MGT 301 EXAM 2 || ALL ANSWERS ARE CORRECT
100%.
Compute freight costs based on weight (in tons),
distance and freight rate (based on full truck load or partial
truck load): correct answers Freight cost = D x Wt x Rt
D = Distance
Wt = Annual weight in tons = R*w/2000 lbs/ton
R = Rate (Freight cost in ton-miles)
Compute inventory holding costs after determining average inventory: correct answers Annual
Holding cost= (Q/2)kc = (order quantity/2)(holding cost)(purchase cost)
Annual Order Cost= (R/Q)s = (annual requirements/order quantity) (cost of placing 1 order)
Annual Purchasing Cost = R*C = annual requirements * Purchase cost
- Compute the cost impact from payment terms and explain in your own language why this
represents a cost savings to the buyer. correct answers Working Capital Savings: Annual
purchase $ X (rate X Payment days/360 + discount)
Example: (remember
Net 30 = $6M x (10% x 30/360 + 0%) = $50,000
2% 10 = $6M x (10% x 10/360 + 2%) = $136,667
List the primary goals of purchasing correct answers 1. Ensure uninterrupted flows of raw
materials and services at the lowest total cost
2. Improve quality of the finished goods and services produced
3. Optimize customer satisfaction
Contributions to goals:
- Actively seeking better materials, services, and reliable suppliers
- Work closely with strategic suppliers to improve quality materials and services
- Involving suppliers and purchasing personnel in new product process, service design, and
development efforts
Explain why companies must effectively manage small dollar purchases: correct answers
Smaller purchases add up more, those small purchases need to be carefully monitored.
List the reasons why a company chooses to outsource an item and the reasons for making it:
correct answers Outsourcing allows a firm to:
• Concentrate on core capabilities
• Reduce staffing levels
• Accelerate reengineering efforts
• Reduce management problems
• Improve manufacturing flexibility.
Reasons for Making or Insourcing
• Protect proprietary technology
• No competent supplier
, • Better quality control
• Use existing idle capacity
• Control of logistics- lead-time transportation, and warehousing cost
• Lower cost
List the reasons for having a single supplier and the reasons for having more than 1 supplier and
explain in your own words the benefits that preferred suppliers provide customers: correct
answers Reasons Favoring a Single Supplier
• To establish a good relationship
• Less quality variability
• Lower cost
• Transportation economies
• Proprietary product or process
• Volume too small to split
Reasons Favoring More Than One Supplier
• Need capacity
• Spread risk of supply interruption
• Create competition
• Information
• Dealing with special kinds of business
identify the criteria for selecting suppliers: correct answers • Product and process technologies
• Willingness to share technologies and information
• Quality
• Cost
• Reliability/Price
• Order System and cycle time
• Capacity
• Communication capability
• Location
• Service
- List the keys to successful supplier partnerships and explain the importance of metrics and
continuous improvement for supplier relationship management: correct answers - Shared vision
and objectives
- Personal Relationships
- Mutual Benefits and Needs
- Commitment and Top Management support
- Change management
- Information sharing & lines of communication
- Capabilities
Metrics :1) understandable, 2) easy to measure, and 3) focused on real value-added results
Continuous improvement: Buyers and suppliers must be willing to continuously improve their
capabilities in meeting customer requirements of cost, quality, delivery, and technology.
100%.
Compute freight costs based on weight (in tons),
distance and freight rate (based on full truck load or partial
truck load): correct answers Freight cost = D x Wt x Rt
D = Distance
Wt = Annual weight in tons = R*w/2000 lbs/ton
R = Rate (Freight cost in ton-miles)
Compute inventory holding costs after determining average inventory: correct answers Annual
Holding cost= (Q/2)kc = (order quantity/2)(holding cost)(purchase cost)
Annual Order Cost= (R/Q)s = (annual requirements/order quantity) (cost of placing 1 order)
Annual Purchasing Cost = R*C = annual requirements * Purchase cost
- Compute the cost impact from payment terms and explain in your own language why this
represents a cost savings to the buyer. correct answers Working Capital Savings: Annual
purchase $ X (rate X Payment days/360 + discount)
Example: (remember
Net 30 = $6M x (10% x 30/360 + 0%) = $50,000
2% 10 = $6M x (10% x 10/360 + 2%) = $136,667
List the primary goals of purchasing correct answers 1. Ensure uninterrupted flows of raw
materials and services at the lowest total cost
2. Improve quality of the finished goods and services produced
3. Optimize customer satisfaction
Contributions to goals:
- Actively seeking better materials, services, and reliable suppliers
- Work closely with strategic suppliers to improve quality materials and services
- Involving suppliers and purchasing personnel in new product process, service design, and
development efforts
Explain why companies must effectively manage small dollar purchases: correct answers
Smaller purchases add up more, those small purchases need to be carefully monitored.
List the reasons why a company chooses to outsource an item and the reasons for making it:
correct answers Outsourcing allows a firm to:
• Concentrate on core capabilities
• Reduce staffing levels
• Accelerate reengineering efforts
• Reduce management problems
• Improve manufacturing flexibility.
Reasons for Making or Insourcing
• Protect proprietary technology
• No competent supplier
, • Better quality control
• Use existing idle capacity
• Control of logistics- lead-time transportation, and warehousing cost
• Lower cost
List the reasons for having a single supplier and the reasons for having more than 1 supplier and
explain in your own words the benefits that preferred suppliers provide customers: correct
answers Reasons Favoring a Single Supplier
• To establish a good relationship
• Less quality variability
• Lower cost
• Transportation economies
• Proprietary product or process
• Volume too small to split
Reasons Favoring More Than One Supplier
• Need capacity
• Spread risk of supply interruption
• Create competition
• Information
• Dealing with special kinds of business
identify the criteria for selecting suppliers: correct answers • Product and process technologies
• Willingness to share technologies and information
• Quality
• Cost
• Reliability/Price
• Order System and cycle time
• Capacity
• Communication capability
• Location
• Service
- List the keys to successful supplier partnerships and explain the importance of metrics and
continuous improvement for supplier relationship management: correct answers - Shared vision
and objectives
- Personal Relationships
- Mutual Benefits and Needs
- Commitment and Top Management support
- Change management
- Information sharing & lines of communication
- Capabilities
Metrics :1) understandable, 2) easy to measure, and 3) focused on real value-added results
Continuous improvement: Buyers and suppliers must be willing to continuously improve their
capabilities in meeting customer requirements of cost, quality, delivery, and technology.
