CHAP 3: Purchasing and Supply management

1. The _____ is used to identify user requirements, evaluate the user needs effectively and efficiently,
identify suppliers who can meet that need, develop agreements with those suppliers, develop the
ordering mechanism, ensure payment occurs promptly, ascertain that the need was effectively met,
and drive continuous improvement.
a. demand management process
b. backdoor buying process
c. materials budgeting process
d. forecasting process
e. purchasing process
ANSWER: e

2. All of the following are objectives of a world-class purchasing organization except _____.
a. ensure that all hard copies of purchase orders and other paper documents are filed correctly in a
secure area
b. develop integrated supply strategies that support business goals and objectives
c. manage the sourcing process efficiently and effectively
d. supplier performance management
e. supply assurance
ANSWER: a

3. Failing to respond to the needs of internal customers will diminish the confidence these users have
in purchasing, and they may try to negotiate contracts themselves (a practice known as _____).
a. strategic sourcing
b. spend management
c. maverick buying
d. outsourcing
e. internal sourcing
ANSWER: c

4. One of the most important objectives of the purchasing function is the selection, development, and
maintenance of suppliers, a process that is sometimes described as _____.
a. supplier performance management
b. category management
c. customer service
d. procure-to-pay
e. maverick buying
ANSWER: a

5. Which of the following is not one of the objectives in supplier performance management?
a. Selecting suppliers that are competitive.
b. Identifying new suppliers that have the potential for excellent performance and developing closer
relationships with these suppliers.
c. Improving existing suppliers.
d. Developing new suppliers that are not competitive with current suppliers.
e. Ensuring timely and accurate payment of supplier invoices.
ANSWER: e

6. Effective supply market intelligence involves all of the following except _____.
a. updating supply markets and trends and translating their impacts on key business outcomes
b. ensuring that purchasing does not exceed its annual operating budget
c. identifying emerging materials and service technologies to support company strategies in key
performance areas
d. developing supply options and contingency plans to reduce risk
e. supporting the organization’s requirements for a diverse and globally competitive supply base
ANSWER: b

7. _____ is a situation that occurs when sellers seek to “go around” purchasing and instead directly
contact and attempt to sell directly to end users (stakeholders).
a. Insourcing
b. Bidding
c. Maverick buying and selling
d. Negotiating
e. Outsourcing
ANSWER: c
8. Which of the following is not one of the characteristics of a mature, well-developed supply
strategy?
a. A repeatable and well-defined process for building strategy and governance around defining,
planning, managing, and receiving products and services for a business.
b. Clear alignment with executive vision and internal user-specific business goals.
c. Established goals and metrics for short-term project plans, as well as a definite five-year plan that
provides year over year performance improvements.
d. Established communication plan to inform senior management and all lines of business updated and
reviewed quarterly against defined goals and objectives.
e. Required use of an online catalog.
ANSWER: e

9. All of the following are benefits of electronically generating and transmitting purchasing-related
documents except _____.
a. a reduction in the need to ensure higher levels of quality from suppliers
b. a virtual elimination of paperwork and paperwork handling
c. improved communication both within the company and with suppliers
d. a reduction in errors
e. a reduction in the time spent in by purchasing personnel on processing purchase orders and invoices
and more time spent on strategic value-adding purchasing activities
ANSWER: a

10. All of the following are required elements in a purchase requisition except _____.
a. quantity and date required
b. estimated unit cost
c. operating account to be charged
d. authorized signature
e. identification and approval of a supplier by the end user
ANSWER: e

11. When marketing wants to purchase an advertising media campaign, the _____ should specify the
work that is to be completed, when it is needed, and what type of service provider is required.
a. reorder point
b. acknowledgement
c. traveling purchase requisition
d. statement of work
e. sales forecast
ANSWER: d

12. In a _____, when inventory is depleted to a given level, the system notifies the materials control
department (or the buyer in some organizations) to issue a request to a supplier for inventory
replenishment.
a. reorder point system
b. traveling purchase requisition system
c. customer service system
d. forecasting system
e. just-in-time system
ANSWER: a

13. A _____ involves the physical checking of inventory to verify that system records match actual
on-hand inventory levels.
a. reorder point system
b. stock check
c. just-in-time system
d. forecasting system
e. p-card system
ANSWER: b

14. A/An _____ has demonstrated its performance capabilities through previous purchase contracts
and therefore receives preference during the supplier selection process.
a. internal supplier
b. new supplier
c. capable supplier
d. final supplier
e. preferred supplier
ANSWER: e
15. All of the following are conditions under which competitive bidding is effective except _____.
a. the buyer has a preferred supplier for the item
b. volume is high enough to justify this method
c. the marketplace is competitive
d. the specifications or requirements are clear to the seller
e. adequate time is available for suppliers to evaluate the RFQs
ANSWER: a

16. Which of the following is not one of the conditions under which negotiation is effective?
a. When the purchase requires agreement about a wide range of performance factors, such as price,
quality, delivery, risk sharing, and product support.
b. When the buyer requires early supplier involvement.
c. When the specifications or requirements are clear to the seller.
d. When the supplier cannot determine risks and costs.
e. When the supplier requires a long period of time to develop and produce the items purchased.
ANSWER: c

17. Which of the following is not an appropriate performance criterion to be used when evaluating
suppliers?
a. Ability to develop process and product technology.
b. Commitment to quality.
c. Management capability and commitment.
d. Cost performance.
e. Commitment to effective marketing and promotion.
ANSWER: e

18. Good reasons for allowing other departments to view purchase orders and incoming receipts does
not include which of the following?
a. The accounting department gains visibility to future accounts payable obligations.
b. The requestor can refer to the purchase order number when inquiring into the status of an order.
c. Receiving has a record of the order to match against the receipt of the material.
d. Traffic becomes aware of inbound delivery requirements and can make arrangements with carriers
or use the company’s own vehicles to schedule material delivery.
e. There is never a good reason for purchasing to allow other departments access to purchase orders
and incoming receipts due to the confidential nature of the price and delivery terms.
ANSWER: e

19. A/An _____ is an open order, usually effective for one year, covering repeated purchases of an
item or family of items.
a. outstanding order
b. pending order
c. blanket purchase order
d. completed order
e. order acceptance
ANSWER: c

20. The _____, which the supplier provides, details the contents of a shipment and contains the
description and quantity of the items in a shipment.
a. material packing slip
b. purchase requisition
c. bill of lading
d. electronic funds transfer
e. request for quotation
ANSWER: a

21. Transportation carriers use a/an _____ to record the quantity of goods delivered to a facility.
a. electronic transfer of funds
b. material packing slip
c. receiving discrepancy report
d. bill of lading
e. purchase order
ANSWER: d

22. The _____ helps protect the carrier against wrongful allegations that the carrier somehow
damaged, lost, or otherwise tampered with a shipment.
a. bill of lading
b. material packing slip
c. invoice
d. material purchase release
e. blanket purchase order
ANSWER: a

23. A _____ details any shipping or receiving discrepancies noted by the receiving department.
a. receiving discrepancy report
b. bill of lading
c. material packing slip
d. change notice
e. RFP
ANSWER: a

24. The _____ purchase category includes such items are petroleum, coal, lumber, and metals such as
copper and zinc.
a. semi finished products and components
b. finished products
c. MRO items
d. raw materials
e. capital equipment
ANSWER: d

25. A key characteristic of a/an _____ is a lack of processing by the supplier into a newly formed
product.
a. component
b. semi finished product
c. finished good
d. MRO item
e. raw material
ANSWER: e

26. _____ include anything that does not go directly into an organization’s product.
a. MRO items
b. Raw materials
c. Production support items
d. Services
e. Semi finished products and components
ANSWER: a

27. _____ include(s) the materials required to pack and ship final products, such as pallets, boxes,
master shipping containers, tape, bags, wrapping, inserts, and other packaging material.
a. Raw materials
b. Production support items
c. Semi finished products
d. Components
e. Work-in-process inventory
ANSWER: b

28. All the following are expected growth areas in e-commerce except _____.
a. transmitting purchase orders to suppliers
b. submitting requests for quotes to suppliers
c. placing orders with suppliers
d. making electronic funds transfer payments
e. submitting written check requests to accounts payable
ANSWER: e

29. Once a purchaser and a supplier reach agreement on a longer-term purchase contract, material
releasing responsibility should shift to _____.
a. marketing
b. purchasing
c. the supplier
d. user groups
 e. accounts payable
ANSWER: d

30. While similar in concept, blanket purchase orders are typically used more often for _____
purchases.
a. unique
b. lower-value
c. complex
d. spot buy
e. There are no differences in the types of products or amounts purchased in either method.
ANSWER: b

1. Which of the following is not one of the features of the new model of progressive purchasing?
A. Developing closer relationships with important suppliers.
B. Performing due diligence on suppliers before awarding longer-term contracts.
C. Focusing primarily on price analysis and short term contracts.
D. Conducting worldwide Internet searches for the best sources of supply.
E. Inviting key suppliers to participate in product and process development.

2. Which of the following is one of the factors driving an emphasis on supply chain management?
A. An increasing emphasis on domestic sourcing due to the longer lead times and higher levels
of pipeline inventories associated with global sourcing.
B. The cost and availability of information resources among entities in the supply chain that
allow easy linkages that eliminate time delays in the network.
C. The level of competition in both domestic and international markets that requires
organizations to be fast, agile, and flexible.
D. Customer expectations and requirements that are becommg more demanding.
E. The ability of an organization's supply chain to react rapidly by managing risk disruptions in
both supply and downstream product or services to mitigate the impact on lost sales.

3. _____ is a functional group (i.e., a formal entity on the organizational chart as well as a functional
activity (i.e., buying goods and services).
A. Engineering
B. Purchasing
C. Quality assurance
D. Logistics
E. Treasury operations

4. The _____ is a change index, and generally a rating over 50 indicates that the economy is
expanding.
A. Consumer Price Index
B. Producer Price Index
C. ISM Report on Business
D. Rrate of inflation
 E. None of these choices.

5. According to the Institute for Supply Management, ______ is the identification, acquisition,
access, positioning, and management of resources and related capabilities an organization needs or
potentially needs in the attainment of its strategic objectives.
A. supply chain management
B. procurement logistics
C. supply management
D. purchasing

6. Instead of adversarial relationships which characterize______, ______ features a long-term win-

7. A _____is a set of three or more organizations linked directly by one or more of the upstream or
downstream
flows of products, services, finances, and information from a source to a customer.
A. process
B. cost savings chain
C. value chain
D. social media chain
E. supply chain

8. All of the following are typical processes involved in supply chain management except
new product development
A. customer-order fulfillment
B. supplier evaluation and selection
C. demand and supply planning
D. cash flow management

9. According to Michael Porter, a firm's ____ is composed of primary and secondary support
activities that can lead to competitive advantage when configured properly.
A. supply chain
B. process
C. value chain
D. marketing channel
E. core competency

10. The ____ states that success is a function of effectively managing a linked group of firms past
first-level suppliers or customers.
A. supply chain orientation
B. value chain concept
C. traditional purchasing perspective
D. extended enterprise concept
E. process orientation

11. _____ are those items provided by suppliers and used directly during production or service
delivery.
 A. Direct materials
B. Indirect materials
C. Indirect services
D. Internal materials
E. Vendor managed inventories

12. Which of the following is an example of a purchased direct item for a manufacturing firm?
A. Parts and components.
B. Executive travel.
C. Office and janitorial supplies.
D. Advertising.
E. Personal computers.

13. Within the downstream portion of a supply chain, ____are responsible for the actual movement of
materials between locations.
A. buyers
B. trucking firms
C. logistics managers
D. accountants
E. purchasing managers

14. Which of the following is an example of a typical resource shared between a buyer and supplier?
A. Dedicated capacity.
B. Specific information.
C. Technological capabilities.
D. Direct financial support.
E. Exchange of managers.

15. All of the following are examples of demand planning activities except_____
A. forecasts of anticipated demand
B. accounts payable
C. inventory adjustments
D. orders taken but not filled
E. spare parts and aftermarket requirements

16. _____identifies all claims on output; while _____is the process of taking demand data and
developing a supply, production, and logistics network capable of satisfying demand requirements.
A. Inventory control....quality control
B. Quality control....supply planning
C. Order processing....material control
D. Demand planning... .customer service
E. Demand planning. ...supply planning

17. ____ involves generating the materials release, contacting a supplier directly concerning changes,
and monitoring the status of inbound shipments.
A. Order processing
B. Material control
C. Warehousing
D. Customer service
E. Quality control

18. ______helps ensure that customers receive material when and where they require it
A. Order processing
 B. Inbound transportation
C. Customer service
D. Scheduling
E. Inventory control

19. The function involves physically getting a product ready for distribution to the customer.
A. customer service
B. material control
C. materials handling
D. quality control
E. shipping

20. Which of the following is one of the four enablers of purchasing and supply chain management?
A. Sufficient cash flow and large on-hand cash deposits.
B. Capable human resources.
C. Proper organizational design.
D. Real-time and shared information technology capabilities.
E. Right measures and measurement system.

21. Research indicates that all of the following are top knowledge areas for purchasers in 2010 except
A. supplier relationship management
B. total cost analysis
C. supplier analysis
D. consumer behavior

22. _____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 chain objectives.
A. Supply chain orientation
B. Human resource management
C. Demand planning
D. Organizational design
E. Extended value chain

23. ______seeks to improve forecast accuracy, optimize production scheduling, reduce working
capital costs, shorten cycle times, cut transportation costs, and improve customer service; while
helps obtain materials and manage physical flows from suppliers through downstream distribution
to ensure that customers receive the right products at the right location, time, and cost.
A. RFID....GPS
B. Execution software....planning software
C. Customer service....mbound transportation
D. The process approach. ...cost management
E. Planning software....execution software

24. All of the following are roadblocks between measurement and improved performance except
A. information technology
B. too many metrics
C. debate over correct metrics
D. constantly changing metrics
E. old data