Chapter 3 — Purchasing Policy and Procedures
1. Although policies are usually documented in writing, unwritten or informal policies can also exist.
a.
True
b.
False
True
Easy
Analytic
2. Once written, policies do not have to be periodically reviewed for clarity and conformance.
a.
True
b.
False
False
Easy
Analytic
3. Policies defining the role of purchasing often serve as a general or broad policy statement from which more detailed or
specific policies evolve.
a.
True
b.
False
True
Easy
Analytic
4. The organization’s policy on contacts and visits to suppliers should address not only purchasing personnel but also
other departments or functions that visitor contact suppliers.
a.
True
b.
False
5. Buyers do not need to consider a supplier’s ability to comply with environmental regulations as a condition for
selection.
a.
True
b.
False
6. Although there is a trend toward less reliance on competitive bids and more on negotiated longer-term agreements,
many contracts are still awarded through the competitive bid process.
a.
True
b.
False
7. Routine items available from many different sources are seldom purchased through competitive bidding.
a.
True
b.
False
8. Organizations do not need to be cautious about liabilities associated with accepting and using ideas provided by
suppliers interested in doing business with a purchaser.
a.
True
b.
False
9. For companies that routinely use or produce hazardous materials, the law requires a policy that outlines in detail the
legal requirements and conditions for the handling of toxic waste.
a.
True
b.
False
10. A procedure is ineffective if it specifies too many steps to carry out or presents unnecessary detail.
a.
True
b.
False
Analytic
Chapter 3 — Purchasing Policy and Procedures
11. It is only the supervisor’s responsibility, and not the employee’s, to ensure that the purchasing employee is familiar
with and follows the procedures covering legal contracts.
a.
True
b.
False
12. The term _____ refers to the set of purposes, principles, and rules of action that guide an organization.
a.
government regulation
b.
procedure
c.
guideline
d.
work rule
e.
policy
Easy
Analytic
13. _____ refer to standard operating procedures along with any rules and regulations.
a.
Union contracts
b.
Rules of action
c.
Government regulations
d.
Policies
e.
OSHA rules
Easy
Analytic
14. Which of the following is not an advantage of written and implied policies?
a.
Policies are a means for executive management to communicate its leadership and views.
b.
Policies provide a framework for consistent decision making and action.
c.
Policies are very easy to communicate throughout an organization.
d.
Policies help ensure that personnel act in a manner consistent with executive or functional management’s
Chapter 3 — Purchasing Policy and Procedures
expectations.
e.
High level policy statements provide guidance that to employees at all levels.
15. Which of the following is not a disadvantage of written and implied policies?
a.
Personnel only follow policies to ingratiate themselves with executive management.
b.
Employees may view policies as a substitute for effective management.
c.
Policies are not a set of how-to instructions designed to provide specific answers for every business decision.
d.
Policy development can restrict innovation and flexibility.
e.
Policies are often difficult to communicate throughout large organizations.
16. All of the following are characteristics of effective policies except _____.
a.
action-oriented
b.
relevant
c.
concise
d.
highly detailed and written.
e.
timely and current
Easy
Analytic
17. Policies to define the role of purchasing do all of the following except _____.
a.
detail the authority of purchasing to delegate certain tasks or assignments to other departments
b.
describe the areas where purchasing authority does or does not exist
c.
outline the overall authority of purchasing as granted by the executive committee while describing the limits to
that authority
d.
exclude the purchasing function from any responsibility for purchasing such things as real estate, medical
insurance policies, or other areas where purchasing may not have direct expertise
e.
define the reporting mechanism for buyers or other employees to report irregular business dealings
18. Which of the following is not a policy defining the conduct of purchasing personnel?
a.
Mileage reimbursement policy.
b.
Ethics policy.
c.
Reciprocity policy.
d.
Policy on contacts and visits to suppliers.
e.
Policy on former employees representing suppliers.
19. _____ occurs when suppliers are pressured to purchase the buyer’s products or services as a condition of securing a
purchase contract.
a.
Negotiation
b.
Competitive bidding
c.
Reciprocity
d.
Irregular business dealing
e.
None of the above.
20. Examples of irregular dealings with suppliers include all of the following except _____.
a.
accepting bribes from suppliers
b.
accepting business lunches before a contract is negotiated
c.
accepting late bids
d.
owning a stake in a supplier’s company
e.
cronyism
21. All of the following are examples of problem factors that confront minority suppliers except _____.
a.
lack of access to capital
b.
large firms’ efforts to optimize their supply bases
c.
inability to attract qualified managers and other professionals
d.
preference for bidding on government contracts
e.
minority suppliers’ relatively small size leading to overreliance on large customer firms
Chapter 3 — Purchasing Policy and Procedures
22. Which of the following is not a best practice for inclusion in any minority supplier development initiative?
a.
Ensuring that all minority suppliers are located nearby the organization’s facilities.
b.
Mandating Tier 1 suppliers to have a Tier 2 diversity spend goal and incorporating the terms in the contracts.
c.
Including minority suppliers in all RFQs without exception.
d.
Tying the goals and objectives of the supplier diversity program to supply chain management strategies and
supply chain job functions.
e.
Incorporating all corporate functions in which suppliers are selected and procurement commitments are made.
23. Which of the following is not one of the principles that support positive buyer-supplier relationships?
a.
Treating suppliers fairly and with integrity.
b.
Providing prompt payment to suppliers.
c.
Encouraging suppliers to submit innovative ideas with joint sharing of benefits.
d.
Establishing a fair process to award purchase contracts.
e.
Providing engineering and manufacturing technical assistance.
24. All of the following are examples of elements that must be part of an environmental management system required by
the ISO 14000 certification process except _____.
a.
create an environmental policy
b.
set appropriate objectives and targets
c.
provide evidence of financial stability
d.
help design and implement a program aimed at achieving environmental goals and objectives
e.
monitor and measure the effectiveness of general environmental management activities within the firm
25. Which of the following is not an example of typical charge-back costs associated with supplier responsibility for
Chapter 3 — Purchasing Policy and Procedures
defective material shipments?
a.
Sales, general, and administrative costs.
b.
Cost of material rework.
c.
Repackaging for return shipment.
d.
Return shipping costs.
e.
Costs associated with lost or delayed production.
26. A _____ is an operating instruction detailing functional duties or tasks.
a.
policy
b.
procedure
c.
work rule
d.
guideline
e.
policy manual
Easy
Analytic
27. Which of the following is not true concerning the purposes of a procedure manual?
a.
The manual outlines the broad set of purposes, principles, and rules of action that guide an organization.
b.
The manual is a reference guide for purchasing personnel and is especially valuable to new employees who
require training in how to accomplish different activities or assignments.
c.
For experienced personnel, the manual provides clarification or simply reinforces knowledge about different
topics.
d.
The manual provides consistency and order by documenting the steps and activities required to perform a task.
e.
The manual may specify industry best practices to follow that are identified through benchmarking
comparisons with leading firms.
28. All of the following are examples of topics discussed in legal contract procedures except _____.
a.
essential elements of the contract
b.
execution and administration of agreements
c.
compliance with contract terms and performance assessment
d.
legal definitions
e.
analysis of competitive quotations
Chapter 3 — Purchasing Policy and Procedures