Chapter 04 Sample questions and answers

1. Invoice clearance and payment procedures:

A. are best performed by the user or specifier.

B. are the same for goods and services.
C. are most effective when performed by a person in accounts payable.
D. may be streamlined with an invoiceless system within an e-procurement system.
E. may stipulate dropping a supplier if a variance exceeds a set amount.

In a manual system, invoices are typically cleared by either accounting or supply, not the user. The process often varies depending on
if it is for a good or a service. For services, pre-payment, payment immediately following service delivery, and progress payments are
common. While it is common to track variances between quantity received and amount invoiced, the usual procedure for frequent
variances is a discussion with the supplier. Receiving, invoicing and payment processes may be streamlined through the use of an
invoiceless system in an e-procurement application.

2. The three options for soliciting business from potential suppliers are:

A. request for information (RFI), request for quotation (RFQ) and request for proposal (RFP).
B. request for quotation (RFQ), request for proposal (RFP) and request or invitation for bid (RFB or IFB).
C. request for quotation (RFQ), request for confirmation (RFC) and request for proposal (RFP).
D. request for information (RFI), request for proposal (RFP), and request or invitation for bid (RFB or IFB).
E. request for quotation (RFQ), request for price (RFP), and request or invitation for bid (RFB or IFB).

The three types of solicitations are (1) request for quotation (RFQ), request for proposal (RFP), and request or invitation for bid (RFB
or IFB). A request for information is not a solicitation; a solicitation may follow after information has been received. There is no such
thing as a request for price or a request for confirmation within soliciting business.

3. Application software for the procurement process is available:

A. only through an (ERP) system.

B. only from a systems developer who develops a customized application.
C. only from a cloud solution.
D. from an ERP system or systems developer, but not from a cloud solution.
E. from an ERP system, a systems developer, or a cloud solution.

A company may acquire access to an electronic procurement system through all three approaches: an ERP system, a systems
developer, or a cloud solution. ERP systems are quite commonly used because they are more cost effective than a customized solution.
Growth is anticipated in cloud computing.
4. Information systems technology can:

A. increase data accessibility and transmission speed, but increases costs.

B. enable system integration across functions, but not data accuracy.
C. increase data accuracy and accessibility at lower cost.
D. enable speedier communication internally, but not externally with suppliers.
E. enable system integration, but increases time spent on tactical issues.

The potential benefits of information technology in supply management include: (1) Increased data accuracy because information is
not entered multiple times by multiple people with the risk for human error, (2) Greater accessibility because more people can access
information from a global database or repository in faster time, and (3) Streamlined processes that result in lower costs and greater
availability of staff to perform tasks of more value to the organization.

5. Corporate purchasing cards are issued to:

A. internal customers to purchase low-dollar, high-volume goods and services.

B. internal customers to purchase high-dollar, technical, production materials.
C. supply department staff to speed acquisition of rush orders and small value orders.
D. internal customers to purchase high and low dollar and volume goods and services.
E. supply department personnel to eliminate purchase orders and individual invoices.

Corporate purchasing cards (also called procurement cards or P-cards) are credit cards issued to internal customers (users) in the
buying organization to purchase low-dollar-value, high-volume goods and services.

6. Radio frequency identification (RFID) will:

A. eliminate bar coding and manual counting.

B. eliminate further investment in information technology.
C. supplement bar coding to reduce theft.
D. be more cost effective to implement than bar coding.
E. improve data capture but slow down inventory picking.

RFID tags contain a chip and antenna that use electromagnetic fields to transfer data. Tags attached to items are automatically
identified and tracked. The tags contain electronically stored information. The real-time tracking allows for faster inventory picking.
This system replaces bar codes and manual inventory counting. It requires a costly investment in the technology.

7. If the buyer does not have a clear and unambiguous description or specification and wants to find out which supplier can deliver the
best value when and where needed, he or she will typically issue a:

A. request for quotation (RFQ).

B. request for proposal (RFP).
C. request for information (RFI).
D. request for bid (RFB).
E. request for suggestions (RFS).

A request for proposal (RFP) asks potential suppliers to propose one or more options for meeting the needs of the buyer. An RFP is
based on the premise that suppliers know their business better than the buyer does and can, therefore, suggest the best ways at
different cost structures to provide the requirement. The buyer will typically negotiate price and terms once a proposal has been
selected.
8. Online reverse auctions have been most effective when:

A. there are a limited number of suppliers available.

B. the organization owns the technology to run the auction.
C. the good or service is unique or highly customized.
D. the market conditions favor sellers.
E. technological, logistical and commercial specifications are clear.

Online reverse auctions allow a group of pre-qualified suppliers to bid against each other for the buyer’s business. There needs to be
multiple, qualified suppliers and a clear and unambiguous specification to make the auction competitive. If it were a seller’s market,
prices would likely increase not decrease. Technology is required, but there are auction providers so the buying organization does not
have to own the technology.

9. Small dollar value purchase orders for MRO can be efficiently and effectively managed by:

A. increasing the number of customized items.

B. implementing a vendor- or supplier-managed inventory system.
C. putting purchases on separate purchase orders.
D. entering into contracts for each item.
E. giving buyers unlimited access to petty cash.

MRO typically consists of large amounts of many different small dollar value items such as nuts and bolts. MRO can be better
managed by simplifying the process. Answers a, c, and d are the opposite of simplification. Each of them increases the time and cost
needed to manage MRO. Giving anyone unlimited access to petty cash is a bad cash management strategy. Vendor-managed inventory
systems allow the supplier to stock, track and manage MRO for the buying organization.

10. Electronic data interchange (EDI) provides:

A. secure transmission of large amounts of data, but with slow turnaround.

B. secure transmission, greater accuracy and shorter process cycle time for all data.
C. slow processing of large amounts of data, but with greater accuracy.
D. longer process cycle time, but with greater accuracy.
E. secure and rapid transmission of small amounts of data.

EDI allows rapid and secure transmission of data back and forth between organizations thereby reducing process cycle time. With no
repetition of data entry, accuracy is improved.