Chapter 2 — The Purchasing Process
True / False
1. Enterprises are relying increasingly on external suppliers to provide only materials and products, not information
technology, services, and design activities.
a.
True
b.
False
False
Easy
Analytic
2. The objectives of a world-class purchasing organization do not need to evolve beyond the traditional mantra of ensuring
we “get a good price!”
a.
True
b.
False
False
Easy
Analytic
3. Organizations are constantly looking for people who have developed the skills necessary to deal with the narrow variety
of tasks faced by purchasing.
a.
True
b.
False
False
Easy
Analytic
4. If a supplier’s components are defective and causing problems for manufacturing, then purchasing must find ways to
improve supplier quality.
a.
True
b.
False
True
Easy
Analytic
5. Purchasing can directly affect (positively or negatively) the long-term growth, revenue, and operating outcomes and
plans of stakeholders and business units.
a.
True
b.
False
Chapter 2 — The Purchasing Process
True
Easy
Analytic
6. The authority to review and challenge specifications (for products or for services) is within purchasing’s span of control
in managing demand, although internal stakeholders sometimes dispute this right.
a.
True
b.
False
True
Moderate
Analytic
7. Purchasing’s right to evaluate and select suppliers means that sales representatives are not allowed to talk with non–
purchasing personnel.
a.
True
b.
False
False
Moderate
Analytic
8. Contract management should be used to trigger proactive sourcing events only after a contract expires.
a.
True
b.
False
False
Easy
Analytic
9. When creating a forecast for a needed product or service, internal customers may not always be able to express exactly
what it is they will need at a future point in time.
a.
True
b.
False
True
Easy
10. For routine, off-the-shelf items, the purchase requisition may contain all the information that purchasing requires.
a.
True
b.
False
True
Easy
Analytic
11. When purchasing works directly with internal stakeholders to anticipate future requirements, such as during new-
product development, or with physician councils in a health care provider, purchasing is acting reactively.
a.
True
b.
False
False
Moderate
Analytic
12. The process that buyers use to select suppliers does not vary widely depending on the required item and the
relationship that a buyer has with its suppliers.
a.
True
b.
False
False
Easy
Analytic
13. Buyers use competitive bidding when price is a minor criteria and the required item (or service) has complex material
specifications.
a.
True
b.
False
False
Moderate
Analytic
14. For standard items, the negotiation process is an efficient method to purchase relatively straightforward requirements.
a.
True
b.
False
False
Moderate
15. If the requested item is complex or requires an untested or new production process, purchasing can include additional
information or attachments on its RFQ to assist the supplier, which might include detailed blueprints, samples, or
technical drawings.
a.
True
b.
False
True
Moderate
Analytic
16. In drafting a purchase order, purchasing must include a large number of details regarding policies because it is a
legally binding document.
a.
True
b.
False
True
Easy
Analytic
17. Almost all firms establish blanket purchase orders with their suppliers.
a.
True
b.
False
True
Easy
Analytic
18. Buyers use material purchase releases to order items covered by blanket purchase orders.
a.
True
b.
False
True
Easy
Analytic
19. Responsibility for concealed damage is often simple and easy to detect.
a.
True
b.
False
Analytic
Chapter 2 — The Purchasing Process
False
Easy
Analytic
20. Material discrepancies usually result from incorrect quantity shipments.
a.
True
b.
False
True
Easy
Analytic
21. The buyer should assume that the purchasing cycle ends with the receipt of an ordered item or the selection of a
supplier.
a.
True
b.
False
False
Easy
Analytic
22. Managing the purchase of semifinished components is not a critical purchasing responsibility because components
rarely affect product quality and cost.
a.
True
b.
False
False
Easy
Analytic
23. Historically, most organizations have paid minimal attention to MRO items.
a.
True
b.
False
True
Easy
Analytic
24. The way MRO items are typically dispersed throughout an organization makes monitoring MRO inventory relatively
Chapter 2 — The Purchasing Process
simple.
a.
True
b.
False
False
Easy
Analytic
25. Capital equipment purchasing involves buying assets intended for use less than one year.
a.
True
b.
False
False
Easy
Analytic
26. It is a common and preferred current practice for suppliers to arrange shipment to a purchaser and simply include the
transportation cost as part of the purchase cost.
a.
True
b.
False
False
Easy
Analytic
27. Most companies spend too much time and too many resources managing the ordering of goods and services,
particularly lower-value items.
a.
True
b.
False
True
Easy
Analytic
28. The dollar value of the items covered by procurement cards is relatively high.
a.
True
b.
False
False
Analytic
Chapter 2 — The Purchasing Process
NOTES:
5
Multiple Choice
29. The _____ is used to identify user requirements, evaluate the user needs effectively and efficiently, identify suppliers
who can meet that need, develop agreements with those suppliers, develop the ordering mechanism, ensure payment
occurs promptly, ascertain that the need was effectively met, and drive continuous improvement.
a.
b.
c.
d.
e.
ANSWER:
DIFFICULTY:
Easy
KEYWORDS:
OTHER:
Analytic
NOTES:
1
30. All of the following are objectives of a world-class purchasing organization except _____.
a.
ensure that all hard copies of purchase orders and other paper documents are filed correctly in a secure area
b.
develop integrated supply strategies that support business goals and objectives
c.
manage the sourcing process efficiently and effectively
d.
supplier performance management
e.
supply assurance
ANSWER:
DIFFICULTY:
Easy
KEYWORDS:
OTHER:
Analytic
NOTES:
1
31. Failing to respond to the needs of internal customers will diminish the confidence these users have in purchasing, and
they may try to negotiate contracts themselves (a practice known as _____).
a.
strategic sourcing
b.
spend management
c.
maverick buying
d.
outsourcing
e.
internal sourcing
ANSWER:
DIFFICULTY:
Easy
KEYWORDS:
OTHER:
Analytic
NOTES:
1
32. One of the most important objectives of the purchasing function is the selection, development, and maintenance of
suppliers, a process that is sometimes described as _____.
Chapter 2 — The Purchasing Process
a.
supplier performance management
b.
category management
c.
customer service
d.
procure-to-pay
e.
maverick buying
Easy
Analytic
33. Which of the following is not one of the objectives in supplier performance management?
a.
Selecting suppliers that are competitive.
b.
Identifying new suppliers that have the potential for excellent performance and developing closer relationships
with these suppliers.
c.
Improving existing suppliers.
d.
Developing new suppliers that are not competitive with current suppliers.
e.
Ensuring timely and accurate payment of supplier invoices.
Easy
Analytic
34. Effective supply market intelligence involves all of the following except _____.
a.
updating supply markets and trends and translating their impacts on key business outcomes
b.
ensuring that purchasing does not exceed its annual operating budget
c.
identifying emerging materials and service technologies to support company strategies in key performance
areas
d.
developing supply options and contingency plans to reduce risk
e.
supporting the organization’s requirements for a diverse and globally competitive supply base
Easy
Analytic
35. _____ is the process of collecting historical data by commodity, relative to demand from the lines of business, with the
exception of personnel expenses, occupancy, and corporate spend.
a.
Demand management
b.
Supply analysis
c.
Category management
d.
Contract management
e.
Spend analysis
36. _____ is the process of using unit and rate consumption levels to forecast and estimate future consumption in an
internal functional customer and providing guidance and input on how to optimize usage and educating the user on the
tradeoffs.
a.
Specification management
b.
Demand management
c.
Category management
d.
Supply market intelligence
e.
Cost management
Easy
Analytic
37. _____ is the process of developing insights into stakeholder requirements, comparing these to external industry
intelligence, supply base capabilities and operational risks, and developing a strategy to align internal requirements with
external supply market conditions.
a.
Spend analysis
b.
Cost management
c.
Contract management
d.
Category management
e.
Procure-to-pay
Easy
Analytic
38. _____ is a situation that occurs when sellers seek to “go around” purchasing and instead directly contact and attempt
to sell directly to end users (stakeholders).
a.
Insourcing
b.
Bidding
c.
Maverick buying and selling
d.
Negotiating
e.
Outsourcing
Easy
Analytic
Easy
Analytic
Chapter 2 — The Purchasing Process
39. _____ is a process associated with defining the contract, defining roles and responsibilities of both parties, and
advising when to modify and ensure appropriate escalation.
a.
Spend analysis
b.
Contract management
c.
Cost management
d.
Supplier selection
e.
Category management
Easy
Analytic
40. _____ involves unbundling the price paid and understanding the total cost of ownership over the life cycle of a
product or service to deliver a target cost and a unit rate to determine if it is priced competitively in the marketplace.
a.
Cost management
b.
Procure-to-pay
c.
Supplier relationship management
d.
Category management
e.
Spend management
Easy
Analytic
41. _____ is the end-to-end process of managing a supplier through the entire sourcing life cycle, which includes first
identifying the abilities of a particular company with regard to performing a service for the internal customer, completing
a sourcing event, negotiating a contract, executing an order, and determining payment.
a.
P2P
b.
CRM
c.
Outsourcing
d.
Competitive bidding
e.
SRM
Easy
Analytic
42. Which of the following is not one of the characteristics of a mature, well-developed supply strategy?
a.
A repeatable and well-defined process for building strategy and governance around defining, planning,
managing, and receiving products and services for a business.
b.
Clear alignment with executive vision and internal user-specific business goals.
Chapter 2 — The Purchasing Process
c.
Established goals and metrics for short-term project plans, as well as a definite five-year plan that provides
year over year performance improvements.
d.
Established communication plan to inform senior management and all lines of business updated and reviewed
quarterly against defined goals and objectives.
e.
Required use of an online catalog.
43. All of the following are benefits of electronically generating and transmitting purchasing-related documents except
_____.
a.
a reduction in the need to ensure higher levels of quality from suppliers
b.
a virtual elimination of paperwork and paperwork handling
c.
improved communication both within the company and with suppliers
d.
a reduction in errors
e.
a reduction in the time spent in by purchasing personnel on processing purchase orders and invoices and more
time spent on strategic value-adding purchasing activities
44. The purchasing cycle begins with the _____.
a.
selection of an appropriate supplier
b.
issuance of a purchase order
c.
receipt of a supplier’s acknowledgement
d.
identification of a need (a requirement)
e.
determination of who can authorize the purchase
45. When a situation arises when an internal customer has a need that comes up suddenly, which is not planned for and for
which there is no preexisting supplier identified to provide the product or service required, purchasing should use a/an
_____ approach.
a.
spot buy
b.
long term agreement
d.
e.
None of the above.