SCM 486 Exam 2

Flashcard maker : Lily Taylor
The _________ function is taking on increasing importance in today’s industrial economy.
financial
purchasing
marketing
human resources
operations
purchasing
Since materials constitute the largest single percentage of their purchasing dollars, _____________ firms have turned to professionally operated purchasing departments to make sure they are getting full value for their outlays on materials.
manufacturing
results oriented
profit oriented
service
retailing
profit oriented
__________ is the life blood of most businesses. Most firms store thousands of different items.
Inventory
Human resources
Capital
Supplies
Buying
Inventory
The type of business a firm is in will usually determine how much of the firm’s assets are invested in ___________.
fixtures
inventories
machinery
buildings
locations
inventories
Management of inventories is a major interest of purchasing managers. In many industries, the investment in inventories comprises a substantial share of the firm’s assets. If the productivity of the inventory asset can be enhanced, the improvement will go directly to the bottom line.
True
False
True
In order to manage the various types of inventory, attributes of the items first must be analyzed in terms of all the following with one exception. Which one is the exception?
quality
cost
past usage
the nature of demand
lead time
quality
Independent demand is related to the demand for other items.
True
False
False
In the area of inventory management, the purchasing professional should make explicit decisions regarding which of the following?
What to stock
How much to invest
How much service to offer
All the above
A and B only
All the above

In the case of a manufacturing firm, you must consider whether the production process is ____________, ___________, or some hybrid of the two.

Retail
Telzon
Pure
Computerized
Management

Pure

The purchasing manager must have a clear understanding of the role of inventory in the ________ management system.

production
purchasing
distribution
materials
supply

materials

The inventory items that are the most important for a specific industry or firm should be items that account for the greatest ___________.

number of sales
dollar value
mark-up
total value
profit margin

Read about lean production vs mass production

dollar value

In the case of a manufacturing firm, you must consider whether the production process is ____________, ___________, or some hybrid of the two.

custom made / made to stock
matrix / made to request
made to order / made to specs
continuous / assembly line
make to order / make to stock

make to order / make to stock

If you analyze what sells the most and what costs the most, a predictable pattern will emerge with most distribution inventories. As a result of this general pattern, a small percentage of the total item usage accounts for a large proportion of total usage value. It is hypothesized that ____ percent of the total inventory cost is vested in approximately ____ percent of the items.

20 / 80
60 /40
50 / 50
70 / 30
80 / 20

80 / 20

There are five primary functions of inventories. One of the following is incorrect. Which one?

Safety stocks
Cycle stocks
Seasonal inventories
Coupling
Pipeline inventory

Coupling

The objective of an inventory system is the minimization of total operating costs. The unavoidable costs of operating pure inventory systems are ___________.

ordering costs, stockout costs, and backorder costs
ordering costs, delivery costs, and holding costs
ordering costs, stocking costs, and holding costs
shipping costs, stockout costs, and pricing costs
ordering costs, stockout costs, and holding costs

ordering costs, stockout costs, and holding costs

The acronym EOQ is defined as _______________.

economical order quantity
equal order quantity
economic order quantity
equal opportunity quantity
economic organizational quantity

economic order quantity

The classical EOQ model is based, in part, on four of the following assumptions. One of the following in not one of the assumptions. Which one?

Intermittent demand
Constant lead time
Fixed holding cost per unit
Fixed order cost per order
Constant unit price

Intermittent demand

From time to time, buying firms receive discounted price schedules from their suppliers. This usually means that the price per unit is lower if larger orders are purchased. It _____________ to the buyer’s advantage to accept the quantity discount.

may be
may not be
is
may or may not be
could be

may or may not be
The classical EOQ model assumes that the per-unit material price is fixed. The quantity discount condition _______________ the total cost curve.
supports
validates
enhances
lowers
invalidates
invalidates

A ________ method can easily be used for determining the minimum cost order quantity.

simple
four-step
complex
three-step
five-step

five-step

___________ is extra inventory held to protect against randomness in demand or lead time.

Random stocks
Warehouse stocks
Lead time stocks
Safety stock
Backorders

Safety stock

__________ is needed to cover the demand during the replenishment lead time in case actual demand is greater than expected demand.

Safety stock
Random stocks
Safety orders
Warehouse stocks
Lead time stocks

Safety stock

____________ (statistical inventory control) techniques are based on the assumption of uniform requirements per unit time. If this assumption of the demands is unrealistic, these techniques can lead to inappropriate inventory decisions.

Order-point
Reorder point
Telzon
Order control
SICT

Order-point

________ systems utilize substantially better information on future requirements than is possible by the traditional non-time-phased order-point system.

PRM
MPD
IRA
MRP
QTR

MRP

_______ systems are helpful for companies with assembled products that have component requirements dependent on the final product.

PDQ
MRP
IRA
ARA
MRA

MRP

The ______ concept provides the basis for projecting future inventories in a ____________ operation.

MRP / manufacturing
PDQ / manufacturing
RAP / retailing
AAP / auto service
MAP / service

MRP / manufacturing

_______ can help improve the traditional non-time-phased order-point system because it allows the _____________ to plan requirements (raw material, component parts) to meet the final assembly schedule.

PDQ / buyer
AAR / sales manager
MRA / purchasing manager
MRP / operating manager
MAPS / production manager

MRP / operating manager

The general __________ problem is to batch requirements to minimize the sum of ordering and carrying cost each time an order is to be placed.

ordering
buying
cost analysis
transportation
lot-sizing

lot-sizing
In situations where discounts are not available, the price per unit is constant regardless of the number of units ordered.
True
False
True
Among the better-known lot-sizing methods for the single item, non-discount, time-phased, certain-demand models are: (1) lot for lot, (2) economic order quantity, (3) periodic order quantity, (4) least unit cost, (5) McLaren s order moment, (6) Silver-Meal, and (7) the Wagner-Whitin dynamic programming algorithm.
True
False
True
The just-in-time (JIT) system is no longer a (n) _______________ in the manufacturing world today. In the face of intense global competition, many firms in the United States are looking at improved techniques to manage their manufacturing operations.
manufacturing theory
production concept
management concept
untried theory
esoteric concept
esoteric concept

JIT is also referred to as _______ production.

mass
quality
lean
custom
short run

lean

The following practices are considered essential for a comprehensive JIT implementation: Uniform production (also known as heijunka), Quick set times, Small lot sizes, Short lead times.

True
False

True

The following practices are considered essential for a comprehensive JIT implementation: Regular maintenance, Diverse workforce, Supplier development, Kanban production control.

True
False

True

JIT is Toyota’s manufacturing philosophy to minimize _______, and the JIT production system is a subsystem controlled by ________.

costs / computer
waste / kanban
expenses / kanban
costs / kanban
waste / computer

waste / kanban
The ________ JIT production system has been erected based on the premise of minimizing _________________ (waste) by reducing or eliminating discrete batches.
computer controlled/batches or lots
computer controlled/inventories
kanban-controlled/stock on hand
kanban-controlled/work-in-process inventories
computer controlled/stock on hand
kanban-controlled/work-in-process inventories

Kanban is the Japanese word for _____________.

card
container
computer
program
system

card
The kanban card contains the part number, the part description, the type of container, and various workstation information.
True
False
True
The kanban production control system uses simple, visual signals to control the movement of materials between work centers as well as the production of new materials to replenish those sent downstream to the next work center.
True
False
True
There are two main types of kanban: __________ signals the need to produce more parts. Each kanban is physically attached to a container. __________ signals the need to withdraw parts from one work center and deliver them to the next work center.
Reorder kanban / Production kanban
Withdrawal kanban / Production kanban
Quality circle kanban / Withdrawal kanban
Production kanban / Withdrawal kanban
Production kanban / Zero defects kanban
Production kanban / Withdrawal kanban
In a ____________, removing an end item (or a fixed lot of end items) triggers the order release, by which the flow of materials or components is initiated. In contrast, ____________ allow for the production or material flow in anticipation of future demand.
push system / pull systems
pull system / push systems
CIT system / CAM systems
diverse system / traditional systems
traditional system / push systems
pull system / push systems
Thus, a kanban system is referred to as a __________ because the kanban is used to ______ parts to the next production stage only when they are needed.
push system / push
pull system / pull
traditional system / ship
traditional system / transfer
pull system / push
pull system / pull
Rule One (1) of the dual card kanban is: No parts are made unless there is a production kanban to authorize production. If no production kanban are in the in box at a work center, the process remains idle, and workers perform other assigned activities. This rule enforces the pull nature of the process control.
True
False
True
The cost of raw materials has traditionally, been a serious concern of top management. Over the years, material cost as a proportion of total cost of the end product has risen sharply and is as high as ______ percent in some instances.
50
60
70
80
90
80
The role of the purchasing function in a manufacturing organization has become increasingly important. The _____________ production control system focuses on reducing both raw materials and work-in-process inventories.
JUST-ON-TARGET
MBO
just-in-time
strategic
just-in-line
just-in-time
The ____________ is to provide a firm with component parts and raw materials. ____________ also must ensure that high-quality products are provided on time, at a reasonable price.
manufacturing department / Manufacturing
operations division / Operations
function of purchasing / Purchasing
procurement department / Operations
buying function / Manufacturing
function of purchasing / Purchasing
One of the most crucial elements of the ____________ system is small lot sizes.
just-in-time
management ordering and buying
just-on-target
purchasing
computer ordering and buying
just-in-time
Traditionally, long and infrequent production runs have in the past been considered beneficial for the overall productivity of a manufacturing organization. However, long production runs usually lead to ____________ of raw-material and finished-goods inventories.
stable levels
low levels
steady flows
intermittent flows
high levels
high levels

JIT purchasing facilitates reduction in _____________ and the associated _____________ costs.

the cost of materials / storage
the cost of shipping / holding
the cost of inventory / storage
inventory levels / materials
inventory levels / inventory holding

inventory levels / inventory holding

Lower levels of __________ contribute significantly to reduced working capital requirements for the firm.

waste
supplies
materials
safety stock
inventory

safety stock
As cooperation and relationships between suppliers and manufacturers build up in a JIT system, so do the opportunities to ______________________ and focus on ________________________.
lower costs of materials and supplies / reducing waste and shrinkage
conduct an extensive competitive analysis / reducing selling prices
conduct an extensive value analysis / reducing the cost of parts purchased
analyze competition / developing competitive strengths
conduct cost analysis / reducing the costs of doing business
conduct an extensive value analysis / reducing the cost of parts purchased
A comprehensive JIT progress report indicates that supplier costs were reduced by ________ when they adopted the JIT system in cooperation with their customers.
significant amounts
11 percent
twenty fold
100 percent
10 percent
11 percent

Because of ____________ and frequent delivery schedules, suppliers are in a position to receive quick feedback regarding any potential manufacturing or design problems. Also, manufacturing is in a position to implement engineering changes quicker because of the _________ inventory levels.

large orders / increased
computerization / flat
smaller orders / increased
computerized ordering systems / reduced
smaller lot sizes / reduced

smaller lot sizes / reduced
The JIT progress report mentioned in the textbook indicates that supplier quality improved by ______ percent since the JIT system was adopted.
26
16
36
6
46
26
It is well documented that JIT reduces physical inventory level. Reductions in physical inventory will also have a favorable impact on: Reduced insurance premiums associated with the storage of inventory, Reduced inventory holding costs, Reduced labor cost in store rooms and material handing costs, Reduced clerical and administrative costs, Reduced waste from the manufacturing process, Reduced obsolescence costs, Reduced deprecation of handling and storage equipment, Each of the cost savings will result in a leaner more profitable operation.
True
False
True
Effective development and implementation of the just-in-time system requires integration of important functional areas such as ______________________. (Choose the best answer)
purchasing
manufacturing
quality
production and transportation
all of the above
all of the above
The _________ see little incentive in adopting the JIT approach when the primary benefits of the program go to the buyer.
customers
suppliers
employees
stockholders
stakeholders
suppliers
Many firms report lack of support from __________ as being one of the major problems encountered in the implementation of JIT (Lean) purchasing.
stakeholders
their employees
their stockholders
their bankers
their lenders
their employees
Very often, resistance is encountered because the employees are required to change their _____________, or because they interpret the new system as being _____________ jobs.
long-standing work habits / a threat to their
work stations / unnecessary to their
job descriptions / an intrusion in their
job standards / an evaluation of their
personal work habits / a change in the expectations of their
long-standing work habits / a threat to their
__________ percent of the firms surveyed using JIT practices in the United States indicated that they had serious problems regarding lack of support from engineering.
Nineteen
Twenty-nine
Sixty-nine
Forty-nine
Thirty-nine
Thirty-nine
If suppliers fail to provide materials of _____________ on a regular basis, production slow-downs and stoppages will occur regularly.
adequate quantity
acceptable quantity
adequate quality
high quality
acceptable quality
adequate quality
A crucial issue to be considered is the relevance of _________ in the successful implementation of the just-in-time system in a country.
culture
procedure
communication style
life styles
policy
culture
It takes time to ___________ of the workforce and _____________ relationships with suppliers.
change habits / improve
change attitudes / nurture long-term
improve the attitudes / build
change old habits / nurture long-term
change attitudes / maintain short-term
change attitudes / nurture long-term

All marketing strategies are compatible with the JIT system.

True
False

False
The transition to ______ has not necessarily been a smooth one for many companies in the United States. But this does not imply that switching from a pure ____ system to a __________ system was a mistake for most companies.
JOT / MRI / JOT or hybrid
JIT / MBO / JIT or hybrid
JIT / MRP / JIT or hybrid
JOT / MRP / JOT or matrix
JIT / MRI / JIT or hybrid
JIT / MRP / JIT or hybrid

_________________ is a stockless inventory method for ordering and stocking MRO and related items. The use of ________________ will aid the firm in reducing ordering and inventory costs.

Purchase Order Systems / Purchase Order Systems
Systems contracting / systems contracting
Systems procurement / systems procurement
Contracting systems / contracting systems
Materials contracting / materials contracting

Systems contracting / systems contracting

The _____________ process requires the use of a negotiated agreement between buyers and sellers.

contracting systems
systems procurement
Purchase Order Systems
materials contracting
systems contracting

systems contracting
The negotiated agreement between buyers and sellers includes the following terms: the type of material, ________________, stocking policy, and delivery requirements.
scope of contract
price
billing policy
All of the above.
B and C only
All of the above.

Recognizing that purchase price is but one element of the total cost picture, the scope of ____________ goes far beyond the purchase price for any given item.

systems contracting
contracting systems
Purchase Order Systems
materials contracting

systems contracting
To extend the commitment to increasing productivity in all departments within a given facility, many companies have adopted the concept of __________.
cost centers
profit centers
profit groups
cost groups
cost divisions
profit centers
__________ professionals are primarily charged with the responsibility for controlling the total cost of ownership (TCO).
Accounting
Purchasing
Marketing
Buying
Operating
Purchasing
Many of the e-procurement software vendors fail to take into account __________________________ and getting suppliers to participate in the e-procurement system.
the total cost of implementing these systems
the difficulty of realizing savings during the development and deployment phases of the transition
the cost of training employees
All of the above.
A and C only
All of the above.

__________ materials are directly related to the production of the finished goods.

Finished
Direct
Raw
Custom
Indirect

Direct

__________ materials are any commodity or service that is not directly involved in the production of finished goods.

Raw
Indirect
Custom
Direct
Finished

Indirect
E-purchasing has lead to significant cost saving and coordinated efficiency.
True
False
True
It is a good idea to implement e-procurement on systems that have a high supply risk and low profit impact, especially if there are a very limited number of suppliers to choose from.
True
False
False
Anything that will immediately impact profits or bottleneck your operations is not a good place to experiment with a new electronic procurement system.
True
False
True

Indirect purchasing can be divided into two categories:

organizational resources management and management of repairs and operations
organizational resource management / maintenance resources and operations
operating resource management and maintenance repair and operations
operations repair management and management of resources and operations
organizational repairs and maintenance / management of resources and organization

operating resource management and maintenance repair and operations

______ purchasing is a term used for purchasing office equipment, furniture, office supplies, forms, computers, travel services, maintenance services, light bulbs, janitorial supplies, and many other relatively low-cost items.

CCM
DOP
MRO
MBO
ORM

ORM

_____ purchasing is concerned with critical maintenance and replacement parts, highly engineered machine parts, and manufacturing equipment..

MRO
MBO
ORM
DOP
CCM

MRO

One problem with indirect purchasing is the tendency for employees to intermittently buy indirect items off contract. This practice is referred to as ________________.

IOC purchasing
local purchasing
OC purchasing
MP
maverick purchasing

maverick purchasing
The seven (7) steps to effectively implement e-procurement are: 1. Start with non-critical items. 2. Bring all internal stakeholders on board with your new procurement process to establish internal customer behavior. 3. Streamline, map, test, troubleshoot, and improve the process before expanding it to external suppliers. Work with a favored supplier to test the system. 4. Leverage your system once it s running. Exploit your full purchasing power by using reverse auctions. 5. Aggregate buyers within your organization to increase your purchasing power and gain better pricing. 6. Use an incremental approach to expand your system. 7. Once the bumps have been ironed out of the system, move on to the manufacturing operations.
True
False
True

Businesses that use reverse auctions, or e-auctions, have given testimonials of savings of more than ____ percent.

80
70
50
90
60

50

With __________, conditions are somewhat different. First, the buying firm initializes the auction by submitting a description of the product or service. Sellers then place bids based on their offer to fulfill the buyer’s needs.

traditional auctions
eBay
silent auctions
Amazon.com
reverse auctions

reverse auctions

In a reverse auction the competition between the sellers drives the price _______, instead of _______, so the buyer pays _________ at the expense of the seller.

down / up / less
up / down / more
down / down / less
up / down / less
up / up less

down / up / less

__________ may not be the solution for all commodity buying. As an example, if there are too few sellers, ___________ will not yield the best price.

Traditional auctions / reverse auctions
Traditional auctions / traditional auctions
Reverse auctions / traditional auctions
Reverse auctions / reverse auctions

Reverse auctions / reverse auctions
A more devastating downside of ______________ is the buyer/seller relationship damage that may result from this method of buying. The buyer runs the risk of alienating both current and potential sources for the goods/services.
traditional auctions
silent auctions
eBay
Overstock.com
reverse auctions
reverse auctions
To maintain trust and cooperation between buying and selling firms, reverse auctions should be used carefully.
True
False
True
______ is the direct computer transmission of orders and other transaction information.
FDIC
EDS
EDI
ESC
DEI
EDI
The main elements of an EDI system are:
computer hardware,software
computer compatibility between the sender and receiver
subscription to a common network
All of the above.
A and B only
All of the above.

There are many benefits to using EDI. For a smaller company, EDI may help ________

keep a valued trading partner or customer
gain new customers or trading partners
all of the above
none of the above

all of the above
There are many benefits to using EDI. For larger firms, the main benefit(s) is (are) generally ________________
the cost savings
to be known as a leading-edge company
all the above
none of the above
all the above

There are some definite benefits to utilizing ______. The first major benefit is reduced labor. Higher information quality due to a reduction in data entry errors also can be attributed to ______

EDI / EDI
CSI / CSI
FDIC / FDIC
RAF / RAF
EID / EID

EDI / EDI

According to the Lewin-Schein theory of change the change process consists of the following three steps:

Unfreezing / Formulating / Refreezing
Unfreezing / Moving / Training
Unfreezing / Training / Moving
Analyzing / Formulating / Freezing
Unfreezing / Moving / Refreezing

Unfreezing / Moving / Refreezing

The way in which the process of developing and implementing an EDI system is managed can greatly influence the success of implementation. Four key areas are:

middle management support, commitment to the project, evaluation, and institutionalization.
top management support, commitment to the project, influence, and institutionalization.
middle management support, knowledge of the project, influence, and institutionalization.
top manage support, knowledge of the project, evaluation, and institutionalization.
top management support, knowledge of the project, commitment, and influence.

top management support, commitment to the project, influence, and institutionalization.

Top management support has long been recognized as one of the _______ important ingredients necessary for the ___________ of any organizational change, and the same holds true for the ____________ of an EDI system.

most / planning / designing
least / implementing / designing
most / scheduling / implementation
most / introduction / introduction
least / planning / designing

most / introduction / introduction

As EDI really takes hold and international EDI becomes more commonplace a major stumbling block will be overcoming the language barriers that now exist. The most widespread EDI language in the United States is _________________

ANSA X12 standard
EDIFACT standard
EDIFACT X10 standard
ODETTE
ANSI X12 standard

ANSI X12 standard

_____________________ is a universal term given to any technology that uses radio waves to identify and track items.

Point of Sale, or POS
Telzon
Radio frequency identification, or RFID
IBMR
OASIS

Radio frequency identification, or RFID

Unlike the barcode-based tracking system, a radio frequency identification system offers a __________________________________ .

fully supported, efficient reading and tracking system.
no-contact, no-line-of-sight reading and tracking system.
contact, no-line-of-sight reading and ordering system.
cost effective, line-of-sight reading and tracking system.
point of sale reading and ordering system.

no-contact, no-line-of-sight reading and tracking system.
RFID tags can be read through snow, fog, ice, paint, and crusted grime, unlike the barcode system. The tag also can be programmed to hold information such as the item s serial number, color, size, manufacture date, and current price, as well as a list of all distribution points the item reaches as it moves before arriving at a store.
True
False
True

E-Procurement benefits by category are: Indirect, Direct, and __________

Decentralized
Centralized
Low cost
Resourcing
Sourcing

Sourcing
Buyers and sellers located on different continents can meet electronically. E-sourcing will also lead to higher transactional accuracy and cost reductions for the entire supply chain. E-sourcing creates value by : 1. Reducing the total cost of ownership. 2. Streamlining the purchasing process and 3. Business innovation
True
False
True

Traditional purchasing professionals who act as little more than order placers are giving way to __________ involved ___________ managers who control vital inputs to the production process.

strategically / analytical
highly/ operations
highly / participative
strategically/ general
highly / general

strategically / analytical
Buying firms select _____________ based on their capabilities, and not purely on the competitive process.
employees
materials
the workforce
managers and supervisors
suppliers
suppliers

The use of outsourcing has quickly become _____________ for an increasing number of businesses.

necessary
a competitive weapon
an advantage
a major strength
a way of operating

a competitive weapon
The following are key mistakes in the make-versus-buy decision: 1) In most cases, businesses are not proficient at identifying their core capabilities. Buyers usually rationalize in-house decisions based on capacity capabilities. 2) Buying organizations wait too late to assess the value of consultants or strategic partners. 3)Buyers do not recognize that the product or service is approaching maturity. 4) There are always new competitors with new technology attacking the market.
True
False
True

_____________ gives a firm more control over the part in question. However, the greater the percentage of internal parts an assembly firm produces, the greater their need to have ___________ in each of the areas involved.

Horizontal integration / competence
Horizontal integration / diversity
Vertical integration / diversity
Vertical integration / good people
Vertical integration / competence

Vertical integration / competence

The buying firm must be highly skilled at ____________________________.

specifying product attributes
forecasting expected requirements
ensuring the right quality at a reasonable price
all the above
A and C only

all the above

Buyers should be experts ___________ and in specific _____________.

on the industry / raw materials or component parts
in the company / technologies
in manufacturing processes / technologies
on material and parts / manufacturing procedures
in engineering / design techniques

on the industry / raw materials or component parts

The _____________________ process is based on the idea of efficient resource coordination and teamwork.

re-supply management
supply chain management
strategic chain management
wholesale chain management
supply chain assistance

supply chain management
The counterproductive relationship is undesirable because: 1) it does not promote a positive rapport between buying and supplying firms involved and 2) neither organization achieves its goals.
True
False
True

________________ relationships are those in which each organization (buying and supplying) is so focused on getting what is best for it that each puts the other at a disadvantage.

Competitive
Collaborative
Counter-collaborative
Counterproductive
Cooperative

Counterproductive

One model that explains supply chain relationship management includes which of the following behavioral dimensions?

counterproductive (lose-lose) / competitive (win-lose)
counter-cooperative (lose-win) / counter-collaborative (win-lose)
collaborative (win-win) relationships / cooperative (win-win)
All of the above.
A and C only

A and C only
A ______________ relationship is almost required with transactional/tier-_______ suppliers and assumes that the buying firm can lower prices to help keep its competitive edge in the market.
collaborative / two
competitive / three
cooperative / three
competitive / five
counterproductive / four
competitive / three

____________ relationships recognize the potential value of both organizations getting what they want and maximize the potential of having a long-term relationship.

Counter-cooperative
Counterproductive
Competitive
Cooperative
Collaborative

Cooperative

Although it is a strong relationship, a cooperative alliance lacks the ___________ that is needed between the various buying and supplying firms in order to optimize the benefits for all of the members of the supply chain.

cooperation
resources
teamwork
communication
commitment

teamwork

Collaboration or collaborative relationships, usually found with the buying firm s strategic/tier-______ suppliers, include the ___________ component that is missing in a cooperative relationship.

three / team
one / team
two / communication
one / communication
five / team

one / team

In collaboration, the two organizations truly realize the benefits of working together to optimize outcomes for both organizations. The two firms work together to develop a ___________ to deliver a high-quality product or service on time and under budget.

process
program
strategy
plan
goal

strategy

Once the system is developed, it then forces the various functions in the buying firm to evaluate which suppliers truly add value. The rankings are aggregated to enable a ranking of all suppliers. The company will then categorize the suppliers into one of three categories:

standard, preferred, or cooperative.
standard, competitive, or preferred.
strategic, preferred, or. transactional.
preferred, critical, or transactional.
strategic, competitive edge, or standard.

strategic, preferred, or. transactional.

___________ suppliers are those that are most important to the buying firm. They supply the buying firm with essential materials and capabilities that are not easily replaced.

standard
Preferred
Strategic
Competitive
Collaborative

Strategic
___________ suppliers are those that are important to the buying firm, but alternative suppliers could be found with some effort.
Standard
Strategic
Cooperative
Competitive
Preferred
Preferred

___________ suppliers are those that can be easily replaced in a short time.

Standard
Transactional
Preferred
Cooperative
Common

Transactional
There are two main categories of supplier evaluations, ___________________.
specification-based evaluations and quality-based evaluations
procedure-based evaluations and quality-based evaluations
process-based evaluations and quality-based evaluations
quality-based evaluations and performance-based evaluations
process-based evaluations and performance-based evaluations
process-based evaluations and performance-based evaluations

The _________ evaluation is an assessment of the supplier s production or service process. ______________ evaluations are based on objective measures of performance.

process-based / Performance-based
performance-based / Process-based
procedure-based / Quality-based
process-based / Quality-based
quality-based / Performance-based

process-based / Performance-based

In addition, large buying organizations increasingly are demanding that their suppliers become certified through third-party organizations, such as ____________ certification or _______________ National Quality Awards.

ISO 0900 / Malcolm Jones
UFO 1000 / Mayfield
POS 2001 / Malcolm Baldrige
ISO 9001 / Malcolm Baldrige
ISO 9000 / Mae Baldrige

ISO 9001 / Malcolm Baldrige
The three general types of supplier evaluation systems in use today are the _________________________.
categorical method, the price-ratio method, and the circular averaging method
categorical method, the cost-ratio method, and the linear averaging method
circular method, the cost-ratio method, and the linear averaging method
cost-ratio method, the gross margin method, and the linear averaging method
categorical-ratio method, the quality-ratio method, and the linear averaging method
categorical method, the cost-ratio method, and the linear averaging method

In general, the guiding factors in determining which system is best are ____________ and _______________ of the system.

quality / cost
quality / cost of implementation
ease of implementation / cost of implementation
reliability / cost
ease of implementation / overall reliability

ease of implementation / overall reliability
The __________ method involves categorizing each supplier s performance in specific areas defined by a list of relevant performance variables.
performance-based
process-based
circular-ratio based
categorical-ratio based
categorical
categorical

The advantages associated with implementing the ________________ evaluation program are that it can be implemented almost immediately and is the least expensive of the three evaluation systems discussed in the textbook.

categorical
process-based
performance
circular-ratio
procedure-based

categorical

The ____________ method s major disadvantage is its dependence on the judgment of its users. The system is largely dependent on the memories of personnel to explain what unsatisfactory or good means. With this method, there is no concrete supporting data.

performance
categorical
process
categorical-ratio
circular-ratio

categorical
The ___________ method evaluates supplier performance by using standard cost analysis.
price-cost-ratio
cost-ratio
performance
process
categorical
cost-ratio

The __________ method is probably the most commonly used evaluation method.

linear averaging
categorical
process
performance
cost averaging

linear averaging

Relationships with strategic suppliers need to be closely managed. One way to keep up on supplier relationships is for a __________ organization is to compile ___________ for each strategic __________.

partner / buyer profiles / supplier
buying / supplier profiles / supplier
supplier / buyer profiles / partner
buying / supplier profiles / partner
manufacturing / supplier standards / partner

buying / supplier profiles / supplier

In addition to the strategic _________ profiles, the buying firm should clearly establish expectations for the strategic _________ and discuss future product and _______ development plans; this is typically done with an annual review period.

buyer / buyers / buyer s
partner / partners / partner s
buyer / suppliers / partner s
supplier / suppliers / supplier
supplier / buyers / partner s

supplier / suppliers / supplier
_______________ and ______________ are necessary in order to keep costs down and create trust with strategic suppliers.
Quality circles / just-in-time delivery
Regular meetings / continuous two way communications
Cost reduction / continuous process improvement
Management by objectives / two way communication
Staff awareness / regular quality meetings
Cost reduction / continuous process improvement
___________________, one type of supplier development program (SDP), are an attempt to meet current and future business needs by improving supplier performance and capabilities.
Supplier training
Supplier evaluations
Supplier workshops
Supplier seminars
Supplier discussions
Supplier evaluations

Buying firm managers should focus their _____ implementation efforts on suppliers that exhibit commitment to the buying firm. Although the buying firm’s perceptions of the supplier’s commitment are inherently biased, it represents the best proxy for the supplier’s commitment.

MOD
PODS
SDP
POS
SOP

SDP
Much debate has taken place concerning the number of suppliers a firm should use. One side of the debate is the _____________ side. This involves the use of two or more suppliers. The other side of the debate is the ____________ policy, in which only one supplier is used to supply a particular part.
multiple-sources / single-source
matrix-sources / hybrid-source
metroplex / single-source
tri-source / mono-source
multi-source / mono-source
multiple-sources / single-source

The main arguments for __________ sourcing are competition and assured supply.

mono
metro
multiple
matrix
multi

multiple

The major arguments in favor of _________ sourcing are that with the certainty of large volumes that the supplier can enjoy lower costs per unit and increased cooperation.

solo
mono
single
multi
multiple

single

A ________ approach can be used that is known as ____________. With this method, the supplier base is expanded without increasing the actual number of suppliers.

multi / multiple-sourcing
matrix / cross-sourcing
hybrid / mono-sourcing
solo / single-sourcing
hybrid / cross-sourcing

hybrid / cross-sourcing
The advantages of multiple sourcing can be viewed as the disadvantages of single sourcing and vice versa.
True
False
True
Single sourcing advocates may want to address the following issues regarding long-term impacts of single sourcing. In the long-run, if everyone reduces their supplier base, there will be fewer suppliers to deal with and overall competition will decrease as there are fewer suppliers. A supplier consolidation will give suppliers less power in the long run.
True
False
False

Grade methods are those that are based on a score or grade given to the supplier by the buyer for some attribute. The most common attributes are _____________________.

cost, reliability, and delivery
quantity, quality, and reliability
quality, price, and delivery
effectiveness, cost, and terms
quality, price, and terms

quality, price, and delivery
The second group of methods used to reduce the number of suppliers a firm uses is what the textbook refers to as the _________ methods.
matrix
hurdle
saddle
barrier
effectiveness
hurdle

Supplier ______________ are very useful tools to evaluate the quality capabilities of a supplier.

review programs
bargaining programs
certification programs
evaluations
negotiations

certification programs
The certification criteria can be changed and updated as recertification may be required. Thus, the hurdle can be lowered until there are a few suppliers left.
True
False
False
Outsourcing can be defined as the ___________ transfer of a business process that has been traditionally ________________ internally to an independently owned external service provider.
partial / owned and supported
complete / operated and managed
first / supervised
business / owned and managed
process / owned and supervised
complete / operated and managed

A complete transfer means that the ______________________________ and other assets are no longer maintained internally once the business process is outsourced.

people, plants, warehouses, headquarters,
facilities, equipment, machinery,
people, facilities, equipment,
people, facilities, equipment, technology,
people, facilities, technology,

people, facilities, equipment, technology

Outsourcing is also sometimes thought to be similar to subcontracting, joint venturing, and contract manufacturing. Contracting is the purchasing of goods or services to facilitate a business process owned by the buyer. The outsourcing point of departure from these concepts is the ________________ of all associated internal business process activities.

date of implementation
agreement for the outsourcing
need to reduce the costs
desire to reduce the expenses
complete transfer

complete transfer

In a recent study, executives categorized their outsourcing activities. Table 9.1 in the textbook illustrates the diverse set of outsourced activities that were reported on. Not surprisingly, information technology outsourcing (ITO) represented the largest number of responses at 25.8 percent. Approximately 35 percent of the responses represented the outsourcing of some type of manufacturing activity, with the remainder being _________________.

business practices administration (BPA)
business process outsourcing (BPO)
business accounting technology (BAT)
business owners administration (BOA)
business technology administration (BTA)

business process outsourcing (BPO)

Outsourcing can be conceptualized as a _________ rather than simply an event. This __________ begins with the development of a strategic and financial business case for outsourcing.

method / method
strategy / strategy
process / process
practice / practice
program / program

process / process
The crafting of the business case is followed by implementing the ____________________ and, ultimately, managing the relationship with the provider.
plan
external sourcing model
contract
outsourcing model
Internal sourcing model
external sourcing model
Global business process outsourcing alone has surpassed the US$________ mark. A recent Booz Allen report posits the expectation that U.S. business process outsourcing will continue to grow at about _____ percent per year in the near term.
9 trillion/12
5 trillion/9
4 trillion/11
6 trillion/8
6 trillion/10
6 trillion/10
According to a recent Deloitte Consulting study, 64 percent of respondents indicated that they had brought outsourced services back in-house. Fifty percent of respondents identified ______________ as the primary problem encountered with outsourcing, while 44 percent _________ realize cost savings.
contractual expenses / did
relationships / did not
hidden costs / did not
relationships / did
hidden costs / did
hidden costs / did not
Another study reported similar findings from a Bain survey of large and medium-sized firms. They found that only ____ percent of the firms were highly satisfied with the costs they were saving, and nearly _____ percent failed to achieve cost savings expectations
5/44
6/60
10/75
10/50
12/50
10/50

a 2005 study reported that, based on the experience of the global consulting firm Booz Allen Hamilton, they would estimate that approximately one in three outsourcing efforts fails to achieve outsourcing expectations. These anecdotal findings suggest that there is a troubling gap between expectations and reality; however, outsourcing is ____________.

here to stay
being revised
being cut back
here for the next couple of years
fading out

here to stay
It is virtually impossible to generalize why organizations outsource various business processes. The final outsourcing decision depends on whether the CEO, CFO, or CIO initiates the outsourcing proposal. Whichever executive initiates the outsourcing proposal, a reduction in __________________ is usually the primary driver.
hidden costs
indirect costs
labor costs
direct operating costs
hidden operating costs
direct operating costs
The cost reduction must be significantly lower than the current direct operating costs in order for an outsourcing proposal to be attractive. The generic strategic benefits of outsourcing are listed below with one exception. Which one is not one of the strategic benefits?
Refocusing the organization to its core competencies is accomplished by focusing what the organization does best and/or transforming the business to focus on new products and services.
Increased market share and revenue is accomplished by assessing the providers network and accelerating expansion into new markets.
Cost minimization is accomplished by reducing direct operating costs, eliminating overhead costs, and transforming fixed costs into variable costs.
Improvement in the organization s core competencies by increasing productivity, reducing indirect operating expenses, lowering overhead, and expanding services.
Improvement in operating performance is accomplished by increasing quality, increasing productivity, and obtaining new capabilities technologies from external sources.
Improvement in the organization s core competencies by increasing productivity, reducing indirect operating expenses, lowering overhead, and expanding services.

Some of the specific benefits of outsourcing are to reduce and control operating costs. Improve quality. Change company focus. Acquire external capabilities. Refocus scarce resources for alternative uses. Reduce cycle time. Obtain cash infusion. Reduce risks. Gain flexibility. Turn fixed costs into variable costs.

True
False

True

While a contract is required to legally protect one’s interests, an extensive strategic assessment and a true commitment to a cooperative relationship with the service provider are both necessary to realize expected outsourcing benefits. These insights offer valuable guidance to __________________ in terms of where and how ______________ should be applied.

business partners / outsourcing techniques
outsourcing practitioners / outsourcing benefits
business practitioners / sourcing techniques
procurement departments / outsourcing benefits
outsourcing practitioners / sourcing resources

outsourcing practitioners / sourcing resources
Outsourcing initiatives must ___________. The type of management and relationship skills and capabilities must be developed through training and/or recruitment within the outsourcing organizations.
create value
create profits
reduce costs
improve quality
create turnover
create value
If sourcing internally, firms must estimate the costs of ________ prevention, the costs of _____________, the cost of ___________, and the cost of ____________.
shrinkage / quantity appraisal / internal losses / external losses
defect / quality appraisal / internal failure / external failure
defect / quantity appraisal / internal problems / external problems
turnover / quality appraisal / internal problems / external problems
shrinkage / quality appraisal / internal losses / external failure
defect / quality appraisal / internal failure / external failure

The buying firm will need to ensure that proper mechanisms are in place to make sure that they are capable of detecting _____________ by an external source.

delivery failures
quantity failures
safety failures
cost failures
quality failures

quality failures
It has long been recognized in both the strategy and operations literature that the most effective external sourcing relationships involve considerable _______________ and ____________.
resources / time
commitment / communication
management time / coordination
management effort / two-way communications
management effort / relationship building
management time / coordination

While internal coordination costs are unique to external sourcing alternatives, they must be contrasted against the _______________ and ____________ associated with internally sourcing a product or service.

management time / turnover costs
internal coordination / overhead costs
external coordination / implementing costs
external coordination / expected benefits
external coordination / overhead costs

internal coordination / overhead costs
In general, one can think of __________ coordination costs as those overhead expenses incurred solely due to the decision to _________ source a product or service.
internal / externally
external / internally
external / externally
management / internally
internal / internally
internal / internally
Presumably, _______________ induces higher levels of many overhead administrative functions such as payroll, benefits management, utility expenses, IT expenses, and so forth.
sourcing internally
outsourcing
sourcing externally
sourcing
alternative sourcing
sourcing internally
The relationship between higher levels of vertical integration and an increase in bureaucratic costs has been noted in the extant academic literature. Some firms have cast the decision to _____________ versus the decision to externally source as a comparison between the costs of bureaucracy and the cost of _____________.
vertically integrate / external coordination
horizontally integrate / internal coordination
merge / management coordination
expand horizontally / supervision
vertically integrate / internal coordination
vertically integrate / external coordination
During the transition period, firms incur additional costs related to internal staff providing _______________. There is usually lower efficiency and effectiveness at the beginning of the contract.
additional resources
advice and assistance
additional support and duplicate resources
duplicate services
training and advice
additional support and duplicate resources
Dunn and Bradstreet found that 20 to 25 percent of all outsourcing relationships fail within __________ and nearly half fail within ____ years. This implies that the likelihood of incurring these expenses again, or experiencing costs associated with re-internalizing an outsourced activity, is ___________. Another critical financial consideration with outsourcing is the impact on the ___________.
two months / ten / relatively high / environment
two years / eight / good / internal workforce
two years / five / relatively high / internal workforce
two years / five / somewhat low / environment
two months / five / relatively high / internal workforce
two years / five / relatively high / internal workforce
Some of the often hidden costs of outsourcing include training internal employees to become relationship managers rather than technical managers. The hidden costs also include ______________________________________ required to thwart labor disputes.
golden parachutes, severance packages, temporary employees, and supervision
retention bonuses, severance packages, employee turnover, and management time
retention bonuses, employee training, redundant activities, and management time
management time, severance packages, employee training, and golden parachutes
performance bonuses, temporary employees, employee turnover, and employee training
retention bonuses, severance packages, employee turnover, and management time
One of the most influential factors in _______________ decisions is the coordination requirements. Perhaps nowhere is this more evident than when considering new product or service development.
horizontal integration
strategic alliance
merger
vertical integration
acquisition
vertical integration

If considering international sourcing alternatives, it is important that the decision makers develop a complete understanding of the costs involved with _____________________ ____________________________________________________________.

moving key personnel to the company of choice, setting up communication links, and building the appropriate facilities
ensuring compliance with governmental laws, regulations, and even local business customs
setting up environmental friendly operations, complying with the local customs, adapting to local regulations, and adjusting to the local culture.
learning local customs, adapting to the culture, meeting local regulations, and adjusting to the language
adjusting to local laws, complying with the local customs, and adapting to the culture

ensuring compliance with governmental laws, regulations, and even local business customs
Tariff rates in ______________ countries are typically less than 10 percent but can be much higher for _________________ nations and for certain products such as agriculture. These environmental parameters may be highly dynamic, requiring analysts to be on the ground and well connected to develop a deep understanding of the _______________.
developed / lesser-developed / evolving environment
lesser developed / developed / evolving environment
developed / lesser developed / evolving business climate
lesser developed / evolving / local customs
developed / lesser developed / target country
developed / lesser-developed / evolving environment

A report by Cranfield University to the Department for Transport in England recognized outsourcing as one of the key factors driving increased levels of ____________. The idea of ______________ should underlie all of the previously discussed cost categories.

insurance / insurance management
losses / loss prevention
shrinkage / shrinkage prevention
supply chain losses / preventing losses
supply chain risk / risk management

supply chain risk / risk management
Broadly, risk can be defined as a measure of the probability and severity of adverse effects. One can divide risk management into four iterative phases. Which of the following is not one of the iterative phases?
contingency planning
Risk mitigation
Loss prevention
Risk monitoring
Risk assessment
Loss prevention

________________ involves answering three questions: (1) What adverse events could happen? (2) What is the probability of these events happening? and (3) What is the financial impact if these events occur?

contingency planning
Risk mitigation
Loss prevention
Risk monitoring
Risk assessment

Risk assessment
_____________ involves a detailed analysis of what can be done to reduce or eliminate the probability and severity of adverse events while also considering the trade-offs involved.
Contingency planning
Risk mitigation
Loss prevention
Risk monitoring
Risk assessment
Risk mitigation
______________ involves continuously evaluating supply chain conditions so that potential issues may be avoided or at least lessened by being more proactive.
Contingency planning
Risk mitigation
Loss prevention
Risk monitoring
Risk assessment
Risk monitoring

A commonly cited source of financial benefit from outsourcing is the vendor’s better ______________.

quality
cost structure
expertise and knowledge
economies of scale
quality and technology

economies of scale
The __________________ is especially concerned with how to coordinate diverse production skills and integrate multiple streams of technology.
lean production system
PDF concept
strength and weakness system
RAP concept
core competency concept
core competency concept
The organization must have a set of ______________ that ensure survival in a competitive marketplace.
values
beliefs
strategic plans
contingency plans
core capabilities
core capabilities
The concept of _______________ along with the resource-based view of the organization provides the basis for the assertion that in considering outsourcing, the decision making team must have a thorough understanding of _______________ capabilities and how they relate to an organization s competitive advantage.
PDF systems / PDF and non-PDF
RFD Systems / RFD and non-RFD
core competencies / core and non-core
advanced technologies / advanced and non-advanced technology
core technologies / core and non-core technology
core competencies / core and non-core
Only organizations that are diligent about understanding and avoiding the pitfalls of _______________ outsourcing and that apply total business-outcome-focused outsourcing will be successful.
international
external
cost focused
quality focused
price reductions
cost focused
Initially, outsourcing decisions predominantly involved ___________, _______________, and activities of ____________ strategic value.
non-standard products / common processes / high
standardized processes / traditional products / relatively high
standardized processes / commoditized products / extremely low
standardized processes / commoditized products / extremely high
non-standardized processes / technology related products / extremely low
standardized processes / commoditized products / extremely low

Firms are increasingly considering more strategic capabilities for outsourcing, making the strategic evaluation much more complex. Firms are discouraged from making outsourcing decisions piecemeal, but rather encourage organizations to make them as part of a __________________.

contingency plan
strategic business plan
outsourcing plan
comprehensive production strategy
comprehensive sourcing strategy

comprehensive sourcing strategy
The _____ step in the make-or-buy decision is to understand the strategic importance (value) of the activity or system.
second
fourth
first
fifth
third
first
Potential outsourcing suppliers must be _____________ and ___________.
recruited / interviewed
identified / investigated
interviewed / selected
selected / qualified
qualified / available
identified / investigated
In addition to the supplier profiles, the buying organization should clearly establish expectations for the potential suppliers and discuss the __________ and the _________________ for the outsourcing activity.
standards / employee training
costs / delivery
scope of work / appropriate pricing
quality / quantity
type of work / quality
scope of work / appropriate pricing
The buying and selling organizations must follow the specific roles outlined in the contract. The buying organization also must appoint a __________ manager. The __________ manager and the suppliers must merge their independent plans into one consensus plan.
coordinating / coordinating
relationship / relationship
contract / contract
purchasing / purchasing
supply / supply
relationship / relationship

It is important to make sure that all ______________ feel as though their interests were represented and considered in making the decision.

employees
stockholders
managers
stakeholders
union members

stakeholders

It is crucial to treat _____________ both survivors of and those directly impacted by outsourcing with respect and dignity during the decision-making and implementation process.

stakeholders
employees
managers
managers and employees
stockholders and stakeholders

employees

Failing to appreciate the ___________ concerns and proactively manage them will have an adverse impact on the outsourcing engagement.

managers’
stockholders’
stakeholders’
employees’
bankers’

employees
In order to effectively cultivate the outsourcing relationship, the buying organization should be active in _______________ performance and ____________________.
managing / identifying problems
monitoring and evaluating / solving problems
monitoring / ensuring quality
evaluating / discussing problems
managing quality / identifying problems
monitoring and evaluating / solving problems
The ____________ establish (es) the performance measures, deliverables, due dates, and the expected supplier requirements. Performance measurement is the cornerstone of the buyer supplier relationship. Without measurement there is no control. Without control there can be no relationship to manage.
negotiating team
original contract
buying organization
supplier
buyer and supplier jointly
original contract
Outsourcing risks include breaches in intellectual property, provider shirking, and opportunistic renegotiation. The combination of contractual incompleteness, asset specificity, and uncertainty gives rise to these risks when firms pursue external sourcing. Outsourcing organizations must have a clear _____________________.
legally binding contract
understanding of the contract
understanding of true supplier intentions
definition of supplier roles and responsibilities
understanding of the supplier s role and responsibilities
understanding of true supplier intentions
____________ is the sum of the actual and potential resources embedded within, available through, and derived from the network of relationships possessed by an individual or social unit.
Political capital
Operating capital
Total assets
Social Capital
Cash flows
Social Capital
For long-term relationships to work, it initially requires _________________ from both parties. Although these longer term relationships can bear significant benefits for the customer and service provider, the road will not always be a smooth one.
a strong commitment
a strong communications system
a good understanding of each other
a meeting of the minds
a pledge to work together
a strong commitment
Equitable distribution of pain and gain will ultimately lead to __________ partnership performance. Along with having a contract that defines performance incentives by means of penalty and reward structures, the relationship also must be able to work through unforeseen conditions in a productive manner.
reduced
enhanced
lower
less
equal
enhanced

A final key element of an effective buyer supplier relationship is ____________________.

the performance evaluation
the monitoring of performance
the control element
the reward element
the incentive to perform well.

the performance evaluation

It appears clear that effective buyer supplier relationships should include a formalized procedure for ______________ the buyer’s expectations and _____________ the supplier’s performance.

communicating / evaluating
setting / monitoring
establishing / evaluating
communicating / changing
establishing / changing

communicating / evaluating
The focus has been on a single aspect of outsourcing: the __________ of jobs, and, in particular, the outsourcing of ___________ jobs.
reduction / blue-collar
reduction / manufacturing
migration / white-collar
migration / service sector
migration / service sector
migration / white-collar
A few countries, notably ______________, are often targeted as the ones that are displacing American workers by offering cheap labor.
Japan and China
South Korea and China
South Korea and Taiwan
India and Japan
India and China
India and China
The intense attention on the outflow of work to overseas locations has generated ________ about which jobs or professions will be outsourced next.
fear
concern
stress
interest
joy
fear
The costs of global sourcing include some of the same costs found in domestic sourcing; there are also costs that are different. These costs are grouped into the following categories: _________________.
administrative
foreign
common
all of the above
all of the above
Exclusively foreign costs are those that would not be incurred if a domestic source were found. Examples of these costs are _________________.
duty charges
custom fees
import fees
currency exchange costs
all of the above
all of the above
Many of the exclusively foreign costs are established by ___________ and are very difficult to avoid.
agreements
suppliers
governments
negotiations
international companies
governments
Direct labor and materials costs, lead-time costs, transportation costs, and inventory costs are a part of both domestic and offshore sourcing. _________________ tend to be higher when sourcing globally.
Transportation costs, inventory costs, and lead-time costs
Transportation costs, materials costs, and lead-time costs
Materials costs, transportation costs, and inventory costs
Transportation costs and inventory costs (only)
Transportation costs and lead-time costs (only)
Transportation costs, inventory costs, and lead-time costs
One of the most important variables to consider is the exchange rate of currencies. Since predicting the fluctuation in currency markets is relatively easy, foreign purchases may actually cost less than negotiated depending on the length of the contract.
True
False
False
Depending on the performance and strength of the dollar, goods can cost American firms different amounts from what s expected.
True
False
True
When the dollar has a weak performance over the life of a contract, a firm can realize savings through the exchange rates
True
False
False
There are many ethical considerations that (companies) must learn in order to be successful. This is one reason that many companies hire _________ to do their sourcing.
agents
importers
nationals
brokers
wholesalers
brokers
Lead times and delivery times can create problems also. Longer times can _______________________. The extended lead time also might push back the date at which a firm is able to introduce new products to the market.
increase inventory and drive down carrying costs
increase inventory needs and drive up carrying costs
reduce inventory needs and drive up ordering costs
increase inventory needs and drive up ordering costs
expand inventory and drive up production costs
increase inventory needs and drive up carrying costs
A third problem companies face in global sourcing is ___________. Many times there are delays and confusion in translations.
negotiating
bargaining
communication
contracting
understanding one another
communication
The associated qualitative risk profiles of _____________________ in some foreign countries must be evaluated.
the impact of national interest
the ethical consequences of sweat shop labor
hazardous working conditions
all of the above
B and C only
all of the above
The general uncertainty associated with the ______________ makes offshore sourcing a risky proposition.
government regulations
business cycle
exchange rate
tariffs
taxes
business cycle
The buying professional who is considering offshore sourcing must be prepared to fully analyze both the _______________ factors.
financial and competitive
competitive and cost
quantitative and capacity
capacity and quality
qualitative and quantitative
qualitative and quantitative
The distance between the buying and selling firm is significant in terms of time zones and physical location. Internet capabilities usually provide a partial solution.
True
False
True
Communication can be described as the _______ that holds together a sourcing relationship.
substance
lubricant
glue
process
procedure
glue

Most of the global risk issues are ____________________________.

distance and communication
time value of money and quality issues
pipeline problems and staffing issues
competition
all of the above

all of the above

Since most offshore deals require the use of a ___________ the buying firm loses the use of funds when the ________ is established

secured credit account / account
letter of credit / letter
wire transfer / transfer
letter of recommendation / letter
credit card / card

letter of credit / letter
The buying firm must spend the necessary time to correctly specify and articulate quality expectations. Then evaluation makes sure that the sample is from a legitimate production run. Prototypes/lab samples should not be analyzed.
True
False
True
___________ inventory issues will always occur when a third party (the shipper) is involved. The problems become pronounced when offshore sourcing is used.
Pipeline
Back up
Reserve
Safety stock
Suppl
Pipeline
If a buying firm is to be effective with an offshore sourcing strategy, it must either hire experts or develop specialists that are assigned to offshore suppliers. Ideally, these individuals must have experience in purchasing management, quality control, and basic accounting. This cost also must be considered in the evaluation process.
True
False
True
The direct and indirect costs (discussed in the textbook) tend to add unexpected costs to purchased items. However, the significant benefits associated with offshore sourcing enable the buying firm to ______________ domestic suppliers
gain leverage over
compete effectively with
reduce costs as compared to
negotiate more effectively with
reduce the number of
gain leverage over
According to the ________________________, export controls and restrictions may be imposed for a range of specific purposes including national security; protection of life, health, and the environment; and the preservation of national treasures.
2001 Fair Trade Act of the European Union
Trade Protection Act of the European Communities
1992 Import and Export Protection Act
1991 Trade Policy Review of the European Communities
1998 Fair Trade and Tariffs Act of the EU
1991 Trade Policy Review of the European Communities
When it comes to negotiations Americans can assume that the English and American businesses operate in the same manner
True
False
False
Due to technical expertise, German negotiators are extremely cautious. The opponent should be well prepared on technical details.
True
False
True
When doing business in France, (a buyer) will often go through a (n) _________ whose credentials are impeccable. (The) choice of __________ is important.
banker / a banker
exporter / an exporter
chief export director / a CED
intermediary contact / an intermediary
secretary of exports / secretary
intermediary contact / an intermediary

China is now a _______ player in the world economy and accounts for more than 6 percent of world trade. This is remarkable for a developing economy. There has been strong import growth, both for processing trade and for domestic consumption

relatively new
minor
major
major-minor
first class

major
The major problems when doing business in China are the language barrier, business practices, and a fluid and diverse legal system. A well-specified _______________ is a basic requirement when buying from China.
procurement strategy
game plan
policy and specification statement
competitive strategy
operational plan
procurement strategy
Any business or individual wanting to import goods into the United States will have to work with the Export Administration (EA) of the U.S. Department of Commerce. Several steps that (a company needs) to be aware of are the following: 1. Determine whether the item (s) in question is subject to the exclusive jurisdiction of a State agency. 2. Determine if the technology or software is privately available. 3. For an item in a foreign country, the cost of the item must be determined. 4. For items made in a foreign country, determine whether it is a decontrolled item in the US. 5. Determine whether the foreign made item is subject to selective prohibition.
True
False
False

The FTC Act of 1934 created ___________ to encourage exports from foreign countries. The act allowed for the storage of goods within the U.S. boundaries without payment until the goods passed to the buying company.

Bill Stowe’s Hair
tax-free zones
transit zones
trade zones
free tariff zones

trade zones
___________ is the exchange of goods for goods in full or partial payment of a sales transaction. Progressive companies must participate in ____________ or risk losing market share.
Exporting / exporting
Exchange trading / exchange trading
Market trading / market trading
Import trading / importing
Counter trade / counter trade
Counter trade / counter trade
Some of the more popular forms of counter trade are as follows with one exception. Which one is the exception?
Offsets
Indirect offsets
Coproduction
Production transfer
Licensed production
Production transfer
_________ are commercial compensation practices required as a condition of purchase of goods and services.
Offsets
Indirect offsets
Coproduction
Sub-contractor production
Licensed production
Offsets
_______________ occur where products or services transferred in an offset arrangement are unrelated to the specific products referred to in the export agreement.
Offsets
Indirect offsets
Coproduction
Sub-contractor production
Licensed production
Indirect offsets

____________ is a form of agreement that involves the purchaser being given a share in the manufacture of a foreign designed product.

Offsets
Indirect offsets
Licensed production
Sub-contractor production
Coproduction

Coproduction

___________________ is when the recipient obtains a share of the production work for its own order.

Offsets
Indirect offsets
Coproduction
Sub-contractor production
Licensed production

Licensed production
_____________ is when a prime contractor substitutes an existing supplier with one located in the buying country.
Offsets
Sub-contractor production
Indirect offsets
Coproduction
Licensed production
Sub-contractor production
________________________ occur as a result of an offset are research and development agreements conducted in the buying country.
Offsets
Indirect offsets
Technology transfers
Coproduction
Licensed production
Technology transfers
_________ is the non monetary exchange of goods-for-goods.
Barter
Offsets
Indirect offsets
Coproduction
Licensed production
Barter
__________ is when the seller exchanges products for compensatory amounts of commodities.
Offsets
Indirect offsets
Coproduction
Counter-purchase
Licensed production
Counter-purchase
____________ is a form of agreement that involves the purchaser being given a share in the manufacture of a foreign designed product.
Offsets
Indirect offsets
Licensed production
Sub-contractor production
Coproduction
Coproduction

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