BUS/230 Week 5 Quiz – Strayer
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Make or Buy, Insourcing and Outsourcing
32. One of the most fundamental and critical decisions in any organization is, should we:
a. have a single source or multiple sources for a specific purchase?
b. order small quantities to avoid carrying costs or large quantities to get volume discounts?
c. switch suppliers because of a slight price discount from a potential supplier?
d. make or buy the needed good or service?
e. enter into a long- or short-term agreement with a supplier?
33. When a team has decided that a task or function currently performed by company employees is not a core competency, the team will probably recommend:
c. continuing to make.
d. continuing to buy.
34. Deciding what represents a core competency in an organization is:
a. a decision best left to the organization’s Board of Directors.
b. a decision best left to the Chief Executive Officer.
c. always the same for companies in the same industry.
d. a fairly easy decision once organizational goals and objectives are known.
e. often a fairly complex decision and a function of many factors.
35. Outsourcing of services is:
a. unrealistic because of the difficulty in measuring and evaluating the performance of service providers.
b. realistic if the internal users and the buyer can carefully define service requirements and quality expectations.
c. declining in popularity because of buyers’ dissatisfaction with most third party service providers.
d. realistic because of the ease in measuring and evaluating performance of service providers.
e. realistic because it is relatively easy to define service requirements and measure the quality of a service provider.
36. Currently, managements tend toward:
a. making rather than buying.
b. buying parts and assembling them onsite.
c. insourcing entire operations.
d. outsourcing entire operations.
e. making anything that is low risk.
a. is often chosen as a way for the organization to reduce or control operating costs, improve company focus, and gain access to world-class capabilities.
b. is a low risk venture because the firm can always revert back to performing the function in-house at low cost.
c. occurs primarily in large manufacturing firms in the private sector, but is rarely practiced in public purchasing.
d. usually results in increased hiring to attain expertise that the organization does not already possess.
e. decisions are based on financial factors that most organizations can easily access through their accounting system.
38. In the outsourcing decisions in many organizations, supply has had:
a. a leadership role.
b. extensive involvement.
c. relatively moderate involvement.
d. limited involvement
e. virtually no involvement.
39. Supply managers believe they can add the most value to the outsourcing decision by:
a. advising the outsourcing team on relevant contractual terms and conditions.
b. reviewing the analysis conducted by the outsourcing team.
c. providing a comprehensive, competitive process.
d. being available if the internal users want their assistance.
e. managing the contract once the decision has been implemented.
40. Supply management:
a. has been outsourced in many organizations because it is not a core competency.
b. has been outsourced in many organizations because of its tactical nature.
c. has not been outsourced because the chief purchasing officer makes outsourcing decisions.
d. and logistics have not been outsourced because both are considered core competencies in most organizations.
e. is seldom outsourced in its entirety, but activities such as inventory monitoring, order placement, and order receiving are outsourced.
41. Subcontracting refers to the practice of:
a. a prime contractor bidding out part of a job to another contractor.
b. an organization hiring a contractor to perform a task it has been doing in house.
c. an organization hiring substitute labor to cover for a supplier’s labor shortage.
d. a prime contractor bidding on another contractor’s incomplete jobs.
e. a prime contractor hiring substitute labor during a strike.
Loss of control is:
a. seldom a concern when considering outsourcing.
b. a concern of the supplier in an outsourcing situation.
c. a concern within the buying organization when considering outsourcing.
d. one of the advantages of outsourcing.
e. one reason few organizations outsource services.
True and False
1. Insourcing and outsourcing occur when a newly formed company first decides what to make inhouse and what to buy from suppliers.
2. Some of the concerns about outsourcing are centered around layoffs, exposure to supplier’s risks, and unexpected fees.
3. Some of the reasons an organization may decide to make rather than buy are: greater supply assurance, stringent quality requirements, and very small quantity requirements.
4. The gray zone in make or buy provides the opportunity to test and learn without fully committing to make or buy.
5. Some of the reasons an organization may decide to buy rather than make are: greater supply assurance, stringent quality requirements, and very small quantity requirements.
6. Supply managers typically recommend insourcing.
7. Outsourcing is prevalent in both the private and public sectors.
8. Growth in outsourcing in the logistics area can be attributed to growing deregulation of transportation companies.
9. Subcontracts are useful when the work is easy to define, has a short time horizon, and is relatively inexpensive.
10. The logistics function and tasks such as freight auditing, leasing, and maintenance and repair are often outsourced because they typically do not represent core competencies.
Need Identification and Specification
42. An advantage of buying by performance or function over other specification methods is that it provides:
a. evidence that the buyer has given thought and careful study to the need and the ways in which it may be satisfied.
b. the opportunity for the potential supplier to establish how to make the most suitable product.
c. the potential for equitable competition by ensuring that the suppliers are quoting for exactly the same material or service.
d. a standard for measuring and checking materials as supplied.
e. an opportunity to purchase identical requirements from a number of different sources of supply.
2. Supply’s growing involvement in the acquisition of services may be explained by:
a. declining technical knowledge of internal users of services.
b. the need for more of a personal relationship with the service supplier.
c. the fact that price and service-delivery requirements are complex.
d. the growing respect for supply managers as equals in the organization.
e. the high dollars spent on services and the opportunities to reduce costs.
3. Capital assets are long-term assets that:
a. are bought and sold in the regular course of business.
b. have an expected use of less than one year.
c. have an ongoing effect on the organization’s operations.
d. are generally expensed.
a. are acquired for fairly small sums of money.
4. When a specification is widely known, commonly recognized and readily available to every buyer, it is called a:
1. standard specification.
2. performance specification.
3. individual specification.
4. market grade specification.
5. customized specification.
5. Early supply involvement can be accomplished by:
a. staffing the engineering department with supply professionals.
b. using cross-functional teams on new product development.
c. encouraging internal customers to regularly interact with suppliers.
d. empowering internal customers to evaluate and select suppliers.
e. co-locating accounting staff in the purchasing/supply department.
6. Description by brand:
a. may be a preference of an internal user, but it is never a necessity.
b. is the least risky and lowest cost approach to attaining “best value.”
c. may be a necessity because the manufacturing process is secret.
d. should always be discouraged by the buyer.
e. indicates a supplier has unduly influenced someone in the buyer’s organization.
7. The purpose of identifying the function of an item to be required is:
a. to provide the mathematics for a suitable inspection program.
b. to assist in the determination of what represents acceptable value.
c. to avoid having to purchase a branded item.
d. to avoid substitution.
e. to avoid engineering-purchasing arguments.
8. A buyer may be compelled to purchase by specification when:
a. a high degree of supplier expertise or skill is required and difficult to define.
b. the internal user’s preferences are impossible to overcome.
c. a supplier holds a needed patent.
d. an opportunity exists to purchase identical requirements from several sources.
e. the buyer wants the supplier to decide how to make the most suitable product.
a. means agreement on definite sizes, design, and quality.
b. is essentially a marketing and sales concept.
c. is a reduction in the number of sizes and designs.
d. is a selective and commercial problem.
e. is an attempt to concentrate production on the most important sizes.
10. Supply chain risks include:
a. interruptions to the flow of goods or services.
b. actions that lower the company’s attractiveness to the investment community.
c. lack of regulatory compliance.
d. a and c
e. a, b, and c
True and False
1. Quality as a term covers both functionality: “Does it do the job we want
done?” and conformance to specification: “Does it fit the specification agreed to?”
2. MRO stands for Maintenance, Resale, and Operating Supplies.
3. Capital items can be depreciated, are often bought under a separate budgetary allocation, and may require special financing arrangements.
4. Equipment, real estate, and construction are examples of capital acquisitions, but information technology is not.
5. Assets may be tangible or intangible.
6. Packaging is an easy category to buy because it has few disposal, environmental, and transportation implications.
7. Buying capital equipment differs from other types of purchases because determination of final cost includes estimates over the life of the equipment.
8. New technology frequently permits an organization to gain competitive advantage on the bases of different products and services at significantly lower cost.
9. For non-repetitive requirements, a system or process of acquisition can be designed.
10. The price of a semiprocessed material—steel sheets instead of ingots, frozen pork bellies instead of hogs, cocoa butter instead of beans—tends to move in the opposite direction of the price of the basic raw material.