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EXAMINATION QUESTIONS AND ANSWERS Chapte
EXAMINATION QUESTIONS AND ANSWERS Chapte
EXAMINATION QUESTIONS AND ANSWERS Chapte
True/False Questions
Note to students, select the answer that is true or false “most of the time”, few situations in social
sciences are simply black or white.
Answer: False
2. Supply management is also known as procurement at many firms and government agencies.
Answer: True
Answer: False
Answer: False
5. In the history of power source relationships, percentage wise, labor costs went down while
materials costs went up.
Answer: True
6. Supply management plays a major role in improving the “bottom line” by driving sales up and
costs down.
Answer: True
7. Generally speaking, firms with the fasted time to market with new products by using cross
functional teams including suppliers, enjoy higher profits.
Answer: True
8. Some 75% of many manufacturer’s quality problems can be traced back to defects in purchased
materials.
Answer: True
9. Of the factors that make up total cost of ownership (TCO), the big majority of this cost is in the
acquisition cost.
Answer: False
Answer: False
11. When supply savings and increased sales due to superior supply chain management are
combined, it is not uncommon to increase ROI 50%.
Answer: True
12. The term “supply chain” means all the members are linked together in one master contract
covering a long time period.
Answer: False
13. The term “value chain” includes both the upstream and downstream portion of the supply chain.
Answer: True
14. The extended enterprise means a group of firms collaborating as a supply alliance, i.e. a strategic
network or virtual corporation.
Answer: True
Answer: True
16. The final step in the typical purchasing cycle for materials in to audit the invoice.
Answer: False
17. Supply management must be a core competency based on its impact on the bottom line.
Answer: True
Answer: True
Answer: True
20. When a group or network of firms collaborates in a partnership (alliance) fashion; the
collaboration is sometimes referred to as a strategic network, virtual corporation, or extended
enterprise.
Answer: True
21. When the group of firms view each other as partners and collaborate effectively for the good of
Burt, Petcavage and Pinkerton Supply Mangement, 8th edition
the larger group, then they leave established an extended enterprise characterized by virtual
integration.
Answer: True
22. Strategic sourcing is about understanding the markets you're purchasing from inside and out and
learning from your own organization and your suppliers' organizational processes, working as a
mediator between suppliers and your organization, and capturing information and using it to
improve relationships.
Answer: True
23. Strategic sourcing requires two-way continuous improvement process work from each
organization.
Answer: True
24. Maintenance is an issue that should be considered after equipment has been purchased.
Answer: False
25. Supply management does not have much of an impact on the bottom line.
Answer: False
Answer: False
27. World-class supply managers need not improve supply processes before the processes have been
implemented.
Answer: False
28. When a group or network of firms collaborates in a partnership (alliance) fashion; the
collaboration is sometimes referred to as a tactical network.
Answer: False
29. When the group of firms view each other as partners and collaborate effectively for the good of
the larger group, then they leave established a transactional relationship.
Answer: False
30. Strategic sourcing is about dominating the markets you're purchasing from through force and
intimidation, never letting the supplier forget that you are the “boss.”
Answer: False
31. Strategic sourcing requires one-way improvement efforts where the buying firm tells the
supplying firm what is best.
Burt, Petcavage and Pinkerton Supply Mangement, 8th edition
Answer: False
Answer: A
33. The term supply management is broader than the purchasing function because it::
A) includes marketing
B) includes operations/production
C) includes managing relationships with suppliers
D) includes negotiating enforceable contracts
E) includes measuring the total cost of ownership
Answer: C
34. Strategic sourcing differs from tactical purchasing in that this activity periodically:
A) analyzes the organization’s spend
B) analyzes the supply market
C) develops sourcing strategy and plans
D) outsources basic business services such as security
E) A, B &C
Answer: E
35. Supply management’s impact on the bottom line includes the ability to increase sales by:
A) reducing the development time of new products by using cross functional teams including
suppliers
B) obtaining the lowest possible prices
C) finding suppliers with the fastest delivery times
D) all of the above
E) none of the above
Answer: A
36. “Lean Thinking” can help reduce total cost of ownership (TCO), this means the supply team in
the entire “chain” must work to:
A) lower conversion cost
B) reduce cycle time cost
C) reduce risk cost
D) reduce non-value costs
E) reduce processing costs
37. The major reason supply management can greatly improve a firm’s return on investment (ROI)
is:
A) the reduction of post ownership costs
B) the reduction of downtime costs
C) the reduction of quality costs
D) the reduction of acquisition cost
E) every dollar saved in purchasing is = to a new dollar of profit
Answer: E
Answer: A
39. The term value chain means we include the supply chain in our analysis and management with:
A) end consumer
B) the downstream portion of the chain and distribution, such as marketing
C) channels of distribution
D) financial impact studies
E) opportunity cost
Answer: B
40. When we add the term networks to the supply and value chains, we are emphasizing the need to
focus on and interactively communicate with:
A) suppliers
B) distributors
C) final consumers
D) tiers of suppliers
E) all support organizations
Answer: C
41. The term extended enterprise is an extension of supply networks, we now have:
A) true value creation
B) real value maintenance
C) innovative and virtual integration
D) a network of firms collaborating in partnership
E) adaptive networks
Answer: D
42. In Appendix A, The “Mechanics of Supply Management”, the typical purchasing cycle for
materials starts with:
Answer: C
Answer: C
Answer: E
Answer: E
Answer: B
Answer: A
Answer: C
Answer: E
Answer: B
Answer: C
Answer: D
Answer: C
Answer: A
Answer: D
Answer: B
Answer: E
Answer: B
60. Which of the following is not one of The Four Phases of Supply Management?
A) Generation of Requirements
B) Sourcing
C) Pricing
D) Profit Sharing
E) Post Award Activities
Answer: D
61. Which of the following bullets is not true about supply management systems?
A) Supply management systems require software optimization models to run effectively
B) Virtually all firms have supply management systems
C) A cross-functional approach to supply management systems enables the lowest total cost
D) Carefully selected suppliers should also join in-house cross-functional teams in developing
supply management systems
E) Supply management systems that include reverse auctions, exchanges, and real-time
electronic transmissions only increase the importance of supply management
Answer: A
Answer: A
Answer: B
Burt, Petcavage and Pinkerton Supply Mangement, 8th edition
64. Which of the following is not a strategic supply management activity?
A) Environment Monitoring
B) Supply Chain / Supply Networks
C) Operations Research
D) Social Responsibilities
E) Understand Key Supply Industries
Answer: C
True/False Questions
17. The lower purchasing is on the organization chart, the less impact the supply function will have
on corporate strategy.
Answer: True
18. The degree of competition for critical materials will be a key factor in the importance of supply
management.
Answer: True
19. Even in a firm, which primarily purchases small numbers of standard production parts, the
supply department can be a significant value as a profit center.
Answer: False
20. The “mind set” or focus on internal processes usually produces the kind of detailed work
necessary to achieve significant material savings.
Answer: False
21. The smaller the organization, the less likely the purchasing operations will be strategic.
Answer: True
Answer: True
Answer: False
24. Managing contract and blanket order releases are operational responsibilities.
Burt, Petcavage and Pinkerton Supply Mangement, 8th edition
Answer: True
25. Consolidation provides the opportunity to standardize, simplify and leverage material purchases.
Answer: True
26. Hybrid organizational structures often use cross functional teams to achieve the best of both
centralized and decentralized decision making.
Answer: True
Answer: False
Answer: False
29. Supply chain management expanded the materials management structure functions to include all
the stake holders and total demand management.
Answer: True
30. Cross function teams are often the key step in a firms evolution to supply chain management.
Answer: True
31. Aside from the benefits of synergy, cross functional teams provides input from all affected
functions.
Answer: True
32. One of the big challenges and problems with cross functional teams is the lack of time for the
team member participation and role conflict.
Answer: True
17. Cross functional teams operate best when they use the brainstorming approach to innovative
thinking.
Answer: False
18. The key first step in establishing cross functional teams is obtaining executive sponsorship.
Answer: True
19. Its best to let a cross functional team “train itself” as they learn how to communicate with one
another.
20. One of the key skills for any leader is to be an effective listener.
Answer: True
21. The importance of supply management in any specific firm is determined by the following
factors:
A) availability of materials and services
B) absolute dollar volume of purchases
C) percentage of product cost represented by materials and services
D) types of materials and services purchased
F) All of the above
Answer: E
22. Of the purchasing/supply responsibilities and activities, ______ becomes more important as the
function becomes responsible for supply and value network chains:
: A) buying supply management
B) executive management
C) strategic planning and research work
D) contract and relationship management
E) Supplier liaison work
Answer: C
23. Managing supplier relationships, contracts, placement of purchase orders and other transaction
focused activities are _____ responsibilities:
: A) strategic
B) short term
C) long term
D D) operational
E E) action
F
Answer: D
24. Aside from reducing potential duplication of efforts, the major advantage of centralized
purchasing is:
: A) improved inventory control
B) leveraged volume purchasing
C) consolidation
G D) transportation savings
H E) lower administrative costs
I
Answer: B
25. When a firm’s major activity is research and development, the firm will most likely use:
: A) centralized purchasing
B) headquarter purchasing
27. The materials management organization structure paved the way for _____ structure:
: A) value network chain structures
B) supply chain management structure
C) procurement management structure
P D) purchasing centralization
Q E) purchasing decentralization
R
Answer: B
28. The most significant advantage of the supply chain management structure is:
: A) it facilitated a total systems approach to stimulate integration
B) it uses the internet to extract key information
C) it increases the visibility of the purchasing department
S D) it focuses management attention on quality
T E) it reveals that inventory costs are often understated
U
Answer: A
True/False Questions
1. Systematically selected supply alliances built on institutional trust help organizations complete
their evolution to SM.
Answer: True
2. The transformation from reactive and mechanical purchasing to proactive procurement and on to
SM, parallels a similar transformation in relationships between buyers and suppliers.
Answer: True
3. Prior to the 1980s, most purchasing relationships were reactive. Interaction between vendor and
purchasing resulted in outcomes where one's gain would be the other's loss.
Answer: True
4. During the late 1980's and early 1990's, “partnerships” became popular. The authors of the
textbook argue that there are problems with the term partner. One of the problems given in the
text was that the implications of the term “partner” were not well understood.
Answer: True
5. During the late 1980's and early 1990's, “partnerships” became popular. The authors of the
textbook argue that there are problems with the term partner. One of the problems given in the
text was that legal problems and concerns inevitably arose regarding the term.
Answer: True
6. Collaborative relationships are typically used for the procurement of non-commodity items and
services.
Answer: True
Answer: True
8. The fundamental difference between collaborative relationships and supply alliances is the
presence of institutional trust in alliances.
Answer: True
Answer: True
Answer: True
Answer: True
12. A captive buyer is held hostage by a supplier free to switch to another customer.
Answer: True
13. A captive supplier makes investments in order to secure a portion of the buyer's business, with no
assurance of sufficient business to recoup the investment.
Answer: True
14. Successful supply chain management requires the effective and efficient management of a
portfolio of relationships.
Answer: True
15. One of the advantages of transactional relationships is that relatively less purchasing time and
effort are required to establish price.
Answer: True
16. One of the advantages of transactional relationships is that lower skill levels of procurement
personnel are required.
Answer: True
Answer: True
18. Collaborative and alliance relationships tend to result in lower total costs and improve
performance of the supply chain.
Answer: True
19. A firm can evolve to SM without any relationships that are built on institutional trust.
Answer: False
Answer: False
Answer: False
22. Since it has become a well-known term and is established in the legal system, the authors of the
textbook support the use of the term partner
Answer: False
23. Collaborative relationships are typically used for the procurement of commodity items.
Answer: False
24. A transactional relationship frequently is an appropriate first step on the road to a strategic
alliance.
Answer: False
25. The fundamental difference between collaborative relationships and supply alliances is the
presence of cost measurement and information technology in alliances.
Answer: False
Answer: False
Answer: False
28. A captive supplier makes investments in order to secure a portion of the buyer's business, but it is
given assurance of sufficient business to recoup the investment through legal contracts.
Answer: False
29. Successful supply chain management requires that all relationships with suppliers be either
collaborative or alliances.
Answer: False
30. One of the advantages of collaborative relationships is that relatively less purchasing time and
effort are required to establish price than in transactional relationships.
Answer: False
Answer: False
32. "Greater price competition through the Internet is the new imperative," declares Michael Dell.
Answer: False
33. Collaborative and alliance relationships tend to result in higher total costs for non-commodity
products than conducting the same business using transactional relationships.
Answer: False
34. Which of the following is not one of the three types of buyer supplier relationships presented in
the textbook?
A) Transactional
B) Transcendental
C) Collaborative
D) Alliance
Answer: B
Answer: A
Answer: E
Answer: D
39. Researchers Stanley and Pearson found that there are three most important factors in a successful
buyer-supplier relationship. Which of the following is not one of the factors?
A) Two-way communication
B) Paying a fair and reasonable price
C) The supplier's responsiveness to supply management's needs
D) Clear product specifications
Answer: B
40. Which of the following is not one of the outcomes that collaborative relationships tend to foster?
A) Longer term contracts
B) Reduction of risk for suppliers
C) Reducing total costs
D) A focus on price
E) Improvement of processes
Answer: D
41. Which of the following is not one of the outcomes that collaborative relationships tend to foster?
A) Decreased information sharing
B) Increased investment in R & D
C) Increased investment in training
D) Increased investment in equipment
E) Better focus on customer needs
Answer: A
42. Which of the following is not one of the benefits of supply alliances?
A) Lower total costs
B) Reduced time to market
C) Increased inspection levels
D) Improved technology flow from suppliers
E) Improved continuity of supply
Answer: C
Answer: B
Answer: C
Answer: C
46. Which of the following is not one of the issues that affect a supplier's assessment of a buying
firm?
A) Cash Flow
B) Openness and Approachability
C) Availability
D) Professionalism
E) Gifts and gratuities
Answer: E
Answer: B
Answer: A
Answer: D
Answer: E
51. Developing and managing collaborative relationships require supply professionals that possess
the all of the following skills and attitudes except one in the following list. Which skill in the
following list is not required?
A) Recognize the benefits of collaboration
B) Ability to identify, obtain and use data
C) Able to work in chaos and uncertainty
D) Agile, flexible, and highly
E) Ability to develop information systems
Answer: E
52. Which of the following is not an e-Commerce trap presented in the textbook?
A) Gilding the pig
B) The Magic pill
C) Shooting the moon
D) Supplier equality
Answer: C
Answer: C
Answer: A
Answer: A
Answer: B
Answer: B
Answer: D
59. Which of the following is not an action to develop and manage trust?
A) An inter-firm team is appointed
B) Discussions conducted in an atmosphere of respect
C) A team of attorneys is appointed to manage the relationship
D) Inter-firm team receives guidance and training in the implementation of practices
E) Listening, understanding, time, energy are invested
Answer: C
Answer: C
61. Which of the following is not an action to develop and manage trust?
A) Hold back critical information from the alliance partner, just in case
B) Negotiation is used as a trust-building opportunity
C) Both firms work together on technology plans
D) Technical personnel from both firms visit the other
E) Contractual relations are designed to enhance trust
Answer: A
62. Which of the following is not an action to develop and manage trust?
A) Contract relations focus on continuous improvement
B) Team and relationship skills are developed early
C) A contracting philosophy and a legal infrastructure are designed to the relationship
D) Develop multiple backup suppliers to assure continuity of supply
E) Institutional trust is measured and managed
Answer: D
63. The Quaker Oats case history demonstrates that in addition to having the trust required to form
an alliance:
A) Both parties must have mutual respect
B) Volume quantities must be fixed
C) There is still a need for a comprehensive contract, including such questions and answers as
“what if”?
D) It is not necessary to have open book accounting
E) Legal provisions are still necessary
Answer: C
EXAMINATION QUESTIONS AND ANSWERS
True/False Questions
1. The ideal services supplier listens to what users complain about most and then designs service
products that supply the market's missing ingredients.
Answer: True
Answer: True
Burt, Petcavage and Pinkerton Supply Mangement, 8th edition
3. The procurement of services is one of supply management's most interesting and challenging
assignments.
Answer: True
4. Supply Management frequently must assume a far more active role in all phases of services
procurement than when purchasing materials.
Answer: True
5. The four formats for statements of work given in the textbook are: performance, functional,
design and level-of-effort.
Answer: True
6. In planning the statement of work, all of the following should be considered: performance
measurements, deliverables, delivery schedule, performance schedule and service levels.
Answer: True
7. In writing an effective S.O.W. as given in the textbook, the S.O.W. should explain the
interrelationship between tasks, identify all constraints and limitations and be clear about phase
requirements.
Answer: True
8. In writing an effective S.O.W. as given in the textbook, the S.O.W. should: limit abbreviations to
those in common usage, include procedures and eliminate extraneous statements.
Answer: True
9. The conventional method and the owner as a contractor are alternative methods of purchasing
construction services as presented in the textbook.
Answer: True
10. The ideal services supplier focus on cost reduction ahead of customer satisfaction.
Answer: False
11. Satisfaction is cannot be built into service products but must be added as an afterthought.
Answer: False
12. The procurement of services is a relatively simple assignment in supply management that usually
results in lower pay for the supply manager.
Answer: False
13. Supply management frequently must assume a less active role in services procurement than
Burt, Petcavage and Pinkerton Supply Mangement, 8th edition
when purchasing materials.
Answer: False
14. The four formats for statements of work given in the textbook are: performance, functional,
design and firm fixed price.
Answer: False
15. In planning the statement of work, all of the following should be considered: statistical process
control, process capability analysis, and the sampling methodology.
Answer: False
16. In writing an effective S.O.W. as given in the textbook, the S.O.W. should not include
explanations of the interrelationship between tasks or constraints and limitations.
Answer: False
17. In writing an effective S.O.W. as given in the textbook, brevity should be used by utilizing as
many abbreviations as possible and not including procedures and or extraneous statements.
Answer: False
18. The Constraint-Based Method is one methods of purchasing construction services as presented in
the textbook.
Answer: False
19. Which of the following is not one of the four formats for statements of work?
A) Performance S.O.W., which details everything the buyer wants
B) Functional S.O.W., which defines what the buyer is “trying to do”
C) Design S.O.W., which is the most detailed type of statement of work
D) Development S.O.W., which specifies the assistance that a buying firm must provide the
supplying firm during the length of the contract
E) Level-of-Effort S.O.W., which is a specialized version of the performance statement of work
Answer: D
Answer: B
Answer: A
Answer: E
Answer: B
24. Which of the following is not one of the tips on writing an effective S.O.W. given in the
textbook?
A) Explain the interrelationship between tasks
B) Identify all constraints and limitations
C) Include standards that will make performance measurement possible and meaningful
D) Include clause for punitive damages to assure compliance
E) Be clear about phase requirements
Answer: D
Answer: C
26. Which of the following is not one of the tips on writing an effective S.O.W. given in the
textbook?
A) Limit abbreviations to those in common usage
B) Include procedures
C) Do not over specify or overstate
D) Always integrate escape clauses
E) Eliminate extraneous statements
Answer: D
27. Which of the following is not a tip given in the textbook for selecting service contractors?
A) Partner with users
B) Engage in reciprocity
C) Learn from the past
D) Update specifications
E) Minimize assumptions
Answer: B
28. Which of the following is not a tip given in the textbook for selecting service contractors?
A) Minimize assumptions
B) Encourage questions
C) Facilitate comparison
D) Play hardball
E) Plan evaluation
Answer: D
29. Which of the following is not an alternative method of purchasing construction services
presented in the textbook?
A) Conventional Method
B) Cost Plus Discretionary Expenses
C) Design and Build, Agreed Price Method
D) Design and Build, Cost-Reimbursable Method
E) The Owner as a Contractor
Answer: B
True/False Questions
1. Outsourcing has become a way to increase an organization's flexibility to meet rapidly changing
market conditions, focus on core competencies and develop competitive advantage. As a result,
the need for SM has intensified and positioned supply managers as agents of strategic change
critical to supply chain success.
Answer: True
2. Outsourcing all non-critical activities is a trend where the idea is to achieve significant cost
leverage.
Answer: True
Answer: True
4. Many companies are not readily staffed to keep a company competitive in e-business. As a
result, companies are outsourcing infrastructure development and maintenance to “Netsourcers.”
Answer: True
5. Firms are becoming more aware of the strategic dimension of the make-or-buy decision.
Answer: True
6. As technology has advanced most manufacturing firms have become much more specialized.
Answer: True
7. Cost of materials has continued to increase in many industries, which means that the make or
buy outsourcing decision must be reinvestigated from time to time for even stable demand
products.
Answer: True
Answer: False
9. Outsourcing all critical activities is a trend where the idea is to achieve significant cost leverage.
Answer: False
10. “Netsourcers” are internal supply management specialists that keep a company competitive in e-
business.
11. As technology has advanced, most manufacturing firms have become much more generalized.
Answer: False
Answer: B
13. Which of the following is not a strategic issue in making the outsourcing decision?
A) The Issue of Short-term Vulnerabilities
B) Core Competencies
C) Supplier Dominance
D) The Creation of Strategic Vulnerabilities
E) The Dangers of Vertical Integration
Answer: A
14. From a strategic level, which of the following items is the most logical to outsource?
A) An item that can be bought and sold in a commodity exchange
B) An item that is critical to the success of the product
C) An item that requires specialized design, manufacturing skills or equipment
D) An item that fits well within the firm's core competencies
Answer: A
15. Which of the following is not a reason to investigate the make or buy decision at the tactical
level?
A) If you currently outsource and the supplier suddenly has poor performance
B) Changing sales demand in the short term
C) Restricted manufacturing capability due to a breakdown
D) Increased manufacturing capability exists due to reduced sales of other items
E) If the part under consideration is still in the design stage
Answer: E
Answer: C
Answer: B
Answer: A
Answer: C
20. Which of the following is a major element typically included in a “to buy” cost analysis?
A) Delivered purchased material costs
B) Transportation costs
C) Direct labor costs
D) Any follow-on costs stemming from quality and related problems
E) Incremental inventory carrying costs
Answer: B
21. Which of the following is a major element typically included in a “to buy” cost analysis?
A) Incremental factory overhead costs
B) Incremental managerial costs
C) Incremental purchasing costs
D) Incremental costs of capital
E) Receiving and inspection costs
Answer: E
22. Which of the following is a major element typically included in a “to make” cost analysis?
A) Direct labor costs at your facility
Burt, Petcavage and Pinkerton Supply Mangement, 8th edition
B) Purchase price of the part from the supplier
C) Transportation costs
D) Receiving and inspection costs of incoming goods
E) Any follow-on costs related to quality or service provided by the supplier
Answer: A
23. Which one of the following points is not a reason that Netsourcing has become popular?
A) Netsourcing enables a quick e-business presence
B) Netsourcing provides supply managers that flexibility to make changes
C) Netsourcing can help create a sustained performance
D) Netsourcing can provide support without the need to train or hire specialized personnel
E) Netsourcing can completely replace supply management using intelligent agents
Answer: E
24. Which one of the following points is not a reason that the Make-or-Buy Decision is often a
volatile decision?
A) Rigid formulas and rules of thumb are often used, which are often a poor choice to apply
B) The make-or-buy question is influenced by a multitude of diverse factors that are constantly
changing
C) Companies do not support promotions based on cost savings
D) The relevant factors for the decision often vary immensely from one firm to another
E) Companies often do not periodically evaluate the effectiveness of their past decisions to
generate information helpful in guiding future decisions
Answer: C
Answer: C
Answer: E
27. Which of the following activities or steps was not included in the typical framework for
outsourcing provided in the textbook?
A) Development of a strategic roadmap
B) Development of a decision flowchart
C) Development of a tactical roadmap
Burt, Petcavage and Pinkerton Supply Mangement, 8th edition
D) Development of a transition back plan
E) Development of a review system
Answer: C