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Chapter 08 - Global Sourcing and Procurement

Chapter 08
Global Sourcing and Procurement
Learning Objectives for Chapter 8:
1. Understand how important sourcing decisions go beyond simple
material purchasing decisions.
2. Demonstrate the bullwhip effect and how it is important to
synchronize the flow of material between supply chain partners.
3. Describe how characteristics of supply and demand have an impact
on structuring supply chains.
. !now the reason for outsourcing capabilities.
". #llustrate what green sourcing is.
$. %nalyze the total cost of ownership.
&. 'alculate inventory turnover and days of supply.
True !alse "uestions

1. Strategic sourcing is the development and management of supplier relationships to acquire
goods and services in a wa that aids in achieving the immediate needs of the business.
!rue "alse

#. !wo common measures to evaluate suppl-chain efficienc are the consumer price inde$
and the beta flow sstem.
!rue "alse

8-1
Chapter 08 - Global Sourcing and Procurement
%. !wo common measures to evaluate suppl-chain efficienc are the inventor turnover and
wee&s-of-suppl ratios.
!rue "alse

'. (nventor turn values that are considered good differ b industr and the tpe of products
being handled.
!rue "alse

). *etailer behavior when stoc&ing up during promotion periods +where the prices of goods
are reduced, is called bac&ward buing.
!rue "alse

-. !he phenomenon that magnifies the variabilit in order quantities for goods as orders move
through the suppl-chain from the customer to the producer is called the bullwhip effect.
!rue "alse

8-#
Chapter 08 - Global Sourcing and Procurement
.. "unctional products include staples that people bu in a wide range of retail outlets/ such as
grocer stores and gas stations.
!rue "alse

8. !he optimal strateg for functional products is to use an efficient suppl-chain.
!rue "alse

0. !he optimal strateg for functional products is to use a responsive suppl-chain.
!rue "alse

10. !he optimal strateg for innovative products is to use an efficient suppl-chain.
!rue "alse

11. !he best strateg for innovative products is to use either a responsive or an agile suppl-
chain.
!rue "alse

1#. 1utsourcing is the act of moving some of a firm2s internal activities and decision
responsibilit to outside providers.
!rue "alse

1%. 1utsourcing allows a firm to achieve an improved focus on its core competencies.
!rue "alse

1'. 3ogistics is a term indicating transportation choices for goods produced internationall but
consumed domesticall.
!rue "alse

8-%
Chapter 08 - Global Sourcing and Procurement
1). 3ogistics is a term that refers to the management functions that support the complete ccle
of material flow/ from the purchase and internal control of production materials4 to the
planning and control of wor&-in-process4 to the purchasing/ shipping/ and distribution of the
finished product.
!rue "alse

1-. 5 financiall-driven reason for outsourcing is that it can turn fi$ed costs into variable
costs.
!rue "alse

1.. 5 financiall-driven reason for outsourcing is that it can shorten ccle time.
!rue "alse

18. 5n organi6ationall-driven reason for outsourcing is that it can improve effectiveness b
focusing on what the firm does best.
!rue "alse

10. 5n organi6ationall-driven reason for outsourcing is that it can transform the
organi6ation.
!rue "alse

#0. 5 financiall-driven reason for outsourcing is that it can reduce costs through a lower cost
structure.
!rue "alse

#1. 5n improvement-driven reason for outsourcing is that it can increase product and service
value/ customer satisfaction/ and shareholder value.
!rue "alse

8-'
Chapter 08 - Global Sourcing and Procurement
##. 5 financiall-driven reason for outsourcing is that it can help gain access to new mar&ets/
especiall in developing countries.
!rue "alse

#%. 5 stable suppl process is one where product volumes are high/ demand is predictable and
there is a long product life.
!rue "alse

#'. 5 stable suppl process is one where the manufacturing process and the underling
technolog are mature and the suppl base is well established.
!rue "alse

#). "irms producing functional products are forced to introduce a stead stream of
innovations in order to survive.
!rue "alse

#-. (nventor turnover and wee&s of suppl are mathematicall the inverse of one another.
!rue "alse

#.. Green sourcing is onl about finding new environmentall friendl technologies and
increasing the use of recclable materials.
!rue "alse

#8. 5n important opportunit in green sourcing is waste reduction opportunities.
!rue "alse

#0. Green sourcing requires incorporating new criteria for evaluating alternatives.
!rue "alse

8-)
Chapter 08 - Global Sourcing and Procurement
%0. !he total cost of ownership +!C1, is an estimate of the cost of an item that includes all
the costs related to the procurement and use of an item/ but does not include an of the costs
related to disposing of the item after it is no longer useful.
!rue "alse

%1. !he total cost of ownership +!C1, can be categori6ed into three areas7 acquisition costs/
ownership costs/ and post-ownership costs.
!rue "alse

%#. (n !otal cost of ownership analsis overemphasis on purchase price frequentl results in
failure to address other significant costs.
!rue "alse

%%. (n conducting a !otal Cost of 1wnership analsis/ it is probabl best to use a team
representing the &e functional areas.
!rue "alse


#ultiple Choice "uestions

%'. !he inventor turnover ratio used in measuring suppl-chain efficienc is found b the
ratio of which of the following8
5. Cost of goods sold95verage aggregate inventor value
:. "i$ed costs9;ariable costs
C. Sales costs9<ar&eting costs
=. Cost of goods sold9Cost to sell goods
>. 1perations flow costs9Suppliers flow costs

8--
Chapter 08 - Global Sourcing and Procurement
%). !he total value of all items held in inventor for the firm at cost is which of the
following8
5. Cost of goods to be sold
:. 5verage aggregate inventor value
C. ?ee&s suppl of goods
=. (nventor turnover
>. @one of the above

%-. (f the average aggregate inventor value is A')/000 and the cost of goods sold is A10/000/
which of the following is wee&s of suppl8
5. ')/000
:. #%'
C. 1#0
=. #%.'
>. '.)

%.. (f the average aggregate inventor value is A1/#00/000 and the cost of goods sold is
A-00/000/ which of the following is wee&s of suppl8
5. 1/0'0
:. -0-
C. 10'
=. -0.-
>. #.0

%8. (f the average aggregate inventor value is A1/#00/000 and the cost of goods sold is
A-00/000/ which of the following is inventor turnover8
5. -0
:. 10.'
C. #
=. 0.)
>. @one of the above

8-.
Chapter 08 - Global Sourcing and Procurement
%0. (f the average aggregate inventor value is A100/000 and the cost of goods sold is
A')0/000/ which of the following is inventor turnover8
5. 10.#%
:. '.)
C. 0.8-)'
=. 0.####
>. @one of the above

'0. (n Bau 3ee2s uncertaint framewor& to classif suppl chains/ a suppl chain for
functional products with an evolving suppl process is called which of the following8
5. >fficient
:. "orward loo&ing
C. 5gile
=. *is& hedging
>. *esponsive

'1. (n Bau 3ee2s uncertaint framewor& to classif suppl chains/ a suppl chain for
functional products with a stable suppl process is called which of the following8
5. >fficient
:. "orward loo&ing
C. 5gile
=. *is& hedging
>. *esponsive

'#. (n Bau 3ee2s uncertaint framewor& to classif suppl chains/ a suppl chain for
innovative products with an evolving suppl process is called which of the following8
5. >fficient
:. "orward loo&ing
C. 5gile
=. *is& hedging
>. *esponsive

8-8
Chapter 08 - Global Sourcing and Procurement
'%. (n Bau 3ee2s uncertaint framewor& to classif suppl chains/ a suppl chain for
innovative products with a stable suppl process is called which of the following8
5. >fficient
:. "orward loo&ing
C. 5gile
=. *is& hedging
>. *esponsive

''. !he effect of the lac& of snchroni6ation among suppl-chain members is referred to as
which of the following8
5. "orward buing
:. Continuous replenishment
C. :ullwhip effect
=. <etcalf2s 3aw
>. :eing out of step

'). (n outsourcing which of the following internal activities and decision responsibilities can
not be transferred to outside contractors8
5. 5ctivities involving people
:. 5ctivities involving facilities
C. 5ctivities involving equipment
=. 5ctivities involving shareholders
>. 5ctivities involving technolog

'-. ?hich of the following is an organi6ationall-driven reason for outsourcing8
5. (mprove effectiveness b focusing on what the firm does best
:. !urn fi$ed costs into variable costs
C. *educe costs through lowered cost structure and increased fle$ibilit
=. (mprove ris& management
>. (mprove credibilit and image b associating with superior providers

8-0
Chapter 08 - Global Sourcing and Procurement
'.. ?hich of the following is not an organi6ationall-driven reason for outsourcing8
5. (mprove effectiveness b focusing on what the firm does best
:. (mprove fle$ibilit to meet changing demand for products and services
C. (ncrease product and service value b improving response to customer needs
=. (mprove credibilit and image b associating with superior providers
>. 5ll of the above are organi6ationall-driven reasons for outsourcing

'8. ?hich of the following is an improvement-driven reason for outsourcing8
5. Shorten ccle time
:. (mprove effectiveness b focusing on what the firm does best
C. (ncrease product and service value b improving response to customer needs
=. !urn fi$ed costs into variable costs
>. *educe costs through a lower cost structure

'0. ?hich of the following is not an improvement-driven reason for outsourcing8
5. (mprove Cualit and productivit
:. >nhance effectiveness b focusing on what ou do best
C. (mprove ris& management
=. 1btain e$pertise/ s&ills and technologies not otherwise available
>. (mprove credibilit and image b associating with superior providers

)0. ?hen considering outsourcing/ what should firms be sure to avoid8
5. 3osing control of non-core activities which don2t distinguish the firm
:. 5llowing outsourcing to develop into a substitute for innovation
C. Giving the outsourcing partner opportunities to become a strong competitor
=. 5llowing emploees transferred to the outsourcing partner to reDoin the firm
>. 5dverse corporate ta$ implications of asset transfers to the outsourcing partner

)1. ?hich is the most challenging &ind of suppl chain to manage according to Bau 3ee8
5. 5gile suppl chain
:. >fficient suppl chain
C. *is&-hedging suppl chain
=. >rratic suppl chain
>. *esponsive suppl chain

8-10
Chapter 08 - Global Sourcing and Procurement
)#. ?hich of the following of "isher2s product categories includes fashionable clothing/
personal computers and other products that tpicall have a ver brief life ccle8
5. "unctional products
:. =sfunctional products
C. (nnovative products
=. :ullwhip products
>. ;alue densit products

)%. ?hich of the following is not an improvement-driven reason to outsource8
5. (mprove ris& management
:. (ncrease commitment in a non-core area
C. Shorten ccle time
=. (mprove qualit and productivit
>. 1btain e$pertise/ s&ills and technologies that are otherwise not available

)'. ?hich of the following is one of the strategic characteristics to consider when deciding
how supplier relationships should be structured on the continuum between vertical integration
+do not outsource, to arm2s length relationships +outsource,8
5. Cost
:. 3ocation
C. (nvestment
=. Coordination
>. !ransportation

)). !he si$-step process for green sourcing does not include which of the following8
5. 5ssess the opportunit.
:. 5ssess the suppl base.
C. Confer with environmental groups.
=. >ngage sourcing agents.
>. (nstitutionali6e the sourcing strateg.

8-11
Chapter 08 - Global Sourcing and Procurement
)-. !he si$-step process for green sourcing includes which of the following8
5. Provide a press release to local +and perhaps national, media.
:. (nclude members of environmental groups in the decision.
C. @otif the state and federal environmental agencies of our plans.
=. Perform an environmental impact stud.
>. =evelop the sourcing strateg.

).. 1wnership costs are incurred after the initial purchase and are associated with the ongoing
use of the product or material. ?hich of the following is not an ownership cost listed in the
te$t8
5. "inancing costs
:. >nerg costs
C. !a$es
=. 5esthetics
>. ?or&er fatigue

)8. 5cquisition costs include which of the following costs8
5. Cualit costs
:. <aintenance and repair costs
C. >nvironmental costs
=. Suppl chain costs
>. Customer dissatisfaction costs

)0. 1wnership costs include which of the following costs8
5. >nvironmental costs
:. ?arrant costs
C. Suppl chain costs
=. Cualit costs
>. !a$es


8-1#
Chapter 08 - Global Sourcing and Procurement
!ill in the $lan% "uestions

-0. ?hat is the effect of the lac& of snchroni6ation among suppl-chain members called8
EEEEEEEEEEEEEEEEEEEEEEEE
EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE

-1. !he acronm *"P stands for7 EEEEEEEEEEEEEEEEEEEEEEEE
EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE

-#. ?hen a customer allows their supplier to manage an item or group of items for them it is
called EEEEEEEEEEEEEEEEEEEEEEEE
EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE

-%. @ame the four tpes of suppl chain in Bau 3ee2s uncertaint framewor& for classifing
suppl chains.
EEEEEEEEEEEEEEEEEEEEEEEE
EEEEEEEEEEEEEEEEEEEEEEEE
EEEEEEEEEEEEEEEEEEEEEEEE
EEEEEEEEEEEEEEEEEEEEEEEE
EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE

-'. (n Bau 3ee2s uncertaint framewor& to classif suppl chains/ a suppl chain that
combines the strengths of a Fris&-hedgingF and a FresponsiveF suppl chain is called what8
EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE
EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE

-). (f the average aggregate inventor value is A'/000 and the cost of goods sold is A10'/000/
what are the wee&s of suppl8 EEEEEEEEEEEEEEEEEEEEEEE
EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE

8-1%
Chapter 08 - Global Sourcing and Procurement
--. (f the wee&s of suppl is 10 and the average aggregate inventor value is A1/000/000/
what is the cost of goods sold8 EEEEEEEEEEEEEEEEEEEEEEE
EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE

-.. (f inventor turnover is #0 and cost of goods sold is A100/000/ what is the average
aggregate inventor value8 EEEEEEEEEEEEEEEEEEEEEEE.
EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE

-8. Baving a suppl chain that is environmentall responsible is called7
EEEEEEEEEEEEEEEEEEEEEEE.
EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE

-0. !he step in the Si$-step Process for Green Sourcing where quantitative and qualitative
criteria to evaluate the sourcing process is developed is called7 EEEEEEEEEEEEEEEEEEEEEEE.
EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE

.0. !he step in the Si$-step Process for Green Sourcing where a set of metrics against which
the supplier will be measured for the contract2s duration is called7
EEEEEEEEEEEEEEEEEEEEEEE.
EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE

.1. 5n estimate of the cost of an item that includes all the costs related to the procurement and
use of an item/ including an related costs in disposing of the item after it is no longer useful
is called what8 EEEEEEEEEEEEEEEEEEEEEEE.
EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE

.#. <easures of sourcing efficienc are EEEEEEEEEEEEEEEEEEEEEEE and
EEEEEEEEEEEEEEEEEEEEEEE.
EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE

8-1'
Chapter 08 - Global Sourcing and Procurement
.%. (n Bau 3ee2s uncertaint framewor& to classif suppl chains/ an
EEEEEEEEEEEEEEEEEEEEEEE suppl chain process should be used for functional products
EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE

.'. (n Bau 3ee2s uncertaint framewor& to classif suppl chains/ a
EEEEEEEEEEEEEEEEEEEEEEE suppl chain process should be used for innovative products.
EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE

8-1)
Chapter 08 - Global Sourcing and Procurement
Chapter 08 Global Sourcing and Procurement 5nswer Ge


True !alse "uestions

1. Strategic sourcing is the development and management of supplier relationships to acquire
goods and services in a wa that aids in achieving the immediate needs of the business.
T&'(

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: no!le"ge
To#ic: Strategic Sourcing

#. !wo common measures to evaluate suppl-chain efficienc are the consumer price inde$
and the beta flow sstem.
!)LS(

AACSB: Analytic
Difficulty: Easy
Learning Objective: $
Taxonomy: no!le"ge
To#ic: %easuring Sourcing &erformance

%. !wo common measures to evaluate suppl-chain efficienc are the inventor turnover and
wee&s-of-suppl ratios.
T&'(

AACSB: Analytic
Difficulty: Easy
Learning Objective: $
Taxonomy: no!le"ge
To#ic: %easuring Sourcing &erformance

8-1-
Chapter 08 - Global Sourcing and Procurement
'. (nventor turn values that are considered good differ b industr and the tpe of products
being handled.
T&'(

AACSB: Analytic
Difficulty: Easy
Learning Objective: $
Taxonomy: no!le"ge
To#ic: %easuring Sourcing &erformance

). *etailer behavior when stoc&ing up during promotion periods +where the prices of goods
are reduced, is called bac&ward buing.
!)LS(

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: no!le"ge
To#ic: Strategic Sourcing

-. !he phenomenon that magnifies the variabilit in order quantities for goods as orders move
through the suppl-chain from the customer to the producer is called the bullwhip effect.
T&'(

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: no!le"ge
To#ic: Strategic Sourcing

.. "unctional products include staples that people bu in a wide range of retail outlets/ such as
grocer stores and gas stations.
T&'(

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: '
Taxonomy: (n"erstan"ing
To#ic: Strategic Sourcing

8-1.
Chapter 08 - Global Sourcing and Procurement
8. !he optimal strateg for functional products is to use an efficient suppl-chain.
!)LS(

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: '
Taxonomy: no!le"ge
To#ic: Strategic Sourcing

0. !he optimal strateg for functional products is to use a responsive suppl-chain.
!)LS(

AACSB: Analytic
Difficulty: Easy
Learning Objective: '
Taxonomy: no!le"ge
To#ic: Strategic Sourcing

10. !he optimal strateg for innovative products is to use an efficient suppl-chain.
!)LS(

AACSB: Analytic
Difficulty: Easy
Learning Objective: '
Taxonomy: no!le"ge
To#ic: Strategic Sourcing

11. !he best strateg for innovative products is to use either a responsive or an agile suppl-
chain.
T&'(

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: '
Taxonomy: no!le"ge
To#ic: Strategic Sourcing

8-18
Chapter 08 - Global Sourcing and Procurement
1#. 1utsourcing is the act of moving some of a firm2s internal activities and decision
responsibilit to outside providers.
T&'(

AACSB: Analytic
Difficulty: Easy
Learning Objective: )
Taxonomy: no!le"ge
To#ic: Outsourcing

1%. 1utsourcing allows a firm to achieve an improved focus on its core competencies.
T&'(

AACSB: Analytic
Difficulty: Easy
Learning Objective: )
Taxonomy: no!le"ge
To#ic: Outsourcing

1'. 3ogistics is a term indicating transportation choices for goods produced internationall but
consumed domesticall.
!)LS(

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: 1
Taxonomy: no!le"ge
To#ic: Strategic Sourcing

1). 3ogistics is a term that refers to the management functions that support the complete ccle
of material flow/ from the purchase and internal control of production materials4 to the
planning and control of wor&-in-process4 to the purchasing/ shipping/ and distribution of the
finished product.
T&'(

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: no!le"ge
To#ic: Strategic Sourcing

8-10
Chapter 08 - Global Sourcing and Procurement
1-. 5 financiall-driven reason for outsourcing is that it can turn fi$ed costs into variable
costs.
T&'(

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: )
Taxonomy: no!le"ge
To#ic: Outsourcing

1.. 5 financiall-driven reason for outsourcing is that it can shorten ccle time.
T&'(

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: )
Taxonomy: no!le"ge
To#ic: Outsourcing

18. 5n organi6ationall-driven reason for outsourcing is that it can improve effectiveness b
focusing on what the firm does best.
T&'(

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: )
Taxonomy: no!le"ge
To#ic: Outsourcing

10. 5n organi6ationall-driven reason for outsourcing is that it can transform the
organi6ation.
!)LS(

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: )
Taxonomy: no!le"ge
To#ic: Outsourcing

8-#0
Chapter 08 - Global Sourcing and Procurement
#0. 5 financiall-driven reason for outsourcing is that it can reduce costs through a lower cost
structure.
T&'(

AACSB: Analytic
Difficulty: Easy
Learning Objective: )
Taxonomy: no!le"ge
To#ic: Outsourcing

#1. 5n improvement-driven reason for outsourcing is that it can increase product and service
value/ customer satisfaction/ and shareholder value.
!)LS(

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: )
Taxonomy: no!le"ge
To#ic: Outsourcing

##. 5 financiall-driven reason for outsourcing is that it can help gain access to new mar&ets/
especiall in developing countries.
T&'(

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: )
Taxonomy: no!le"ge
To#ic: Outsourcing

#%. 5 stable suppl process is one where product volumes are high/ demand is predictable and
there is a long product life.
!)LS(

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: '
Taxonomy: no!le"ge
To#ic: Strategic Sourcing

8-#1
Chapter 08 - Global Sourcing and Procurement
#'. 5 stable suppl process is one where the manufacturing process and the underling
technolog are mature and the suppl base is well established.
T&'(

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: '
Taxonomy: no!le"ge
To#ic: Strategic Sourcing

#). "irms producing functional products are forced to introduce a stead stream of
innovations in order to survive.
!)LS(

AACSB: Analytic
Difficulty: Easy
Learning Objective: '
Taxonomy: (n"erstan"ing
To#ic: Strategic Sourcing

#-. (nventor turnover and wee&s of suppl are mathematicall the inverse of one another.
T&'(

AACSB: Analytic
Difficulty: Easy
Learning Objective: $
Taxonomy: Analysis
To#ic: %easuring Sourcing &erformance

#.. Green sourcing is onl about finding new environmentall friendl technologies and
increasing the use of recclable materials.
!)LS(

AACSB: Analytic
Difficulty: Easy
Learning Objective: *
Taxonomy: (n"erstan"ing
To#ic: +reen Sourcing

8-##
Chapter 08 - Global Sourcing and Procurement
#8. 5n important opportunit in green sourcing is waste reduction opportunities.
T&'(

AACSB: Analytic
Difficulty: Easy
Learning Objective: *
Taxonomy: (n"erstan"ing
To#ic: +reen Sourcing

#0. Green sourcing requires incorporating new criteria for evaluating alternatives.
T&'(

AACSB: Analytic
Difficulty: Easy
Learning Objective: *
Taxonomy: (n"erstan"ing
To#ic: +reen Sourcing

%0. !he total cost of ownership +!C1, is an estimate of the cost of an item that includes all
the costs related to the procurement and use of an item/ but does not include an of the costs
related to disposing of the item after it is no longer useful.
!)LS(

AACSB: Analytic
Difficulty: Easy
Learning Objective: ,
Taxonomy: no!le"ge
To#ic: Total Cost of O!ners-i#

%1. !he total cost of ownership +!C1, can be categori6ed into three areas7 acquisition costs/
ownership costs/ and post-ownership costs.
T&'(

AACSB: Analytic
Difficulty: Easy
Learning Objective: ,
Taxonomy: no!le"ge
To#ic: Total Cost of O!ners-i#

8-#%
Chapter 08 - Global Sourcing and Procurement
%#. (n !otal cost of ownership analsis overemphasis on purchase price frequentl results in
failure to address other significant costs.
T&'(

AACSB: Analytic
Difficulty: Easy
Learning Objective: ,
Taxonomy: (n"erstan"ing
To#ic: Total Cost of O!ners-i#

%%. (n conducting a !otal Cost of 1wnership analsis/ it is probabl best to use a team
representing the &e functional areas.
T&'(

AACSB: Analytic
Difficulty: Easy
Learning Objective: ,
Taxonomy: (n"erstan"ing
To#ic: Total Cost of O!ners-i#


#ultiple Choice "uestions

%'. !he inventor turnover ratio used in measuring suppl-chain efficienc is found b the
ratio of which of the following8
)* Cost of goods sold95verage aggregate inventor value
:. "i$ed costs9;ariable costs
C. Sales costs9<ar&eting costs
=. Cost of goods sold9Cost to sell goods
>. 1perations flow costs9Suppliers flow costs

AACSB: Analytic
Difficulty: Easy
Learning Objective: $
Taxonomy: (n"erstan"ing
To#ic: %easuring Sourcing &erformance

8-#'
Chapter 08 - Global Sourcing and Procurement
%). !he total value of all items held in inventor for the firm at cost is which of the
following8
5. Cost of goods to be sold
$* 5verage aggregate inventor value
C. ?ee&s suppl of goods
=. (nventor turnover
>. @one of the above

AACSB: Analytic
Difficulty: Easy
Learning Objective: $
Taxonomy: no!le"ge
To#ic: %easuring Sourcing &erformance

%-. (f the average aggregate inventor value is A')/000 and the cost of goods sold is A10/000/
which of the following is wee&s of suppl8
5. ')/000
$* #%'
C. 1#0
=. #%.'
>. '.)

AACSB: Analytic
Difficulty: Easy
Learning Objective: $
Taxonomy: Analysis
To#ic: %easuring Sourcing &erformance

%.. (f the average aggregate inventor value is A1/#00/000 and the cost of goods sold is
A-00/000/ which of the following is wee&s of suppl8
5. 1/0'0
:. -0-
C* 10'
=. -0.-
>. #.0

AACSB: Analytic
Difficulty: Easy
Learning Objective: $
Taxonomy: Analysis
To#ic: %easuring Sourcing &erformance

8-#)
Chapter 08 - Global Sourcing and Procurement
%8. (f the average aggregate inventor value is A1/#00/000 and the cost of goods sold is
A-00/000/ which of the following is inventor turnover8
5. -0
:. 10.'
C. #
+* 0.)
>. @one of the above

AACSB: Analytic
Difficulty: Easy
Learning Objective: $
Taxonomy: Analysis
To#ic: %easuring Sourcing &erformance

%0. (f the average aggregate inventor value is A100/000 and the cost of goods sold is
A')0/000/ which of the following is inventor turnover8
5. 10.#%
$* '.)
C. 0.8-)'
=. 0.####
>. @one of the above

AACSB: Analytic
Difficulty: Easy
Learning Objective: $
Taxonomy: Analysis
To#ic: %easuring Sourcing &erformance

'0. (n Bau 3ee2s uncertaint framewor& to classif suppl chains/ a suppl chain for
functional products with an evolving suppl process is called which of the following8
5. >fficient
:. "orward loo&ing
C. 5gile
+* *is& hedging
>. *esponsive

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: '
Taxonomy: (n"erstan"ing
To#ic: Strategic Sourcing

8-#-
Chapter 08 - Global Sourcing and Procurement
'1. (n Bau 3ee2s uncertaint framewor& to classif suppl chains/ a suppl chain for
functional products with a stable suppl process is called which of the following8
)* >fficient
:. "orward loo&ing
C. 5gile
=. *is& hedging
>. *esponsive

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: '
Taxonomy: (n"erstan"ing
To#ic: Strategic Sourcing

'#. (n Bau 3ee2s uncertaint framewor& to classif suppl chains/ a suppl chain for
innovative products with an evolving suppl process is called which of the following8
5. >fficient
:. "orward loo&ing
C* 5gile
=. *is& hedging
>. *esponsive

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: '
Taxonomy: (n"erstan"ing
To#ic: Strategic Sourcing

'%. (n Bau 3ee2s uncertaint framewor& to classif suppl chains/ a suppl chain for
innovative products with a stable suppl process is called which of the following8
5. >fficient
:. "orward loo&ing
C. 5gile
=. *is& hedging
(* *esponsive

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: '
Taxonomy: (n"erstan"ing
To#ic: Strategic Sourcing

8-#.
Chapter 08 - Global Sourcing and Procurement
''. !he effect of the lac& of snchroni6ation among suppl-chain members is referred to as
which of the following8
5. "orward buing
:. Continuous replenishment
C* :ullwhip effect
=. <etcalf2s 3aw
>. :eing out of step

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: no!le"ge
To#ic: Strategic Sourcing

'). (n outsourcing which of the following internal activities and decision responsibilities can
not be transferred to outside contractors8
5. 5ctivities involving people
:. 5ctivities involving facilities
C. 5ctivities involving equipment
+* 5ctivities involving shareholders
>. 5ctivities involving technolog

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: )
Taxonomy: no!le"ge
To#ic: Outsourcing

'-. ?hich of the following is an organi6ationall-driven reason for outsourcing8
)* (mprove effectiveness b focusing on what the firm does best
:. !urn fi$ed costs into variable costs
C. *educe costs through lowered cost structure and increased fle$ibilit
=. (mprove ris& management
>. (mprove credibilit and image b associating with superior providers

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: )
Taxonomy: no!le"ge
To#ic: Outsourcing

8-#8
Chapter 08 - Global Sourcing and Procurement
'.. ?hich of the following is not an organi6ationall-driven reason for outsourcing8
5. (mprove effectiveness b focusing on what the firm does best
:. (mprove fle$ibilit to meet changing demand for products and services
C. (ncrease product and service value b improving response to customer needs
+* (mprove credibilit and image b associating with superior providers
>. 5ll of the above are organi6ationall-driven reasons for outsourcing

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: )
Taxonomy: (n"erstan"ing
To#ic: Outsourcing

'8. ?hich of the following is an improvement-driven reason for outsourcing8
)* Shorten ccle time
:. (mprove effectiveness b focusing on what the firm does best
C. (ncrease product and service value b improving response to customer needs
=. !urn fi$ed costs into variable costs
>. *educe costs through a lower cost structure

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: )
Taxonomy: (n"erstan"ing
To#ic: Outsourcing

'0. ?hich of the following is not an improvement-driven reason for outsourcing8
5. (mprove Cualit and productivit
$* >nhance effectiveness b focusing on what ou do best
C. (mprove ris& management
=. 1btain e$pertise/ s&ills and technologies not otherwise available
>. (mprove credibilit and image b associating with superior providers

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: )
Taxonomy: (n"erstan"ing
To#ic: Outsourcing

8-#0
Chapter 08 - Global Sourcing and Procurement
)0. ?hen considering outsourcing/ what should firms be sure to avoid8
5. 3osing control of non-core activities which don2t distinguish the firm
:. 5llowing outsourcing to develop into a substitute for innovation
C* Giving the outsourcing partner opportunities to become a strong competitor
=. 5llowing emploees transferred to the outsourcing partner to reDoin the firm
>. 5dverse corporate ta$ implications of asset transfers to the outsourcing partner

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: )
Taxonomy: (n"erstan"ing
To#ic: Outsourcing

)1. ?hich is the most challenging &ind of suppl chain to manage according to Bau 3ee8
)* 5gile suppl chain
:. >fficient suppl chain
C. *is&-hedging suppl chain
=. >rratic suppl chain
>. *esponsive suppl chain

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: '
Taxonomy: no!le"ge
To#ic: Strategic Sourcing

)#. ?hich of the following of "isher2s product categories includes fashionable clothing/
personal computers and other products that tpicall have a ver brief life ccle8
5. "unctional products
:. =sfunctional products
C* (nnovative products
=. :ullwhip products
>. ;alue densit products

AACSB: Analytic
Difficulty: Easy
Learning Objective: '
Taxonomy: no!le"ge
To#ic: Strategic Sourcing

8-%0
Chapter 08 - Global Sourcing and Procurement
)%. ?hich of the following is not an improvement-driven reason to outsource8
5. (mprove ris& management
$* (ncrease commitment in a non-core area
C. Shorten ccle time
=. (mprove qualit and productivit
>. 1btain e$pertise/ s&ills and technologies that are otherwise not available

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: '
Taxonomy: (n"erstan"ing
To#ic: Strategic Sourcing

)'. ?hich of the following is one of the strategic characteristics to consider when deciding
how supplier relationships should be structured on the continuum between vertical integration
+do not outsource, to arm2s length relationships +outsource,8
5. Cost
:. 3ocation
C. (nvestment
+* Coordination
>. !ransportation

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: )
Taxonomy: (n"erstan"ing
To#ic: Outsourcing

)). !he si$-step process for green sourcing does not include which of the following8
5. 5ssess the opportunit.
:. 5ssess the suppl base.
C* Confer with environmental groups.
=. >ngage sourcing agents.
>. (nstitutionali6e the sourcing strateg.

AACSB: Analytic
Difficulty: Easy
Learning Objective: *
Taxonomy: no!le"ge
To#ic: +reen Sourcing

8-%1
Chapter 08 - Global Sourcing and Procurement
)-. !he si$-step process for green sourcing includes which of the following8
5. Provide a press release to local +and perhaps national, media.
:. (nclude members of environmental groups in the decision.
C. @otif the state and federal environmental agencies of our plans.
=. Perform an environmental impact stud.
(* =evelop the sourcing strateg.

AACSB: Analytic
Difficulty: Easy
Learning Objective: *
Taxonomy: (n"erstan"ing
To#ic: +reen Sourcing

).. 1wnership costs are incurred after the initial purchase and are associated with the ongoing
use of the product or material. ?hich of the following is not an ownership cost listed in the
te$t8
5. "inancing costs
:. >nerg costs
C* !a$es
=. 5esthetics
>. ?or&er fatigue

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: ,
Taxonomy: no!le"ge
To#ic: Total Cost of O!ners-i#

)8. 5cquisition costs include which of the following costs8
)* Cualit costs
:. <aintenance and repair costs
C. >nvironmental costs
=. Suppl chain costs
>. Customer dissatisfaction costs

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: ,
Taxonomy: (n"erstan"ing
To#ic: Total Cost of O!ners-i#

8-%#
Chapter 08 - Global Sourcing and Procurement
)0. 1wnership costs include which of the following costs8
5. >nvironmental costs
:. ?arrant costs
C* Suppl chain costs
=. Cualit costs
>. !a$es

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: ,
Taxonomy: (n"erstan"ing
To#ic: Total Cost of O!ners-i#


!ill in the $lan% "uestions

-0. ?hat is the effect of the lac& of snchroni6ation among suppl-chain members called8
EEEEEEEEEEEEEEEEEEEEEEEE
The bull,hip effect

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: no!le"ge
To#ic: Strategic Sourcing

-1. !he acronm *"P stands for7 EEEEEEEEEEEEEEEEEEEEEEEE
&e-uest for proposal

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: no!le"ge
To#ic: Strategic Sourcing

8-%%
Chapter 08 - Global Sourcing and Procurement
-#. ?hen a customer allows their supplier to manage an item or group of items for them it is
called EEEEEEEEEEEEEEEEEEEEEEEE
.endor managed inventor/

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: 1
Taxonomy: no!le"ge
To#ic: Strategic Sourcing

-%. @ame the four tpes of suppl chain in Bau 3ee2s uncertaint framewor& for classifing
suppl chains.
EEEEEEEEEEEEEEEEEEEEEEEE
EEEEEEEEEEEEEEEEEEEEEEEE
EEEEEEEEEEEEEEEEEEEEEEEE
EEEEEEEEEEEEEEEEEEEEEEEE
0* (fficient1 2* &esponsive1 3* &is%4hedging5 6* )gile

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: '
Taxonomy: no!le"ge
To#ic: Strategic Sourcing

-'. (n Bau 3ee2s uncertaint framewor& to classif suppl chains/ a suppl chain that
combines the strengths of a Fris&-hedgingF and a FresponsiveF suppl chain is called what8
EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE
)gile

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: '
Taxonomy: no!le"ge
To#ic: Strategic Sourcing

8-%'
Chapter 08 - Global Sourcing and Procurement
-). (f the average aggregate inventor value is A'/000 and the cost of goods sold is A10'/000/
what are the wee&s of suppl8 EEEEEEEEEEEEEEEEEEEEEEE
2 ,ee%s

AACSB: Analytic
Difficulty: Easy
Learning Objective: $
Taxonomy: Analysis
To#ic: %easuring Sourcing &erformance

--. (f the wee&s of suppl is 10 and the average aggregate inventor value is A1/000/000/
what is the cost of goods sold8 EEEEEEEEEEEEEEEEEEEEEEE
7852005000

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: $
Taxonomy: Analysis
To#ic: %easuring Sourcing &erformance

-.. (f inventor turnover is #0 and cost of goods sold is A100/000/ what is the average
aggregate inventor value8 EEEEEEEEEEEEEEEEEEEEEEE.
785000

AACSB: Analytic
Difficulty: %e"ium
Learning Objective: $
Taxonomy: Analysis
To#ic: %easuring Sourcing &erformance

-8. Baving a suppl chain that is environmentall responsible is called7
EEEEEEEEEEEEEEEEEEEEEEE.
Green Sourcing

AACSB: Analytic
Difficulty: Easy
Learning Objective: *
Taxonomy: no!le"ge
To#ic: +reen Sourcing

8-%)
Chapter 08 - Global Sourcing and Procurement
-0. !he step in the Si$-step Process for Green Sourcing where quantitative and qualitative
criteria to evaluate the sourcing process is developed is called7 EEEEEEEEEEEEEEEEEEEEEEE.
+evelop the sourcing strateg/

AACSB: no!le"ge
Difficulty: %e"ium
Learning Objective: *
Taxonomy: no!le"ge
To#ic: +reen Sourcing

.0. !he step in the Si$-step Process for Green Sourcing where a set of metrics against which
the supplier will be measured for the contract2s duration is called7
EEEEEEEEEEEEEEEEEEEEEEE.
9nstitutionali:e the sourcing strateg/

AACSB: no!le"ge
Difficulty: %e"ium
Learning Objective: *
Taxonomy: no!le"ge
To#ic: +reen Sourcing

.1. 5n estimate of the cost of an item that includes all the costs related to the procurement and
use of an item/ including an related costs in disposing of the item after it is no longer useful
is called what8 EEEEEEEEEEEEEEEEEEEEEEE.
Total cost of o,nership

AACSB: no!le"ge
Difficulty: %e"ium
Learning Objective: ,
Taxonomy: no!le"ge
To#ic: Total Cost of O!ners-i#

.#. <easures of sourcing efficienc are EEEEEEEEEEEEEEEEEEEEEEE and
EEEEEEEEEEEEEEEEEEEEEEE.
inventor/ turnover and ,ee%s of suppl/

AACSB: no!le"ge
Difficulty: %e"ium
Learning Objective: 1
Taxonomy: no!le"ge
To#ic: Strategic Sourcing

8-%-
Chapter 08 - Global Sourcing and Procurement
.%. (n Bau 3ee2s uncertaint framewor& to classif suppl chains/ an
EEEEEEEEEEEEEEEEEEEEEEE suppl chain process should be used for functional products
efficient

AACSB: no!le"ge
Difficulty: %e"ium
Learning Objective: '
Taxonomy: no!le"ge
To#ic: Strategic Sourcing

.'. (n Bau 3ee2s uncertaint framewor& to classif suppl chains/ a
EEEEEEEEEEEEEEEEEEEEEEE suppl chain process should be used for innovative products.
responsive processes

AACSB: no!le"ge
Difficulty: %e"ium
Learning Objective: '
Taxonomy: no!le"ge
To#ic: Strategic Sourcing

8-%.

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