SCM 406 EXAM 1 UPDATED ACTUAL QUESTIONS AND CORRECT ANSWERS

SCM 406 EXAM 1 UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS

Question:
1. purchasing
Answer:
-a functional group (i.e. a formal entity on the organization chart) as well as a functional activity (i.e.
buying goods and services)
-"procurement" and "purchasing" are often used interchangeably

Question:
2. what types of activities would you perform?
Answer:
-buying stuff or services
-researching the supply market
-identifying and selecting suppliers
-negotiating price and other factors
-awarding and monitoring contracts
-measuring suppliers' performance over time and taking action
-improving purchasing systems/processes

Question:
3. sourcing
Answer:
finding, evaluating, and contracting with the best supplier

Question:
4. purchasing def
Answer:
processing the transaction; getting a price, placing an order, receiving the items, matching invoice to the
order and items received

Question:
5. procurement
Answer:
= sourcing + purchasing + supplier management + total cost management

Question:
6. buyer
Answer:
someone who does purchasing (purchasing agent or analyst)

Question:
7. institute for supply management (ISM)

,Answer:
-largest professional association in the world
-career center
-professional credential programs
-certified professional in supply management (CPSM)
-certified professional in supplier diversity (CPSD)
-certified purchasing manager (CPM) (mission is to lead the supply management profession through its
standards of excellence in research, promotional activities, and education) *end lesson 1*

Question:
8. make vs. buy past
Answer:
-RM-->fabrication-->CP-->assembly-->FG
-RM= raw material
-CP= component part
-FG= finished goods (in the past, a suppliers responsibility was really only with RM/fabrication)

Question:
9. procurement costs as a % of revenue examples
Answer:
-IBM- 52% of revenue spent on procurement
-Delta- 50%
-Dell- 82%

Question:
10. make vs. buy- present
Answer:
-suppliers are resonsible for RM, fabrication, CP, assembly
-Now, more activities are being outsourced to suppliers and thus their responsibility is being shifted
downwards. Manufacturers, such as automobile manufacturers, may only do the final assembly of cars.
With clothing maybe all of the manufacturing is outsourced and producers just get the FG, but aren't
actually involved with any of the RA or CP.

Question:
11. procuring through risk and uncertainty
Answer:
-drive toward outsourcing- biggest
-unplanned events
-wall street's impatience
-product life cycles "the product assault on Apple's products.."
-competition
-changing tax, trade polices regulations

Question:
12. 5 reasons why purchasing is important to a firm:

, Answer:
1. creates value and savings for the firm
2. builds relationships and drives innovation
3. improves quality and reputation
4. reduces time-to-market for new products
5. manages risk (supply-side)

Question:
13. 1. creates value and savings
Answer:
-suppliers have substantial impact on a firm's total cost
-many ideas originate from suppliers
-in a manufacturing firm, purchased content of a product can be 55% or more of revenue
-cost avoidance through early involvement in product design

Question:
14. 2. builds relationships and drives innovation
Answer:
-traditional approach is to bargain hard for price reductions
-new approach is to conduct joint cost reduction with suppliers
-buyer and supplier BOTH benefit
-suppliers can contribute innovative ideas

Question:
15. types of SC relationships:
Answer:
arm's length, collaborative, strategic

Question:
16. arm's length
Answer:
-transactional
-routine
-low value ex. office supply for hershey

Question:
17. collaborative
Answer:
-partnerships
-critical
-high value

Question:
18. strategic