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24. When the majority of the company’s business is given to one supplier and other suppliers are
treated as backup suppliers, this is called
25. When a firm uses supplier A to supply a family of parts to one division, and uses supplier B
to supply a similar family of parts to a different division, this is called
26. Which of the following is NOT typically required to be a preferred supplier?
17-10
27. The first step in the purchasing cycle is to
28. The purchasing cycle is described as
29. Which of the following statements is NOT correct?
17-11
30. Which of the following would typically carry the most weight in supplier selection
decisions?
31. A company uses a weighted supplier selection matrix and finds the overall scores for two
suppliers to be almost exactly the same. The buyer should
32. Which of the following is NOT one of the five challenges facing purchasing?
17-12
33. Consider the following statements regarding supplier relationship management:
(1) Performance is evaluated with an eye toward improving or terminating the
relationship.
(2) Trust is established once the supplier fulfills the terms of the contract.
34. A U.S. hospital system is considering outsourcing a portion of its diagnostic workload to a
medical consulting firm based in India. In the United States these diagnostic services, done
internally by the hospital system, cost $700,000 per year. The consulting firm would charge
$400,000 per year for the same workload. In addition, the hospital system expects to spend
$50,000 per year in managerial oversight, $8,000 per year administering the contract, and
$125,000 to initially train the consulting firm’s staff (amortized over five years). What is the
total annual outsourcing cost during the first five years?
35. A firm has begun using a supplier scorecard with its top 25 suppliers. This suggests the firm
has increased its efforts in which of the following areas?
True/False Questions
36. If it isn’t a core competence, anything else a company does is a candidate for outsourcing.
37. Even when a company can easily do something itself, it may choose to outsource in order to
free up resources for other higher-value activities.
38. Transaction costs tend to be higher for commodities, especially when multiple suppliers are
in competition with each other.
39. One advantage of lean systems is that they are more resistant to supply chain disruptions.
17-14
40. The term business process outsourcing (BPO) refers to outsourcing basic manufacturing
processes, such as processes for building components or subassemblies that go into the final
product.
41. At present, 70% of the manufactured products purchased in the U.S. market are made
outside the United States.
42. One significant reason for reshoring is a company needing its supply chain to be more
responsive to changes in demand.
43. Cross-sourcing occurs when the majority of business is given to one supplier and the other
supplier is treated as a backup supplier.
17-15
44. Knowledgeable buyers from purchasing can add value by suggesting to a design engineer
the use of a common part instead of the engineer’s custom part in the design.
45. Once issued, the purchase order becomes the basis for managing the purchasing relationship
on an ongoing basis.
