Deck 1: Purchasing and Supply Management

Question 1

In manufacturing organizations, the dollars spent with suppliers fall into what range as a percent of revenues?

A) 65 to 75.
B) 50 to 80.
C) 45 to 75.
D) 30 to 60.
E) 25 to 35.

Answer 1

B

Question 2

Supply makes a limited contribution to organizational risk management since most supply decisions have few downside risks that might impact the organization's strategy.

Answer 2

False

Question 3

The true test of supply's contribution is when the chief executive officer and the management team recognize the value of supply and suppliers in reducing prices paid for goods and services.

Answer 3

False

Question 4

The return on assets effect ROA) quantifies and measures:

A) the indirect contribution of supply management to profitability.
B) any increase in sales that occurs at a greater rate than the cost of assets.
C) the impact of supply actions on inventory and the balance sheet.
D) reductions in the allocations to the operating budget of the supply department.
E) the effect on profitability of reduced spend compared to a sales increase.

Question 5

Sustainability initiatives include the effective and efficient capture and disposition of downstream products from customers and the reduction of the impact of the organization's supply chains on the natural environment

Question 6

Terms such as purchasing, procurement, supply, supply chain and logistics do not have standard definitions that are widely used across sectors and industries.

Question 7

Performance of the supply management function can be viewed in two contexts:

A) operational and trouble-avoidance.
B) operational and strategic.
C) operational and transactional.
D) strategic and opportunistic.
E) strategic and future-oriented.

Question 8

Since labor and other costs greatly exceed outlays for purchased materials and services in most service organizations, supply is of little consequence in most service organizations.

Question 9

One of the most important steps in achieving the potential of the supply function in a company is elevation of the chief supply officer to executive status.

Question 10

The design and management of seamless, value-added processes across organizational boundaries to meet the real needs of the end customer is called:

A) strategic sourcing.
B) value management.
C) customer relationship management.
D) supply chain management.
E) strategic process management.

Question 11

The total purchase sales ratio the percentage of sales dollars paid out to suppliers) varies little from industry to industry.

Question 12

Reductions in inventory investment primarily come from getting users to reduce their demand for inventoried items.

Question 13

Supply has the potential to contribute to:

A) cost management, profitability, return on assets, competitive position and corporate social policy.
B) cost management, profitability, return on assets and competitive position.
C) cost management, profitability and return on assets.
D) cost management and profitability.
E) cost management.

Question 14

The increase in outsourcing has resulted in an increase in the percentage of revenue paid out to suppliers.

Question 15

Supply management has evolved from a transaction-based, tactical function to a process-oriented, strategic function.

Question 16

Supply management may indirectly contribute to the organization's competitive advantage by:

A) the profit-leverage effect.
B) the return on assets effect.
C) reducing annual spend.
D) improving process efficiency.
E) all of the above.

Question 17

Evidence of the growth and influence of supply management in an organization includes:

A) fewer activities under the management or control of supply.
B) more intense involvement in fewer supply chain activities.
C) involvement in strategic planning and mergers and acquisitions.
D) a clear delineation between supply and accounting.
E) merging of supply and accounts payable.

Question 18

As supply chains have become more global, the risk of supply disruptions has:

A) decreased because risk is spread among suppliers all over the world.
B) decreased because there are also more international laws and treaties.
C) stayed the same because the issues are similar wherever suppliers are located.
D) increased because other countries lack the business ethics of the U.S.
E) increased because of financial and exchange rate fluctuations.

Question 19

The profit-leverage effect of supply savings means that:
B) a reduction in money tied up in inventory improves profits.
C) a reduction in purchase spend increases profit more than an equal sales increase.
D) effective price negotiations with a supplier will lower the supplier's profits.
E) the buyer gains leverage over suppliers when purchases are standardized.
F) efficient and effective supply management processes will increase profits.