PURCHASING AND SUPPLY CHAIN MANAGEMENT MIDTERM
EXAM WITH SOLUTIONS #16
Supply Management - correct answer + A newer term that encompasses all acquisition
activities
+ Identification, acquisition, access, positioning, and management of resources an
organization needs or potentially needs in the attainment of its strategic objectives
Strategic sourcing - correct answer Managing the firm's external resources to support
firm's long term goals
Bench-marking - correct answer The process of copying what other businesses do best
and a comparison amongst competitors
The primary goals of purchasing - correct answer + Ensure uninterrupted flows of raw
materials at the lowest total cost
+Improve quality of the finished goods produced
+Optimize customer satisfaction
Profit Leverage Effect - correct answer Decrease in spending (COGS) is more
advantageous than an equivalent percentage increase in revenue (Sales)
Return on Assets (ROA) - correct answer + Net income/total assets
+ High ROA suggests the firm's ability to make high profits with little investment (lower
spending)
Inventory Turnover - correct answer + Shows how many times inventory is utilized and
replaced
+ Low inventory turnover rate shows poor sales and high inventory levels
Corporate Social Responsibility - correct answer The practice of business ethics
Ethical Sourcing - correct answer That which attempts to take into account the public
consequences of organizational buying or bring about positive social change through
organizational buying behavior
Fair Trade Products - correct answer Manufactured or grown by a disadvantaged
producer in a developing country
Sustainable Sourcing - Sustainability - correct answer The ability to meet current needs
of the supply chain without hindering the ability to meet future needs in terms of
economic, environmental, and social challenges
Social Sourcing - Sustainability - correct answer Considers worker safety, wages,
working conditions, human rights
, Sustainable Sourcing - Green Purchasing - correct answer Aimed at ensuring products
or materials meet environmental objectives e.g. Waste reduction, reuse, re-
manufacturing and recycling
Advantages of e-Procurement - correct answer Time savings, Cost savings, Accuracy,
Real Time
Mobility, Trackability, Management, Benefits to the suppliers
Reasons for Outsourcing - correct answer Better quality, Cost, Technical support and
expertise, Capacity, Volatile demand, Gain information on latest trends
Outsourcing Allows Firms to - correct answer + Concentrate on core capabilities
+ Reduce staffing levels
+ Accelerate re-engineering efforts
+ Reduce management problems
+ Improve manufacturing flexibility
Risks associated with outsourcing - correct answer + Loss of control
+ Production decisions & intellectual property
+ Increased reliance on suppliers
+ Increased need for supplier management
Supply Base Rationalization - correct answer Supply base reduction or supply base
optimization
Advantages to Supply Base Rationalization - correct answer + Reduced purchase
prices
+ Fewer supplier management problems
+ Closer & more frequent interaction between buyer & supplier
+ Greater levels of quality & delivery reliability
Developing Supplier Relationships - correct answer +Building Trust
+ Shared Vision & Objectives
+ Personal Relationships
+ Mutual Benefits & Needs
+ Commitment & Top Management Support
+ Change Management
+ Information Sharing & Lines of Communication
+ Capabilities
Total Cost of Ownership includes: - correct answer + landed cost (transportation and
custom duties)
+ acquire the product
+ service the product
+ installation and maintenance
+ training
EXAM WITH SOLUTIONS #16
Supply Management - correct answer + A newer term that encompasses all acquisition
activities
+ Identification, acquisition, access, positioning, and management of resources an
organization needs or potentially needs in the attainment of its strategic objectives
Strategic sourcing - correct answer Managing the firm's external resources to support
firm's long term goals
Bench-marking - correct answer The process of copying what other businesses do best
and a comparison amongst competitors
The primary goals of purchasing - correct answer + Ensure uninterrupted flows of raw
materials at the lowest total cost
+Improve quality of the finished goods produced
+Optimize customer satisfaction
Profit Leverage Effect - correct answer Decrease in spending (COGS) is more
advantageous than an equivalent percentage increase in revenue (Sales)
Return on Assets (ROA) - correct answer + Net income/total assets
+ High ROA suggests the firm's ability to make high profits with little investment (lower
spending)
Inventory Turnover - correct answer + Shows how many times inventory is utilized and
replaced
+ Low inventory turnover rate shows poor sales and high inventory levels
Corporate Social Responsibility - correct answer The practice of business ethics
Ethical Sourcing - correct answer That which attempts to take into account the public
consequences of organizational buying or bring about positive social change through
organizational buying behavior
Fair Trade Products - correct answer Manufactured or grown by a disadvantaged
producer in a developing country
Sustainable Sourcing - Sustainability - correct answer The ability to meet current needs
of the supply chain without hindering the ability to meet future needs in terms of
economic, environmental, and social challenges
Social Sourcing - Sustainability - correct answer Considers worker safety, wages,
working conditions, human rights
, Sustainable Sourcing - Green Purchasing - correct answer Aimed at ensuring products
or materials meet environmental objectives e.g. Waste reduction, reuse, re-
manufacturing and recycling
Advantages of e-Procurement - correct answer Time savings, Cost savings, Accuracy,
Real Time
Mobility, Trackability, Management, Benefits to the suppliers
Reasons for Outsourcing - correct answer Better quality, Cost, Technical support and
expertise, Capacity, Volatile demand, Gain information on latest trends
Outsourcing Allows Firms to - correct answer + Concentrate on core capabilities
+ Reduce staffing levels
+ Accelerate re-engineering efforts
+ Reduce management problems
+ Improve manufacturing flexibility
Risks associated with outsourcing - correct answer + Loss of control
+ Production decisions & intellectual property
+ Increased reliance on suppliers
+ Increased need for supplier management
Supply Base Rationalization - correct answer Supply base reduction or supply base
optimization
Advantages to Supply Base Rationalization - correct answer + Reduced purchase
prices
+ Fewer supplier management problems
+ Closer & more frequent interaction between buyer & supplier
+ Greater levels of quality & delivery reliability
Developing Supplier Relationships - correct answer +Building Trust
+ Shared Vision & Objectives
+ Personal Relationships
+ Mutual Benefits & Needs
+ Commitment & Top Management Support
+ Change Management
+ Information Sharing & Lines of Communication
+ Capabilities
Total Cost of Ownership includes: - correct answer + landed cost (transportation and
custom duties)
+ acquire the product
+ service the product
+ installation and maintenance
+ training
