MULTIPLE CHOICE, TRUE OR FALSE, FILL IN THE BLANKS PRACTICE QUESTIONS

The authors suggest that the most important step in the purchasing process is _______
A) communication B) transaction management
C) supplier selection D) relationship management

Outsourcing is
A.Exporting
B.Importing
C.A firm having someone else do part of what it previously did itself.
D.Building a factory in another country to produce for that countrys market.
E. Going out of business

Reduction of inventory often creates a risk to lean operations._______ T/F

The purpose of penalty clauses in purchasing agreements is to ________.

A) avoid supplier delivery problems
B) stock inventory at the supplier
C) require the supplier to comply with mandatory cost reduction efforts
D) assure the financial stability of the supplier

Offshoring is
A.Substituting foreign for domestic labor.
B. Subcontracting a part of production to another firm. C. Exporting D. Importing
E.Building a factory in another country to produce for that countrys market.

The function of ________ is to transport and store goods, assuring that inbound
materials are available for operations and that outbound finished products are available
to the customer._______
A) production B) purchasing C) logistics D) material planning

All of the following are major steps in the supplier selection process except ________.
_______
A) development
B) monitoring C) identification
D) approval

"Relationship management" as a part of the purchasing process includes which of the

following tasks.
A) performance monitoring B) supplier payment
C) communication
D) placement of the purchase order

How does offshoring affect an industrys productivity?

a) It reduces productivity by making workers anxious and unable to concentrate on
their jobs.
b) It reduces productivity by replacing workers with low-quality machines,
produced abroad.
c) It increases productivity by scaring workers into working harder.
d) It increases productivity by eliminating the activities at which the firm is least
efficient.
e) It has no measurable effect on productivity, according to studies that have
sought to measure it.

A ________ specifies the overall terms of agreement for a given time period, often 1
or more years and the total quantity purchased.______

A) limited purchase order

B) selection approval

C) blanket order

D) expedite order

Supplier certification suggests that the supplier ________.______

A) meets the requirements of an international standard
B) is capable of consistently shipping high quality material
C) has achieved on-time delivery requirements
D) meets government regulations for the commodity

It is typical for warehouses and distribution centers to perform light manufacturing or

assembly______T/F

Customer service in logistics focuses on understanding what customers want and

measuring logistics performance against these customer requirements. T/F

Firms do not compete only against global competitors, but against:

A.their suppliers. B. themselves. C. the customers of their competitors.
D.their competitors supply chains.

The classic purchasing process begins with:

A.needs identification. B.description. C.supplier selection. D.depletion.

________ design is a manufacturing activity that refers to the technology selection and
work design that is based on production volumes, financial resources, and labor cost.
______
A) Product
B) Material C) Process
D) Facility

The text refers to four practices that are elements of a strong supplier performance
monitoring process. They include all of the following except ________ ______
A) current status of the PO
B) part type or commodity information
C) technology improvements of the commodity
D) contract information

A major goal of lean operations is to identify and eliminate waste.______ T/F

The Japanese term, Jidoka suggests that only manufacturing management can stop the
production line. T/F

One major purchasing objective achieved through the supplier selection process is to
_______ ______ A) identify high quality supplier candidates,
B) establish the make cost of the purchased material
C) maximize use of the ERP system D) determine candidates for future purchased
material

Which of the following is NOT a flow typically found in a supply chain?

A.Physical B. information C.monetary Drisk

______________ is an example of an output of the transformation process.

A.Material B. Information C.Satisfied customers D.Intangible needs

A "pull" or "kanban" system of manufacturing is driven by the amount of received

inventory. ______T/F

21) Lean operations depend on incremental productivity gains and consistent

innovation.
______T/F

a)
b)
c)
d)

Which of the following statements regarding the supply chain is TRUE?

A second tier supplier is downstream from a first tier supplier.
A first tier supplier is upstream from a second tier supplier.
A first tier supplier is downstream from a second tier supplier.
A customer is upstream from a first tier supplier.

One of the benefits of outsourcing is that it permits a business to invest in a few

specific skills while relying on outsource partners to perform other vital activities.
______T/F

Knowledge management is a purchasing skill that modern sourcing professionals

require and would include one of the following ________. ______
A) supplier capacity and capabilities B) downstream processes
C) alternative designs
D) new commodity technology

a)
b)
c)
d)

Which of the following lists is in correct supply chain order?

first tier supplier manufacturer distributor
distributor manufacturer retailer
first tier supplier second tier supplier third tier supplier
customer retailer distributor

Dock-to stock refers to ______________

A) supplied material requires inspection than movement to the stockroom
B) the normal process flow of procured material
C) supplied material is directed to stock and not the manufacturing floor
D) a just-in-time material delivery process

Third-party logistics (3PL) is the insourcing of a business's logistics operations.

______T/F

A ________ is used to clearly describe and communicate needs to sourcing and

includes vital information such as item description, purchase quantity, and delivery
date. ______
A) MRP
B) purchase order C) supplier selection form
D) purchase
requisition

Which of these SCOR model flows moves in the opposite direction from the others?
A.Plan B.Return C.Source D.Make

________ relies on market forces to get suppliers to offer a low price.______

A) Supplier selection B) Competitive bidding C) Negotiation D) Reverse
auctions

Distribution management is concerned with the inbound movement and storage of raw
materials, purchased components and subassemblies.
______T/F

Dwell time ratio evaluates the number of days inventory sits idle compared to the
number of days the inventory is moving.
______T/F

All of the following are typical steps in the purchasing process except ________.
a) A) ERP information system B) relationship management

A quality perspective that focuses on whether or not a product was made or a service
was performed as intended is the:
A.performance perspective. B.value perspective. C.conformance perspective.
a) intention perspective.

"Transaction management" as a part of the purchasing process includes which of the

following tasks.
______
A) evaluation B) price determination C) monitoring supplier improvement D) approval

In a well-managed purchasing department, expediting a purchase order occurs

typically on a ________ percentage of material shipments. ______
A) large B) routine
C) small
D) moderate

The __________ dimension of quality asks how long a product can go between
failures or the need for maintenance.
A.Warranty B. lifetime C. serviceability D. reliability

The non-profit organization, Supply Chain Council proposes a supply chain reference
model as a business standard. All of the following processes are key elements of this
model except ______________
A) return
B) plan C) finance
D) deliver

_______ provides an estimate of what products need to be produced and when they
need to be produced.______
A) Inventory control
B) Scheduling C) Quality control D) Forecasting
________ determines how much and when to make specific products.______
A) Forecasting B) Scheduling C) Inventory control
D) Quality control
Costs incurred by defects that occur prior to delivery to the customer are called:
a) external failure costs. B. internal failure costs. C. appraisal costs. D. prevention
costs.

Process management is a purchasing skill that modern sourcing professionals require.

All of the following are elements of supplier process management except
________.______
A) minimize purchasing costs
B) improvement of the sourcing process
C) manage collaborative processes D) initiate supplier development efforts

The order fulfillment cycle consists of order entry, order picking, packaging, and
shipment. ______T/F

________ is often used instead of a purchase order for small-dollar purchases that the
end-customer can use to purchase material and is similar to a credit card.______
A) P-card
B) Verbal authorization C) MRP directive D) Purchase index card

A major element of the Toyota production system is JIT.______ T/F

To maximize transport efficiencies, more companies are experimenting with shared

logistics services.
______T/F

The term LTL related to truck transportation is defined as a full truckload. _____T/F

14. A technique used to translate customer requirements into technical requirements is:
A.quality assurance. B. statistical quality control.
B.quality function deployment. D.continuous improvement.

A "PO" is a document that specifies the terms and condition of the purchase agreement
and initiates supplier _____________
A) action to proceed B) selection C) notification of customer interest D) bidding

Materials management focuses on the outbound transportation and storage of finished

products from the point of manufacture to where customers wish to acquire them. T/F

Making and delivering a valued product or service is the responsibility of purchasing,

customer service, and logistics.______T/F

Usually a JIT manufacturing system improves productivity AND reduces waste. T/F

The three operation functions, ________, ________, and ________, are responsible
for the "order fulfillment" process.
A) purchasing, production and logistics
B) material control, production, quality assurance
C) purchasing, production and quality assurance D) material control, production, logistics

One international standard for managing quality across the supply chain is:
A.ISO 9000. B. ISO 14000. C. AQL. D.LTPD.

Every time an order is placed at a work center, the time taken to set up is lost as a
productive output time. This is ________ cost._______
A) setup and teardown
B) lost capacity C) purchase order D) production control

________ are devices that move material horizontally or vertically between two fixed
points in a fixed route. _______
A) Hoists
B) Cranes C) Conveyors D) Industrial trucks

Which of the following is NOT an appropriate measure of capacity?

A.square yards of carpet installed per hour B.number of cars assembled per month
B.thickness of laminate on a desktop D.printed pages per minute

The ABC principle is based on ________ law.

A) Deming's B) Crosby's C) Pareto's
D) Juran's

_______

SHORT ANSWER.
A company has 9,000 units on hand and the annual usage is 48,000 units. There are
240 working days in the year. What is the days of supply? _____________

Discuss the total-cost concept._____________

The variable costs associated with distribution centers are space and materials
handling._______T/F

SHORT ANSWER.
What should the objectives be of a firm wishing to maximize profit?
_____________
Inaccurate inventory records will result in: _______
A) increased sales
B) shortages or excess inventory
C) higher productivity D) improved delivery performance

a)
b)
c)
d)

An example of a variable cost is:

a payment to your raw materials supplier.
a lease payment on a piece of equipment.
a mortgage payment on buildings.
a monthly licensing fee for a software package.

The ________ warehouse has a dynamic purpose of movement and mixing.

A) dynamic B) general
C) finished goods
D) WIP

Materials handling is the long-distance movement that takes place in or around a

building such as a plant or distribution center (DC). ______T/F

SHORT ANSWER.
What costa are used for inventory management decisions? _____________

A company ships dog houses fully assembled to luxury dog hotels. The average linehaul cost per shipment is $12.50 per mile and the truck carries 100 assembled large
dog houses. The company decided to ship the houses unassembled and figures it can
ship 500 in a truck. Calculate the line-haul cost per assembled and unassembled dog
house. If the average trip is 300 miles, calculate the potential savings per dog house.
_____________

Taking a physical inventory is a time-honored practice in many companies mainly

because it has been required for an "accurate" appraisal of inventory value for the
annual financial statements. ______T/F

a)
b)
c)
d)

If a firm cannot make a profit regardless of output volume, then:

FC > VC.
VC > FC.
VC > R.
BEP > VC.

A video game publishing company needs to predict the total sales in the European
market for the next year. This is an example of a(n):
A.firm-level demand forecast. B.overall market demand forecast.
C.supply forecast. D.price forecast.

The package must: ______

A) identify the product and protect the product

B) identify and contribute to a product's physical distribution efficiency
C) protect and contain the product
D) all of the above

Cycle counting is a system of counting inventory once per year. ______T/F

A company carries an average annual inventory of $2,000,000. If it estimates the cost

of capital is 10%, storage costs are 7%, and risk costs are 6%, what does it cost per
year to carry this inventory? _____________

Identify the basic systems of locating stock? _____________

Days of supply is calculated as:______

A) inventory on hand/average daily usage B) inventory on hand * average daily usage
C) average daily usage/inventory on hand D) none of the above

A qualitative forecasting technique well-suited for demand forecasts of a new product

or service is the:
A. Delphi method. B. Build-up forecast. C.life cycle analogy method. D.market survey.
It is important to audit record accuracy, but it is important to audit the system to
A) find the causes of record inaccuracy
B) eliminate the causes of record accuracy
C) both A and B
D) neither A nor B
SHORT ANSWER. Write the word or phrase that best completes each statement or answers
the question.
What is a channel of distribution? _____________

A company normally ships a product by trail. Transportation cost is $200 and the
transit time is 10 days. However the goods can be moved by air at a cost of $1,000
and will take only one day to delivery. The cost of inventory in transit for a shipment
is $100 per day. What are the costs involved in their decision._____________

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
Bar codes are read using a laser light. ______

To judge inventory accuracy, a tolerance level for each part must be specified.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or
answers the question.
About 50% of the items account for about 5% of the dollar usage is a good description
of ________ inventory items. ______
A) A B) B C) C D) D
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
Major retailers like Wal-Mart see the value in using RFID as a way of gathering
information and are demanding their use in many of their products. ______

A qualitative forecasting technique in which individuals familiar with specific market

segments estimate the demands within these sectors that are then summed to get an
overall forecast is called a:
A.market survey B.life cycle analogy C.panel consensus D.build-up method
A special count is appropriate when: ______
A) an error is detected B) there is a negative balance on the stock record
C) there is an obvious error D) all of the above
SHORT ANSWER. Write the word or phrase that best completes each statement or answers
the question.
If owners' equity is $1,000 and liabilities are $800, what are the assets?
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
RFID works similar to bar codes but uses reflected radio waves to receive
information.__
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
Not only should the stores staff be well-trained in handling and storing material and in
recording transactions, but other personnel who interact with stores must be trained to
ensure transactions are recorded properly.
______

A long-term movement up or down in a time series is called:

A.seasonality. B. trend. C. randomness. D. cycle.

The use of supply chain partners to provide products or services is called:

A. outsourcing. B. insourcing. C. offloading. D. partnering.

A service firm that takes care of all of the logistics requirements for other companies is
a: A) common carrier.
B) third party logistics provider. C) freight forwarder.
D) contract carrier.

Cargo is loaded and unloaded only once with:

______
A) less-than-truckload shipment. B) multimodal solutions. C) direct truck shipment.
D) None of these modes always has only one loading and unloading.
Which of these is NOT a logistics activity? ______
A) inspection B) warehousing C) material handling
D) inventory management

a)
b)
c)
d)

One advantage of outsourcing is that it:

gives the company a high degree of control over its operations.
increases the companys access to state-of-the-art products and processes.
protects the companys proprietary designs and processes.
encourages the development of the companys core competencies.

Which of these is a direct cost associated with outsourcing?

A. Direct material B. Direct labor C. Variable overhead D. Price from invoice
Which of the following statements about learning curves is best?______
A) Frequent design changes and reengineering have no effect on learning rates.
B) Underestimated learning effects may cause overestimation of capacity needs.

C) An eighty percent learning curve means that each unit takes twenty percent less time to
produce than its immediate predecessor.
D) Learning improvements always follow a constant pattern.
Which of the following statements about theoretical capacity is best?
______
A) Running a factory at this level for a short time is often better than permanently raising
resource levels.
B) Theoretical capacity levels are usually lower than rated capacity levels.
C) Theoretical capacity levels take into account that machines occasionally break and that
workers occasionally call in sick.
D) Theoretical capacity allows adjustments for preventive maintenance.

A sourcing strategy in which two suppliers are used for the same purchased product or
service is: A.cross sourcing. B.dual sourcing. C.contingency sourcing. D.
multisourcing.

If a firm cannot make a profit regardless of output volume, then:_____

A) VC > R.
B) BEP > VC. C) FC > VC. D) VC > FC.

The inventory that companies hold to protect themselves against uncertainties in either
demand or replenishment time is called:
14) ______
A) safety stock. B) hedge inventory. C) smoothing inventory.
D) anticipation
inventory.

Which of these conditions is NOT necessary for the economic order quantity model to
be valid?
A) The item has a constant safety stock.
B) The item has a constant
lead time.
C) The item has a constant price.
D) The item has a constant demand.
Which of these is NOT a logistics activity?
A. material handling B. inventory management C. warehousing
D. inspection

The mode of transportation that is highly cost effective for bulky items but has
relatively poor delivery reliability and speed is:
A. highway. B. water. C. rail. D. air.

This transportation mode is often the most expensive on a per pound basis. 11) ______
A) water
B) highway C) rail D) air

Hub and spoke systems are characterized by:

A.spokes that are represented by the sites that receive the goods.
B.hubs that hold inventory until the appropriate season or upswing in demand.
C.inventory locations that are close to producers, not customers.
D.warehouses that are purely sorting facilities.

A manufacturer replenishes their packaging materials according to the economic order

quantity model. They use 25,000 cases of packaging materials per year and order 500
cases at a time. Their cost to carry a case in inventory for a year is $12. How much
does it cost them to place an order with their supplier?
A) $60 B) $720
C) $5 D) $12

One form of warehousing that features light manufacturing and packaging duties and
allows firms to put off final assembly or packaging until the last possible moment is:
A. assortment warehousing. B. spot stock warehousing.
C. postponement warehousing. D. pac-man warehousing.

A university orders all office supplies, including red grading pens, out of a catalog
from the same supplier. Conservative estimates of the demand for these red pens are
12,000 pens per year. There is a $25 charge for placing an order and the university has
a $10 annual cost for holding these pens. Prices for the pens are based on the quantity
purchased, so if less than 100 are ordered, the unit price is $2.50, if 100 to 299 are
ordered, the unit price is $2.40, if 300 to 499 are ordered, the unit price is $2.30, and if
500 or more are ordered, the unit price is $2.20. What order quantity will result in the
lowest total annual cost to the university?
A) 500 B) 300
C) 100 D) 245

The transportation mode other than highway with the highest annual tonnage in the United
States is:_______ A) rail.
B) air. C) pipeline. D) water.

a)
b)
c)
d)

A firm that is interested in consistent on-time delivery would probably design their
transportation and warehousing system to include:
air transportation with a spot stock warehouse.
rail transportation with a consolidation warehouse.
water transportation with a hub and spoke warehouse.
pipeline transportation with a postponement warehouse.

An advantage to a point-of-use storage is: ______

A) material handling is increased
B) central storage costs are increased
C) material is accessible a all times D) materials are only accessible to marketing
________ is the consolidation of several units into large units so there is less handling.
A) Utilization B) Packaging C) Palletizing D) Centralization

A service firm that takes care of all of the logistics requirements for other companies is
a: A. common carrier. B. contract carrier. C. third party logistics provider. D.
freight forwarder.

The inventory that companies hold to protect themselves against uncertainties in either
demand or replenishment time is called:
A. safety stock. B. anticipation inventory. C. hedge inventory. D.smoothing inventory.
The number of items an item is counted in a year is called its ______________
A) count frequency B) physical count C) cycle frequency
D) cycle count

The more ________ the item, the greater the weight that can be carried in a given
vehicle. A) valuable B) perishable C) packaged D) dense

If shipments to customers are ________, the total transportation cost is ________ by

establishing a distribution center in the area. ______
A) TL, increased
B) LTL, increased
C) TL, reduced
D) LTL, reduced

Individual links in the supply chain can stabilize their production at the most efficient
level by using: A.safety stock. B.anticipation inventory. C.linkage inventory
D.smoothing inventory.

The mismatch between timing of customer demand and supply chain lead times is
what drives the need for:
a) safety stock. B. anticipation inventory. C. cycle stock. D. hedge inventory.
Causes of inventory record error are: ______
A) unsecured stockroom B) poorly trained personnel
C) unauthorized withdrawal of material D) all of the above
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
Distribution centers improve customer service by providing place utility. ______
Operating costs ________ as the number of distribution centers _____________
A) decrease, increase
B) stay the same, increase C) increase, increase
D) increase,
decrease
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
The responsibility for taking the physical inventory usually rests with the marketing
manager who should ensure that a good plan exists and is followed.______

While transportation consolidation is concerned with reduction of transportation costs,

product mixing deals with the grouping of different items into an order and the
economies that warehouses can provide in doing this. ______

Lower inventories can be achieved by ordering smaller quantities more often, but this
practice results in higher annual ordering costs. This defines: ______

Which of the following relationships shows dependent demand inventory?

A.A business purchases a new car when the old one wears out.
B.A tire maker buys cleaning supplies.
C.An automaker purchases four tires for each car they produce.
D.A winemaker buys grapes from farmers in the Columbia Valley.

Which of these conditions is NOT necessary for the economic order quantity model to
be valid?
A. The item has a constant demand. B. The item has a constant lead time.
C. The item has a constant price.
D. The item has a constant safety stock.

As distribution centers are added: ______

A) the costs of LTL shipments to customers increase
B) the total cost of transportation increases
C) the cost of truckload shipments increase
D) the cost of truckload shipments decrease
A stockout can potentially be expensive because of: ______
A) back-order costs B) lost customers C) lost sales
D) all of the above
SHORT ANSWER. Write the word or phrase that best completes each statement or answers

the question.
What are the advantages and disadvantages of air transport? _____________
________ is the amount of money the owners have invested in the company______
A) Retained Earnings B) Capital C) Revenue
D) Income

To survive, companies must ________ at the pace and scale of the marketplace.
A. compete B. grow C. innovate D. globalize

________ and ________ inertia prevent managers from adapting to the evolving rules
of a changing competitive game.
A. Supplier, customer B. Logistical, transformational C. Employee, shareholder
D. Cultural, strategic
An objective of material handling is:______
A) to decrease cube utilization B) increase cube utilization
C) increase the need for aisle space
D) not to consider the height of the building
For physical control and security what is needed is a system that:______
A) makes it difficult for people to make mistakes
B) makes it difficult for people to be dishonest
C) both A and B
D) neither A nor B

The best bet to avoid complacency and decline is to create a culture of _________.
A.cost cutting B .team building C. organizational learning D.innovation

In the ________, items are grouped by zone to make counting more efficient. The
system is used when a fixed-location system is used or when WIP or transit inventory
is being counted.
A) periodic inventory count system B) Location and audit
system C) zone method
D) cycle counting system

In the ________ , rather than handling individual orders, a number of orders are
gathered together and all the items are divided by zone.
______
A) area system B) reserve stock system C) zone system D) multi-order system
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
Laid-down cost is the delivered cost of a product to a particular geographic point.
Tolerances are set on individual items based on:
______
A) availability and lead time
B) ability to stop production and safety problems
C) value and critical nature of the item D) all of the above