SCMN 3730 Exam 1 Questions and
Answers
Supply management is a more broad concept than purchasing - ANSWER-What is
the difference between Purchasing / Procurement and Supply Management?
The value chain is the entire production chain, and the supply chain is just a portion
or subset of the value chain process - ANSWER-What is the difference between a
supply chain and a value chain?
Identifying, evaluating, selecting, managing, and developing suppliers to improve
performance & moving across functional area boundaries - ANSWER-What is meant
by the term process approach?
Sharing information
Suppliers as an extension of the buying company - ANSWER-What is meant by the
term cross-functional?
Third party logistics
an independent logistics provider that performs any or all of the functions required to
get a client's product to market - ANSWER-What is meant by the term 3PL?
-User selects different supplier than supply management has approved
-May be acceptable when there is small chance of risk
-Loss of opportunity to control cost and/or leverage purchase volume
-Exposes firm to greater risk - ANSWER-What is meant by maverick spending?
Identify user requirements
Evaluate user needs effectively and efficiently
Identify suppliers to meet that need
Develop agreements with suppliers
Develop ordering mechanism
Ensure payment occurs promptly
Ascertain that need was effectively met
Drive continuous improvement - ANSWER-What are the steps in the purchasing
cycle?
when an internal customer has a need that comes up suddenly, which is not planned
for and for which there is no preexisting supplier identified to provide the product or
service required. - ANSWER-Under what circumstances would a spot buy be
appropriate?
Description of required material or service
Quantity required
Estimated unit cost
Operating account to be charged
Date of requisition
, Date required
Authorized signature - ANSWER-What are the required elements of a purchase
requisition?
A preferred supplier has demonstrated its performance capabilities through previous
purchase contracts and therefore receives preference during the supplier selection
process. - ANSWER-What does it take to become a preferred supplier?
Usually open for 1 year
Used for repeated purchases of item or family of items
Release materials as needed vs. issuing new P.O. each time
P.O. remains open during specified term
Importance of escape clause - ANSWER-Blanket Purchase order
Expensive, complex, and critical purchases
Risk of large contingency fee
Need to identify and monitor relevant supplier costs - ANSWER-What is involved in
setting up a cost-based contract?
Raw Materials - ANSWER-Unprocessed natural products used in production
MRO items - ANSWER-Business supplies that include maintenance items, repair
items, and operating supplies.
Most organizations do not track MRO items with same intensity as with production
items
There are typically too many MRO suppliers
There are too many small orders which take up too much time
Capital Equipment - ANSWER-items that require a large dollar amount to purchase
Assets to be used > 1 year
Standard general equipment vs. customized equipment
Features of CE procurement
Irregular frequency
Requires large sums of money
Highly sensitive to general economic conditions
EFT - ANSWER-Electronic Funds Transfer; exchange of money by sending bank
records via a computer network
To not run out of supplies - ANSWER-What is the most important purchasing
objective?
Spend Analysis - ANSWER-Process of collecting historical data by commodity
Category Management - ANSWER-The process of developing insights into
stakeholder requirements, comparing these to external industry intelligence, supply
base capabilities and operational risks, and developing a strategy to align internal
requirements with external supply market conditions.
Answers
Supply management is a more broad concept than purchasing - ANSWER-What is
the difference between Purchasing / Procurement and Supply Management?
The value chain is the entire production chain, and the supply chain is just a portion
or subset of the value chain process - ANSWER-What is the difference between a
supply chain and a value chain?
Identifying, evaluating, selecting, managing, and developing suppliers to improve
performance & moving across functional area boundaries - ANSWER-What is meant
by the term process approach?
Sharing information
Suppliers as an extension of the buying company - ANSWER-What is meant by the
term cross-functional?
Third party logistics
an independent logistics provider that performs any or all of the functions required to
get a client's product to market - ANSWER-What is meant by the term 3PL?
-User selects different supplier than supply management has approved
-May be acceptable when there is small chance of risk
-Loss of opportunity to control cost and/or leverage purchase volume
-Exposes firm to greater risk - ANSWER-What is meant by maverick spending?
Identify user requirements
Evaluate user needs effectively and efficiently
Identify suppliers to meet that need
Develop agreements with suppliers
Develop ordering mechanism
Ensure payment occurs promptly
Ascertain that need was effectively met
Drive continuous improvement - ANSWER-What are the steps in the purchasing
cycle?
when an internal customer has a need that comes up suddenly, which is not planned
for and for which there is no preexisting supplier identified to provide the product or
service required. - ANSWER-Under what circumstances would a spot buy be
appropriate?
Description of required material or service
Quantity required
Estimated unit cost
Operating account to be charged
Date of requisition
, Date required
Authorized signature - ANSWER-What are the required elements of a purchase
requisition?
A preferred supplier has demonstrated its performance capabilities through previous
purchase contracts and therefore receives preference during the supplier selection
process. - ANSWER-What does it take to become a preferred supplier?
Usually open for 1 year
Used for repeated purchases of item or family of items
Release materials as needed vs. issuing new P.O. each time
P.O. remains open during specified term
Importance of escape clause - ANSWER-Blanket Purchase order
Expensive, complex, and critical purchases
Risk of large contingency fee
Need to identify and monitor relevant supplier costs - ANSWER-What is involved in
setting up a cost-based contract?
Raw Materials - ANSWER-Unprocessed natural products used in production
MRO items - ANSWER-Business supplies that include maintenance items, repair
items, and operating supplies.
Most organizations do not track MRO items with same intensity as with production
items
There are typically too many MRO suppliers
There are too many small orders which take up too much time
Capital Equipment - ANSWER-items that require a large dollar amount to purchase
Assets to be used > 1 year
Standard general equipment vs. customized equipment
Features of CE procurement
Irregular frequency
Requires large sums of money
Highly sensitive to general economic conditions
EFT - ANSWER-Electronic Funds Transfer; exchange of money by sending bank
records via a computer network
To not run out of supplies - ANSWER-What is the most important purchasing
objective?
Spend Analysis - ANSWER-Process of collecting historical data by commodity
Category Management - ANSWER-The process of developing insights into
stakeholder requirements, comparing these to external industry intelligence, supply
base capabilities and operational risks, and developing a strategy to align internal
requirements with external supply market conditions.
