Chapter 17 — Purchasing Services
1. Virtually all of indirect spend is normally purchased throughthe organization’s formal sourcing function or using well-
established supply management processes.
a.
True
b.
False
False
Easy
Analytic
2. Because of widespread industry differences, one company’s indirect spend may be considered direct spend for another.
a.
True
b.
False
True
Easy
Analytic
3. Historically, expenditures for indirect materials and services have received the same level of management
attention as have direct materials.
a.
True
b.
False
False
Easy
Analytic
4. Reverse logistics flow requires companies to find innovative methods of recovering and recycling products to minimize
potential negative impacts on the natural environment.
a.
True
b.
False
True
Moderate
Analytic
5. Inbound logistics may also include the shipment of repairable items back to maintenance facilities for refurbishment
and return to usable or salable condition.
a.
True
b.
False
False
Easy
6. As organizations continue to focus more and more on their internal core competencies and outsource non-core
activities, they have come to recognize that many of their necessary transportation and logistics services can, and should
be, outsourced to expert companies specializing in transportation and logistics services.
a.
True
b.
False
True
Moderate
Analytic
7. The primary objective of deregulation in the United States was to make its domestic transportation systems more
efficient by dramatically increasing marketplace competition within the transportation and logistics industry and
increasing economic regulation.
a.
True
b.
False
False
Moderate
Analytic
8. On average, transportation costs easily comprise ten percentor more of a product’s total cost.
a.
True
b.
False
True
Easy
Analytic
9. More effective control of inbound shipment costs usually requires purchasing goods under a shipping
designation of FOB destination.
a.
True
b.
False
False
Easy
Analytic
10. A savvy buyer will want to control transportation costs internally instead of simply allowing the shipper to
pass them along in the form of a delivered price.
a.
True
b.
False
True
Easy
Analytic
11. Whenever a supplier ships FOB destination, the buyer often loses the ability to track or control its inbound
transportation expenses which also artificially increases the value of the buyer’s inventory.
a.
True
b.
False
True
Moderate
Analytic
12. An apparently low-cost carrier may actually end up costing far more than a seemingly higher-cost carrier
when the total associated costs are calculated.
a.
True
b.
False
True
Easy
Analytic
13. For some purchased items, such as bulk raw materials, speed of transportation is the most important factor.
a.
True
b.
False
False
Easy
Analytic
14. Carriers will generally not consider the availability of backhauls when quoting one-way freight rates on a
particular traffic lane.
a.
True
b.
False
False
Easy
15. Inland water carriers are usually accessible for most domestic shippers, as lakes, rivers, and canals are
widely dispersed throughout the country.
a.
True
b.
False
False
Easy
Analytic
16. The greatest competition between domestic transportation modes involves rail and motor carriers.
a.
True
b.
False
True
Easy
Analytic
17. The most significant advantage of a motor carrier is its relatively lower variable cost.
a.
True
b.
False
False
Easy
Analytic
18. A major advantage of a rail carrier is the wide range of items it is capable of carrying.
a.
True
b.
False
True
Easy
Analytic
19. A major disadvantage of a rail carrier is its relatively higher cost.
a.
True
b.
False
True
Analytic
20. Additional railcars can be added to a freight train with only a minimal increase in its total variable cost, absent any
limitations on train length.
a.
True
b.
False
True
Easy
Analytic
21. A two-day shipment by truck can often take a week or more by railbecause of the extra handling involved.
a.
True
b.
False
True
Easy
Analytic
22. Air carriers haul the most amount of commercial freight because of their inherent speed advantages.
a.
True
b.
False
False
Easy
Analytic
23. Shipping a high-priced component via air is never a cost-effective option.
a.
True
b.
False
False
Easy
Analytic
24. Air freight has a high variable-cost-to-fixed-cost ratio because of the high costs of operating a flight.
a.
True
b.
False
Easy
Analytic
Chapter 17 — Purchasing Services
True
Easy
Analytic
25. Inland water carriers typically transport finished or semifinished products because of the lengthy in-transit
time.
a.
True
b.
False
False
Easy
Analytic
26. Growth in international trade has increased the amount of freight moving on oceangoing vessels.
a.
True
b.
False
True
Easy
Analytic
27. Although mode selection is usually not an issue for international ocean shipments, as in all strategic supplier selection
decisions, carrier selection is still paramount.
a.
True
b.
False
True
Moderate
Analytic
28. The use of a pipeline is usually part of the decision tradeoff between transportation modes.
a.
True
b.
False
False
Easy
Analytic
29. Because of the huge quantities involved, deciding on the use of pipeline is rarely something a buyer needs to
Chapter 17 — Purchasing Services
consider.
a.
True
b.
False
True
Easy
Analytic
30. Oftentimes, a single mode of transportation may prove inadequate for a specific shipment.
a.
True
b.
False
True
Easy
Analytic
31. Private carriers are never utilized to make daily “milk runs,” picking up smaller amounts of materials from a
series of nearby suppliers to be used in a just-in-time or lean manufacturing environment.
a.
True
b.
False
False
Moderate
Analytic
32. Exempt carriers are highly regulated economically by the Surface Transportation Board.
a.
True
b.
False
False
Easy
Analytic
33. A major outcome from transportation economic deregulation has been the shift of pricing information
garnered from public tariffs and rate bureaus to the negotiating table.
a.
True
b.
False
True
Easy
Analytic
34. A shipper should necessarily negotiate a contract with every carrier it uses, even if it is considered a small or
infrequent shipper.
a.
True
b.
False
False
Easy
Analytic
35. The U.S. Bureau of Customs and Border Protection established the so-called “10+2” rule that affects all
modes of transportation except ocean container freight.
a.
True
b.
False
False
Easy
Analytic
36. A performance-based logistics system seeks to drive the logistics service provider’s performance by clearly
delineating the buyer’s preferred outcomes, not by transaction, but in terms of provider value-added and overall systems
costs.
a.
True
b.
False
True
Moderate
Analytic
37. Performance-based logistics has been widely adopted by the private sector.
a.
True
b.
False
False
Easy
Analytic
38. A PBL agreement and a SLA are similar concepts.
a.
True
b.
False
Chapter 17 — Purchasing Services
True
Easy
Analytic
39. The use of 3PLs is increasingly becoming a viable option for smaller shippers and infrequent shipments
a.
True
b.
False
True
Easy
Analytic
40. A clear trend is that many carriers now market themselves simply as providers of physical transportation
services.
a.
True
b.
False
False
Easy
Analytic
41. Full-service carriers, in addition to picking up and delivering goods, may consolidate shipments, provide
simplified billing, ship just-in-time from local storage points, handle complex overseas shipments, coordinate
shipments with other carriers or modes, or configure final products for direct shipment to end customers.
a.
True
b.
False
True
Moderate
Analytic
42. The importance of effectively managing an organization’s indirect spend is decreasing.
a.
True
b.
False
False
Easy
Analytic
43. If indirect spend is to be leveraged, supply management must have a clear understanding of exactly what
indirect goods and services are being purchased by individual SBUs.
a.
True
b.
False
True
Easy
Analytic
44. By limiting internal requisitioners to previously approved catalogs of already contracted goods and services
from preselected and approved suppliers, volume commitments to approved suppliers can be achieved and
maverick spending reduced.
a.
True
b.
False
True
Moderate
Analytic
45. Many buyers are beginning to question the sustainability of cost reductions achieved through reverse auctions over
time once the initial reductions are made.
a.
True
b.
False
True
Easy
Analytic
46. Traditional cost accounting systems are designed to systematically track and consolidate indirect spend
across an organization.
a.
True
b.
False
False
Easy
Analytic
47. In general, supply management should provide and manage suppliers’ e-catalogs.
a.
True
b.
False
False
48. Assigning and maintaining accurate and representative commodity codes for indirect goods and services across an
enterprise is relatively easy.
a.
True
b.
False
False
Easy
Analytic
49. Suppliers of multiple indirect items can often have multiple ship-to and bill-to addresses, resulting in
numerous codes being assigned to the same supplier for each item.
a.
True
b.
False
True
Moderate
Analytic
50. Every project must have a scope that succinctly defines the project to help avoid misunderstandings between
the buyer and the service provider.
a.
True
b.
False
True
Easy
Analytic
51. A project’s scope does not need to include any nondisclosure statements to protect the buying company’s
interests.
a.
True
b.
False
False
Easy
Analytic
Easy
Analytic
52. Project scopes should be very detailed for all service providers, including those who have previously
performed work for the organization.
a.
True
b.
False
False
Easy
Analytic
53. Moving to a centralized process for procuring professional services does not allow the buying company to
leverage its corporate buying power.
a.
True
b.
False
False
Easy
Analytic
54. Centralization of professional service procurement can increase the accountability of outside consultants to the buyer
by increasing the monitoring and auditing of services provided.
a.
True
b.
False
True
Moderate
Analytic
55. A preferred supplier list database should be set up to generate a list of preferred suppliers based on previous project
performance criteria.
a.
True
b.
False
True
Easy
Analytic
56. Although it is important to develop a rationalized supply base such that buying power can be appropriately
leveraged, a single-source strategy frequently maximizes the value of professional services.
a.
True
b.
False
False
57. In purchasing professional services, it is not important for a standard contract template or format to be
developed by the organization’s legal department because there are so many types of professional services and
providers.
a.
True
b.
False
False
Moderate
Analytic
58. The parameters on which a professional services supplier is evaluated should include, but not be limited to,
quality, cost management, delivery, technical support, and wavelength.
a.
True
b.
False
True
Moderate
Analytic
59. Top management should consider internal buy-in from affected employees and other stakeholders before
defining the final scope of the project.
a.
True
b.
False
True
Easy
Analytic
60. _____ can be defined as the sum of all purchased goods and services that are not a direct part of products or
services delivered to the customer.
a.
b.
c.
d.
e.
Moderate
Analytic