Chapter 7 — Supplier Evaluation and Selection
True / False
1. Most purchasing experts will agree that there is only one best way to evaluate and select suppliers.
a.
True
b.
False
False
Easy
Analytic
2. The degree of effort associated with supplier selection is inversely related to the importance of the required
good or service.
a.
True
b.
False
False
Easy
Analytic
3. Progressive purchasing groups increasingly anticipate rather than react to supplier selection needs.
a.
True
b.
False
True
Easy
Analytic
4. The complexity and value of a required purchase does not influence the extent to which a buyer evaluates
potential supply sources.
a.
True
b.
False
False
Easy
Analytic
5. A major source of information on potential supply sources comes from current or existing suppliers.
a.
True
b.
False
True
Easy
6. Using existing suppliers, because it is easier and quicker, is always the best long-term approach.
a.
True
b.
False
False
Easy
Analytic
7. Designation as a preferred supplier means that a supplier consistently satisfies the performance and service
standards defined by the buyer and responds to unexpected changes.
a.
True
b.
False
True
Easy
Analytic
8. Databases allow the purchaser to quickly identify suppliers potentially qualified to support a requirement and
may contain information on current products, the supplier’s future technology roadmap, process capability
ratios, and past performance.
a.
True
b.
False
True
Moderate
Analytic
9. One argument against rotating buyers too frequently between product lines or types of purchases is that a
buyer may lose the expertise built up over the years.
a.
True
b.
False
True
Easy
Analytic
10. Suppliers seldom use trade journals to advertise their products or services.
Analytic
Chapter 7 — Supplier Evaluation and Selection
a.
True
b.
False
False
Easy
Analytic
11. Trade shows are seldom an ineffective way to gain exposure to a large number of suppliers at one time.
a.
True
b.
False
False
Easy
Analytic
12. Today, buyers seldom use the Internet to help locate potential sources that might qualify for further
evaluation.
a.
True
b.
False
False
Easy
Analytic
13. The popularity of JIT and quick replenishment systems favor using fewer local suppliers.
a.
True
b.
False
False
Moderate
Analytic
14. Supplier size does become a factor when one firm decides to leverage its purchases from one or a few
suppliers.
a.
True
b.
False
True
Easy
Analytic
15. A buying firm frequently wants the seller to become more dependent on its business.
a.
True
b.
False
False
Easy
Analytic
16. Purchasing from competitors may limit information sharing between the parties.
a.
True
b.
False
True
Easy
Analytic
17. Supply departments that are building diversity into their supply base are likely to deal with a decreased
number of small suppliers.
a.
True
b.
False
False
Easy
Analytic
18. Local suppliers are less responsive to the buying firm’s changing needs and cannot economically make
frequent smaller deliveries.
a.
True
b.
False
False
Easy
Analytic
19. Many purchasers prefer to focus on suppliers who have the “capability to do the job” regardless of size.
a.
True
b.
False
True
Easy
20. Purchasers always want to select suppliers who are profitable and growing.
a.
True
b.
False
True
Easy
Analytic
21. Certain suppliers who may present the lowest cost seldom present greater risks.
a.
True
b.
False
False
Easy
Analytic
22. Traditional purchasers understand the risk/reward tradeoff and are prepared to manage it better to attain
overall lower costs.
a.
True
b.
False
False
Moderate
Analytic
23. An in-depth evaluation of all potential supply sources should be conducted for every purchase.
a.
True
b.
False
False
Easy
Analytic
24. Purchasers often perform a first cut or preliminary evaluation of potential suppliers to narrow the list before
conducting an in-depth formal evaluation.
a.
True
b.
False
Analytic
Chapter 7 — Supplier Evaluation and Selection
True
Easy
Analytic
25. Most purchasers fail to perform at least a cursory financial analysis of prospective suppliers.
a.
True
b.
False
False
Easy
Analytic
26. Before committing time to evaluate a supplier in depth, suppliers should satisfy certain entry qualifiers.
a.
True
b.
False
True
Easy
Analytic
27. Buyers seldom receive and evaluate detailed information directly from potential suppliers for the purpose of
awarding a purchase contract.
a.
True
b.
False
False
Easy
Analytic
28. Although many sources exist to discover information about a potential supplier, visiting the actual facility
provides the most complete way to ensure an accurate assessment of the supplier.
a.
True
b.
False
True
Moderate
Analytic
29. Supplier site visits are relatively inexpensive and require minimal buyer time in travel and information
Chapter 7 — Supplier Evaluation and Selection
collection.
a.
True
b.
False
False
Easy
Analytic
30. Due to resource constraints, the use of teams for supplier evaluation and selection is decreasing.
a.
True
b.
False
False
Easy
Analytic
31. Using third-party information can be a timely and effective way to gain insight into potential suppliers.
a.
True
b.
False
True
Easy
Analytic
32. The selection criteria used in a high-technology purchase will be the same as those used for a distributor.
a.
True
b.
False
False
Easy
Analytic
33. Many suppliers do not have a sophisticated cost accounting system and are unable to assign overhead costs
to products or processes.
a.
True
b.
False
True
Moderate
Analytic
34. As some suppliers view cost data as highly proprietary, buyers will often develop reverse pricing models
that provide estimates of the supplier’s cost structure during the initial supplier evaluation.
a.
True
b.
False
True
Moderate
Analytic
35. Few purchasers expect potential suppliers to have adopted quality systems based on MBNQA or ISO 9000
criteria.
a.
True
b.
False
False
Easy
Analytic
36. The supplier’s selection of a production process does little to define its required technology, human resource
skills, and capital equipment requirements.
a.
True
b.
False
False
Easy
Analytic
37. Sustainable carbon footprint reductions should be measured at product suppliers but not at service suppliers.
a.
True
b.
False
False
Easy
Analytic
38. Professional purchasers should become familiar with financial ratios because they can provide quick and
valuable insights into a supplier’s financial health.
a.
True
b.
False
Chapter 7 — Supplier Evaluation and Selection
True
Easy
Analytic
39. A supplier’s willingness to move beyond a traditional purchasing relationship should be part of the
evaluation process for items and services where a longer-term relationship might be beneficial.
a.
True
b.
False
True
Easy
Analytic
40. In supplier evaluation, reliability refers to the different individuals or groups reviewing the same items and
measurement scales will arrive at the same conclusion.
a.
True
b.
False
True
Easy
41. The format of a supplier evaluation should not provide any flexibility across different types of purchase
requirements.
a.
True
b.
False
False
Easy
Analytic
42. A well-defined supplier evaluation scoring systems takes criteria that may be highly subjective and develops
a quantitative scale for measurement.
a.
True
b.
False
True
Easy
Analytic
43. Purchasers should set minimum acceptable performance requirements for a supplier to meet before they
become part of the supply base.
a.
True
b.
False
True
Easy
Analytic
44. Most purchase contracts address areas that are similar.
a.
True
b.
False
True
Easy
Analytic
45. Progressive supply managers work with their legal group to develop pre-established contract language that
can be cut and pasted during a supplier negotiation.
a.
True
b.
False
True
Easy
Analytic
46. Progressive firms are working to increase the length of their purchase contracts.
a.
True
b.
False
False
Easy
Analytic
Multiple Choice
47. Which of the following is not a commonly accepted source of information regarding potential supply
sources?
a.
Current suppliers.
b.
Sales representatives.
Chapter 7 — Supplier Evaluation and Selection
c.
Television advertising.
d.
Organizational knowledge.
e.
Second-party or indirect information.
48. Which of the following information is not generally maintained in a supplier informational database?
a.
Current products.
b.
Supplier’s future technology roadmap.
c.
Process capability ratios.
d.
Advertising campaign information.
e.
Past performance.
49. The _____ buys from the OEM and resells, therefore incurring a transaction cost, and it must make a profit.
a.
vendo
b.
customer
c.
preferred supplier
d.
single source supplier
e.
distributor
50. _____ is a program that distributors market to manage their customers’ inventory for them.
a.
Just-in-time
b.
Supplier managed inventory
c.
Self-managed inventory
d.
Countertrade
e.
Preferred supplier inventory
51. Which of the following is not one of the criteria used to determine whether to buy direct vs. using a
distributor?
a.
Size of the purchase.
b.
Manufacturer’s policies regarding direct sales.
c.
Storage space available at the purchaser’s facility.
d.
Distance between the manufacturer and the distributor.
e.
Extent of services required.
52. _____ are more responsive to the buying firm’s changing needs and can economically make frequent smaller
deliveries.
a.
Local suppliers
b.
International suppliers
c.
Global suppliers
d.
National suppliers
e.
There is no relationship with the location of the supplier and customer responsiveness.
53. Although _____ provides optimum leverage and power over the supplier, _____ provides improved
assurance of supply.
a.
multiple sourcing….single sourcing
b.
single sourcing….multiple sourcing
c.
sole sourcing….single sourcing
d.
multiple sourcing….sole sourcing
e.
There is no difference in the number of suppliers for these benefits.
54. A _____ is one that consistently satisfies the performance and service standards defined by the buyer and
Chapter 7 — Supplier Evaluation and Selection
responds to unexpected changes.
a.
certified supplier
b.
sole source supplier
c.
partnered supplier
d.
preferred supplier
e.
disqualified supplier.
55. A _____ has had its quality systems extensively audited by the buying firm and are capable of consistently
meeting or exceeding the buyer’s quality needs.
a.
certified supplier
b.
disqualified supplier
c.
single source supplier
d.
partnered supplier
e.
None of the above.
56. A _____ is limited to a select group of suppliers who provide critical high value items to the firm.
a.
disqualified supplier
b.
sole source supplier
c.
preferred supplier
d.
single source supplier
e.
partnered supplier
57. A _____ is a supplier who no longer meets the buying organization’s standards and will not be considered
for future business until its problems are corrected.
a.
preferred supplier
b.
disqualified supplier
c.
certified supplier
d.
single source supplier
Chapter 7 — Supplier Evaluation and Selection
e.
sole source supplier
58. _____ is the process of identifying potential negative events, assessing the likelihood of their occurrence,
heading off these events before they occur or reducing the probability that they will occur, and making
contingency plans to mitigate the consequences if they do occur.
a.
Supplier selection
b.
Supplier evaluation
c.
Supplier categorization
d.
Global sourcing
e.
Risk management
59. _____ is defined as the continual monitoring of the strength of suppliers’ financial condition to ensure their
ability to meet the purchaser’s performance requirements for products or services.
a.
Operational risk management
b.
Sole sourcing
c.
Financial risk management
d.
Multiple sourcing
e.
None of the above.
60. _____ focuses on the continued ability of the supplier’s human, intellectual, and physical capital to meet the
buying firm’s requirements with respect to quality and delivery.
a.
Operational risk management
b.
Global sourcing
c.
Logistics risk management
d.
Total quality management
e.
Financial risk management
61. A/An _____ involves sending a preliminary survey to suppliers.
a.
request for quotation
b.
request for information
c.
purchase order
d.
order release
e.
All of the above.
62. A/An _____ is a basic component that suppliers must possess before they proceed to the next phase of the
evaluation and selection process.
a.
core competency
b.
technology roadmap
c.
Internet website
d.
entry qualifier
e.
triple bottom line
63. All of the following are examples of entry qualifiers that suppliers must possess before they proceed to the
next phase of the evaluation and selection process except _____.
a.
appropriate sales and marketing activities
b.
financial strength
c.
proven manufacturing or service capability
d.
capable and supportive management
e.
adequate facilities
64. Which of the following is not a method used to further evaluate and select suppliers once the initial
Chapter 7 — Supplier Evaluation and Selection
evaluation has taken place?
a.
Evaluation of supplier-provided information.
b.
Supplier visits.
c.
Use of preferred, certified, and partnered suppliers.
d.
Trade journals.
e.
External or third party information.
65. Which of the following is not an example of questions that should be asked when evaluating a supplier’s
management capability?
a.
Has management committed the supplier to TQM and continuous improvement?
b.
Is management customer focused?
c.
What is the willingness of employees to contribute to improved operations?
d.
Does management put a priority on supply chain management?
e.
What is the history of labor/management relations?
66. Which of the following is not an example of points that should be considered when evaluating a supplier’s
employee capabilities?
a.
The degree to which employees are committed to quality and continuous improvement.
b.
The overall skills and abilities of the workforce.
c.
Employee morale.
d.
Workforce turnover.
e.
Disclosure of environmental infractions.
67. All of the following are examples of commonly used environmental performance criteria except _____.
a.
disclosure of any environmental infractions
b.
attainment of ISO 9000 certification
c.
formal hazardous and toxic waste reduction programs exist
d.
programs to control or eliminate ozone-depleting substances
Chapter 7 — Supplier Evaluation and Selection
e.
attainment of ISO 14000 certification
68. Which of the following is not a risk of selecting a supplier in poor financial condition?
a.
The supplier is unwilling to share its technical expertise with the purchaser.
b.
The supplier will go out of business.
c.
The supplier may not have the resources to invest in plant, equipment, or research that is necessary
for longer-term technological or other performance improvements.
d.
The supplier may become too financially dependent on the purchaser.
e.
Financial weakness is usually an indication of other underlying problems.
69. Which of the following key financial ratios is calculated as Current assets/Current liabilities?
a.
Inventory turnover.
b.
Debt to equity.
c.
Current ratio.
d.
Total asset turnover.
e.
Quick ratio.
70. Which of the following key financial ratios is calculated as Profit after taxes/Sales?
a.
Current debt to equity.
b.
Fixed asset turnover.
c.
Return on assets.
d.
Says sales outstanding.
e.
Net profit margin.
71. Which of the following key financial ratios is calculated as Sales/Total assets?
a.
Fixed asset turnover.
b.
Total asset turnover.
c.
Current ratio.
d.
Return on assets.
e.
Interest coverage.
72. Which of the following is not an example of a question that should be asked when evaluating a supplier’s
production scheduling and control systems?
a.
Does the supplier use a requirements planning system as part of an ERP system to ensure the
availability of required components or meet service requests on a timely basis?
b.
What lead time does the supplier’s production scheduling and control system require?
c.
What is the supplier’s on-time delivery performance history?
d.
Does the supplier’s scheduling system support a purchaser’s delivery requirements?
e.
What safeguards are in place to protect the confidentiality of electronic transfers?
73. All of the following are examples of questions that should be asked when evaluating a supplier for longer-
term relationship potential except _____.
a.
Has the supplier indicated a willingness or commitment to a longer-term relationship?
b.
Will the supplier engage in joint problem solving and improvement efforts?
c.
What is the supplier’s on-time delivery performance?
d.
Is the supplier willing to come to us first with innovations?
e.
Is the corporate culture similar between the two parties?
74. All of the following are characteristics of an effective supplier survey except _____.
a.
the survey should include the performance categories considered important to the evaluation and
selection process
Chapter 7 — Supplier Evaluation and Selection
b.
the survey process should be as objective as possible
c.
it is mathematically straightforward
d.
the buyer should attempt to measure every possible variable every time it is used
e.
the format of the evaluation should provide some flexibility across different types of purchase
requirements
75. A/An _____ is a discrepancy, nonconformance, or missing requirement that will have a significant negative
impact on an important area of concern in an audit statement.
a.
deficiency
b.
performance problem
c.
entry qualifier
d.
unacceptable outcome
e.
challenge
76. A/An _____ is a minor departure from an intended level of performance, or a nonconformance that is easily
resolved and does not materially affect the required output.
a.
discrepancy
b.
problem
c.
defect
d.
unacceptable outcome
e.
deficiency
77. _____ involves the identification of the steps, activities, time, and costs involved within a process.
a.
Data warehousing
b.
Co-location
c.
Process mapping
d.
Supply base optimization
e.
TQM
Chapter 7 — Supplier Evaluation and Selection
78. A _____ is responsible for understanding in depth entire families or groups of purchased goods and services.
a.
third party
b.
general buyer
c.
preferred supplier
d.
long-term buyer-supplier relationship
e.
commodity team