Deck 9: Supplier Management and Development: Creating a World-Class Supply Base

Question 1

The categorical approach to supplier evaluation is commonly used by smaller organizations because it is both easy and relatively inexpensive to implement.

Answer 1

True

Question 2

Many buyers have now concluded that,if they select suppliers carefully and develop close and collaborative working relationships with fewer suppliers,supply risk can actually decrease.

Answer 2

True

Question 3

All supplier measurement systems have some element of subjectivity.

Answer 3

True

Question 4

The administrative cost of maintaining 5,000 suppliers will be dramatically lower than the cost of maintaining a core group of 500 highly qualified suppliers.

Question 5

During the early phases of supply base rationalization and optimization,the process usually results in an absolute reduction in the total number of suppliers.

Question 6

The remaining suppliers in a rationalized and optimized supply base are often smaller on average and seldom capable of offering a broader range of value-adding services.

Question 7

Weighted-point supplier evaluation systems are very inflexible.

Question 8

Short-term purchase contracts that award small volumes of business to multiple suppliers decrease production costs and provide incentive for individual supplier investments in process improvement.

Question 9

Supplier performance measurement differs somewhat from the process used to initially evaluate and select a supplier as it is a continuous process as opposed to a unique,one-time event.

Question 10

A buyer may delay reporting a supplier's poor performance until the next annual performance review.

Question 11

The cost-based supplier evaluation system is the most thorough and least subjective.

Question 12

Supplier performance that is good enough today should suffice in the marketplace of tomorrow.

Question 13

The elimination of both marginal and small-purchase-volume suppliers is usually the first phase of the supply base rationalization process.

Question 14

Buyers rarely rely on suppliers for cost-reduction assistance.

Question 15

Supply base rationalization and optimization often involves eliminating those suppliers who are unwilling to achieve (or are incapable of achieving)supply management performance objectives,either currently or expected in the near future.

Question 16

Maintaining multiple suppliers for each item can actually increase the probability and level of supply base risk.

Question 17

The supplier performance index never provides an incomplete or misleading assessment of supplier performance.

Question 18

Considering the cost-based supplier evaluation system,the actual cost per nonconformance event may be difficult to estimate or calculate,as many traditional cost accounting systems are not designed to identify and capture such data.

Question 19

Central to the design of all supplier measurement systems is the decision about what to measure and how to weigh various performance categories.

Question 20

A single source can never deliver cost and quality improvements over the life of a contract even if a buyer manages that supplier appropriately.

Question 21

Suppliers are sometimes not willing to accept outside help in the form of supplier development,either because they are too proud to accept help or because they do not see the value in improving quality or delivery performance.

Question 22

The prime reason for hedging is to protect the buyer against major swings in the value of a future purchase.

Question 23

Buyers cannot move too aggressively when reducing the supply base.

Question 24

Scenario analysis is technically considered forecasting.

Question 25

Regarding supply base risk,each sourcing decision is different and needs to be evaluated in its own right.

Question 26

Direct involvement in a supplier's operations by buyer personnel is the most challenging part of any supplier development process.

Question 27

A single source supplier may hold the buyer hostage by unduly raising prices or becoming too complacent,particularly when there are higher switching costs.

Question 28

Pursuing supplier development activities directly with suppliers is both quick and easy.

Question 29

If a supplier's product or service is routine,it should be considered for supplier development.

Question 30

Multiple sourcing can add quality variability to the sourced product due to the use of different materials and processes.

Question 31

Maintaining small quantities of inventory has been the traditional methods of dealing with supply base risk.

Question 32

Buyers can minimize supply disruption risk from a single suppler by selecting a supplier with multiple production facilities.

Question 33

The buyer and the supplier must agree on how to divide or share the costs and benefits from a supplier development project.

Question 34

In supplier development,the supplier must be convinced that it is in its own best interest to accept the buyer's direction and assistance.

Question 35

Scenario planning is a one-time activity.

Question 36

All buying organizations need to pursue supplier development.

Question 37

A large supply base means the duplication of a wide range of supply management activities,adding to acquisition cost without a corresponding increase in value added.

Question 38

Supply base rationalization and optimization should be a one-time activity.

Question 39

A smaller supplier with limited capacity may need to eliminate some existing customers in order to meet the increased requirements of its larger customer.

Question 40

There is only one common approach to supply base rationalization and optimization.

Question 41

____ is the process of identifying how many and which suppliers a buyer will maintain.

A) Supply base optimization
B) Supply base rationalization
C) Six Sigma
D) Zero defects
E) Strategic sourcing

Question 42

Sustainability reflects the importance of strategic environmental practices of suppliers but not the management of social responsibility in the supply base.

Question 43

In supplier measurement,the basic logic of the ____ is built around the calculation of a/an ____.

A) categorical system...supplier performance index
B) cost-based system...process capability index
C) weighted-point system...Q adjustment factor
D) weighted-point system...cost accounting system
E) cost-based system...supplier performance index

Question 44

Certain risks,such as those arising from war,piracy,and losses attributable to delays in transit are generally covered without the need for additional insurance premiums.

Question 45

The ____ supplier evaluation system seeks to quantify the total cost of doing business with a supplier,as the lowest purchase price is not always the lowest total cost for an item or service.

A) Six Sigma
B) zero defects
C) cost-based
D) categorical
E) weighted-point

Question 46

All of the following are advantages of a weighted-point supplier evaluation system except ____.

A) flexible system
B) supplier ranking allowed
C) moderate implementation costs
D) total cost approach
E) quantitative and qualitative factors combined into a single system

Question 47

Which of the following is not one of the management uses for the data derived from a comprehensive cost-base supplier evaluation system?

A) Such a system provides the necessary information that allows a buyer to justify buying from a preferred supplier despite a higher unit price.
B) The system allows a buyer to communicate the cost of specific nonperformance events to the originating supplier, which then helps identify improvement opportunities.
C) Quantifying nonconformance costs can result in a chargeback to the offending supplier for unplanned costs.
D) The system allows customized assignment of cost accounting codes depending on how much money is left in the annual budget.
E) A buyer can use this data to identify longer-term sources of supply based on a supplier's total cost performance history.

Question 48

Which of the following is a disadvantage of a categorical supplier evaluation system?

A) Least reliable.
B) Cost accounting system required.
C) Less frequent generation of evaluations.
D) Most subjective.
E) Usually manual.

Question 49

The supplier performance index (SPI)equals (____ plus ____)divided by ____.

A) total purchases....nonperformance costs....total purchases
B) nonperformance costs....total purchases....nonperformance costs
C) total purchases....appraisal costs....external failure costs
D) external failure costs....internal failure costs....total purchases
E) failure costs....appraisal costs....prevention costs

Question 50

Which of the following is not a typical qualitative service factor in a supplier performance measurement system?

A) Problem resolution ability.
B) Technical ability.
C) Process capability.
D) Ongoing progress reporting.
E) Wavelength.

Question 51

All of the following are advantages of a categorical supplier evaluation system except ____.

A) easy to implement
B) requires minimal data
C) different personnel contribute
D) low-cost system
E) greatest potential for long-term improvement

Question 52

Which of the following is not one of the typical uses of supplier measurement data?

A) Support supply base rationalization and optimization.
B) Determining a supplier's future purchase volume based on its past performance ratings).
C) Allows the buyer to identify those areas of supplier performance requiring improvement.
D) Deciding where to locate supplier facilities.
E) Making sourcing decisions.

Question 53

All buyers must engage in currency hedging activities,regardless of their experience.

Question 54

The ____ is a normalization factor for the supplier performance index that eliminates high-dollar lot bias.

A) Cp
B) MRO
C) Q adjustment factor
D) Cp_k
E) Rfx

Question 55

Which of the following is a disadvantage of a cost-based supplier evaluation system?

A) Least reliable.
B) Most complex so implementation costs are high.
C) Less frequent generation of evaluations.
D) Most subjective.
E) Usually manual.

Question 56

Overall reduction in material usage can be accomplished through engineering design changes and reuse and recycle programs.

Question 57

Which of the following is a disadvantage of a weighted-point supplier evaluation system?

A) Tends to focus on unit price.
B) Most complex so implementation costs are high.
C) Most subjective.
D) Least reliable.
E) Cost accounting system required.

Question 58

All of the following are advantages of a cost-based supplier evaluation system except ____.

A) total cost approach
B) specific areas of supplier nonperformance identified
C) objective supplier ranking
D) greatest potential for long-range improvement
E) good for firms with limited resources

Question 59

____ involves an analysis of the supply base to ensure that only the most capable and highest performing suppliers are kept in the supply base after it is reduced.

A) Supply base optimization
B) Outsourcing
C) Strategic sourcing
D) Supply base reduction
E) Supply base rationalization

Question 60

Few international shipments of merchandise require insurance coverage.

Question 61

____ in a supply base consists of such factors as: country stability,regional stability,party and governmental stability,levels of corruption,differences in contract law and intellectual property rights,elections,military actions,civil disturbances,terrorism,trade balance issues,and duties and tariffs.

A) Financial risk
B) Market risk
C) Supplier company risk
D) Political risk
E) Sourcing risk

Question 62

All of the following are possible risks of maintaining fewer suppliers except ____.

A) supplier dependency
B) supply disruption
C) overaggressive supply reduction
D) maintaining an all-domestic supply base
E) absence of competition

Question 63

Which of the following is not a supplier-specific barrier to supplier development?

A) No immediate benefit to supplier development is evident in the buying organization.
B) Lack of commitment on the part of supplier's management.
C) Supplier's management agrees to improvements but fails to implement the proposals.
D) Supplier lacks engineering resources to implement solutions.
E) Supplier lacks employee skill base to implement solutions.

Question 64

Which of the following is not one of the advantages of a rationalized and optimized supply base?

A) Buying from world-class suppliers.
B) Use of full-service suppliers.
C) Lower supply base administrative costs.
D) Reduction of supply base risk.
E) Absence of competition.

Question 65

Which of the following is not one of the elements of financial risk in a supply base?

A) Inventory carrying costs.
B) Currency exchange rates.
C) INCOTERMS
D) Hard vs. soft currencies.
E) Legal systems.

Question 66

Which of the following is not one of the advantages of a rationalized and optimized supply base?

A) Longer lead-times.
B) Use of full-service suppliers.
C) Lower total product cost.
D) Ability to pursue complex supply management strategies.
E) Buying from world-class suppliers.

Question 67

Which of the following is not a buyer-specific barrier to supplier development?

A) The buying company's purchase volume from the supplier does not justify development investment.
B) No immediate benefit to supplier development is evident to the buying organization.
C) Lack of executive support within the buying organization for supplier development.
D) Importance of purchased item does not justify development efforts.
E) Supplier's management agrees to improvement but fails to implement the proposals.

Question 68

Which of the following is not one of the supply base reduction methods offered by Keki Bhote?

A) Twenty/eighty rule.
B) "Improve or else" approach.
C) Global sourcing.
D) Triage approach.
E) Competency staircase approach.

Question 69

All of the following are categories of supply base risk except ____.

A) political risk
B) market risk
C) sourcing risk
D) financial risk
E) employee hiring risk

Question 70

The ____ provides all suppliers,regardless of their performance history,a chance to remain in the supply base.

A) "improve or else" approach
B) triage approach
C) competency staircase approach
D) twenty/eighty rule
E) Six Sigma approach

Question 71

____ allows an organization to react more quickly when risk events occur by already having previously prepared plans and proposed actions in place in advance of the actual event.

A) Hedging
B) Use of third party intermediaries
C) Multiple sourcing
D) Scenario analysis
E) None of these choices.

Question 72

In ____,a buyer selects or develops suppliers with multiple or redundant capabilities.

A) single sourcing
B) cross-sourcing
C) global sourcing
D) strategic sourcing
E) sole sourcing

Question 73

Which of the following is not a typical supplier development activity?

A) Providing incentives to suppliers for improved performance.
B) Promoting competition among suppliers.
C) Raising prices paid for purchased goods and services.
D) Directly involving buyer personnel with suppliers.
E) Conducting training and process improvement initiatives.

Question 74

In overcoming the barriers to supplier development,which of the following is not one of the approaches typically used?

A) Direct-involvement activities.
B) Multiple sourcing.
C) Incentives and rewards.
D) Warnings and penalties.
E) All of these choices are typical approaches.

Question 75

The ____ is often used when the buying organization requires a rapid reduction in the number of suppliers.

A) "improve or else" approach
B) triage approach
C) supplier development approach
D) competency staircase approach
E) twenty/eighty rule

Question 76

The ____ requires the systematic evaluation of the performance of individual suppliers and placement into one of three categories.

A) twenty/eighty rule
B) competency staircase approach
C) "improve or else" approach
D) triage approach
E) zero defects approach

Question 77

All of the following are elements of market risk in a supply base except ____.

A) the number of buyers competing for the same goods
B) shorter product life cycles
C) regional political risk
D) threat of emerging technologies
E) protecting and maintaining trade secrets and intellectual properties from misuse or misappropriation

Question 78

The ____ requires suppliers to successfully navigate a successive series of performance milestones or hurdles in order to remain in the supply base.

A) triage approach
B) competency staircase approach
C) M*A*S*H approach
D) "improve or else" approach
E) twenty/eighty rule

Question 79

____ is any activity undertaken by a buyer to improve a supplier's performance or capabilities to meet the buyer's short- and long-term supply needs.

A) Supply base rationalization
B) The twenty/eighty rule
C) Supply base optimization
D) Supplier development
E) Six Sigma

Question 80

All of the following are contingency management tools that can be effectively used at the tactical level to assist the supply manager in identifying,analyzing,reducing,and monitoring supply base risk except ____.

A) KSA
B) inventory
C) multiple sourcing
D) use of third party intermediaries
E) scenario analysis