Deck 3: The Purchasing Function

Question 1

The total amount spent in order to own a product/service is the total cost of ownership.

Answer 1

True

Question 2

Single sourcing does not work in an adversarial setting as it usually implies a long-term collaborative relationship.

Answer 2

False

Question 3

The buy-phase model is essentially a version of the rational decision-making process.

Answer 3

True

Question 4

The Department of Defense has proved conclusively that single sourcing is the only way to attract high-quality,low-price suppliers.

Question 5

The multiattribute model is based on the idea that buyers compare products across product attributes and/or features according to the importance assigned to them by buyers.

Question 6

ESI is an outsourcing strategy by which firms use suppliers to help design new products.

Question 7

Buyers are often asked to sign nondisclosure agreements which state that they will not share information about new products with anyone who has not also signed such an agreement.

Question 8

Concurrent manufacturing is the supplier's version of JIT.

Question 9

Purchasing departments are unaffected by the influences of the economy.

Question 10

The term,"out-suppliers" refers to those firms with whom a buyer will not deal.

Question 11

Computer models are the basis for SRM models,designed to identify the most valuable suppliers and/or purchasing opportunities.

Question 12

Under an adversarial purchasing philosophy,buyers routinely resort to legal threats or actual lawsuits,to force suppliers to lower product prices.

Question 13

Values are rules for how someone should operate that can be followed as situations demand.

Question 14

Compliance programs require general contractors to allocate a certain percentage of the total contract to minority-owned subcontractors.

Question 15

SRIP programs are used by buyers to evaluate the quality of performance for each vendor they use.

Question 16

Selling to governments can take much longer than selling to corporations.

Question 17

By definition,outsourcing always involves the shifting of purchasing to foreign firms.

Question 18

Complexity management describes the process of reducing costs through targeted standardization and simplification.

Question 19

JIT programs often result in suppliers bearing bulk of the inventory costs when the buyer and supplier don't share information and coordinate plans.

Question 20

The buy-phase model only applies to the purchase of new products.

Question 21

Suppliers schedule their own manufacturing based on the shipment needs of their customers under:

A) JIT systems
B) Concurrent manufacturing systems
C) EDI systems
D) Value analysis
E) Complexity management

Question 22

The quantity that minimizes BOTH ordering and storing costs is called:

A) JIT
B) EDI
C) EOQ
D) SRM
E) ESI

Question 23

Which of the following is a method of comparing the benefit,function and cost of materials,components and work processes?

A) Value analysis
B) Outsourcing
C) Quality function deployment
D) SWOT analysis
E) Conceptual map

Question 24

Outsourcing:

A) Always sends jobs overseas
B) Means buying from another firm
C) Does not affect the purchasing department
D) Is the total amount expended in order to own a service
E) Rarely reduces the firm's costs

Question 25

The total amount expended in order to own a product or use a service is:

A) Total cost of ownership
B) Economic order quantity
C) Supply chain management
D) Make to stock
E) Sunk cost

Question 26

According to the buy-phase model,the last step in the buying process is:

A) Evaluation of proposals and selection of a supplier
B) Selection of an order procedure
C) Acquisition and analysis of proposals
D) Evaluation of product performance
E) Search for qualified suppliers

Question 27

The concept of shipping products such that they arrive at the customer's location exactly when needed is called:

A) JIT
B) EDI
C) EOQ
D) SRM
E) ESI

Question 28

_____ suggests that people go through a series of steps when making a decision,beginning with problem recognition.

A) Complexity management
B) The buy-phase model
C) Forward buying
D) The multiattribute model
E) Value analysis

Question 29

According to the buy-phase model,what is the first step in the buying process?

A) Definition of the product-type needed
B) Recognition of a need
C) Development of detailed specifications
D) Search for qualified suppliers
E) Acquisition and analysis of proposals

Question 30

Which of the following statements about adversarial purchasing philosophy is TRUE?

A) Buyers operating under this philosophy seek out the best suppliers and then work to develop close relationships
B) It seeks to maximize the benefits of collaboration between the buyer and a few suppliers
C) It means to have several vendors for each product
D) It occurs when a company selects one supplier to satisfy all needs in a given area
E) It is to have the right product available when needed, in the right quantity and at the right quality, all for the lowest total cost

Question 31

Which of the following statements about concurrent manufacturing is FALSE?

A) Concurrent manufacturing means that the supplier can keep inventory costs down
B) In concurrent manufacturing, suppliers schedule their own manufacturing based on the shipment needs of their customers
C) JIT and concurrent manufacturing can only be used by suppliers of component parts
D) An important technological development that enabled many firms to use JIT was EDI
E) In order for suppliers to reduce their costs, they are turning to concurrent manufacturing

Question 32

An important technological development that enabled many firms to use JIT was:

A) EOQ
B) ESI
C) MRO
D) SRM
E) EDI

Question 33

Single sourcing:

A) Always implies a long-term collaborative relationship
B) Cannot occur in an adversarial setting
C) Without partnering can prove risky
D) Occurs when a firm selects many suppliers to satisfy all needs in a given area
E) Invariably reduces costs

Question 34

Forward buying is usually an unintended negative consequence of a(n)

A) Poor pricing decision
B) Adversarial purchasing
C) Demand uncertainty
D) Make-or-buy decision
E) Modified rebuy

Question 35

Buy-class refers to:

A) The type of buying decision, based on the experience of the buyer with a purchase of a particular product or service
B) The series of steps people go through when making a decision, beginning with problem recognition
C) Searching for and evaluating alternatives and selecting a solution which is then implemented and evaluated
D) Defining the type of product the organization needs
E) Acquisition and analysis of proposals, receiving and reviewing bids from each contractor

Question 36

The use of electronic transmission of data between buyer and seller to order and maintain product inventory is:

A) Electronic funds transfer
B) Electronic lockbox
C) Wholesale lockbox
D) Electronic data interchange
E) Electronic marketing

Question 37

Which of the following is an effective response to the problem of forward buying?

A) To have several vendors for each product
B) To evaluate potential suppliers and their offerings
C) To secure volume discounts
D) To provide an adequate supply of the right product or service at the best possible price
E) To separate the order quantity from the shipping quantity through an annual contract

Question 38

The practice of purchasing larger quantities than are currently needed because the discount is greater than the carrying costs is called:

A) JIT
B) Adversarial purchasing
C) Supply chain management
D) Forward buying
E) EOQ

Question 39

Identify the process of identifying links among components that raise costs if any changes are made.

A) Value analysis
B) SWOT analysis
C) Supplier relationship management
D) Complexity management
E) Supply chain management

Question 40

_____ seeks to maximize the benefits of collaboration between the buyer and a few suppliers.

A) Strategic sourcing
B) Adversarial purchasing
C) Single sourcing
D) Partnership purchasing
E) Outsourcing

Question 41

"Comparison advertising" is MOST likely for

A) Straight rebuys
B) Modified rebuys
C) Promotional rebuys
D) New task buys
E) Spot buys

Question 42

In-suppliers:

A) Do not have an opportunity to earn business in a modified rebuy
B) Are suppliers whose products are ordered automatically in a straight rebuy
C) Do not have to prove the value of their offering
D) Are suppliers whose products are not considered in a straight rebuy
E) Do not compete with out-suppliers in any buying situation

Question 43

The _____ model is based on the idea that people compare products across features,weighted by importance.

A) Multiattribute
B) Buy-grid
C) Buy-phase
D) Five forces
E) Hierarchy-of-effects

Question 44

This is a strategy of attempting to influence demand for products and services made by a company so that the supply chain can be managed most efficiently.

A) Demand planning
B) JIT
C) Supply chain management
D) Benchmarking
E) Complexity management

Question 45

The process of designing and managing supply networks to optimize operational and organization performance is:

A) Compliance program
B) Strategic sourcing
C) Complexity management
D) Outsourcing
E) Benchmarking

Question 46

The complete buying process is ONLY followed in the purchase of:

A) Repurchased products
B) Straight rebuys
C) Modified rebuys
D) New buys
E) Component products

Question 47

Modified rebuys occur due to all the following reasons EXCEPT:

A) Changing prices
B) A product or service needs to be bought again automatically
C) Dissatisfaction with the performance of a supplier and/or the product
D) A change in the personnel involved
E) Changing technology that improves product performance and requires reevaluation of vendors and their offerings

Question 48

Which of the following types of purchases require the LEAST buying-process "steps" to complete?

A) Modified rebuys
B) Component parts
C) Straight rebuys
D) Delayed purchases
E) Reciprocal purchases

Question 49

Modified rebuys:

A) Mean repurchasing regularly
B) Imply products or services never purchased before
C) May involve need recognition, an evaluation of suppliers and a decision
D) Need recognition and placing an order
E) Imply the buyer has no experience with the product or service

Question 50

Which of the following statements about straight rebuy is TRUE?

A) There is more emphasis on search and evaluation of suppliers than product definition
B) Selling includes anticipating or responding quickly to changes in customer needs
C) All steps of the buying process are taken with emphasis on product definition and development of product specifications
D) Promotion includes offering free trials or demonstrations at the customer's site
E) Reminder advertising is used to build image for company

Question 51

Reminder advertising is MOST likely to be featured in:

A) New task buying
B) Modified rebuys
C) Promotional rebuys
D) Straight rebuys
E) Spot buying

Question 52

According to the buy-grid theory,

A) A lot of information is required for a straight rebuy
B) More information is needed by the buyer to make a new buy than when making a modified rebuy
C) More information is needed by the buyer to make a modified rebuy and a straight rebuy than for a new buy
D) More information is needed by the buyer to make a new buy and a straight rebuy than for a modified rebuy
E) More information is needed by the buyer to make a modified rebuy than when making a new buy

Question 53

Out-suppliers:

A) Do not compete with in-suppliers in any buying situation
B) Are suppliers whose products are ordered automatically in a straight rebuy
C) Are not considered in a modified rebuy
D) Are suppliers whose products are not considered in a straight rebuy
E) Are almost always denied the opportunity to earn the business

Question 54

Outsourcing:

A) Always "exports" jobs
B) Is limited to contracting out a complete service
C) Diverts the firm from its core business
D) Is the process of finding another organization to supply products previously created in-house
E) Is a strategy of attempting to influence demand for products made by a company so that the supply chain can be managed most efficiently

Question 55

Which of the following statements about modified rebuy is TRUE?

A) Advertising is detailed and educational
B) All steps of the buying process are taken
C) There is more emphasis on product definition and development of product specifications
D) Selling includes anticipating or responding quickly to changes in customer needs
E) Promotion involves offering free trials or demonstrations at the customer's site

Question 56

The integration of supply processes from end user through original suppliers that provide products,services and information that adds value for customers is:

A) Preferred supplier systems
B) Strategic sourcing
C) Benchmarking
D) Demand planning
E) Supply chain management

Question 57

Identify the incorrect statement about SRIP.

A) Companies with high performance on SRIPs advertise their high ratings to attract more business
B) It first identifies events or problems with supplier service
C) Buyers recognize that the quality of service is not reflected in the total cost of acquisition
D) Buyers evaluate suppliers for elevation to partner or preferred supplier status
E) The SRIP procedure provides only supplier performance information

Question 58

What is the difference between a modified rebuy and a new buy?

A) The product performance
B) The evaluation of a particular part
C) The buyer's experience in buying a particular product or service
D) The number of steps involved in making a purchase
E) The amount and type of information that must be collected before a purchase

Question 59

Straight rebuys:

A) Mean repurchasing regularly
B) Imply a partnership
C) Imply a strong relationship
D) Imply products or services never purchased before
E) Require the most buying-process steps to complete

Question 60

Which of the following statements about a new task buy is TRUE?

A) Promotion includes customer site demonstrations and hospitality events at trade shows
B) Selling involves protecting relationships with current customers with plant tours, special trade-in pricing and other offers
C) All steps of the buying process are taken with emphasis on product definition and development of product specifications
D) Selling includes anticipating or responding quickly to changes in customer needs
E) Comparison advertising is used to show differences between the firm's product and similar products

Question 61

Buyers are often asked to sign _____,which means that they will not share any information about the new products with anyone who has not also signed such an agreement.

A) Non-compete clauses
B) Nondisclosure agreements
C) Cost-plus contracts
D) Fixed-price agreements
E) Progress payment contracts

Question 62

Minority set-asides:

A) Are programs designed to advance affirmative action programs for women, minorities and the handicapped
B) Require general contractors and other major suppliers to allocate a certain percentage of the total contract to minority-owned subcontractors
C) Are programs where purchasers must be in compliance with federal guidelines in order to be eligible to supply the government
D) Are systems that first identify events or problems with supplier service
E) Are programs designed to encourage the development and growth of minority-owned businesses

Question 63

Early supplier involvement:

A) Is a strategy of attempting to influence demand for products made by a firm so that the supply chain can be managed most efficiently
B) Is an outsourcing strategy whereby companies use suppliers to help design new products or processes
C) Is defined as the process of designing and managing supply networks to optimize operational and organization performance
D) Means the suppliers schedule their own manufacturing based on the shipment needs of their customers
E) Is to have several vendors for each product in order to increase competition for the buyer's business

Question 64

A(n)_____ means that if it costs a firm more to build an item than it thought,the firm has to cover the higher costs.

A) Fixed-price agreement
B) Cost-plus contract
C) Nondisclosure agreement
D) Economic order quantity
E) Caveat emptor

Question 65

The GSA:

A) Has the expertise necessary to make all kinds of purchases
B) Always make the final purchase
C) Gets involved in all nondefense buying
D) Negotiates the price to be charged the government
E) Is the only supplier for the military

Question 66

Cross-functional sourcing teams typically:

A) Develop cost-reduction strategies, create sourcing strategies and handle other purchasing functions, many times in global servicing situations
B) Identify links among components that raise costs if any changes are made
C) Develop methods of comparing the benefit, function and cost of materials, components and work processes
D) Seek to maximize the benefits of collaboration between the buyer and a few suppliers
E) Help companies make decisions about where to locate a plant or who to employ

Question 67

What is the purpose of the DLA?

A) To secure volume discounts by buying for all of the military such items as copiers, office supplies and office furniture
B) To induce general contractors and other major suppliers to allocate a certain percentage of the total contract to minority-owned subcontractors
C) To enable purchasers to be in compliance with federal guidelines in order to be eligible to supply the government
D) To ship products such that they arrive at the customer's location exactly when needed
E) To design and manage supply networks to optimize operational and organization performance

Question 68

This involves the use of computer models to identify the most valuable suppliers and to identify purchasing opportunities.

A) Supply chain management
B) Strategic sourcing
C) Supplier relationship management
D) Value analysis
E) Electronic data interchange

Question 69

Write a brief note on demand planning?

Question 70

Which of the following statements about selling to governments is FALSE?

A) It always results in increased prices and margins
B) It can be a difficult process
C) It is made complex by the number of regulations involved
D) It can take much longer than selling to corporations
E) It requires significantly more paperwork

Question 71

_____ are moral codes of conduct,rules for how someone should operate that can be followed as situations demand.

A) Functions
B) Values
C) Norms
D) Beliefs
E) Ethics

Question 72

Write a short note on economic order quantity?

Question 73

Which is the largest single buying agency in the federal government,accounting for an estimated 80 percent of all government purchases?

A) The Department of Labor
B) The Department of State
C) The Department of Defense
D) The Department of Energy
E) The Department of Commerce

Question 74

Successful teams not only have different functional areas represented,but also different races,backgrounds and even corporate philosophies.Properly harnessed,the resulting tension can result in surprising creativity.This best illustrates which factor that leads to successful cross-functional purchasing teams?

A) Continuity
B) Embracing diversity
C) Communication
D) Appropriate leadership
E) Top-level commitment

Question 75

How has the Internet made outsourcing easier? Explain with examples?

Question 76

Company A can agree to a _____,which means that Company A will reimburse Company B for all of its costs plus a certain percentage for Company B's profit.

A) Caveat emptor
B) Fixed-price agreement
C) Nondisclosure agreement
D) Economic order quantity
E) Cost-plus contract

Question 77

Make-or-buy is:

A) A method of comparing the benefit, function and cost of materials, components and work processes
B) One outsourcing strategy whereby companies use suppliers to help design new products
C) A strategy of attempting to influence demand for products and services
D) Buying in larger than required quantities, when the discount is greater than the carrying costs
E) A comparison of the value created internally versus if created by someone else

Question 78

Compare and contrast the adversarial purchasing philosophy and partnership purchasing?

Question 79

Explain the most important elements of the purchasing department's function?

Question 80

Some purchasing areas require permanent cross-functional teams.A distributor of gas and welding equipment has a team that focuses on supplier relationships; this team includes a marketing manager to represent customers.What is the MOST likely factor that leads to a successful cross-functional purchasing team in this case?

A) Top-level commitment
B) Communication
C) Appropriate leadership
D) Continuity
E) Embracing diversity