duration, transaction costs and specificity (assume levels as short, medium and long for contract duration and for the rest, low, medium and high).Vendor managed inventory belongs to

A)long contract duration, high transaction costs and low specificity.
B)short contract duration, high transaction costs and low specificity.
C)long contract duration, low transaction costs and low specificity.
D)long contract duration, high transaction costs and high specificity.
E)long contract duration, low transaction costs and high specificity.

Question 62

Other things remaining the same, if the cost of goods sold decreases, then

A)Inventory turnover ratio and weeks of supply will both go up.
B)Inventory turnover ratio will go down, but the weeks of supply will go up.
C)Inventory turnover ratio and weeks of supply will both go down.
D)Inventory turnover ratio will go up, but weeks of supply will go down.
E)Inventory turnover ratio will stay the same, but weeks of supply will go down.

Question 63

Ownership costs include which of the following costs?

A)Environmental costs
B)Warranty costs
C)Supply chain costs
D)Quality costs
E)Taxes

Question 64

Warranty costs are part of (choose the most appropriate)

A)Acquisition cost
B)Total cost of ownership
C)post-ownership costs
D)B and C
E)None of the above

Question 65

Other things remaining the same, if the average aggregate inventory value goes down, then

A)Inventory turnover ratio and weeks of supply will both go down.
B)Inventory turnover ratio will go down, but the weeks of supply will stay the same.
C)Inventory turnover ratio and weeks of supply will both go up.
D)Inventory turnover ratio will go up, but weeks of supply will go down.
E)Inventory turnover ratio stay the same, but weeks of supply will go down.

Question 66

First Among Best Solar Inc.announces that they will take back free of cost, all of their solar panels that are no longer useful.Till now, the cost of disposal was significant.This action reduces

A)Acquisition cost
B)Total cost of ownership
C)post-ownership costs
D)B and C
E)None of the above