SCMT Exam 2 - FLASHCARDS - Chapter 16
What is focused on acquiring goods and services in a way that aids in achieving the needs of the business?
Strategic sourcing
A process suitable for procuring products that are strategically important to the firm?
Sourcing
What is a sourcing term to describe how common an item is and/or how many substitutes may be available?
Specify
_____ available products can be purchased using a relatively simple process?
Commonly
When the supplier takes full responsibility to manage items for the customer, the supplier is performing
vendor managed inventory.
______ is so sophisticated that even core functions such as engineering, research and development, manufacturing, information technology, and marketing can be moved outside the firm.
Outsourcing
What are the drawbacks to forward buying? Check all that apply.
Lower purchase price
Large carrying costs
Shipment bulge
Higher supply chain costs
Large carrying costs
Shipment bulge
Higher supply chain costs
Sourcing activities can vary greatly and depend on what thing?
The item being purchased.
A generic pizza box that can be used by multiple pizza shops is an example of a product with _____ specificity?
Low
The bullwhip effect indicates a lack of what among supply chain members?
synchronization
_____ _____ _____ is commonly used for purchasing items that are more complex or expensive and where there may be a number of potential vendors?
Request for proposal
Specific criteria for identifying functional products include which of the following? Check all that apply.
Forecast errors below 1-2%
Long product life cycle
Few (10-20) variations
High contribution margins
Long product life cycle
Few (10-20) variations
Which of the following is not a common constraint regarding vendor managed inventory?
Billing transaction process
Required service level
Shipping terms
Maximum inventory level
Shipping terms
What type of products have a life cycle of just a few months?
Innovative
What term is used to describe a practice where a customer purchases excess parts in advance?
Forward buying
Which of the following resources may be transferred in outsourcing? Check all that apply.
People
Equipment
Facilities
Technology
Non-related activities
People
Equipment
Facilities
Technology
A one-time purchase is called what?
spot purchase
Which of the following is not an organizationally driven reason to outsource?
Increase flexibility
Increase product and service value
Generate cash by selling low-return entities
Improve effectiveness
Generate cash by selling low-return entities
What is a program for automatically supplying groups of items to a customer on a regular basis?
Continuous replenishment
What type of products include staples that people buy in a wide range of retail outlets?
Functional
Which of the following is not a reason why a firm may choose to outsource an activity?
Shorten cycle time
Turn variable costs into fixed costs
Improve risk management
Gain access to new markets, particularly in developing countries.
Improve quality
Turn variable costs into fixed costs
What are some reasons that a firm might outsource logistics?
Lower costs.
Reducing the number of employees.
Freight tracking using technology.
What should not be considered when structuring a supplier relationship?
Collaboration
What type of activities are key to the business but do not confer a competitive advantage?
Core
When considering all costs of an item, we call it the:
total cost of ownership.
Which cost of ownership includes maintenance and ergonomic factors?
Ownership
What is strategic sourcing?
the development and management of supplier relationships to acquire goods and services in a way that aids in achieving the immediate needs of the business
What is another name for strategic sourcing?
purchasing or procurement
What is a firm’s supply management goals?
- Ensure timely availability of resources
- Reduce total cost of ownership (TCO)
- Enhance quality
- Enable access to technology and innovations
- Foster sustainability
What refers to how common the item is and, in a relative sense, how many substitutes might be available?
Specificity
What is used for purchasing items that are more complex or expensive and where there may be a number of potential vendors?
Request for proposal (RFP)
What is when a customer actually allows the supplier to manage an item or group of items for them?
Vendor managed inventory
What is a phenomenon of variability
magnification as we move from the customer to
the producer in the supply chain?
Bullwhip effect
What is continuous replinishment?
inventory is replaced frequently, as part of an ongoing process
What uses electronic data interchange (EDI) links, allowing
the supplier to better anticipate retailer demand?
Continuous replinishment
What can innovation help a company do?
enables a company to achieve higher profit margins
Which products have a life cycle of just a few months?
Innovative products. ompanies are forced to introduce a
steady stream of newer innovations
What type of supply chain has low demand uncertainty and low supply uncertainty?
Efficient supply chain:
Basic apparel, commodity
food, oil, and gas
What type of supply chain has low demand uncertainty and high supply uncertainty?
Risk-hedging supply chain:
Hydroelectric power
What type of supply chain has high demand uncertainty and low supply uncertainty?
Responsive supply chain:
Fashion apparel, computers,
popular music
What type of supply chain has high demand uncertainty and high supply uncertainty?
Agile supply chain:
Telecom, high-end
computers, semiconductors
What type of supply chains utilize strategies aimed at creating the highest cost efficiency?
Efficient supply chains
What type of supply chains utilize strategies aimed at being responsive and flexible?
Responsive supply chains
What type of supply chains utilize strategies aimed at pooling and sharing resources in a supply chain to share risk?
Risk hedging supply chains
What type of supply chains utilize strategies aimed at being responsive and flexible to customer needs?
Agile supply chains
What is moving some of a firm’s internal activities and decision responsibility to outside providers?
Outsourcing
What is it when outsourcing (or insourcing) to a
different country?
Offshoring
What are financially driven reasons for outsourcing?
Gain access to new markets, particularly in developing countries.
Improve return on assets by reducing inventory and selling unnecessary assets.
Reduce costs through a lower cost structure.
Generate cash by selling low-return entities.
Turn fixed costs into variable costs.
What are improvement reasons for outsourcing?
– Improve quality and productivity
– Shorten cycle time
– Obtain expertise, skills, and technologies that are
otherwise unavailable
– Improve risk management
– Improve credibility and image by associating with superior
providers
What are organizational reasons for outsourcing?
– Improve effectiveness by focusing on what the firm does
best
– Increase flexibility to meet changing demand for products
and services
– Increase product and service value by improving response
to customer needs
What are the risks of outsourcing?
• Potential increase in delivery times
• Potential increase in total cost of ownership(TCO)
• Less control over quality and flexibility
• Complexity of contracts and warranty claims
• Theft of intellectual property
What do you need to consider when making a sourcing decision?
Need to consider local outsourcing, offshoring, and insourcing when making sourcing decision
What is inventory turnover?
how often average inventory is replaced during the year
What is the formula for inventory turnover?
Cost of goods sold / Average aggregate inventory value
What are advantages of high inventory turnover?
– Higher sales volume from more new or fresh items
– Less risk of obsolescence or need to mark down
– Reduced total inventory holding costs
– Lower asset investment and higher productivity
What are dangers of high inventory turnover?
– Lower sales if desired inventory is not available
– Increased costs from missing quantity requirements (loss of
economies of scale)
What is green sourcing?
Business practices designed to positively affect
the planet and environment as well as profits
What are goals of green sourcing?
– Add value to communities
– Environmental responsibility
– Ethical behavior
– Financial responsibility
– Respect human rights
– Safe working environment
How can green sourcing help a company?
– Improving financial performance
– Lowering total cost
– Improving the work environment
– Instilling customer loyalty
– Enhancing firm reputation
– Providing impetus to reduce w
What is cost of goods sold?
the annual cost for a company to produce the goods or services provided to customers
What is average aggregate inventory value?
the total value of all items held in inventory
What is the formula for weeks of supply?
(Average aggregate inventory value / cost of goods sold) x 52
What is the formula for days of supply?
On‐hand Inventory / Daily Demand
True or false: Functional products include staples that people buy in a wide range of retail outlets, such as gas stations?
TRUE
True or false: Logistics is a term indicating transportation choices for goods produced internationally but consumed domestically?
False. Logistics is a term that refers to the management functions that support the complete cycle of material flow, from the purchase and internal control of production materials; to the planning and control of work-in-process; to the purchasing, shipping, and distribution of the finished product
True or false: An improvement-driven reason for outsourcing is that it can increase cycle time?
False. An improvement reason is to decrease cycle time
Which of the following is an improvement-driven reason for outsourcing?
A. Shorten cycle time.
B. Improve effectiveness by focusing on what the firm does best.
C. Increase product and service value by improving response to customer needs.
D. Turn fixed costs into variable costs.
E. Reduce costs through a lower cost structure.
Shorten cycle time
Within the total cost of ownership, ownership costs include which of the following costs?
A. Environmental costs
B. Warranty costs
C. Supply chain costs
D. Quality costs
E. Taxes
Supply chain costs
