OPRE 6371

supply chain management
The design and management of seamless, value-added processes across organizational boundaries to meet the real needs of the end customer is called:
As supply chains have become more global, the risk of supply disruptions has:
increased because of financial and exchange rate fluctuations.
Performance of the supply management function can be viewed in two contexts:
operational and strategic
The return on assets effect (ROA) quantifies and measures
the impact of supply actions on inventory and the balance sheet.
Supply has the potential to contribute to:
cost management, profitability, return on assets, competitive position and corporate social policy.
In manufacturing organizations, the dollars spent with suppliers fall into what range as a percent of revenues?
50 to 80
Supply management may indirectly contribute to the organization’s competitive advantage by:
improving process efficiency
Evidence of the growth and influence of supply management in an organization includes:
involvement in strategic planning and mergers and acquisitions.
profit-leverage effect of supply savings means that:
a reduction in purchase spend increases profit more than an equal sales increase.
use of the concepts of purchasing, procurement, supply, and supply chain
management will vary from organization to organization depending on:
a. the organization’s stage of development and/or sophistication.
b. the industry in which they operate
c. the organization’s competitive position.
supply’s contribution
reducing cost
improving effieciency
Sustainability initiatives include
the effective and efficient capture and disposition of downstream products from customers and the reduction of the impact of the organization’s supply chains on the natural environment
True or false Terms such as purchasing, procurement, supply, supply chain and logistics do not have standard definitions that are widely used across sectors and industries.
True of false Reductions in inventory investment primarily come from getting users to reduce their demand for inventoried items.
Supply management has evolved from a transaction-based, tactical function to a process-oriented, strategic function.
One of the most important steps in achieving the potential of the supply function in a company is elevation of the chief supply officer to executive status.
The increase in outsourcing has resulted in an increase in the percentage of revenue paid out to suppliers.
Since labor and other costs greatly exceed outlays for purchased materials and services in most service organizations, supply is of little consequence in most service organizations.
Since labor and other costs greatly exceed outlays for purchased materials and services in most service organizations, supply is of little consequence in most service organizations.
Supply makes a limited contribution to organizational risk management since most supply decisions have few downside risks that might impact the organization’s strategy.
The total purchase sales ratio (the percentage of sales dollars paid out to suppliers) varies little from industry to industry.
contributions of supply
information source
competitive posit./customer satisfaction
organizationa risk
training for new managers
management strategy
An effective supply strategy primarily focuses on linking:
current and future needs to current and future markets.
Organizational objectives and supply objectives typically are expressed:
differently, making it difficult to translate organizational objectives into supply objectives.
Which one of the following is NOT one of the six major supply strategy areas:
new-product design strategies.
When developing supply strategies related to “how to buy,” decisions must be made about:
systems and procedures
The key question in strategic supply management is
How can supply and the supply chain contribute effectively to organizational objectives and strategy?
Three major challenges exist when setting supply objectives and strategies:
effectively interpreting corporate and supply objectives, selecting appropriate actions to achieve objectives, and integrating supply information into organizational strategies.
To effectively manage supply risks, the supply manager must:
identify and classify risks, assess the potential impact, and develop a risk mitigation strategy.
Linking supply strategy to corporate strategy is:
essential in all organizations, and many lack the mechanisms to link them.
Strategic planning can be defined as:
an action plan to achieve specific long-term goals and objectives.
Supply strategies that are based on changes in demand and supply are known as:
assurance-of-supply strategies
True or False The three levels of strategic planning are: function, unit, and corporate.
True or False Environmental-change strategies are designed to anticipate and recognize shifts in the natural world that affect supply availability.
True or False Even if a supply manager identifies and eliminates the causes of uncertainty and risk in the supply chain, the organization may still need to carry the same amount of inventory.
True or False Risks in the supply chain can be classified into three main categories: (1) operational, (2) financial, and (3) strategic.
True or False There is a growing emphasis on strategic supply management processes and less on purchase transactions.
True or False A corporate risk management group headed by a chief risk officer has emerged in many organizations to assess total risk exposure and develop strategies to best manage all risks.
True or False Assurance-of-supply strategies emphasize quality over all other considerations
True or False The most fundamental question facing an organization is whether to make or buy.
True or False Supply managers may be able to provide information to identify risks to the organization and they can develop strategies to mitigate those risks.
True or False Seldom do the actions of supply managers impact the organization’s reputation either positively or negatively.
Close to 70 percent of the value of any given requirement is established when needs are recognized and described. Therefore, the following functions should work together during need recognition and description:
the primary user, design engineering, supply and all other relevant functional areas such as accounting/finance, marketing and operations.
A change in how supply is organized and structured is the result of:
a change in the overall corporate organizational structure.
Which factors have a major influence on supply’s level in the organization:
1. the ratio of purchased material and services costs as a percentage of total costs or income.
2. the nature of the products or services acquired.
3. the extent to which supply and suppliers can provide competitive advantage.
Organizations commit resources to cross-functional team development to:
achieve time, quality, or cost-reduction targets
Supply can provide an uninterrupted flow of materials, supplies and services by:
holding large inventories.
standardizing capital equipment, materials, MRO and services.
A purchasing consortium:
consists of two or more independent organizations that combine requirements for materials, services and capital goods to gain better pricing, service and technology from suppliers.
Hybrid supply structures typically:
capture the benefits of both centralized and decentralized structures.
The organizational structure (centralized, decentralized, or hybrid) of the supply function:
influences supply processes, internal cross-functional relationships, and the procedures and systems employed.
Supply’s contribution to the organization’s competitive position depends on its ability to:
reduce costs
enhance revenue
manage assets
Specialization within the supply function:
allows staff to develop expertise in particular areas.
The greatest opportunity to affect value in the purchasing process is when:
needs are recognized and described.
If the buyer does not have a clear and unambiguous description or specification and wants to find out which suppliers can deliver the best value when and where needed, he or she will typically issue a:
request for proposal (RFP).
The benefit(s) of participation in an e-marketplace include:
the ability to aggregate spend
the advantages from economies of scale.
visibility up- and downstream in the supply chain.
the ability to automate and facilitate transactions.
One purpose of a requisition is:
to clarify the description of need before communicating with potential suppliers.
Radio frequency identification (RFID) will:
eliminate bar coding and manual counting.
Efficient and effective supply processes are needed because of:
the need for an audit trail.
the large volume of items and dollar value.
severe consequences of poor performance.
the potential contribution to organizational objectives.
Online auctions have been most effective when:
the market conditions favor buyers.
Electronic data interchange (EDI) provides:
secure transmission, greater accuracy and shorter process cycle time for all data.
Application software for the procurement process is available:
from an ERP system, a systems developer, or an ASP.
Enterprise Resource Planning
application software provider
Effectively and efficiently applying technology to the supply management process will result in:
an ability to reduce the total cost of doing business by enabling just-in-time systems, bar-coding applications, integrated manufacturing, and electronic funds transfers.
One of the most fundamental and critical decisions in any organization is, should we:
make or buy the needed good or service?
When a team has decided that a task or function currently performed by company employees is not a core competency, the team will probably recommend:
Deciding what represents a core competency in an organization is:
often a fairly complex decision and a function of many factors
Outsourcing of services is:
realistic if the internal users and the buyer can carefully define service requirements and quality expectations
Currently, managements tend toward
outsourcing entire operations
is often chosen as a way for the organization to reduce or control operating costs, improve company focus, and gain access to world-class capabilities.
In the outsourcing decisions in many organizations, supply has had:
relatively moderate involvement
Supply managers believe they can add the most value to the outsourcing decision by:
providing a comprehensive, competitive process
Supply management:
is seldom outsourced in its entirety, but activities such as inventory monitoring, order placement, and order receiving are outsourced.
Subcontracting refers to the practice of:
a prime contractor bidding out part of a job to another contractor.
Loss of control is:
c. a concern within the buying organization when considering outsourcing
An advantage of buying by performance or function over other specification methods is that it provides:
the opportunity for the potential supplier to establish how to make the most suitable product.
Supply’s growing involvement in the acquisition of services may be explained by:
the high dollars spent on services and the opportunities to reduce costs
Capital assets are long-term assets that:
have an ongoing effect on the organization’s operations
When a specification is widely known, commonly recognized and readily available to every buyer, it is called a:
standard specification.
Early supply involvement can be accomplished by:
using cross-functional teams on new product development.
Description by brand:
may be a necessity because the manufacturing process is secret.
The purpose of identifying the function of an item to be required is:
to assist in the determination of what represents acceptable value.
A buyer may be compelled to purchase by specification when:
means agreement on definite sizes, design, and quality
means agreement on definite sizes, design, and quality
Supply chain risks include:
interruptions to the flow of goods or services.
actions that lower the company’s attractiveness to the investment community.
lack of regulatory compliance.
Determination of the “best buy” is based on:
a balance of requirements of marketing, engineering, operations, and supply
ISO 9001:2008 provides a tested framework for a systematic approach to consistently delivering product that satisfies customers’ expectations by managing:
process capability.
A sampling technique that is based on the cumulative effect of information that every additional item in the sample adds as it is inspected is called:
cumulative sampling.
A process is capable when:
it averages a set number of standard deviations within the specifications.
The role and responsibilities of supply may contribute to the containment of the cost of poor quality by addressing:
a. prevention costs
b. appraisal costs
c. internal costs
d. external costs
A six sigma (6σ) approach to quality:
means there are no more than 6 defects per million opportunities.
Upper (UCL) and lower control limits (LCL):
require operator action when the process is outside normal operating range
Quality control in services is:
relatively difficult compared to quality control of goods
A supplier certification program
may enable the buyer and seller to lower costs and improve quality.
Deming’s 14 points stress the importance of:
minimizing total cost with a single source.
Inventory use that is determined directly by customer orders is called:
independent demand.
“A” items in ABC analysis are
particularly critical in financial terms
When the carrying cost of inventory is expressed as a percentage:
it is multiplied by the material unit cost to calculate the per unit carrying cost.
On an annual requirement of 100 items spread evenly throughout the year, any purchaser has an opportunity of buying all 100 units at a price of $100 each, or buying 10 units at a time at a price of $120. If the inventory carrying cost is 25 percent per year and assuming no ordering costs:
buying 100 at a time will save the company $900 per year.
Closed-loop MRP:
provides a feedback loop between capacity and the master production schedule.
A buffer inventory
protects against uncertainties in supply and demand.
Stockout costs
can vary depending on whether it is a seller’s or a buyer’s market.
Which statement is most accurate when thinking about deciding how much to buy::
balancing price, volume, carrying cost, and the cost of stockouts is key to successfully determining how much to buy at any point in time.
When a retailer uses daily sales of each product to identify patterns and to forecast inventory requirements, this is an example of:
a time series forecasting technique.
The three main inputs of a material requirements planning (MRP) system are:
an accurate bill of material, a master production schedule, and the inventory record.

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