Procurement and Supply Management
Final Test Solutions
Course Introduction
Procurement and Supply Management explores the fundamental concepts and strategic importance of acquiring goods and services for organizational efficiency and competitiveness. The course covers the entire procurement cycle, from supplier selection, contract negotiations, and purchasing strategies to inventory control and supply chain risk management. Students gain insights into ethical sourcing, global supply markets, quality management, and the integration of advanced technologies such as e-procurement. Emphasis is placed on cost analysis, relationship management, and creating value through effective procurement practices, preparing students for roles in diverse sectors requiring robust supply chain and procurement expertise.
Recommended Textbook
Supply Chain Management Strategy Planning and Operation 6th Edition by Sunil Chopra
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Chapter 1: Understanding the Supply Chain
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Sample Questions
Q1) Which of the following statements about pull processes is accurate?
A) They may also be referred to as speculative processes.
B) Execution is initiated in anticipation of customer orders.
C) At the time of execution, demand must be forecast.
D) They may also be referred to as reactive processes.
Answer: D
Q2) Customer order receiving is
A) the point in time when the customer has access to choices and makes a decision regarding a purchase.
B) the customer informing the retailer of what they want to purchase and the retailer allocates product to the customer.
C) the process where product is prepared and sent to the customer.
D) the process where the customer receives the product and takes ownership.
Answer: D
Q3) The production scheduling process in the manufacturing cycle is similar to the
A) order receiving process in the replenishment cycle.
B) order fulfillment process in the replenishment cycle.
C) order entry process in the replenishment cycle.
D) order trigger process in the replenishment cycle.
Answer: C
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Chapter 2: Supply Chain Performance: Achieving Strategic
Fit and Scope
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Sample Questions
Q1) Discuss the two keys to the success or failure of a company.
Answer: A company's success or failure is thus closely linked to the following keys:
1. The competitive strategy and all functional strategies must fit together to form a coordinated overall strategy. Each functional strategy must support other functional strategies and help a firm reach its competitive strategy goal.
2. The different functions in a company must appropriately structure their processes and resources to be able to execute these strategies successfully.
Q2) The degree of supply chain responsiveness should be consistent with the implied uncertainty.
A)True
B)False Answer: True
Q3) If all functional strategies are deliberately aligned with each other and with the overall competitive strategy, then the company profit will be maximized.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Supply Chain Drivers and Metrics
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Sample Questions
Q1) Which of the following is a technology that shares and analyzes information in the supply chain?
A) Internet
B) Enterprise Data Planning (EDP)
C) Electronic Resource Interchange (ERI)
D) Chain Management (CM) software
Answer: A
Q2) What is the range of sale price of the gasoline?
A) 7.51
B) 10
C) 0.69
D) 22.54
Answer: C
Q3) What is the average sale price of the gasoline?
A) $2.61
B) $2.64
C) $2.67
D) $2.70
Answer: A
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Page 5
Chapter 4: Designing Distribution Networks and Applications to e-Business
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Sample Questions
Q1) Total logistics costs for a supply chain network are a sum of A) inventory and facility costs.
B) inventory, facility, and distributor costs.
C) facility, transportation, and distributor costs.
D) inventory, transportation, and facility costs.
Q2) Companies in the same industry often select very different distribution networks because
A) some companies are poorly run.
B) different companies try to avoid using the same approach.
C) different companies have different objectives for their supply chain.
D) all of the above
Q3) The main advantage of a distribution network with local storage is that it can lower the delivery cost and provide a faster response than other networks.
A)True
B)False
Q4) For physical products, i.e., products that cannot be downloaded, customer requests take longer to fulfill through online sales than in a retail store setting.
A)True
B)False
6
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Chapter 5: Network Design in the Supply Chain
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Sample Questions
Q1) If the technology is flexible, it becomes more difficult to consolidate manufacturing in a few large facilities.
A)True
B)False
Q2) If the production technology is very inflexible and product requirements vary from one country to another, a firm has to set up
A) local facilities to serve the market in each country.
B) a few high-capacity facilities to serve the market in each country.
C) many local facilities because this helps lower transportation costs.
D) a few high-capacity facilities because this helps lower transportation costs.
Q3) Transportation costs increase as the number of facilities is increased.
A)True
B)False
Q4) The supply chain network is designed to maximize total profits, taking into account the expected margin and demand in each market, various logistics and facility costs, and the taxes and tariffs at each location.
A)True
B)False
Q5) Explain the two situations in which managers use network design models.
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Chapter 6: Designing Global Supply Chain Networks
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Sample Questions
Q1) Summarize the steps in the decision tree analysis methodology.
Q2) The net present value (NPV) of a stream of cash flows is equal to
A) the sum of all cash flows for all periods being considered.
B) the sum of all cash flows for all periods being considered divided by the number of periods.
C) the average of all cash flows for all periods being considered multiplied by the number of periods.
D) the sum of all cash flows for all periods being considered discounted by the rate of return for each period.
Q3) The rate of return k is also referred to as the present value of capital.
A)True
B)False
Q4) A global supply chain with offshoring would tend to see which of these performance dimensions decrease?
A) Working capital
B) Hidden costs
C) Supply chain visibility
D) Product returns
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8
Chapter 7: Demand Forecasting in a Supply Chain
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Sample Questions
Q1) Qualitative forecasting methods are most appropriate when A) there is good historical data available.
B) there is little historical data available.
C) experts do not have critical market intelligence.
D) forecasting demand into the near future.
Q2) The mixed form of the systematic component of demand is shown as
A) level × trend × seasonal factor.
B) level + trend + seasonal factor.
C) (level + trend) × seasonal factor.
D) level × (trend + seasonal factor).
Q3) The moving average forecast method is used when demand has an observable trend or seasonality.
A)True
B)False
Q4) In adaptive forecasting, the estimates of level, trend, and seasonality are updated after each demand observation.
A)True
B)False
Q5) Describe the basic characteristics of forecasts that managers should be aware.
Page 9
Q6) Discuss key issues of forecasting in practice.
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Chapter 8: Aggregate Planning in a Supply Chain
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Sample Questions
Q1) Use the information from Scenario 8.1 to determine the number of decision variables in this scenario.
A) 10
B) 15
C) 20
D) 24
Q2) Aggregate planning solves problems involving
A) aggregate decisions and stock keeping unit (SKU) level decisions.
B) aggregate decisions or stock keeping unit (SKU) level decisions.
C) aggregate decisions rather than stock keeping unit (SKU) level decisions.
D) stock keeping unit (SKU) level decisions rather than aggregate decisions.
Q3) Most strategies that an aggregate planner actually uses are in combination, and are referred to as hybrid strategies.
A)True
B)False
Q4) Aggregate planning is concerned with determining
A) the production level, sales level, and capacity for each period.
B) the demand level, inventory level, and capacity for each period.
C) the production level, inventory level, and capacity for each period.
D) the production level, staffing level, and capacity for each period.
Page 10
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Chapter 9: Sales and Operations Planning: Planning Supply and Demand
in a Supply
Chain
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Sample Questions
Q1) Which approach to capacity management would schedule the workforce so that the available capacity better matches demand?
A) Time flexibility from workforce
B) Use of seasonal workforce
C) Use of subcontracting
D) Use of dual facilities-dedicated and flexible
Q2) The promotion and pricing decisions made by marketing and sales typically have the objective of
A) maximizing profitability.
B) minimizing profitability.
C) minimizing revenue.
D) maximizing revenue.
Q3) Which approach to capacity management may be hard to sustain if the labor market is tight?
A) Time flexibility from workforce
B) Use of seasonal workforce
C) Use of subcontracting
D) Use of dual facilities-dedicated and flexible
Q4) Discuss how a firm can respond to predictable variability of demand in the supply chain.
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Chapter 10: Coordination in a Supply Chain
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Sample Questions
Q1) All transportation decisions should be evaluated based on their effect on A) transportation costs.
B) fuel costs.
C) total costs.
D) sales revenue.
Q2) Mickey the manager reviewed his company's customers' orders for the past year and compared the variability of those orders with the variability of the orders he placed with his suppliers. This comparison allowed him to estimate his own company's contribution to
A) the forecast.
B) supply chain surplus.
C) market demand.
D) the bullwhip effect.
Q3) Operational improvements that reduce lot sizes can dampen the bullwhip effect by
A) decreasing the uncertainty of demand during the lead time.
B) decreasing the amount of fluctuation that can accumulate between any pair of stages of a supply chain.
C) discouraging retailers from artificially inflating their orders in the case of a shortage.
D) allocating the available supply based on past retailer sales.
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Page 12
Chapter 11: Managing Economies of Scale in the Supply
Chain: Cycle Inventory
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Sample Questions
Q1) A price discount where the pricing schedule offers discounts based on the quantity ordered in a single lot is
A) customer based.
B) lot size based.
C) supplier based.
D) volume based.
Q2) A firm is often better served by ordering a convenient lot size close to the economic order quantity rather than the precise EOQ.
A)True
B)False
Q3) Discuss the characteristics of a successful multi-echelon supply chain.
Q4) The cost of carrying one unit in inventory for a specified period of time, usually one year, is referred to as
A) the material cost and is denoted by C.
B) the fixed ordering cost and is denoted by S.
C) the holding cost and is denoted by H.
D) the purchase price and is denoted by P.
Q5) Describe the impact of trade promotions on cycle inventory.
Q6) Discuss the role of cycle inventory in the supply chain.
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Chapter 12: Managing Uncertainty in a Supply Chain: Safety Inventory
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Sample Questions
Q1) The issue of product availability and the level of safety inventory is particularly significant in industries where
A) product life cycles are short and demand is stable.
B) product life cycles are short and demand is very volatile.
C) product life cycles are long and demand is stable.
D) product life cycles are long and demand is very volatile.
Q2) What is the standard deviation of demand during their lead time?
A) 45 phones
B) 64 phones
C) 90 phones
D) 109 phones
Q3) Product availability reflects a firm's ability to fill a customer order out of available inventory.
A)True
B)False
Q4) For the same safety inventory, an increase in lot size
A) decreases the fill rate but not the cycle service level.
B) increases the fill rate but not the cycle service level.
C) decreases both the fill rate and the cycle service level.
D) increases both the fill rate and the cycle service level.
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Chapter 13: Determining the Optimal Level of Product Availability
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Sample Questions
Q1) Suppose the taco stand manager could wake up a little earlier and borrow his buddy's full size pickup to transport tacos to campus. If time and capacity were not an issue, how many total tacos should he bring to campus each day?
A) 2500
B) 3000
C) 5041
D) 5500
Q2) A managerial lever to increase profitability is to decrease the salvage value of each unit.
A)True
B)False
Q3) The cost of understocking is denoted by C<sub>U</sub> and is the margin lost by a firm for each lost sale because there is no inventory on hand.
A)True
B)False
Q4) Explain how tailored postponement can improve profitability.
Q5) Describe managerial levers to increase profitability within a supply chain.
Page 15
Q6) Describe the approaches a manager can use to reduce demand uncertainty.
Q7) Discuss the advantages and disadvantages of quick response.
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Chapter 14: Transportation in a Supply Chain
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Q1) Discuss the two key players involved in any transportation in the supply chain.
Q2) Rail is the dominant mode of freight transportation in the United States and accounts for over 75 percent of the nation's freight bill.
A)True
B)False
Q3) A shrewd supply chain manager would aggregate only safety inventory and use an inexpensive mode of transportation for replenishing cycle inventory if she is dealing with a
A) high-value product and high demand.
B) high-value product and low demand.
C) low-value product and high demand.
D) low-value product and low demand.
Q4) A dabba uses the Mumbai railway system to carry about 40 lunches each day. A)True
B)False
Q5) Which mode of transportation is used primarily for petroleum and natural gas?
A) Air
B) Truck
C) Water
D) Pipeline
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Chapter 15: Sourcing Decisions in a Supply Chain
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Sample Questions
Q1) Effective sourcing processes within a firm can improve profits for the firm and total supply chain surplus in a variety of ways.
A)True
B)False
Q2) Supplier performance should be compared based on
A) purchase price alone.
B) its impact on total cost.
C) the supplier's quality of material.
D) the ability of the supplier to coordinate forecasting and planning.
Q3) A third party increases the supply chain surplus if it aggregates the sourcing for many small players and facilitates economies of scale in ordering, inbound transportation and production. This is called
A) capacity aggregation.
B) procurement aggregation.
C) information aggregation.
D) relationship aggregation.
Q4) Why should design collaboration capability be considered in supplier selection decisions?
Q5) What are some of the benefits of effective sourcing decisions?
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Chapter 16: Pricing and Revenue Management in a Supply Chain
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Sample Questions
Q1) Hotels use differential pricing by day of week and time of year
A) in order to shift demand from peak periods to off-peak periods.
B) in order to increase demand during off-peak periods.
C) in order to shift revenue from peak periods to off-peak periods.
D) in order to shift profit from peak periods to off-peak periods.
Q2) Describe the role of revenue management.
Q3) Customers will have a negative perception of revenue management tactics if they are simply presented as a mechanism for extracting maximum revenue.
A)True
B)False
Q4) The amount of the asset reserved for the higher price segment is such that
A) all orders from the lower priced segment will be accepted and filled.
B) the expected marginal revenue from the higher priced segment is more than the price to the lower price segment.
C) the expected marginal revenue from the higher priced segment is less than the price to the lower price segment.
D) the expected marginal revenue from the higher priced segment equals the price to the lower price segment.
Page 18
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Chapter 17: Sustainability and the Supply Chain
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Sample Questions
Q1) A cap and trade system can achieve price stability as long as A) a price floor is established.
B) intertemporal banking of emission allowances is allowed.
C) both a price floor and intertemporal banking of emissions allowances are allowed.
D) both a price floor and a price ceiling are established.
Q2) The primary reason for the general lack of design for remanufacturing is that remanufacturing is more expensive for a manufacturer.
A)True
B)False
Q3) ________ continues to be one of the biggest challenges to improved supply chain sustainability.
A) Good information
B) Waste generation
C) Water consumption
D) Reducing packaging
Q4) A carbon tax system is computed by multiplying the tax rate by the carbon emissions.
A)True
B)False
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