21) This table contains a list of three companies that have been rated on four weighted performance
dimensions (larger numbers are better). Which of the following statements regarding this information is
BEST?
Performance Dimension
Strickland
Thatherton
Mega-Low
Amerigas
Quality (W=0.5)
4
4
2
4
Cost (W=0.4)
4
3
5
3
Speed (W=0.1)
2
2
4
5
A) Thatherton is superior to Amerigas.
B) Amerigas is superior to Strickland.
C) Mega-Low is superior to Thatherton.
D) Strickland is superior to Mega-Low.
22) A description method used when a product or service is proprietary or when there is a perceived
advantage to using a particular supplier’s product or services is:
A) description by market grade.
B) description by brand.
C) description by specification.
D) description by performance characteristics.
23) The two basic types of purchasing contracts are:
A) fixed-price and cost-based.
B) bid-rigged and cost-plus.
C) cost-zero and fixed-variable.
D) fixed-quantity and variable-cost.
24) The first step of the purchasing process is to select the supplier.
25) Maverick spending is often promoted by top management as a way to improve the bottom line and
break out of a purchasing cycle.
26) A manufacturer seeking to reduce the variability of the quality of purchased products should use
multiple sourcing.
27) A manufacturer that wants to make sure that suppliers do not become complacent should use
multiple sourcing.
28) Cross sourcing is a strategy in which two suppliers are used for the same purchased product or
service.
29) Portfolio analysis begins with assignment to a quadrant before a sourcing strategy is formulated.
30) A company that uses portfolio analysis would probably classify things like office supplies in the
Bottleneck quadrant.
31) Outsourcing can be risky because it decreases the firm’s strategic flexibility.
32) Total cost analysis divides costs into direct (costs that are tied to the level of operations or supply
chain activities) and indirect (costs that are not tied to the level of operations or supply chain activity).
33) The weighted-point evaluation system allows for a completely objective decision to be made.
34) The request for quotation is a formal request for suppliers to deliver a product or service that includes
key terms and conditions, such as price, delivery, and quality requirements.
35) In the description of the purchasing process, the product should be described only by brand or
specification.
36) When a supplier does not exist, competitive bidding and negotiation are two methods commonly
used for final supplier selection.
37) In a cost-based contract, the stated price does not change, regardless of fluctuations in the general
overall economic conditions.
38) Use of EDI in the supply chain has led to shorter lead times and lower inventory.
39) A company that regularly outsources goods and services may have established close relationships
with their suppliers and therefore will allow these suppliers the first opportunity to bid for new business
needs. These suppliers are known as ________.
40) ________ are high-level, often strategic decisions regarding which products or services will be
provided internally and which will be provided by external supply chain members.
41) Use of a single supplier for a part or service in part of the business and another supplier with the same
capability for a different part or service in another area of the business is known as ________.
42) Among the disadvantages of ________ are that different product attributes with varying qualities may
be produced which can actually result in reduced supplier loyalty over time.
43) The purchasing team occasionally examined its spending patterns to identify irregularities as part of
a(n) ________.
44) A company using portfolio analysis decides to form partnerships with suppliers; the products in
question probably fall in the ________ quadrant.
45) The bulk of insourcing costs are usually ________ costs.
46) ________ is the name for a process requiring a company to identify and determine all of the major
costs associated with different sourcing possibilities.
47) ________ is a purchasing description method that focuses attention on the outcomes the customer
wants.
48) Perhaps the best way to describe standard items is to use ________ which is a description method that
is applicable when the requirements are well understood.
49) Horace Smithfield, Esq., was insistent that he pay a flat rate of $10,000,000 and not a penny more to
transfer his inheritance through your checking account so he could move vast sums of cash out of his
country. Sure, he had fallen out of favor with the government and the economy in his country was in a
dire situation, but a deal was a deal and $10,000,000 was all he could afford to pay. This type of purchase
contract was to be a(n) ________ if you would kindly provide your account information.
50) What are the four sourcing strategies, how do they work, and what are the advantages of each?
51) What are the advantages and disadvantages of insourcing and outsourcing?
52) Briefly describe the objective of spend analysis and the general requirements for accomplishing it.
53) What is sourcing portfolio analysis? Discuss the model and the strategies and tactics associated with
each quadrant.
54) What is portfolio analysis and how is it accomplished? Provide an example of a purchased product or
service that would fall in each area for a university applying portfolio analysis.
55) Define outsourcing and discuss its advantages and disadvantages.
56) The deans’ suite hoped to cut costs and decided to perform a total cost analysis on its tequila supplier.
Consumption was currently 10,000 bottles per semester and this was predicted to maintain that level for
the next few years. Their current source, Byron‘s, charged $15.50 per bottle and packed 300 bottles in a
crate. The cost to ship the crate was $15. Another potential source of tequilas was Pancho’s, who charged
$14.75 per bottle but could ship only 100 bottles in a crate and at a higher price, $75. Assume that a partial
crate may be purchased. Conduct a total cost analysis and make a recommendation.
57) The deans’ suite hoped to cut costs and decided to perform a total cost analysis on its tequila supplier.
Consumption was currently 10,000 bottles per semester and this was predicted to maintain that level for
the next few years. Their current source, Byron’s, charged $15.50 per bottle and packed 300 bottles in a
crate. The cost to ship the crate was $15. Another potential source of tequilas was Pancho’s, who charged
$14.75 per bottle but could ship only 100 bottles in a crate and at a higher price, $75. Assume that a partial
crate may be purchased. By how much does Byron need to lower its per bottle price to reduce their total
cost to that of Pancho?
58) This table contains the performance criteria and scores (larger numbers are better) for four potential
suppliers to Los Pollos Hermanos. Evaluate the data and identify the BEST source for Los Pollos
Hermanos.
Performance Dimension
Company W
Company P
Company G
Purity (W = 0.5)
5
4
5
Cost (W = 0.2)
4
3
2
Stability (W = 0.2)
2
1
5
Speed (W = 0.1)
3
5
2
59) This table contains the performance criteria and scores (larger numbers are better) for four potential
suppliers to Satriale’s Pork Store. Evaluate the data and identify the BEST source for Satriale’s. Consider
the two runners-up to the best source and what points of negotiation might lead them to becoming the
optimal supplier.
Performance Dimension
Company T
Company C
Company P
Innovation (W = 0.4)
4
4
5
Cost (W = 0.3)
4
3
2
Stability (W = 0.2)
2
1
5
Speed (W = 0.1)
3
5
2
60) The entire plant needs a fresh coat of paint so you, as the operations manager, are charged with
securing a painting contract to accomplish this. You locate four painting contractors and ask them for
their performance on four criteria. Their responses, along with your minimum standards and the
importance you place on each criterion, is shown in the table. Note that strongly positive references are 9
or better on a ten-point scale and positive references are 7 up to 9 on a ten-point scale. Assign scores from
1 to 5 where 1 is terrible and 5 is excellent, for each contractor’s performance on each criterion and
determine who should be awarded the contract. Write a brief explanation for all the 1s and 5s you assign.
Contractor
Cost
20%
Paint Time
25%
Experience
20%
References
20%
Paint Quality
15%
1
$22,000
5 days
15 years
Positive
20 year
2
$20,000
4 days
10 years
Strongly
positive
Lifetime
3
$25,000
8 days
3 years
Positive
25 year
4
$22,500
5 days
25 years
Strongly
positive
20 year
Minimum
Standard
Less than
$25,000
Less than 1
week
5 years in
business
No negative
references out
of three
15 year
guarantee
7.3 The Procure-to-Pay Cycle
1) Terms and conditions for a purchased service that indicate what services will be performed and how
the service provider will be evaluated is called a:
A) request for quotation.
B) bid specification.
C) preferred supplier contract.
D) statement of work.
2) Money is automatically drawn from the buyer‘s account and deposited into the supplier’s account in an
electronic funds transfer (EFT).
3) Authorization to a supplier to deliver a product is done through a(n) ________, and released using the
form of technology known as ________.
4) Business partners that transfer payments between banks using an information system are using
________.
5) What takes place in each step in the procure–to-pay cycle and which step is most critical?
7.4 Trends in Supply Management
1) A recent survey of executives at Global 1000 companies uncovered what single biggest threat?
A) the fear of a supply chain disruption
B) the fear of the unknown
C) the fear of improperly weighting performance dimensions
D) the fear of misclassifying direct and indirect costs
2) Which of these factors is most likely to increase the risk of a missed shipment, communication
problem, or human error?
A) supply base alienation
B) global outsourcing
C) multicriteria decision models
D) electronic data interchange
3) A recent trend in supply management is a move towards a more sustainable supply chain.
4) Top executives name ________ as a significant threat to their companies’ revenue streams.
5) Identify the major trends in supply management and their impact from a strategic perspective.