Chapter 5 — Purchasing and Supply Management Organization
True / False
1. Center-led organizations have the same total authority that purely centralized units do.
a.
True
b.
False
False
Easy
Analytic
2. If the CPO at corporate headquarters has the authority for the majority of the organization’s purchases, then the
organization maintains a decentralized authority structure.
a.
True
b.
False
False
Easy
Analytic
3. Regarding the continuum of complete centralization and complete decentralization of purchasing authority, few
organizations lie at these polar extremes, and most organizations lie somewhere toward one end or the other.
a.
True
b.
False
True
Moderate
Analytic
4. Today’s version of decentralized purchasing should emphasize support, integration, and coordination of different tasks
that are common across a business rather than strict control over all the activities within the purchasing process.
a.
True
b.
False
False
Easy
Analytic
5. The challenge today for location of authority is to know which activities, processes, and tasks to control or coordinate
centrally and which to assign to operating units.
a.
True
b.
False
Chapter 5 — Purchasing and Supply Management Organization
True
Easy
Analytic
6. If the organization’s strategy is to be responsive to individual customers in different markets, then a more centralized
approach is likely.
a.
True
b.
False
False
Easy
Analytic
7. If purchases are very different across business units, an argument could be made for decentralization.
a.
True
b.
False
True
Easy
Analytic
8. The mission of a decentralized purchasing structure is to facilitate the consolidation of similar buying requirements and
standardize buying processes at the various facilities.
a.
True
b.
False
False
Easy
Analytic
9. Spend analysis involves using systems software to identify items purchased in common among divisions or business
units.
a.
True
b.
False
10. A reason for decentralization is a reduction in duplication of effort.
a.
True
b.
False
False
Easy
Analytic
11. Purchasing is becoming more of a tactical function and less of a strategic function.
a.
True
b.
False
False
Easy
Analytic
12. If each division or unit is responsible for developing its own e-purchasing system or data gathering and part-
numbering system, the result will be a compatible purchasing system.
a.
True
b.
False
False
Moderate
Analytic
13. Purchasing personnel cannot become experts in all categories of spend, especially as the purchasing function becomes
more complex and sophisticated.
a.
True
b.
False
True
Moderate
Analytic
14. The ability to respond quickly to user and customer requirements has always been a major justification for centralized
purchasing authority.
a.
True
b.
False
False
Easy
15. Decentralized purchasing personnel should gain a greater understanding and appreciation of local operating
requirements.
a.
True
b.
False
True
Easy
Analytic
16. In organizations where new product development occurs at the divisional or business unit level, a centralized
purchasing structure can support new product development at earlier stages.
a.
True
b.
False
False
Easy
Analytic
17. The advantage of center-led organizations is their ability to garner savings on common purchases yet allow local
purchasing decisions on unique items.
a.
True
b.
False
True
Easy
Analytic
18. Regional buying groups are most advantageous where geographic concentration exists within a company.
a.
True
b.
False
True
Moderate
Analytic
19. A consortium is a voluntary group where buyers are in the same industry and conduct business with many of the same
suppliers.
a.
True
b.
False
Analytic
Chapter 5 — Purchasing and Supply Management Organization
20. In general, the lower purchasing is in the corporate structure, the greater the role it plays in supporting organizational
objectives.
a.
True
b.
False
False
Easy
Analytic
21. Perhaps the least important factor contributing to purchasing’s position in the organizational hierarchy is history.
a.
True
b.
False
False
Easy
Analytic
22. The preparation and transfer of material releases to suppliers is part of the operational support process.
a.
True
b.
False
23. Few of the tasks that qualify as operational support are being streamlined or automated, especially with the advent of
e-purchasing systems.
a.
True
b.
False
False
Easy
Analytic
24. The actual expediting process frequently provides new value within the purchasing process.
Chapter 5 — Purchasing and Supply Management Organization
a.
True
b.
False
False
Easy
Analytic
25. Progressive organizations recognize that a need for expeditors indicates that suppliers are performing as required, or
that suppliers are receiving realistic or stable material release schedules.
a.
True
b.
False
False
Easy
Analytic
26. Increasingly, purchasing is becoming more involved with expediting and inventory control.
a.
True
b.
False
27. Transportation is a highly specialized activity with its own set of requirements.
a.
True
b.
False
28. Purchasing never analyzes whether a new or existing purchase requirement should be internally or externally sourced.
a.
True
b.
False
False
Easy
Analytic
29. The objective of value analysis is to enhance value by reducing the cost of a good or service without sacrificing
quality, enhancing functionality without increasing cost, or providing greater functionality to the user above and beyond
any increase in cost.
a.
True
b.
False
Moderate
Analytic
30. Detailed short- and long-term purchasing plans are required for items subject to technological, economic, or political
change.
a.
True
b.
False
True
Easy
Analytic
31. Supply management is a progressive approach to managing the supply base that relies primarily on a traditional arm’s–
length or adversarial approach with sellers.
a.
True
b.
False
32. Managing day-to-day supply management operations is substantially the same as managing longer-term
responsibilities.
a.
True
b.
False
False
Easy
Analytic
33. Strategic responsibilities lack the immediacy of tactical duties and, as a result, are often ignored.
a.
True
b.
False
True
Moderate
34. Separation of supply management duties into strategic and tactical job assignments means that strategic
responsibilities are more important.
a.
True
b.
False
False
Moderate
Analytic
35. Separation of supply management duties into strategic and tactical job assignments means that tactical responsibilities
are more important.
a.
True
b.
False
False
Moderate
Analytic
36. The skills required for a strategic focus are the same as those required for an operational focus.
a.
True
b.
False
False
Easy
Analytic
37. Not all observers agree that the use of teams is a guarantee of greater effectiveness.
a.
True
b.
False
True
Easy
Analytic
38. Organizations that rely on part-time teams typically do not maintain their existing functional structure while adding
additional team-related duties.
a.
True
Analytic
Chapter 5 — Purchasing and Supply Management Organization
b.
False
False
Easy
Analytic
39. Many recognition and reward systems today encourage members not to participate on teams.
a.
True
b.
False
40. Participation on a team may present a personal risk and create conflict once members realize that supporting a team
takes time away from activities that are recognized and rewarded.
a.
True
b.
False
True
Easy
Analytic
41. The trend today is to move away from a horizontal focus, where work and information are managed across groups and
between organizations, toward a vertical focus, where work and information are managed up and down within functional
groups.
a.
True
b.
False
False
Easy
Analytic
42. The supply chain organization of the future will rely much more on hierarchical and functional boundaries.
a.
True
b.
False
False
Easy
Analytic
Chapter 5 — Purchasing and Supply Management Organization
Multiple Choice
43. _____ refers to the process of assessing and selecting the structure and formal system of communication, division of
labor, coordination, control, authority, and responsibility required to achieve organizational goals and objectives,
including supply management objectives.
a.
Cross-functional teaming
b.
Reciprocity
c.
Organizational design
d.
Purchasing authority
e.
Supply chain integration
44. If purchasing authority for the majority of purchase expenditures is at the divisional, business unit, or site level, then a
firm has a more _____ structure.
a.
center-led
b.
centralized
c.
globalized
d.
decentralized
e.
Organizational structure has no relationship with the location of purchasing authority.
Easy
Analytic
45. A/An _____ organizational structure combines a centralized approach for purchased items common to several
business units and a decentralized approach to unique requirements.
a.
centralized
b.
focused
c.
decentralized
d.
outsourcing
e.
center-led
46. Which of the following is not one of the factors to be considered when implementing an organization’s supply
structure?
a.
The firm’s overall business strategy.
Chapter 5 — Purchasing and Supply Management Organization
b.
What foreign competitors are doing.
c.
The similarity of purchases.
d.
Total purchase dollar expenditures.
e.
The overall philosophy of management.
Moderate
Analytic
47. Which of the following is not an advantage of centralized or center-led purchasing structures?
a.
Enhanced product development support at the business unit level.
b.
Leverage purchase volumes.
c.
Coordination of purchasing strategies and plans.
d.
Development of specialized expertise.
e.
Reduced duplication of purchasing effort.
Moderate
Analytic
48. All of the following are advantages of decentralized purchasing except _____.
a.
ownership of decisions affecting purchases
b.
understanding unique operational requirements
c.
speed and responsiveness
d.
reduced duplication of purchasing effort
e.
new-product development support
Easy
Analytic
49. _____ refers to the assumption that local personnel understand and support the objectives of the business unit or
division and feel a personal commitment to a particular operation.
a.
Centralization of purchasing authority
b.
Hybrid structure
c.
Correlation
d.
Specialization
e.
Ownership
50. Which of the following is not a common organizational mechanism to enable center-led organization design?
a.
Lead division buying.
b.
Restricted use of procurement cards.
c.
Regional buying council.
d.
Global sourcing council.
e.
Consortiums and group purchasing organizations.
51. In the use of [a] _____, a group of operating units buys common items, typically because they produce common
products.
a.
procurement cards
b.
regional buying council
c.
global sourcing council
d.
lead division buying
e.
corporate purchasing council
52. When a key commodity is purchased by many major business units, use of [a] _____ is beneficial.
a.
joint global strategy
b.
purchasing cards
c.
decentralized purchasing structure
d.
corporate purchasing council
e.
lead division buying
53. Use of a _____ is most advantageous where geographic concentration exists within a company.
a.
regional buying group
b.
business unit leader
c.
corporate purchasing council
d.
corporate steering committee
Chapter 5 — Purchasing and Supply Management Organization
e.
None of the above.
Easy
Analytic
54. [A] _____ is comprised of group of buyers who purchase similar items at various facilities.
a.
decentralized purchasing structure
b.
lead division buying
c.
corporate purchasing council
d.
corporate steering committee
e.
There is no such group.
55. [A] _____ is similar to [a] _____ except that they tend to be more advisory in nature.
a.
strategic sourcing group….lead division buying
b.
corporate steering committee….lead division buying
c.
lead division buying….corporate steering committee
d.
corporate steering committee….corporate purchasing council
e.
There is no difference between the two entities.
Moderate
Analytic
56. A _____ is a voluntary group where buyers are in the same industry and conduct business with many of the same
suppliers.
a.
group purchasing organization
b.
consortium
c.
lead division buying group
d.
global sourcing council
e.
strategic sourcing group
57. All of the following are factors affecting purchasing’s position in the organizational hierarchy except _____.
Chapter 5 — Purchasing and Supply Management Organization
a.
history
b.
type of industry
c.
total spend on goods and services
d.
the founder’s philosophy
e.
the number of decentralized purchasing personnel
Easy
Analytic
58. In rapidly changing industries or those where purchased goods and services comprise a _____ portion of product or
service costs, management usually recognizes the need to place purchasing in a _____ position in the organizational
hierarchy.
a.
smaller….higher
b.
larger….lower
c.
larger….higher
d.
median….lower
e.
There is no relationship between the level of purchases and the placement of purchasing in the organizational
hierarchy.
Moderate
Analytic
59. All of the following are major areas of the scope of purchasing and supply management jobs in larger organizations
except _____.
a.
material handling
b.
sourcing, negotiation, and contract management
c.
market intelligence and research
d.
operational support and follow-up
e.
administration and data management
60. The _____ task involves identifying company spend and matching to the best potential suppliers, negotiating with
selected suppliers, and finally managing the contract.
a.
market intelligence and research
b.
operational support and follow-up
c.
administration and data management
d.
sourcing, negotiation, and contract management
Chapter 5 — Purchasing and Supply Management Organization
e.
material handling
61. _____ involves a systematic monitoring of the supply environment to assure a continual economic supply of goods
and services.
a.
Operational support and follow-up
b.
Market intelligence
c.
Administration and data management
d.
Material handling
e.
Sourcing, negotiation, and contract management
62. The _____ group includes the activities supporting the day-to-day operations of the purchasing or materials function.
a.
material handling
b.
market intelligence and research
c.
administration and data management
d.
operational support and follow-up
e.
sourcing, negotiation, and contract management
63. The _____ group is responsible for developing the policies and procedures that purchasing personnel follow,
administering and maintaining the purchasing information system and database, determining required staffing levels,
developing department plans, organizing training and seminars for buyers, and developing measurement systems to
evaluate purchasing performance.
a.
administration and data management
b.
tactical buying
c.
sourcing, negotiation, and contract management
d.
operational support and follow-up
e.
market intelligence and research
64. By definition, _____ is a broad term describing the purchase of raw materials, components, finished goods, or services
from suppliers, some of whom can be another operating unit within the organization.
a.
expediting
b.
negotiating
c.
insourcing
d.
value analysis
e.
buying
65. _____ is the process of personally or electronically contacting suppliers to determine the status of past-due or near-
past-due shipments.
a.
Buying
b.
Negotiating
c.
Outsourcing
d.
Expediting
e.
Insourcing
66. The _____ function monitors the day-to-day management of purchased and in-process inventory at each using
location.
a.
inventory control
b.
buying
c.
material handling
d.
expediting
e.
transportation
67. _____ is the organized study of an item’s function as it relates to value and cost.
a.
Buying
b.
Purchasing intelligence
c.
New product development
Chapter 5 — Purchasing and Supply Management Organization
d.
Inventory control
e.
Value analysis
68. All of the following should be included in detailed short- and long-term purchasing plans except _____.
a.
historical and projected future usage of the purchased item
b.
purchase objectives
c.
assignment of the proper cost accounting code
d.
assessment of the supply market
e.
cost/price analysis
69. Which of the following is an example of an operational activity?
a.
Manage relationships with critical suppliers.
b.
Generate and forward material releases and expedite.
c.
Develop electronic purchasing systems.
d.
Negotiate company-wide supply contracts.
e.
Manage critical commodities.
70. Which of the following is an example of a strategic activity?
a.
Manage transactions with suppliers.
b.
Source items that are unique to the operating unit.
c.
Manage risk monitoring programs.
d.
Generate and forward material releases and expedite.
e.
Provide supplier performance feedback.
71. Used under the right conditions, teams provide all of the following benefits to organizations except _____.
a.
synergies gained from a wider range of knowledge through collaboration
b.
guaranteed success when using a team
c.
better decision making
d.
creation of a more involved workforce
e.
facilitation of improved products and services
Moderate
Analytic
72. Which of the following is not one of the hurdles that can affect how well an organization uses teams?
a.
Many organizations form teams using functional group employees as part-time members.
b.
There are increased requirements for the use of social networks.
c.
Many organizations fail to recognize and reward the effort team members put forth towards their assignments.
d.
It is not the nature of our individualistic national culture, except perhaps for sporting events, to be group or
team focused.
e.
All of the above are hurdles that affect how well an organization uses teams.
Moderate
Analytic
73. Which of the following is not one of the broad features of the ideal future procurement organizational model?
a.
A flatter hierarchy for faster decision making and freer flow of ideas along with joint ventures and alliances
with key supply chain members.
b.
Requirement of having cost accounting personnel present on all cross-functional teams.
c.
Increased use of center-led structures that enable consolidation of common purchases coupled with
decentralization of unique and transactional buying activities.
d.
Co-location of purchasing personnel with internal customers that will provide lower costs and improved
service.
e.
Rotation of business managers across business units and functional groups.
Moderate
Analytic