21) Which of these is an indirect cost associated with insourcing?
A) maintenance
B) purchasing
C) receiving
D) quality control
22) A supplier that has previously demonstrated its performance capabilities through purchase
contracts may well receive:
A) maverick status.
B) a request for description.
C) preferred supplier status.
D) a request for proposal.
23) A company using portfolio analysis correctly decides to streamline the purchasing process
for a few items by use of EDI and automated requisitions to the greatest extent possible. The
quadrant that these items fall in is most probably the:
A) bottleneck quadrant.
B) critical quadrant.
C) leverage quadrant.
D) routine quadrant.
24) Competitive bidding, active sourcing, and using industry standards are all actions that are
appropriate if the sourcing strategy is to:
A) form partnerships with suppliers.
B) maximize commercial advantage.
C) simplify the acquisition process.
D) ensure supply continuity.
25) When compared with single sourcing, multiple sourcing has the advantage of:
A) spreading risk.
B) volume leveraging.
C) lower transportation costs.
D) reduced quality variability.
26) Single sourcing is a better choice than multiple sourcing from the perspective of:
A) increased competition.
B) ensuring that a supplier will not become complacent.
C) spreading risk.
D) gaining access to the supplier’s design and engineering capabilities.
27) A sourcing strategy in which two suppliers are used for the same purchased product or
service is:
A) cross sourcing.
B) dual sourcing.
C) contingency sourcing.
D) multisourcing.
28) This table contains the performance criteria and scores (larger numbers are better) for four
potential suppliers to Kramerica Industries. Evaluate the data and identify the BEST source for
Kramerica.
Performance Dimension
Company A
Company B
Company C
Company D
Quality (W = 0.4)
3
4
2
5
Cost (W = 0.3)
4
3
5
3
Flexibility (W = 0.2)
5
3
4
2
Speed (W = 0.1)
2
5
5
4
A) Company A
B) Company B
C) Company C
D) Company D
29) 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 D
Company G
Purity (W = 0.5)
5
4
2
5
Cost (W = 0.2)
4
3
5
2
Stability (W = 0.2)
2
1
4
5
Speed (W = 0.1)
3
5
5
2
A) Company W
B) Company P
C) Company G
D) Company D
30) 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
Quality (W=0.5)
4
4
2
Cost (W=0.4)
4
3
5
Speed (W=0.1)
2
2
4
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.
31) 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.
32) 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.
33) The purchasing team occasionally examined its spending patterns to identify irregularities as
part of a(n) ________.
34) ________ 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.
35) ________ is the name for a technique requiring a company to identify and determine all of
the major costs associated with different sourcing possibilities.
36) The bulk of insourcing costs are usually ________ costs.
37) 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 ________.
38) A company using portfolio analysis decides to form partnerships with suppliers; the products
in question probably fall in the ________ quadrant.
39) 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
________.
40) Among the disadvantages of ________ are that different product attributes with varying
qualities may be produced and that it can actually result in reduced supplier loyalty over time.
41) ________ is a purchasing description method that focuses attention on the outcomes the
customer wants.
42) Perhaps the best way for standard items is ________ which is a description method that is
applicable when the requirements are well understood.
43) 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..
44) Define outsourcing and discuss its advantages and disadvantages.
45) What is sourcing portfolio analysis? Discuss the model and the strategies and tactics
associated with each quadrant.
46) What are the four sourcing strategies, how do they work, and what are the advantages of
each?
47) 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 D
Company G
Purity (W = 0.5)
5
4
2
5
Cost (W = 0.2)
4
3
5
2
Stability (W = 0.2)
2
1
4
5
Speed (W = 0.1)
3
5
5
2
48) 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 S
Company P
Innovation (W = 0.4)
4
4
2
5
Cost (W = 0.3)
4
3
5
2
Stability (W = 0.2)
2
1
4
5
Speed (W = 0.1)
3
5
5
2
49) 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. 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
Learning Objective 7-3
1) Money is automatically drawn from the buyer’s account and deposited into the supplier’s
account in an electronic funds transfer (EFT).
2) 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.
3) Authorization to a supplier to deliver a product, known as a(n) ________, increasingly takes
the form of a 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?
Learning Objective 7-4
1) A recent trend in supply management is a move towards a more sustainable supply chain.
2) A recent survey of executives at Global 1000 companies uncovered what fear?
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
3) Which of these factors is most likely to increase the risk of a missed shipment, communication
problem, or human error?
A) supply base reduction
B) global outsourcing
C) multicriteria decision models
D) electronic data interchange
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.