Global Sourcing and Procurement Quiz
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Questions and Answers

What is the primary goal of supply management?

  • To improve the quality of the finished goods produced
  • To ensure uninterrupted flows of raw materials at the lowest total cost (correct)
  • To maximize customer satisfaction
  • To identify and acquire resources for short-term needs

    • What is the role of purchasing in achieving supply management objectives?

  • To negotiate prices with suppliers
  • To handle logistics and transportation
  • To identify and select suppliers
  • To involve suppliers and purchasing personnel in new product design and development efforts (correct)

    • What is the purpose of the e-procurement system?

  • To track supplier performance
  • To enable electronic transmission of purchase orders to suppliers (correct)
  • To automate inventory management
  • To manage supplier relationships

    • What is the first step in the purchasing process?

    <p>Material user enters a purchase request</p> Signup and view all the answers

    What is the definition of supply management according to the Institute of Supply Management?

    <p>The identification, acquisition, access, positioning, and management of resources</p> Signup and view all the answers

    What is the benefit of working closely with strategic suppliers?

    <p>To improve quality and materials</p> Signup and view all the answers

    What is one of the advantages of the make option?

    <p>Having better control over lead time and logistical costs</p> Signup and view all the answers

    What is the purpose of the Make-or-Buy Break-Even Analysis?

    <p>To decide whether to make or buy a component</p> Signup and view all the answers

    What is the major drawback of sole sourcing?

    <p>It increases the reliance on a single supplier</p> Signup and view all the answers

    What is the trend in sourcing currently?

    <p>Using fewer sources for each item</p> Signup and view all the answers

    What is the difference between sole sourcing and single sourcing?

    <p>Sole sourcing refers to the only available source, while single sourcing refers to the deliberate practice of concentrating purchases</p> Signup and view all the answers

    Why should firms use single or a few sources whenever possible?

    <p>To enable the development of close relationships with the best suppliers</p> Signup and view all the answers

    What is a key benefit of having a single supplier?

    <p>Less quality variability</p> Signup and view all the answers

    What is a reason for using multiple suppliers?

    <p>Create competition</p> Signup and view all the answers

    What is an advantage of a single supplier in terms of transportation?

    <p>Lower costs per unit</p> Signup and view all the answers

    Why might a firm need to use multiple suppliers, even if it's not the most cost-effective option?

    <p>To meet government requirements</p> Signup and view all the answers

    What is a potential risk of relying on a single supplier?

    <p>Supply interruptions</p> Signup and view all the answers

    What is a benefit of working with multiple suppliers in terms of information?

    <p>More information about market conditions</p> Signup and view all the answers

    What is the primary responsibility of the purchasing function in a business?

    <p>Acquiring required materials, services, and equipment</p> Signup and view all the answers

    What percentage of each sales dollar do manufacturers typically spend on raw materials?

    <p>50 percent</p> Signup and view all the answers

    What drove the shift in the role of purchasing in business?

    <p>Increased global competition</p> Signup and view all the answers

    What is the result of the increased strategic role of purchasing in business?

    <p>Higher levels of skill and responsibility for purchasing professionals</p> Signup and view all the answers

    What is the consequence of large quantities of purchased material and work-in-process inventories?

    <p>Impact on manufacturing cost, quality, new product development, and delivery lead time</p> Signup and view all the answers

    What is the focus of new supply chain management concepts?

    <p>Purchasing as a key strategic business process</p> Signup and view all the answers

    What does the Kraljic matrix assess in a portfolio analysis?

    <p>Supply risk and total amount spent</p> Signup and view all the answers

    How are 'Strategic Purchase' purchases characterized in the Kraljic matrix?

    <p>High risk and high spend</p> Signup and view all the answers

    What is the recommended tactic for managing 'Bottleneck' purchases?

    <p>Use one or two suppliers</p> Signup and view all the answers

    In the context of 'Leverage' purchases, what is the main tactic suggested?

    <p>Standardize purchases</p> Signup and view all the answers

    What potential issue can arise if Bottleneck purchases are not managed effectively?

    <p>Production delays</p> Signup and view all the answers

    How does the Kraljic matrix differentiate between strategic purchase and leverage purchases?

    <p>By core importance to the firm</p> Signup and view all the answers

    The primary responsibility of the purchasing function is to acquire finished goods

    <p>False</p> Signup and view all the answers

    New supply chain management concepts focus on minimizing the role of purchasing in business strategy

    <p>False</p> Signup and view all the answers

    The use of e-procurement systems is a traditional method of procurement

    <p>False</p> Signup and view all the answers

    Manufacturers typically spend less than 20 percent of each sales dollar on raw materials

    <p>False</p> Signup and view all the answers

    Purchasing is a narrow specialized supporting function to overall business strategy in today's business setting

    <p>False</p> Signup and view all the answers

    The Kraljic matrix is used to analyze supply chain management concepts

    <p>False</p> Signup and view all the answers

    The e-procurement system allows buyers to review closed bids and select a supplier in real-time.

    <p>False</p> Signup and view all the answers

    E-procurement is more efficient when processing requests for quotation and purchase orders.

    <p>True</p> Signup and view all the answers

    The e-procurement system allows buyers to track each purchase requisition electronically from conversion to a purchase order.

    <p>False</p> Signup and view all the answers

    The e-procurement system reduces the manual task of matching bids to purchase requisitions.

    <p>True</p> Signup and view all the answers

    The e-procurement system provides up-to-date information on suppliers, but goods and services are not readily available online.

    <p>False</p> Signup and view all the answers

    The e-procurement system allows buyers to initiate bids and suppliers to respond only during business hours.

    <p>False</p> Signup and view all the answers

    The Make or Buy decision is a tactical decision.

    <p>False</p> Signup and view all the answers

    A firm may outsource production due to lack of expertise in a particular component.

    <p>True</p> Signup and view all the answers

    Backward vertical integration involves acquiring downstream customers.

    <p>False</p> Signup and view all the answers

    A firm may choose to make a component in-house to protect proprietary technology.

    <p>True</p> Signup and view all the answers

    The trend in sourcing has been moving towards backward vertical integration.

    <p>False</p> Signup and view all the answers

    A firm with excess idle capacity may choose to outsource production to a supplier.

    <p>False</p> Signup and view all the answers

    HKTVmall's O2O store strategy encouraged online shopping and enabled home delivery.

    <p>False</p> Signup and view all the answers

    The COVID-19 pandemic led to a decrease in demand for masks and PPE in Hong Kong.

    <p>False</p> Signup and view all the answers

    The World Health Organization initially recommended the use of masks to prevent the spread of COVID-19.

    <p>False</p> Signup and view all the answers

    HKTVmall invested in basic warehousing and logistics systems to reduce shipping fees and times.

    <p>False</p> Signup and view all the answers

    The Hong Kong Consumer Council encouraged firms to take advantage of the shortage of masks and PPE.

    <p>False</p> Signup and view all the answers

    HKTVmall became the dominant player in the market by offering a low-quality e-commerce experience.

    <p>False</p> Signup and view all the answers

    Using multiple suppliers can help a firm create competition among suppliers in terms of quality only.

    <p>False</p> Signup and view all the answers

    Having a single supplier can lead to higher transportation costs due to the concentration of purchase volume.

    <p>False</p> Signup and view all the answers

    A firm's volume being too small to split can be a reason favoring the use of multiple suppliers.

    <p>True</p> Signup and view all the answers

    One advantage of using multiple suppliers is accessing more information about market conditions and new process technologies.

    <p>True</p> Signup and view all the answers

    If a firm needs to spread the risk of supply interruptions, it is advised to only use a single supplier.

    <p>False</p> Signup and view all the answers

    Using a single supplier is always the most cost-effective option due to reduced variability in quality.

    <p>False</p> Signup and view all the answers

    Study Notes

    Supply Management Goals and Roles

    • Primary goal of supply management is to optimize the flow of goods and services while minimizing costs.
    • Purchasing plays a crucial role in achieving supply management objectives by acquiring the necessary goods and services efficiently.
    • Supply management is defined by the Institute of Supply Management as the integration of key business processes across the supply chain.

    E-Procurement Systems

    • The e-procurement system streamlines purchasing by allowing real-time bid reviews and supplier selection.
    • It enhances efficiency in processing requests for quotations and purchase orders.
    • Provides electronic tracking of purchase requisitions from initiation to order completion, reducing manual tasks.

    Purchasing Process and Strategies

    • First step in the purchasing process involves identifying needs and specifications for products or services.
    • Working closely with strategic suppliers offers benefits like innovation, cost reduction, and improved service levels.
    • Current trend in sourcing is leaning towards backward vertical integration to have more control over supply chains.
    • Sole sourcing involves selecting one supplier for a product, while single sourcing may involve a preferred supplier among multiple options.
    • Firms should prefer single or a few sources to maintain better control, foster supplier relationships, and ensure consistency.

    Supplier Management

    • Key benefit of having a single supplier includes streamlined communication and coordination.
    • Advantages of using multiple suppliers include competition, cost management, and access to diverse information about market conditions.
    • Potential risks of relying solely on one supplier include disruptions in case of supplier issues.

    Purchasing Function Responsibilities

    • Primary responsibility of the purchasing function is to acquire finished goods effectively and at optimal cost.
    • Manufacturers typically spend less than 20% of each sales dollar on raw materials, reflecting efficient cost management.

    Strategic Role of Purchasing

    • The role of purchasing has evolved to become more strategic within business operations, driving optimization and value creation.
    • Increased strategic purchasing influences inventory management and material flow.

    Kraljic Matrix and Purchase Types

    • The Kraljic matrix assesses supply portfolio based on risk and supply availability, categorizing purchases into strategic, leverage, bottleneck, and non-critical.
    • 'Strategic Purchase' characterized by high impact and low supply risk; requires long-term supplier relationships.
    • Recommended tactic for managing 'Bottleneck' purchases includes developing alternative supply routes.
    • 'Leverage' purchases suggest using competitive bidding to attain favorable pricing.

    Consequences of Poor Management

    • Failure to manage Bottleneck purchases can result in significant supply interruptions.
    • New supply chain management concepts emphasize minimizing procurement's role within business strategy while maximizing efficiency.

    HKTVmall Example

    • HKTVmall capitalized on the O2O (Online to Offline) strategy to dominate the e-commerce market during the COVID-19 pandemic, facilitating home delivery.
    • Investments in logistics reduced shipping fees and times, enhancing customer experience amidst high demand fluctuations.

    Risks and Benefits

    • Multiple suppliers help firm manage risk and encourage competition in quality.
    • Sole suppliers can lead to higher transportation costs due to concentrated purchase volumes.
    • Relying on a single supplier can be cost-effective due to reduced quality variability, although not always recommended for risk management.

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    Week 7 Global Sourcing/Procurement PDF

    Description

    Test your knowledge on purchasing terms, e-procurement, single sourcing versus multiple sourcing, and a case study of a Hong Kong e-commerce platform for COVID. Learn about the overview of purchasing as a key business function responsible for acquiring materials, services, and equipment.

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