Tentamen Purchasing & Supply Chain
Management
The questions stated are meant to practice for the open questions in the exam of Purchasing and
Supply Chain Management, to be held on October 29, 2014, 9.00 – 12.00 hrs.
Questions in this mock exam are organized based on the lectures given. In the exam similar open
questions will be asked about the lectures. In addition to the questions below, the possible exam
questions, as stated in the slides of lectures 4, 6 and 7 can be used to practice for the open
questions in the exam.
In addition to open questions, the exam will include 20 true/false questions and a case study
question based on a newspaper article.
,Lecture 1
Learning goals
› Differences and similarities between SCM and Purchasing
Purchasing and supply chain management share focal concepts (relationships, management of
activities & performance), but differ in focus and scope.
Purchasing SCM
Focus Dyadic relations Multiple relations: first, second, third, …
Supplier focus tier
Supplier and customer focus
Scope Exhange between two Activities in business system: end-to-
organizations end chain or network
Performance Value for buyer Value for end customer (quality, cost,
flexibility, speed, dependability)
› Define purchasing and supply chain management and explain how they are related
Purchasing: The management of a firm’s external resources, supply of goods, services,
knowledge and capabilities to perform the firm’s primary and support activities
Supply chain management: The management of upstream and downstream relations with
suppliers and customers to deliver superior customer value at less cost to the SC as a whole.
Different relations between PM and SCM:
Traditionalist: SCM is part of Purchasing
Re-labeling: SCM has replaced Purchasing
Unionist: Purchasing is in the heart of SCM
Intersectionist: SCM and Purchasing have both common and individual themes and
concepts
› Explain purchasing and supply chain management in relation to concepts as (global)
sourcing and outsourcing
What to make in-house vs what to buy
Outsourcing decision…
contracting out activities/functions to specialized suppliers
…leads to Purchasing activities…
who will provide the activity / function demanded?
…and to management of chains and networks
How to make sure all work together to deliver what the customer wants?
› Evaluate the drivers and challenges of outsourcing
,Purchasing activities
Supplier selection
Negotiating terms and conditions
Supplier monitoring
Management of chains and networks
Increasing supply chain length: what do 2nd, 3rd etc tier suppliers do?
Quality assurance and product reliability
Environmental and ethical considerations
› Analyse ‘make, buy or ally’ decisions from different (theoretical) perspectives,
Application of RBV and TCE
Transaction Cost Economics (TCE)
Decision based on minimization of transaction costs
Asset specificity: to what extent are assets unique to specific task?
Potential for opportunistic behavior: what are the costs for reducing uncertainty?
Make or buy?
High: make
Low: buy
Hybrid forms: long term contracting, alliances
Resource Based View (RBV) & core competencies
Sources of sustained competitive advantage
Skills, resources, activities
Core competencies (Hamel & Prahalad, 1990):
Deliver customer value
Differentiate firm from competitors
Can potentially be extended and developed
Valuable, Rare, Inimitable, Non-substitutable
Make or buy? The closer to the core, the more important to keep in-house
› Evaluate the criticality of the sustainability challenge and how it affects purchasing and
supply chain management
Sustainability: Using resources to meet the needs of the present without compromising the
ability of future generations to meet their own needs
, The three dimensions of sustainability
Environmental
Social
Economic
Tripple bottom line: perform well at all three
Why do firms engage in sustainability? Different reasons:
Political
Legal demands / regulation
Economic
Competitive advantage
Reputation loss
Social/moral
Response to stakeholders, customers, environmental and social pressure groups
Own values, social/moral responsibility
Challenges that firms face:
Focus: New types of stakeholders to deal with
Scope: Cannot be sustainable by yourself
Look at longer part of chain / network
Coordination effort, intense communication in the SC
Performance: wider set of objectives
Short term costs versus long-term revenues
Social and environmental performance
a. Name the three basic concepts related to transaction cost economics. In addition,
explain how these three concepts together inform the make or buy decision. Use 150
words maximum.
Answer slide 30:
Transaction costs (cost incurred in making an economic exchange)
Asset specificity (assets specialized an unique to a specific task)
Opportunism (self-interest seeking behavior)
TCE focuses on minimizing transaction costs. When asset specificity is high (low) and the risk for
opportunistic behavior of suppliers is high (low), TCE recommends an organization to make
(buy) the product in order to minimize these costs. Transactions with highly uncertain outcomes
that occur more frequently and that require highly transaction specific investments should be
made by the organization itself because the company cannot safeguard itself against
opportunistic behaviour.
b. StudentBooks Inc is a writer-printer-publisher of teaching books for students. Recently,
the CEO is reconsidering the organization’s strategy. He has formulated a new mission: ‘be
the gateway to knowledge, anyway, anywhere and anytime the student needs that
knowledge’. The CEO wants to reorganize the organization according to this new mission.
As such he needs to make various make-or buy-decisions. One of these make-or-buy
decisions concerns the printing division of the organization. Reason, from a Resource
Management
The questions stated are meant to practice for the open questions in the exam of Purchasing and
Supply Chain Management, to be held on October 29, 2014, 9.00 – 12.00 hrs.
Questions in this mock exam are organized based on the lectures given. In the exam similar open
questions will be asked about the lectures. In addition to the questions below, the possible exam
questions, as stated in the slides of lectures 4, 6 and 7 can be used to practice for the open
questions in the exam.
In addition to open questions, the exam will include 20 true/false questions and a case study
question based on a newspaper article.
,Lecture 1
Learning goals
› Differences and similarities between SCM and Purchasing
Purchasing and supply chain management share focal concepts (relationships, management of
activities & performance), but differ in focus and scope.
Purchasing SCM
Focus Dyadic relations Multiple relations: first, second, third, …
Supplier focus tier
Supplier and customer focus
Scope Exhange between two Activities in business system: end-to-
organizations end chain or network
Performance Value for buyer Value for end customer (quality, cost,
flexibility, speed, dependability)
› Define purchasing and supply chain management and explain how they are related
Purchasing: The management of a firm’s external resources, supply of goods, services,
knowledge and capabilities to perform the firm’s primary and support activities
Supply chain management: The management of upstream and downstream relations with
suppliers and customers to deliver superior customer value at less cost to the SC as a whole.
Different relations between PM and SCM:
Traditionalist: SCM is part of Purchasing
Re-labeling: SCM has replaced Purchasing
Unionist: Purchasing is in the heart of SCM
Intersectionist: SCM and Purchasing have both common and individual themes and
concepts
› Explain purchasing and supply chain management in relation to concepts as (global)
sourcing and outsourcing
What to make in-house vs what to buy
Outsourcing decision…
contracting out activities/functions to specialized suppliers
…leads to Purchasing activities…
who will provide the activity / function demanded?
…and to management of chains and networks
How to make sure all work together to deliver what the customer wants?
› Evaluate the drivers and challenges of outsourcing
,Purchasing activities
Supplier selection
Negotiating terms and conditions
Supplier monitoring
Management of chains and networks
Increasing supply chain length: what do 2nd, 3rd etc tier suppliers do?
Quality assurance and product reliability
Environmental and ethical considerations
› Analyse ‘make, buy or ally’ decisions from different (theoretical) perspectives,
Application of RBV and TCE
Transaction Cost Economics (TCE)
Decision based on minimization of transaction costs
Asset specificity: to what extent are assets unique to specific task?
Potential for opportunistic behavior: what are the costs for reducing uncertainty?
Make or buy?
High: make
Low: buy
Hybrid forms: long term contracting, alliances
Resource Based View (RBV) & core competencies
Sources of sustained competitive advantage
Skills, resources, activities
Core competencies (Hamel & Prahalad, 1990):
Deliver customer value
Differentiate firm from competitors
Can potentially be extended and developed
Valuable, Rare, Inimitable, Non-substitutable
Make or buy? The closer to the core, the more important to keep in-house
› Evaluate the criticality of the sustainability challenge and how it affects purchasing and
supply chain management
Sustainability: Using resources to meet the needs of the present without compromising the
ability of future generations to meet their own needs
, The three dimensions of sustainability
Environmental
Social
Economic
Tripple bottom line: perform well at all three
Why do firms engage in sustainability? Different reasons:
Political
Legal demands / regulation
Economic
Competitive advantage
Reputation loss
Social/moral
Response to stakeholders, customers, environmental and social pressure groups
Own values, social/moral responsibility
Challenges that firms face:
Focus: New types of stakeholders to deal with
Scope: Cannot be sustainable by yourself
Look at longer part of chain / network
Coordination effort, intense communication in the SC
Performance: wider set of objectives
Short term costs versus long-term revenues
Social and environmental performance
a. Name the three basic concepts related to transaction cost economics. In addition,
explain how these three concepts together inform the make or buy decision. Use 150
words maximum.
Answer slide 30:
Transaction costs (cost incurred in making an economic exchange)
Asset specificity (assets specialized an unique to a specific task)
Opportunism (self-interest seeking behavior)
TCE focuses on minimizing transaction costs. When asset specificity is high (low) and the risk for
opportunistic behavior of suppliers is high (low), TCE recommends an organization to make
(buy) the product in order to minimize these costs. Transactions with highly uncertain outcomes
that occur more frequently and that require highly transaction specific investments should be
made by the organization itself because the company cannot safeguard itself against
opportunistic behaviour.
b. StudentBooks Inc is a writer-printer-publisher of teaching books for students. Recently,
the CEO is reconsidering the organization’s strategy. He has formulated a new mission: ‘be
the gateway to knowledge, anyway, anywhere and anytime the student needs that
knowledge’. The CEO wants to reorganize the organization according to this new mission.
As such he needs to make various make-or buy-decisions. One of these make-or-buy
decisions concerns the printing division of the organization. Reason, from a Resource
