Chapter 6

1. A _____ refers to a specific family of products or services that is used in delivering value to the end customer.
a. spend analysis
b. decentralized structure
c. category
d. centralized structure
e. hybrid structure

2. Which of the following is not one of the primary ways that companies create shareholder value?
a. Increase volume.
b. Reduce cost of employees (downsize).
c. Reduce cost of process and waste.
d. Reduce cost of goods and services.
e. Lower prices.

3. A _____ is concerned with (1) the definition of businesses in which the corporation wishes to participate and (2)
the acquisition and allocation of resources to these business units.
a. business unit strategy
b. supply management strategy
c. human resource management strategy
d. corporate strategy
e. functional strategy

4. A _____ is concerned with (1) the scope or boundaries of each business and the links with corporate strategy
and (2) the basis on which the business unit will achieve and maintain a competitive advantage within an industry.
a. commodity strategy
b. category strategy
c. business unit strategy
d. functional strategy
e. supply management strategy

5. A _____ specifies how supply management will (1) support the desired competitive business-level strategy and
(2) complement other functional strategies.
a. supply management strategy
b. corporate strategy
c. marketing strategy
d. category strategy
e. business unit strategy

6. A _____ specifies how a group tasked with developing the strategy for the specific category being purchased
will achieve goals that in turn will support higher-level strategies.
a. functional strategy
b. corporate strategy
c. business unit strategy
d. category strategy
e. None of the above.

7. A _____ is an annual review of a firm's entire set of purchases.

a. cost analysis
b. price analysis
c. make-buy analysis
d. technology roadmap
e. spend analysis

8. Which of the following is not one of the questions to be addressed when conducting a spend analysis?

a. What did the business spend its money on over the past year?
b. Did the business receive the right amount of products and services given what it paid for them?
c. What suppliers received the majority of the business, and did they charge an accurate price across all the
divisions in comparison to the requirements in the POs, contracts, and statements of work?
d. What was the on-time delivery performance for each supplier?
e. Which divisions of the business spent their money on products and services that were correctly budgeted for?

9. Which of the following is not one of the steps in the strategic sourcing process?
a. Build the team and the project charter.
b. Conduct market intelligence research on suppliers.
c. Increasing revenues.
d. Strategy development.
e. Supplier relationship management.

10. The _____ in the strategic sourcing process is a clear statement of the goals and objectives of the sourcing
project, which is officially announced shortly after the team's first few meetings.
a. triangulation phase
b. optimization process
c. spend analysis
d. project charter
e. price analysis

11. The key to good market intelligence is to _____ data, which means to explore, compare, and contrast data
from multiple sources before it can be validated.
a. triangulate
b. minimize
c. gather
d. collect
e. assemble

12. The whole point of collecting _____ is to understand the prevailing market conditions and the ability of current
or potential new suppliers to deliver the product or service effectively.
a. customer data
b. secondary data
c. internal data
d. spend analysis data
e. market research

13. All of the following are examples of factors in Porter's market internal competition force except _____.
a. speed of industry growth
b. buyer propensity to substitute
c. exit barriers
d. switching costs
e. capacity utilization

14. Which of the following is not one of Porter's five forces?

a. Buyer bargaining power.
b. Switching costs.
c. The threat of new entrants.
d. Market internal competition.
e. Supplier bargaining power.

15. Which of the following is not one of the examples of Porter's threat of new entrants?
a. Capital markets.
b. Economies of scale.
c. Supplier concentration.
d. Product life cycles.
e. Brand equity and customer loyalty.

16. Which of the following is not one of the examples of Porter's threat of substitute products and services?
a. Relative performance of substitutes.
b. Relative price of substitutes.
c. Switching costs.
d. Buyer propensity to substitute.
e. Economies of scale.

17. All of the following are examples of Porter's power of buyers except _____.
a. buyer concentration
b. exit barriers
c. price sensitivity
d. brand identity
e. buyer volume

18. Which of the following is not one of the examples of Porter's power of suppliers?
a. Prices of major inputs.
b. Ability to pass along price increases.
c. Supplier concentration.
d. Availability of skilled workers.
e. Threat of forward or backward integration.

19. In supplier analysis, _____ requires identifying critical performance criteria and identifying relative competitive
performance.
a. benchmarking
b. make/buy analysis
c. insourcing/outsourcing analysis
d. Porter's Five Forces analysis
e. cost analysis

20. The _____ is a solicitation document that is used by organizations to obtain general information about
services, products, or suppliers and is used generally before a specific requisition of an item is issued.
a. e-RA
b. PO
c. RFP
d. RFI
e. RFQ

21. The goal of _____ is to be able to understand, identify, and exploit cost savings opportunities that may have
been overlooked by business unit managers or even by suppliers in bringing the products and services to the
appropriate location.
a. Marketing research
b. Make-buy analysis
c. Value chain analysis
d. Price analysis
e. Cost analysis

22. [A] _____ is required to identify the specific capabilities and financial health of key suppliers that are in the
supply base or that may not currently be in the supply base.
a. Make-buy analysis
b. supplier evaluation scorecard
c. Price analysis
d. Portfolio analysis
e. Supplier research

23. [A] _____ is a tool to structure and segment the supply base and is used as a means of classifying suppliers into
one of four types.
a. Supplier scorecard
b. Portfolio analysis
c. Make-buy analysis
d. Price analysis
e. Value chain analysis

24. Which of the following is not one of the four categories found in a portfolio analysis matrix?
a. Critical.
b. Routine.
c. Leverage.
d. Commodity.
e. Bottleneck.

25. All of the following are goals for a strategic category except _____.
a. develop a competitive advantage
b. support and leverage the supplier's core competencies
c. develop best-in-class suppliers
d. support the company's overall strategy
e. simplification of the procurement process using electronic tools

26. Which of the following is not one of the goals for sourcing a routine commodity?
a. Reduce the number of items through substitution.
b. Elimination of small volume spend.
c. Conduct of a detailed negotiation to improve supplier capability.
d. Elimination of duplicate SKUs.
e. Simplification of the procurement process using electronic tools.

27. A _____ has a high volume of internal consumption, is readily available, is important to the business, and
represents a significant proportion of spend.
a. leverage commodity
b. portfolio commodity
c. critical commodity
d. routine commodity
e. bottleneck commodity

28. A _____ has unique requirements or niche suppliers, yet is significant to the business.
a. critical commodity
b. bottleneck commodity
c. matrix commodity
d. routine commodity
e. leverage commodity

29. In supplier evaluation, different aspects of _____ include management's commitment to continuous process
and quality improvement, its overall professional ability and experience, its ability to maintain positive
relationships with its workforce, and its willingness to develop a closer working relationship with the buyer.

a. management capability
b. process and design capabilities
c. financial condition and cost structure
d. planning and control systems
e. environmental regulation compliance

30. In supplier evaluation, a _____ includes those systems that release, schedule, and control the flow of work in
an organization.

a. logistics system
b. cost accounting system
c. traffic management system
d. planning and control system
e. warehouse management system

31. In the _____ of the process of supplier segmentation, the supplier views the buyer as a core customer, as the
size of the account is significant to the supplier, and the account is also important from a strategic perspective.
a. COMMODITY segment
b. DEVELOP segment
c. EXPLOIT segment
d. NUISANCE segment
e. CORE segment

32. In the _____ of the process of supplier segmentation, the attractiveness of the buyer as a customer is
significant and important to the supplier, but perhaps the historical volume of business with the buyer has been
relatively low.
a. EXPLOIT segment
b. CORE segment
c. DEVELOP segment
d. PRICE segment
e. NUISANCE segment

33. In the _____ of the process of supplier segmentation, suppliers have a significant portion of the buyer's spend
but do not view the buyer as an important customer.
a. NUISANCE segment
b. COMMODITY segment
c. DEVELOP segment
d. EXPLOIT segment
e. CORE segment

34. In the _____ of the process of supplier segmentation, the supplier views the buyer as an unimportant
customer, and to make the situation worse, the volume the buyer has with this supplier is insignificant to the
supplier
a. NUISANCE segment
b. CORE segment
c. EXPLOIT segment
d. DEVELOP segment
e. None of the above.

35. A/An _____ may be used as a decision support tool in which the sourcing team assigns a weight to the different
categories and develops a numerical score for each supplier in each category, thereby developing a final
performance score.
a. make-buy analysis
b. portfolio analysis matrix
c. reverse auction
d. e-catalog
e. supplier selection scorecard

36. A/An _____ has demonstrated its performance capabilities through previous purchase contracts and,
therefore, receives preference during the supplier selection process.
a. commodity supplier
b. preferred supplier
c. sole source supplier
d. new supplier responding to a RFQ
e. marginal supplier

37. A/An _____ is a formal request for the suppliers to prepare bids, based on the terms and conditions set by the
buyer.
a. RFQ
b. purchase order
c. RFI
d. supplier analysis
e. e-RA

38. Buying firms use competitive bidding when _____ is a dominant criterion and the required items or services
have ______ specifications.
a. price....unique
b. delivery....unique
c. product performance....straightforward
d. design....unique
e. price....straightforward

39. Competitive bidding is most effective when all of the following conditions apply except when _____.
a. the buying firm can provide qualified suppliers with clear descriptions of the items or services to be purchased
b. volume is high enough to justify the cost and effort
c. the firm does not have a preferred supplier
d. the item is new or technically complex, with only vague specifications
e. None of the above conditions apply to competitive bidding.

40. Face-to-face negotiation is best when all of the following conditions apply except when _____.
a. the item is new or technically complex, with only vague specifications
b. the purchase requires agreement about a wide range of performance factors
c. the firm does not have a preferred supplier
d. the buyer requires the supplier to participate in the development effort
e. the supplier cannot determine risks and costs without additional input from the buyer

41. A _____ is used in regularly scheduled review meetings with suppliers, so that deficiencies in performance can
be noted, discussed, and acted upon.
a. supplier scorecard
b. make-buy analysis
c. competitive bidding process
d. portfolio analysis
e. cost analysis

42. _____ is the process of determining the appropriate number and mix of suppliers to maintain.
a. Make-buy analysis
b. Competitive bidding
c. Supply base optimization
d. Portfolio analysis
e. Price analysis

43. Which of the following is not true in regards to low-cost country sourcing?
a. Low-cost country sourcing can be used to access new markets or to gain access to the same suppliers that are
helping global companies become more competitive.
b. Although there has been a strong push to source from emerging BRIC countries in search of lower costs, there
has also been a strong push toward sourcing in these countries because of local content requirements established
by governments in these areas.
c. Global sourcing is an opportunity to gain exposure to product and process technology, increase the number of
available sources, satisfy countertrade requirements, and establish a presence in foreign markets.
d. Some buyers source globally to introduce competition to domestic suppliers.
e. Firms are highly experienced with global business processes and practices, and there are many personnel
qualified to develop and negotiate with global suppliers or manage material pipelines.

44. _____ is a simultaneous engineering approach that occurs between buyer and seller and seeks to maximize the
benefits received by taking advantage of the supplier's design capabilities.

a. Supplier development
b. Early supplier design involvement
c. Total cost of ownership
d. Supplier relationship management
e. Supply base optimization

45. _____ is the process of identifying cost considerations beyond unit price, transport, and tooling.
a. Total cost of ownership
b. Price analysis
c. Make-buy analysis
d. Portfolio analysis
e. Low-cost country sourcing

46. Which of the following elements is false regarding Phase 1, Basic Beginnings, of supply management strategy
development?

a. Quality/cost teams.
b. Longer-term contracts.
c. Volume leveraging.
d. Supply-base consolidation.
e. Early sourcing.

47. Which of the following elements is false regarding Phase 2, Moderate Development, of supply management
strategy development?

a. e-RAs.
b. Ad hoc supplier alliances.
c. International sourcing.
d. Global supply chains with an external customer focus.
e. Supply-base optimization.

48. Which of the following elements is false regarding Phase 3, Limited Integration, of supply management strategy
development?

a. Supplier quality focus.

b. Global sourcing.
c. Ad hoc supplier alliances.
d. Volume leveraging.
e. Long-term contracts.

49. Which of the following elements is true regarding Phase 4, Fully Integrated Supply Chains, of supply
management strategy development?

a. Cross-functional sourcing teams.

b. Cross-enterprise decision making.
c. Quality/cost teams.
d. International sourcing.
e. Total cost of ownership.
Chapter 7

1. Which of the following is not a commonly accepted source of information regarding potential supply sources?

a. Current suppliers.
b. Sales representatives.
c. Television advertising.
d. Organizational knowledge.
e. Second-party or indirect information.

2. 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.

3. 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

4. _____ 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
5. 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.

6. _____ 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.

7. 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.

8. A _____ is one that consistently satisfies the performance and service standards defined by the buyer and
responds to unexpected changes.

a. certified supplier
b. sole source supplier
c. partnered supplier
d. preferred supplier
e. disqualified supplier.

9. 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.

10. 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

11. 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
e. sole source supplier

12. _____ 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

13. _____ 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.

14. _____ 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

15. 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.

16. 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

17. 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

18. Which of the following is not a method used to further evaluate and select suppliers once the initial 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.

19. 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?

20. 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.

21. 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
e. attainment of ISO 14000 certification

22. 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.

23. 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.
24. 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.

25. 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.

26. 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?

27. 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?

28. 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
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

29. 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

30. 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

31. _____ 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

32. 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
Chapter 8

1. According to Armand Feigenbaum, _____ is defined as the total composite of product and service characteristics
of marketing, engineering, manufacturing, and maintenance through which the product or service in use will meet or
exceed the expectations of the customer.

a. productivity
b. process capability
c. zero defects
d. quality
e. supply base optimization

2. _____ represents the ability to meet or exceed current and future customer (i.e., buyer and eventually end
customer) expectations or requirements within critical performance areas on a consistent basis.

a. Kaizen
b. Supplier quality
c. Strategic sourcing
d. Process capability
e. Supply base rationalization

3. Which of the following is not one of the expectations that suppliers have in a typical supply chain relationship?

a. Minimizing product design changes once production begins.

b. Providing visibility to future purchase volume requirements.
c. Sharing early access and visibility to new-product requirements.
d. Valuing accurate and timely payment of invoices.
e. Having the buyer co-locate its buying, engineering, and quality staff into a supplier's facility.

4. The average North American manufacturing firm spends _____ percent of its cost of goods sold on purchased
goods and services.

a. < 10
b. 25
c. 55
d. 75
e. > 90

5. The_____ the proportion of the final product that suppliers provide, the_____ the impact they will have on overall
product cost and quality.

a. smaller....greater
b. larger....lesser
c. smaller....more significant
d. larger....greater
e. There is no definitive relationship between proportion of final product provided by suppliers and impact on
overall product cost and quality.

6. All of the following are factors that influence how much attention supply management should commit to
managing supplier quality except _____.

a. the physical distance between the supplier and buyer facilities

b. the ability of a supplier to affect a buyer's total quality
c. the internal resources available to support supplier quality management and improvement
d. the ability of a buying firm to practice world-class quality
e. a buyer's ability to collect and analyze quality-related data

7. Which of the following is not one of the eight key principles of total quality management?

a. Define quality in terms of customers and their requirements.

b. Inspect for quality at the end of the production line.
c. Stress objective rather than subjective analysis.
d. Strive for zero defects.
e. Make quality of everyone's responsibility.

8. Which of the following is not one of the eight key principles of total quality management?

a. Pursue quality at the source.

b. Emphasize prevention rather than detection of defects.
c. Focus on the process rather than output.
d. Establish continuous improvement as a way of life.
e. Stress subjective rather than objective analysis.

9. Which of the following is not one of the eight key principles of total quality management?
a. Strive for zero defects.
b. Define quality in terms of customers and their requirements.
c. Focus on output rather than process.
d. Make quality everyone's responsibility.
e. Stress objective rather than subjective analysis.

10. Which of the following is one of the dimensions used in developing a clear understanding of the buyer's
expectations and requirements?

a. The ability of the buyer to succinctly identify, define, quantify, or specify its technical and sourcing requirements.
b. The seller's ability to effectively communicate its requirements.
c. How compatible the buyer's and supplier's respective corporate cultures are.
d. The ability of the selling company to succinctly identify, clearly define, quantify, or specify its technical and
sourcing requirements.
e. None of the above.
11. Which of the following is not one of the unique features of Deming's philosophy?

a. Variation is the primary source of quality nonconformance.

b. Although quality is everyone's responsibility, senior management has the ultimate responsibility for quality
improvement.
c. Intrinsic motivation is more powerful than extrinsic motivation.
d. Interacting parts of a system must be treated individually, not as a whole.
e. Predictions must be grounded in the theory that helps to understand cause-and-effect relationships.

12. Which of the following is not one of Deming's 14 points?

a. Create a vision and demonstrate commitment.

b. Utilize fear to motive workers.
c. Improve constantly and forever.
d. Optimize the efforts of teams.
e. Remove barriers to pride in workmanship.

13. Which of the following is not one of Deming's 14 points?

a. Encourage education and self-improvement.

b. Take action.
c. Institute leadership.
d. Optimize the efforts of teams.
e. Utilize numerical quotas and measurements by the objective to motivate management.

14. Which of the following is not one of Deming's 14 points?

a. Institute training.
b. Drive out fear.
c. Optimize the efforts of individuals working alone.
d. Stop making decisions purely on the basis of price.
e. Improve constantly and forever.

15. _____ means continuous improvement and must be built into every single process in the organization.
a. Banzai
b. Optimization
c. Gung ho
d. Kaizen
e. Bonsai

16. The concept of _____ consists of rework and disposal efforts that increase cost and decrease productivity.
a. the hidden factory
b. Six Sigma
c. continuous improvement
d. zero defects
e. kaizen

17. Which of the following is false concerning Deming's philosophy on fear in the workplace?

a. Employees may be fearful of making a mistake and being reprimanded for it.
b. Fear-free organizations are very common as they only take a short time to develop and maintain an organizational
culture that promotes risk-taking and change.
c. Most people have a fear of failure, so they don't want to try anything new or different.
d. People are creatures of habit and do not like to make changes in their routines.
e. Middle managers may be fearful of letting go of their traditional power based on command and control.
18. Which of the following is false concerning Deming's philosophy on numerical quotas and measurement by
objective?

a. Workers may game the system to make their individual production and output goals.
b. Many numerical based goals and objectives are often developed arbitrarily.
c. Goals are often short term in their focus.
d. Output standards fully support TQM improvements and other quality initiatives.
e. Many numerically-based goals and objectives are beyond the control of the worker.

19. _____ occurs whenever value is added to a product or service as it moves through transformation processes in
the supply chain.

a. Six Sigma
b. Process capability
c. Kaizen
d. Supply base rationalization
e. Quality at the source

20. All of the following are positive results from early supplier design involvement except _____.

a. longer lead-times in order to find and fix product defects before they get to the customer
b. better quality and product design
c. establishing reasonable tolerances
d. suppliers can anticipate and begin preproduction work
e. improved product quality and manufacturability

21. _____ is the avoidance of nonconformance in products and services by not allowing errors or defects to occur in
the first place.
a. Detection
b. Inspection
c. Prevention
d. The hidden factory
e. Optimization

22. A _____ program is the formal process of verifying, usually through an intensive cross-functional on-site audit,
that a supplier's processes and methods actually produce consistent and conforming quality.

a. supplier selection and evaluation program

b. supplier certification
c. Six Sigma
d. process capability
e. zero defects

23. _____ is the ability of a process to generate outputs that meet engineering specifications and/or customer
requirements and refers to the normal behavior of a process when operating in a state of statistical control.

a. Process optimization
b. Six Sigma
c. Supplier certification
d. Quality at the source
e. Process capability

24. The _____ process capability index quantifies the relationship between the process's natural tolerance limits and
the product's specifications using a two-sided approach, regardless of process centering.

a. Cpk
b. x-bar
c. MRP
d. Cp
e. Six Sigma

25. The _____ process capability index does not adequately account for situations where the process is not closely
centered on the nominal specification target value.

a. Cxy
b. optimization
c. Six Sigma
d. Cpk
e. Cp

26. A _____ is designed to provide information about the performance of the process under stable operating
conditions, i.e. when no special causes of variation are present.

a. make-buy analysis
b. process capability study
c. price analysis
d. cost analysis
e. Six Sigma project

27. According to Philip Crosby, the only true performance standard that defines total quality is _____, which he
defined as conformance to requirements.

a. zero defects
b. Six Sigma
c. process capability
d. optimization
e. rationalization

28. _____ include the direct, out-of-pocket costs of measuring quality, specifically checking for possible defects.

a. Six Sigma costs

b. Internal failure costs
c. Appraisal costs
d. External failure costs
e. Prevention costs

29. _____ occur before the product or service is provided to the customer.

a. Internal failure costs

b. Appraisal costs
c. External failure costs
d. Prevention costs
e. Total costs

30. _____ are incurred following production or after the customer takes possession.

a. Inspection costs
b. Appraisal costs
c. Internal failure costs
d. Prevention costs
e. External failure costs
31. _____ are those costs incurred when production processes are designed or modified to prevent defects from
occurring in the first place.
a. Appraisal costs
b. Internal failure costs
c. External failure costs
d. Prevention costs
e. Six Sigma costs

32. All of the following are examples of appraisal costs except _____.

a. laboratory testing of prototypes and samples

b. production inspection activities
c. development and maintenance of a quality management system
d. development and maintenance of a quality management system
e. incoming materials inspections

33. Which of the following is not an example of an internal failure cost?

a. Process troubleshooting.
b. Equipment calibration.
c. Re-inspection following the detection of a defect.
d. Production downtime caused by defects.
e. Scrap and process waste.

34. All of the following are examples of external failure costs except _____.

a. warranty costs
b. replacement of defective products to customers
c. liability lawsuits
d. quality planning
e. loss of customer goodwill

35. Which of the following is not an example of a prevention cost?

a. Incoming material inspections.

b. Quality planning.
c. Equipment calibration.
d. Development of a quality manual.
e. Maintenance of a quality management system.

36. In _____, there is an intense focus on identifying and eliminating common causes of waste that add cost, time,
and effort to the product or service while not adding value to the customer.

a. supplier evaluation and selection process

b. the MBNQA
c. SIO 14000:2004
d. the Honda BP process
e. None of the above.

37. Which of the following is not one of the seven wastes identified by the Honda BP process?

a. Overproduction.
b. Delivery.
c. Waste in the work itself.
d. Inventory.
e. Product advertising and promotion.
38. _____ results in waste because valuable equipment or labor resource is not producing output.

a. Idle time
b. Inventory
c. Wasted operator motion
d. Delivery
e. Overproduction

39. _____ is the organized and systematic study of every element of cost in a part, material, process, or service to
ensure that it fulfills its design and operational functions at the lowest possible total cost.

a. Six Sigma
b. Process capability
c. New product development
d. CAD/CAM
e. VA/VE

40. Which of the following is not one of the five elements in the Six Sigma performance improvement model?

a. D(efine).
b. M(easure).
c. A(ccess).
d. I(mprove).
e. C(ontrol).

41. To remain current registration, ISO 9001:2008 registration must be accomplished every _____.

a. 10 years
b. 5 years
c. 2 years
d. 3 years
e. There is no expiration date for ISO 9001:2008 registration.

42. In ISO 9000:2008, (the) _____ consists of a quality manual, related procedures, and work instructions.

a. third-party registration
b. quality management system
c. environmental management system
d. supplier certification
e. All of the above.

43. Which of the following is not one of the benefits to the buyer of a supplier achieving ISO 9001:2008
registration?

a. Few buying firms have sufficient size or resources to independently develop and implement their own
comprehensive supplier certification audits.
b. The supplier may develop interest from other buyers wanting to do business with it.
c. Third-party registration may provide insight into a supplier's quality system conformance that a buyer may
otherwise lack.
d. The buying firm receives the benefit of a supplier quality certification without actually having to conduct its own
quality certification audits.
e. The supplier assumes responsibility for meeting the ISO standards and paying its own registration fees.

44. The _____ series of standards, originally established in 1993, is designed to promote environmental awareness
and protection as well as pollution prevention.
a. MBNQA
b. ISO 9001:2008
c. Zero defects
d. Six Sigma
e. ISO 14001:2004

45. _____ is a competition and implies that a winning organization excels not only in quality management but also
in quality achievement.

a. ISO 9001:2008
b. MBNQA
c. ISO 14001:2004
d. Six Sigma
e. Zero defects

46. _____ is the most basic and important tenet of the MBNQA criteria.

a. Continuous improvement
b. Six Sigma
c. Statistical process control
d. Process capability
e. None of the above.

47. An effective supplier quality manual will contain all of the following except _____.

a. documentation control
b. testing and acceptance procedures
c. metrics and measurement protocols
d. basic responsibilities of both the buyer and the supplier
e. approved accounting expenses
Chapter 9

1. Which of the following is not a typical qualitative service factor in a supplier performance measurement system?

a. Problem resolution ability.

b. Technical ability.
c. Process capability.
d. Ongoing progress reporting.
e. Wavelength.

2. Which of the following is not one of the typical uses of supplier measurement data?

a. Supporting supply base rationalization and optimization.

b. Identifying those highly capable suppliers that may qualify for consideration of longer-term partnerships or
designation as preferred suppliers.
c. Identifying those suppliers that are not performing at expected levels so that appropriate remedial or
development actions can be taken.
d. Deciding where to locate supplier facilities.
e. Determining a supplier's future purchase volume based on its past performance.

3. Which of the following is a disadvantage of a categorical supplier evaluation system?

a. Least reliable.
b. Cost accounting system required.
c. Less frequent generation of evaluations.
d. Most subjective.
e. Usually manual.

4. All of the following are advantages of a categorical supplier evaluation system except _____.

a. easy to implement
b. requires minimal data
c. different personnel can contribute
d. low-cost system
e. greatest potential for long-range improvement

5. Which of the following is a disadvantage of a weighted-point supplier evaluation system?

a. Tends to focus on unit price.

b. Most complex, so implementation costs are high.
c. Most subjective.
d. Least reliable.
e. Cost accounting system required.

6. All of the following are advantages of a weighted-point supplier evaluation system except _____.

a. flexible system
b. supplier ranking allowed
c. moderate implementation costs
d. total cost approach
e. quantitative and qualitative factors combined into a single system

7. Which of the following is a disadvantage of a cost-based supplier evaluation system?

a. Least reliable.
b. Most complex so implementation costs are high.
c. Less frequent generation of evaluations.
d. Most subjective.
e. Tends to focus on unit price.

8. All of the following are advantages of a cost-based supplier evaluation system except _____.
a. total cost approach
b. specific areas of supplier nonperformance identified
c. objective supplier ranking
d. the greatest potential for long-range improvement
e. good for firms with limited resources

9. The _____ supplier evaluation system seeks to identify and quantify the total cost of doing business with a given
supplier, as the lowest purchase price may not always result in the lowest total cost for an item or service.
a. Six Sigma
b. zero defects
c. cost-based
d. categorical
e. weighted-point

10. In supplier measurement, the basic logic of the _____ is built around the calculation of a/an _____.
a. categorical system...supplier performance index
b. cost-based system...process capability index
c. weighted-point system...Q adjustment factor
d. weighted-point system...cost accounting system
e. cost-based system...supplier performance index (SPI)

11. The supplier performance index (SPI) equals (_____ plus _____) divided by _____.

a. Total Purchases....Nonperformance Costs....Total Purchases

b. Nonperformance Costs....Total Purchases....Nonperformance Costs
c. Total Purchases....Appraisal Costs....External Failure Costs
d. External Failure Costs....Internal Failure Costs....Total Purchases
e. TransportationCosts....Appraisal Costs....Prevention Costs

12. Which of the following is not one of the management uses for the data derived from a comprehensive cost-
base supplier evaluation system?

a. Such a system provides the necessary information that allows a buyer to justify buying from a preferred supplier
despite a higher unit price.
b. The system allows a buyer to communicate the cost of specific nonperformance events to the originating
supplier, which then helps identify improvement opportunities.
c. Quantifying nonconformance costs can result in a chargeback to the offending supplier for unplanned costs.
d. The system allows customized assignment of cost accounting codes depending on how much money is left in the
annual budget.
e. A buyer can use this data to identify longer-term sources of supply based on a supplier's total cost performance
history.

13. The _____ is a normalization factor for the supplier performance index (SPI) that eliminates high-dollar lot bias.
a. Cp
b. MRO
c. Q adjustment factor
d. Cpk
e. Rfx

14. _____ is the process of identifying how many and which suppliers a buyer will maintain.

a. Supply base optimization

b. Supply base rationalization
c. Six Sigma
d. Zero defects
e. Strategic sourcing

15. _____ involves a detailed analysis of the supply base to ensure that only the most capable and highest
performing suppliers are kept in the supply base after it is rationalized.

a. Supply base optimization

b. Outsourcing
c. Strategic sourcing
d. Supply base reduction
e. Supply base management

16. Which of the following is not one of the advantages of a rationalized and optimized supply base?
a. Buying from world-class suppliers.
b. Use of full-service suppliers.
c. Lower supply base administrative costs.
d. Reduction of supply base risk.
e. Absence of competition.

17. Which of the following is not one of the advantages of a rationalized and optimized supply base?

a. Longer lead-times.
b. Use of full-service suppliers.
c. Lower total product cost.
d. Ability to pursue complex supply management strategies.
e. Buying from world-class suppliers.

18. All of the following are possible risks of maintaining fewer suppliers except _____.

a. supplier dependency
b. supply disruption
c. overaggressive supply reduction
d. maintaining an all-foreign supply base
e. absence of competition

19. In _____, a buyer selects or develops suppliers with multiple or redundant capabilities.
a. single sourcing
b. cross-sourcing
c. global sourcing
d. strategic sourcing
e. sole sourcing

20. Which of the following is not one of the formal approaches to supply base rationalization?

a. Twenty/eighty rule.
b. "Improve or else" approach.
c. Global sourcing.
d. Triage approach.
e. Competency staircase approach.

21. The _____ identifies those 20 percent of suppliers receiving the bulk of purchase spend or that minority of
suppliers that cause the most quality problems.

a. "improve or else" approach

b. triage approach
c. strategic sourcing approach
d. competency staircase approach
e. twenty/eighty rule

22. The _____ provides all suppliers, regardless of their performance history, a chance to remain in the supply
base.

a. "improve or else" approach

b. triage approach
c. competency staircase approach
d. twenty/eighty rule
e. Six Sigma approach

23. The _____ requires the systematic evaluation of the performance of individual suppliers and ultimate
placement into one of three categories.

a. twenty/eighty rule
b. competency staircase approach
c. "improve or else" approach
d. triage approach
e. zero defects approach

24. The _____ requires suppliers to successfully navigate a successive series of performance milestones or hurdles
in order to remain in the supply base.

a. triage approach
b. competency staircase approach
c. MAS*H approach
d. "improve or else" approach
e. twenty/eighty rule

25. _____ is any activity undertaken by a buyer to improve a supplier's performance or capabilities to meet the
buyer's short- and long-term supply needs.

a. Supply base rationalization

b. The twenty/eighty rule
c. Supply base optimization
d. Supplier development
e. Six Sigma

26. Which of the following is not a typical supplier development activity?

a. Providing incentives to suppliers for improved performance.

b. Promoting competition among suppliers.
c. Raising prices paid for purchased goods and services.
d. Directly involving buyer personnel with suppliers.
e. Conducting training and process improvement initiatives.

27. In overcoming the barriers to supplier development, which of the following is not one of the approaches
typically used?

a. Direct-involvement activities.
b. Single sourcing.
c. Incentives and rewards.
d. Warnings and penalties.
e. All of the above are typical approaches.

28. Which of the following is not a buyer-specific barrier to supplier development?

a. The buying company's purchase volume from the supplier does not justify development investment
b. No immediate benefit to supplier development is evident to the buying organization.
c. Lack of executive support within the buying organization for supplier development.
d. Importance of purchased item does not justify development efforts.
e. Supplier's management agrees to improvement but fails to implement the proposals.

29. Which of the following is not a supplier-specific barrier to supplier development?

a. No immediate benefit to supplier development is evident in the buying organization.

b. Lack of commitment on the part of supplier's management.
c. Supplier's management agrees to improvements but fails to implement the proposals.
d. Supplier lacks engineering resources to implement solutions.
e. Supplier lacks employee skill base to implement solutions.

30. All of the following are general categories of supply base risk except _____.

a. political risk
b. market risk
c. sourcing risk
d. financial risk
e. employee hiring risk

31. _____ in a supply base consists of such factors as: country stability, regional stability, political and
governmental stability, levels of official corruption, dissimilarities regarding contract law and intellectual property
rights, elections, military actions, civil disturbances, terrorism, trade balance issues, and customs duties and tariffs.

a. Financial risk
b. Market risk
c. Supplier company risk
d. Political risk
e. Sourcing risk

32. All of the following are elements of market risk in a supply base except _____.

a. the number of buyers competing for the same goods or source of supply
b. increasingly shorter product life cycles
c. regional political risk
d. threat of emerging, often disruptive, technologies
e. protecting and maintaining trade secrets and intellectual properties from misuse or misappropriation by
suppliers, particularly those located overseas

33. Which of the following is not one of the elements of financial risk in a supply base?

a. Inventory carrying costs.

b. Currency exchange rates.
c. INCOTERMS
d. Hard vs. soft currencies.
e. Legal systems.

34. All of the following are common contingency management tools that can be effectively used at the tactical
level to assist the supply manager in identifying, analyzing, reducing, and monitoring supply base risk except
_____.

a. single-sourcing
b. inventory
c. automated visibility and early warning systems
d. use of third party intermediaries
e. scenario analysis

35. _____ allows a buying organization to react more quickly when supply chain risk events occur by already having
previously prepared plans and proposed responses in place in advance of the actual risk event.

a. Hedging
b. Use of third party intermediaries
c. Multiple sourcing
d. Scenario analysis
e. None of the above.

36. If a/an _____ currency is utilized, the _____ bears the currency risk and is likely to build in additional
contingency costs to cover its unknown risk.

a. supplier's...supplier
b. buyer's...supplier
c. buyer's...buyer
d. supplier's...buyer
e. Regardless of the currency chosen, both parties share the currency risk equally.

37. _____ can be defined as how supply chain members communicate and collaborate regarding sources of risk,
utilizing risk management tools to mitigate and minimize risk and uncertainty across the supply chain.

a. PERT/CPM
b. Scenario analysis
c. Hedging
d. SCRM
e. None of the above.

38. According to ISM, _____ is defined as the ability to meet current needs without hindering the ability to meet
the needs of future generations in terms of economic, environmental, and social challenges.

a. Sustainability
b. Scenario analysis
c. Social responsibility
d. Supply chain risk management
e. Standardization

39. According to ISM, _____ is a framework of measurable corporate policies and procedures and resulting
behavior designed to benefit the workplace and, by extension, the individual, the organization, and the
community.

a. supply chain risk management

b. sustainability
c. ISO 9000:2008
d. social responsibility
e. supplier development