SCM 4350 Exam UPDATED ACTUAL
QUESTIONS AND CORRECT ANSWERS
Supply management is a broader concept than purchasing. - CORRECT ANSWER A.
True
Selection and Evaluation Process - CORRECT ANSWER Recognize need for supplier
selection
Identify key sourcing requirements
Determine sourcing strategy
Identify potential supply sources
Limit suppliers in selection pool
Determine method of supplier evaluation and selection
Select supplier and reach agreement
What opportunities are there in Purchasing/Procurement/SC?
Can I make a good living doing this as a job? - CORRECT ANSWER Developing a
sourcing Strategy
Executing a sourcing strategy
Managing day to day operations
The overall importance of the purchasing function is increasing, particularly for firms that
compete in industries characterized by worldwide competition and rapid change. -
CORRECT ANSWER A. True
Why Purchasing/Supply Management Is Important - CORRECT ANSWER Increasing
value and savings
,Building relationships and driving innovation
Improving quality and reputation
Reducing time-to-market
Contributing to competitive advantage
Supplier evaluation and Selection - CORRECT ANSWER During new product
development
Due to poor existing supplier performance
At the end of existing contract
Buying new equipment
Receiving internal user requisitions
A firm's annual sales are $5,000,000, and its annual material costs are $3,000,000. The firm's
profit margin is 9%. The firm's supply management group sets a goal to reduce the material
costs by 3%, which would increase the firm's profit accordingly. If the same profit increase
were to be generated by increasing sales, what sales increase would be required? -
CORRECT ANSWER ($3,000,000*3%)/9% = $1,000,000
Increasing Value and Savings - CORRECT ANSWER Suppliers have substantial
impact on a firm's total cost
Many product features originate from suppliers
In manufacturing, purchased content typically is more
than 55% of revenues
Reducing costs through early involvement in product design stage
,Identify Key Sourcing Requirements - CORRECT ANSWER May be determined by
internal and external customers
Supplier quality
Cost
Delivery performance
Vary widely from item to item
Determine Sourcing Strategy - CORRECT ANSWER Single vs. multiple sourcing
Manufacturer or distributor
Small versus large suppliers
Local or national or international suppliers
Category management is ______ - CORRECT ANSWER B. the process of developing
external industry intelligence and analysis, internal demand, supply base capabilities and
operational risks, and a strategy to approach that marketplace with the organization's needs to
match it with what suppliers can offer.
The Impact on ROI of Reducing Materials Costs vs. Increasing Sales - CORRECT
ANSWER If the same profit increase were to be generated by increasing sales, what
sales increase would be required?
At the existing 8% profit margin, the following calculation provides the answer
Profit increase = new sales X .08
115,000 = new sales x .08
new sales = 115,000/.08 = $1,437,700
1,437,,000,000 * 100=. 28.8% revenue increase
, or a sales increase of 28.8% is required to match the profit increase generated by a 5%
reduction in materials cost
All of the following are conditions under which competitive bidding is effective except ____.
- CORRECT ANSWER A. the buyer has a preferred supplier for the item
Building Relationships and
Driving Innovation - CORRECT ANSWER Traditional approach is to bargain hard for
price reductions
New approach is to conduct joint cost reduction with suppliers
Both the buyer and the supplier must benefit
Suppliers can contribute innovative ideas
A/An ____ is an open order, usually effective for one year, covering repeated purchases of an
item or family of items. - CORRECT ANSWER C. blanket purchase order
Improving Quality and Reputation - CORRECT ANSWER - Buyer focuses on core
competencies and outsources non-core activities and materials
- Need for ability to track materials back up through supplier's supply chain
- *Supplier quality --> product quality*
* Lapses in managing supplier quality can potentially tarnish a buyer's reputation
Single vs. multiple sourcing - CORRECT ANSWER Overall trend to rationalize supply
base
QUESTIONS AND CORRECT ANSWERS
Supply management is a broader concept than purchasing. - CORRECT ANSWER A.
True
Selection and Evaluation Process - CORRECT ANSWER Recognize need for supplier
selection
Identify key sourcing requirements
Determine sourcing strategy
Identify potential supply sources
Limit suppliers in selection pool
Determine method of supplier evaluation and selection
Select supplier and reach agreement
What opportunities are there in Purchasing/Procurement/SC?
Can I make a good living doing this as a job? - CORRECT ANSWER Developing a
sourcing Strategy
Executing a sourcing strategy
Managing day to day operations
The overall importance of the purchasing function is increasing, particularly for firms that
compete in industries characterized by worldwide competition and rapid change. -
CORRECT ANSWER A. True
Why Purchasing/Supply Management Is Important - CORRECT ANSWER Increasing
value and savings
,Building relationships and driving innovation
Improving quality and reputation
Reducing time-to-market
Contributing to competitive advantage
Supplier evaluation and Selection - CORRECT ANSWER During new product
development
Due to poor existing supplier performance
At the end of existing contract
Buying new equipment
Receiving internal user requisitions
A firm's annual sales are $5,000,000, and its annual material costs are $3,000,000. The firm's
profit margin is 9%. The firm's supply management group sets a goal to reduce the material
costs by 3%, which would increase the firm's profit accordingly. If the same profit increase
were to be generated by increasing sales, what sales increase would be required? -
CORRECT ANSWER ($3,000,000*3%)/9% = $1,000,000
Increasing Value and Savings - CORRECT ANSWER Suppliers have substantial
impact on a firm's total cost
Many product features originate from suppliers
In manufacturing, purchased content typically is more
than 55% of revenues
Reducing costs through early involvement in product design stage
,Identify Key Sourcing Requirements - CORRECT ANSWER May be determined by
internal and external customers
Supplier quality
Cost
Delivery performance
Vary widely from item to item
Determine Sourcing Strategy - CORRECT ANSWER Single vs. multiple sourcing
Manufacturer or distributor
Small versus large suppliers
Local or national or international suppliers
Category management is ______ - CORRECT ANSWER B. the process of developing
external industry intelligence and analysis, internal demand, supply base capabilities and
operational risks, and a strategy to approach that marketplace with the organization's needs to
match it with what suppliers can offer.
The Impact on ROI of Reducing Materials Costs vs. Increasing Sales - CORRECT
ANSWER If the same profit increase were to be generated by increasing sales, what
sales increase would be required?
At the existing 8% profit margin, the following calculation provides the answer
Profit increase = new sales X .08
115,000 = new sales x .08
new sales = 115,000/.08 = $1,437,700
1,437,,000,000 * 100=. 28.8% revenue increase
, or a sales increase of 28.8% is required to match the profit increase generated by a 5%
reduction in materials cost
All of the following are conditions under which competitive bidding is effective except ____.
- CORRECT ANSWER A. the buyer has a preferred supplier for the item
Building Relationships and
Driving Innovation - CORRECT ANSWER Traditional approach is to bargain hard for
price reductions
New approach is to conduct joint cost reduction with suppliers
Both the buyer and the supplier must benefit
Suppliers can contribute innovative ideas
A/An ____ is an open order, usually effective for one year, covering repeated purchases of an
item or family of items. - CORRECT ANSWER C. blanket purchase order
Improving Quality and Reputation - CORRECT ANSWER - Buyer focuses on core
competencies and outsources non-core activities and materials
- Need for ability to track materials back up through supplier's supply chain
- *Supplier quality --> product quality*
* Lapses in managing supplier quality can potentially tarnish a buyer's reputation
Single vs. multiple sourcing - CORRECT ANSWER Overall trend to rationalize supply
base
