Deck 9: Strategic Outsourcing

Question 1

Potential outsourcing suppliers must be _____________ and ___________.

A) recruited / interviewed
B) identified / investigated
C) interviewed / selected
D) selected / qualified
E) qualified / available

Answer 1

B

Question 2

______________ involves continuously evaluating supply chain conditions so that potential issues may be avoided or at least lessened by being more proactive.

A) Contingency planning
B) Risk mitigation
C) Loss prevention
D) Risk monitoring
E) Risk assessment

Answer 2

D

Question 3

Initially, outsourcing decisions predominantly involved ___________, _______________, and activities of ____________ strategic value.

A) non-standard products / common processes / high
B) standardized processes / traditional products / relatively high
C) standardized processes / commoditized products / extremely low
D) standardized processes / commoditized products / extremely high
E) non-standardized processes / technology related products / extremely low

Answer 3

C

Question 4

The _____ step in the make-or-buy decision is to understand the strategic importance (value) of the activity or system.

A) second
B) fourth
C) first
D) fifth
E) third

Question 5

The buying and selling organizations must follow the specific roles outlined in the contract. The buying organization also must appoint a __________ manager. The __________ manager and the suppliers must merge their independent plans into one consensus plan.

A) coordinating / coordinating
B) relationship / relationship
C) contract / contract
D) purchasing / purchasing
E) supply / supply

Question 6

It is crucial to treat _____________ (both survivors and those directly impacted) with respect and dignity during the decision-making and implementation process.

A) stakeholders
B) employees
C) managers
D) managers and employees
E) stockholders and stakeholders

Question 7

If a firm can generate nearly equal financial improvement through internal efforts as would be realized with outsourcing, then the business case may need to be called into question. According to a Deloitte study, many organizations could realize incremental savings on the order of _________percent of direct labor from implementing innovative programs such as lean production.

A) 10 to 20
B) 30 to 50
C) 20 to 30
D) 35
E) 25

Question 8

_____________ involves a detailed analysis of what can be done to reduce or eliminate the probability and severity of these adverse events while also considering the trade-offs involved.

A) Contingency planning
B) Risk mitigation
C) Loss prevention
D) Risk monitoring
E) Risk assessment

Question 9

The organization must have a set of ______________ that ensure survival in a competitive marketplace.

A) values
B) beliefs
C) strategic plans
D) contingency plans
E) core capabilities

Question 10

Organizations continuously __________ in order to attract customers and increase revenues and market share with products and services.

A) innovate
B) advertise
C) expand
D) lower prices
E) improve quality

Question 11

In addition to the supplier profiles, the buying organization should clearly establish expectations for the potential suppliers and discuss the __________ and the _________________ for the outsourcing activity.

A) standards / employee training
B) costs / delivery
C) scope of work / appropriate pricing
D) quality / quantity
E) type of work / quality

Question 12

Only organizations that are diligent about understanding and avoiding the pitfalls of _______________ outsourcing and that apply total business-outcome-focused outsourcing will be successful.

A) international
B) external
C) cost focused
D) quality focused
E) price reduction

Question 13

irms are increasingly considering more strategic "capabilities" for outsourcing, making the strategic evaluation much more complex. They discourage firms from making outsourcing decisions piecemeal, but rather encourage organizations to make them as part of a __________________.

A) contingency plan
B) strategic business plan
C) outsourcing plan
D) comprehensive production strategy
E) comprehensive sourcing strategy

Question 14

commonly cited source of financial benefit from outsourcing is the vendor's better ______________.

A) quality
B) cost structure
C) expertise and knowledge
D) economies of scale
E) quality and technology

Question 15

concept very similar to the resource-based view of the firm is that of ______________. _______________ are the collective learning in an organization

A) strengths and weaknesses / Strengths and weaknesses
B) core competencies / Core competencies
C) lean production / Lean production systems
D) PDF / PDF systems
E) CCC / CCC systems

Question 16

It is important to make sure that all ______________ feel as though their interests were represented and considered in making the decision.

A) employees
B) stockholders
C) managers
D) stakeholders
E) union members

Question 17

The __________________ is especially concerned with how to coordinate diverse production skills and integrate multiple streams of technology.

A) lean production system
B) PDF concept
C) strength and weakness system
D) RAP concept
E) core competency concept

Question 18

ailing to appreciate the ___________ concerns and proactively manage them will have an adverse impact on the outsourcing engagement.

A) managers'
B) stockholders'
C) stakeholders'
D) employees'
E) bankers'

Question 19

The concept of _______________ along with the resource-based view of the organization provides the basis for the assertion that in considering outsourcing, the decision making team must have a thorough understanding of _______________ capabilities and how they relate to an organization's competitive advantage.

A) PDF systems / PDF and non-PDF
B) RFD Systems / RFD and non-RFD
C) core competencies / core and non-core
D) advanced technologies / advanced and non-advanced technology
E) core technologies / core and non-core technology

Question 20

The success of the outsourcing initiative depends heavily on the ______________ beginning with the contract execution to the transfer of the agreed-upon activities and resources.

A) terms of the contract
B) the front line supervisor's actions
C) management's actions
D) task force
E) implementation effort

Question 21

It appears clear that effective buyer-supplier relationships should include a formalized procedure for ______________ the buyer's expectations and _____________ the supplier's performance.

A) communicating / evaluating
B) setting / monitoring
C) establishing / evaluating
D) communicating / changing
E) establishing / changing

Question 22

quitable distribution of pain and gain will ultimately lead to __________ partnership performance. Along with having a contract that defines performance incentives by means of penalty and reward structures, the relationship also must be able to work through unforeseen conditions in a productive manner.

A) reduced
B) enhanced
C) lower
D) less
E) equal

Question 23

Outsourcing can be conceptualized as a _________ rather than simply an event. This __________ begins with the development of a strategic and financial business case for outsourcing.

A) method / method
B) strategy / strategy
C) process / process
D) practice / practice
E) program / program

Question 24

complete transfer means that the ______________________________ and other assets are no longer maintained internally once the business process is outsourced.

A) people, plants, warehouses, headquarters,
B) facilities, equipment, machinery,
C) people, facilities, equipment,
D) people, facilities, equipment, technology,
E) people, facilities, technology,

Question 25

In order to effectively cultivate the relationship, the buying organization should be active in _______________ performance and ____________________.

A) managing / identifying problems
B) monitoring and evaluating / solving problems
C) monitoring / ensuring quality
D) evaluating / discussing problems
E) managing quality / identifying problems

Question 26

Outsourcing can be defined as the ___________ transfer of a business process that has been traditionally ________________ internally to an independently owned external service provider.

A) partial / owned and supported
B) complete / operated and managed
C) first / supervised
D) business / owned and managed
E) process / owned and supervised

Question 27

The ____________ establish (es) the performance measures, deliverables, due dates, and the expected supplier requirements. Performance measurement is the cornerstone of the buyer-supplier relationship. Without measurement there is no control. Without control there can be no relationship to manage.

A) negotiating team
B) original contract
C) buying organization
D) supplier
E) buyer and supplier jointly

Question 28

It is virtually impossible to generalize why organizations outsource various business processes. The final outsourcing decision depends on whether the CEO, CFO, or CIO initiates the outsourcing proposal. Whichever executive initiates the outsourcing proposal, a reduction in __________________ is usually the primary driver.

A) hidden costs
B) indirect costs
C) labor costs
D) direct operating costs
E) hidden operating costs

Question 29

final key element of an effective buyer-supplier relationship is ____________________.

A) the performance evaluation
B) the monitoring of performance
C) the control element
D) the reward element
E) the incentive to perform well

Question 30

Outsourcing is also sometimes thought to be similar to subcontracting, joint venturing, and contract manufacturing. Contracting is the purchasing of goods or services to facilitate a business process owned by the buyer. The outsourcing point of departure from these concepts is the ________________ of all associated internal business process activities.

A) date of implementation
B) agreement for the outsourcing
C) need to reduce the costs
D) desire to reduce the expenses
E) complete transfer

Question 31

Global business process outsourcing alone has surpassed the US$________ mark. A recent Booz Allen report posits the expectation that U.S. business process outsourcing will continue to grow at about _____ percent per year in the near term.

A) 9 trillion / 12
B) 5 trillion / 9
C) 4 trillion / 11
D) 6 trillion / 8
E) 6 trillion / 10

Question 32

or long-term relationships to work, it initially requires _________________ from both parties. Although these longer term relationships can bear significant benefits for the customer and service provider, the road will not always be a smooth one.

A) a strong commitment
B) a strong communications system
C) a good understanding of each other
D) a meeting of the minds
E) a pledge to work together

Question 33

ccording to a recent Deloitte Consulting study, 64 percent of respondents indicated that they had brought outsourced services back in-house. Fifty percent of respondents identified ______________ as the primary problem encountered with outsourcing, while 44 percent _________ realize cost savings.

A) "contractual expenses" / did
B) "relationships" / did not
C) "hidden costs" / did not
D) "relationships" / did
E) "hidden costs" / did

Question 34

nother study reported similar findings from a Bain survey of large and medium-sized firms. They found that only ____ percent of the firms were highly satisfied with the costs they were saving, and nearly _____ percent failed to achieve cost savings expectations

A) 5 / 44
B) 6 / 60
C) 10 / 75
D) 10 / 50
E) 12 / 50

Question 35

____________ is the sum of the actual and potential resources embedded within, available through, and derived from the network of relationships possessed by an individual or social unit.

A) Political capital
B) Operating capital
C) Total assets
D) Social capital
E) Cash flows

Question 36

In a recent study, executives categorized their outsourcing activities. Table 9.1 in the textbook illustrates the diverse set of outsourced activities that were reported on. Not surprisingly, information technology outsourcing (ITO) represented the largest number of responses at 25.8 percent. Approximately 35 percent of the responses represented the outsourcing of some type of manufacturing activity, with the remainder being _________________.

A) business practices administration (BPA)
B) business process outsourcing (BPO)
C) business accounting technology (BAT)
D) business owners administration (BOA)
E) business technology administration (BTA)

Question 37

2005 study reported that, based on the experience of the global consulting firm Booz Allen Hamilton, they would estimate that approximately one in three outsourcing efforts fails to achieve outsourcing expectations. These anecdotal findings suggest that there is a troubling gap between expectations and reality; however, outsourcing is ____________.

A) here to stay
B) being revised
C) being cut back
D) here for the next couple of years
E) fading out

Question 38

Traditional thinking about the most appropriate form of governance has cast the decision as somewhat of a dichotomous choice between hierarchy (i.e., internal sourcing) and market (i.e., external sources). Prior works have developed the image of ____________ governance as an arm's length relationship between the customer and the supplier organization.

A) supplier
B) buyer
C) stakeholder
D) local
E) market

Question 39

The crafting of the business case is followed by implementing the ____________________ and, ultimately, managing the relationship with the provider.

A) plan
B) external sourcing model
C) contract
D) outsourcing model
E) internal sourcing model

Question 40

Outsourcing risks include breaches in intellectual property, provider shirking, and opportunistic renegotiation. The combination of contractual incompleteness, asset specificity, and uncertainty gives rise to these risks when firms pursue external sourcing. Outsourcing organizations must have a clear _____________________.

A) legally binding contract
B) understanding of the contract
C) understanding of true supplier intentions
D) definition of supplier roles and responsibilities
E) understanding of the supplier's role and responsibilities

Question 41

uring the transition period, firms incur additional costs related to internal staff providing _______________. There is usually lower efficiency and effectiveness at the beginning of the contract.

A) additional resources
B) advice and assistance
C) additional support and duplicate resources
D) duplicate services
E) training and advice

Question 42

While internal coordination costs are unique to external sourcing alternatives, they must be contrasted against the _______________ and ____________ associated with internally sourcing a product or service.

A) management time / turnover costs
B) internal coordination / overhead costs
C) external coordination / implementing costs
D) external coordination / expected benefits
E) external coordination / overhead costs

Question 43

It has long been recognized in both the strategy and operations literature that the most effective external sourcing relationships involve considerable _______________ and ____________.

A) resources / time
B) commitment / communication
C) management time / coordination
D) management effort / two-way communications
E) management effort / relationship building

Question 44

If sourcing internally, firms must estimate the costs of ________ prevention, the costs of _____________, the cost of ___________, and the cost of ____________.

A) shrinkage / quantity appraisal / internal losses / external losses
B) defect / quality appraisal / internal failure / external failure
C) defect / quantity appraisal / internal problems / external problems
D) turnover / quality appraisal / internal problems / external problems
E) shrinkage / quality appraisal / internal losses / external failure

Question 45

roadly, risk can be defined as a measure of the probability and severity of adverse effects. One can divide risk management into four iterative phases. Which of the following is not one of the iterative phases?

A) contingency planning
B) risk mitigation
C) loss prevention
D) risk monitoring
E) risk assessment

Question 46

The cost of quality is an essential consideration in sourcing decisions. The costsssociated with ensuring quality are often categorized as: .

A) maintenance, innovation
B) preventative, appraisal
C) internal failure, external failure
D) All of the above
E) "B" and "C"

Question 47

The relationship between higher levels of vertical integration and an increase in bureaucratic costs has been noted in the extant academic literature. Some firms have cast the decision to _____________ versus the decision to externally source as a comparison between the costs of bureaucracy and the cost of _____________.

A) vertically integrate / external coordination
B) horizontally integrate / internal coordination
C) merge / management coordination
D) expand horizontally / supervision
E) vertically integrate / internal coordination

Question 48

One of the most influential factors in _______________ decisions is the coordination requirements. Perhaps nowhere is this more evident than when considering new product or service development.

A) horizontal integration
B) strategic alliance
C) merger
D) vertical integration
E) acquisition

Question 49

Some of the often "hidden costs" of outsourcing include training internal employees to become relationship managers rather than technical managers. The hidden costs also include ______________________________________ required to thwart labor disputes.

A) "golden parachutes," severance packages, temporary employees, and supervision
B) retention bonuses, severance packages, employee turnover, and management time
C) retention bonuses, employee training, redundant activities, and management time
D) management time, severance packages, employee training, and "golden parachutes"
E) performance bonuses, temporary employees, employee turnover, and employee training

Question 50

report by Cranfield University to the Department for Transport in England recognized outsourcing as one of the key factors driving increased levels of ____________. The idea of ______________ should underlie all of the previously discussed cost categories.

A) insurance / insurance management
B) losses / loss prevention
C) shrinkage / shrinkage prevention
D) supply chain losses / preventing losses
E) supply chain risk / risk management

Question 51

________________ involves answering three questions: (1) What adverse events could happen? (2) What is the probability of these events happening? and (3) What is the financial impact if these events occur?

A) Contingency planning
B) Risk mitigation
C) Loss prevention
D) Risk monitoring
E) Risk assessment

Question 52

The cost reduction must be significantly lower than the current direct operating costs in order for an outsourcing proposal to be attractive. The generic strategic benefits of outsourcing are listed below with one exception. Which one is not one of the strategic benefits?

A) Refocusing the organization to its core competencies is accomplished by focusing what the organization does best and/or transforming the business to focus on new products and services.
B) Increased market share and revenue is accomplished by assessing the providers' network and accelerating expansion into new markets.
C) Cost minimization is accomplished by reducing direct operating costs, eliminating overhead costs, and transforming fixed costs into variable costs.
D) Improvement in the organization's core competencies by increasing productivity, reducing indirect operating expenses, lowering overhead, and expanding services.
E) Improvement in operating performance is accomplished by increasing quality, increasing productivity, and obtaining new capabilities technologies from external sources.

Question 53

In general, one can think of __________ coordination costs as those overhead expenses incurred solely due to the decision to _________ source a product or service.

A) internal / externally
B) external / internally
C) external / externally
D) management / internally
E) internal / internally

Question 54

Outsourcing initiatives must ___________. The type of management and relationship skills and capabilities must be developed through training and/or recruitment within the outsourcing organizations.

A) create value
B) create profits
C) reduce costs
D) improve quality
E) create turnover

Question 55

Moreover, Dunn and Bradstreet found that 20 to 25 percent of all outsourcing relationships fail within __________ and nearly half fail within ____ years. This implies that the likelihood of incurring these expenses again, or experiencing costs associated with reinternalizing an outsourced activity, is ___________. Another critical financial consideration with outsourcing is the impact on the ___________.

A) two months / ten / relatively high / environment
B) two years / eight / good / internal workforce
C) two years / five / relatively high / internal workforce
D) two years / five / somewhat low / environment
E) two months / five / relatively high / internal workforce

Question 56

If considering international sourcing alternatives, it is important that the decision makers develop a complete understanding of the costs involved with _____________________ ____________________________________________________________.

A) moving key personnel to the company of choice, setting up communication links, and building the appropriate facilities
B) ensuring compliance with governmental laws, regulations, and even local business customs
C) setting up environmental friendly operations, complying with the local customs, adapting to local regulations, and adjusting to the local culture.
D) learning local customs, adapting to the culture, meeting local regulations, and adjusting to the language
E) adjusting to local laws, complying with the local customs, and adapting to the culture

Question 57

Tariff rates in ______________ countries are typically less than 10 percent but can be much higher for _________________ nations and for certain products such as agriculture. These environmental parameters may be highly dynamic, requiring analysts to be "on the ground" and well connected to develop a deep understanding of the _______________.

A) developed / lesser-developed / evolving environment
B) lesser developed / developed / evolving environment
C) developed / lesser developed / evolving business climate
D) lesser developed / evolving / local customs
E) developed / lesser developed / target country

Question 58

While a contract is required to legally protect one's interests, an extensive strategic assessment and a true commitment to a cooperative relationship with the service provider are both necessary to realize expected outsourcing benefits. These insights offer valuable guidance to __________________ in terms of where and how ______________ should be applied.

A) business partners / outsourcing techniques
B) outsourcing practitioners / outsourcing benefits
C) business practitioners / sourcing techniques
D) procurement departments / outsourcing benefits
E) outsourcing practitioners / sourcing resources

Question 59

Presumably, _______________ induces higher levels of many overhead administrative functions such as payroll, benefits management, utility expenses, IT expenses, and so forth.

A) sourcing internally
B) outsourcing
C) sourcing externally
D) sourcing
E) alternative sourcing

Question 60

The buying firm will need to ensure that proper mechanisms are in place to make sure that they are capable of detecting _____________ by an external source.

A) delivery failures
B) quantity failures
C) safety failures
D) cost failures
E) quality failures